<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------------------
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934.
For the quarterly period ended December 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934.
For the transition period from ___________ to ___________
Commission File Number: 0-28822
ROCKSHOX, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 77-0396555
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
401 Charcot Avenue, San Jose, California 95131
(Address of principal executive offices) (zip code)
Registrant's telephone number, including area code (408) 435-7469
NO CHANGE
-------------------------------------------------------------------------
(Former name, former address and former fiscal year
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
YES [ X ] NO [ ]
As of February 10, 1998 there were 13,757,231 shares of the registrant's
common stock, par value $.01 per share, outstanding.
This quarterly report on Form 10-Q contains 13 pages, of which this is page 1.
<PAGE>
ROCKSHOX, INC.
INDEX
<TABLE>
<CAPTION>
Page
----
<S> <C>
Part I: Financial Information
Item 1. Financial Statements
Condensed Consolidated Balance Sheets as of December 31, 1997
and March 31, 1997.............................................. 3
Condensed Consolidated Statements of Operations for the three-
and nine- months ended December 31, 1997 and 1996............... 4
Condensed Consolidated Statements of Cash Flows for the
nine-months ended December 31, 1997 and 1996.................... 5
Notes to Condensed Consolidated Financial Statements.............. 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations....................................... 9
Item 3. Quantitative and Qualitative Disclosures about Market Risks....... 11
Part II: Other Information
Item 1. Legal Proceedings.................................................. 11
Item 6. Exhibits and Reports on Form 8-K................................... 11
(a) Exhibits..................................................... 13
(b) Reports on Form 8-K
None
</TABLE>
2
<PAGE>
Part I: Item 1.
ROCKSHOX, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
<TABLE>
<CAPTION>
Dec. 31, 1997 March 31, 1997
------------- --------------
(Unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents................. $ 7,736 $ 14,747
Trade accounts receivable, net of
allowance for doubtful accounts of
$1,106 and $1,589, respectively.......... 14,860 6,618
Inventories............................... 12,906 10,800
Prepaid expenses and other current assets. 684 1,132
Deferred income taxes..................... 3,727 4,739
-------- ---------
Total current assets.................... 39,913 38,036
Property, plant and equipment, net.......... 14,220 7,700
Other assets................................ 305 139
-------- ---------
Total assets.......................... $ 54,438 $ 45,875
-------- ---------
-------- ---------
Current liabilities:
Accounts payable.......................... $ 5,559 $ 3,459
Accrued liabilities....................... 8,052 10,855
-------- ---------
Total current liabilities............... 13,611 14,314
Stockholders' equity:
Common stock................................ 138 136
Additional paid-in capital.................. 65,910 64,828
Distributions in excess of net book value... (45,422) (45,422)
Retained earnings........................... 20,201 12,019
-------- ---------
Total stockholders' equity.............. 40,827 31,561
-------- ---------
Total liabilities and stockholders'
equity............................. $ 54,438 $ 45,875
-------- ---------
-------- ---------
</TABLE>
The accompanying notes are an integral part of these condensed
consolidated financial statements.
3
<PAGE>
Part I: Item 1.
ROCKSHOX, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
Dec. 31, 1997 Dec. 31, 1996 Dec. 31, 1997 Dec. 31, 1996
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Net sales........................................................ $ 26,575 $ 32,143 $ 80,159 $ 81,702
Cost of sales.................................................... 19,108 20,086 54,244 51,625
-------- -------- -------- --------
Gross profit................................................... 7,467 12,057 25,915 30,077
Selling, general and administrative expense...................... 3,588 2,856 9,851 8,897
Research, development and engineering expense.................... 1,196 1,355 3,738 3,519
Non-recurring charge............................................. --- --- --- 6,580
-------- -------- -------- --------
Operating expenses............................................. 4,784 4,211 13,589 18,996
-------- -------- -------- --------
Income from operations........................................ 2,683 7,846 12,326 11,081
Interest income.................................................. 103 187 451 288
Interest expense................................................. --- (27) --- (2,697)
-------- -------- -------- --------
Income before taxes and extraordinary item.................... 2,786 8,006 12,777 8,672
Income tax expense............................................... (975) (3,081) (4,595) (3,337)
-------- -------- -------- --------
Income before extraordinary item.............................. 1,811 4,925 8,182 5,335
Extraordinary loss from early extinguishment of debt
(net of tax benefit of $885).................................... --- --- --- (1,328)
-------- -------- -------- --------
Income before accretion....................................... 1,811 4,925 8,182 4,007
Accretion for dividends on mandatorily redeemable
preferred stock................................................ --- --- --- (185)
-------- -------- -------- --------
Net income available to common stockholders................... $ 1,811 $ 4,925 $ 8,182 $ 3,822
-------- -------- -------- --------
-------- -------- -------- --------
Income per share before extraordinary item - basic............... $ 0.13 $ 0.36 $ 0.60 $ 0.48
Loss per share from extraordinary item - basic................... --- --- --- (0.12)
-------- -------- -------- --------
Net income per share - basic.................................. $ 0.13 $ 0.36 $ 0.60 $ 0.36
-------- -------- -------- --------
-------- -------- -------- --------
Shares used in per share calculations - basic.................... 13,757 13,620 13,703 10,700
-------- -------- -------- --------
-------- -------- -------- --------
Income per share before extraordinary item - dilutive............ $ 0.13 $ 0.35 $ 0.58 $ 0.48
Loss per share from extraordinary item - dilutive................ --- --- --- (0.13)
-------- -------- -------- --------
Net income per share - dilutive................................ $ 0.13 $ 0.35 $ 0.58 $ 0.35
-------- -------- -------- --------
-------- -------- -------- --------
Shares used in per share calculations - dilutive................. 13,998 14,026 14,054 10,835
-------- -------- -------- --------
-------- -------- -------- --------
</TABLE>
The accompanying notes are an integral part of these condensed
consolidated financial statements.
4
<PAGE>
Part I: Item 1.
ROCKSHOX, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
Dec. 31, 1997 Dec. 31, 1996
------------- -------------
<S> <C> <C>
Cash flows from operating activities:
Net income....................................................... $ 8,182 $ 4,007
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization.................................. 3,415 2,425
Write-off of capitalized financing costs....................... --- 2,213
Loss on disposal of assets..................................... 308 ---
Provisions for excess and obsolete inventory................... 137 514
Deferred income taxes.......................................... 1,012 20
Changes in operating assets and liabilities:
Trade accounts receivable...................................... (8,242) (2,209)
Inventories.................................................... (2,243) (2,774)
Prepaid expenses and other current assets...................... 448 (295)
Accounts payable and accrued liabilities....................... (703) 683
-------- --------
Net cash provided by operating activities.................... 2,314 4,584
-------- --------
Cash flows from investing activities:
Purchases of property and equipment.............................. (10,231) (4,476)
Other............................................................ (178) (16)
-------- --------
Net cash used in investing activities.......................... (10,409) (4,492)
-------- --------
Cash flows from financing activities:
Proceeds from initial public offering, net of expenses........... --- 64,569
Repayment of mandatorily redeemable preferred stock.............. --- (7,541)
Repayment of short-term borrowings and bank debt................. --- (27,500)
Repayment of notes payable to related parties.................... --- (17,000)
Proceeds from exercise of stock options.......................... 606 ---
Tax benefits from disqualifying dispositions of common stock..... 478 ---
-------- --------
Net cash provided by financing activities...................... 1,084 12,528
-------- --------
Net increase (decrease) in cash and cash equivalents........... (7,011) 12,620
Cash and cash equivalents, beginning of period................... 14,747 1,808
-------- --------
Cash and cash equivalents, end of period......................... $ 7,736 $ 14,428
-------- --------
-------- --------
Supplemental disclosure of non-cash transactions:
Income taxes paid................................................ $ 2,333 $ 3,892
Interest paid.................................................... --- 3,599
Accretion for dividends on mandatorily redeemable preferred stock --- 185
</TABLE>
The accompanying notes are an integral part of these condensed
consolidated financial statements.
5
<PAGE>
Part I: Item 1.
ROCKSHOX, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. BASIS OF PRESENTATION:
The accompanying unaudited condensed consolidated financial statements
of ROCKSHOX, INC. (the "Company") have been prepared in accordance with
generally accepted accounting principles for interim financial information
and in accordance with instructions to Form 10-Q and Article 10 of Regulation
S-X. Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles ("GAAP") for complete
financial statements. In the opinion of management, all adjustments
(consisting of normal recurring adjustments) considered necessary for a fair
presentation have been included. The year-end consolidated balance sheet
data was derived from the audited financial statements and does not include
all disclosures required by GAAP. Operating results for the three- and
nine-month periods ended December 31, 1997 are not necessarily indicative of
the results that may be expected for the fiscal year ending March 31, 1998.
The unaudited condensed, consolidated interim financial statements contained
herein should be read in conjunction with the audited consolidated financial
statements and footnotes for the year ended March 31, 1997 included in the
Company's Annual Report on Form 10-K.
2. INVENTORY:
The components of inventory are as follows (in thousands):
<TABLE>
<CAPTION>
December 31, 1997 March 31, 1997
----------------- --------------
<S> <C> <C>
Raw materials............... $ 7,997 $ 6,357
Finished goods.............. 4,909 4,443
------- -------
$12,906 $10,800
</TABLE>
3. NET INCOME PER SHARE AMOUNTS:
The Company has adopted the provisions of Statement of Financial
Accounting Standards No. 128, Earnings Per Share ("SFAS 128") effective
December 31, 1997. SFAS 128 requires the presentation of basic and diluted
earnings per share ("EPS"). Basic EPS is computed by dividing income
available to common stockholders by the weighted average number of common
shares outstanding for that period. Diluted EPS is computed giving effect to
all dilutive potential common shares that were outstanding during the period.
Dilutive potential common shares consist of incremental common shares
issuable upon exercise of stock options and warrants for all periods. All
prior period net income (loss) amounts have been restated to comply with SFAS
128.
6
<PAGE>
Part I: Item 1.
ROCKSHOX, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
3. NET INCOME PER SHARE AMOUNTS (CONTINUED):
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
Dec. 31, 1997 Dec. 31, 1996 Dec. 31, 1997 Dec. 31, 1996
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Reconciliation of net income available
to common stockholders used in basic
and diluted per share calculations:
Income before extraordinary item
and accretion.......................... $ 1,811 $ 4,925 $ 8,182 $ 5,335
Accretion for dividends on mandatorily
redeemable preferred stock............. --- --- --- (185)
------- ------- ------- -------
Income before extraordinary item
for basic and diluted net income
per share............................ $ 1,811 $ 4,925 $ 8,182 $ 5,150
------- ------- ------- -------
------- ------- ------- -------
Reconciliation of shares used in basic
and diluted per share calculations:
Basic net income per share:
Weighted average shares of common
stock outstanding...................... 13,757 13,620 13,703 10,700
------- ------- ------- -------
Shares used in basic net income per
share calculation...................... 13,757 13,620 13,703 10,700
------- ------- ------- -------
------- ------- ------- -------
Diluted net income per share:
Weighted average shares of common
stock outstanding...................... 13,757 13,620 13,703 10,700
Dilutive effect of stock options........ 241 406 351 135
------- ------- ------- -------
Shares used in diluted net income per
share calculation...................... 13,998 14,026 14,054 10,835
------- ------- ------- -------
------- ------- ------- -------
Income per share before extraordinary
item--basic............................ $ 0.13 $ 0.36 $ 0.60 $ 0.48
------- ------- ------- -------
------- ------- ------- -------
Income per share before extraordinary
item--dilutive......................... $ 0.13 $ 0.35 $ 0.58 $ 0.48
------- ------- ------- -------
------- ------- ------- -------
</TABLE>
7
<PAGE>
Part I: Item 1.
ROCKSHOX, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
4. CONTINGENCIES: As previously reported, on September 26, 1996,
Answer Products, Inc. ("Answer"), filed a complaint naming RockShox as the
defendant in an action in the United States District Court for the Southern
District of Indiana entitled ANSWER PRODUCTS, INC. V. ROCKSHOX, INC. (the
"Indiana Action"). Answer's complaint in the Indiana Action alleges that
certain RockShox suspension forks infringe a patent that was issued in 1995
and is exclusively licensed to Answer. The complaint seeks preliminary and
permanent injunctive relief, destruction of the equipment used to make the
allegedly infringing forks, and accounting, compensatory damages, treble
damages, attorney' fees, interest and costs. The Company believes, after
consultation, that it has meritorious defenses to Answer's claims in the
Indiana Action.
On September 27, 1996, RockShox commenced an action against Answer in
the United States District Court for the Northern District of California
entitled ROCKSHOX, INC. V. ANSWER PRODUCTS, INC. (the "California Action").
RockShox' complaint in the California Action seeks a declaratory judgment
that the patent at issue in the Indiana Action is invalid, unenforceable and
not infringed by RockShox, as well as preliminary and permanent injunctions
against Answer, compensatory damages, attorneys' fees and costs. On October
21, 1996, Answer filed an answer to RockShox' complaint denying that RockShox
was entitled to the relief requested in the California Action and requesting
that the court declare the patent valid and infringed.
On December 30, 1996, the Indiana Action was transferred to Federal
Court in San Jose for consolidation with the California Action. On September
3, 1997, Answer filed a motion seeking leave to amend its answer in the
California Action to add claims under three additional patents purportedly
owned by Answer. The Court has not yet set a briefing schedule on Answer's
motion to amend. Discovery in these cases is ongoing. While the Company has
estimated the cost of resolving this matter and has accrued such amounts in
the accompanying financial statements, due to the uncertainties surrounding
litigation, the ultimate outcome of this matter is not determinable.
In addition, the Company is involved in certain trademark and employment
related legal matters in the ordinary course of business. No provision for
any liability that may result upon the resolution of these matters has been
made in the accompanying financial statements nor is the amount or range of
possible loss, if any, reasonably estimable. While the Company has accrued
certain amounts for the estimated costs associated with defending these
matters, there can be no assurance that the Answer complaint or other third
party assertions will be resolved without costly litigation, in a manner that
is not adverse to the Company's financial position or results of operations,
or without requiring royalty payments in the future which may adversely
impact gross margins.
5. RECENT ACCOUNTING PRONOUNCEMENTS: In June 1997, the Financial
Accounting Standards Board issued Statement No. 130 ("SFAS 130"), Reporting
Comprehensive Income. SFAS 130 establishes standards of disclosure and
financial statement display for reporting total comprehensive income and its
individual components. It is effective for the Company's fiscal year ending
March 31, 1999.
The Company is studying the implication of this new statement and the
impact of its implementation on its financial statements.
8
<PAGE>
Part I: Item 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations:
Net sales. Net sales for the quarter ended December 31, 1997 decreased
by 17.3% to $26.6 million compared to $32.1 million for the corresponding
period of the prior year. Net sales for the nine months ended December 31,
1997 decreased by 1.9% to $80.2 million compared to $81.7 million for the
corresponding period of the prior year. For the quarter ended December 31,
1997, OEM sales declined by 6.5% to $21.0 million compared to $22.5 million
for the corresponding period of the prior year due to volume reductions from
certain domestic OEM customers reflecting soft demand for mountain bikes,
principally in the U.S. market as well as a shift in market share between
U.S. OEM's. For the nine months ended December 31, 1997, OEM sales increased
by 1.3% to $60.2 million compared to $59.4 million for the corresponding
period of the prior year. For the quarter ended December 31, 1997, sales to
the retail accessory market decreased by 42.4% to $5.6 million compared to
$9.6 million for the corresponding period of the prior year, principally due
to a shift in the seasonal pattern of dealer ordering from the preceding
quarter and overall softness in the domestic mountain bike market. For the
nine months ended December 31, 1997, sales to the retail accessory market
decreased by 10.3% to $20.0 million compared to $22.3 million for the
corresponding period of the prior year. The Company believes that net sales
for the last quarter of the fiscal year ending March 31, 1998 will continue
to be below the levels for the corresponding period of the prior year
principally due to continued soft demand for mountain bikes as
discussed above.
Gross margin. Gross margin (gross profit as a percentage of net sales)
for the quarter ended December 31, 1997 decreased to 28.1% compared to 37.5%
for the corresponding period of the prior year. For the nine months ended
December 31, 1997, gross margin decreased to 32.3% compared to 36.8% for the
corresponding period of the prior year. The decrease in gross margin was
primarily due to fixed overhead costs not being fully absorbed due to lower
than anticipated sales and certain manufacturing inefficiencies encountered
during the first three quarters of fiscal year ended March 31, 1998. In
addition, fiscal 1997 had a higher percentage of aftermarket sales compared
to fiscal 1998. Aftermarket sales generally have a higher gross margin than
OEM sales due to discounts given to OEM customers. The Company believes that
gross margins will continue to be below the levels recorded in the
corresponding period of the prior year for the fourth quarter of the fiscal
year ending March 31, 1998.
Selling, general and administrative expense. Selling, general and
administrative ("SG&A") expense for the quarter ended December 31, 1997
increased by 25.6% to $3.6 million (or approximately 13.5% of net sales)
compared to $2.9 million (or approximately 8.9% of net sales) in the
corresponding period of the prior year. The increase was principally due to
costs of $402,000 associated with closing two of the Company's smaller
facilities located in San Jose, California and moving to a single, larger
facility in December 1997. SG&A expense for the nine months ended
December 31, 1997 increased by 10.7% to $9.9 million (or approximately 12.3%
of net sales) compared to $8.9 million (or approximately 10.9% of net sales)
for the corresponding period of the prior year.
Research, development and engineering expense. Research, development
and engineering ("R&D") expense for the quarter ended December 31, 1997
decreased by 11.7% to $1.2 million (or approximately 4.5% of net sales)
compared to $1.4 million (or approximately 4.2% of net sales) for the
corresponding period of the prior year. The decrease was due to certain
start-up costs associated with new products that occurred during the
quarter ended December 31, 1996. R&D expense for the nine months ended
December 31, 1997 increased by 6.2% to $3.7 million (or approximately
4.7% of net sales) compared to $3.5 million (or approximately 4.3% of net
sales) for the corresponding period of the prior year. The increase in R&D
expense was principally due to increased engineering headcount and related
expenses and certain development expenses incurred for new products.
9
<PAGE>
Non-recurring charge. In the quarter ended September 30, 1996, the
Company incurred a non-recurring charge of $6.6 million related to the
termination of an incentive based bonus plan with the Company's President and
Vice President of Advanced Research.
Interest income (expense). For the quarter ended December 31, 1997 the
Company had net interest income of $103,000 and during the quarter ended
December 31, 1996 the Company had net interest income of $160,000. The
decrease was due principally to lower cash balances in the current year. For
the nine months ended December 31, 1997, the Company had interest income of
$451,000 and for the nine months ended December 31, 1996 the Company incurred
net interest expense of $2.4 million (which included the amortization of
capitalized financing costs). The change was principally due to the
elimination of the Company's outstanding debt upon the closing of the
Company's IPO in October 1996.
Income tax expense. The Company's effective tax rate for the nine
months ended December 31, 1997 was 36.0% compared to 38.5% for the
corresponding period of the prior year. The decrease was principally due to
certain capital investment tax credits and a lower state tax rate.
Extraordinary item. For the nine months ended December 31, 1996, the
Company recognized a one-time pre-tax charge, reflected as an extraordinary
item, from the write-off of capitalized financing costs, totaling
approximately $2.2 million before income taxes, in connection with the
repayment of all of the Company's outstanding debt that occurred on October
2, 1996 upon the closing of the Company's IPO.
Liquidity and Capital Resources:
For the nine months ended December 31, 1997, net cash provided by
operating activities was $2.3 million, which principally consisted of net
income of $8.2 million increased by non-cash charges for depreciation and
amortization of $3.4 million and a decrease in deferred income taxes of $1.0
million, offset by increases in trade accounts receivable of $8.3 million and
inventory of $2.2 million.
For the nine months ended December 31, 1997, net cash used in investing
activities was $10.4 million, which principally consisted of acquisitions of
property and equipment. Net cash provided by financing activities was $1.1
million, which consisted of proceeds and tax benefits from the exercise of
employee stock options.
At December 31, 1997, the Company had cash and cash equivalents of $7.7
million and working capital of $26.3 million. The Company believes that its
current cash balances will be sufficient to provide operating liquidity for
at least the next twelve months.
Recent Accounting Pronouncements:
In June 1997, the Financial Accounting Standards Board issued Statement
No. 130 (SFAS 130), Reporting Comprehensive Income. SFAS 130 establishes
standards of disclosure and financial statement display for reporting total
comprehensive income and its individual components. It is effective for the
Company's fiscal year ending March 31, 1999.
The Company is studying the implication of this new statement and the
impact of its implementation on its financial statements.
10
<PAGE>
Forward Looking Statements:
Certain statements made in this document constitute "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995. Such forward-looking statements involve known and unknown risks,
uncertainties and other facts that may cause the actual results, performance or
achievements of the Company, or industry results, to be materially different
from any future results, performance or achievements expressed or implied by
such forward-looking statements. Such factors are discussed in detail in the
Company's Annual Report on Form 10-K. Given these uncertainties, prospective
and current investors are cautioned not to place undue reliance on such
forward-looking statements. The Company disclaims any obligation to update
any such factors or to publicly announce the result of any revisions to any
of the forward-looking statements contained in the Annual Report on Form 10-K
or this document.
Year 2000:
During the quarter, the Company decided to replace its current
management information systems. The Company previously intended to upgrade the
current system to become Year 2000 compliant. The system conversion is expected
to occur during the 1999 fiscal year and will allow the Company to become Year
2000 compliant. The estimated cost of the system conversion is between $1.0 and
$1.5 million.
Item 3. Quantitative and Qualitative Disclosures about Market Risks
N/A
Part II: Other Information
Item 1. Legal Proceedings
The information required by this item is contained in Note 4 of Notes to
Condensed Consolidated Financial Statements of this Form 10-Q.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
2 Form of Agreement and Plan of Merger between RSx Holdings, Inc.
and RockShox, Inc. *
3.1 Form of Amended and Restated Certificate of Incorporation of
RockShox, Inc. *
3.2 Form of Amended and Restated Bylaws of RockShox, Inc. *
4 Form of Common Stock Certificate of RockShox, Inc. *
10.1 Form of First Amendment to Standard Industrial/Commercial
Multi-Tenant Lease - modified net, dated as of November 4, 1997,
between S. Stephen Nakashima and Sally S. Nakashima, and
RockShox, Inc.
10.2 Employment agreement between RockShox, Inc. and George Napier
11 Statement regarding computation of net income (loss) per share.
27 Financial Data Schedule.
(b) Reports on Form 8-K:
None
- -------------------------------------------------------------------------------
Previously filed with the Registration Statement on Form S-1 of RockShox Inc.
(Registration No. 333-8069).
11
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ROCKSHOX, INC.
Dated: February 12, 1998 /s/ CHARLES E. NOREEN, JR.
--------------------------
Charles E. Noreen, Jr.
Chief Financial Officer and
Duly Authorized Officer
12
<PAGE>
EXHIBIT 10.1
FIRST AMENDMENT TO STANDARD INDUSTRIAL/
COMMERCIAL MULTI-TENANT LEASE -- MODIFIED NET
THIS FIRST AMENDMENT TO STANDARD INDUSTRIAL/COMMERCIAL MULTI-TENANT
LEASE -- MODIFIED NET (this "AMENDMENT") dated for reference purposes only as
of November 4, 1997, is made by and between S. STEPHEN NAKASHIMA and SALLY S.
NAKASHIMA, husband and wife ("LESSOR"), and Rock Shox, Inc., a Delaware
corporation ("LESSEE"). Capitalized terms used in this Amendment but not
expressly defined herein shall have the meanings given them in the Lease (as
such term is hereinafter defined).
RECITALS
A. Lessor and Lessee previously entered into that certain Standard
Industrial/Commercial Multi-Tenant Lease -- Modified Net dated March 7, 1997
(together with all addenda, riders, and exhibits attached thereto, the "LEASE"),
providing for the lease of certain premises described therein and in EXHIBIT A-1
attached hereto (the "ORIGINAL PREMISES").
B. Lessor and Lessee desire to amend the Lease, to among other
things, provide for Lessor's lease to Lessee of certain additional premises
described in EXHIBIT A-2 attached hereto (the "ADDITIONAL PREMISES"), upon the
terms and conditions provided herein.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements herein contained and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, Lessor and Lessee
agree as follows:
1. EFFECTIVENESS OF AMENDMENT. PARAGRAPH 2 of this Amendment
entitled "AMENDMENT OF LEASE" shall be effective, if at all, only as of the time
and date Lessor delivers possession of all of the Additional Premises to Lessee
free and clear of the interest of any other person therein (except Lessor) (the
"NEW COMMENCEMENT DATE"), and prior to the New Commencement Date the Lease shall
continue in full force and effect as currently written, and only from and after
the New Commencement Date shall the Lease continue in full force and effect as
amended by PARAGRAPH 2 hereof.
2. AMENDMENT OF LEASE. Effective as of the New Commencement Date,
the following provisions of the Lease are amended as follows:
<PAGE>
a. The term "Lease" as defined in PARAGRAPH 1.1 of the Lease
shall include, without limitation, this Amendment thereto.
b. The text of PARAGRAPH 1.2(a) of the Lease entitled
"Premises" is deleted in its entirety and the following substituted therefor as
if originally set forth therein:
"The entire Building, including all improvements therein or to be
provided by Lessor under the terms of this Lease, commonly known as
the street address of 1989 Little Orchard Street, located in the City
of San Jose, County of Santa Clara, State of California, with zip code
95125, as outlined on EXHIBIT "A" attached hereto (the "PREMISES"),
consisting of: (i) those certain Premises in the front two-thirds of
the Building of approximately 100,800 square feet as outlined on
EXHIBIT "A-1" attached hereto (the "ORIGINAL PREMISES"); and
(ii) those certain Premises in the rear one-third of the Building of
approximately 57,400 square feet as outlined on EXHIBIT "A-2" attached
hereto (the "ADDITIONAL PREMISES")."
c. The text of PARAGRAPH 1.2(b) of the Lease entitled "Parking"
is deleted in its entirety and the following substituted therefor as if
originally set forth therein:
"All unreserved vehicle parking spaces at the Industrial Center
("UNRESERVED PARKING SPACES") which shall consist of approximately 305
Unreserved Parking Spaces; and all reserved vehicle parking spaces, if
any ("RESERVED PARKING SPACES"). (Also see Paragraph 2.6)."
d. To the end of PARAGRAPH 1.3 of the Lease entitled "Term" is
added the following as if originally set forth therein:
"New Commencement Date shall mean the later to occur of: (i) the date
Lessor delivers possession of all of the Additional Premises to Lessee
free and clear of the interest of any other person therein (except
Lessor); and (ii) November 15, 1997."
e. The text of PARAGRAPH 1.6(b) of the Lease entitled "Lessee's
Share of Common Area Operating Expenses" is deleted in its entirety and the
following substituted therefor as if originally set forth therein:
"One hundred percent (100%) ("LESSEE'S SHARE")."
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f. The text of PARAGRAPH 1.7 of the Lease entitled "Security
Deposit" is deleted in its entirety and the following substituted therefor as if
originally set forth therein:
"$87,196.00 ("SECURITY DEPOSIT"). (Also see Paragraph 5)."
g. The text of PARAGRAPH 1.8 of the Lease entitled "Permitted
Use" is deleted in its entirety and the following substituted therefor as if
originally set forth therein:
"Manufacturing, warehousing and distribution of mechanical parts,
office space, and all other legal uses."
h. The fourth line of PARAGRAPH 1.10(a) of the Lease entitled
"Real Estate Brokers" is deleted in its entirety and the following substituted
therefor as if originally set forth therein:
"Grubb & Ellis Company (with respect to the Original Premises) and
Cawley International Real Estate Services (with respect to the
Additional Premises) represent Lessee exclusively ("LESSEE'S BROKER");
or"
i. The text of PARAGRAPH 1.12 of the Lease entitled "Addenda
and Exhibits" is deleted in its entirety and the following substituted therefor
as if originally set forth therein:
"Attached hereto is an Addendum or Addenda consisting of PARAGRAPHS 49
THROUGH 54, and EXHIBITS "A," "A-1," "A-2," "A-3," "B," and "C," all
of which constitute a part of this Lease."
j. References to the Premises on, as of, or following the
Commencement Date in PARAGRAPHS 2.2 and 2.3 of the Lease entitled "Condition"
and "Compliance with Covenants, Restrictions and Building Code": (i) shall be
deemed to relate to the Original Premises on, as of, or following the
Commencement Date; and (ii) shall be deemed to relate to the Additional Premises
on, as of, or following the New Commencement Date.
k. The text of PARAGRAPH 2.5 of the Lease entitled "Lessee as
Prior Owner/Occupant" is deleted in its entirety and the following substituted
therefor as if originally set forth therein:
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"The warranties made by Lessor in this PARAGRAPH 2 shall be of no
force or effect TO THE EXTENT THAT prior to the New Commencement Date
Lessee was the owner or occupant of the Original Premises."
l. The text of PARAGRAPH 2.6 (c) of the Lease entitled "Vehicle
Parking" is deleted in its entirety and the following substituted therefor as if
originally set forth therein:
"Lessor shall at the Commencement Date of this Lease and at the New
Commencement Date of this Lease, provide the parking facilities
required by Applicable Law; provided, however, that Lessor shall not
be responsible for providing any additional parking facilities that
are required by Applicable Law as the result of Lessee's construction
of improvements at the Premises."
m. The reference to the Premises as of the date of the Lease in
the first sentence of PARAGRAPH 7.3 (a) of the Lease entitled "Definitions;
Consent Required": (i) shall be deemed to relate to the Original Premises as of
March 7, 1997; and (ii) shall be deemed to relate to the Additional Premises as
of the New Commencement Date.
n. The second sentence of PARAGRAPH 11 of the Lease entitled
"Utilities" is deleted in its entirety.
o. The first sentence of PARAGRAPH 12.3(a) of the Lease
entitled "Additional Terms and Conditions Applicable to Subletting" is deleted
in its entirety and the following substituted therefor as if originally set
forth therein:
"Lessee hereby assigns and transfers to Lessor all of Lessee's
interest in all rents and income arising from any sublease of all or a
portion of the Premises heretofore or hereafter made by Lessee, and
Lessor may collect such rent and income and apply the same toward
Lessee's obligations under this Lease; provided, however, that until a
Breach (as defined in PARAGRAPH 13.1) shall occur in the performance
of Lessee's obligations under this Lease, Lessee may, except as
otherwise expressly provided in this Lease, receive, collect, and
enjoy all the rents and income accruing under such sublease and
relating to the Premises; provided further, however, that one-half
(1/2) of the rents and income accruing under such sublease and
relating to the Premises shall be paid to Lessor by Lessee if, as, and
when received by Lessee, but only after deduction for all
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rent, additional rent, and other amounts payable under the Lease, and
for all actual costs and expenses of subleasing the Premises, including,
without limitation, brokerage commissions, tenant improvements, legal
fees, and rent credits and abatements."
p. The text of PARAGRAPH 34 of the Lease entitled "Signs" is
deleted in its entirety and the following substituted therefor as if originally
set forth therein:
"Lessee shall be permitted to place and install such signs at the
Industrial Center as are permitted by the City of San Jose. The
installation of any such signs by or for Lessee shall be subject to
the provisions of PARAGRAPH 7 (Maintenance, Repairs, Utility
Installations, Trade Fixtures, and Alterations), and to Lessor's prior
approval, which may not be unreasonably withheld or delayed."
q. The text of PARAGRAPH 39 of the Lease entitled "Option" is
deleted in its entirety and the following substituted therefor as if originally
set forth therein:
"39.1 EXERCISE OF OPTION. Lessee shall have the option (the
"OPTION") to extend the term of this Lease as to any of the Original
Premises, the Additional Premises, or the entire Premises for a period
of five additional years (the "OPTION PERIOD"), upon the same terms
and conditions as are applicable to the initial term hereof, except
for the grant of this Option (which is the only extension option) and
Base Rent (which shall be determined as set forth below). Said Option
may only be validly exercised by Lessee giving written notice thereof
to Lessor not less than 210 calendar days nor more than 300 calendar
days prior to the expiration of the initial term of this Lease (the
"OPTION NOTICE"). If Lessee does not exercise the Option in
accordance with the provisions contained herein, the Option shall
forever terminate and be of no further force or effect.
39.2 OPTION PERIOD RENT. If Lessee exercises the Option pursuant to
this PARAGRAPH 39, then Lessee shall pay to Lessor during the Option
Period as monthly Base Rent, without deduction, setoff, prior notice,
or demand, an amount equal to the square footage of the premises
leased during the Option Period multiplied by 95.00% of the monthly
"Market Rental" (as hereinafter defined) determined as of the time the
Option
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Notice is given. "MARKET RENTAL" shall mean the net monthly fair market
value per square foot, taking into account all relevant factors
(including, without limitation, supply and demand), for similar
industrial space in similar buildings located in the general area of the
Industrial Center, or within a distance from the Industrial Center of up
to ten (10) miles if necessary to locate comparable space and buildings.
Market Rental shall be determined by mutual agreement of Lessor and
Lessee as follows. Within twenty (20) calendar days of Lessor's receipt
of the Option Notice, Lessor shall propose to Lessee in writing a Market
Rental. If Lessee is not in agreement with such proposal, Lessee shall
so advise Lessor in writing within fifteen (15) calendar days of
Lessee's receipt of the proposed Market Rental, and Lessor and Lessee
shall within ten (10) calendar days thereafter each appoint a real
estate broker, licensed as such in the State of California and having
been engaged in the leasing of industrial real estate situated in the
County of Santa Clara, State of California, for a period of not less
than three years immediately preceding such broker's appointment, to
mutually determine Market Rental. If said brokers are unable to agree
upon Market Rental within fifteen (15) calendar days after their
appointment they shall, within such period, appoint a third
disinterested broker meeting the qualifications described above to
assist in determining Market Rental, and Market Rental shall then be
deemed the average of the determination prepared by said third broker
and the determination (prepared by either of the first two brokers)
which is closest in value to (whether greater than or less than) the
determination prepared by the third broker; provided, however, that in
no event shall Market Rental be less than $.586 per square foot.
Notwithstanding anything to the contrary contained in this PARAGRAPH 39,
Lessee shall have fifteen (15) calendar days from and after the date
Market Rental is determined by the brokers as provided above, to advise
Lessor in writing that Lessee no longer desires to lease the premises
described in the Option Notice at the determined Market Rental, and
thereupon the Option Notice (and the Option) shall become null and void
and of no force or effect, and Lessee shall have no obligation to lease
the premises which were the subject of the Option Notice. If either
party fails to appoint a broker as herein required, the decision of the
other broker shall be binding. If the two originally appointed brokers
are unable timely to agree upon the appointment of a third broker, then
either party, acting on behalf of both, may request such appointment by
the Presiding Judge of the Superior Court of the State of California in
and for the County of Santa Clara. Upon the failure, refusal, or inability
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of any broker to act, a new broker shall be appointed in such broker's
stead, which appointment shall be made in the same manner as hereinbefore
provided for the appointment of the broker failing, refusing, or unable
to act. Each party shall bear the fees and expenses of the broker appointed
by it and the fees and expenses of the third broker (if any) shall be borne
equally by Lessor and Lessee.
r. The text of PARAGRAPH 50 of the Lease entitled "Rent" is
deleted in its entirety and the following substituted therefor as if originally
set forth therein:
With respect to the Original Premises only:
From May 1, 1997 to April 30, 1998-----$.49 per square foot per month
From May 1, 1998 to April 30, 1999-----$.505 per square foot per month
From May 1, 1999 to April 30, 2000-----$.520 per square foot per month
From May 1, 2000 to April 30, 2001-----$.536 per square foot per month
From May 1, 2001 to April 30, 2002-----$.552 per square foot per month
From May 1, 2002 to April 30, 2003-----$.569 per square foot per month
From May 1, 2003 to April 30, 2004-----$.586 per square foot per month
With respect to the Additional Premises only:
From the New Commencement Date to the first annual anniversary thereof-----
$.49 per square foot per month
From the first day after the first annual anniversary of the New
Commencement Date to the second annual anniversary thereof-----
$.505 per square foot per month
From the first day after the second annual anniversary of the New
Commencement Date to the third annual anniversary thereof-----
$.520 per square foot per month
From the first day after the third annual anniversary of the New
Commencement Date to the fourth annual anniversary thereof-----
$.536 per square foot per month
From the first day after the fourth annual anniversary of the New
Commencement Date to the fifth annual anniversary thereof-----
$.552 per square foot per month
From the first day after the fifth annual anniversary of the New
Commencement Date to the sixth annual anniversary thereof-----
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$.569 per square foot per month
From the first day after the sixth annual anniversary of the New
Commencement Date to April 30, 2004 (which time period may be less
than a twelve month period)-----
$.586 per square foot per month
s. To the end of PARAGRAPH 51 of the Lease entitled "Tenant
Improvements" is added the following as if originally set forth therein:
"Lessor agrees that Lessee may, during the term of the Lease or during
any extension thereof, construct in the Premises at Lessee's sole cost
and expense, an office mezzanine, and Lessor hereby consents thereto,
provided that said mezzanine shall be constructed in accordance with
SECTION 7.3 of the Lease including, without limitation, clauses (i) -
(iii) of SUBSECTION 7.3 (b) of the Lease. Lessee shall not, however,
upon the expiration or earlier termination of the Lease, be required
to remove any portion of the office mezzanine constructed in the
"Mezzanine Area" (as such area is depicted on EXHIBIT A-3 attached
hereto), except to the limited extent, if any, that such portion of
the office mezzanine exceeds 10,000 square feet. The construction of
an office mezzanine of any size shall in no event change or otherwise
affect the amount of rent, additional rent, or other compensation due
Lessor under the Lease."
t. EXHIBIT A of the Lease is hereby deleted in its entirety and
replaced with EXHIBIT A attached to this Amendment, and EXHIBITS A-1, A-2, and
A-3 attached to this Amendment are hereby made EXHIBITS A-1, A-2, and A-3 of the
Lease as though originally set forth therein.
u. EXHIBIT B of the Lease is hereby deleted in its entirety and
replaced with EXHIBIT B attached to this Amendment as though originally set
forth therein.
v. The words "the Commencement Date," in PARAGRAPH 12 of Rider
2 of the Lease are deleted in their entirety and the following substituted
therefor as if originally set forth therein:
"the New Commencement Date,"
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w. The words "exceed $39,000" in RIDER X of the Lease captioned
"Adjacent Premises; Limit on Premiums" are deleted in their entirety and the
following substituted therefor as if originally set forth therein:
"exceed $0.387 per square foot of Premises leased by Lessee"
3. THE ADDITIONAL PREMISES. Lessor represents and warrants to
Lessee that Lessor has terminated its lease of the Additional Premises to
Pinnacle Manufacturing Associates ("PINNACLE") and that it has removed
Pinnacle from the Additional Premises and from the Industrial Center in order
to enable Lessee to occupy the Additional Premises in accordance with the
terms and conditions of this Amendment. The parties agree that the
effectiveness of PARAGRAPH 2 of this Amendment is conditioned upon such
removal of Pinnacle from the Industrial Center. If Lessor has not delivered
possession of all of the Additional Premises to Lessee free and clear of any
other person's (other than Lessor's) interest therein by January 1, 1998,
Lessor agrees that Lessee may at Lessee's sole and absolute option by written
notice to Lessor advise Lessor, at anytime thereafter and before accepting
possession thereof, that PARAGRAPH 2 of this Amendment shall never become
effective and shall remain of no force and effect, in which event Lessee
shall be discharged from all obligations under this Amendment, and Lessor
shall return to Lessee all funds received from Lessee in connection with this
Amendment, including, without limitation, any increase in the Security
Deposit and any prepaid Basic Rent. Lessor may deliver the Additional
Premises to Lessee in their current "as-is" condition; provided, however,
that they shall be broom clean, in reasonable repair, and with all systems,
including, but not limited to HVAC, the roof, electrical, and plumbing, in
good working condition; and further provided that if the Additional Premises
become available prior to November 15, 1997, Lessee shall be entitled to take
early possession thereof in accordance with PARAGRAPHS 1.4 AND 3.2 of the
Lease. Lessor agrees to be responsible for all ADA requirements relating to
the Additional Premises (provided, however, that if Lessee makes improvements
to the Additional Premises that trigger additional ADA compliance, then
Lessee shall be responsible for all costs associated with the additional ADA
compliance), and all other work required to bring the Additional Premises
into compliance with any and all laws, rules, regulations, and codes.
4. BASE RENT CREDIT. On the New Commencement Date, in consideration
for Lessee waiving (pursuant to PARAGRAPH 2 (l) above) its right to require
Lessor to provide separately metered power to certain areas of the Premises,
Lessor agrees that Lessee shall receive a $15,000.00 credit against the Base
Rent first due and payable thereafter. Lessor and Lessee agree that this credit
is not and shall not be
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deemed an Inducement Provision (as such term is defined in PARAGRAPH 13.3 of
the Lease).
5. REPRESENTATIONS AND WARRANTIES. Lessor hereby remakes to Lessee,
with respect to the Additional Premises, both as of the date of this Amendment
and as of any New Commencement Date, the representations and warranties made by
Lessor in PARAGRAPH 6.5 of the Lease; and Lessor hereby represents and warrants
to Lessee, both as of the date hereof and as of any New Commencement Date, that
it has not received any written notice that might indicate any of the
representations and warranties made by Lessor in PARAGRAPH 6.5 of the Lease with
respect to the Original Premises are untrue.
6. BROKERS. Lessor and Lessee each represent and warrant to the
other that it has had no dealings with any person, firm, broker, or finder other
than Mr. Larry Blickman of BT Commercial (representing Lessor) and Mr. William
Cawley of Cawley International (representing Lessee) in connection with the
negotiation of this Amendment and the consummation of the transaction
contemplated hereby, and that no broker or other person, firm, or entity other
than said named brokers is entitled to any commission or finder's fee in
connection with said transaction. Lessor and Lessee do each agree to indemnify,
defend, and hold the other harmless from and against liability for compensation
or charges which may be claimed by any such unnamed broker, finder, or other
similar party by reason of any dealings or actions of the indemnifying party,
including any costs, expenses, and/or attorneys' fees reasonably incurred with
respect thereto, and Lessor and Lessee each agree to pay the commission of their
respective broker.
7. MEMORANDUM OF LEASE AND SUBORDINATION, NON-DISTURBANCE, AND
ATTORNMENT AGREEMENT. Lessor agrees to execute, acknowledge, and deliver to
Lessee for recordation (and to request its lender, Sumitomo Bank of California,
to do the same), such amendments to the parties' previously recorded Memorandum
of Lease and previously recorded Subordination, Non-Disturbance, and Attornment
Agreement as Lessee may reasonably request for the sole purpose of causing such
documents to reflect this Amendment and the leasing of the Additional Premises
by Lessee.
8. AUTHORITY TO AMEND. Each party hereto represents and warrants to
the other that it holds all the right, title, and interest of the landlord (in
the case of Lessor) or the tenant (in the case of Lessee) under the Lease, and
that it has full power and authority to amend the Lease as provided herein
without the consent or agreement of any third party.
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9. FURTHER ASSURANCES. Lessor and Lessee hereby agree to execute
and deliver to the other any additional instrument or other document which the
other party may reasonably request to evidence or to better effect the
amendments and agreements contained herein, promptly upon the request of such
other party; provided, however, that neither party shall be obligated to execute
or deliver any such other document which would enlarge the obligations or
liabilities, or diminish the rights, of such party hereunder.
10. ENFORCEMENT COST. Should either Lessor or Lessee institute any
actions or proceedings to enforce any provision of this Amendment, or for
damages or other losses incurred by reason of an alleged breach of any provision
hereof, then the prevailing party shall be entitled to receive all costs and
expenses (including reasonable attorneys' fees and expenses) incurred by the
prevailing party in connection with such action or proceeding.
11. MODIFICATION; BINDING EFFECT; BENEFIT. This Amendment may not be
modified, amended, supplemented, or otherwise changed except by a writing
executed by the party against whom such modification, amendment, supplement, or
other agreement is to be enforced. The terms and provisions contained herein
shall be binding upon and inure to the benefit of the parties hereto and to
their respective successors and assigns, but upon and to no other.
12. COUNTERPARTS. This Amendment may be executed in any number of
counterparts, each of which when executed and delivered shall be deemed an
original, and all of which taken together shall constitute but one and the same
instrument.
13. GOVERNING LAW. This Amendment shall be governed by, interpreted
under, and construed and enforced in accordance with the laws of the State of
California without giving effect to the principles of conflict of laws thereof.
14. ENTIRE AGREEMENT. This Amendment sets forth the entire agreement
of the parties hereto with respect to the subject matter contained herein, and
any prior agreement, whether oral or written, express or implied, of the parties
hereto and with respect to the subject matter contained herein is hereby
declared null and void. No agreements or representations, oral or otherwise,
express or implied, with respect to the subject matter hereof have been made by
the parties hereto, that are not set forth expressly in this Amendment.
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15. CAPTIONS. The captions in this Amendment are for convenience of
reference only and shall not be deemed to modify, explain, restrict, alter, or
affect the meaning or interpretation of any provision of this Amendment.
16. TIME. Time is of the essence of each and every provision hereof.
IN WITNESS WHEREOF, the undersigned parties have caused this Amendment
to be executed and delivered by their respective representatives, thereunto duly
authorized, as of the date first above written.
LESSOR:
/s/ S. STEPHEN NAKASHIMA
------------------------
S. Stephen Nakashima
/s/ SALLY S. NAKASHIMA
----------------------
Sally S. Nakashima, by S. Stephen
Nakashima, her attorney-in-fact
LESSEE:
ROCK SHOX, INC.,
a Delaware corporation
By: /s/ CHARLES E. NOREEN
-----------------------
Name: Charles E. Noreen
Title: CFO
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EXHIBIT 10.2
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement"), effective this 1st day of
November, 1997 (the "Effective Date"), is entered into by and between George
Napier ("Executive") and RockShox, Inc., a Delaware corporation (the
"Company").
WHEREAS, the Company desires to establish its right to the services
of Executive, in the capacity described below, on the terms and conditions
hereinafter set forth, and Executive is willing to serve the Company on such
terms and conditions.
NOW, THEREFORE, in consideration of the mutual agreements
hereinafter set forth, Executive and the Company have agreed and do hereby
agree as follows:
1. EMPLOYMENT. The Company does hereby employ Executive and
Executive does hereby accept employment as Chief Executive Officer and
President of the Company. Executive shall do and perform all services and
acts necessary or reasonably advisable to fulfill the duties and
responsibilities of his position and shall render such services on the terms
set forth herein and shall report to the Company's Board of Directors
(together with any duly authorized committee thereof, the "Board"). In
addition, Executive shall have such other executive and managerial powers and
duties with respect to the Company as may reasonably be assigned to him by
the Board, to the extent consistent with his positions and status as set
forth above. Executive agrees to devote to the Company his full business
time to the conduct of his duties hereunder. During the Term, Executive shall
continue to serve on the Board, but shall not receive any director fee for
such service. Upon termination of employment for any reason, at the request
of the Company, Executive shall resign as a director of the Company. During
the Term, without the prior consent of the Board, Executive shall not serve
on the board of directors of any other corporation, PROVIDED, that Executive
may continue to serve on the boards of directors of Stroheim & Romann and
Dimensions in Sport.
<PAGE>
2. TERM OF AGREEMENT. The term of this Agreement ("Term") shall
commence on the Effective Date and shall continue until the earlier of (i)
three (3) years after the Effective Date of the Agreement or (ii) such
earlier date upon which this Agreement is terminated as otherwise provided
herein.
3. PLACE OF EMPLOYMENT. Executive shall spend at least three
weeks of every month at the Company's offices in San Jose, California, unless
Executive is away from such offices of the Company on official business of
the Company, excluding normal vacations and holidays. The Company shall
reimburse Executive for travel expenses incurred in connection with
Executive's weekly commute between the Company's offices and Executive's
current residence.
4. COMPENSATION.
(a) BASE SALARY. During the Term, the Company shall pay
Executive an initial annual base salary at the rate of $300,000 per year or
such higher amount as the Board may from time to time determine (the "Base
Salary"), payable in equal biweekly installments or at such other time or
times as Executive and the Board shall agree.
(b) ADDITIONAL PAYMENT. In addition to his Base Salary,
Executive shall receive a one-time $50,000 cash payment if Executive is
continuously employed by the Company from the Effective Date through May 1,
1998.
(c) BONUS. In addition to his Base Salary, the Company shall
pay Executive the following bonus compensation (the "Bonus") during the Term:
(ii) For the twelve month period ending March 31, 1999,
$300,000, provided that the Company and Executive have
achieved certain objectives during such period to be
mutually agreed to, and negotiated in good faith, in
advance by Executive and the Board on or about the
first day of such period.
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(iii) For the twelve month period ending March 31, 2000,
$300,000, provided that the Company and Executive have
achieved certain objectives during such period to be
mutually agreed to, and negotiated in good faith, in
advance by Executive and the Board on or about the
first day of such period.
(iv) For the twelve month period ending March 31, 2001, a
pro rata portion of $300,000 based on the number of
days Executive is employed by the Company during such
fiscal year, provided that the Company and Executive
have achieved certain objectives during such period to
be mutually agreed to, and negotiated in good faith, in
advance by Executive and the Board on or about the
first day of such period.
With respect to each twelve month period, the Bonus may be adjusted
upward or downward based upon the extent to which targeted performance
objectives have been met, as agreed to by the Board and Executive and
provided in a Company bonus plan. Each such bonus shall be payable within
thirty (30) days after the issuance of the Company's audited statements with
respect to the Company's applicable fiscal year.
5. OTHER COMPENSATION
(a) LIFE INSURANCE. The Company shall reimburse Executive
for the cost of purchasing and maintaining a term life insurance policy with
a face value of $2 million on Executive's life (the "Life Insurance Policy"),
plus any federal, state or local income or other taxes imposed on Executive
by reason of such reimbursement; up to a maximum annual amount of seven
thousand dollars. The owner and beneficiary of such policy shall be
designated by Executive.
(b) STOCK OPTIONS. Subject to the approval by the
Compensation Committee of the Board (as to which the Company shall use its
best efforts to obtain), the Company shall grant Executive stock options (the
"Options")
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to purchase 300,000 shares of Common Stock under the RockShox, Inc. 1996
Stock Plan (the "Plan"). The per share exercise price of such Options shall
equal the fair market value of the stock on the date of grant and shall vest
and become exercisable pro rata on the first, second and third anniversary
dates of the date of grant. The vesting of the Options shall accelerate upon
the occurrence of a Transaction (as defined below). Such Options shall
qualify as Incentive Stock Options, to the extent permitted under the Plan
and Section 422 of the Internal Revenue Code of 1986, as amended.
Subject to the approval by the Compensation Committee of the Board
(as to which the Company shall use its best efforts to obtain), the Company
shall also grant Executive Options to purchase an additional 100,000 shares
of Common Stock. The terms and provisions relating to such Options shall be
substantially similar those of options granted generally under the RockShox,
Inc. 1996 Stock Plan, provided that (i) the per share exercise price of such
Options shall be equal to the fair market value of the stock on the date of
grant, (ii) the Options shall vest pro rata on the first, second and third
anniversary dates of the date of grant, (iii) such Options shall become
exercisable only at such time that Executive ceases to be a named executive
officer of the Company and (iv) the vesting of the Options shall accelerate
upon the occurrence of a Transaction (as defined below).
A "Transaction" means any recapitalization, sale of stock or
assets, dissolution, or merger that (i) occurs during the period beginning
six months after the Effective Date and ending (A) on the date of Executive's
termination of employment for Cause or by reason of his voluntary termination
or (B) six months after Executive's termination of employment other than for
Cause or by reason of his voluntary termination and (ii) results in the
delivery of cash, stock or other property to the holders of a majority of the
then outstanding common stock of the Company on a fully diluted basis (I.E.,
including shares issuable upon exercise of then outstanding options).
(c) FRINGE BENEFITS. Executive shall be entitled to
participate in the following fringe benefits:
(1) PARTICIPATION IN RETIREMENT/WELFARE PLANS. Executive
shall be eligible to participate in all savings, retirement, and welfare
plans, practices, policies and programs applicable generally to senior
executive officers of the Company.
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(2) VACATION. Executive shall be entitled to accrue up to
a maximum of four weeks of paid vacation days in each year of employment.
If Executive has accrued four weeks of vacation, Executive shall cease to
accrue vacation days until the amount of such accrued vacation is less than
four weeks. The timing of paid vacations shall be scheduled in a reasonable
manner by Executive.
(3) HEALTH INSURANCE. Executive, his spouse and children
shall receive (and the Company shall be responsible for the payment
therefor) coverage under health insurance substantially similar to the
health insurance provided to Executive, his spouse and children immediately
prior to his employment with the Company.
6. REIMBURSEMENT FOR BUSINESS EXPENSES. The Company shall reimburse
Executive for all reasonable and necessary expenses incurred by Executive in
performing his duties for the Company, including the following business
expenses:
(a) TRAVEL. The Company shall reimburse Executive for expenses
incurred in connection with customary business travel in accordance with Company
policy and Executive's reasonable discretion, including but not limited to,
business-class travel expenses.
(b) RENTAL CAR. The Company shall reimburse Executive for
expenses incurred in renting an automobile during the first six months of
Executive's employment with the Company.
7. RENTAL APARTMENT. The Company shall reimburse Executive for
reasonable out-of-pocket expenses incurred by Executive for a month-to-month
rental apartment in the San Jose area. During the six month period following
the Effective Date of this Agreement, the Board and Executive shall develop a
policy regarding Executive's permanent relocation to the San Jose area, which
would include reimbursement of the costs of renting a home for Executive and
his family in the San Jose area for so long as Executive maintains a home in
Connecticut. In the event any payment, property or benefit that is received
by Executive or paid by the Company on his behalf with respect to his
relocation to the San Jose area (including travel and rental car expenses, to
the extent not treated
5
<PAGE>
as business or moving expenses) is subject to federal, state, or local income
taxes, the Company shall reimburse Executive for such taxes.
8. TERMINATION OF EXECUTIVE'S EMPLOYMENT. Upon termination of
Executive's employment, Executive shall be entitled to receive the following
benefits:
(a) DEATH. In the event Executive's employment hereunder is
terminated by reason of Executive's death, Executive's estate (or other
appropriate payee or beneficiary) shall be entitled to receive (i) all
benefits payable to Executive through his date of termination from the
Company under the terms of those Company benefit plans, programs or
arrangements provided to Executive as "Other Compensation" in Section 5 of
this Agreement and (ii) any bonus to which Executive would have been entitled
pursuant to Section 4(c) with respect to the twelve month period ending on
the March 31 immediately following Executive's death, provided that such
bonus is prorated for the portion of the fiscal year during which Executive
was employed by the Company.
(b) DISABILITY. If, as a result of Executive's incapacity
due to physical or mental illness ("Disability"), Executive shall have been
absent from the full-time performance of his duties with the Company for
sixty (60) days during any one-hundred and eighty (180) day period,
Executive's employment under this Agreement may be terminated by the Company
or Executive for Disability. During any period prior to such termination
during which Executive is absent from the full-time performance of his duties
with the Company due to Disability, the Company shall continue to pay
Executive his Base Salary at the rate in effect at the commencement of such
period of Disability. Upon termination of Executive's employment for
Disability, (i) the Company shall continue to pay Executive his Base Salary
for a period of twelve months (subject to offset for disability insurance
benefits received by Executive or his designee on a tax adjusted basis) and
(ii) the Company shall pay all benefits payable to Executive through his date
of termination under the terms of those Company benefit plans, programs or
arrangements provided to Executive as "Other Compensation" in Section 5 of
this Agreement.
(c) TERMINATION FOR CAUSE OR RESIGNATION. The Company may
terminate Executive's employment under this Agreement for Cause at any time
prior to expiration of the Term. As used herein, termination for "Cause"
shall mean termination upon (1) the material failure by Executive to
6
<PAGE>
perform any of his duties with the Company or to follow the good faith
instructions of the Board (other than any such failure resulting from his
incapacity due to physical or mental illness), including, but not limited to,
the "Place of Employment" obligations set forth in Section 3 of the
Agreement, provided that Executive has failed to cure such breach within 10
days of receipt of written notice thereof from the Company, (2) the willful
engaging by Executive in conduct that is materially injurious to the Company,
monetarily or otherwise, (3) the conviction of Executive of (or the pleading
by Executive of NOLO CONTENDRE to) any felony, fraud or embezzlement or (4)
any material breach by Executive of the terms of this Agreement, which
Executive has failed to cure within 10 days of receipt of written notice of
such breach from the Company.
In the event of termination for Cause or resignation by Executive,
this Agreement shall terminate without further obligation by the Company,
except for payment of amounts of Base Salary and any fringe benefits accrued
through the date of such termination for Cause or resignation by Executive.
(d) TERMINATION BY THE COMPANY OTHER THAN FOR DEATH,
DISABILITY, CAUSE OR RESIGNATION. If Executive's employment is terminated by
the Company on or before April 30, 1998, for any reason other than
Executive's death, Disability, resignation, or for Cause, Executive shall
receive as severance (i) his Base Salary at the rate then in effect for a
period of six months and (ii) continuation of health benefits for a period of
six months substantially similar to the health benefits provided to Executive
immediately prior to termination.
If Executive's employment is terminated by the Company after April
30, 1998, for any reason other than Executive's death, Disability,
resignation, or for Cause, Executive shall receive as severance (i) his Base
Salary at the rate then in effect for a period of twelve months (such period,
the "Severance Period"), (ii) continuation of health benefits during the
Severance Period substantially similar to those provided to Executive
immediately prior to termination, (iii) continuation of payments with respect
to premiums on the life insurance policy through the end of the Severance
Period, (iv) reimbursement (including income taxes due thereon) of the
reasonable cost of relocating Executive's family back to Executive's current
Connecticut residence, and (v) all outstanding equity incentive awards
(including without limitation stock options granted) that would have become
vested during the Severance Period, shall
7
<PAGE>
immediately vest and remain exercisable for a period of ninety (90) days
following Executive's termination of employment.
The Base Salary payments provided to Executive during the Severance
Period pursuant to Section 8(d)(i) hereof shall be reduced by an amount equal
to the Consulting Fee (as defined below) payable by the Company to Executive
pursuant to Section 10(a) of this Agreement.
9. CONFIDENTIAL INFORMATION AND NON-SOLICITATION.
(a) CONFIDENTIALITY. Executive acknowledges that in his
employment hereunder, and during prior periods of employment with the
Company, he has occupied and will continue to occupy a position of trust and
confidence. Executive shall not, except as may be required to perform his
duties hereunder or as required by court order or applicable law, without
limitation in time or until such information shall have become public other
than by Executive's unauthorized disclosure, disclose to others or use,
whether directly or indirectly, any Confidential Information regarding the
Company. "Confidential Information" shall mean information about the
Company, and their respective clients and customers that is not disclosed by
the Company for financial reporting purposes and that was learned by
Executive in the course of his employment by the Company, including (without
limitation) any proprietary knowledge, trade secrets, data, formulae,
information and client and customer lists and all papers, resumes, and
records (including computer records) of the documents containing such
Confidential Information. Executive acknowledges that such Confidential
Information is specialized, unique in nature and of great value to the
Company and that such information gives the Company a competitive advantage.
Executive agrees to deliver or return to the Company, at the Company's
request at any time or upon termination or expiration of his employment or as
soon thereafter as possible, all documents, computer tapes and disks,
records, lists, data, drawings, prints, notes and written information (and
all copies thereof) furnished by the Company or prepared by Executive during
the term of his employment by the Company.
(b) NON-SOLICITATION OF CUSTOMERS AND SUPPLIERS. During the
period in which he is employed by the Company (and, in the event Executive's
employment is terminated by the Company for Cause, for a period of one (1)
year beyond the expiration of the Term), Executive shall not, directly or
indirectly, influence or attempt to influence customers or suppliers of the
8
<PAGE>
Company to divert their business to any business, individual, partner, firm,
corporation, or other entity that is then a direct competitor of the Company
with respect to the manufacture and sale of bicycle components or
non-automotive suspension products (each such competitor a "Competitor of the
Company").
(c) NON-SOLICITATION OF EMPLOYEES. Executive recognizes that
he possesses and will possess confidential information about other employees
of the Company relating to their education, experience, skills, abilities,
compensation and benefits, and inter-personal relationships with customers of
the Company. Executive recognizes that the information he possesses and will
possess about these other employees is not generally known, is of substantial
value to the Company and its subsidiaries in developing its business and in
securing and retaining customers, and has been and will be acquired by him
because of his business position with the Company. Executive agrees that,
during the period in which he is employed by the Company (and, in the event
Executive's employment is terminated by the Company for Cause, for a period
of one (1) year beyond the expiration of the Term), he will not, directly or
indirectly, solicit or recruit any employee of the Company for the purpose of
being employed by him or by any Competitor of the Company on whose behalf he
is acting as an agent, representative or employee and that he will not convey
any such confidential information or trade secrets about other employees of
the Company to any other person.
10. NONCOMPETITION/CONSULTING ARRANGEMENT; SURVIVAL OF PROVISIONS.
(a) NONCOMPETE/CONSULTING. For a period of one year
following termination of employment, Executive shall be a non-employee
consultant of the Company and shall provide consulting services to the
Company, as the Company reasonably requests. Executive shall not, during
such period, directly or indirectly, for his own account or for the account
of others, either as an officer, director, stockholder, owner, partner,
promoter, employee, consultant, adviser, agent, manager, or in any other
capacity assist or provide services to any person or entity that is then in
competition with the Company or its affiliates in the manufacturing and sale
of bicycle components or non-automotive suspension products. In consideration
of Executive's consulting and non-competition obligations provided herein,
Executive shall receive an annual consulting fee of $25,000 (the "Consulting
Fee"), payable at regular payroll intervals. At the
9
<PAGE>
Company's discretion, after a period of twelve months, the Consulting Fee
shall be terminated.
(b) SURVIVAL OF PROVISIONS. The obligations contained in
Sections 9 and 10 shall, to the extent provided in Sections 9 and 10, survive
the termination or expiration of Executive's employment with the Company and,
as applicable, shall be fully enforceable thereafter in accordance with the
terms of this Agreement. If it is determined by a court of competent
jurisdiction in any state that any restriction in Sections 9 or 10 is
excessive in duration or scope or is unreasonable or unenforceable under the
laws of that state, it is the intention of the parties that such restriction
may be modified or amended by the court to render it enforceable to the
maximum extent permitted by the law of that state.
11. MITIGATION/OFFSET. Executive shall be required to mitigate
the amount of any payment provided for under Section 8(d)(i) or 8(d)(ii) of
this Agreement by seeking other employment. The amount of any payment or
benefit provided for in Section 8 of this Agreement shall be reduced by any
similar compensation or benefits earned by him as a result of employment by
another employer.
12. NOTICES. All notices and other communications under this
Agreement shall be in writing and shall be given by fax, first-class mail,
certified or registered with return receipt requested, or overnight courier
service, and shall be deemed to have been duly given three (3) days after
mailing or twenty-four (24) hours after transmission of a fax or by overnight
courier service to the respective persons named below:
If to Company: RockShox, Inc.
401 Charcot Avenue
San Jose, California 95131
ATTENTION: Corporate Secretary
Phone: (408) 435-7469
Fax: (408) 435-7468
If to Executive: George Napier
71 Clapboard Ridge Road
Greenwich, Connecticut 06830
Phone: (203) 629-9144
10
<PAGE>
Either party may change such party's address for notices by notice duly given
pursuant hereto.
13. DISPUTE RESOLUTION; ATTORNEYS' FEES. The Company and
Executive agree that any dispute, other than with respect to Sections 9 or
10, about the validity, interpretation, effect or alleged violation of this
Agreement (an "Arbitrable Dispute") must be submitted to confidential
arbitration. Arbitration shall take place before an experienced employment
arbitrator licensed to practice law and selected in accordance with the Model
Employment Arbitration Procedures of the American Arbitration Association.
Arbitration shall be the exclusive remedy of any Arbitrable Dispute. Should
any party to this Agreement pursue any Arbitrable Dispute by any method other
than arbitration, the other party shall be entitled to recover from the party
initiating the use of such method all damages, costs, expenses and attorneys'
fees incurred as a result of the use of such method. Each party shall have
the right, in addition to any other relief granted by such arbitrator (or by
any court with respect to relief granted with respect to Sections 9 or 10),
to attorneys' fees based on a determination by the arbitrator (or, with
respect to Sections 9 or 10, the court) of the extent to which each party has
prevailed as to the material issues raised in determination of the dispute.
14. TERMINATION OF PRIOR AGREEMENTS. This Agreement terminates
and supersedes any and all prior agreements and understandings between the
parties with respect to Executive's employment and compensation by the
Company, but only with respect to the matters expressly addressed herein.
15. ASSIGNMENT; SUCCESSORS. This Agreement is personal in its
nature and neither of the parties hereto shall, without the consent of the
other, assign or transfer this Agreement or any rights or obligations
hereunder; provided that, in the event of the merger, consolidation,
transfer, or sale of all or substantially all of the assets of the Company
with or to any other individual or entity, this Agreement shall, subject to
the provisions hereof, be binding upon and inure to the benefit of such
successor and such successor shall discharge and perform all the promises,
covenants, duties, and obligations of the Company hereunder.
11
<PAGE>
16. GOVERNING LAW. This Agreement and the legal relations thus
created between the parties hereto shall be governed by and construed under
and in accordance with the laws of the State of Delaware.
17. WITHHOLDING. The Company shall make such deductions and
withhold such amounts from each payment made to the Executive hereunder as
may be required from time to time by law, governmental regulation or order.
18. HEADINGS. Section headings in this Agreement are included
herein for convenience of reference only and shall not constitute a part of
this Agreement for any other purpose.
19. WAIVER; MODIFICATION. Failure to insist upon strict
compliance with any of the terms, covenants, or conditions hereof shall not
be deemed a waiver of such term, covenant, or condition, nor shall any waiver
or relinquishment of, or failure to insist upon strict compliance with, any
right or power hereunder at any one or more times be deemed a waiver or
relinquishment of such right or power at any other time or times. This
Agreement shall not be modified in any respect except by a writing executed
by each party hereto.
20. SEVERABILITY; POOLING.
(a) In the event that a court of competent jurisdiction
determines that any portion of this Agreement is in violation of any statute
or public policy, only the portions of this Agreement that violate such
statute or public policy shall be stricken. All portions of this Agreement
that do not violate any statute or public policy shall continue in full force
and effect. Further, any court order striking any portion of this Agreement
shall modify the stricken terms as narrowly as possible to give as much
effect as possible to the intentions of the parties under this Agreement.
(b) In the event that the Company is party to a transaction
which is otherwise intended to qualify for "pooling of interests" accounting
treatment then (1) this Agreement shall, to the extent practicable, be
interpreted so as to permit such accounting treatment, and (2) to the extent
that the application of clause (1) of this Section 20(b) does not preserve
the availability of such accounting treatment, then, to the extent that any
provision of the Agreement disqualifies the transaction as a "pooling"
transaction (including, if applicable, the
12
<PAGE>
entire Agreement), such provision shall be null and void as of the date
hereof. All determinations under this Section 20(b) shall be made by the
accounting firm whose opinion with respect to "pooling of interests" is
required as a condition to the consummation of such transaction. The Company
shall use its best efforts to maintain the effectiveness of all provisions of
the Agreement (or to give Executive the economic benefit thereof) without
adversely affecting "pooling of interests" treatment of a transaction.
21. INDEMNIFICATION. The Company shall indemnify and hold
Executive harmless for acts and omissions in his capacity as an officer,
director or employee of the Company to the maximum extent permitted under
applicable law.
22. COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original but all of
which together will constitute one and the same instrument.
23. BOARD APPROVAL. This Agreement shall take effect upon the
Effective Date, but shall be subject to the approval of the Board.
13
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Agreement to be
executed by its duly authorized officer, and the Executive has hereunto
signed this Agreement, as of the date first above written.
ROCKSHOX, INC.
----------------------------------
By:
Its:
----------------------------------
George Napier
14
<PAGE>
Item 6. Exhibit 11
ROCKSHOX, INC.
Statement regarding computation of net income (loss) per share
(In thousands, except per share data)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
Dec. 31, 1997 Dec. 31, 1996 Dec. 31, 1997 Dec. 31, 1996
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Reconciliation of shares used in basic
and diluted per share calculations:
- --------------------------------------
Weighted average shares of common stock
outstanding.............................. 13,757 13,620 13,703 10,700
------ ------ ------ ------
Shares used in basic net income per share
calculation.............................. 13,757 13,620 13,703 10,700
------ ------ ------ ------
------ ------ ------ ------
Weighted average shares of common stock
outstanding.............................. 13,757 13,620 13,703 10,700
Dilutive effect of stock options........... 241 406 351 135
------ ------ ------ ------
Shares used in diluted net income per share
calculation.............................. 13,998 14,026 14,054 10,835
------ ------ ------ ------
------ ------ ------ ------
Income before extraordinary item........... 1,811 4,925 8,182 5,335
Accretion for dividends on mandatorily
redeemable preferred stock............... --- --- --- (185)
------ ------ ------ ------
Income before extraordinary loss available
to common stockholders................ 1,811 4,925 8,182 5,150
Extraordinary loss from early extinguishment
of debt (net of tax benefit of $885)..... --- --- --- (1,328)
------ ------ ------ ------
Net income available to common
stockholders.......................... $1,811 $4,925 $8,182 $3,822
------ ------ ------ ------
------ ------ ------ ------
Income per share before extraordinary
item-basic............................... $ 0.13 $ 0.36 $ 0.60 $ 0.48
Loss per share from extraordinary
item-basic............................... --- --- --- (0.12)
------ ------ ------ ------
Net income per share-basic............. $ 0.13 $ 0.36 $ 0.60 $(0.36)
------ ------ ------ ------
------ ------ ------ ------
Income per share before extraordinary
item-dilutive........................... $ 0.13 $ 0.35 $ 0.58 $ 0.48
Loss per share from extraordinary
item-dilutive........................... --- --- --- (0.13)
------ ------ ------ ------
Net income per share-dilutive......... $ 0.13 $ 0.35 $ 0.58 $ 0.35
------ ------ ------ ------
------ ------ ------ ------
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-START> APR-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 7,736
<SECURITIES> 0
<RECEIVABLES> 15,966
<ALLOWANCES> (1,106)
<INVENTORY> 12,906
<CURRENT-ASSETS> 39,913
<PP&E> 21,273
<DEPRECIATION> (7,053)
<TOTAL-ASSETS> 54,438
<CURRENT-LIABILITIES> 13,611
<BONDS> 0
0
0
<COMMON> 138
<OTHER-SE> 40,689
<TOTAL-LIABILITY-AND-EQUITY> 54,438
<SALES> 80,159
<TOTAL-REVENUES> 80,159
<CGS> 54,244
<TOTAL-COSTS> 13,589
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 12,777
<INCOME-TAX> 4,595
<INCOME-CONTINUING> 8,182
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 8,182
<EPS-PRIMARY> .60
<EPS-DILUTED> .58
</TABLE>
