SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-K
(Mark One)
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (FEE REQUIRED)
For the fiscal year ended June 29, 1996
--------------------------
/ / OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from to
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Commission file number 0-19873
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BELL SPORTS CORP
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(Exact name of registrant as specified in its charter)
Delaware 36-3671789
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(State or other jurisdiction of (I.R.S. employer identification no.)
incorporation or organization)
15170 N. Hayden Rd., Suite #1, Scottsdale, Arizona 85260
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(Address of principal executive offices) (Zip Code)
(602) 951-0033
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(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
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Not applicable
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Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.01 par value
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(Title of class)
Preferred Stock Purchase Rights
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(Title of class)
4 1/4% Convertible Subordinated Debentures due 2000
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(Title of class)
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that 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
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Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
The aggregate market value of the voting stock held by non-affiliates of the
registrant as of September 6, 1996 was $99,331,960 (based on the average of the
high and low sales price as reported by The Nasdaq Stock Market on such date).
APPLICABLE ONLY TO CORPORATE REGISTRANTS
The number of shares outstanding of each of the registrant's classes of common
stock, as of September 6, 1996:
Class Number of shares
- ----- ----------------
Common Stock, $.01 par value 13,700,960
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PART I.
Item 1. Business
(a) General development of business
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The Company is a leading worldwide designer, manufacturer and marketer of
bicycle accessories, bicycle helmets, bicycles and auto racing helmets. The
Company sells bicycle helmets and a variety of bicycle accessories under various
brand names such as Bell, Giro, Advent, Rhode Gear, Blackburn, VistaLite,
SportRack, BSI, Copper Canyon and BikeXtras. The Company's bicycle line is sold
under the Mongoose brand name. For the fiscal year ended June 29, 1996, bicycle
accessories, bicycle helmets, bicycles and auto racing products represented
49%, 31%, 18% and 2%, respectively, of the Company's net sales.
Bell Sports Corp. was incorporated in Delaware in 1989. As used herein, unless
the context otherwise clearly requires, the "Company" refers to Bell Sports
Corp., its consolidated subsidiaries and its predecessors. The Company is a
successor to four principal businesses that engaged in the manufacture and
marketing of motorcycle helmets, bicycle helmets, bicycle accessories and auto
racing products. In June 1991, the Company ceased manufacturing and marketing
motorcycle helmets, although the Company continues to license the trademarks
used in connection with the manufacture of such helmets to a third party. In
August 1991, the Company established EuroBell S.A. ("EuroBell") to enhance the
Company's ability to compete in the European market. In April 1992, the Company
completed an initial public offering of its common stock, par value $.01
("Common Stock"). In November 1992, the Company acquired Blackburn Designs, Inc.
("Blackburn"), a leading designer and marketer of certain bicycle accessories.
In December 1992, the Company completed a secondary public offering of its
common stock. The Company completed a public offering of convertible
subordinated debentures in November 1993. In January 1994, the Company acquired
the business of VistaLite, Inc. ("VistaLite"), a leading designer and
manufacturer of LED safety lights and headlights for bicycles. In May 1995, the
Company acquired substantially all of the assets of SportRack Canada, Inc.
("SportRack"), which designs, manufactures and markets automobile roof rack
systems. In July 1995, the Company completed the merger (the "AMRE Merger") of a
subsidiary of the Company with American Recreation Company Holdings, Inc.
("AMRE") pursuant to which AMRE became a wholly-owned subsidiary of the Company.
AMRE is a world-wide designer, marketer and distributor of bicycles and related
parts and accessories. In January 1996, the Company acquired the assets of Giro
Sport Design, Inc. and all of the outstanding stock of Giro Sport Design
International, Inc. (collectively "Giro"). Giro designs, manufacturers and
markets premium bicycle helmets.
VistaLite is a trademark of Bell Sports, Inc. BELL(R), RHODE GEAR U.S.A.(R),
GIRO(R), BSI(R) and BLACKBURN(R) are trademarks of Bell Sports, Inc., which are
registered in the United States and other countries. AMRE proprietary products
include bicycle helmets, parts and accessories and bicycles sold under the
BikeXtras(TM), Copper Canyon(TM), Cycletech(TM), Advent(TM) and Mongoose(TM)
brand names.
(b) Financial information about industry segments
---------------------------------------------
The Company operates primarily in one line of business--the marketing and
distribution of bicycle accessories, bicycle helmets and bicycles. The Company
also manufactures and markets auto racing helmets. The revenues generated and
the identifiable assets used in the auto racing business are not significant to
the Company.
(c) Narrative description of business
---------------------------------
(i) Principal products produced and principal markets and methods of
distribution
The Company markets and distributes bicycle accessories, bicycle
helmets and bicycles.
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The Company markets its products in two primary trade channels --
specialty retail and mass merchant. The specialty retail trade channel
is comprised of independent bicycle dealers ("IBDs"), sporting goods
retailers and mail-order catalogs, all of which target the mid-to
premium-priced segment of the consumer market. The mass merchant trade
channel appeals to the economy-priced segment of the market and
includes retailers such as Kmart, Wal*Mart and Price Costco.
The Company has three U.S. divisions: Specialty Retail, Service Cycle
and Giro--which offer products to the specialty retail trade channel.
The Company's Specialty Retail Division markets bicycle helmets under
the Bell Pro brand name and bicycle accessories under the Rhode Gear,
Blackburn and VistaLite brand names. Sale of merchandise is made
through the division's own sales force. The Service Cycle Division
offers bicycle helmets and bicycle accessories under the Advent brand
name and a value-priced line of bicycles sold under the widely
recognized Mongoose brand. Mongoose offers a full line of off-road
(mountain and BMX) and on-road bicycles for adults and juveniles.
Service Cycle distributes its proprietary products as well as several
popular brands of non-propriety bicycle accessories through the
division's own sales force. The Company's Giro Division offers premium
bicycle helmets under the Giro brand name and sunglasses under the
Smith brand name. The Giro brand is considered one of the most elite
brands in the bicycle helmet industry. The Giro Division distributes
its products through independent sales representatives.
The Company also markets a wide range of bicycle accessories and
bicycle helmets in the mass merchant trade channel through the
Company's U.S. Mass Merchant Division. Bicycle helmets are marketed
under the brand names: Bell and BSI. Bicycle accessories are marketed
under the Copper Canyon and BikeXtras brand names. Prior to fiscal
1996, the Bell brand of bicycle helmets was marketed exclusively in the
specialty retail trade channel.
The Company currently has three international divisions located in
Canada, France and Ireland. Bell Sports Canada, located in Granby,
Quebec, has three divisions: Specialty Retail, Mass Merchant and
SportRack. The Specialty Retail and Mass Merchant Divisions operate
similar to the U.S.divisions, and use most of the same brand names,
plus a few that are unique to the Canadian market. SportRack
manufacturers, markets and distributes automotive roof rack systems to
IBDs and other nontraditional trade channels such as original
automotive equipment manufacturers and snow ski shops.
The EuroBell Division, located in France, was established in 1991
primarily as a bicycle helmet manufacturing, marketing and distribution
operation. EuroBell has expanded its product offerings to include a
variety of bicycle accessories and bicycles. Bicycle helmets are
marketed to specialty shops and mass merchants under the Bell and Bike
Star brand names, as well as certain private label arrangements.
Bicycle accessories are marketed under the Rhode Gear, VistaLite,
Blackburn and SportRack brands. Bicycles are offered under the Mongoose
name.
Giro Ireland Limited, located in Ireland, markets and distributes
bicycle helmets across Europe under the Giro brand name.
The Company anticipates opening a sales and marketing office in Sidney,
Australia during fiscal 1997 to market and distribute the Company's
various brand name products to the Pacific Rim specialty retail and
mass merchant trade channels.
The Company is also a leading manufacturer and marketer of auto racing
helmets on an international basis.
(ii) Status of new products
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The Company has ongoing research and development programs directed at
enhancing and extending its existing products and developing new
products. See "Research and Development Expenditures." The Company does
not at present have a new product or new industry segment that requires
the investment of a material amount of the total assets of the Company.
(iii) Sources and availability of raw materials
No single raw material accounts for a significant portion of the cost
of the Company's products. The Company's bicycle and auto racing
helmets contain plastic expandable polystyrene foam, which is one of
the primary materials used in the Company's helmets. Presently, the
Company purchases substantially all of its expandable polystyrene from
BASF and Polysource, two of several possible suppliers of this
material. Metal tubing, readily available from many sources, is used
extensively in the manufacturing of bicycle carriers and roof racks for
automobiles. The Company does not have any long-term supply contracts
for the purchase of raw materials. Some components and many finished
good items, including bicycles and certain bicycle parts and
accessories, are manufactured for the Company by outside suppliers,
including suppliers in Mexico, Europe and the Far East.
(iv) Patents, trademarks and licenses
In the course of its business, the Company employs various trademarks,
trade names and service marks, including its logos, in the packaging
and advertising of its products. The Company believes the strength of
its service marks, trademarks and trade names is of considerable value
and importance to its business and intends to continue to protect and
promote its marks as appropriate. The loss of any significant mark
could have a material adverse effect on the Company. The Company also
licenses the Bell trademark for use on certain motorcycle, snowmobile,
ski and police helmets manufactured by third parties.
The Company is the owner of numerous federal registrations and
applications filed with the United States Patent and Trademark Office.
These registrations constitute evidence of the validity of these marks
and the Company's exclusive right to use the marks on its products. The
Company may also be entitled to protection under the federal Trademark
Act for the Company's unregistered marks. As of June 29, 1996, the
Company owned 70 United States patents and 30 foreign patents. In
addition, as of June 29, 1996, the Company had 14 United States patents
and eight foreign patents pending issuance. None of the Company's
patents are believed to be individually material to the continuing
operations of the Company.
(v) Extent to which the business is seasonal
As a result of the timing of the Company's spring selling season, net
sales are normally higher in the second half of the fiscal year than
the first half. The first quarter of the fiscal year is the Company's
slowest quarter. Although some selling and administrative expenses are
variable with sales, many expenses are incurred evenly throughout the
year. Accordingly, low sales in any quarter may adversely effect the
Company's operating margins and profitability in such quarter. The
Company's quarterly results may also vary depending on such factors as
the timing of new product introductions, major customer shipments,
inventory holdings of significant customers, adverse weather conditions
and the sales mix of products sold.
(vi) Working capital items
The timing of the Company's preseason selling programs and spring
selling season may cause fluctuations in the levels of inventory and
receivables held by the Company from quarter to quarter. The Company
supports sales of its products through various seasonal
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promotions, which include extended payment terms for independent
bicycle dealers. Historically, inventories and receivables are higher
in the second half of the fiscal year as compared to the first half.
(vii) Dependence on single customer
The Company sells to small independent bicycle dealers and national
mass merchants. For the year ended June 29, 1996, approximately 17% of
the Company's sales were to a single customer, Wal*Mart. The loss of
this customer or a significant reduction in sales to this or other
large mass merchant customers could have a material adverse effect on
the Company's sales and profitability. The write-off of any significant
receivable due from these customers could also adversely impact the
Company's profitability.
(viii) Amount of backlog
Historically, there is a backlog of specialty retail orders from
October to December as a result of preseason orders placed after the
fall trade shows. The backlog decreases over the winter months and is
usually insignificant by the end of the Company's third fiscal quarter.
The mass merchant trade channel does not operate with a large backlog.
The Company's backlog of orders at June 29, 1996 and July 1, 1995 was
not significant.
(ix) Business subject to renegotiation
The Company does not currently engage in any business with governmental
authorities that may be subject to renegotiation of profits or
termination of contracts or subcontracts at the election of such
authorities.
(x) Competitive conditions
The markets for the Company's bicycle-related products are highly
competitive and the Company faces competition from a number of sources
in each of its product lines. Some competitors are part of large
bicycle manufacturers and may be able to better promote bicycle helmet
and accessory sales through bicycle sales programs. Competition is
based on price, quality, customer service, brand name recognition and
style. Although there are no significant technological or manufacturing
barriers to entry into the Company's bicycle related businesses,
factors such as brand recognition, customer relationships and product
liability exposure may discourage new competitors from entering the
business. Many new competitors have entered the bicycle helmet market
in the last five years and pricing pressures have increased
significantly as a result of such competition.
(xi) Research and development expenditures
The Company has an ongoing research and development program directed at
enhancing and expanding its existing products and developing new
products. The Company's bicycle helmet research and development staff
primarily focuses on developing technical product features that can
improve helmet aerodynamics, weight, comfort, durability, safety,
aesthetics and style in an effort to broaden a helmet's consumer
appeal. A separate staff focuses on developing state-of-art and better
performing bicycle accessories. The Company also maintains an
experienced bicycle research and development staff to develop
innovative bicycle products and improve upon existing products. The
Company spent approximately $4.7 million, $3.3 million and $3.2 million
on research and development in the fiscal years ended June 29, 1996,
July 1, 1995 and July 2, 1994, respectively. The increase in fiscal
1996 is attributed to the addition of AMRE, SportRack and Giro.
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(xii) Material effects of compliance with environmental regulations
In the ordinary course of its business, the Company is required to
dispose of certain waste at off-site locations. During 1993, the
Company became aware of an investigation by the Illinois Environmental
Protection Agency (the "Illinois Agency") of a waste disposal site,
owned by a third party, which was previously utilized by the Company.
As a result of that investigation, the Illinois Agency informed the
Company that certain of the Company's practices with respect to the
identification, storage and disposal of hazardous waste and related
reporting requirements may not have complied with the applicable law.
On March 14, 1995, the State of Illinois (the "State") filed a
complaint with the Illinois Pollution Control Board (the "Pollution
Control Board") against the Company and the disposal site owner based
on the same allegations. The complaint seeks penalties not exceeding
statutory maximums and such other relief as the Pollution Control Board
determines appropriate. The disposal site owner filed a cross-claim
against the Company that seeks to have penalties assessed against the
Company and not against the disposal site owner. Any penalties as a
result of the cross-claim would be payable to the State. The State and
the Company have agreed in principle to a settlement in which the
Company will pay $69,000 to the State and will dispose of certain
materials in a container at the waste disposal site at an authorized
hazardous waste disposal facility. The Company is seeking dismissal of
the cross-claim on several grounds.
Additionally, the Illinois Agency has been negotiating with the
disposal site owner with respect to the procedures and actions
necessary to close the disposal site. The extent and nature of any
actions which may be taken against the Company with respect to this
matter cannot presently be determined
(xiii) Number of employees
The Company employed approximately 1,700 persons at June 29, 1996.
(d) Financial information about foreign and domestic operations and export
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sales
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The financial information required with respect to foreign and domestic
operations and export sales of the Company appears in note 13 to the
Consolidated Financial Statements of the Company appearing on page 35 of
this Annual Report on Form 10-K.
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Item 2. Properties
The following table sets forth a brief description of the properties of the
Company and its subsidiaries:
Location General Description
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Scottsdale, AZ Corporate headquarters of approximately 12,180 square feet
Rantoul, IL Administrative, manufacturing, and distribution facility of
approximately 322,400 square feet on 34 acres
San Jose, CA Sales, marketing, research and development facility of
approximately 63,600 square feet
Santa Cruz, CA Giro sales, marketing, administration, distribution and
research and development facility of approximately 41,300
square feet
Torrance, CA Mongoose product development and marketing facility of
approximately 5,900 square feet
Commack, NY(1) Administration office of approximately 20,000 square feet
York, PA Distribution center with approximately 300,000 square feet
Memphis, TN Distribution center with approximately 198,000 square feet
Fairfield, CA Distribution center with approximately 254,000 square feet
Paris, France EuroBell, S.A. sales and marketing office of approximately
5,000 square feet
Roche-La-Moliere, Administrative, manufacturing and distribution facility of
France approximately 38,700 square feet on 2.9 acres
Limerick, Ireland Giro sales and distribution facility of approximately 18,750
square feet
Granby, Quebec Sales, marketing, administration and distribution facilities
with a combined square footage total of approximately
136,000
Calgary, Alberta Distribution facility of approximately 14,000 square feet
All locations are leased except for the York, Pennsylvania facility, which is
owned by American Recreation Company, Inc., a wholly-owned subsidiary of the
Company, and the Roche-La-Moliere facility, which is held under a lease-purchase
arrangement.
(1) The Company expects to close this office by December 1996.
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Item 3. Legal Proceedings
Due to the nature of its business, the Company at any particular time, may be a
defendant in a number of product liability lawsuits for serious personal injury
or death allegedly related to the Company's products and, in certain instances,
products manufactured by others. Many of such lawsuits seek damages in
substantial amounts, including punitive damages.
As of June 29, 1996, there were 34 lawsuits pending relating to injuries
allegedly suffered from products made or sold by the Company. Of the 34
lawsuits, 14 involve motorcycle helmets, eight involve bicycle helmets, one
involves an auto racing helmet, one involves a bicycle pedal, six involve
bicycles, three involve bicycle accessories, and one involves a child seat.
Four of the 34 lawsuits pending against the Company as of June 29, 1996 are
scheduled for trial prior to December 31, 1996. During each of the last five
fiscal years the Company has been served with complaints in the following number
of cases: 19 cases in fiscal 1992, ten cases in fiscal 1993, 11 cases in fiscal
1994, five cases in fiscal 1995 and 12 cases in fiscal 1996. Of the 12 cases
served in fiscal 1996, which includes AMRE lawsuits, two involve motorcycle
helmets, three involve bicycle helmets, six involve bicycles and one involves an
accessory product. Of these same 12 cases, two cases involve a claim relating to
death, five involve claims relating to serious, permanently-disabling injuries,
and five involve less serious injuries such as broken bones or lacerations.
Typical product liability claims include allegations of failure to warn, breach
of express and implied warranties, design defects and defects in the
manufacturing process.
Although the Company sold its motorcycle manufacturing business in June 1991 in
a transaction in which the purchaser assumed all responsibility for product
liability claims arising out of helmets manufactured prior to the date of the
disposition, the Company agreed to use its in-house defense team to defend these
claims at the purchaser's expense. Included in the 14 motorcycle helmet cases
that were being defended by the Company's in-house defense team at June 29,
1996, are lawsuits in which the Company is either a named defendant or is
defending claims against the purchaser. One of the cases involves the appeal of
a jury verdict rendered against the Company in February 1996 by a Canadian jury.
Unless reversed on appeal, the verdict is estimated to be between $3.0 and $4.0
million, which includes associated legal fees and tax implications. If the
purchaser is for any reason unable to pay a judgment, settlement amount or
defense costs arising out of these claims, the Company could be held responsible
for the payment of such amount or costs. The Company believes that the purchaser
does not currently have the financial resources to pay any significant judgment,
settlement amount or defense costs arising out of any claim. Although the
Company cannot predict the outcome of an appeal, the Company currently has
adequate cash balances and sources of capital available to satisfy the judgment
if the appeal is unsuccessful. Accordingly, the Company currently does not
believe the claim will have a material adverse effect on liquidity or the
financial condition of the Company. Although the Company maintains product
liability insurance, this claim arose during a period in which the Company was
self-insured. The Company currently does not have a reserve for this judgment.
The Company has licensed the "Bell" trademark for use on motorcycle helmets. The
Company believes that it is possible that, by virtue of its status as licensor
and the fact that such motorcycle helmets carry the Bell name, the Company could
be named as a defendant in an action involving liability for the motorcycle
helmets manufactured by the purchaser of the Company's motorcycle helmet
business.
The philosophy of the Company is to vigorously defend all product liability
claims. The Company has developed extensive in-house experience with respect to
the defense of claims due to the number of claims lodged against the Company and
its vigorous defense posture. The Company also retains certain outside counsel
who specialize in product liability and frequently represent the Company. To
date the Company has been successful in defending and settling product liability
claims, with only one final judgment having been entered against the Company in
1984 in an amount not material to the Company. Although the Company intends to
continue to aggressively defend itself against all claims asserted against it,
currently pending proceedings and any future claims are subject to the
uncertainties attendant to litigation and the ultimate outcome of any such
proceedings or claims cannot be predicted.
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Since 1977, the Company has been intermittently protected to some degree by
various product liability insurance policies. There are various periods,
however, for which no insurance is available. Due to certain deductibles,
self-insured retention levels and aggregate coverage amounts applicable under
the Company's insurance policies that do exist, the Company may bear
responsibility for the significant portion, if not all, of the defense costs
(which include attorney's fees, settlement costs and the cost of satisfying
judgments) of any claim asserted against the Company. There can be no assurance
that insurance coverage, if available, will be sufficient to cover one or more
large claims or that the applicable insurer will be solvent at the time of any
covered loss. Certain of the Company's insurers for the periods prior to fiscal
1986 are insolvent. Further, there can be no assurance that the Company will
obtain insurance coverage at acceptable levels and costs in the future.
Successful assertion against the Company of one or a series of large uninsured
claims, or of one or a series of claims exceeding any insurance coverage, could
have a material adverse effect on the Company. The Company's current products
liability insurance covers claims based on occurrences within the policy period
up to a maximum of $15 million for each occurrence and $15 million in the
aggregate in excess of the Company's self-insured retention of $2 million per
occurrence for helmets and the Company's self-insured retention of $250,000 for
other products, including Mongoose bicycles. The policy provides coverage only
for products manufactured or sold by the Company and does not provide any
coverage with respect to motorcycle helmets. The Company's current insurance
policy allows the Company's in-house product liability defense team to manage
all claims against the Company.
Insurance coverage for products distributed prior to the AMRE Merger include
various self-insured retentions from $25,000 to $50,000 for all products claims
with various coverages in excess of the self-insured retention. As of June 29,
1996 one case had exceeded its $40,000 self-insured retention. Litigation is
currently managed by a third party administrator, Risk Management Enterprises.
The Company maintains an active role in the management of this litigation. The
Company continues to utilize its in-house defense team to manage all claims.
Insurance coverage for products manufactured by Giro, prior to the acquisition
by the Company in January 1996, include self-insured retentions from $25,000 to
$150,000 for all product claims with $1.5 million coverage in excess of the self
insured retention levels. The Company maintains an active role in the management
of all Giro related litigation.
Besides the product liability litigation described above, the Company is not
party to any material litigation that, if adversely determined, would have a
material effect on its business.
See Item 1.(c)(xii) "Material effects of compliance with environmental
regulations" for information relating to an investigation by the Illinois
Environmental Protection Agency of certain of the Company's off-site waste
handling practices.
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Shareholder Litigation
- ----------------------
On February 16, 1995, an AMRE shareholder filed a lawsuit, on his own behalf,
and a purported class action, against AMRE and its directors in the Chancery
Court of the State of Delaware, alleging various breaches of fiduciary and
common law duties and requesting both monetary and injunctive relief. The
alleged basis for the claims are the action of AMRE and its directors in
connection with the authorization and approval of the AMRE Merger. The AMRE
Merger was consummated on July 3, 1995 and the case has been inactive since that
date. On October 2, 1995, the Company filed a motion to dismiss the case.
Item 4. Submission of Matters to a Vote of Securities Holders
None.
PART II.
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters
The Common Stock is traded on The Nasdaq National Market under the symbol
"BSPT." The Company's 4 1/4% Convertible Subordinated Debentures due 2000 are
traded on The Nasdaq Small Cap Market under the symbol "BSPTG".
As of September 13, 1996, there were approximately 1,220 shareholders of record;
the Company estimates that, as of such date, there were approximately 14,800
beneficial owners.
Fiscal Year 1995 High Low Dividends Declared
- ---------------- ---- --- ------------------
1st Quarter 28 1/2 18 1/4 -----
2nd Quarter 24 3/4 12 3/4 -----
3rd Quarter 18 1/2 12 1/4 -----
4th Quarter 15 11 1/4 -----
Fiscal Year 1996
- ----------------
1st Quarter 14 1/2 9 7/8 -----
2nd Quarter 11 1/8 7 -----
3rd Quarter 9 1/8 5 1/2 -----
4th Quarter 10 3/8 6 -----
The Company does not anticipate paying dividends on its Common Stock in the
foreseeable future.
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Item 6. Selected Financial Data
BELL SPORTS CORP.
SELECTED FINANCIAL DATA
(in thousands, except per share data)
<TABLE>
<CAPTION>
Fiscal Years Ended
June 29, July 1, July 2, July 3, June 27,
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Summary of Operations:
Net sales $ 262,340 $ 102,990 $ 116,090 $ 82,611 $ 64,459
(Loss) income from continuing
operations (12,375) (3,443) 10,459 6,582 4,125
(Loss) income before
extraordinary items and
cumulative effect of change in
accounting principle (12,375) (3,443) 10,459 6,582 4,125
Extraordinary items -- -- -- (298) 1,318
(Loss) income before cumulative
effect of change in accounting
principle (12,375) (3,443) 10,459 6,284 5,443
Cumulative effect of change in
accounting for income taxes -- -- -- 700 --
Net (loss) income $ (12,375) $ (3,443) $ 10,459 $ 6,984 $ 5,443
Per share:
(Loss) income from continuing
operations $ (0.90) $ (0.42) $ 1.27 $ 0.88 $ 0.77
Net (loss) income (0.90) (0.42) 1.27 0.93 1.01
Weighted average number of
common and common
equivalent shares outstanding 13,740 8,178 8,245 7,523 5,375
Balance Sheet Information:
Total assets $ 298,635 $ 186,434 $ 184,658 $ 82,219 $ 46,690
Total debt 125,570 92,934 91,384 3,853 7,926
Total stockholders' equity 136,041 75,816 75,187 67,658 27,242
</TABLE>
Results for fiscal 1996 include an inventory write-up of $14.1 million related
to the AMRE Merger and the acquisitions of SportRack and Giro, which were fully
charged against cost of sales.
Results for fiscal 1993, which was a 53 week accounting period, include a loss
on an early extinguishment of debt which was classified as an extraordinary
item.
Results for fiscal 1992 include a loss on an early extinguishment of debt of
$1.1 million and utilization of net operating loss carryforwards of $2.4 million
which were classified as extraordinary items.
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Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
The Company is a leading worldwide designer, manufacturer and marketer of
bicycle accessories, bicycle helmets, bicycles and auto racing helmets. The
Company sells bicycle helmets and a variety of bicycle accessories, under
various brand names such as Bell, Giro, Rhode Gear, Blackburn, VistaLite and
SportRack. The Company's bicycle line is sold under the Mongoose brand name.
In July 1995, the Company completed the merger (the "AMRE Merger") of a
subsidiary of the Company with American Recreation Company Holdings, Inc.
("AMRE") pursuant to which AMRE became a wholly-owned subsidiary of the Company.
The unaudited pro forma summary presented below is for illustrative purpose
only, giving effect to the AMRE Merger, accounted for as a "purchase", as such
term is used under generally accepted accounting principles.
In adddition, the Company acquired the assets of Giro Sport Design, Inc. and all
of the outstanding stock of Giro Sport Design International, Inc. (collectively
"Giro") in January 1996. The Giro acquisition was accounted for as a "purchase"
and is included in the financial statements from the effective date of the
acquisition.
Certain matters contained herein are forward-looking statements that involve
risks and uncertainties that could cause actual results to differ materially
from those in the forward-looking statements. These include, but are not limited
to, seasonality, competitive business conditions, timing of major customer
shipments, adverse weather conditions, retail environment, economic conditions
and currency fluctuations.
Comparison of the Fiscal Year Ended June 29, 1996 with the Fiscal Year Ended
July 1, 1995
Net Sales. Net sales increased by 4% to $262.3 million in fiscal 1996 compared
to $253.3 million in fiscal 1995 stated on a pro forma basis. The overall
increase is primarily attributed to inclusion of Giro and SportRack sales, which
were not included for the entire comparable prior year period. Sales increases
were experienced in the bicycle accessories category due to the addition of
SportRack and higher sales to the mass merchant channel. Bicycle helmet sales
were down 1% due to a weak retail environment in the Company's second and third
quarters and inclement weather conditions during the third and fourth quarters.
The Company believes it maintained bicycle helmet market share in fiscal 1996
despite an overall decline in bicycle helmet unit sales. This market decline
was offset by the acquisition of Giro and the introduction of the Bell helmet
brand into the mass merchant trade channel. At June 29, 1996, a total of 25
million children were covered by mandatory helmet legislation, in 14 states. An
additional 2.5 million children will become covered in January 1997 when the
state of Florida legislation becomes effective. Bicycle sales increased by 7%
due to higher domestic Mongoose sales and an increased distribution of Mongoose
products in Europe.
For the year ended June 29, 1996, bicycle accessories, bicycle helmets, bicycles
and auto racing helmets represented 49%, 31%, 18% and 2%, respectively, of the
Company's net sales. For the year ended July 1, 1995 stated on a pro forma
basis, bicycle accessories, bicycle helmets, bicycles and auto racing helmets
represented 48%, 32%, 18% and 2%, respectively, of the Company's net sales. The
Company's sales outlook for the first half of fiscal 1997 remains cautious due
to the slow retail environment for bicycle products.
Gross Margin. Gross margins increased to 29% of net sales in fiscal 1996,
excluding the impact of the inventory write-up, compared to 25% in fiscal 1995,
stated on a pro forma basis. The increase is due to improvement in the Bell
brand helmet margins from 42% to 46%, improved Mongoose bicycle margins and the
inclusion of Giro and SportRack, which provide higher gross margins, during the
current fiscal year. The increase in the Bell brand margin was attained in both
the specialty retail and the mass merchant channels.
Gross margins for fiscal 1996 were 23% including the impact of an inventory
write-up. The inventory write-up of $14.1 million, related to the merger with
AMRE and the acquisitions of SportRack and Giro has been fully charged against
cost of sales during fiscal 1996.
13
<PAGE>
Selling, General and Administrative. Selling, general and administrative costs
increased to 25% of net sales for fiscal 1996 from 24% in fiscal 1995 stated on
a pro forma basis. For fiscal 1996 selling, general and administrative costs
increased $5.7 million from $61.1 million in fiscal 1995 stated on a pro forma
basis to $66.8 million in fiscal 1996. The increase is attributable to
incremental expenditures in excess of $5.6 million for an advertising and
promotional campaign to promote the Bell brand and to educate consumers on the
importance of wearing bicycle helmets and incremental selling, general and
administrative expenses related to SportRack and Giro which were acquired in May
1995 and January 1996, respectively, offset by general and administrative
expense savings resulting from the merger with AMRE. The Company expects to
spend approximately $1.0 million to $2.0 million less on advertising in fiscal
1997 than in fiscal 1996.
Amortization of Intangibles. Amortization of goodwill and intangible assets
increased to $2.9 million for fiscal 1996 from $2.3 million in fiscal 1995,
stated on a pro forma basis. These increases are due to a full year of
amortization of the SportRack intangibles and the inclusion of amortization of
intangibles for Giro which was acquired in January 1996.
Net Investment Income and Interest Expense. Net investment income decreased by
$1.5 million in fiscal 1996 to $2.9 million from $4.4 million in fiscal 1995,
stated on a pro forma basis. The decrease is due to lower cash and marketable
securities balances resulting from the cash acquisition of Giro and utilization
of cash to reduce outstanding debt balances. Interest expense decreased by $1.2
million in fiscal 1996 to $8.7 million from $9.9 million in fiscal 1995, stated
on a pro forma basis. The decrease is attributable to lower outstanding debt
balances in fiscal 1996 than fiscal 1995, stated on a pro forma basis. In order
to minimize the adverse effect on the Company's marketable securities of
potential future increases in interest rates, the Company may continue, from
time to time, to liquidate certain marketable securities, possibly at a loss.
Subsequent to year-end, the Company was awarded $1.8 million in an arbitration
case related to the handling of certain marketable securities by an outside
investment advisor. This settlement (net of expenses) will be recorded in the
first quarter of fiscal 1997.
Consolidation Costs. Consolidation costs were $5.9 million in fiscal 1996
compared to $4.6 million in fiscal 1995, stated on a pro forma basis. These
costs relate to the consolidation of organizations, facilities, computer systems
and product lines related to the merger with AMRE. The Company estimates that
future consolidation costs under these programs will approximate $1.5 million
and will be incurred in the first half of fiscal 1997. Future costs relate
primarily to the relocation and severance of employees.
Income Taxes. An income tax benefit of $8.3 million or 40% of the pre-tax loss
was reported for fiscal 1996 compared to an income tax benefit of $3.6 million
or 32% of the pre-tax loss for fiscal 1995, stated on a pro forma basis. Net
operating loss carryforwards of approximately $26.0 million remain available to
the Company at June 29, 1996.
Comparison of the Fiscal Year Ended July 1, 1995 with the Fiscal Year Ended July
2, 1994
Net Sales. Net sales declined 11% from $116.1 million in fiscal 1994 to $103.0
million in fiscal 1995 due to a decline in demand within the bicycle helmet
industry. The helmet industry was adversely affected due to a decrease in the
number of children becoming covered for the first time by mandatory helmet
legislation from period to period and a 20% reduction in the average retail
price for bicycle helmets.
Mandatory helmet legislation generally requires infants, toddlers and youths to
wear an approved safety helmet while riding on a bicycle. Historically, the
Company has experienced an increase in demand for bicycle helmets as new
legislation is enacted. In fiscal 1995, only one additional state with
approximately 1.4 million children enacted mandatory legislation as compared to
seven states with a combined total of 13.3 million children becoming covered by
mandatory helmet legislation in fiscal 1994. The sharp decline in the number of
children becoming covered for the first time by mandatory helmet legislation
during fiscal 1995 negatively impacted fiscal 1995 sales levels. At July 1,
1995, an estimated 23 million children nationwide, in nine states and various
cities and counties were covered by mandatory
14
<PAGE>
helmet legislation. An additional four states have recently passed legislation
that will require an estimated 1.9 million children to wear helmets in fiscal
1996. Additionally, two Canadian provinces passed mandatory helmet legislation
that will require approximately 13.4 million adults and children to wear bicycle
helmets.
European sales increased 12% in fiscal 1995 due to a more favorable French franc
exchange rate and higher sales volume within the mass merchant trade channel.
Bicycle helmets, bicycle accessories and auto racing products accounted for 62%,
34% and 4% of the Company's net sales, respectively, in fiscal 1995 compared to
72%, 25% and 3%, respectively, in fiscal 1994.
Gross Margin. Gross margins were 28% of net sales in fiscal year 1995, compared
to 41% in fiscal 1994. The decrease is attributed to a decline in the average
selling price for bicycle helmets, lower than planned factory volume and certain
one-time adjustments recorded in connection with the AMRE Merger and the
introduction of the Bell helmet brand across all trade channels. The average
retail price of bicycle helmets declined approximately 20% due to increased
competition at the opening price points.
In fiscal 1994, the Company expanded helmet manufacturing capacity as a result
of the surge in helmet demand. The increase in factory overhead cost related to
this expansion, combined with lower production levels in fiscal 1995, caused the
Company to generate significant factory variances which negatively impacted
gross margins. Production volumes were reduced to match the lower sales levels
experienced in fiscal 1995 and to reduce finished goods inventory levels.
One-time charges of $2.4 million negatively impacted gross margins due to the
combination of the Company's and AMRE's bicycle helmet lines and the
introduction of the Bell brand into the mass merchant trade channel, resulting
in the discontinuance of certain BSI brand product tooling and inventory. Before
consolidation and other one-time charges, the gross margin for fiscal 1995, was
30%.
Selling, General and Administrative. Selling, general and administrative costs
increased to 30% of net sales in fiscal 1995 from 26% in fiscal 1994. The
increase was attributable to lower sales in fiscal 1995 as compared to fiscal
1994 and $0.6 million in other one-time charges recorded in the fourth quarter
of fiscal 1995. Selling, general and administration costs before other one-time
charges were 29% of net sales in fiscal 1995.
Actual selling, general and administrative costs, excluding one-time
adjustments, increased $0.4 million in fiscal 1995 over fiscal 1994 due to
increased ad co-op and advertising expenses partially offset by a decline in
sales commissions due to lower sales levels.
Amortization of Intangibles. Amortization of goodwill and intangible assets
increased $70,000 during fiscal 1995, compared to the fiscal 1994 period due to
the inclusion of a full year of amortization on VistaLite intangibles and
amortization on the SportRack intangibles. The Company acquired VistaLite in
January 1994 and SportRack in May 1995.
Net Investment Income and Interest Expense. Net investment income increased $1.1
million or 31% in fiscal 1995, increasing to $4.7 million from $3.6 million in
fiscal 1994. The increase was due to higher cash and marketable securities
balances resulting from the net cash proceeds from the Company's November 1993
public offering of aggregate principal amount of $86.3 million of its 4 1/4%
Convertible Subordinated debentures due 2000 (the "Debentures") being invested
for a twelve month period in fiscal 1995 compared to an eight month period in
fiscal 1994. Net investment income is net of $1.0 million and $0.8 million in
net losses on the sale of securities in fiscal 1995 and 1994, respectively.
Interest expense increased to $4.6 million in fiscal 1995 from $3.0 million in
fiscal 1994 primarily due to the Debentures being outstanding for twelve months
in fiscal 1995 compared to eight months in fiscal 1994.
Consolidation Costs. In fiscal 1995, the Company recorded $2.1 million of
consolidation costs related to the AMRE Merger. The costs primarily represented
severance benefits and facility closing costs, which
15
<PAGE>
have been or are expected to be, incurred as a result of the consolidation and
integration plans the Company approved in connection with the AMRE Merger.
During fiscal 1994, consolidation costs of $185,000 were recorded relating to
the consolidation of the manufacturing and distribution operations of Blackburn,
which was acquired by the Company in fiscal 1993.
Income taxes. An income tax benefit of $1.9 million or 36% of the pre-tax loss
was reported for fiscal 1995 as compared to income tax expense of $6.5 million
or 38% of pre-tax earnings in fiscal 1994. Net operating loss and capital loss
carryforwards totaling $2.7 million remained available to the Company at July 1,
1995.
Financial Position
The Company's current ratio improved to 5.4 to 1 at June 29, 1996 from 5.3 to 1
at July 1, 1995, stated on a pro forma basis. Cash and current and noncurrent
marketable securities decreased to $31.1 million at June 29, 1996 from $102.7
million at July 1, 1995 stated on a pro forma basis. The decline primarily
relates to the net reduction of long-term debt of $29.2 million, the acquisition
of Giro of $16.8 million and the purchase of treasury stock of $5.5 million.
Accounts receivable at June 29, 1996 increased 26% from July 1, 1995 stated on a
pro forma basis due to the acquisition of Giro and a higher proportion of sales
to independent bicycle dealers who get extended dating programs. Inventories at
June 29, 1996 increased 6% from July 1, 1995 stated on a pro forma basis and
excluding the inventory step up. This increase is due to the acquisition of Giro
in January 1996 and an increase in SportRack inventory due to the start up of
the new Mondial product line.
Goodwill, intangibles and other assets increased by $15.4 million at June 29,
1996 from July 1, 1995 stated on a pro forma basis. The increase is attributable
to the Giro acquisition, classification of certain deferred tax assets as long-
term, offset by current year amortization expense.
Long-term debt decreased to $122.9 million at June 29, 1996 from $150.5 at July
1, 1995 stated on a pro forma basis. The decrease is due to the Company
utilizing excess cash to pay off a portion of the debt. The Company's total
debt-to-capitalization ratio decreased to 48% at June 29, 1996 from 50% at July
1, 1995 stated on a pro forma basis.
Unrealized holding losses on marketable securities of $500,000 and $1.3 million
were recorded as a reduction of stockholders' equity at June 29, 1996 and July
1, 1995 stated on a pro forma basis, respectively. The decline of $800,000 in
unrealized holding losses is the result of the sale of certain marketable
securities.
Liquidity and Capital Resources
The Company's working capital decreased during fiscal 1996 compared to fiscal
1995 stated on a pro forma basis as cash was utilized in the reduction of debt
obligations, the Giro acquisition and the purchase of treasury stock.
In February 1996, the Company entered into a $100.0 million multicurrency,
unsecured revolving line of credit (the "Revolving Credit") with a syndicated
bank group. This facility replaces prior revolving credit facilities that were
used by the Company's North American operations. At June 29, 1996, a total of
$35.1 million was outstanding under the credit facility.
The Revolving Credit, which expires in December 1999, provides the Company with
several interest rate options, including U.S. prime, LIBOR plus a margin,
Canadian prime plus the applicable LIBOR margin less 0.50%, Canadian banker's
acceptance plus the LIBOR margin plus 0.125%, and short-term fixed rates offered
by the agent bank in the loan syndication. The LIBOR margin is currently 1.25%
per annum, but it
16
<PAGE>
can range between 0.75% and 1.50% depending on the Company's interest coverage
ratio. Under the Revolving Credit, the Company is required to pay a quarterly
commitment fee on the unused portion of the facility at a rate that ranges from
0.15% to 0.30% per annum. At June 29, 1996 the quarterly commitment fee was
0.25% per annum.
The Revolving Credit contains certain financial covenants, the most restrictive
of which are a minimum interest coverage ratio, a maximum funded debt ratio and
a minimum consolidated tangible net worth amount. It also contains covenants
that restrict the amount of cash dividends as well as the amount that the
Company can repurchase of its subordinated debt and common stock.
In August 1996, the Company amended the Revolving Credit to grant to the
syndicated bank group a security interest in U.S. accounts receivable and
inventories. The security interest is subject to automatic release by the bank
group upon the achievement of certain financial ratios after September 1, 1997.
The amendment, among other things, also waives the interest coverage covenant
default as of June 29, 1996. Accordingly, the Revolving Credit is classified as
a long-term liability at June 29, 1996.
The Company's primary uses of funds during 1996 relates to the acquisition of
Giro of $16.8 million, repurchase of $5.5 million of the Company's Common Stock
in connection with the Company's stock repurchase program, debt reduction of
$29.2 million and capital expenditures of $5.3 million. In fiscal 1996, capital
expenditures were made for new product tooling, computer equipment and factory
automation. The Company expects to spend approximately $5.0 to $6.0 million on
capital expenditures in fiscal 1997. The largest planned expenditures are for
computer equipment and new product tooling.
A principal business strategy of the company has been to pursue acquisitions of
businesses, products or technologies that will complement its current business.
The Company has identified the bicycle and sporting goods industries as possible
areas of focus. Such acquisitions may be funded with available cash, debt
financing, issuance of common stock or a combination thereof.
The Company believes its available cash flows from operations and the Revolving
Credit should be adequate to satisfy its working capital requirements in fiscal
1997. The Company does not anticipate paying dividends on its Common Stock in
the foreseeable future.
17
<PAGE>
Item 8. Financial Statements and Supplementary Data
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
and Stockholders of
Bell Sports Corp.
In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of operations, of stockholders' equity and of cash flows
present fairly, in all material respects, the financial position of Bell Sports
Corp. and its subsidiaries at June 29, 1996 and July 1, 1995, and the results of
their operations and their cash flows for each of the three fiscal years in the
period ended June 29, 1996, in conformity with generally accepted accounting
principles. These financial statements are the responsibility of the Company's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these statements in
accordance with generally accepted auditing standards which require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for the opinion expressed
above.
As discussed in Note 1, the Company changed its method of accounting for certain
investments in debt and equity securities during the fiscal year ended July 2,
1994.
PRICE WATERHOUSE LLP
Chicago, Illinois
August 14, 1996
18
<PAGE>
BELL SPORTS CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except per share data)
<TABLE>
<CAPTION>
Pro forma
June 29, July 1, July 1,
1996 1995 1995
---- ---- ----
(unaudited)
<S> <C> <C> <C>
ASSETS
- ------
Current Assets:
Cash and cash equivalents $ 23,140 $ 65,765 $ 72,018
Marketable securities, current 7,996 11,062 11,062
Accounts receivable 75,651 60,075 22,262
Inventories 59,413 68,277 15,184
Deferred taxes and other current assets 17,285 18,386 8,243
------------ ------------ ------------
Total current assets 183,485 223,565 128,769
Marketable securities, noncurrent 25,893 25,893
Property, plant and equipment 24,722 25,313 16,292
Goodwill 71,245 64,316 11,539
Intangibles and other assets 19,183 10,748 3,941
------------ ------------ ------------
Total assets $ 298,635 $ 349,835 $ 186,434
============ ============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Current Liabilities:
Accounts payable $ 11,797 $ 10,028 $ 8,604
Accrued compensation and employee benefits 4,392 4,761 1,780
Accrued expenses 16,752 23,480 6,463
Notes payable and current maturities of long-term debt and
capital lease obligations 1,070 3,555 3,101
------------ ------------ ------------
Total current liabilities 34,011 41,824 19,948
Long-term debt 122,919 150,450 88,354
Capital lease obligations and other liabilities 5,664 4,533 2,316
------------ ------------ ------------
Total liabilities 162,594 196,807 110,618
------------ ------------ ------------
Commitments and contingencies
Stockholders' equity:
Preferred stock; $.01 par value; authorized 1,000,000 shares,
none issued
Common stock; $.01 par value; authorized 25,000,000 shares;
issued 14,224,360, 14,153,753 and 8,165,812 shares,
respectively, outstanding 13,700,960, 14,153,753 and
8,165,812 shares, respectively 142 142 82
Additional paid-in capital 141,647 141,472 64,320
Unrealized holding losses on marketable securities (461) (1,283) (1,283)
Cumulative foreign currency translation adjustments 81 173 173
Retained earnings 149 12,524 12,524
------------ ------------ ------------
141,558 153,028 75,816
Less - 523,400 shares of common stock in treasury at cost (5,517)
------------ ------------ ------------
Total stockholders' equity 136,041 153,028 75,816
------------ ------------ ------------
Total liabilities and stockholders' equity $ 298,635 $ 349,835 $ 186,434
============ ============ ============
</TABLE>
See accompanying notes to these consolidated financial statements.
19
<PAGE>
BELL SPORTS CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
<TABLE>
<CAPTION>
Fiscal years ended
Pro forma
June 29, July 1, July 1, July 2,
1996 1995 1995 1994
---- ---- ---- ----
(unaudited)
<S> <C> <C> <C> <C>
Net sales $ 262,340 $ 253,251 $ 102,990 $ 116,090
Cost of sales 187,514 190,948 74,407 68,692
Inventory write-up 14,107
--------- --------- --------- ---------
Gross profit 60,719 62,303 28,583 47,398
--------- --------- --------- ---------
Selling, general and administrative expenses 66,826 61,125 30,948 30,007
Amortization of goodwill and intangible assets 2,854 2,266 954 884
Consolidation costs 5,850 4,618 2,123 185
Net investment income (2,877) (4,427) (4,740) (3,579)
Interest expense 8,691 9,934 4,633 2,962
--------- --------- --------- ---------
(Loss) income before income taxes (20,625) (11,213) (5,335) 16,939
(Benefit) provision for income taxes (8,250) (3,589) (1,892) 6,480
--------- --------- --------- ---------
Net (loss) income $ (12,375) $ (7,624) $ (3,443) $ 10,459
========= ========= ========= =========
(Loss) income per common share:
Net (loss) income $ (0.90) $ (0.53) $ (0.42) $ 1.27
========= ========= ========= =========
Weighted average number of common shares
outstanding 13,740 14,284 8,178 8,245
========= ========= ========= =========
</TABLE>
See accompanying notes to these consolidated financial statements.
20
<PAGE>
BELL SPORTS CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(in thousands)
<TABLE>
<CAPTION>
Unrealized
Holding Foreign
Additional Losses on Currency Total Stock-
Common Common Paid-In Marketable Translation Retained Treasury holders'
Shares Stock Capital Securities Adjustment Earnings Stock Equity
------ ----- ------- ---------- ---------- -------- ----- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at July 3, 1993 8,008 $ 80 $ 62,145 $ (75) $ 5,508 $ 67,658
Exercise of stock options 91 1 1,571 1,572
Change in unrealized holding losses
on marketable securities $ (4,551) (4,551)
Other 15 34 49
Net income 10,459 10,459
------ ------ --------- -------- ----- ------- ------- -------
Balance at July 2, 1994 8,099 81 63,731 (4,551) (41) 15,967 75,187
Exercise of stock options 67 1 589 590
Change in unrealized holding losses
on marketable securities 3,268 3,268
Currency translation adjustment 214 214
Net loss (3,443) (3,443)
------ ------ --------- -------- ----- ------- ------- -------
Balance at July 1, 1995 8,166 82 64,320 (1,283) 173 12,524 75,816
Issuance of stock and stock options for
AMRE merger 5,988 59 77,152 77,211
Exercise of stock options 70 1 175 176
Purchase of treasury stock (523) $(5,517) (5,517)
Change in unrealized holding losses
on marketable securities 822 822
Currency translation adjustment (92) (92)
Net loss (12,375) (12,375)
------ ------ --------- -------- ----- ------- ------- -------
Balance at June 29, 1996 13,701 $ 142 $ 141,647 $ (461) $ 81 $ 149 $(5,517) $136,041
====== ====== ========= ======== ===== ======= ======= =======
</TABLE>
See accompanying notes to these consolidated financial statements
21
<PAGE>
BELL SPORTS CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
<TABLE>
<CAPTION>
June 29, July 1, July 2,
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
CASH FLOWS (USED IN) PROVIDED BY OPERATING ACTIVITIES:
Net (loss) income $(12,375) $ (3,443) $ 10,459
Adjustments to reconcile net (loss) income to net cash (used in)
provided by operating activities:
Amortization of goodwill and intangibles 2,854 954 884
Depreciation 6,059 3,971 2,731
Write off of fixed assets 1,299
Provision for doubtful accounts 2,481 1,024 328
Provision for inventory obsolescence 3,602 4,183 778
Deferred income taxes (7,546) (2,612) (75)
Changes in assets and liabilities, net of adjustments for acquisitions:
Accounts receivable (14,819) 8,594 (13,912)
Inventories 8,296 (1,097) (6,670)
Other assets 717 (527) (61)
Accounts payable 852 (1,267) 2,015
Other liabilities (13,370) (1,524) 4,174
-------- -------- --------
Net cash (used in) provided by operating activities (21,950) 8,256 651
-------- -------- --------
CASH FLOWS PROVIDED BY (USED IN) INVESTING ACTIVITIES:
Capital expenditures (5,312) (5,198) (6,163)
Acquisition of other businesses (16,789) (3,822) (3,110)
Net sale (purchase) of marketable securities 29,779 24,778 (42,226)
Other 22
-------- -------- --------
Net cash provided by (used in) investing activities 7,678 15,758 (51,477)
-------- -------- --------
CASH FLOWS (USED IN) PROVIDED BY FINANCING ACTIVITIES:
Proceeds from issuance of common stock, net of costs 176 123 582
Proceeds from issuance of convertible debentures 83,520
Net (payments on) issuance of notes payable, long-term debt and
capital leases (29,175) 1,008 1,102
Treasury stock purchases (5,517)
-------- -------- --------
Net cash (used in) provided by financing activities (34,516) 1,131 85,204
-------- -------- --------
Effect of exchange rate changes on cash (90) 117 93
-------- -------- --------
Net (decrease) increase in cash and cash equivalents (48,878) 25,262 34,471
Cash and cash equivalents at beginning of period 72,018 46,756 12,285
-------- -------- --------
Cash and cash equivalents at end of period $ 23,140 $ 72,018 $ 46,756
======== ======== ========
</TABLE>
See accompanying notes to these consolidated financial statements
22
<PAGE>
BELL SPORTS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - The Company And Its Significant Accounting Policies
Bell Sports Corp. and its wholly-owned subsidiaries (collectively, the "Company"
or "Bell") design, manufacture and market related bicycle parts and accessories,
bicycle helmets, bicycles and automotive racing helmets.
Principles of Consolidation and Accounting Period
- -------------------------------------------------
The consolidated financial statements include the accounts of Bell Sports Corp.
and its wholly-owned subsidiaries. All material intercompany transactions and
balances have been eliminated in consolidation. The Company's fiscal year is
either a fifty-two or fifty-three week accounting period ending on the Saturday
that is nearest to the last day of June.
The unaudited pro forma information presented in these consolidated financial
statements is for illustrative purposes only, giving effect to the AMRE Merger,
accounted for as a "purchase", as such term is used under generally accepted
accounting principles.
(Loss) Income Per Share Information
- ------------------------------------
(Loss) income per common and common equivalent share is computed using the
weighted average number of common stock and common stock equivalent shares
outstanding during the periods, using the treasury stock method for stock
options and warrants. Common equivalent shares are excluded from the computation
if their effect is anti-dilutive except that, pursuant to Staff Accounting
Bulletin No. 83 of the Securities and Exchange Commission, certain stock options
that were granted at prices below the initial public offering price of the
common stock, $.01 par value of the Company (the "Common Stock") during the
twelve month period immediately preceding the April 1992 initial public offering
of the Common Stock have been treated as common stock equivalents for all
periods presented. Fully diluted net (loss) income per common share for the
fiscal years ended June 29, 1996, July 1, 1995, and July 2, 1994 have not been
presented since an assumed conversion (using the if-converted method, which
includes the adjustment of reported net income for interest charges on a
net-of-tax basis) of the Company's convertible subordinated debentures (the
"Debentures") bearing interest at 4 1/4% per annum (see Note 5) would be
anti-dilutive.
Accounts Receivable and Concentration of Credit Risk
- ----------------------------------------------------
Accounts receivable at June 29, 1996 and July 1, 1995 are net of allowances for
doubtful accounts of $3,448,000 and $647,000, respectively.
The Company's principal customers operate in the mass merchant or sporting goods
retail industries or operate as independent bicycle dealers. The customers are
not geographically concentrated. As of June 29, 1996, 21% of the Company's gross
accounts receivable were attributed to one mass merchant customer. As of July 1,
1995, 20% of the Company's gross accounts receivable were attributed to two mass
merchant customers. In addition, one mass merchant customer accounted for 17%
and 13% of net sales during the fiscal years ended June 29, 1996 and July 1,
1995, respectively.
Cash and Cash Equivalents
- -------------------------
The Company considers all highly liquid investments with original maturities of
three months or less to be cash equivalents.
Marketable Securities
- ---------------------
23
<PAGE>
In May 1993, the Financial Accounting Standards Board (FASB) issued Statement of
Financial Accounting Standards (SFAS) No. 115 "Accounting for Certain
Investments in Debt and Equity Securities" (SFAS 115). The Company adopted SFAS
115 on a prospective basis at the beginning of the 1994 fiscal year. Consistent
with the provisions of SFAS 115, all marketable securities have been classified
as available-for-sale securities and are reported at fair value with unrealized
holding gains and losses reported in stockholders' equity until realized. A
decline in the market value of the security below cost that is deemed other than
temporary is charged to earnings resulting in the establishment of a new cost
basis for the security. The fair value of the marketable securities was obtained
from published market quotes or outside professional pricing sources. The
Company uses specific identification as the basis for determining cost in
computing realized gains and losses.
Inventories
- -----------
Inventories are stated at the lower of cost (first-in, first-out basis) or
market (net realizable value). Costs included in inventories are landed
purchased cost on sourced items and raw materials, direct labor and
manufacturing overhead on manufactured items.
Property, Plant and Equipment
- -----------------------------
Property, plant and equipment are stated at cost, less accumulated depreciation
and amortization. Depreciation is provided using the straight-line method over
the estimated useful lives of the related assets. Leasehold improvements and
capital lease assets are amortized using the straight-line method over the
shorter of the base lease term or the estimated useful lives of the related
assets. Maintenance and repair costs are expensed as incurred.
Goodwill and Intangible Assets
- ------------------------------
The excess of the acquisition cost over the fair value of the net identifiable
assets of businesses acquired in purchase transactions has been included in
goodwill and is amortized on a straight-line basis over twenty-five to forty
years and is recorded net of accumulated amortization of $4.0 million and $2.0
million at June 29, 1996 and July 1, 1995, respectively. Other intangible
assets, which include non-compete agreements, acquisition costs, patents and
trademarks and other items, are amortized over their estimated economic lives,
ranging from two to seventeen years. Accumulated amortization for intangible
assets totaled $3.1 million and $1.9 million at June 29, 1996 and July 1, 1995,
respectively. The Company's policy is to account for goodwill and all other
intangible assets at the lower of amortized cost or net realizable value. As
part of an ongoing review of the valuation and amortization of intangible
assets, management assesses the carrying value of the Company's intangible
assets to determine if changes in facts and circumstances suggest that it may be
impaired. If this review indicates that the intangibles will not be recoverable,
as determined by an undiscounted cash flow analysis over the remaining
amortization period, the carrying value of the Company's intangibles would be
reduced to its estimated fair market value.
Management's Estimates and Assumptions
- --------------------------------------
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Research And Development Expense
- --------------------------------
Research and developmental costs are charged to expense as incurred. These costs
totaled $4.7 million, $3.3 million and $3.2 million for fiscal years ended 1996,
1995 and 1994, respectively.
Advertising Costs
- -----------------
24
<PAGE>
Advertising and related costs are expensed as incurred, except for ad production
costs which are expensed in the fiscal year in which the ad is first run. These
costs amounted to $14.7 million, $6.2 million and $4.6 million for fiscal years
ended 1996, 1995 and 1994, respectively.
Translation of Foreign Currency
- -------------------------------
Assets and liabilities of foreign subsidiaries are translated into U.S. dollars
at the rates of exchange on the balance sheet date. Revenue and expense items
are translated at the average rates of exchange prevailing during the fiscal
year. Translation adjustments are recorded in the cumulative translation
adjustment component of stockholders' equity.
Foreign Exchange Contracts
- --------------------------
The Company periodically enters into forward foreign exchange contracts in
managing its foreign currency risk. Forward exchange contracts are used to hedge
various intercompany and external commitments with foreign subsidiaries and
inventory purchases denominated in foreign currencies. Exchange contracts
usually have maturities of less than one year. The Company has no outstanding
foreign exchange contracts at June 29, 1996.
Income Taxes
- ------------
The Company uses the liability method of accounting for income taxes (SFAS 109)
which is an asset and liability approach for financial accounting and reporting
of income taxes. Deferred tax assets and liabilities are recorded based upon
temporary differences between the tax basis of assets and liabilities and their
carrying values for financial reporting purposes. A valuation allowance is
provided for deferred tax assets when management concludes it is more likely
than not that some portion of the deferred tax assets will not be realized. The
Company prospectively adopted SFAS 109 at the beginning of the 1993 fiscal year.
Accounting for Stock-Based Compensation
- ---------------------------------------
In October 1995, SFAS No. 123, "Accounting for Stock-Based Compensation" (SFAS
123) was issued. Companies will have the option of recognizing compensation
expense in the financial statements for virtually all stock-based compensation
arrangements including stock options, based upon the fair value of the
stock-based compensation at the date of the grant, or alternatively, continuing
to recognize compensation expense based on the intrinsic value of the grant on
the measurement date in accordance with Accounting Principles Board Opinion No.
25, "Accounting for Stock Issued to Employees" (APB No. 25) while disclosing the
pro forma effect on a fair value basis. SFAS 123 is required to be adopted in
fiscal 1997.
While the Company intends to continue to recognize compensation expense using
the method prescribed by APB No. 25, the Company will adopt the disclosure
requirements of SFAS No. 123 in fiscal 1997. The Company has not determined the
impact of SFAS No. 123 on future financial statement disclosures.
Reclassifications
- -----------------
Certain prior year amounts have been reclassified to conform with the current
year presentation.
NOTE 2 - Marketable Securities And Net Investment Income
As of June 29, 1996, marketable securities consisted of preferred equity
securities and U.S. Government Agency instruments. Scheduled maturities of U.S.
Government Agency instruments are approximately seven years, on a weighted
average basis.
25
<PAGE>
Increases in the general level of interest rates in the United States beginning
in February 1994 adversely affected the market value of certain of the Company's
marketable securities, many of which provide dividends or interest at fixed
rates. Interest rate fluctuations in the intervening periods have resulted in
both positive and negative changes in the carrying values of the related
securities. As of June 29, 1996, the fair values of the Company's holdings in
preferred equity securities and U.S. Government Agency instruments were $6.1
million and $1.9 million, respectively. The cost of the preferred equity
securities and the U.S. Government Agency instruments exceeded their respective
fair values by approximately $400,000 and $100,000 at June 29, 1996.
As of July 1, 1995, the fair values of the Company's holdings in preferred
equity securities, U.S. Government Agency investments and municipal securities
were $24.9 million, $9.6 million and $2.5 million, respectively. The cost of the
preferred equity securities and the U.S. Government Agency instruments exceeded
their respective fair values by approximately $1.0 million and $300,000 at July
1, 1995. At that date, the cost of municipal securities approximated their
aggregate fair value.
Net investment income consists of the following for each fiscal year:
(in thousands) 1996 1995 1994
---- ---- ----
Dividend income $ 610 $1,919 $2,196
Interest income 3,130 4,329 2,263
Realized gains on sale of marketable securities 10 465
Realized losses on sale of marketable securities (779) (1,031) (1,284)
Investment fees and other (84) (487) (61)
------ ------ ------
Total $2,877 $4,740 $3,579
====== ====== ======
Subsequent to year-end, the Company was awarded $1.8 million in an arbitration
case related to the handling of certain marketable securities by an outside
investment advisor. This settlement (net of expenses) will be recorded in the
first quarter of fiscal 1997.
NOTE 3 - Inventories
Inventories consist of the following components:
(in thousands) June 29, July 1,
1996 1995
---- ----
Raw materials $ 5,330 $ 2,912
Work in process 2,315 2,424
Finished goods 51,768 9,848
------- -------
Total $59,413 $15,184
======= =======
Included in cost of sales for fiscal 1996 is approximately $14.1 million
pertaining to the write-up to fair value of finished goods related to the merger
with AMRE and the acquisitions of SportRack Canada, Inc. ("SportRack") and Giro
Sport Design, Inc. and Giro Sport Design International, Inc.
NOTE 4 - Property, Plant And Equipment
Property, plant and equipment consists of the following:
June 29, July 1, Estimated
(in thousands) 1996 1995 useful life
---- ---- -----------
Land, buildings, and leasehold improvements $ 9,523 $ 3,628 3-38 years
Machinery, equipment and tooling 21,215 18,237 3-10 years
Office equipment 7,478 3,843 3-7 years
Other 570 526 3-7 years
-------- --------
26
<PAGE>
38,786 26,234
Less: Accumulated depreciation and amortization (14,064) (9,942)
------- ------
Total $24,722 $16,292
======= =======
NOTE 5 - Bank Credit Facilities And Long-Term Debt
In February 1996, the Company entered into a $100 million multicurrency,
unsecured revolving line of credit (the "Revolving Credit") with a syndicated
bank group. This facility replaces prior revolving credit facilities that were
used by the Company's North American operations. At June 29, 1996, a total of
$35.1 million was outstanding under the credit facility.
The Revolving Credit, which expires in December 1999, provides the Company with
several interest rate options, including U.S. prime, LIBOR plus a margin,
Canadian prime plus the applicable LIBOR margin less 0.50%, Canadian banker's
acceptance plus the LIBOR margin plus 0.125%, and short-term fixed rates offered
by the agent bank in the loan syndication. The LIBOR margin is currently 1.25%
per annum, but it can range between 0.75% and 1.50% depending on the Company's
interest coverage ratio. Under the Revolving Credit, the Company is required to
pay a quarterly commitment fee on the unused portion of the facility at a rate
that ranges from 0.15% to 0.30% per annum. At June 29, 1996 the quarterly
commitment fee was 0.25% per annum.
The Revolving Credit contains certain financial covenants, the most restrictive
of which are a minimum interest coverage ratio, a maximum funded debt ratio and
a minimum consolidated tangible net worth amount. The Revolving Credit also
contains covenants that restrict the amount of cash dividends as well as the
amount that the Company can repurchase of its subordinated debt and common
stock.
In August, 1996, the Company amended the Revolving Credit to grant to the
syndicated bank group a security interest in U.S. accounts receivable and
inventories. The security interest is subject to automatic release by the bank
group upon the achievement of certain financial ratios after September 1, 1997.
The amendment among other things also waives a default in the interest coverage
ratio covenant as of June 29, 1996. Accordingly, the Revolving Credit is
classified as a long-term liability at June 29, 1996.
On November 16, 1993, the Company issued an aggregate principal amount of $86.25
million of Subordinated Convertible Debentures (the "Debentures"), at par value.
Interest on the Debentures is payable on May 15 and November 15 of each year.
The Debentures are redeemable, in whole or in part, at the option of the Company
at any time on or after November 15, 1996, at specified redemption prices.
Principal is due at maturity on November 15, 2000. The Debentures are
convertible by the holder at any time prior to maturity, unless previously
redeemed, into shares of the Common Stock at a conversion price of $54.06 per
share, subject to adjustment in certain events. For the fiscal years ended June
29, 1996 and July 1, 1995, interest expense relating to the Debentures totaled
$4.1 million in each year. This amount includes $384,000 of amortization expense
relating to debt issuance costs. Unamortized debt issuance costs relating to the
Debentures total $1.7 million and $2.1 million at June 29, 1996 and July 1,
1995, respectively. Such costs are amortized on a straight-line basis over seven
years.
The fair value of the Debentures at June 29, 1996, based on their quoted market
price of $75 1/2 at the close of business on June 29, 1996, was approximately
$65.1 million.
Long-term debt consists of the following:
<TABLE>
<CAPTION>
June 29, July 1,
(in thousands) 1996 1995
---- ----
<S> <C> <C>
Notes collateralized by certain equipment due at various dates
through December 2000 and bearing interest at fixed rates ranging
from 2.9% to 10.3%. $ 2,304 $ 3,189
Revolving credit agreement, maturing December 1999, bearing
interest at rates ranging from 6.1% to 8.25%. 35,138
</TABLE>
27
<PAGE>
<TABLE>
<S> <C> <C>
4 1/4% subordinated convertible debentures maturing
November 2000 86,250 86,250
-------- --------
123,692 89,439
Less: Current maturities 773 1,085
-------- --------
Total long term debt $122,919 $ 88,354
======== ========
</TABLE>
Scheduled maturities of long-term debt are as follows:
Fiscal Year Amount
Ending (in thousands)
--------------
1997 $ 773
1998 615
1999 527
2000 35,460
2001 86,317
NOTE 6 - Stockholders' Equity
Stock Options
- -------------
The Company may grant, under various employee stock option plans (the "Plans"),
options to purchase up to 1,825,000 shares of Common Stock to officers and key
employees. In addition, under the 1993 Outside Directors Stock Option Plan (the
"Directors' Plan"), stock options for up to 130,000 shares may be granted to
directors who are not employees of the Company. Under the various Plans and the
Directors' Plan, the exercise price of options granted may not be less than the
fair market value of the Common Stock at the date of grant. The options must be
exercised within ten years of the date of grant and typically vest equally over
a three year period.
On March 31, 1995, the Management Stock Incentive Committee of the Board of
Directors (the "Board") implemented a stock option replacement program (the
"Replacement Program"). Under the Replacement Program, holders of stock options
issued under the Restated and Amended Bell Sports Corp. 1991 Management Stock
Incentive Plan or the Restated and Amended Bell Sports Corp. 1992 Management
Stock Incentive Plan were given the opportunity to exchange such options for
replacement stock options ("Replacement Options"). Each Replacement Option was
for the number of shares of Common Stock subject to the replaced stock option at
the time of replacement. Replacement Options are exercisable on the first
anniversary of the grant of such Replacement Option for 1/3 of the shares
covered thereby and an additional 1/3 of the shares covered thereby on the
second and third anniversaries of the grant date. The Replacement Program
provides for a per share exercise price equal to the fair market value of a
share of Common Stock on March 31, 1995, which was $13.87. Stock options with
respect to 676,501 shares with exercise prices ranging from $23.25 to $38.37
were exchanged under the Replacement Program.
The following table summarizes option activity for each fiscal year:
1996 1995 1994
---- ---- ----
Options outstanding at beginning of year 1,152,675 1,016,540 811,449
Options granted 909,688 918,001 299,000
Options exercised (70,607) (76,114) (90,909)
Options canceled (75,000) (676,501)
Options terminated (70,167) (29,251) (3,000)
--------- --------- ---------
Options outstanding at end of year 1,846,589 1,152,675 1,016,540
========= ========= =========
Options exercisable at end of year 549,660 161,000 293,941
========= ========= =========
28
<PAGE>
Prices per share:
Exercised $0.01-$10.80 $0.01-$10.80 $0.01-$24.87
Unexercised at end of year $0.01-$42.37 $10.80-$42.37 $0.01-$42.37
Rights Plan
- -----------
On September 22, 1994, the Board declared a dividend of one preferred stock
purchase right (a "Right") for each outstanding share of Common Stock. The
dividend was awarded on October 3, 1994, to the holders of record of the Common
Stock at the close of business on October 3, 1994. One Right is also associated
with each share of Common Stock issued after October 3, 1994.
When the Rights become exercisable, each Right will entitle the holder thereof
(with certain exceptions) to purchase from the Company one one-hundredth of a
share of the Series A Junior Participating Preferred Stock, $.01 par value (the
"Preferred Shares"), of the Company at a price of $75.00 per one one-hundredth
of a Preferred Share, subject to adjustment (the "Exercise Price"). Under
certain circumstances, each Right (other than those which have become void) will
entitle the holder to purchase, at the Exercise Price, Common Stock having a
then current market value of two times the Exercise Price; or, if the Company is
acquired in a merger or other business combination, each such Right will entitle
the holder to purchase, at the Exercise Price, common stock of the acquirer
having a then current market value of two times the Exercise Price.
The Rights become exercisable 10 business days after any person has acquired, or
announced its intention to commence a tender offer for, 15% or more of the
Common Stock. The Rights will also become exercisable 10 business days after a
determination by the disinterested members of the Board (as defined in the
Stockholders Rights Agreement dated as of September 22, 1994 and amended by the
First Amendment dated as of February 15, 1995) that any person beneficially
owning 10% or more of the Common Stock intends to utilize its position to seek
short-term financial gain to the detriment of the best long-term interests of
the Company and its stockholders.
Under specified conditions, the Company will be entitled to redeem the Rights at
$.01 per Right.
Stock Repurchase Program
- ------------------------
On August 24, 1995, the Company announced a stock repurchase program authorizing
the repurchase of up to 10% of the outstanding shares of the Company's Common
Stock from time to time in open market or private transactions. The timing of
any repurchase and the price and number of shares repurchased will depend on
market conditions and other factors. As of June 29, 1996 the Company had
repurchased a total of 523,400 shares at an aggregate purchase price of
approximately $5.5 million. Shares repurchased may be retired or used for
general corporate purposes.
NOTE 7 - Commitments And Contingencies
Product Liability
- -----------------
The Company is subject to various product liability claims and/or suits brought
against it for claims involving damages for personal injuries or deaths.
Allegedly, these injuries or deaths relate to the use by claimants of products
manufactured by the Company and, in certain cases, products manufactured by
others. The ultimate outcome of these existing claims and any potential future
claims cannot presently be determined. Management believes that existing product
liability claims/suits are defensible and that, based on the Company's past
experience and assessment of current claims, the aggregate of defense costs and
any uninsured losses will not have a material adverse impact on the Company's
liquidity or financial position.
The cost of product liability insurance fluctuated greatly in past years and the
Company opted to self-insure claims for certain periods. The Company has been
covered by product liability insurance since
29
<PAGE>
July 1, 1991. This insurance is subject to a self-insured retention. There is no
assurance that insurance coverage will be available or economical in the future.
The Company sold its motorcycle helmet manufacturing business in June 1991 in a
transaction in which the purchaser assumed all responsibility for product
liability claims arising out of helmets manufactured prior to the date of
disposition and the Company agreed to use its in-house defense team to defend
these claims at the purchaser's expense. If the purchaser is for any reason
unable to pay the judgment, settlement amount or defense costs arising out of
this or any other claim, the Company could be held responsible for the payment
of such amounts or costs. The Company believes that the purchaser does not
currently have the financial resources to pay any significant judgment,
settlement amount, or defense costs arising out of this or any other claim.
On February 2, 1996, a Toronto, Canada jury returned a verdict against Bell
based on injuries arising out of a 1986 motorcycle accident. The jury found that
Bell was 25% responsible for the injuries with the remaining 75% of the fault
assigned to the plaintiff and the other defendant. Unless reversed on appeal,
the verdict is expected to be between $3.0 and $4.0 million, which includes
associated legal fees and tax implications.
The Company has filed an appeal of the Canadian verdict. Although the Company
cannot predict the outcome of an appeal, the Company currently has adequate cash
balances and sources of capital available to satisfy the judgment if the appeal
is unsuccessful. Accordingly, the Company currently does not believe the claim
will have a material adverse effect on liquidity or the financial condition of
the Company. Although the Company maintains product liability insurance, this
claim arose during a period in which the Company was self-insured. The Company
currently does not have a reserve for this judgment.
Environmental Litigation
- ------------------------
In the ordinary course of its business, the Company is required to dispose of
certain waste at off-site locations. During 1993, the Company became aware of an
investigation by the Illinois Environmental Protection Agency (the "Illinois
Agency") of a waste disposal site, owned by a third party, which was previously
utilized by the Company. As a result of that investigation, the Illinois Agency
informed the Company that certain of the Company's practices with respect to the
identification, storage and disposal of hazardous waste and related reporting
requirements may not have complied with the applicable law. On March 14, 1995,
the State of Illinois (the "State") filed a complaint with the Illinois
Pollution Control Board (the "Pollution Control Board") against the Company and
the disposal site owner based on the same allegations. The complaint seeks
penalties not exceeding statutory maximums and such other relief as the
Pollution Control Board determines appropriate. The disposal site owner filed a
cross-claim against the Company that seeks to have penalties assessed against
the Company and not against the disposal site owner. Any penalties as a result
of the cross-claim would be payable to the State. The State and the Company have
agreed in principle to a settlement in which the Company will pay $69,000 to the
State and will dispose of certain materials in a container at the waste disposal
site at an authorized hazardous waste disposal facility. The Company is seeking
dismissal of the cross-claim on several grounds.
Additionally, the Illinois Agency has been negotiating with the disposal site
owner with respect to the procedures and actions necessary to close the disposal
site. The extent and nature of any actions which may be taken against the
Company with respect to this matter cannot presently be determined
Shareholder Litigation
- ----------------------
On February 16, 1995, an AMRE shareholder filed a lawsuit, on his own behalf,
and a purported class action, against AMRE and its directors in the Chancery
Court of the State of Delaware, alleging various breaches of fiduciary and
common law duties and requesting both monetary and injunctive relief. The
alleged basis for the claims are the action of AMRE and its directors in
connection with the authorization
30
<PAGE>
and approval of the AMRE Merger with Bell Sports Corp. The AMRE Merger was
consummated on July 3, 1995 and the case has been inactive since that date. On
October 2, 1995, the Company filed a motion to dismiss the case.
Leases
- ------
The Company leases certain equipment and facilities under various noncancellable
capital and operating leases. The total expense under these operating leases
amounted to approximately $3.4 million, $1.9 million and $1.2 million for the
fiscal years ended in 1996, 1995 and 1994, respectively.
At June 29, 1996, the future minimum annual rental commitments under all
noncancellable leases were as follows:
(in thousands) Operating Capital
Leases Leases
------ ------
1997 $ 3,992 $ 463
1998 3,401 353
1999 3,148 245
2000 3,008 245
2001 2,651 245
Thereafter 11,572 1,135
------- ------
Total minimum lease commitments $27,772 2,686
=======
Less: Interest portion 808
------
Present value of capital lease obligations 1,878
Less: Current portion 297
------
Total long-term capital lease obligations $1,581
======
NOTE 8 - Fair Value Of Financial Instruments
The carrying amount of cash and cash equivalents, accounts receivable, accounts
payable, accrued expenses and short-term debt approximates fair value because of
the short maturity of these instruments. The following table presents the
carrying amounts and estimated fair value of the Company's other financial
instruments:
June 29, 1996 July 1, 1995
-----------------------------------------------
Carrying Fair Carrying Fair
(in thousands) Amount Value Amount Value
------ ----- ------ -----
Marketable securities (Note 2) $ 7,996 $ 7,996 $36,955 $36,955
Long-term debt (Note 5) 122,919 102,561 88,354 65,929
The estimated fair values of marketable securities and the convertible
debentures are based on quoted market prices. The estimated fair value of other
long-term debt approximates its carrying value.
NOTE 9 - Acquisitions
Effective July 3, 1995, the Company completed, for common stock, the merger
("AMRE Merger") of a subsidiary of the Company with American Recreation Company
Holdings, Inc. ("AMRE") a designer, marketer and distributor of bicycles,
related bicycle parts and accessories and bicycle helmets in the United States
and Canada. The purchase price of $76.0 million was computed by converting each
of the 8.7 million outstanding shares of AMRE common stock into .6890 shares of
Bell Common Stock and multiplying the result by $12.70, the average of the Bell
Common Stock between June 9, 1995 and June 22, 1995. The purchase price was
increased by an additional $1.2 million attributable to outstanding AMRE stock
options, which were converted into Bell stock options. The purchase price has
been allocated to the fair value of the net assets of AMRE. The purchase price
was approximately $52.8 million greater than the fair value of the identifiable
net assets acquired, and, accordingly, goodwill was increased by this amount.
31
<PAGE>
Unaudited pro forma financial information for fiscal 1995 is presented in the
Consolidated Balance Sheets and Consolidated Statements of Operations assuming
the Company consummated the AMRE merger at the beginning of the 1995 fiscal
year. Pro forma adjustments have been made to adjust net investment income and
interest expense for the effects of a required pre-payment of related party
obligations, to increase amortization expense for goodwill and other
intangibles, and to reflect pro forma tax effects.
On January 22, 1996, the Company acquired, for $16.8 million, substantially all
of the assets of privately-owned, Giro Sport Design, Inc. of California and all
outstanding shares of Giro Sport Design International, Inc., the holding company
which owns Giro's Ireland operation (collectively "Giro"). Giro designs,
manufactures and markets premium bicycle helmets in North America, Europe and
other parts of the world.
On May 15, 1995, the Company purchased, for cash, substantially all of the
assets of SportRack a Canadian designer, manufacturer and marketer of automobile
roof rack systems.
On January 5, 1994, the Company purchased, for cash, substantially all of the
assets of VistaLite, a manufacturer and marketer of safety lights and halogen
headlights for the bicycle industry.
These acquisitions were accounted for as purchase transactions from their
respective effective dates. Accordingly their results of operations have been
included in the accompanying statements of operations from the effective dates
of the acquistions. The impact of these acquisitions, other than AMRE, were not
significant.
NOTE 10 - Consolidation Costs And Other One-Time Charges
On June 27, 1995, the Company's stockholders approved the issuance of Common
Stock in connection with the Agreement and Plan of Merger dated February 15,
1995 among the Company, Bell Merger Co., a wholly-owned subsidiary of the
Company, and American Recreation Company Holdings, Inc. ("AMRE"). In
contemplation of the merger, the Company formulated a program (the "Program") to
consolidate and integrate the operations of Bell, SportRack and AMRE, as well as
combine certain product lines. This Program called for the consolidation of
certain sales and marketing, research and development, manufacturing, finance
and management information systems functions.
Consolidation Costs - 1996
- --------------------------
During fiscal 1996, the Company commenced significant organizational and office
consolidations including closing the Cerritos, Providence, Commack and Calgary
offices. Most U.S. sales, marketing and research and development operations were
consolidated in San Jose, California and all corporate functions in Scottsdale,
Arizona. Substantially all of the Canadian operations were consolidated into one
facility in Granby, Quebec. These consolidation activities are substantially
completed and should be finalized during the first half of fiscal 1997.
Included in fiscal 1996 pre-tax income is $5.9 million related to consolidation
costs, including facility closing costs, severance benefits, relocation expenses
and costs to combine computer systems. The severance benefits related to the
elimination of 35 positions in sales and marketing, research and development,
finance and manufacturing. The relocation expenses are due to various employees
relocating to San Jose or Scottsdale. The costs to combine computer systems
related to an implementation study and the write-off of redundant software
costs.
The following table sets forth the details of activity during fiscal 1996 for
consolidation costs and related accrued liabilities:
<TABLE>
<CAPTION>
Balance Acquisition
at accrual Non- Balance at
July 1, recorded to Consol. Cash cash June 29,
(in thousands) 1995 goodwill costs payments charges 1996
---- -------- ----- -------- ------- ----
<S> <C> <C> <C> <C> <C> <C>
Lease payments and other
facility expenses $ 769 $1,951 $ 528 $ (1,755) $(551) $ 942
Severance and other related
benefits 453 5,904 484 (4,009) 2,832
Relocation and other 2,061 1,844 (2,522) 1,383
</TABLE>
32
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Computer systems 2,994 (2,994)
------ ------ ------ -------- ----- ------
Total $1,222 $9,916 $5,850 $(11,280) $(551) $5,157
====== ====== ====== ========= ====== ======
</TABLE>
Consolidation Costs - 1995
- --------------------------
Included in fiscal 1995 pre-tax income is $2.1 million related to consolidation
costs, including facility closing costs, reductions in the carrying value of
assets, severance benefits, relocation expenses and other costs. The severance
benefits relate to the elimination of 25 positions, in sales and marketing,
research and development, finance and manufacturing.
The following table sets forth the details of activity during fiscal 1995 for
consolidation costs:
<TABLE>
<CAPTION>
1995 Cash Non-cash Balance at
(in thousands) Accrual Payments Charges July 1, 1995
------- -------- ------- ------------
<S> <C> <C> <C> <C>
Lease payments and other facility expenses $ 769 $ 769
Severance and other related benefits 453 453
Relocation and other 219 $(219)
Asset write-downs 682 $(682)
------ ----- ----- ------
Total $2,123 $(219) $(682) $1,222
======= ===== ===== ======
</TABLE>
Other One-Time Charges
- ----------------------
In fiscal 1995, the Company made a strategic decision to market its Bell helmet
brand across all trade channels, including the mass merchant trade channel. As a
result of this branding change, the Company recorded in the fourth quarter
charges of $2.4 million, which reduced gross profit, for the discontinuation of
certain product tooling and inventory. These charges primarily relate to the
combination of the Company's bicycle helmet product line with AMRE's helmet
product line.
Consolidation Costs - 1994
- --------------------------
In connection with integrating the operations of acquired entities and
reorganization of the Company's independent bike dealer sales and distribution
organization, the Company recorded consolidation charges of $185,000 for the
fiscal year ended in 1994.
NOTE 11 - Income Taxes
Pre-tax (loss) income by jurisdiction for each fiscal year follows:
(in thousands) 1996 1995 1994
---- ---- ----
Domestic $(22,395) $(3,963) $17,703
Foreign 1,770 (1,372) (764)
-------- ------- -------
Total $(20,625) $(5,335) $16,939
======== ======= =======
The (benefit) provision for income taxes charged to operations for each fiscal
year follows:
(in thousands) 1996 1995 1994
---- ---- ----
Current (benefit) expense:
U.S. Federal $(1,254) $ 100 $ 3,735
State and local 153 1,003
Foreign 482
------- ------- -------
Total current (772) 253 4,738
Deferred tax (benefit) expense:
U.S. Federal (6,402) (1,933) (4)
33
<PAGE>
State and local (1,144) (309) (1)
Foreign (370) (70)
------- ------- -------
Total deferred (7,546) (2,612) (75)
Impact of stock option deduction credited to equity 68 467 970
Utilization of net operating loss carryforwards 847
------- ------- -------
Total income tax (benefit) provision $(8,250) $(1,892) $ 6,480
======= ======= =======
Deferred taxes are comprised of the following:
(in thousands) June 29, 1996 July 1, 1995
------------- ------------
Net operating losses and other tax loss carryforwards $ 12,494 $ 2,741
Inventory and accounts receivable reserves 4,468 716
Accrued liabilities 2,505 682
Package design costs capitalized for tax purposes 746 599
Consolidation cost reserves 2,040 553
Other 578 631
-------- --------
Gross deferred tax assets 22,831 5,922
Depreciation (65) (289)
Other (1,388) (488)
-------- --------
Gross deferred tax liability (1,453) (777)
Deferred tax assets valuation allowance (1,305) (2,001)
-------- --------
Net deferred tax assets 20,073 3,144
Less: current portion (11,116) (3,322)
-------- --------
Long term deferred tax assets (liabilities) $ 8,957 $ (178)
======== ========
The (benefit) provision for income taxes for each fiscal year differs from the
U.S. statutory federal income tax rate for the following reasons:
1996 1995 1994
---- ---- ----
Statutory U.S. rate (34.0)% (34.0)% 34.0%
Tax exempt investment income (0.2) (11.5) (4.0)
Other permanent differences 0.7 3.0 0.8
State and foreign taxes (6.1) 1.8 4.8
Other (0.4) 5.2 2.6
----- ----- ----
Effective tax (benefit) rate (40.0)% (35.5)% 38.2%
===== ===== ====
Domestic net operating losses totaling approximately $26.0 million will be
carried forward and begin to expire in 2007. Foreign net operating losses
totaling approximately $618,000 will begin to expire in 1999. Capital loss
carryforwards totaling approximately $2.4 million begin to expire in 1999.
Utilization of loss carryforwards in future years may be subject to limitations
if substantial changes in the Company's ownership should occur.
General business tax credits were accounted for under the flow-through method
and totaled approximately $700,000. The credits will be carried forward and will
begin to expire in 2009 and minimum tax credits totaling approximately $1.8
million will be carried forward with an indefinite life.
The deferred tax assets valuation allowances at June 29, 1996 and July 1, 1995
were required primarily for capital tax loss carryforwards and accounting
reserves that, in management's view, will not be realized in the foreseeable
future.
34
<PAGE>
The Company has not provided for U.S. federal income and foreign withholding
taxes of certain non-U.S. subsidiaries' undistributed earnings as of June 29,
1996, because such earnings are intended to be reinvested indefinitely. If these
earnings were distributed, foreign tax credits should become available under
current law to reduce or eliminate the resulting U.S. income tax liability.
NOTE 12 - Additional Cash Flow Statement Information
The Company's non-cash investing and financing activities and cash payments for
interest and income taxes are summarized below:
<TABLE>
<CAPTION>
Fiscal Years Ended
------------------
June 29, July 1, July 2,
(in thousands) 1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Additional paid in capital arising from tax benefits associated
with the exercise of stock options $ 68 $ 467 $ 970
Issuance of stock and stock options for AMRE Merger 77,211
Purchase price adjustment to accrued liabilities and goodwill 200
Liabilities assumed in lieu of a cash payment in connection
with the acquisition of:
SportRack 1,382
VistaLite 1,159
Cash paid during the period for:
Interest $ 8,816 $ 4,183 $ 2,190
Income taxes 116 2,180 4,183
</TABLE>
NOTE 13 - Foreign Operations And Export Sales
Information regarding geographic sales, net income and identifiable assets for
fiscal years 1996, 1995 and 1994 are as follows:
United
(in thousands) States Europe Canada Total
------ ------ ------ -----
Year ending June 29, 1996:
Sales to unaffiliated customers $222,613 $17,408 $22,319 $262,340
Net income (loss) (13,644) 688 581 (12,375)
Total assets 262,568 10,956 25,111 298,635
Year ending July 1, 1995:
Sales to unaffiliated customers $ 88,430 $14,325 $ 235 $102,990
Net loss (3,347) (5) (91) (3,443)
Total assets 172,245 9,632 4,557 186,434
Year ending July 2, 1994:
Sales to unaffiliated customers $103,332 $12,758 $116,090
Net income 9,823 636 10,459
Total assets 178,166 6,492 184,658
NOTE 14 - Quarterly Financial Data (Unaudited)
The unaudited information presented below has been prepared in accordance with
generally accepted accounting principles for interim financial information. In
the opinion of management, all adjustments
35
<PAGE>
(consisting only of normal recurring adjustments) considered necessary for a
fair presentation of financial position and results of operations have been
made.
Quarterly financial data for the fiscal years ended in 1996 and 1995 are as
follows:
1st 2nd 3rd 4th
(in thousands, except per share data) Quarter Quarter Quarter Quarter
------- ------- ------- -------
1996:
Net sales $57,675 $56,215 $67,442 $81,009
Gross profit 10,135 8,442 19,916 22,226
Net income (loss) (5,372) (7,724) 713 7
Net income (loss) per share (0.38) (0.56) 0.05 0.00
1995:
Net sales $21,088 $26,256 $26,843 $28,803
Gross profit 7,112 8,499 7,943 5,029
Net income (loss) 155 582 22 (4,202)
Net income (loss) per share 0.02 0.07 0.00 (0.51)
36
<PAGE>
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None.
PART III
Item 10. Directors and Executive Officers of the Registrant
Directors of the Registrant
- ---------------------------
The information contained under the headings "Nominees for Directors", "Members
of Board of Directors Continuing in Office" and "Section 16 (a) Beneficial
Ownership Reporting Compliance" in the Proxy Statement (which Proxy Statement
will be filed with the Securities and Exchange Commission on or before October
10, 1996) is incorporated herein by reference.
Executive Officers of the Registrant
- ------------------------------------
Information with respect to executive officers of the Company as of September,
1996 is set forth below:
<TABLE>
<CAPTION>
Name Age Positions and Offices
- ---- --- ---------------------
<S> <C> <C>
Terry G. Lee 47 Chairman and Chief Executive Officer
Harry H. Manko 69 Vice Chairman
Mary J. George 46 President - North America
John L. Carenza 63 Executive Vice President
Howard A. Kosick 42 Executive Vice President - Chief Financial Officer, Secretary and
Treasurer
Bernie M. Kotlier 44 President - Specialty Retail and Service Cycle Division
Brent R. Knudsen 40 President - Mass and Sporting Goods Division
Robert Alan McCaughen 42 President - Canada
Linda K. Bounds 41 Vice President and Corporate Controller
</TABLE>
Terry G. Lee, Director, Chairman and Chief Executive Officer. Prior to the AMRE
Merger, Mr. Lee also served as the President of the Company. He joined Bell
Helmets, Inc. (a predecessor of the Company, "Bell Helmets") as President and
Chief Operating Officer and a director in 1984, and became Chief Executive
Officer in 1986. He was also a stockholder and consultant to Echelon Sports
Corporation (a predecessor of the Company) prior to its acquisition by the
Company in 1989. Mr. Lee became Chief Executive Officer and Chairman of the
Company in November 1989.
Harry H. Manko, Director and Vice Chairman. Mr. Manko became Vice Chairman of
the Company in July 1995, in connection with the AMRE Merger. Mr. Manko had been
involved with AMRE and its predecessors for 41 years. He became Chairman of the
Board and a director of AMRE in April 1993. From 1984 to 1993, Mr. Manko was
President and Chief Executive Officer of American Recreation Group, L.P., a
predecessor of AMRE. Mr. Manko was formerly the President of both the Bicycle
Wholesale Distributor Association and the Bicycle Institute of America.
Mary J. George, President - North America. Ms. George joined the Company in
October 1994 as the Senior Vice President of Marketing and Strategic Planning,
became President - Specialty Retail Division in July 1995 and became President -
North America in December, 1995. Prior to joining the Company, Ms. George served
as President of Denar Corporation from January 1993 to August 1994 and as
President of The WestPointe Group from January 1991 to December 1992. Ms. George
was Chief Executive Officer of Kids William & Clarissa (formerly Avitar
Marketing) from September 1990 to December 1990 and served as its President and
Chief Operating Officer from January 1989 to September 1990.
37
<PAGE>
John L. Carenza, Executive Vice President. Mr. Carenza joined Bell Helmets in
1988 as Executive Vice President and has served in various executive management
positions with Bell since 1989. From 1980 until he joined Bell Helmets in 1988,
Mr. Carenza served in various capacities for the Thermos Division of Household
Manufacturing, Inc.
Howard A. Kosick, Executive Vice President - Chief Financial Officer, Secretary
and Treasurer. Mr. Kosick joined Bell in October 1989 as its Chief Financial
Officer, Secretary, Treasurer and Senior Vice President and became Executive
Vice President in 1992. From 1981 until October 1989, he served in various
financial management positions for Household Manufacturing, Inc. Mr. Kosick is a
Certified Public Accountant.
Bernie M. Kotlier, President - Specialty Retail and Service Cycle Division. Mr.
Kotlier joined the Company in July 1995, in connection with the AMRE Merger, as
President - Service Cycle Division and became President - Specialty Retail and
Service Cycle Division in December 1995. Mr. Kotlier previously served as
Executive Vice President of AMRE from March 1994 to June 1995. Prior to joining
AMRE, Mr. Kotlier served as Executive Vice President for Lawee Inc./Univega
Bicycles from November 1988 to November 1993.
Brent R. Knudsen , President - Mass and Sporting Goods. Mr. Knudsen joined the
Company in July 1996. From 1995 to 1996, Mr. Knudsen served as President - Full
Force/EPIC Manufacturing, divisions of Specialized Bicycle Components. Mr.
Knudsen served in various management positions, including Vice President -
Marketing at Price Costco from 1985 to 1995.
Robert Alan McCaughen , President - Canada. Mr. McCaughen joined the Company in
July 1995, in connection with the AMRE merger as President of Denrich Sporting
Goods. Mr. McCaughen became President - Canada in August 1995. Previously, Mr.
McCaughen served as President of Denrich Sporting Goods Canada, LTD. ("Denrich")
since August 1991, when AMRE acquired Denrich. Mr. McCaughen also served as
President and was one of the founders of Denrich's predecessor company that
commenced operations in 1989.
Linda K. Bounds, Vice President and Corporate Controller (Chief Accounting
Officer). Ms. Bounds joined the Company in February 1990 and became a Vice
President in 1993. From 1984 to 1990, she served in various financial management
positions for Celestial Seasonings, Inc. Ms. Bounds is a Certified Public
Accountant.
Item 11. Executive Compensation
Except for the information relating to Item 13 hereof and except for information
referred to in Item 402(a)(8) of Regulation S-K, the information contained under
the headings "Executive Officer Compensation" and "Directors Meetings and
Committees" in the Proxy Statement (which Proxy Statement will be filed with the
Securities and Exchange Commission on or before October 10, 1996) is
incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management
The information contained under the heading "Security Ownership of Directors,
Officers and Principal Stockholders" in the Proxy Statement (which Proxy
Statement will be filed with the Securities and Exchange Commission on or before
October 10, 1996) is incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions
Except for the information relating to Item 11 hereof and except for information
referred to in Item 402 (a)(8) of Regulation S-K, the information contained
under the headings "Executive Officer Compensation", "Directors Meetings and
Committees" and "Certain Relationships and Related
38
<PAGE>
Transactions" in the Proxy Statement (which Proxy Statement will be filed with
the Securities and Exchange Commission on or before October 10, 1996) is
incorporated herein by reference.
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
The consolidated financial statements, other financial data and consolidated
financial schedules of the Company and its subsidiaries, listed below are
included as part of this report:
Page No.
- --------
19 Consolidated balance sheets June 29, 1996, July 1, 1995 and July 1,
1995 on a pro forma basis
20 Consolidated statements of operations - years ended June 29, 1996,
July 1, 1995, July 1, 1995 on a pro forma basis and July 2, 1994
22 Consolidated statements of cash flows - years ended June 29, 1996,
July 1, 1995 and July 2, 1994
23 Notes to consolidated financial statements - June 29, 1996
18 Report of Independent Accountants on Consolidated Financial
Statements
S-2 Schedule II - Valuation and qualifying accounts
S-1 Report of Independent Accountants on Financial Statement Schedule
All other schedules for which provision is made in the applicable accounting
regulations of the Securities and Exchange Commission are not required under the
related instructions or are inapplicable, and therefore have been omitted.
39
<PAGE>
(a)(3) Exhibits
Except for the documents that are marked with an asterisk, each of
the documents listed below has heretofore been filed with the
Securities and Exchange Commission (the "Commission") and each
such document is incorporated herein by reference. The documents
that are marked with an asterisk are filed herewith.
Number Description
- ------ -----------
3 (i) Restated Certificate of Incorporation of the Registrant, as
amended by the Certificate of Designation of Series A Junior
Participating Preferred Stock of the Registrant and as further
amended on June 27, 1995 (Exhibit 4 (1) to the Registrant's
Registration Statement on Form S-8, File No. 33-94296)
3 (ii) Bylaws of the Registrant (Exhibit 4 (2) to the Registrant's
Registration Statement on Form S-8, File No. 33-94296)
4.1 Certificate of Designation of Series A Junior Participating
Preferred Stock of Bell Sports Corp. (Exhibit 4 (2) to the
Registrant's Registration Statement on Form S-4, File No.
33-92344)
4.2 Stockholders Rights Agreement (the "Stockholders Rights
Agreement") dated as of September 22, 1994 between the
Registrant and Harris Trust & Savings Bank, as Rights Agent
(Exhibit 1 of the Registrant's Registration Statement on Form
8-A dated September 27, 1994)
4.3 First Amendment dated February 15, 1995 to the Stockholders
Rights Agreement (Exhibit 4 of the Registrant's Current Report
on Form 8-K dated February 15, 1995)
4.4 Indenture, dated as of November 15, 1993, between the
Registrant (Exhibit 4 (1) to the Registrant's Current Report
on Form 8-K dated October 26, 1993)
10.1 Employment Agreement dated as of June 13, 1995 among
Registrant, Bell Sports, In. and Terry G. Lee (Exhibit 10(1)
to the Registrant's Annual Report on Form 10-K for the fiscal
year ended July 1, 1995)
10.2 Employment Agreement dated as of June 13, 1995 amoung
Registrant, Bell Sports, Inc. and Howard A. Koisck (Exhibit 10
(1) to the Registrant's Annual Report on form 10-K for the
fiscal year ended July 1, 1995)
10.3 Employment Agreement dated as of June 30, 1994 among
Registrant, Bell Sports, Inc. and John L. Carenza (Exhibit 10
(2) to the Registrant's Quarterly Report on Form 10-Q, for the
quarter ended October 1, 1994)
10.4 Employment Agreement dated as of June 13, 1995 among
Registrant, American Recreation Company Holdings, Inc. and
Harry H. Manko (Exhibit 10(1) to the Registrant's Annual
Report on Form 10-K for the fiscal year ended July 1, 1995)
10.5 Employment Agreement dated as of June 13, 1995 among
Registrant, American Recreation Company Holdings, Inc. and
Stephen A. Silverstein (Exhibit 10(1) to the Registrant's
Annual Report on Form 10-K for the fiscal year ended July 1,
1995)
*10.6 Severance Agreement and General Release between Bell Sports
Corp., American Recreation Company Holdings, Inc. and Stephen
A. Silverstein dated June 26, 1996
10.7 Restated and Amended 1991 Management Stock Incentive Plan
(Exhibit 10 (24) to the Registrant's Annual Report on Form
10-K for the fiscal year ended June 27, 1992)
10.8 Restated and Amended 1992 Management Stock Incentive Plan
(Exhibit 4 (3) to the Registrant's Registration Statement on
Form S-8, File No. 33-94296)
10.9 American Recreation Company Holdings, Inc. Stock Option Plan
(Exhibit 4(3) to the Registrant's Registration Statement on
Form S-8, File No. 33-94298)
40
<PAGE>
10.10 Restated and Amended 1992 Outside Directors Stock Option Plan,
(Exhibit 10 (25) to the Registrant's Annual Report on Form
10-K for the fiscal year ended June 27, 1992)
10.11 1993 Outside Directors Stock Option Plan, (Exhibit 4 (c) to
the Registrant's Registration Statement on Form S-8, File No.
333-4472)
10.12 1996 Stock option plan (Exhibit 4 (c) to the Registrant's
Registration Statement on Form S-8, File No. 333-4468)
10.13 U.S. $100,000,000 Multicurrency Credit Agreement dated as of
February 15, 1996 Among Bell Sports Corp., The Guarantors
Party Hereto, The Banks Party Hereto, and Harris Trust and
Savings Bank as Agent (Exhibit 10 to the Registrant's
Quarterly Report on Form 10-Q for the fiscal quarter ended
March 30, 1996)
*10.14 First Amendment to Credit Agreement dated April 22, 1996
between Bell Sports Corp., The Guarantors Party Hereto, The
Banks Party Hereto, and Harris Trust and Savings Bank as Agent
*10.15 Second Amendment to the Credit Agreement dated August 9, 1996
between Bell Sports Corp., The Guarantors Party Hereto, The
Banks Party Hereto, and Harris Trust and Savings Bank as Agent
10.16 Form of Vehicle Lease Agreement between Bell Sports, Inc. and
Mission Leasing, (Exhibit 10 (77) to the Registrant's
Registration Statement on Form S-1, File No. 33-45868)
10.17 Form of Equipment Lease Agreement between Bell Sports, Inc.
and Mission Leasing, (Exhibit 10 (78) to the Registrant's
Registration Statement on Form S-1, File No. 33-45868)
*10.18 Lease of Aircraft between Bell Sports, Inc. and Hayden
Leasing, L.C. dated November 1, 1995
10.19 Post Merger Stockholders Agreement dates as of February 15,
1995 between the Registrant and CB Capital Investors, Inc.,
Harry H. Manko and Stephen A. Silverstein. (Exhibit 10(2) to
the Registrant's Current Report on Form 8-K dated February 15,
1995)
*11 Statement re: computation of per share earnings
*21 Subsidiaries of the Registrant
*23 Consent of Price Waterhouse
*24 Powers of attorney
*27 Financial data schedule
- -----------
* Filed herewith
Exhibits 10 (1) through 10 (12) listed are the management contracts and
compensatory plans or arrangements required to be filed as exhibits hereto
pursuant to the requirements of Item 601 of Regulation S-K.
41
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
Date: September 18, 1996
BELL SPORTS CORP.
/s/ Terry G. Lee
- --------------------------------------
Terry G. Lee
Chairman and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below on September 18, 1996 by the following persons on behalf
of the Registrant and in the capacities indicated, including a majority of the
Board of Directors.
<TABLE>
<S> <C>
/s/ Terry G. Lee Chairman and Chief Executive Officer
- -------------------------------------------------------
Terry G. Lee
(Principal executive officer)
/s/ Howard A. Kosick Executive Vice President and Chief Financial Officer
- -------------------------------------------------------
Howard A. Kosick
(Principal financial officer)
/s/ Linda K. Bounds Vice President and Corporate Controller
- -------------------------------------------------------
Linda K. Bounds
(Principal accounting officer)
/s/ Harry H. Manko Director
- -------------------------------------------------------
Harry H. Manko
/s/ Phillip D. Matthews Director
- -------------------------------------------------------
Phillip D. Matthews
/s/ Arnold L. Chavkin Director
- -------------------------------------------------------
Arnold L. Chavkin
/s/ Michael R. Hannon Director
- -------------------------------------------------------
Michael R. Hannon
/s/ Kenneth K. Harkness Director
- -------------------------------------------------------
Kenneth K. Harkness
/s/ W. Leo Kiely, III Director
- -------------------------------------------------------
W. Leo Kiely, III
/s/ Frederick W. Winter Director
- -------------------------------------------------------
Frederick W. Winter
/s/ Christopher Wright Director
- -------------------------------------------------------
Christopher Wright
*By: /s/Terry G. Lee
- --------------------------------------
Terry G. Lee, Attorney-in-Fact
</TABLE>
<PAGE>
Report of Independent Accountants on
------------------------------------
Financial Statement Schedule
----------------------------
To the Board of Directors of Bell Sports Corp.
Our audits of the consolidated financial statements referred to in our report
dated August 14, 1996 appearing on page 18 of the 1996 Annual Report to
Shareholders of Bell Sports Corp. also included an audit of the Financial
Statement Schedule listed in Item 14 of this Form 10-K. In our opinion, this
Financial Statement Schedule presents fairly, in all material respects, the
information set forth therein when read in conjunction with the related
consolidated financial statements.
Chicago, Illinois
August 14, 1996
S-1
<PAGE>
BELL SPORTS CORP. AND SUBSIDIARIES
SCHEDULE II - VALUATION
AND QUALIFYING ACCOUNTS For each
of the three fiscal years in the
period ended June 29,1996
(in thousands)
<TABLE>
<CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
ADDITIONS
------------------------------
BALANCE AT CHARGED TO CHARGED TO BALANCE AT
BEGINNING COSTS AND OTHER END OF
DESCRIPTION OF PERIOD EXPENSES ACCOUNTS DEDUCTIONS PERIOD
- ----------- --------- -------- -------- ---------- ------
<S> <C> <C> <C> <C> <C>
June 29, 1996
- -------------
Deferred tax asset
valuation allowance $ 2,001 $ (362) $ (334) $ -- $ 1,305
Allowance for
doubtful accounts $ 647 $ 2,481 $ 1,996(a) $ 1,676 $ 3,448
Inventory valuation
allowance $ 1,298 $ 3,602 $ 9,696(a) $ 7,997 $ 6,599
July 1, 1995
- ------------
Deferred tax asset
valuation allowance $ 3,348 $ (15) $(1,332) $ -- $ 2,001
Allowance for
doubtful accounts $ 763 $ 519 $ -- $ 635 $ 647
Inventory valuation
allowance $ 576 $ 4,183 $ -- $ 3,461 $ 1,298
July 2, 1994
- ------------
Deferred tax asset
valuation allowance $ 1,336 $ 2,012 $ -- $ -- $ 3,348
Allowance for
doubtful accounts $ 653 $ 328 $ -- $ 218 $ 763
Inventory valuation
allowance $ 586 $ 778 $ -- $ 788 $ 576
</TABLE>
(a) Acquisiton accrual recorded to goodwill
S-2
SEVERANCE AGREEMENT AND GENERAL RELEASE
---------------------------------------
This Severance Agreement and General Release (this "Agreement") is
entered into on June 26, 1996, effective as of June 15, 1996 among Bell Sports
Corp., a Delaware corporation (the "Company"), American Recreation Company
Holdings, Inc., a Delaware corporation and wholly-owned subsidiary of the
Company ("Old ARC"), and Stephen A. Silverstein (the "Executive").
WHEREAS, the Executive currently serves as President and Chief
Operating Officer and a Director of the Company, and also as President and Chief
Executive Officer of Old ARC and the Bicycle and Bicycle Merchandise Division of
the Company;
WHEREAS, the Company, Old ARC and the Executive have entered into an
Employment Agreement dated June 13, 1995 (the "Employment Agreement") pursuant
to which the Company has agreed to employ the Executive upon the terms set forth
therein; and
WHEREAS, the Company, Old ARC and the Executive desire to set forth
herein their mutual agreement with respect to the cessation of the Executive's
employment with the Company and Old ARC and his service as a Director of the
Company.
NOW, THEREFORE, in consideration of the mutual promises and agreements
contained herein, the adequacy and sufficiency of which are hereby acknowledged,
the Company, Old ARC and the Executive hereby agree as follows:
1. Resignation: Termination of Employment and Directorship. On the date
hereof, the Executive shall execute and deliver to the Company a resignation in
the form attached hereto as Exhibit A, effective as of June 15, 1996 (the
Effective Date"), and the Executive shall as of the close of business on the
Effective Date cease to be employed by the Company, Old ARC or any other direct
or indirect subsidiary of the Company and shall also cease to serve as a
Director of the Company or any direct or indirect Subsidiary of the Company.
2. Severance Payments. The Company shall pay to the Executive on the
Effective Date all amounts due to the Executive for salary accrued for services
rendered through the Effective Date, plus a lump sum cash amount equal to
$863,000 (the "Severance Payment"), being the amount which the Company, Old ARC
and the Executive have agreed represents full payment of all amounts (including,
without limitation, any amounts relating to salary, bonuses, long-term incentive
awards, severance payments or other benefits) due Executive under the Employment
Agreement; provided, however, that if the Executive shall have received any cash
compensation from the Company or Old ARC for any period subsequent to June 15,
1996, the Severance Payment shall be
<PAGE>
reduced by an amount equal to such cash compensation,it being understood that
there shall be no such reduction for benefits received in accordance with
Sections 3, 4, 5 or 6 hereof.
3. Reimbursement of Business Expenses. The Company shall honor each
currently outstanding request submitted by the Executive prior to June 26, 1996
for reimbursement of business expenses incurred by the executive in accordance
with Company policy and shall pay to the Executive all amounts due to the
Executive as reimbursement of business expenses incurred by the Executive prior
to the Effective Date in accordance with Company policy. Such reimbursement
shall be made promptly following receipt by the Company of the Executive's
request therefor, accompanied by supporting documentation satisfactory to the
Company.
4. Automobile. Prior to July 15, 1996, the Executive shall deliver to
the Company the automobile leased by the Company and used by the Executive and
any obligation of the Company or old ARC to provide the Executive with use of
such automobile or to reimburse the Executive for certain costs and expenses
related to Executive's use of an automobile shall terminate.
5. Cessation of Insurance Benefits.
(a) Life Insurance. As of the Effective Date, the participation of the
Executive in any life insurance or disability plan or program of the Company (or
any subsidiary thereof) shall terminate, including any short-term and long-term
disability and life insurance plan, any accidental death and dismemberment
protection plan and any travel accident insurance plan. Except as expressly set
forth in Section 5(b) of this Agreement, from and after the Effective Date
neither the Company nor any subsidiary thereof shall have any obligation to
provide the Executive with any insurance-related benefits, including the benefit
described in Section 6 of the Employment Agreement (and related schedule 6)
relating to the reimbursement of premiums on a whole life insurance policy.
(b) Medical and Dental. The coverage of the Executive and his
dependents under any medical and dental insurance plans or programs of the
Company, as such plans or programs are in affect from time to time, shall
continue through July 15, 1996. Except to the extent of COBRA benefits expressly
required by law, after July 15, 1996 the Company shall have no obligation to
provide the Executive or his dependents coverage under any medical or dental
insurance plans or programs, including any obligation to reimburse the Executive
for any costs and expenses, described in paragraph 3 of Schedule 6 of the
Employment Agreement.
-2-
<PAGE>
6. Other Benefits.
(a) Profit Sharing Benefits. The Executive shall be entitled to make
contributions to the Bell Sports Corp. Employees' Retirement and 401(k) Plan
through the Effective Date in accordance with the terms thereof. As soon as
reasonably practicable following the Effective Date, all benefits of the
Executive which shall be vested and accrued as of the Effective Date under such
Plan shall be distributed, as a roll-over distribution, in accordance with the
terms of such Plan.
(b) Stock Options. Any options to purchase shares of Common Stock of
the Company granted to the Executive prior to the date of this Agreement
pursuant to the Bell Sports Corp. Restated and Amended 1992 Management Stock
Incentive Plan which remain unexercised at the Effective Date may thereafter be
exercised only in such amounts, at such times and upon such terms as set forth
in subparagraph (5) of paragraph (g) of such Plan. Any options to purchase
shares of Common Stock of the Company granted to the Executive prior to the date
of this Agreement pursuant to the American Recreation Company Holdings, Inc.
Stock Option Plan, as amended, which remain unexercised on June 26, 1996 may
thereafter be exercised only to the extent and subject to the conditions set
forth in subparagraph (d) of paragraph 4 of such Plan.
(c) Arizona Residence. As soon as practicable after the Effective Date,
the Company shall purchase from the Executive the Executive's residence located
at 8912 N. 65th Street, Town of Paradise Valley, Arizona 85253. The aggregate
purchase price payable by the Company to the Executive for such residence shall
be $1,115,000 plus reimbursement for the expenses (including any income taxes
imposed upon the Executive with respect to such reimbursement and with respect
to such income taxes (assuming a combined marginal income tax rate of 48.9%))
set forth on Exhibit B hereto, payable in cash upon the closing of such purchase
(it being understood that the reimbursement in respect of income taxes shall be
made at the same time). At the closing of such purchase, the Executive shall be
required to execute and deliver to the Company a deed with respect to such
residence, in form and substance substantially equivalent to that delivered to
the Executive upon his purchase of such residence transferring to the Company
all of the Executive's right, title and interest in and to such residence, free
and clear of all encumbrances. The Company acknowledges that it is purchasing
the said property in "as is" condition.
(d) Long Island, New York Residence. The executive shall remain solely
responsible for any and all costs and expenses relating to his residence on Long
Island, New York, including the sale of such residence or any costs and expenses
relating to the termination of any contract for the sale of such residence.
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<PAGE>
7. Federal and State Withholding. The Company shall deduct from the
amounts payable to the Executive pursuant to this agreement the amount of all
required federal and state withholding taxes in accordance with the Executive's
Form w-4 on file with the Company and all applicable social security taxes.
8. Releases.
a) Release of the Company. The Executive, on behalf of himself and
anyone claiming through him, including, but not limited to, his past, present
and future spouses, family members, representatives, heirs, executors and
administrators, and the predecessors, successors and assigns of each of them,
hereby releases and agrees not to sue the Company, Old ARC or any of their
respective divisions, subsidiaries, affiliates, other related entities (whether
or not such entities are wholly owned) or the officers, directors, agents,
attorneys or representatives thereof, or the predecessors, successors or assigns
of each of them (hereinafter jointly referred to as the "Company Released
Parties"), with respect to any and all known or unknown claims which the
Executive now has, has ever had, or may in the future have, against any of the
Company Released Parties for or related in any way to anything occurring from
the beginning of time up to and including the Effective Date, including, without
limiting the generality of the foregoing, any and all claims which in any way
result from, arise out of, or relate to, the Executive's employment by the
Company or Old ARC or the termination of such employment, including, but not
limited to, any and all claims for severance or termination payments under any
agreement between the Executive and the Company or Old ARC or any program or
arrangement of the Company or Old ARC or any claims that could have been
asserted by the Executive or on his behalf against any of the Company Released
Parties in any federal, state or local court, commission, department or agency
under any fair employment, contract or tort law, or any other federal, state or
local law. regulation or ordinance, including, without limitation, Title VII of
the Civil Rights Act of 1964, the Employee Retirement Income Security Act of
1974, as amended, the Americans with Disabilities Act or the Age Discrimination
in Employment Act, or under any compensation, bonus, severance, retirement or
other benefit plan; provided, however, that nothing contained in this Section
8(a) shall apply to, or release the Company or Old ARC from, any obligation
contained in this Agreement. The Executive expressly represents and warrants
that he has not transferred or assigned any rights or causes of action that he
might have against any of the Company Released Parties.
(b) Release of the Executive. The Company and Old ARC, on behalf of
themselves and each of their respective divisions and subsidiaries, and the
predecessors, successors and assigns of each of them, hereby release and agree
not to sue the Executive or anyone else claiming through him including, but not
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<PAGE>
limited to his past, present and future spouses, family members,
representatives, heirs, executors and administrators, and the predecessors,
successors and assigns of each of them (hereafter jointly referred to as the
("Executive Released Parties"), with respect to any and all known or unknown
claims which the Company or Old ARC now has, has ever had, or may in the future
have, against any of the Executive Released Parties for or related in any way to
anything occurring from the beginning of time up to and including the Effective
Date, including, without limiting the generality of the foregoing, any and all
claims which in any way result from, arise out of, or relate to, the Executive's
employment by the Company or Old ARC, his service as an officer of the Company
or Old ARC, his service as a director of the Company or Old ARC or the
termination of such employment or service, including but not limited to, any and
all claims that could have been asserted by the Company or Old ARC or on behalf
of either against any of the Executive Released Parties in any federal, state or
local court, commission, department or agency, provided, however, that nothing
contained in this section 8(b) shall apply to, or release the Executive from,
(i) any obligation contained in this Agreement or (ii) any claim or obligation
relating to an act or omission by the Executive which an arbitrator or court of
competent jurisdiction determines to constitute common law or statutory fraud.
Each of the Company and Old ARC expressly represents and warrants that it has
not transferred or assigned any rights or causes of action that it might have
against any of the Executive Released Parties.
9. Authorization. The execution, delivery and performance of this
Agreement have been duly authorized by all requisite corporate action by the
Company and Old ARC.
10. Termination of Employment Agreement. Effective as of the date of
this Agreement, the Employment Agreement (other than, to the extent set forth
below, the provisions of Sections 10, 11 and 12 thereof) shall be terminated and
shall have no further force or effect. Notwithstanding anything contained in
this Agreement or the Employment Agreement to the contrary, (a) from and after
the Effective date the Executive shall continue to be entitled to
indemnification in respect of Proceedings (as defined in Section 10 of the
Employment Agreement) relating to or arising out of the Executive's service
prior to the Effective Date as a director, officer or employee of the Company
(or, at the request of the Company, as a director, officer, member, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprises, including service with respect to employee benefit plans) to the
extent, and subject to the conditions, set forth in section 10 of the Employment
Agreement, (b) the obligations of the Executive under Section 11 of the
Employment Agreement shall remain in full force and effect from and after the
Effective Date and shall not be affected by the termination of the Employment
Agreement or the cessation of
-5-
<PAGE>
the Executive's employment with the Company or Old ARC and (c) the obligations
of the Executive under Section 12 of the Employment Agreement shall remain in
full force and effect from and after the Employment Date and shall not be
affected by the termination of the Employment Agreement or the cessation of the
Executive's employment with the Company or Old ARC it being understood that, for
purposes of such Section 12 of the Employment Agreement, the Non-Compete Period
(as defined therein) shall expire on June 30, 1999). The applicable provisions
of Sections 10, 11 and 12 of the Employment Agreement are attached hereto as
Exhibit C and incorporated by reference herein.
11. Successors: Binding Agreement. This Agreement shall inure to the
benefit of and be enforceable by the Company and Old ARC and their respective
successors and assigns and by the Executive and by his personal or legal
representatives, executors, administrators, successors, heirs, distributees,
devisees and legatees. In the event of the death of the Executive while any
amounts are payable to the Executive hereunder, all such amounts, unless
otherwise provided herein, shall be paid in accordance with the terms of this
Agreement to such person or persons designated in writing by the Executive to
receive such amounts or, if no person is so designated, to the Executive's
estate.
12. Notices. All notices and other communications required or permitted
under this Agreement shall be in writing and shall be deemed to have been duly
given when personally delivered or five days after deposit in the United States
mail, postage prepaid, addressed (a) if to the Executive, to Stephen A.
Silverstein, 7 Round Hill Lane, Sands Point, New York 11050, with a copy to
Edward W. Kerson, Esq.., Proskauer Rose Goetz & Mendelsohn LLP, 1585 Broadway,
New York, New York 10036-8299, and if to the Company or Old ARC, to Bell Sports
Corp., 15170 N. Hayden, Suite 1, Scottsdale, Arizona 85260, attention Chairman,
with a copy to Larry A. Barden, Esq., Sidley & Austin, One First National Plaza,
Chicago, Illinois 60603, or (b) to such other address as either party may have
furnished to the other in writing in accordance herewith, except that notices of
change of address shall be effective only upon receipt.
13. Governing Law. Validity. The interpretation, construction and
performance of this Agreement shall be governed by and construed and enforced in
accordance with the internal laws of the State of Illinois without regard to the
principle of conflicts of laws.
14. Counterparts. This Agreement may be executed in two counterparts,
each of which shall be deemed to be an original and all of which together shall
constitute one and the same instrument.
15. Miscellaneous. No provision of this Agreement may be modified or
waived unless such modification or waiver is
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<PAGE>
agreed to in writing and executed by the Executive and by a duly authorized
officer of the Company and of Old ARC. No waiver by either party hereto at any
time of any breach by the other party hereto of, or compliance with, any
condition or provision of this Agreement to be performed by such other party
shall be deemed a waiver of similar or dissimilar provisions or conditions at
the same or at any prior or subsequent time. Failure by the Executive, the
Company or Old ARC to insist upon strict compliance with any provision of this
Agreement or to assert any right which the Executive, the Company or old ARC may
have hereunder shall not be deemed to be a waiver of such provision or right or
any other provision or right of this Agreement.
16. Acknowledgment by Executive. By executing this Agreement, the
Executive expressly acknowledges that he has read this Agreement carefully, that
he fully understands its terms and conditions, that he has been advised of his
rights and has consulted an attorney prior to executing this Agreement, that he
has been advised that he has at least 21 days within which to decide whether or
not to execute this Agreement and that he intends to be legally bound by it.
During a period of seven days following the date of his execution of this
Agreement, the Executive shall have the right to revoke his release under
Section 8 of this Agreement of claims under the Age Discrimination in Employment
Act by serving within such period written notice of revocation. If the Executive
exercises his rights under the preceding sentence, he shall forfeit all amounts
payable to him pursuant to this Agreement.
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<PAGE>
IN WITNESS WHEREOF, the Company has caused this Agreement to
be executed by a duly authorized officer of the Company, Old ARC has caused this
Agreement to be executed by a duly authorized officer of Old ARC and the
Executive has executed this Agreement, in each case, as of the day and year
first above written.
BELL SPORTS CORP.
By Terry G. Lee
--------------------------
Terry G. Lee, Chairman and
Chief Executive Officer
AMERICAN RECREATION COMPANY
HOLDINGS, INC.
By Terry G. Lee
--------------------------
Terry G. Lee, Chairman
EXECUTIVE:
Stephen A. Silverstein
------------------------------
Stephen A. Silverstein
-8-
<PAGE>
EXHIBIT A
RESIGNATION
June 26, 1996
To: Terry G. Lee
Chairman and Chief Executive Officer
Bell Sports Corp.
The undersigned, Stephen A. Silverstein, hereby resigns as (a)
President and Chief Operating officer of Bell Sports Corp., (b) President and
Chief Executive Officer of American Recreation Company Holdings, Inc., (c)
President and Chief Executive Officer of the Bicycle and Bicycle Merchandise
Division of Bell Sports, Inc., (d) Director of Bell Sports Corp. and (e) an
officer or director of any direct or indirect subsidiary of Bell Sports Corp.,
in each case effective as of June 15, 1996.
----------------------------
Stephen A. Silverstein
<PAGE>
EXHIBIT B
SCHEDULE OF EXPENSES
Expenses per SAS 6/17/96 Expense Report:
- ----------------------------------------
Arizona Home Expense 8,132.36
Legal Bill 8,370.23
Home Mortgage Payments 8,027.94
Interlink Home Appraisal 1,060.00
Various Home Expense 15,777.61
Additional Various Home Expense 1,000.00
Chemical Bank Bridge Loan Interest 20,656.24
Chemical Bank Loan Interest to 7/5/96 1,488.72
Norwest Bank Lona Interest to 7/8/97 2,918.19
(33 days interest form 6/6/93 - 7/8/96)
Closing Costs on June 26, 1996:
- -------------------------------
HQA Dues (308.33)
County Taxes 1/1/96 - 6/27/96 3,074.31
County Taxes 1/1/96 - 3/12/96 (previously paid) (1,247,29)
------------
Subtotal 68,949.98
Less: Payments made to date (26,379.61)
------------
Total 42,570.37
============
<PAGE>
EXHIBIT C
SECTIONS 10, 11 AND 12 OF EMPLOYMENT AGREEMENT
<PAGE>
10. Indemnification
(a) The Company agrees that, if the Executive is made a party,
or is threatened to be made a party, to any action, suit or proceeding, whether
civil, criminal, administrative or investigative (a "Proceeding"), by reason of
the fact that he is or was a director, officer or employee of the Company or is
or was serving at the request of the Company as a director, officer, member,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise, including service with respect to employee benefit plans,
whether or not the basis of the Proceeding is the Executive's alleged action in
an official capacity while serving as a director, officer, member, employee or
agent, the Executive shall be indemnified and held harmless by the Company to
the fullest extent permitted or authorized by the Company's certificate of
incorporation or bylaws or, if greater, by the law of the state of Delaware,
against all cost, expense, liability and loss (including, without limitation,
attorney's fees, judgements, fines, ERISA excise taxes or penalties and amounts
paid or to be paid in settlement) reasonably incurred or suffered by the
Executive in connection therewith, and such indemnification shall continue as to
the Executive even if he has ceased to be a director, member, employee or agent
of the Company or other entity and shall inure to the benefit of the Executive's
heirs, executors and administrators. The Company shall advance to the Executive
all reasonable costs and expenses incurred by him in connection with a
Proceeding within 20 days after receipt by the Company of a written request for
the advance. The request shall include an undertaking by the Executive to repay
the advance, if it ultimately is determined he is not entitled to be indemnified
against such costs and expenses.
(b) Neither the failure of the Company (including its board of
directors, independent legal counsel or stockholders to have made a
determination prior to the commencement of any Proceeding concerning payment of
amounts claimed by the Executive under section 10(a) that indemnification of the
Executive is proper because he has met the applicable standard of conduct, nor
11
<PAGE>
a determination by the Company (including its board of directors, independent
legal counsel or stockholders) that the Executive has not met such applicable
standard of conduct, shall create a presumption that the Executive has not met
the applicable standard of conduct.
(c) The Company shall continue to maintain a directors' and
officers' liability insurance policy covering the Executive to the extent the
Company provides such coverage for its other executive officers.
11. Confidentiality. The Executive shall at all times during the period
of his employment and thereafter hold in confidence any and all Confidential
Information (as defined below) that may have come or may come into his
possession or within his knowledge concerning the products, services, processes,
businesses, suppliers, customers and clients of the Company or its controlled
affiliates. The Executive agrees that neither he nor any person or enterprise
controlled by him will for any reason directly or indirectly, for himself or any
other person, use or disclose any trade secrets, proprietary or confidential
information, inventions, manufacturing or industrial processes or procedures,
patents, trademarks, trade names, customer lists, service marks, service names,
copyrights, applications for any of the foregoing or licenses or other rights in
respect thereof (collectively, "Confidential Information"), owned or used by, or
licensed to, the Company or any of its controlled affiliates, provided that the
Executive may disclose Confidential Information that has become generally
available to the public other than as a result of a breach of this agreement by
the Executive or pursuant to an order of a court of competent jurisdiction or of
a governmental agency, department or commission. Upon termination of his
employment under this agreement, the Executive shall promptly surrender to the
Company all documents he believes contain Confidential Information and that are
within his possession or control, other than documents to which the Executive is
or was a party or that relate to the Executive or the basis, or purported basis,
on which his employment was terminated.
12. Noncompetition and Nonsolicitation
(a) The Executive agrees that from the date of this agreement
and subsequent to the termination of his employment under this agreement and
continuing for the period that is the longer of 24 months (or, in case the
Executive's employment is terminated by notice given by the Company in
accordance with the second sentence of section 2, 12 months) following
termination of employment or the period in respect of which salary continuation
payments are required to be made under section 9(c)(i)(B) (the "Non-Compete
Period"), neither he nor any person or enterprise controlled by him will become
a stockholder, lender, director, officer, agent or employee of a corporation or
member of or
12
<PAGE>
lender to a partnership, engage as a sole proprietor in any business, act as a
consultant to any of the foregoing or otherwise engage directly or indirectly in
any business that is in competition with the business then conducted by the
Company or any of its controlled affiliates in any state in the United States or
any other country in which the Company or any of its controlled affiliates has
engaged in such business during the term of the Executive's employment under
this agreement; provided, however, that the foregoing shall not prohibit the
Executive from owning less than two percent of the outstanding securities of any
class of capital stock of a corporation the securities of which are regularly
traded or quoted on a national securities exchange or on an inter-dealer
quotation system.
(b) The executive agrees that during the Non-Compete Period,
neither he nor any person or enterprise controlled by him will (i) solicit for
employment or employ any person who was employed by the Company or any of its
controlled affiliates at any time within one year prior to the time of the act
of solicitation or (ii) in any way cause, influence or participate in the
employment of any such individual by anyone else.
(c) The Executive acknowledges that there is no adequate
remedy at law for a breach of this section 12 and that, in the event of such a
breach or attempted breach, the Company shall be entitled to injunctive or other
equitable relief to prevent any such breach, attempted breach or continuing
breach, without prejudice to any other remedies for damages or otherwise. The
Executive agrees that the covenants in this section 12 are separate and are
reasonable in their scope and duration and that the Executive shall not raise
any issue of reasonableness as a defense in any proceeding to enforce any such
covenant. Notwithstanding the foregoing, in the event that a covenant in this
Section 12 shall be deemed by any court to be unreasonably broad in any respect,
the parties agree that the court may modify such covenant for the purpose of
making such covenant reasonable in scope and duration. The validity, legality or
enforceability of the remaining provisions of this agreement shall not be
affected by any such modification.
13
<PAGE>
RESIGNATION
June 26, 1996
To: Terry G. Lee
Chairman and Chief Executive Officer
Bell Sports Corp.
The undersigned, Stephen A. Silverstein, hereby resigns as (a)
President and Chief Operating Officer of Bell Sports Corp., (b) President and
Chief Executive Officer of American Recreation Company Holdings, Inc., (c)
President and Chief Executive Officer of the Bicycle and Bicycle Merchandise
Division of Bell Sports, Inc., (d) Director of Bell Sports Corp. and (e) an
officer or director of any direct or indirect subsidiary of Bell Sports Corp.,
in each case effective as of June 15, 1996.
Stephen A. Silverstein
-----------------------------
Stephen A. Silverstein
14
Bell Sports Corp.
First Amendment to Credit Agreement
Harris Trust and Savings Bank LaSalle National Bank
111 West Monroe Street 120 South LaSalle Street
Chicago, Illinois 60603 Chicago, Illinois 60603
The Boatmen's National Bank of St. Louis
One Boatmen's Plaza Norwest Bank Arizona, N.A.
800 Market Street 3300 North Central Avenue
Post Office Box 236 Phoenix, Arizona 85012
St. Louis, Missouri 63166-0236
The Northern Trust Company
Bank of America - Arizona 50 South LaSalle Street
101 North First Avenue Chicago, Illinois 60675
Phoenix, Arizona 85003
Ladies and Gentlemen:
Reference is hereby made to that certain Multicurrency Credit Agreement
dated as of February 15, 1996 by and among Bell Sports Corp. (the "Borrower")
and each of you (the "Banks") (such Multicurrency Credit Agreement being
hereinafter referred to as the "Credit Agreement") pursuant to which the Banks
currently extend credit to the Borrower. Capitalized terms used herein shall
have the same meaning herein as such terms have in the Credit Agreement unless
otherwise specified.
The Borrower has requested that the Banks acquire risk participations
in loans to be made from time to time by Bank of Montreal to Bell Sports Canada
Inc. and make certain other amendments to the Credit Agreement. The Banks have
agreed to accommodate such requests by the Borrower on the terms and conditions
herein set forth.
Section 1. Canadian Loan Participations.
Upon the effectiveness of this Amendment as hereinafter set forth,
Section 3 of the Credit Agreement shall be amended by inserting the following
new Section immediately at the end thereof:
Section 3.6. Canadian Loan Participations. The Borrower
desires that loans denominated in Canadian Dollars be made in Canada on
a revolving basis to Bell Canada in an aggregate U.S. Dollar
Equivalent, when taken together with the Original Dollar Amount of
Committed Loans denominated in the Alternative Currency, not to exceed
$20,000,000 at any one time outstanding and on substantially the same
terms and conditions as loans are available to the Borrower under this
Credit Agreement. Bank of Montreal, a chartered bank of Canada, is
willing to make such Canadian Dollar loans on the condition, among
others, that the Banks acquire risk participations in the full amount
of the Canadian Dollar loans. Each Bank agrees, severally but not
jointly, to acquire and hold a Canadian Loan Participation equal at all
times to its Percentage in each such Canadian Dollar loan and for that
purpose to enter into the Canadian Participation
<PAGE>
Agreement. The Canadian Participation Agreement may from time to time
be modified or amended and its provisions may be waived at any time, in
each case without notice to or consent of anyone (including the
Borrower) upon the written consent of the requisite parties thereto;
provided, however, that (i) the Banks shall not, without the prior
consent of the Borrower, agree to any modification or amendment of the
Canadian Participation Agreement which would (x) obligate or permit the
Banks to fund their participations thereunder except upon the
occurrence and during the continuance of any event or condition which
is specified in this Agreement as a Default or Event of Default
hereunder or which is specified in the Canadian Credit Agreement as an
Event of Default or which is an event which with the passage of time,
giving of notice, or both, would constitute such an Event of Default
under the Canadian Credit Agreement or (y) impair the rights of the
Banks under Paragraphs 8 and 9 of the Canadian Participation Agreement
to control Bank of Montreal's administration and enforcement of the
loans made under the Canadian Credit Agreement and (ii) the Agent and
Banks will not consent to the grant by Bank of Montreal of any
participation (other than the Canadian Loan Participations) in, or any
other assignment by Bank of Montreal of, its rights and obligations
under the Canadian Credit Agreement without the Borrower's prior
written consent (which consent shall not be unreasonably withheld). The
Agent will provide the Borrower a fully executed counterpart of the
Canadian Participation Agreement and will use reasonable efforts to
provide the Borrower on a prompt basis with a copy of each formal
written amendment or similar modification to the Canadian Participation
Agreement. The Agent will also promptly notify the Borrower in the
event the Banks fund the purchase of their Canadian Loan
Participations.
Section 2. Other Amendments.
Upon the effectiveness of this Amendment as hereinafter set forth, the
Credit Agreement shall be and hereby is amended as follows:
Section 2.01. Sections 1.1, 1.2 and 2.1 shall be and hereby are amended
by inserting the phrase "plus the U.S. Dollar Equivalent of the Canadian Loan
Participations" in such Sections, in each case preceded and followed by a comma,
as follows:
(a) immediately after the phrase "and L/C Obligations"
appearing in the second sentence of Section 1.1 of the Credit
Agreement;
(b) immediately after the parenthetical "(whether Committed
Loans or Swing Loans)" appearing in the first sentence of Section
1.2(a) of the Credit Agreement; and
(c) immediately after the phrase "and L/C Obligations"
appearing in the first sentence of Section 2.1 of the Credit Agreement;
and
(d) immediately after the phrase "and L/C Obligations"
appearing in the first sentence of Section 3.5 of the Credit Agreement.
Section 2.02. Commitment Fee. Section 4.1(a) of the Credit Agreement
shall be amended by inserting the following sentence immediately at the end
thereof:
The Original Dollar Amount of the Canadian Loan Participations from
time to time outstanding shall be deemed usage of the Revolving Credit
Commitments for purposes of determining such commitment fee.
Section 2.03. Excess Canadian Credit. Section 3.3 of the Credit
Agreement shall be further amended by inserting the following new subsections
(c) and (d) immediately at the end thereof:
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<PAGE>
(c) Excess Credit and Canadian Loan Participations. The
Borrower covenants and agrees that if at any time the sum of the
aggregate Original Dollar Amount of Loans (whether Committed Loans or
Swing Loans) and of L/C Obligations at any time outstanding, when taken
together with the U.S. Dollar Equivalent of the Canadian Loan
Participations then outstanding, shall exceed the Revolving Credit
Commitments in effect at such time, the Borrower shall within three (3)
Business Days after written demand from the Agent, pay over the amount
of such excess (to the extent such excess remains outstanding three
Business Days after such demand) to the Agent for the account of the
Lenders as and for a mandatory prepayment on the Swing Loans or, if the
Swing Loans have been prepaid in full but Committed Loans are
outstanding, then and in any such event, such excess shall be paid over
to the Agent as and for mandatory prepayment on the Committed Loans or,
if the Committed Loans have been prepaid in full but L/C Obligations
are outstanding, then and in any such event, such excess shall be paid
over to the Agent to be applied against the Reimbursement Obligations
then outstanding with any balance held as collateral security for any
remaining L/C Obligations. Notwithstanding the foregoing, unless any
Event of Default occurs and is continuing, the Borrower shall not be
required to make any prepayment of any Eurocurrency Loan pursuant to
this subsection (c) until the last day of the Interest Period with
respect thereto so long as an amount equal to such prepayment is
deposited by the Borrower in a cash collateral account maintained with
the Agent to be held in such account on terms satisfactory to the Agent
and the Required Lenders.
(d) Excess Canadian Credit. The Borrower covenants and agrees
that if at any time the sum of the aggregate Original Dollar Amount of
Committed Loans denominated in the Alternative Currency, when taken
together with the U.S. Dollar Equivalent of the Canadian Loan
Participations then outstanding, shall be in excess of $20,000,000, the
Borrower shall within three (3) Business Days after written demand from
the Agent, pay over the amount of such excess (to the extent such
excess remains outstanding three Business Days after such demand) to
the Agent for the account of the Lenders as and for a mandatory
prepayment on such Committed Loans. Notwithstanding the foregoing,
unless any Event of Default occurs and is continuing, the Borrower
shall not be required to make any prepayment of any Eurocurrency Loan
pursuant to this subsection (d) until the last day of the Interest
Period with respect thereto so long as an amount equal to such
prepayment is deposited by the Borrower in a cash collateral account
maintained with the Agent to be held in such account on terms
satisfactory to the Agent and the Required Lenders.
Section 2.04. Participation Fee. Section 4.1 of the Credit Agreement
shall be amended by inserting the following new subsection (f) immediately at
the end thereof:
(f) Participation Fee. In consideration of their taking the
Canadian Loan Participations, for such period during which any Canadian
Loan Participations are outstanding to the Banks, the Borrower shall
pay to the Agent for the ratable account of the Banks in accordance
with their Percentages a fee accruing at the rate per annum equal to
the Eurocurrency Margin as in effect from time to time on the average
daily Original Dollar Amount of the unpaid principal balance of the
loans which are the subject of the Canadian Loan Participations. Such
fee is payable in arrears on the last day of each calendar quarter
(commencing on the first of such dates after any Canadian Loan
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<PAGE>
Participations are outstanding) and on the Termination Date and
thereafter such fee shall be payable on demand."
Section 2.05. Amended Definitions. Section 6.1 of the Credit Agreement
shall be amended by striking the definitions of the terms "Original Dollar
Amount" and "Unused Commitments" appearing therein and substituting therefor the
following new definitions of such terms:
"Original Dollar Amount" means the amount of any Obligation
denominated in U.S. Dollars and, in relation to any Loan denominated in
the Alternative Currency, the U.S. Dollar Equivalent of such Loan on
the day it is advanced or continued for an Interest Period, and in
relation to any Bank's Canadian Loan Participation, such Bank's
Percentage of the sum of the U.S. Dollar Equivalents of each loan
outstanding under the Canadian Credit Agreement on the day such loan
was advanced by Bank of Montreal or continued by Bell Canada for a new
"Fixed Period" identified and defined in the Canadian Credit Agreement.
"Unused Commitment" means at any time the difference between
the (x) the Revolving Credit Commitments then in effect and (y) the
aggregate outstanding Original Dollar Amount of Loans (whether
Committed Loans or Swing Loans) and L/C Obligations and Original Dollar
Amount of Canadian Loan Participations then outstanding.
Section 2.06. New Definitions. Section 6.1 of the Credit Agreement
shall be amended by inserting in the appropriate alphabetical locations the
definitions of the following terms and deleting in its entirety each definition
of the same term already appearing in such Section (if any):
"Bell Canada" means Bell Sports Canada Inc., a Canadian
federally chartered corporation.
"Canadian Credit Agreement" means that certain Credit
Agreement dated as of April 22, 1996 by and between Bank of Montreal
and Bell Canada, as the same may from time to time be modified or
amended.
"Canadian Loan Participations" means the participations
acquired by the Banks pursuant to the Canadian Participation Agreement
in loans extended from time to time to Bell Canada under the Canadian
Credit Agreement. The U.S. Dollar Equivalent of the Canadian Loan
Participations shall mean (x) prior to the Banks' funding of their
purchases thereof, the U.S. Dollar Equivalent of the Canadian Loan
Participations as of the close of the most recently completed calendar
month or as of such more current date as the Agent or any Bank shall
specify and (y) on and after the Banks' funding thereof, the U.S.
Dollar Equivalent of the Canadian Loan Participation so funded as of
the date of such funding.
"Canadian Participation Agreement" shall mean that certain
Participation Agreement Re: Bell Sports Canada Credit Agreement dated
as of April 22, 1996 by and among Bank of Montreal and the Banks, as
the same may from time to time be modified or amended.
-4-
<PAGE>
Section 2.07. Cross Default to Canadian Credit Agreement. Subsection
10.1(d) of the Credit Agreement shall be amended by inserting the following
clause immediately at the end thereof:
"or (iii) any event occurs or condition exist in each case
which is specified as an Event of Default under the Canadian
Credit Agreement."
Section 2.08. Domestic Loan to Repay Canadian Loan. Section 10 of the
Credit Agreement shall be amended by inserting the following new Section
immediately at the end thereof:
Section 10.7. Alternative Currency Loan. If any Event of
Default has occurred and is continuing, if the Banks so determine in
their sole discretion, the Borrower shall be deemed to have requested a
Borrowing of Eurocurrency Loans denominated in the Alternative Currency
with an Interest Period of one month in an amount sufficient to repay
in full all the loans and other obligations owing under the Canadian
Credit Agreement (whether or not then due and payable). Such Borrowing
shall be disbursed to Bank of Montreal in repayment of such loans and
obligations without regard to the conditions precedent hereunder to
making any such Borrowing and any requirement of this Agreement that
each Borrowing of Eurocurrency Loans denominated in the Alternative
Currency be in a minimum amount. Nothing herein contained shall in any
way impair or otherwise affect the obligations of Bell Canada or any
guarantor on such loans and obligations to the extent the same are not
so repaid. The Banks shall be under no obligation whatsoever to make
such Borrowing, the decision to do so being wholly within their
discretion.
Section 2.09. Withholding Taxes on Canadian Loan Participations.
Section 14.1 of the Credit Agreement shall be amended by inserting the following
new Subsection immediately at the end thereof:
(e) In order to induce the Banks to enter into the Canadian
Loan Participations, the Borrower hereby agrees that each payment to a
Bank on its Canadian Loan Participation shall be made without
withholding for or on account of any present or future taxes (other
than overall net income taxes on the Bank receiving the payment)
imposed by or within the jurisdiction in which Bell Canada, Bank of
Montreal or the Borrower is domiciled, any jurisdiction from which Bell
Canada or the Borrower makes any payment on the loans made under the
Canadian Credit Agreement, or any jurisdiction from which Bank of
Montreal makes any payment to the Banks on the Canadian Loan
Participations, or (in each case) any political subdivision or taxing
authority thereof or therein. If any such withholding is so required,
the Borrower shall make the withholding, pay the amount withheld to the
appropriate governmental authority before penalties attach thereto or
interest accrues thereon and forthwith pay such additional amount as
may be necessary to insure that the net amount actually received by
each Bank on its Canadian Loan Participation free and clear of such
taxes (including such taxes on such additional amount) is equal to the
amount which that Bank would have received had such withholding not
been made, all to the greatest extent possible as if such payment on
its Canadian Loan Participation were a payment to that Bank by the
Borrower under the Credit Documents. The Borrower's obligations under
this paragraph are separate from its obligations to Bank of Montreal in
respect of the loans made under the Canadian Credit Agreement.
-5-
<PAGE>
Section 2.10. Assignments. Section 14.12(a) of the Credit Agreement
shall be amended by inserting the following new sentence immediately at the end
thereof:
Notwithstanding anything in the foregoing to the contrary, no
such assignment to an assignee Bank shall be permitted unless
such assignee Bank becomes a party, with Bank of Montreal's
consent, to the Canadian Participation Agreement, holding an
undivided fractional interest in the relevant assigning Bank's
Canadian Loan Participations equal to the Percentage of such
assignee Bank after giving effect to such assignment.
Section 2.11. Limitations on Indemnity. Section 14.15 of the Credit
Agreement shall be amended by inserting the following new sentence immediately
at the end thereof:
Notwithstanding anything in the foregoing to the contrary, no
Bank and none of its directors, officers and employees shall
be entitled to indemnification under this Section for an
Indemnified Claim arising out of such Bank's failure to fund
its Canadian Loan Participation as and when required by the
terms of the Canadian Participation Agreement.
Section 2.12. Exchange Rate Risk on Canadian Loan Participations.
Section 14.17 of the Credit Agreement shall be amended by inserting the
following new paragraph immediately at the end thereof:
The Borrower acknowledges that the loans in which the Banks
participate under the Canadian Loan Participations are
denominated in the Alternative Currency. In order to induce
the Banks to enter into the Canadian Loan Participations, the
Borrower agrees that in the event the amount U.S. Dollars
which any Bank may purchase, with a sum paid to it on its
Canadian Loan Participation in another currency (after any
premium and costs of exchange), on the Business Day
immediately following the day on which such Bank receives such
payment is for any reason less (any such deficiency being
hereinafter referred to as a "loss") than the U.S. Dollar
Equivalent of any corresponding payment made by such Bank to
acquire a participation under its Canadian Loan Participation
in the amount so paid to it in such other currency, the
Borrower agrees, as an obligation separate from those arising
under the Canadian Credit Agreement, to indemnify such Bank
against such loss. Notwithstanding the foregoing, the
indemnification provided by this paragraph (i) shall not cover
any loss due to taxes covered by Section 14.1 hereof and (ii)
shall not apply to payments to a Bank on its Canadian Loan
Participation representing interest which accrued after such
Bank funded its purchase of a participation in the principal
on which such interest accrued. If the Banks have funded the
purchase of their Canadian Loan Participations and the
Borrower notifies the Agent (which shall promptly notify each
Bank) of the Business Day on which the Borrower expects the
loans outstanding under the Canadian Credit Agreement will be
paid and demonstrates (to the reasonable satisfaction of the
Required Banks) reasonable prospects for making such
repayment, the amount for which the Borrower is liable to each
Bank under this Section shall be determined as if such Bank
had entered into hedging arrangements (whether or not such
Bank actually enters into such hedging arrangements, there
being no obligation on any Bank to do so) to protect such Bank
against exchange rate risk on the amount expended by that Bank
to fund its Canadian Loan Participation, such hedging
arrangements to be effective for the period commencing on the
Business Day following such notice from the Agent to that Bank
and ending on the date of repayment so specified by the
Company. The Company agrees to pay each Bank its reasonable
costs and expenses of actually entering into such hedging
-6-
<PAGE>
arrangements and to indemnify each Bank against any
liabilities or damages incurred by such Bank as a result of
entering into such arrangements. Each Bank will provide the
Borrower upon its reasonable request a certificate setting
forth in reasonable detail a calculation to the amount due
such Bank under this Section and, if applicable, such
information establishing such Bank's actual participation in
such hedging arrangements to the extent that its claim is made
on account of same.
Section 3. Confirmation of Scope of Covenant Restricting Advances.
The parties hereto acknowledge and agree that the Borrower's payment of
legal expenses and court costs of proceedings instituted by or against it for
which payment the Borrower has rights of reimbursement against third parties
shall not constitute a loan or advance by the Borrower to the party obligated to
provide such reimbursement.
Section 4. Canadian Amalgamation.
The Borrower represents to the Banks that the amalgamation of Mongoose
Bicycle Canada Inc. ("Mongoose"), Cycle Products Company Canada, Ltd. ("Cycle
Products") Bell Sports Canada Inc. (a Quebec corporation) and Denrich Sporting
Goods Canada Ltd. ("Denrich") into a new Canadian federally chartered
corporation known as Bell Sports Canada Inc. has occurred as permitted by
Section 9.12(a)(4) of the Credit Agreement. Accordingly, Schedule 7.2 of the
Credit Agreement shall be and hereby is amended by (i) striking all references
appearing thereon to Mongoose, Cycle Products and Denrich and (ii) striking the
name "Quebec" appearing as the jurisdiction of incorporation for Bell Sports
Canada Inc. and substituting therefor the name "Canada".
Section 5. Conditions Precedent.
The effectiveness of this Amendment is subject to the satisfaction of
all of the following conditions precedent:
(a) The Banks shall have accepted this Amendment in the spaces
provided for that purpose below.
(b) The Guarantors shall have accepted this Amendment in the
spaces provided for that purpose below.
(c) The Banks shall have received evidence reasonably
satisfactory to them that the conditions precedent to closing the
transactions contemplated by the Canadian Credit Agreement have been
satisfied except for the Banks' execution of the Canadian Participation
Agreement.
(d) The Agent shall have received for the account of the Banks
documentation for Bell Canada sufficient to satisfy the Borrower's
obligations under Section 9.1 of the Credit Agreement after giving
effect to the amalgamation referenced in Section 4 of this Amendment.
-7-
<PAGE>
(e) The Agent shall have received, for the account of the
Banks, an opinion of the Borrower's counsel with respect to this
Amendment, such opinion to be in form and substance reasonably
acceptable to the Agent and the Required Banks.
(f) The Borrower and the Guarantors shall be in full
compliance with the terms of the Credit Agreement and no Event of
Default or Default shall have occurred or be continuing after giving
effect to this Amendment.
(g) All other legal matters incident to the execution and
delivery hereof contemplated hereby and to the transactions
contemplated hereby shall be satisfactory to the Agent, the Banks and
their respective counsel.
Section 6. Representations Reaffirmed.
In order to induce the Agent and the Banks to execute and deliver this
Amendment, the Borrower hereby represents to the Agent and the Banks that
immediately after giving effect to this Amendment, each of the representations
and warranties by the Borrower set forth in Section 7 of the Credit Agreement as
amended hereby (except those representations that relate expressly to an earlier
date) are and shall be true and correct (except that the representations
contained in Section 7.4 shall be deemed to refer to the most recent financial
statements of the Borrower delivered to the Banks pursuant to Section 9.6 of the
Credit Agreement) and that the Borrower and the Subsidiaries are and shall be in
full compliance with the terms of the Credit Agreement as so amended and the
Credit Documents and that no Event of Default or Default shall be continuing or
shall result after giving effect to this Amendment.
Section 7. Miscellaneous.
This Amendment may be executed in any number of counterparts and by
different parties hereto on separate counterparts, each of which when so
executed shall be an original but all of which shall constitute one and the same
instrument. Except as specifically waived or amended hereby, all of the terms
and conditions of the Credit Agreement shall stand and remain unchanged and in
full force and effect. No reference to this Amendment need be made in any note,
instrument or other document making reference to the Credit Agreement, any
reference to the Credit Agreement in any such note, instrument or other document
(including, without limitation, the Credit Documents) to be deemed to be a
reference to the Credit Agreement as amended hereby. The Borrower agrees to pay
all reasonable out-of-pocket costs and expenses (including attorneys' fees)
incurred by the Agent in connection with the preparation, execution and delivery
hereof and the documents and transactions contemplated hereby.
THIS INSTRUMENT SHALL BE CONSTRUED AND GOVERNED BY AND IN ACCORDANCE
WITH THE LAWS OF THE STATE OF ILLINOIS (WITHOUT REGARD TO PRINCIPLES OF
CONFLICTS OF LAWS).
IN WITNESS WHEREOF, the Borrower and the Banks have executed and
delivered this Amendment as of the day and year below written.
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<PAGE>
Dated as of this 22 day of April, 1996.
Bell Sports Corp.
By_________________________________
Its______________________________
Each of the undersigned consents to the above Amendment and
acknowledges and agrees that all of its obligations under Section 13 of the
Credit Agreement (collectively, the "Guaranty") remain in full force and effect
for the benefit and security of, among other things, the Credit Agreement as
modified hereby. Each of the undersigned further acknowledges and agrees that
all references in the Guaranty to the Credit Agreement shall be deemed a
reference to the Credit Agreement as amended hereby. Each of the undersigned
agrees to execute and deliver any and all instruments or documents as may be
required by the Agent or the Required Banks to confirm any of the foregoing.
Each of the undersigned agrees that its consent to this Amendment is not
required and that its consent to any further amendments of the Credit Agreement
shall not be required as a result of this consent having been obtained.
Bell Sports, Inc.
By_________________________________________
Name: Howard A. Kosick
Title: Secretary
American Recreation Company Holdings,
Inc.
By_________________________________________
Name: Howard A. Kosick
Title: Secretary
American Recreation Company, Inc.
By_________________________________________
Name: Howard A. Kosick
Title: Secretary
Giro Sport Design International, Inc.
By_________________________________________
Name: Howard A. Kosick
Title: Secretary
Bell Sports Canada Inc.
By_________________________________________
Name: Howard A. Kosick
Title: Secretary
-9-
<PAGE>
Accepted and agreed to.
Harris Trust and Savings Bank
By_________________________________________
Its_____________________________________
The Boatmen's National Bank of St. Louis
By_________________________________________
Its_____________________________________
Bank of America - Arizona
By_________________________________________
Its_____________________________________
LaSalle National Bank
By_________________________________________
Its_____________________________________
Norwest Bank Arizona, N.A.
By_________________________________________
Its_____________________________________
The Northern Trust Company
By_________________________________________
Its_____________________________________
-10-
MANUALLY EXECUTED ORIGINAL
Bell Sports Corp.
Second Amendment to Credit Agreement
Harris Trust and Savings Bank LaSalle National Bank
111 West Monroe Street 120 South LaSalle Street
Chicago, Illinois 60603 Chicago, Illinois 60603
The Boatmen's National Bank of St. Louis
One Boatmen's Plaza Norwest Bank Arizona, N.A.
800 Market Street 3300 North Central Avenue
Post Office Box 236 Phoenix, Arizona 85012
St. Louis, Missouri 63166-0236
The Northern Trust Company
Bank of America - Arizona 50 South LaSalle Street
101 North First Avenue Chicago, Illinois 60675
Phoenix, Arizona 85003
Ladies and Gentlemen:
Reference is hereby made to that certain Multicurrency Credit Agreement
dated as of February 15, 1996 by and among Bell Sports Corp. (the "Borrower")
and each of you (the "Banks") as amended by that certain First Amendment to
Credit Agreement dated as of April 22, 1996 by and among the same such parties
(such Multicurrency Credit Agreement as so amended being hereinafter referred to
as the "Credit Agreement") pursuant to which the Banks currently extend credit
to the Borrower. Capitalized terms used herein shall have the same meaning
herein as such terms have in the Credit Agreement unless otherwise specified.
The Borrower has requested that the Banks waive the Borrower's
noncompliance with the Interest Coverage Ratio and make certain other amendments
to the Credit Agreement. The Banks have agreed to accommodate such requests by
the Borrower on the terms and conditions set forth in this Second Amendment to
Credit Agreement (the "Amendment").
Section 1. Current Asset Collateral.
Upon the effectiveness of this Amendment as hereinafter set forth,
Section 3 of the Credit Agreement shall be amended by inserting the following
new Section immediately at the end thereof:
Section 1.8. Domestic Current Asset Collateral. (a) Generally.
The Loans and other Obligations shall be secured by valid and perfected
first Liens on all inventory of the Borrower and each Subsidiary
incorporated in the United States which is a Material Subsidiary (a
"Material U.S. Subsidiary") and all accounts receivable of the Borrower
and its Material U.S. Subsidiaries and all proceeds of the foregoing,
in each case pursuant to a Security Agreement in the case of the
Borrower, in the form or substantially the form of Exhibit H hereto and
in the case of each such Material U.S. Subsidiary in the form or
substantially the form of Exhibit I hereto, as each such Agreement may
from time to time be modified or amended (collectively the "Security
Agreements" and individually a "Security Agreement"); provided,
however, that (i) such Liens need not be perfected on
<PAGE>
any inventory located outside the United States in accordance with the
Security Agreements and (ii) the Borrower shall not be in default of
its obligations under this Section 1.8(a) unless it fails to provide
such Liens on such of its Property by August 30, 1996 (such failure to
constitute an Event of Default under this Agreement). The Borrower
agrees that it will, and will cause the Material U.S. Subsidiaries to,
from time to time at the request of the Agent or the Required Banks,
execute and deliver such documents and do such acts and things, as the
Agent or the Required Banks may reasonably request in order to provide
for or perfect such Liens on the Collateral, except to the extent any
of the foregoing represents action to perfect Liens on Collateral
located outside the United States in accordance with the Security
Agreements.
(b) Release. If (i) the Borrower so requests at any time on or
after the later of (x) September 1, 1997 or (y) the Banks' receipt of
audited financial statements complying with Section 9.6(a)(ii) hereof
for the Borrower's fiscal year ending on or about June 28, 1997, (ii)
the Interest Coverage Ratio exceeds 2.25 to 1 as of the close of the
two most recently completed fiscal quarters of the Borrower, (iii)
Consolidated Tangible Net Worth shall be in compliance with Section
9.15 hereof after giving effect to the $2,000,000 increase in the
Minimum Required Amount (as defined in such Section) which will result
under the terms of such Section from the release being requested, (iv)
no Default or Event of Default shall have occurred and be continuing
and (v) the Borrower shall have furnished to the Bank certificates
(including a Compliance Certificate) which meet the requirements of
Section 9.6(b) hereof confirming satisfaction of the foregoing
conditions of this clause (b), then the Agent and the Lenders will, at
the Borrower's sole cost and expense, within ten (10) Business Days of
the date on which all the foregoing conditions have been satisfied,
release the Liens created and provided for by the Security Agreements.
Section 2. Other Amendments.
Upon the effectiveness of this Amendment as hereinafter set forth, the
Credit Agreement shall be and hereby is amended as follows:
Section 2.01. Borrowing Base and Increased Canadian Dollar Loans.
Section 1.1 of the Credit Agreement shall be and hereby is amended by striking
the second sentence of such Section and substituting therefor the following:
The sum of the aggregate Original Dollar Amount of Loans (whether
Committed Loans or Swing Loans) and of L/C Obligations at any time
outstanding shall not exceed the lesser of (x) the Revolving Credit
Commitments in effect at such time or (y) unless and until the
Reinstatement Condition has been satisfied, the Borrowing Base as then
determined and computed; and the sum of the aggregate Original Dollar
Amount of Committed Loans denominated in the Alternative Currency shall
not exceed $35,000,000.
Section 2.02. Maximum L/C Obligations. Section 1.2(a) of the Credit
Agreement shall be amended by striking the first sentence of such Section and
substituting therefor the following:
Subject to the terms and conditions hereof, as part of the Revolving
Credit, the Agent shall issue standby or commercial letters of credit
(each a "Letter of Credit") for the Borrower's account in U.S. Dollars
in an aggregate undrawn face amount up to the amount of the L/C
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<PAGE>
Commitment, provided that the aggregate L/C Obligations at any time
outstanding shall not exceed the difference between (x) the lesser of
(i) the Revolving Credit Commitments in effect at such time or (ii)
until the Reinstatement Condition has been satisfied, the Borrowing
Base as then determined and computed and (y) the Original Dollar Amount
of Loans (whether Committed Loans or Swing Loans) then outstanding.
Section 2.03. Collateral for Letters of Credit. Section 1.2(b) of the
Credit Agreement shall be amended by inserting the phrase "and except as
provided in Section 1.8 hereof" immediately after the word "Termination Date"
appearing in clause (ii) of the third sentence of such Section.
Section 2.04. Maximum Swing Loans. Section 2.1 of the Credit Agreement
shall be amended by striking the first sentence of such Section and substituting
therefor the following:
Subject to all of the terms and conditions hereof, Harris Trust and
Savings Bank ("Harris") agrees to make Loans in U.S. Dollars to the
Borrower under the Swing Line ("Swing Loans") which shall not in the
aggregate at any time outstanding exceed the lesser of (i) the Swing
Line Commitment or (ii) the difference between (a) the lesser of (1)
the Revolving Credit Commitments in effect at such time or (2) until
the Reinstatement Condition has been satisfied, the Borrowing Base as
then determined and computed and (b) the Original Dollar Amount of all
Committed Loans and L/C Obligations outstanding at the time of
computation.
Section 2.05. Excess Canadian Credit. Section 3.3 of the Credit
Agreement shall be amended by inserting the following new subsection (e)
immediately at the end thereof:
(e) Credit in Excess of Borrowing Base. The Borrower covenants
and agrees that if at any time prior to satisfaction of the
Reinstatement Condition, the sum of the aggregate Original Dollar
Amount of Loans (whether Committed Loans or Swing Loans) and of L/C
Obligations at any time outstanding, when taken together with the U.S.
Dollar Equivalent of the Canadian Loan Participations then outstanding,
shall for any reason exceed the Borrowing Base as then determined and
computed, the Borrower shall within three (3) Business Days after
written demand from the Agent, pay over the amount of such excess to
the Agent for the account of the Lenders as and for a mandatory
prepayment on the Swing Loans or, if the Swing Loans have been prepaid
in full but Committed Loans are outstanding, then and in any such
event, such excess shall be paid over to the Agent as and for mandatory
prepayment on the Committed Loans or, if the Committed Loans have been
prepaid in full but L/C Obligations are outstanding, then and in any
such event, such excess shall be paid over to the Agent to be applied
against the Reimbursement Obligations then outstanding with any balance
held as collateral security for any remaining L/C Obligations.
Notwithstanding the foregoing, unless any Event of Default occurs and
is continuing, the Borrower shall not be required to make any
prepayment of any Eurocurrency Loan pursuant to this subsection (e)
until the last day of the Interest Period with respect thereto so long
as an amount equal to such prepayment is deposited by the Borrower in a
cash collateral account maintained with the Agent to be held in such
account on terms satisfactory to the Agent and the Required Lenders.
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<PAGE>
Section 2.06. Increased Canadian Dollar Loans in Canada. Section 3.6 of
the Credit Agreement shall be amended by striking the first sentence of such
Section and substituting therefor the following:
The Borrower desires that loans denominated in Canadian Dollars be made
in Canada on a revolving basis to Bell Canada in an aggregate U.S.
Dollar Equivalent, when taken together with the Original Dollar Amount
of Committed Loans denominated in the Alternative Currency, not to
exceed the Canadian Loan Limit at any one time outstanding and on
substantially the same terms and conditions as Loans are available to
the Borrower under this Credit Agreement.
Section 2.07. Change in Eurocurrency Margin. Section 1.3(b) of the
Credit Agreement shall be amended by inserting the following new sentence
immediately at the end of the last paragraph thereof:
Notwithstanding the foregoing, the Eurocurrency Margin shall be 1.50%
during the period commencing on each Pricing Date following any release
of the Collateral pursuant to Section 1.8(b) hereof (a "Post Release
Pricing Date") and ending immediately prior to the next Pricing Date if
the Interest Coverage Ratio as of such Post Release Pricing Date is
less than 2.25 to 1.0.
Section 2.08. Change in Commitment Fee Rate. Section 4.1(a) of the
Credit Agreement shall be amended by inserting the following new sentence
immediately at the end thereof:
Notwithstanding the foregoing, the Commitment Fee Rate shall be 0.30%
during the period commencing on each Pricing Date following any release
of the Collateral pursuant to Section 1.8(b) hereof (a "Post Release
Pricing Date") and ending immediately prior to the next Pricing Date if
the Interest Coverage Ratio as of such Post Release Pricing Date is
less than 2.25 to 1.0.
Section 2.9. Audit Fees. Section 4.1 of the Credit Agreement shall be
amended by inserting the following new subsection (g) immediately at the end
thereof:
(g) Audit Fees. The Borrower shall pay to the Agent reasonable
charges for audits of the Collateral performed by the Agent or its
agents or representatives in such amounts as the Agent may from time to
time request (the Agent acknowledging and agreeing that such charges
shall be computed in the same manner as it at the time customarily uses
for the assessment of charges for similar collateral audits); provided,
however, that in the absence of any Default or Event of Default, the
Borrower shall not be required to pay the Agent for more than two (2)
such audits per calendar year.
Section 2.10. Changed Definitions. Section 6.1 of the Credit Agreement
shall be amended by striking the definition of the terms "Credit Documents" and
"Interest Coverage Ratio" appearing therein and substituting therefor the
following new definitions of such terms:
"Credit Documents" means this Agreement, the Notes, the
Applications, the Letters of Credit, each Subsidiary Guaranty Agreement
delivered to the Agent pursuant to Section 9.1 hereof and the
Collateral Documents.
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<PAGE>
"Interest Coverage Ratio" means, for any period of four
consecutive fiscal quarters of the Borrower ending with the most
recently completed such fiscal quarter, the ratio of EBITA to Interest
Expense for such period.
Section 2.11. New Definitions. Section 6.1 of the Credit Agreement
shall be amended by inserting in the appropriate alphabetical locations the
definitions of the following terms:
"Borrowing Base" means, as of any time it is to be determined, the sum
of:
(a) 85% of the then net book value of Eligible
Accounts (computed using the method of receivables valuation
applied by the Borrower in accordance with GAAP which reflects
such value as the net book value of its receivables, except
that net book value for such purposes shall not reflect any
reserve for accounts more than ninety days past due that have
already been excluded from gross accounts in computing such
Eligible Accounts) less such other reserves for
uncollectibility, location of account debtor, contras and
other matters as the Agent or Required Lenders in good faith
shall from time to time reasonably deem appropriate to adjust
such net book value; plus
(b) the lesser of (i) $30,000,000 and (ii) 50% of the
value (computed at its cost using the method of inventory
valuation applied by the Borrower in accordance with GAAP
which reflects such cost on the Borrower's books as its net
book value, but in any event after reducing such value as so
computed by the aggregate amount of all reserves for
obsolescence, slow-moving items, shrinkage and all such other
matters as the Agent or Required Lenders in good faith shall
from time to time reasonably deem appropriate to adjust such
net book value) of Eligible Inventory;
provided that (i) the Borrowing Base shall be computed only as against
and on so much of the Collateral as is included on the certificates to
be furnished from time to time by the Company pursuant to Section
9.6(d) hereof and, if required by the Agent pursuant to any of the
terms hereof or any Collateral Document, as verified by such other
evidence required to be furnished to the Agent pursuant hereto or
pursuant to any such Collateral Document and (ii) the Agent shall have
the right to reduce the advance rates against Eligible Accounts or
Eligible Inventory and the sublimit on Eligible Inventory in the
reasonable exercise of its discretion based on the results of any field
audit of any Collateral (which the Borrower acknowledges may be
conducted by inhouse audit personnel) which reasonably supports any
such reduction. The parties hereto acknowledge and agree that the first
such field audit shall be conducted such that it shall be completed and
its results distributed to the Banks by no later than September 30,
1996.
"Canadian Loan Increase Condition" means the satisfaction of both of
the following conditions:
(i) The Banks shall have received and approved as to form and
substance the instruments and documents which upon execution by the
appropriate parties and satisfaction of the conditions precedent set
forth therein will modify the Canadian Credit Agreement to effect the
Canadian Loan Modifications; and
-5-
<PAGE>
(ii) Such instruments and documents shall have been executed
by the appropriate parties and the conditions precedent to the
effectiveness of the same shall have been satisfied to the satisfaction
of the requisite lenders under the Canadian Credit Agreement.
"Canadian Loan Limit" shall mean $20,000,000 prior to satisfaction of
the Canadian Loan Increase Condition and $35,000,000 thereafter.
"Canadian Loan Modifications" shall mean the following modifications to
the Canadian Credit Agreement: (i) an increase in the Authorized Limit on the
Credit identified and defined therein from $20,000,000 to $35,000,000; (ii) a
limitation on the aggregate principal amount of Prime Advances to Cdn.
$5,000,000; and (iii) a reduction to one Business Day's prior notice under
Section 5.01(a) for Fixed Advances not more than Cdn. $10,000,000.
"Collateral" means all properties, rights, interests and privileges
from time to time subject to the Liens granted to the Agent by the Collateral
Documents.
"Collateral Documents" means the Security Agreements and all other
security agreements, assignments, financing statements and other documents as
shall from time to time secure the Obligations.
"Companies" means the Borrower and the Material U.S. Subsidiaries, and
the term "Company" shall mean any of the foregoing unless the context in which
such term is used shall otherwise require.
"Eligible Account" means each account receivable of each Company that:
(a) arises out of the sale by such Company of inventory
delivered to and accepted by, or out of the rendition of services fully
performed by such Company and accepted by, the account debtor on such
account receivable, and in each case such account receivable otherwise
represents a final sale;
(b) is an asset of such Company to which it has good and
marketable title, is freely assignable, is subject to a perfected,
first priority Lien in favor of the Agent, and is free and clear of any
other Lien other than Liens permitted by Sections 9.9(a), (b), (c), (d)
and (h) hereof
(c) the account debtor thereon is not a Subsidiary or an
Affiliate of any Company; and
(d) is not unpaid more that ninety (90) days after the
original due date of the applicable invoice.
"Eligible Inventory" means all finished goods inventory of each Company
(other than packaging, crating and supplies inventory), provided that such
inventory:
(a) is an asset of such Company to which it has good and
marketable title, is freely assignable, is subject to a perfected,
first priority Lien in favor of the Agent, and is free and
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<PAGE>
clear of any other Lien other than Liens permitted by Sections 9.9(a),
(b), (c), (d) and (h) hereof; and
(b) is located in the United States;
"Reinstatement Condition" means the satisfaction at any time on or
after September 30, 1998 of both of the following conditions:
(i) the Collateral shall have been released pursuant to
Section 1.8(b) hereof; and
(ii) No Default or Event of Default shall have occurred and be
continuing.
Section 2.12. Insurance. Section 9.5 of the Credit Agreement shall be
amended by inserting the following sentence immediately at the end thereof:
The Borrower shall in any event maintain insurance on the Collateral to
the extent required by the Collateral Documents.
Section 2.13. Borrowing Base Certificate. Section 9.6 of the Credit
Agreement shall be amended by inserting the following new subsection (d)
immediately at the end thereof:
(d) Without any request from the Agent or any Bank, the
Borrower will furnish to the Agent, with sufficient copies for each
Bank (which the Agent shall promptly distribute to each Bank), as soon
as available, but in any event within 25 days following the close of
each monthly accounting period of the Borrower (commencing with the
monthly accounting period ending on or about August 30, 1996), a
written certificate signed by the Borrower's chief financial officer or
corporate controller showing in reasonable detail the computation of
the Borrowing Base as of the close of such monthly accounting period,
such certificate to be in form and substance reasonably acceptable to
the Agent and the Required Banks.
Section 2.14. Lien of Security Agreement. Section 9.9 of the Credit
Agreement shall be amended by inserting the following sentence immediately at
the end thereof:
Notwithstanding anything herein to the contrary, this Section shall not
apply to nor operate to prevent the Liens granted in favor in the Agent
and the Lenders pursuant to the Collateral Documents.
Section 2.15. New Tangible Net Worth Requirement. Section 9.15 of the
Credit Agreement shall be amended and as so amended shall be restated in its
entirety to read as follows:
Section 9.15. Consolidated Tangible Net Worth. The Borrower
will at all times maintain a Consolidated Tangible Net Worth of not
less than the Minimum Required Amount. For purposes of this section,
the "Minimum Required Amount" shall mean $53,000,000 and shall increase
as of September 28 1996 and as of the last day of each fiscal quarter
thereafter, by an amount equal to 50% of the cumulative positive
Consolidated Net Income earned each fiscal quarter commencing and
completed after June 30, 1996 (but without subtraction for any negative
Consolidated Net Income for any such fiscal quarter)
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<PAGE>
and shall further increase by an additional $2,000,000 as of the date
of any release of the Collateral pursuant to Section 1.8(b) hereof.
Section 2.16. New Interest Coverage Ratio. Section 9.17 of the Credit
Agreement shall be amended and as so amended shall be restated in its entirety
to read as follows:
Section 9.17. Interest Coverage Ratio. The Borrower will, as
of the last day of each fiscal quarter of the Borrower occurring on or
about the date specified below (commencing with the fiscal quarter of
the Borrower ending on June 28, 1997), maintain an Interest Coverage
Ratio of not less than:
Interest Coverage Ratio
For Fiscal Quarter Ending: shall not be less than:
June 28, 1997 1.5 to 1
September 27, 1997 1.75 to 1
December 27, 1997 1.75 to 1
March 28, 1998 1.75 to 1
June 27, 1998 2.00 to 1
Each fiscal quarter thereafter 2.75 to 1
Section 2.17. New Defaults Related to Collateral. Section 10.1 of the
Credit Agreement shall be amended by striking the period appearing at the end of
subsection (j) of such Section and substituting therefor a semicolon followed by
the word "or" and by inserting the following new subsection (k) immediately
after such subsection (j) as so amended:
(k) Default for five (5) Business Days after written notice to
the Borrower in the observance or performance of any provision of any
Collateral Document requiring the maintenance of insurance on the
inventory subject thereto, or default in the observance or performance
of any provision of any Collateral Document dealing with the use or
remittance of proceeds of the accounts subject thereto, or any Company
shall purport to disavow, repudiate, revoke or terminate any Collateral
Document or otherwise assert that any of the Collateral Documents is
null and void.
Section 2.18. New Address for Borrower. Section 14.8 of the Credit
Agreement shall be amended by striking the address "10601 North Hayden Road"
appearing therein and substituting therefor the address "15170 North Hayden
Road" and deleting the portion of such address appearing therein as "Suite
I-100" and substituting therefor the address "Suite 1".
Section 2.19. Cost and Expenses. Section 14.15 of the Credit Agreement
shall be amended by inserting the following sentence immediately at the end
thereof:
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<PAGE>
The Borrower acknowledges and agrees that the costs and expenses for
which the Borrower is liable under this Section shall include the cost
of recording, filing and releasing the Collateral Documents.
Section 2.20. New Borrower Security Agreement. The Credit Agreement
shall be amended by inserting Attachment One hereto as a new Exhibit H to the
Credit Agreement immediately after Exhibit G to the Credit Agreement.
Section 2.21. New Security Agreement. The Credit Agreement shall be
amended by inserting Attachment Two as a new Exhibit I hereto to the Credit
Agreement immediately after Exhibit H to the Credit Agreement as amended hereby
Section 3. Waiver.
Upon the effectiveness of this Amendment as hereinafter set forth, at
the Borrower's request, the Banks hereby waive each Default or Event of Default
under Section 9.17 of the Credit Agreement that existed prior to the
effectiveness of this Amendment which after giving effect to the amendments and
modifications made by this Amendment no longer exists.
Section 4. Canadian Loan Modifications.
Concurrently with the effectiveness of this Amendment as hereinafter
set forth:
(a) The Lenders hereby consent to the Canadian Loan
Modifications.
(b) The Lenders agree to execute an amendment to the Canadian
Participation Agreement and such other documents as the lenders party to the
Canadian Credit Agreement deem necessary or appropriate to assure that the
Banks, upon satisfaction of the Canadian Loan Increase Condition, will purchase
and pay for Canadian Loan Participations in the credit outstanding to Bell
Canada under the Canadian Credit Agreement after giving effect to the Canadian
Loan Modifications.
(c) The Banks agree, upon satisfaction of the Canadian Loan
Increase Condition, to honor their obligations under the Canadian Participation
Agreement as the same may be modified to reflect the Canadian Loan
Modifications, to purchase and pay for Canadian Loan Participations in the
credit outstanding to Bell Canada under Canadian Credit after giving effect to
the Canadian Loan Modifications.
Section 5. Conditions Precedent.
The effectiveness of this Amendment is subject to the satisfaction of
all of the following conditions precedent:
(a) The Banks shall have accepted this Amendment in the spaces
provided for that purpose below.
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<PAGE>
(b) The Guarantors shall have accepted this Amendment in the
spaces provided for that purpose below.
(c) The Agent shall have received a duly completed and
executed original counterpart (or facsimile thereof, with a hard copy
to follow by overnight courier) of a Security Agreement from Bell
Sports, Inc. and American Recreation Company, Inc. and executed
originals of all the UCC financing statements requested by the Agent in
connection therewith.
(d) The Agent shall have received evidence of the insurance
required by the Security Agreements.
(e) The Agent shall have received for the ratable account of
the Banks a fee in the amount of $37,500 in consideration of the Banks'
agreements in this Amendment.
(f) The Agent shall have received, with a sufficient number of
copies for each Bank (which the Agent shall properly distribute to each
Bank), a Borrowing Base certificate complying with Section 9.6(d) of
the Credit Agreement after giving effect to this Amendment showing the
computation of the Borrowing Base as of June 28, 1996.
(g) The Agent shall have received, for the account of the
Banks, an opinion of the Borrower's counsel with respect to this
Amendment, such opinion to be in form and substance reasonably
acceptable to the Agent and the Required Banks.
(h) The Borrower and the Guarantors shall be in full
compliance with the terms of the Credit Agreement and no Event of
Default or Default shall have occurred or be continuing after giving
effect to this Amendment.
(i) All other legal matters incident to the execution and
delivery hereof contemplated hereby and to the transactions
contemplated hereby shall be satisfactory to the Agent, the Banks and
their respective counsel.
Section 6. Representations Reaffirmed.
In order to induce the Agent and the Banks to execute and deliver this
Amendment, the Borrower hereby represents to the Agent and the Banks that
immediately after giving effect to this Amendment, each of the representations
and warranties by the Borrower set forth in Section 7 of the Credit Agreement as
amended hereby (except those representations that relate expressly to an earlier
date) are and shall be true and correct (except that the representations
contained in Section 7.4 shall be deemed to refer to the most recent financial
statements of the Borrower delivered to the Banks pursuant to Section 9.6 of the
Credit Agreement) and that the Borrower and the Subsidiaries are and shall be in
full compliance with the terms of the Credit Agreement as so amended and the
Credit Documents and that no Event of Default or Default shall be continuing or
shall result after giving effect to this Amendment.
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<PAGE>
Section 7. Miscellaneous.
This Amendment may be executed in any number of counterparts and by
different parties hereto on separate counterparts, each of which when so
executed shall be an original but all of which shall constitute one and the same
instrument. Except as specifically waived or amended hereby, all of the terms
and conditions of the Credit Agreement shall stand and remain unchanged and in
full force and effect. No reference to this Amendment need be made in any note,
instrument or other document making reference to the Credit Agreement, any
reference to the Credit Agreement in any such note, instrument or other document
(including, without limitation, the Credit Documents) to be deemed to be a
reference to the Credit Agreement as amended hereby. The Borrower agrees to pay
all reasonable out-of-pocket costs and expenses (including attorneys' fees)
incurred by the Agent in connection with the preparation, execution and delivery
hereof and the documents and transactions contemplated hereby.
THIS INSTRUMENT SHALL BE CONSTRUED AND GOVERNED BY AND IN ACCORDANCE
WITH THE LAWS OF THE STATE OF ILLINOIS (WITHOUT REGARD TO PRINCIPLES OF
CONFLICTS OF LAWS).
IN WITNESS WHEREOF, the Borrower and the Banks have executed and
delivered this Amendment as of the day and year below written.
Dated as of this 9th day of August, 1996.
Bell Sports Corp.
By /s/ Howard A. Kosick
-----------------------------------
Its CFO
-------------------------------
Each of the undersigned consents to the above Amendment and
acknowledges and agrees that all of its obligations under Section 13 of the
Credit Agreement (collectively, the "Guaranty") remain in full force and effect
for the benefit and security of, among other things, the Credit Agreement as
modified hereby. Each of the undersigned further acknowledges and agrees that
all references in the Guaranty to the Credit Agreement shall be deemed a
reference to the Credit Agreement as amended hereby. Each of the undersigned
agrees to execute and deliver any and all instruments or documents as may be
required by the Agent or the Required Banks to confirm any of the foregoing.
Each of the undersigned agrees that its consent to this Amendment is not
required and that its consent to any further amendments of the Credit Agreement
shall not be required as a result of this consent having been obtained.
Bell Sports Inc.
By /s/ Howard A. Kosick
-----------------------------------
Name: Howard A. Kosick
Title: Secretary
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<PAGE>
American Recreation Company Holdings, Inc.
By /s/ Howard A. Kosick
-----------------------------------
Name: Howard A. Kosick
Title: Secretary
American Recreation Company, Inc.
By /s/ Howard A. Kosick
-----------------------------------
Name: Howard A. Kosick
Title: Secretary
Giro Sport Design International, Inc.
By /s/ Howard A. Kosick
-----------------------------------
Name: Howard A. Kosick
Title: Secretary
Bell Sports Canada Inc.
By /s/ Howard A. Kosick
-----------------------------------
Name: Howard A. Kosick
Title: Secretary
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<PAGE>
Accepted and agreed to.
Harris Trust and Savings Bank
By /s/ Signature Illegible
-----------------------------------
Its Vice President
-------------------------------
The Boatmen's National Bank of St. Louis
By____________________________________
Its________________________________
Bank of America - Arizona
By____________________________________
Its________________________________
LaSalle National Bank
By____________________________________
Its________________________________
Norwest Bank Arizona, N.A.
By____________________________________
Its________________________________
The Northern Trust Company
By____________________________________
Its________________________________
BELL SPORTS CORP.
EXHIBIT 11 - STATEMENT RE:
COMPUTATION OF PER SHARE EARNINGS
(In Thousands, Except Per Share Amounts)
June 29, July 1, July 2,
1996 (1) 1995 1994
------------------------------
Net (loss) income $(12,375) $ (3,443) $ 10,459
Net effect of convertible subordinated
debentures (using the if-converted method) 2,427 2,609 1,564
------------------------------
Adjusted net (loss) income $ (9,948) $ (834) $ 12,023
==============================
Weighted average number of common
and common equivalent shares
outstanding - primary 13,838 8,178 8,245
Additional shares assuming conversion of
convertible subordinated debentures 1,595 1,595 997
------------------------------
Adjusted average shares outstanding for
fully diluted computation 15,433 9,773 9,242
==============================
Per share amount - fully diluted $ (0.64) $ (0.09) $ 1.30
==============================
LEASE OF AIRCRAFT
Hayden Leasing, L.C., an Arizona limited liability company,
hereinafter called Lessor, enters into the following agreement with Bell Sports,
Inc., a California corporation, hereinafter called Lessee.
1. Lease of Airplane, Term, Rental. Lessor leases to Lessee,
subject to the terms and conditions, and for the consideration herein set out,
the following described airplane, 1978 KingAir C-90 N37PW for a term of
forty-four (44) months, commencing November 1, 1995 and terminating June 30,
1999, and as consideration for the lease of said airplane, Lessee shall pay to
Lessor rentals payable in forty-four (44) monthly installments at $3,000.00 per
month, plus $150.00 per hour of Lessee's operation, plus all fees and expenses
associated with the co-pilot, payable at the office of the Lessor on the 1st day
of each month. Lessor shall be responsible to pay all operating costs of the
airplane including fuel, other than those costs specifically stated herein as
being Lessee's responsibility. Lessor shall have the right to possess and to use
the airplane at all times other than when Lessee shall require use of the
airplane. Lessee may use the airplane at any time and for any periods provided
48-hour prior reservation is made. Lessor agrees to use reasonable efforts to
make the aircraft available for Lessee's use when a reservation of less than 48
hours in advance is made.
2. Location of Airplane. The Lessee and Lessor agree that the
said airplane shall be permanently based at the municipal airport, in
Scottsdale, Arizona. The Lessor shall not make any change in such permanent base
without first notifying the Lessee in writing of said change and receiving the
Lessee's approval.
3. Default. In the event that Lessee defaults in any of the
provisions or in any of the terms, conditions and covenants to be performed
hereunder upon the part of the Lessee, or in the event that Lessee should be the
subject of any bankruptcy proceeding or become insolvent, or make an assignment
for the benefit of creditors, or consent to the appointment of a Receiver or
Trustee, or if a Trustee or Receiver is appointed for the Lessee without its
consent, or if bankruptcy, reorganization, arrangement, insolvency, or
liquidation proceedings are instituted by or against the Lessee, then in such
event, Lessor, at its option, may declare that this Lease shall be terminated,
and Lessor shall have all rights and remedies available under the law or at
equity. Lessee hereby waives all rights under all exemption laws.
4. Right of Repossession. In the event of Lessee's default,
Lessor may take immediate possession of the airplane without the necessity of
legal action to recover possession of same, and Lessor is hereby authorized to
enter upon the premises where said aircraft may be found without liability for
trespassing for so entering.
5. Condition of Airplane, Title, Control. Lessor represents
that the airplane is in good, safe and serviceable condition, and that it is fit
for use. It is understood and agreed between the parties that title to the
airplane shall remain with the Lessor, and that the Lessee shall have no control
over the operation of the airplane. Lessor warrants that it is the absolute
owner of the said airplane and that it has the full right to lease the airplane
to the Lessee.
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<PAGE>
6. License Fees, Taxes. Lessor agrees to pay when due, all
license fees and other fees and assessments necessary for the securing of
licenses, certificates of title and other similar permits for the operation of
said airplane, such certificates showing title in the Lessor, and further agrees
to pay when due, all taxes now or hereafter imposed by any State, Federal or
local government upon said airplane, or upon the leasing, use or operation
thereof whether assessed to Lessor or Lessee.
7. Insurance. Lessor shall secure, and maintain in effect
throughout the lease term, an insurance policy providing for full hull coverage,
including all risk, both in flight and not in flight. Liability Insurance, in an
amount not less than $2,000,000 for a single occurrence, will be obtained by the
Lessor and Lessee will be named as an additional insured. The cost of all
insurance purchased by the Lessor is included in the lease rental payments.
Copies of all insurance policies or certificates will be provided to Lessee upon
its written request.
8. Loss of or Damage to Airplane. In the event of loss or
damage to the airplane, the Lessor shall immediately report said loss or damage
to the Lessee, the insurance company and to any and all applicable governmental
agencies, both Federal and State, and shall furnish such information and execute
such documents as may be required and necessary to collect the proceeds from any
insurance policies. In this event, the rights, liabilities and obligations of
the parties hereto shall be as follows:
a. In the event that the airplane is lost or is
damaged beyond repair, the proceeds of any property damage insurance policy or
policies shall be payable to Lessor. Upon the Lessor's failure to replace the
airplane with a substantially similar aircraft within ninety (90) days of such
event, this Contract shall then terminate.
b. In the event that the airplane is partially
damaged, then this contract shall remain in full force and effect. The Lessor
shall, at its cost and expense but subject to the availability of sufficient
insurance proceeds (without regard to policy stated deductibles), fully repair
the airplane in order that the airplane shall be placed in as good and the same
condition as it was prior to the damage. Further, in the event such insurance
proceeds (when added to any funds which Lessor may elect to include) are not
sufficient to effect full repairs, or in the event that such repairs are not
completed within ninety (90) days of the date of damage, then in such event,
either party may terminate this Lease.
9. Restrictions on Use. During the term of this lease, the
Lessee shall have use of the airplane on a non-exclusive basis; however, such
use shall be restricted to the ordinary purposes of Lessee's business and
pleasure. Lessee will not use, operate, maintain or store the airplane
improperly, carelessly or in violation of this agreement, or of any applicable
law or regulation, Federal or State, or any instructions furnished therefor by
the Lessor. Lessee shall not operate said airplane for hire. Lessee shall not
operate said airplane beyond the geographical limits as defined in the attached
insurance policies; nor use the airplane for any purpose other than that
stipulated in the insurance policies, unless Lessee first notifies the Lessor in
time for the Lessor to approve of said operation and obtain proper insurance
coverage for the intended trip. The cost of any additional insurance shall be
borne by Lessee.
2
<PAGE>
10. Maintenance, Repairs, Inspection. Lessor agrees at all
times to keep the airplane in a fully operative condition and completely
airworthy; and further to keep said airplane in mechanical condition adequate to
comply with regulations as set forth by the Department of Transportation and any
other regulations as set forth by any Federal, State or local governing body,
domestic or foreign, having power to regulate or supervise the airplane or the
Lessor's maintenance, use or operation of said airplane.
11. Operation of Airplane. The Lessor agrees that it will, at
all times during the use of the airplane by Lessee, cause the airplane to be
operated by safe, careful and duly qualified pilots engaged or employed by the
Lessor. Lessor warrants that each of the pilots who will pilot said airplane
shall be a duly qualified pilot whose license is in good standing and who meets
the requirements established and specified by the insurance policies required to
be obtained by Lessor pursuant to this lease. Lessor further agrees that the
pilots operating said airplane must meet the minimum requirements set forth by
any insurance policy covering the airplane.
12. Mutual Release. Except to the extent of any proceeds
available under any insurance coverage obtained by a party, each party hereby
releases the other from and against any and all loss, damage, injury or death
claims, demands and liability of every nature, including reasonable attorney's
fees, arising directly or indirectly from or in connection with the use or
operation of subject airplane by Lessor or Lessee. The foregoing release shall
not apply in regard to causes of action based upon the gross negligence or
willful misconduct of a party.
13. Assignment by Lessee. Lessee agrees not to assign this
lease or any interest therein without prior written consent of Lessor, or to
sublet said airplane or to part with the possession of same, either by voluntary
act, operation of law or otherwise. In the event that the Lessee sublets or
attempts to sublet same, or voluntarily or involuntarily parts with possession
of same, or attempts to move said airplane from the airport where it is required
to be kept, except while being in the ordinary business of Lessee or for its
pleasure, or in any manner violates any of the terms hereof, then in either or
any of these events this lease shall at the option of the Lessor immediately
terminate and Lessor shall be entitled to immediate possession of said airplane.
Lessee agrees to pay all attorney's fees, collection charges or other expense,
occasioned by Lessee's failure to abide by any of the provisions hereof.
14. Assignment by Lessor. It is understood by the parties
hereto that subject to the prior written consent of Lessee, the Lessor may
assign this Lease and said airplane, and that any such assignee may also assign
same. All rights and obligations of Lessor hereunder shall be succeeded to and
assumed by the assignee under any such assignment, and said assignee's title to
this lease, to the rental herein provided for and to the said airplane shall be
free from all defenses, setoffs or counterclaims which Lessee may be entitled to
assess against Lessor; it being understood and agreed that any such assignee
does not assume any obligations of the Lessor herein named, and that Lessee may
separately claim against Lessor as to any matters which Lessee may be entitled
to assert against the Lessor.
15. Entire Agreement, Severability, Successors. Lessee and
Lessor hereby agree that no representation, statement or agreement other than
those set forth herein shall be binding upon either of the parties hereto unless
specified in writing, signed by each, and purporting to be an express
modification of this contract. Should
3
<PAGE>
any provisions of this lease be held invalid, such provisions shall be deemed to
be eliminated insofar as it is declared invalid and the balance of the lease
shall in no wise be affected thereby. Subject to the terms hereof, the covenants
and conditions of this lease shall inure to the benefits of and be binding upon
the heirs, executors, administrators, personal representatives, trustees,
successors or assigns of the parties hereto.
16. Lessor's Right to Terminate. Lessor may terminate
this lease upon notice of not less than thirty (30) days.
IN WITNESS WHEREOF, the parties hereto have placed their hands
and seals on this, the 17th day of April, 1996.
LESSEE: BELL SPORTS, INC., a California corporation
By: _______________________________
______________________
Its:______________________
LESSOR: HAYDEN LEASING, L.C., an Arizona limited
liability company
By: _______________________________
______________________
Its:______________________
4
BELL SPORTS CORP.
EXHIBIT 21 - SUBSIDIARIES OF
THE REGISTRANT
1. Bell Sports, Inc., a California corporation (a wholly owned subsidiary)
2. Euro Bell S.A., a French corporation (99% owned by Bell Sports, Inc.)
3. Bell Sports Canada Inc., a Canadian corporation (50% owned subsidiary
of Bell Sports, Inc. and 50% owned by American Recreation Company,
Inc.)
4. American Recreation Company Holdings, Inc. ("AMRE"), a Delaware
corporation (a wholly owned subsidiary)
5. American Recreation Company, Inc., a Delaware corporation (a wholly
owned subsidiary of AMRE)
6. Giro Sport Design International, Inc., a California corporation (a
wholly owned subsidiary of Bell Sports, Inc.)
7. Giro Ireland Limited, an Ireland corporation (a wholly owned subsidiary
of Giro Sport Design International, Inc.)
CONSENT OF INDEPENDENT ACCOUNTANTS
----------------------------------
We hereby consent to the incorporation by reference in the Registration
Statements on Forms S-8 (No. 33-53636, No. 33-53638, No. 33-56366, No. 33-53634,
No. 33-56368, No. 33-77134, No. 33-77136, No. 33-94296, No. 33-94298, No.
333-4468, No. 333-4470, and No. 333-4472) of Bell Sports Corp. of our report
dated August 14, 1996 appearing on page 18 of this Form 10-K. We also consent to
the incorporation by reference of our report on the Financial Statement
Schedule, which appears on page S-1 of this Form 10-K.
Chicago, Illinois
August 14, 1996
POWER OF ATTORNEY
The undersigned, a Director and/or Officer of Bell Sports Corp., a
Delaware corporation does hereby constitute and appoint Howard A. Kosick his
true and lawful attorney-in-fact and agent, with full power and authority to
execute in the name and on behalf of the undersigned as such Director and/or
Officer, Bell Sports Corp.'s Annual Report on Form 10-K for the fiscal year
ended June 29, 1996 to be filed by Bell Sports Corp. with the Securities and
Exchange Commission pursuant to the requirements of the Securities Exchange Act
of 1934, as amended. The undersigned hereby grants unto such attorney-in-fact
and agent, full power of substitution and revocation in the premises and hereby
ratifies and confirms all that such attorney-in-fact and agent may do or cause
to be done by virtue of these presents.
Dated this 18th day of September, 1996.
/s/ Terry G. Lee
---------------------------------------
Terry G. Lee
<PAGE>
POWER OF ATTORNEY
The undersigned, a Director and/or Officer of Bell Sports Corp., a
Delaware corporation does hereby constitute and appoint Terry G. Lee his true
and lawful attorney-in-fact and agent, with full power and authority to execute
in the name and on behalf of the undersigned as such Director and/or Officer,
Bell Sports Corp.'s Annual Report on Form 10-K for the fiscal year ended June
29, 1996 to be filed by Bell Sports Corp. with the Securities and Exchange
Commission pursuant to the requirements of the Securities Exchange Act of 1934,
as amended. The undersigned hereby grants unto such attorney-in-fact and agent,
full power of substitution and revocation in the premises and hereby ratifies
and confirms all that such attorney-in-fact and agent may do or cause to be done
by virtue of these presents.
Dated this 18th day of September, 1996.
/s/ Howard A. Kosick
---------------------------------------
Howard A. Kosick
<PAGE>
POWER OF ATTORNEY
The undersigned, a Director and/or Officer of Bell Sports Corp., a
Delaware corporation does hereby constitute and appoint Terry G. Lee or Howard
A. Kosick his true and lawful attorney-in-fact and agent, with full power and
authority to execute in the name and on behalf of the undersigned as such
Director and/or Officer, Bell Sports Corp.'s Annual Report on Form 10-K for the
fiscal year ended June 29, 1996 to be filed by Bell Sports Corp. with the
Securities and Exchange Commission pursuant to the requirements of the
Securities Exchange Act of 1934, as amended. The undersigned hereby grants unto
such attorney-in-fact and agent, full power of substitution and revocation in
the premises and hereby ratifies and confirms all that such attorney-in-fact and
agent may do or cause to be done by virtue of these presents.
Dated this 18th day of September, 1996.
/s/ Linda K. Bounds
---------------------------------------
Linda K. Bounds
<PAGE>
POWER OF ATTORNEY
The undersigned, a Director and/or Officer of Bell Sports Corp., a
Delaware corporation does hereby constitute and appoint Terry G. Lee or Howard
A. Kosick his true and lawful attorney-in-fact and agent, with full power and
authority to execute in the name and on behalf of the undersigned as such
Director and/or Officer, Bell Sports Corp.'s Annual Report on Form 10-K for the
fiscal year ended June 29, 1996 to be filed by Bell Sports Corp. with the
Securities and Exchange Commission pursuant to the requirements of the
Securities Exchange Act of 1934, as amended. The undersigned hereby grants unto
such attorney-in-fact and agent, full power of substitution and revocation in
the premises and hereby ratifies and confirms all that such attorney-in-fact and
agent may do or cause to be done by virtue of these presents.
Dated this 18th day of September, 1996.
/s/ Harry H. Manko
---------------------------------------
Harry H. Manko
<PAGE>
POWER OF ATTORNEY
The undersigned, a Director and/or Officer of Bell Sports Corp., a
Delaware corporation does hereby constitute and appoint Terry G. Lee or Howard
A. Kosick his true and lawful attorney-in-fact and agent, with full power and
authority to execute in the name and on behalf of the undersigned as such
Director and/or Officer, Bell Sports Corp.'s Annual Report on Form 10-K for the
fiscal year ended June 29, 1996 to be filed by Bell Sports Corp. with the
Securities and Exchange Commission pursuant to the requirements of the
Securities Exchange Act of 1934, as amended. The undersigned hereby grants unto
such attorney-in-fact and agent, full power of substitution and revocation in
the premises and hereby ratifies and confirms all that such attorney-in-fact and
agent may do or cause to be done by virtue of these presents.
Dated this 18th day of September, 1996.
/s/ Phillip D. Matthews
---------------------------------------
Phillip D. Matthews
<PAGE>
POWER OF ATTORNEY
The undersigned, a Director and/or Officer of Bell Sports Corp., a
Delaware corporation does hereby constitute and appoint Terry G. Lee or Howard
A. Kosick his true and lawful attorney-in-fact and agent, with full power and
authority to execute in the name and on behalf of the undersigned as such
Director and/or Officer, Bell Sports Corp.'s Annual Report on Form 10-K for the
fiscal year ended June 29, 1996 to be filed by Bell Sports Corp. with the
Securities and Exchange Commission pursuant to the requirements of the
Securities Exchange Act of 1934, as amended. The undersigned hereby grants unto
such attorney-in-fact and agent, full power of substitution and revocation in
the premises and hereby ratifies and confirms all that such attorney-in-fact and
agent may do or cause to be done by virtue of these presents.
Dated this 18th day of September, 1996.
/s/ Arnold L. Chavkin
---------------------------------------
Arnold L. Chavkin
<PAGE>
POWER OF ATTORNEY
The undersigned, a Director and/or Officer of Bell Sports Corp., a
Delaware corporation does hereby constitute and appoint Terry G. Lee or Howard
A. Kosick his true and lawful attorney-in-fact and agent, with full power and
authority to execute in the name and on behalf of the undersigned as such
Director and/or Officer, Bell Sports Corp.'s Annual Report on Form 10-K for the
fiscal year ended June 29, 1996 to be filed by Bell Sports Corp. with the
Securities and Exchange Commission pursuant to the requirements of the
Securities Exchange Act of 1934, as amended. The undersigned hereby grants unto
such attorney-in-fact and agent, full power of substitution and revocation in
the premises and hereby ratifies and confirms all that such attorney-in-fact and
agent may do or cause to be done by virtue of these presents.
Dated this 18th day of September, 1996.
/s/ Michael R. Hannon
---------------------------------------
Michael R. Hannon
<PAGE>
POWER OF ATTORNEY
The undersigned, a Director and/or Officer of Bell Sports Corp., a
Delaware corporation does hereby constitute and appoint Terry G. Lee or Howard
A. Kosick his true and lawful attorney-in-fact and agent, with full power and
authority to execute in the name and on behalf of the undersigned as such
Director and/or Officer, Bell Sports Corp.'s Annual Report on Form 10-K for the
fiscal year ended June 29, 1996 to be filed by Bell Sports Corp. with the
Securities and Exchange Commission pursuant to the requirements of the
Securities Exchange Act of 1934, as amended. The undersigned hereby grants unto
such attorney-in-fact and agent, full power of substitution and revocation in
the premises and hereby ratifies and confirms all that such attorney-in-fact and
agent may do or cause to be done by virtue of these presents.
Dated this 18th day of September, 1996.
/s/ Kenneth K. Harkness
---------------------------------------
Kenneth K. Harkness
<PAGE>
POWER OF ATTORNEY
The undersigned, a Director and/or Officer of Bell Sports Corp., a
Delaware corporation does hereby constitute and appoint Terry G. Lee or Howard
A. Kosick his true and lawful attorney-in-fact and agent, with full power and
authority to execute in the name and on behalf of the undersigned as such
Director and/or Officer, Bell Sports Corp.'s Annual Report on Form 10-K for the
fiscal year ended June 29, 1996 to be filed by Bell Sports Corp. with the
Securities and Exchange Commission pursuant to the requirements of the
Securities Exchange Act of 1934, as amended. The undersigned hereby grants unto
such attorney-in-fact and agent, full power of substitution and revocation in
the premises and hereby ratifies and confirms all that such attorney-in-fact and
agent may do or cause to be done by virtue of these presents.
Dated this 18th day of September, 1996.
/s/ W. Leo Kiely III
---------------------------------------
W. Leo Kiely III
<PAGE>
POWER OF ATTORNEY
The undersigned, a Director and/or Officer of Bell Sports Corp., a
Delaware corporation does hereby constitute and appoint Terry G. Lee or Howard
A. Kosick his true and lawful attorney-in-fact and agent, with full power and
authority to execute in the name and on behalf of the undersigned as such
Director and/or Officer, Bell Sports Corp.'s Annual Report on Form 10-K for the
fiscal year ended June 29, 1996 to be filed by Bell Sports Corp. with the
Securities and Exchange Commission pursuant to the requirements of the
Securities Exchange Act of 1934, as amended. The undersigned hereby grants unto
such attorney-in-fact and agent, full power of substitution and revocation in
the premises and hereby ratifies and confirms all that such attorney-in-fact and
agent may do or cause to be done by virtue of these presents.
Dated this 18th day of September, 1996.
/s/ Frederick W. Winter
---------------------------------------
Frederick W. Winter
<PAGE>
POWER OF ATTORNEY
The undersigned, a Director and/or Officer of Bell Sports Corp., a
Delaware corporation does hereby constitute and appoint Terry G. Lee or Howard
A. Kosick his true and lawful attorney-in-fact and agent, with full power and
authority to execute in the name and on behalf of the undersigned as such
Director and/or Officer, Bell Sports Corp.'s Annual Report on Form 10-K for the
fiscal year ended June 29, 1996 to be filed by Bell Sports Corp. with the
Securities and Exchange Commission pursuant to the requirements of the
Securities Exchange Act of 1934, as amended. The undersigned hereby grants unto
such attorney-in-fact and agent, full power of substitution and revocation in
the premises and hereby ratifies and confirms all that such attorney-in-fact and
agent may do or cause to be done by virtue of these presents.
Dated this 18th day of September, 1996.
/s/ Christopher Wright
---------------------------------------
Christopher Wright
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