SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(Mark One)
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal quarterly period ended December 28, 1996
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OR
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _______________ to ____________
Commission file number 0-19873
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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
incorporation or organization) identification no.)
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)
N/A
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Former name, former address and former fiscal year, if changed since
last report.
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) Yes _X_ No___ and (2) has been
subject to such filing requirements for the past 90 days. Yes _X_ No ___ .
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the last practicable date.
Common Stock, $.01 par value February 10, 1997 13,723,214
- ---------------------------- ------------------ ----------------
Class Date Number of shares
1
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BELL SPORTS CORP.
INDEX TO FORM 10-Q
PART I
<TABLE>
<CAPTION>
Page
Number
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<S> <C>
Bell Sports Corp. and Subsidiaries Consolidated Balance Sheets
as of December 28, 1996 and June 29, 1996 3
Bell Sports Corp. and Subsidiaries Consolidated Statements of Operations
for the six months and three months ended December 28, 1996 and
December 30, 1995
4
Bell Sports Corp. and Subsidiaries Consolidated Condensed Statements of Cash Flows
for the six months ended December 28, 1996 and December 30, 1995 5
Notes to Consolidated Financial Statements 6 - 10
Management's Discussion and Analysis of
Financial Condition and Results of Operations 11 - 13
PART II
Items 1 to 6 14
Signatures 15
</TABLE>
2
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PART 1. Financial Information
Item 1. Financial Statements
BELL SPORTS CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands)
<TABLE>
<CAPTION>
December 28, June 29,
1996 1996
---- ----
(unaudited)
<S> <C> <C>
ASSETS
- ------
Cash and cash equivalents $ 28,424 $ 23,140
Marketable securities --- 7,996
Accounts receivable 67,190 75,651
Inventories 71,727 59,413
Other current assets 19,580 17,285
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Total current assets 186,921 183,485
Property, plant and equipment 26,044 24,722
Goodwill 70,202 71,245
Intangibles and other assets 18,939 19,183
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Total assets $302,106 $298,635
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LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Accounts payable $ 9,742 $ 11,797
Accrued expenses 13,042 16,752
Accrued compensation and employee benefits 4,118 4,392
Notes payable and current maturities of long-term
debt and capital lease obligations 3,011 1,070
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Total current liabilities 29,913 34,011
Long-term debt and capital lease obligations 131,732 124,501
Other liabilities 4,177 4,082
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Total liabilities 165,822 162,594
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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 shares; outstanding 13,700,960 shares 142 142
Additional paid-in capital 141,809 141,647
Unrealized holding losses on marketable securities --- (461)
Foreign currency translation adjustments 176 84
(Accumulated deficit) Retained earnings (326) 146
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141,801 141,558
Less-523,400 shares of common stock in treasury, at cost (5,517) (5,517)
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Total stockholders' equity 136,284 136,041
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Total liabilities and stockholders' equity $302,106 $298,635
============= =============
</TABLE>
See accompanying notes to these consolidated financial statements.
3
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BELL SPORTS CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited; in thousands, except per share data)
<TABLE>
<CAPTION>
Six Months Ended Three Months Ended
--------------------------------- ----------------------------
Dec. 28, Dec. 30, Dec. 28, Dec. 30,
1996 1995 1996 1995
---------------- -------------- ----------- --------------
<S> <C> <C> <C> <C>
Net sales $118,691 $113,890 $56,623 $56,215
Cost of sales 85,177 95,313 40,617 47,773
---------------- -------------- ----------- --------------
Gross profit 33,514 18,577 16,006 8,442
Selling, general and administrative expenses 29,926 30,360 14,647 15,771
Amortization of goodwill and intangible assets 1,729 1,181 867 594
Restructuring charges 1,466 1,057 108 670
Net investment (income) (2,292) (1,962) (500) (930)
Interest expense 3,526 4,324 1,730 2,007
---------------- -------------- ----------- --------------
Loss before income taxes (841) (16,383) (846) (9,670)
Benefit from income taxes (369) (3,289) (371) (1,946)
---------------- -------------- ----------- --------------
Net loss ($472) ($13,094) ($475) ($7,724)
================ ============== =========== ==============
Net loss per common
and common equivalent shares ($0.03) ($0.94) ($0.03) ($0.56)
================ ============== =========== ==============
Weighted average number of common and
common equivalent shares outstanding 13,759 13,944 13,764 13,757
================ ============== =========== ==============
</TABLE>
See accompanying notes to these consolidated financial statements.
4
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BELL SPORTS CORP. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(unaudited; in thousands)
<TABLE>
<CAPTION>
Six Months Ended
------------------------------------
December 28, December 30,
1996 1995
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<S> <C> <C>
CASH FLOWS USED IN OPERATING ACTIVITIES:
Net cash used in operating activities $ (7,353) $ (23,412)
-------------- ----------------
CASH FLOWS PROVIDED BY (USED IN) INVESTING ACTIVITIES:
Capital expenditures (4,479) (3,774)
Net sale of marketable securities 8,105 20,580
Acquisition of other businesses (519) (1,660)
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Net cash provided by investing activities 3,107 15,146
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CASH FLOWS PROVIDED BY (USED IN) FINANCING ACTIVITIES:
Proceeds from issuance of stock --- 23
Treasury stock purchases --- (5,517)
Payments on notes payable, long-term debt and capital leases (784) (732)
Advances taken on credit lines 31,186 2,305
Payments made on credit lines (21,000) (25,493)
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Net cash provided by (used in) financing activities 9,402 (29,414)
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Effect of exchange rate changes on cash 128 (52)
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Net increase (decrease) in cash and cash equivalents 5,284 (37,732)
Cash and cash equivalents at beginning of period 23,140 72,018
-------------- ----------------
Cash an cash equivalents at end of period $ 28,424 $ 34,286
============== ================
</TABLE>
See accompanying notes to these consolidated financial statements.
5
<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)
design, manufacture and market bicycles, related bicycle parts and accessories,
bicycle helmets and automotive racing helmets.
Consolidation
- -------------
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.
Accounting Period
- -----------------
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.
Unaudited Information and Basis of Presentation
- -----------------------------------------------
The consolidated balance sheet as of December 28, 1996 and statements of
operations and condensed cash flows for all periods included in the accompanying
financial statements have not been audited. In the opinion of management these
financial statements include all normal and recurring adjustments necessary for
a fair presentation of such financial information. The results of operations for
the interim periods are not necessarily indicative of the results of operations
to be expected for the full year.
The financial information included herein has been prepared pursuant to the
rules and regulations of the Securities and Exchange Commission. Certain
information and footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have been
omitted pursuant to such rules and regulations. The interim financial
information and the notes thereto should be read in conjunction with the audited
financial statements for the fiscal years ended June 29, 1996, July 1, 1995 and
July 2, 1994 which are included in the Company's 1996 annual report to
stockholders.
Income Per Share Information
- ----------------------------
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 during the twelve
month period immediately preceding the April 1992 initial public stock offering
have been treated as common stock equivalents for all periods presented. Fully
diluted net income per common share for all periods included in the accompanying
financial statements has 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 4 1/4% convertible
debentures (see Note 4) would be anti-dilutive.
6
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Marketable Securities
- ---------------------
All marketable securities, consisting of preferred equity securities and U.S.
Government Agency instruments, have been classified as available-for-sale
securities and are reported at fair value with unrealized holding gains and
losses reported in stockholders' equity. The fair value of the marketable
securities was obtained from published market quotes or outside professional
pricing sources. The cost of the Company's marketable securities available for
sale exceeded the fair market value of such securities by approximately $461,000
at June 29, 1996. Such excess was recorded as a reduction to the Company's
stockholders' equity at June 29, 1996.
During the first quarter of fiscal 1997, the Company was successful in an
arbitration case related to the handling of certain marketable securities by an
outside investment advisor. The settlement proceeds, net of related expenses and
expected losses to sell certain securities in the net amount of $1.3 million, is
included in net investment income.
Accounts Receivable
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Accounts receivable at December 28, 1996 and June 29, 1996 are net of allowances
for doubtful accounts of $2.9 million and $3.4 million, respectively.
Property, Plant and Equipment
- -----------------------------
Property, plant and equipment at December 28, 1996 and June 29, 1996 are net of
accumulated depreciation of $16.9 million and $14.1 million, respectively.
NOTE 2 - INVENTORIES
Inventories consist of the following:
December 28, June 29,
(in thousands) 1996 1996
---- ----
Raw materials $ 6,544 $ 5,330
Work in process 2,505 2,315
Finished goods 62,678 51,768
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$71,727 $59,413
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7
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NOTE 3 - PRODUCT LIABILITY 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. Other than for the February 1996 case
described below, 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 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 any judgment, settlement amount or defense costs arising out of
these claims, 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.
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 estimated 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. The Company is seeking dismissal of the cross-claim on several grounds.
8
<PAGE>
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 closure of this site 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 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.
NOTE 4 - NOTES PAYABLE, LONG TERM DEBT AND CAPITAL LEASE OBLIGATIONS
The Company has approximately $135 million in notes payable, long-term debt and
capital lease obligations outstanding at December 28, 1996. Of this amount,
$86.25 million relates to the outstanding balance on the Company's 4 1/4%
convertible subordinated debentures. Maturing November 15, 2000, the debentures
are convertible into common stock at any time prior to maturity at a conversion
price of $54.06 per share. Interest on the debentures is payable semi-annually.
The debentures are redeemable at the Company's option at any time on or after
November 15, 1996, at specified redemption prices.
In February 1996, the Company entered into a $100 million multicurrency,
revolving line of credit (the "Revolving Credit") with a syndicated bank group.
At December 28, 1996, a total of $43.0 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 December 28, 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 payable 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, waived a default in the interest coverage
ratio covenant as of June 29, 1996.
9
<PAGE>
NOTE 5 - COMMON STOCK
From time to time, the Company has granted to its executive officers,
non-employee directors and certain other employees options to purchase shares of
the Company's Common Stock. At December 28, 1996 options to purchase
approximately 2,021,000 shares of Common Stock were outstanding.
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 January 1997, 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 6 - RESTRUCTURING 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 (acquired May 15,
1995) 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.
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. Included in the first half of fiscal 1997 pre-tax
income are $1.5 million of restructuring charges related to the Program,
including facility closing costs, severance benefits and relocation expenses.
The following table sets forth the details of activity during fiscal 1997 for
restructuring charges:
<TABLE>
<CAPTION>
(in thousands) Accrual at Restructuring Cash Accrual at
June 29, Charges Payments December 28,
1996 1996
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<S> <C> <C> <C> <C>
Lease payments and other facility expenses $ 942 $ 338 ($ 524) $ 756
Severance and other related benefits 2,832 382 (2,263) 951
Relocation and other 1,383 746 (1,466) 663
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Total $ 5,157 $ 1,466 ($4,253) $2,370
==================================================================
</TABLE>
10
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Item 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FINANCIAL POSITION AND LIQUIDITY
The Company's current ratio increased to 6.2 to 1 at December 28, 1996 from 5.4
to 1 at June 29, 1996. Cash and current marketable securities decreased to $28.4
million at December 28, 1996 from $31.1 million at June 29, 1996. The decline
primarily relates to cash used in operations.
Accounts receivable at December 28, 1996 declined $8.5 million from June 29,
1996, due to the collection of receivables in the normal course of business.
Inventories increased $12.3 million in fiscal 1997 compared to the balance at
June 29, 1996. The increase is attributed to the normal business cycle in which
inventory is built up in the first half of the fiscal year in order to meet
anticipated sales demands in the second half of the fiscal year.
In February 1996, the Company entered into a $100.0 million multicurrency,
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 December 28, 1996, a total of $43.0
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 December 28, 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, waived a default in the interest coverage
covenant as of June 29, 1996.
Capital expenditures were $4.5 million for the first half of fiscal 1997. The
Company expects to spend approximately $6.0 million on capital expenditures in
fiscal year 1997, primarily for computer systems 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. With respect to
acquisitions prior to fiscal 1997, the Company has earnout payments that could
aggregate $2.4 million. Of this amount, $500,000 is payable in February 1997 and
the remainder is subject to future financial results. In November 1996, the
Company acquired a distributor in Sydney, Australia to directly market its
products.
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.
11
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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, adverse outcome from pending litigation, competitive actions,
loss of significant customers, timing of major customer shipments, adverse
weather conditions, retail environment, pending accounting pronouncements,
economic conditions and currency fluctuations.
RESULTS OF OPERATIONS
Net Sales. Net sales increased by 1% to $56.6 million during the three
months ended December 28, 1996 as compared to $56.2 million in the same period
of 1996. Bicycle helmets increased 14% over prior year due to the inclusion of
Giro sales ($3.9 million). In addition, accessories sales increased 5% over a
year ago. These increases were offset by a decrease in bicycle sales of 17% or
$2.9 million due to sluggish industry sales. On a year-to-date basis net sales
increased 4% to $118.7 million from $113.9 million in the previous year. The
year-to-date increase can be attributed to Giro sales, offset by lower U.S.
sales caused by a weak U.S. retail environment.
The product line sales mix for the six month and three month periods are as
follows:
Six Months Ended Three Months Ended
---------------- ------------------
Dec. 28, Dec. 30, Dec. 28, Dec. 30,
1996 1995 1996 1995
---- ---- ---- ----
Product Line Sales Mix:
Bicycle accessories 48% 48% 42% 40%
Bicycle helmets 30% 28% 32% 30%
Bicycles 20% 23% 24% 29%
Auto Racing helmets 2% 1% 2% 1%
Management remains cautious about second half sales due to the soft sales
environment experienced in the U.S. during the second quarter of fiscal 1997.
Gross Margin. Gross margins were 28% of net sales in the second quarter
and in the first half of fiscal 1997, in comparison to 28% in the prior year
excluding the impact of the inventory write-up. Helmet margins improved during
the quarter due to the addition of Giro but were offset by a decline in bicycle
margins due to increased end of season close-out sales.
During the second quarter and the first half of fiscal 1996, $7.1 million and
$13.1 million, respectively, were charged to cost of sales for the write-up of
inventory related to the merger with AMRE and the acquisition of SportRack.
Selling, General and Administrative. Selling, general and
administrative costs were 26% of net sales in the second quarter of fiscal 1997
compared to 28% in fiscal 1996. Actual selling, general and administrative costs
decreased 7% to $14.6 million for the quarter. Selling, general and
administrative costs declined by $2.6 million or 16%, when excluding Giro which
was acquired in January 1996. On a year to date basis, selling, general and
administrative costs decreased 1% to $29.9 million. When excluding Giro, these
costs declined by $3.3 million or 11%. Year to date selling, general and
administrative costs represented 25% of sales compared to 27% in the first half
of fiscal 1996. These reductions result from the Company's recent restructuring
activities and management's continuing efforts to reduce the Company's overall
selling, general and administrative cost structure.
12
<PAGE>
Amortization of intangibles. Amortization of goodwill and intangible
assets increased to $867,000 in the second quarter and $1.7 million year-to-date
during fiscal 1997 compared to $594,000 in the second quarter and $1.1 million
year-to-date for fiscal 1996. The increase is attributed to the acquisition of
Giro in January 1996.
Restructuring charges. During fiscal 1996, the Company commenced
significant organizational and office consolidations including closing four
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. Restructuring charges were $108,000 for the second
quarter and $1.5 million on a year-to-date basis. These costs relate to facility
closing costs, severance benefits and relocation expenses.
Net investment income and interest expense. For the fiscal 1997 second
quarter, net investment income decreased to $500,000 in fiscal 1997, compared to
$930,000 in fiscal 1996. This decline is due to lower levels of cash and
marketable securities. Net investment income increased to $2.3 million for the
first six months in fiscal 1997, compared to $2.0 million in fiscal 1996. The
increase is due to settlement of an arbitration case related to the handling of
certain marketable securities by an outside investment advisor during the first
quarter. The settlement proceeds, net of related expenses and expected losses to
sell certain securities, of $1.3 million, are included in net investment income.
Interest expense decreased to $1.7 million in the second quarter of fiscal 1997
from $2.0 million in the second quarter of fiscal 1996. On a year to date basis,
interest expense decreased to $3.5 million for fiscal 1997 from $4.3 million for
fiscal 1996. The decreases are due to lower debt balances outstanding and lower
interest rates for the first six months of fiscal 1997 compared to prior year.
Income taxes. The effective tax rate was 44% for the quarter and the
six month period of fiscal 1997. The effective rate was 47% for the quarter and
the six month period of fiscal 1996, excluding restructuring charges and the
impact of the inventory write-up. The effective rate was 20% if such costs were
included for both periods in fiscal 1996.
Net income and weighted average shares. Results from operations for the
fiscal 1997 second quarter was a loss of $475,000 or $0.03 cents on a per share
basis compared to a loss of $7.7 million or $0.56 cents per share for the fiscal
1996 second quarter. Second quarter results included pre-tax restructuring
charges of $108,000 and $670,000 in fiscal 1997 and fiscal 1996, respectively.
The results of the second quarter of fiscal 1996 also included a $7.2 million
charge for the inventory write-up arising from the acquisition of SportRack in
May 1995 and the merger with AMRE, Inc. in July 1995. For the six month period
ending December 28, 1996, results from operations were a loss of $472,000 or
$0.03 cents per share compared to a loss of $13.1 million or $0.94 cents per
share for the same period of fiscal 1996. The fiscal 1996 results included a
$13.1 million charge for the inventory write-up arising from the acquisition of
SportRack in May 1995 and the merger with AMRE, Inc. in July 1995.
Weighted average shares outstanding for the fiscal three month periods ended
December 28, 1996 and December 30, 1995 were 13.8 million. Year-to-date
outstanding shares for fiscal 1997 were 13.8 million shares compared to 13.9
million for the same period of fiscal 1996.
13
<PAGE>
BELL SPORTS CORP.
PART II
<TABLE>
<S> <C>
Item 1 Legal Proceedings
None
Item 2 Changes in Securities
None
Item 3 Defaults Upon Senior Securities
None
Item 4 Submission of Matters to a Vote of Security Holders
(a) The 1996 Annual Meeting of Stockholders of Bell Sports Corp. was held
on November 21, 1996
(b) Not required
(c) The following matters were voted upon and approved at the meeting:
(i) The re-election of Class II Directors to serve until the 1999
Annual Meeting; nominees were Frederick W. Winter, Kenneth K.
Harkness and Harry H. Manko
(ii) The re-election of Arnold L. Chavkin, Class III Director, to serve until
the 1997 Annual Meeting
(iii)The amendment to the Bell Sports Corp. 1993 Outside Directors
Stock Option Plan to provide for the payment of retainer fees in
stock options in lieu of cash and to increase the number of shares
issuable under the plan
(iv) The appointment of Price Waterhouse as the independent public
accountants for the Company for its fiscal year ending June 28, 1997
Summary of proxies voted:
Broker
Proposal For Against Withheld Non-Votes
-------- ---------- -------- -------- ---------
(i) Winter 10,300,754 --- 288,293 ---
(i) Harkness 10,300,038 --- 289,009 ---
(i) Manko 10,300,047 --- 289,000 ---
(ii) Chavkin 10,298,358 --- 290,688 ---
(iii) Stock Option Plan 9,566,490 486,005 87,536 449,016
(iv) Accountants 10,472,529 86,628 29,889 ---
Total shares voted 10,589,047
Total shares unvoted 3,111,913
(d) None
Item 5 Other Information
None
Item 6 Exhibits and Reports on Form 8-K
(a) None
</TABLE>
14
<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: February 10, 1997
------------------------
BELL SPORTS CORP.
/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)
15
<PAGE>
BELL SPORTS CORP.
INDEX TO EXHIBITS
Exhibit
Number Description Page
- --------------------------------------------------------------------------------
3 Bylaws of the Registrant Page 17
10.1 Restated and Amended Bell Sports Corp. 1993 Outside
Directors Stock Option Plan Page 42
10.2 Form of Restricted Stock Award Agreement dated as of
August 27, 1996 between Registrant and certain of
its executive officers Page 47
11 Statement re: computation of per share earnings Page 52
27 Financial Data Schedule Page 53
16
BYLAWS
OF
BELL SPORTS CORP.
A Delaware Corporation
As In Effect On November 21, 1996
ARTICLE I
MEETINGS OF STOCKHOLDERS
Section 1.1 Annual Meetings. The annual meeting of the stockholders of
Bell Sports Corp., a Delaware corporation (the "Corporation"), for the election
of directors and for the transaction of such other business as may come before
the meeting shall be on the third Wednesday of November of each year, if not a
legal holiday, and if a legal holiday, then on the next succeeding day not a
legal holiday, at such time and at such location as shall be designated by the
Board of Directors or at such other date, time, and location as the Board of
Directors shall designate. If the election of directors shall not be held on the
day designated herein for the annual meeting of stockholders, or at any
adjournment thereof, the Board of Directors shall cause such election to be held
at a special meeting of stockholders to be called as soon thereafter as is
convenient.
Section 1.2 Special Meetings. Special meetings of the Stockholders (as
hereinafter defined) for any purpose or purposes, unless otherwise prescribed by
statute, may be called at any time only by the Chairman of the Board, the Chief
Executive Officer, the Board of Directors or by a committee of the Board of
Directors authorized to call such meetings, and by no other person. The business
transacted at a special meeting of the Stockholders shall be limited to the
purpose or purposes for which such meeting is called, except as otherwise
determined by the Board of Directors or the chairman of the meeting.
Section 1.3 Notice of Meetings. Notice of the place, date and time of
the holding of each annual and special meeting of the Stockholders and, in the
case of a special meeting, the purpose or purposes thereof, may be given by
personal delivery or by depositing it in a postage prepaid envelope, in the
United States mails, air mail or first class, or by delivering it to a telegraph
company, charges prepaid for transmission, or by transmitting it via telecopier,
to each Stockholder entitled to vote at such meeting, not less than ten (10) nor
more than sixty (60) days before the date of such meeting, and, if mailed, shall
be directed to such Stockholder at such Stockholder's address as it appears on
the records of the Corporation, unless such Stockholder shall have filed with
the Secretary of the Corporation a written request that notices to such
Stockholder be mailed at some other address, in which case it shall be directed
<PAGE>
to such Stockholder at such other address. Such requirements for notice shall
also be deemed satisfied, except in the case of stockholder meetings required by
law, if actual notice is received orally or by other writing by the person
entitled thereto as far in advance of the event with respect to which notice is
being given as the minimum notice period required by the laws of the State of
Delaware or these Bylaws. Notice of any meeting of Stockholders shall not be
required to be given to any Stockholder who shall attend such meeting in person
or by proxy and shall not, at the beginning of such meeting, object to the
transaction of any business because the meeting is not lawfully called or
convened, or who shall, either before or after the meeting, submit a signed
waiver of notice, in person or by proxy. Unless the Board of Directors shall
fix, after the adjournment, a new record date for an adjourned meeting, notice
of such adjourned meeting need not be given if the time and place to which the
meeting shall be adjourned were announced at the meeting at which the
adjournment is taken. At the adjourned meeting, the Corporation may transact any
business which might have been transacted at the original meeting. If the
adjournment is for more than thirty (30) days, or if after the adjournment a new
record date is fixed for the adjourned meeting, a notice of the adjourned
meeting shall be given to each Stockholder of record.
Whenever notice is required to be given under any provision of the laws
of the State of Delaware, the Certificate of Incorporation or these Bylaws, to
any stockholder to whom (i) notice of two consecutive annual meetings of
stockholders, and all notices of meetings of stockholders to such stockholder
during the period between such two consecutive annual meetings, or (ii) all, or
at least two, payments (if sent by first class mail) of dividends or interest on
securities of the Corporation during a 12-month period, have been mailed
addressed to such stockholder at the address of such stockholder as shown on the
records of the Corporation and have been returned undeliverable, the giving of
such notice to such stockholder shall not be required. Any meeting which shall
be taken or held without notice to such stockholder shall have the same force
and effect as if such notice had been duly given. If any such stockholder shall
deliver to the Corporation a written notice setting forth the then current
address of such stockholder, the requirement that notice be given to such
stockholder shall be reinstated.
Section 1.4 Place of Meetings. Meetings of the Stockholders may be held
at such place, within or without the State of Delaware, as the Board of
Directors or the officer calling the same shall specify in the notice of such
meeting, or in a duly executed waiver of notice thereof. If not otherwise
designated, the place of any special meeting shall be the principal office of
the Corporation in the State of Illinois.
- 2 -
<PAGE>
Section 1.5 Quorum. At all meetings of the Stockholders, the holders of
a majority of the votes of (i) the shares of common stock of the Corporation
issued and outstanding and entitled to vote generally and in the election of
directors (hereinafter called "Common Stock") and (ii) the shares of preferred
stock issued and outstanding and entitled to vote generally and in the election
of directors (hereinafter called "Preferred Stock") (the Common Stock and the
Preferred Stock issued and outstanding at any time and from time to time is
sometimes hereinafter collectively referred to as "Stock" and the holders
thereof are sometimes hereinafter referred to as the "Stockholders") shall be
present in person or by proxy in order to constitute a quorum for the
transaction of any business, except as otherwise provided by statute or in the
Corporation's amended and Restated Certificate of Incorporation (the
"Certificate of Incorporation"). In the absence of a quorum, the holders of a
majority of the shares of the Stock present in person or by proxy, or if no
Stockholder is present, then any officer of the Corporation may adjourn the
meeting. At any such adjourned meeting at which a quorum may be present, any
business may be transacted which might have been transacted at the meeting as
originally called.
Section 1.6 Organization. At each meeting of the Stockholders, the
Chairman or Chief Executive Officer, or in the absence of the Chairman and the
Chief Executive Officer, or the Chairman's and the Chief Executive Officer's
inability to act, any President, or in the absence of all Presidents or all
Presidents' inability to act, any Vice President, or in the absence or inability
of any such Vice President to act, any person chosen by a majority of those
Stockholders present, in person or by proxy and shall act as Chairman of the
meeting. The Secretary, or in the absence or inability of such Secretary to act,
any Assistant Secretary, or in the absence or inability of such Assistant
Secretary to act, any person appointed by the Chairman of the meeting, shall act
as secretary of the meeting and keep the minutes thereof.
Section 1.7 Order of Business. The order of business at all meetings of
the Stockholders shall be as determined by the Chairman of the meeting.
Section 1.8 Voting. Except as otherwise provided by statute, by the
Certificate of Incorporation, or by any certificate duly filed in the State of
Delaware pursuant to Section 151 of the General Corporation Law of the State of
Delaware, or any successor section thereto, the Stockholders shall have the
exclusive right to vote for the election of directors and for all other
purposes, each of the Stockholders being entitled to one vote for each share
held in such Stockholder's name on the record of stockholders of the Corporation
on the date fixed by the Board of Directors as the
- 3 -
<PAGE>
record date for the determination of the stockholders who shall be entitled to
notice of and to vote at such meeting; or if such record date shall not have
been so fixed, then at the close of business on the day next preceding the date
on which notice thereof shall be given, or if notice is waived, at the close of
business on the day next preceding the day on which the meeting is held. If a
quorum shall be present, then, except as otherwise provided by statute, these
Bylaws, or the Certificate of Incorporation, any corporate action to be taken by
vote of the Stockholders shall be authorized by a majority of the total votes
cast at a meeting of Stockholders by the holders of shares of Stock present in
person or represented by proxy and entitled to vote on such action. Unless
required by statute, or determined by the Chairman of the meeting to be
advisable, the vote on any question need not be by written ballot. On a vote by
written ballot, each ballot shall be signed by the Stockholder voting, or by his
proxy, if there be such proxy, and shall state the number of shares voted.
Section 1.9 Proxies. At every meeting of stockholders, each stockholder
having the right to vote thereat shall be entitled to vote in person or by
proxy. Such proxy shall be filed with the Secretary before or at the time of the
meeting. No proxy shall be valid after three years from its date, unless such
proxy provides for a longer period. Every proxy shall be revocable at the
pleasure of the Stockholder executing it, except in those cases where an
irrevocable proxy is permitted by law.
A stockholder may authorize another person or persons to act for such
stockholder as proxy (i) by executing a writing authorizing such person or
persons to act as such, which execution may be accomplished by such stockholder
or such stockholder's authorized officer, director, employee or agent signing
such writing or causing his or her signature to be affixed to such writing by
any reasonable means, including, but not limited to, facsimile signature, or
(ii) by transmitting or authorizing the transmission of a telegram, cablegram or
other means of electronic transmission (a "Transmission") to the person who will
be the holder of the proxy or to a proxy solicitation firm, proxy support
service organization or like agent duly authorized by the person who will be the
holder of the proxy to receive such Transmission; provided, however, that any
such Transmission must either set forth or be submitted with information from
which it can be determined that such Transmission was authorized by such
stockholder. Either the Secretary or such other person or persons as shall be
appointed from time to time by the Board of Directors, or the inspector or
inspectors appointed pursuant to Section 1.12 hereof, as appropriate, shall
examine Transmissions to determine if they are valid. If it is determined that a
Transmission is valid, the person or persons making that determination shall
specify the information upon which such person or persons relied. Any copy,
- 4 -
<PAGE>
facsimile telecommunication or other reliable reproduction of such a writing or
such a Transmission may be substituted or used in lieu of the original writing
or Transmission for any and all purposes for which the original writing or
Transmission could be used; provided, however, that such copy, facsimile
telecommunication or other reproduction shall be a complete reproduction of the
entire original writing or Transmission.
Section 1.10 Fixing Date for Determination of Stockholders
of Record.
(a) In order that the Corporation may determine the stockholders
entitled to notice of or to vote at any meeting of stockholders or any
adjournment thereof, the Board of Directors may fix a record date, which record
date shall not precede the date upon which the resolution fixing such record
date shall be adopted by the Board of Directors, and which record date shall not
be more than sixty (60) nor less than ten (10) days before the date of such
meeting. If no such record date shall have been fixed by the Board of Directors,
such record date shall be at the close of business on the day next preceding the
day on which such notice is given or, if such notice is waived, at the close of
business on the day next preceding the day on which such meeting shall be held.
A determination of stockholders of record entitled to notice of or to vote at
any meeting of stockholders shall apply to any adjournment of such meeting;
provided, however, that the Board of Directors may fix a new record date for the
adjourned meeting.
(b) In order that the Corporation may determine the stockholders
entitled to receive payment of any dividend or other distribution or any
allotment of any rights or the stockholders entitled to exercise any rights in
respect of any change, conversion or exchange of any capital stock, or for the
purpose of any other lawful action, the Board of Directors may fix a record
date, which record date shall not precede the date upon which the resolution
fixing such record date shall be adopted by the Board of Directors, and which
record date shall not be more than sixty (60) days prior to such payment,
allotment or other action. If no such record date shall have been fixed, such
record date shall be at the close of business on the day on which the Board of
Directors shall adopt the resolution relating to such payment, allotment or
other action.
Section 1.11 List of Stockholders. The officer who has charge of the
stock ledger of the Corporation shall prepare and make, at least ten (10) days
before every meeting of Stockholders, a complete list of the Stockholders
entitled to vote at the meeting, arranged in alphabetical order, and showing the
address of each Stockholder and the number of shares registered in the name of
each Stockholder. Such list shall be open to the examination of any Stockholder,
for any purpose
- 5 -
<PAGE>
germane to the meeting, during ordinary business hours, for a period of at least
ten days prior to the meeting either at a place within the city where the
meeting is to be held, which place shall be specified in the notice of the
meeting, or if not so specified, at the place where the meeting is to be held.
The list shall also be produced and kept at the time and place of the meeting
during the whole time thereof, and may be inspected by any Stockholder who is
present. Such stock ledger shall be the only evidence as to who are the
stockholders entitled to examine such stock ledger, such list or the books of
the Corporation or to vote in person or by proxy at any meeting of stockholders.
Section 1.12 Voting Procedures and Inspectors of Elections.
(a) The Board of Directors shall, in advance of any meeting of
Stockholders, appoint one or more inspectors (individually, an "Inspector," and
collectively, "Inspectors") to act at such meeting and make a written report
thereof. The Board of Directors may designate one or more persons as alternate
Inspectors to replace any Inspector who shall fail to act. If no Inspector or
alternate shall be able to act at such meeting, the person presiding at such
meeting shall appoint one or more other persons to act as Inspectors thereat.
Each Inspector, before entering upon the discharge of his or her duties, shall
take and sign an oath faithfully to execute the duties of Inspector with strict
impartiality and according to the best of his or her ability.
(b) The Inspectors shall (i) ascertain the number of shares of capital
stock of the Corporation outstanding and the voting power of each, (ii)
determine the shares of capital stock of the Corporation represented at such
meeting and the validity of proxies and ballots, (iii) count all votes and
ballots, (iv) determine and retain for a reasonable period a record of the
disposition of any challenges made to any determination by the Inspectors and
(v) certify their determination of the number of such shares represented at such
meeting and their count of all votes and ballots. The Inspectors may appoint or
retain other persons or entities to assist them in the performance of their
duties.
(c) The date and time of the opening and the closing of the polls for
each matter upon which the stockholders will vote at such meeting shall be
announced at such meeting. No ballots, proxies or votes, nor any revocations
thereof or changes thereto, shall be accepted by the Inspectors after the
closing of the polls unless the Court of Chancery of the State of Delaware upon
application by any stockholder shall determine otherwise.
(d) In determining the validity and counting of proxies and ballots,
the Inspectors shall be limited to an examination of the proxies, any envelopes
submitted with such proxies, any
- 6 -
<PAGE>
information provided in accordance with the second paragraph of Section 1.9 of
these Bylaws, ballots and the regular books and records of the Corporation,
except that the Inspectors may consider other reliable information for the
limited purpose of reconciling proxies and ballots submitted by or on behalf of
banks, brokers, their nominees or similar persons which represent more votes
than the holder of a proxy is authorized by a Stockholder of record to cast or
more votes than such Stockholder holds of record. If the Inspectors consider
other reliable information for the limited purpose permitted herein, the
Inspectors, at the time they make their certification pursuant to paragraph (b)
of this Section 1.12, shall specify the precise information considered by them,
including the person or persons from whom they obtained such information, when
the information was obtained, the means by which such information was obtained
and the basis for the Inspectors' belief that such information is accurate and
reliable.
Section 1.13 Voting of Shares by Certain Holders. Shares of capital
stock of the Corporation standing in the name of another corporation, domestic
or foreign, and entitled to vote may be voted by such officer, agent or proxy as
the Bylaws of such other corporation may prescribe or, in the absence of such
provision, as the board of directors of such other corporation may determine.
Shares of capital Stock of the Corporation standing in the name of a
deceased person, a minor, an incompetent or a corporation declared bankrupt and
entitled to vote may be voted by an administrator, executor, guardian,
conservator or trustee, as the case may be, either in person or by proxy,
without transfer of such shares into the name of the official so voting.
A Stockholder whose shares of capital Stock of the Corporation are
pledged shall be entitled to vote such shares unless on the transfer books of
the Corporation the pledgor has expressly empowered the pledgee to vote such
shares, in which case only the pledgee, or such pledgee's proxy, may represent
such shares and vote thereon.
Shares of capital stock of the Corporation belonging to the
Corporation, or to another corporation if a majority of the shares entitled to
vote in the election of directors of such other corporation shall be held by the
Corporation, shall not be voted at any meeting of Stockholders and shall not be
counted in determining the total number of outstanding shares for the purpose of
determining whether a quorum is present. Nothing in this Section 1.13 shall be
construed to limit the right of the Corporation to vote shares of capital stock
of the Corporation held by it in a fiduciary capacity.
- 7 -
<PAGE>
Section 1.14 Action by Written Consent. No action required to be or
which may be taken at any annual or special meeting of Stockholders of the
Corporation may be taken without a meeting, and the power of Stockholders to
consent in writing, without a meeting, is specifically denied.
Section 1.15 Advance Notice of Stockholder Business. At an annual
meeting of the Stockholders, only such business shall be conducted as shall have
been properly brought before the meeting. To be properly brought before an
annual meeting, business must be (i) specified in the notice of meeting (or any
supplement thereto) given by or at the direction of the Board of Directors, (ii)
otherwise properly brought before the meeting by or at the direction of the
Board of Directors, or (iii) otherwise properly brought before the meeting by a
Stockholder. For business to be properly brought before an annual meeting by a
Stockholder, the Stockholder must have given timely notice thereof in writing to
the Secretary of the Corporation. To be timely, a Stockholder's notice must be
delivered to or mailed and received at the principal executive offices of the
Corporation, not less than sixty (60) days nor more than ninety (90) days prior
to the meeting; provided, however, that in the event that less than seventy (70)
days' notice or prior public disclosure of the date of the meeting is given or
made to Stockholders, notice by the Stockholder to be timely must be so received
not later than the close of business on the 10th day following the day on which
such notice of the date of the annual meeting was mailed or such public
disclosure was made. A Stockholder's notice to the Secretary shall set forth as
to each matter the Stockholder proposes to bring before the annual meeting (w) a
brief description of the business desired to be brought before the annual
meeting and the reasons for conducting such business at the annual meeting, (x)
the name and address, as they appear on the Corporation's books, of the
Stockholder proposing such business, (y) the class and number of shares of the
Corporation which are beneficially owned by the Stockholder, and (z) any
material interest of the Stockholder in such business. Notwithstanding anything
in the Bylaws to the contrary, no business shall be conducted at any annual
meeting except in accordance with the procedures set forth in this Section 1.15.
The Chairman of the annual meeting shall, if the facts warrant, determine and
declare to the meeting that business was not properly brought before the meeting
and in accordance with the provisions of this Section 1.15, and if the Chairman
of the meeting should so determine, the Chairman shall so declare to the meeting
and any such business not properly brought before the meeting shall not be
transacted.
Section 1.16 Notice of Stockholder Nominees. Only persons who are
nominated in accordance with the procedures set forth in this Section 1.16 shall
be eligible for election as Directors. Nominations of persons for election to
the Board of Directors of
- 8 -
<PAGE>
the Corporation may be made at a meeting of Stockholders by or at the direction
of the Board of Directors or by any Stockholder of the Corporation entitled to
vote for the election of Directors at the meeting who complies with the notice
procedures set forth in this Section 1.16. Such nominations, other than those
made by or at the direction of the Board of Directors, shall be made pursuant to
timely notice in writing to the Secretary of the Corporation. To be timely, a
Stockholder's notice shall be delivered to or mailed and received at the
principal executive offices of the Corporation not less than sixty (60) days nor
more than ninety (90) days prior to the meeting; provided, however, that in the
event that less than seventy (70) days' notice or prior public disclosure of the
date of the meeting is given or made to Stockholders, notice by the Stockholder
to be timely must be so received not later than the close of business on the
10th day following the day on which such notice of the date of the meeting was
mailed or such public disclosure was made. Such Stockholder's notice shall set
forth (a) as to each person whom the Stockholder proposes to nominate for
election or re-election as a Director, (i) the name, age, business address and
residence address of such person, (ii) the principal occupation or employment of
such person, (iii) the class and number of shares of the Corporation which are
beneficially owned by such person and (iv) any other information relating to
such person that is required to be disclosed in solicitations of proxies for
election of Directors, or is otherwise required, in each case pursuant to
Regulation 14A under the Securities Exchange Act of 1934, as amended (including
without limitation such persons' written consent to being named in the proxy
statement as a nominee and to serving as a Director if elected); and (b) as to
the Stockholder giving the notice (i) the name and address, as they appear on
the Corporation's books, of such Stockholder and (ii) the class and number of
shares of the Corporation which are beneficially owned by such Stockholder. At
the request of the Board of Directors any person nominated by the Board of
Directors for election as a Director shall furnish to the Secretary of the
Corporation that information required to be set forth in a Stockholder's notice
of nomination which pertains to the nominee. No person shall be eligible for
election as a Director of the Corporation unless nominated in accordance with
the procedures set forth in this Section 1.16. The Chairman of the meeting
shall, if the facts warrant, determine and declare to the meeting that a
nomination was not made in accordance with the procedures prescribed by the
Bylaws, and if the Chairman should so determine, the Chairman shall so declare
to the meeting and the defective nomination shall be disregarded.
- 9 -
<PAGE>
ARTICLE II
BOARD OF DIRECTORS
Section 2.1 General Powers. The business and affairs of the Corporation
shall be managed by the Board of Directors. The Board of Directors may exercise
all such authority and powers of the Corporation and do all such lawful acts and
things as are not by statute or the Certificate of Incorporation directed or
required to be exercised or done by the Stockholders.
Section 2.2 Number, Qualifications, Election, and Term of Office. The
number of directors constituting the entire Board shall be not less than three
(3) nor more than nine (9) as fixed from time to time by vote of a majority of
the entire Board; provided, however, that the number of directors shall not be
reduced so as to shorten the term of any director at the time in office, and
provided, further, that the number of directors constituting the entire Board
shall be nine (9) until otherwise fixed by a majority of the entire Board.
Section 2.3 Place of Meeting. Meetings of the Board of Directors may be
held at such place, within or without the State of Delaware, as the Board of
Directors may from time to time determine or shall be specified in the notice or
waiver of notice of such meeting. If not otherwise designated, the place of any
special meeting shall be the principal office of the Corporation in the State of
Illinois.
Section 2.4 Regular Meetings. Regular meetings of the Board of
Directors shall be held quarterly at such place as the Board of Directors may
from time to time determine. If any day fixed for a regular meeting shall be a
legal holiday at the place where the meeting is to be held, then the meeting
which would otherwise be held on that day shall be held at the same hour on the
next succeeding business day. Notice of regular meetings of the Board of
Directors need not be given except as otherwise required by statute or these
Bylaws.
Section 2.5 Special Meetings. Special meetings of the Board of
Directors may be called by any three (3) directors of the Corporation or by the
Chairman, or by the Chief Executive Officer.
Section 2.6 Notice of Meetings. Notice of each special meeting of the
Board of Directors (and of each regular meeting for which notice shall be
required) shall be given by the Secretary as hereinafter provided in this
Section 2.6, in which notice shall be stated the time and place of the meeting.
Notice of each such meeting shall be delivered to each director either
personally or by telephone, telegraph cable or telecopier, at least twenty-four
(24) hours before the time at which such meeting is to be held or by depositing
it, in a sealed envelope,
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<PAGE>
in the United States mails first class mail, postage prepaid, addressed to each
director at the director's residence, or usual place of business, at least three
(3) days before the day on which such meeting is to be held. Notice of any such
meeting need not be given to any director who shall, either before or after the
meeting, submit a signed waiver of notice or who shall attend such meeting
without protesting, prior to or at its commencement, the lack of notice to such
director. Except as otherwise specifically required by these Bylaws, a notice or
waiver of notice of any regular or special meeting need not state the purpose of
such meeting.
Section 2.7 Quorum and Manner of Acting. A majority of the entire Board
of Directors shall be present in person at any meeting of the Board of Directors
in order to constitute a quorum for the transaction of business at such meeting,
and, except as otherwise expressly required by statute or the Certificate of
Incorporation, the act of a majority of the directors present at any meeting at
which a quorum is present shall be the act of the Board of Directors. In the
absence of a quorum at any meeting of the Board of Directors, a majority of the
directors present thereat, or if no director be present, the Secretary, may
adjourn such meeting to another time and place, or such meeting, unless it be
the first meeting of the Board of Directors, need not be held. At any adjourned
meeting at which a quorum is present, any business may be transacted which might
have been transacted at the meeting as originally called. Except as provided in
Article III of these Bylaws, the directors shall act only as a Board and the
individual directors shall have no power as such.
Section 2.8 Telephonic Meetings. Members of the Board of Directors or
of any committee designated by the Board of Directors may participate in a
meeting of the Board of Directors or such committee through conference telephone
or similar communications equipment by means of which all persons participating
in such meeting can hear each other, and participation in any meeting conducted
pursuant to this Section 2.8 shall constitute presence in person at such
meeting.
Section 2.9 Organization. At each meeting of the Board of Directors,
the Chairman, or, in the absence of or inability of the Chairman to act, another
director chosen by a majority of the directors present shall act as Chairman of
the meeting and preside thereat. The Secretary (or, in the absence or inability
to act of the Secretary any person appointed by the Chairman) shall act as
secretary of the meeting and keep the minutes thereof.
Section 2.10 Presumption of Assent. Unless otherwise provided by the
laws of the State of Delaware, a director who is present at a meeting of the
Board of Directors or a committee thereof at which action is taken on any
corporate matter shall be
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presumed to have assented to the action taken unless his or her dissent shall be
entered in the minutes of such meeting or unless he or she shall file his or her
written dissent to such action with the person acting as secretary of such
meeting before the adjournment thereof or shall forward such dissent by
registered mail to the Secretary immediately after the adjournment of such
meeting. Such right to dissent shall not apply to a director who voted in favor
of such action.
Section 2.11 Resignations. Any director of the Corporation may resign
at any time by giving written notice of such director's resignation to the Board
of Directors or the President or the Secretary. Any such resignation shall take
effect at the time specified therein or, if the time when it shall become
effective shall not be specified therein, immediately upon its receipt; and,
unless otherwise specified therein, the acceptance of such resignation shall not
be necessary to make it effective.
Section 2.12 Vacancies. Any vacancies in the Board of Directors for any
reason and any directorships resulting from any increase in the number of
directors may be filled by a majority of the directors then in office, though
less than a quorum, or by a sole remaining director, and any directors so chosen
shall hold office until the next election of the class for which such directors
shall have been chosen and until their successors are duly elected and
qualified. If there are no directors in office, then an election of directors
may be held in the manner provided by statute. If, at the time of filling any
vacancy or any newly created directorship, the directors then in office shall
constitute less than a majority of the whole Board (as constituted immediately
prior to any such increase), the Court of Chancery may, upon application of any
holder or holders of at least ten percent (10%) of the Stock at the time
outstanding and entitled to vote to fill the vacancy summarily order an election
to be held to fill any such vacancies or newly created directorships, or to
replace the directors chosen by the directors then in office. Except as
otherwise provided in these Bylaws, when one or more directors shall resign from
the Board of Directors, effective at a future date, a majority of the directors
then in office, including those who have so resigned, shall have the power to
fill such vacancy or vacancies, the vote thereon to take effect when such
resignation or resignations shall become effective, and each director so chosen
shall hold office as provided in this section in the filling of other vacancies.
Section 2.13 Removal of Directors. Notwithstanding any provision of the
Certificate of Incorporation or these Bylaws (and notwithstanding the fact that
some lesser percentage may be specified by law, the Certificate of Incorporation
or these Bylaws), any director or the entire Board of Directors of the
Corporation may be removed at any time, but only for cause and
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only by the affirmative vote of the holders of sixty-five percent (65%) or more
of the Stock cast at a meeting of the Stockholders called and held for that
purpose. Notwithstanding the foregoing, and except as otherwise required by law
or by the Certificate of Incorporation, whenever the holders of any one or more
series of Preferred Stock shall have the right, voting separately as a class, to
elect one or more directors of the Corporation, the provisions of this Section
shall not apply with respect to the director or directors elected by such
holders of Preferred Stock, but such director or directors may be removed only
for cause and only by the affirmative vote of the holders of sixty-five percent
(65%) or more of the series of Preferred Stock which elected such director or
directors.
Section 2.14 Compensation. The Board of Directors shall have authority
to fix the compensation, including fees and reimbursement of reasonable
expenses, of directors for services to the Corporation in any capacity, provided
no such payment shall preclude any director from serving the Corporation in any
other capacity and receiving compensation therefor.
Section 2.15 Action Without Meeting. Any action required or permitted
to be taken at any meeting of the Board of Directors or of any committee thereof
may be taken without a meeting if all members of the Board of Directors or
committee, as the case may be, consent thereto in writing, and the writing or
writings are filed with the minutes of proceedings of the Board of Directors or
committee.
Section 2.16 Executive Committee. The Board of Directors may, in its
discretion, by resolution passed by a majority of the entire Board of Directors,
designate an Executive Committee consisting of such number of directors as the
Board of Directors shall determine. The Executive Committee shall have and may
exercise all of the powers and authority of the Board of Directors in the
management of the business and affairs of the Corporation with respect to any
matter which may require action prior to, or which in the opinion of the
Executive Committee may be inconvenient, inappropriate or undesirable to be
postponed until, the next meeting of the Board of Directors; provided, however,
that the Executive Committee shall not have the power or authority of the Board
of Directors in reference to amending the Certificate of Incorporation, adopting
an agreement of merger or consolidation, recommending to the stockholders the
sale, lease or exchange of all or substantially all of the Corporation's
property and assets, recommending to the stockholders a dissolution of the
Corporation or a revocation of such a dissolution, amending these Bylaws,
declaring a dividend, authorizing the issuance of capital stock of the
Corporation, adopting a certificate of ownership and merger or otherwise
approving a transaction with an aggregate value in excess of $100,000. Any
member of the Board of Directors may request the
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chairman of the Executive Committee to call a meeting of the Executive Committee
with respect to a specified subject.
Section 2.17 Other Committees. The Board of Directors may from time to
time, in its discretion, by resolution passed by a majority of the entire Board
of Directors, designate other committees of the Board of Directors consisting of
such number of directors as the Board of Directors shall determine, which shall
have and may exercise such lawfully delegable powers and duties of the Board of
Directors as shall be conferred or authorized by such resolution. The Board of
Directors shall have the power to change at any time the members of any such
committee, to fill vacancies and to dissolve any such committee.
In connection with the foregoing, the Corporation shall establish an
Audit Committee, Compensation Committee, Management Stock Incentive Committee
and Outside Directors Stock Option Committee, in addition to the Executive
Committee. The chairmen of the Compensation and Audit Committees shall be
persons not regularly employed by the Corporation. In addition, a majority of
the members of the Audit Committee shall be persons not regularly employed by
the Corporation. No member of the Management Stock Incentive Committee shall be
entitled to receive stock options under any stock option plan administered by
such committee.
Section 2.18 Alternates. The Board of Directors may from time to time
designate from among the directors alternates to serve on any committee of the
Board of Directors to replace any absent or disqualified member at any meeting
of such committee. Whenever a quorum cannot be secured for any meeting of any
committee from among the regular members thereof and designated alternates, the
member or members of such committee present at such meeting and not disqualified
from voting, whether or not constituting a quorum, may unanimously appoint
another director to act at such meeting in place of any absent or disqualified
member.
Section 2.19 Quorum and Manner of Acting - Committees. A majority of
the members of any committee of the Board of Directors shall constitute a quorum
for the transaction of business at any meeting of such committee, and the act of
a majority of the members present at any meeting at which a quorum is present
shall be the act of such committee.
Section 2.20 Committee Chairman, Books and Records, Etc. The chairman
of each committee of the Board of Directors shall be selected from among the
members of such committee by the Board of Directors, or, in the absence of such
selection, by the majority vote of the Committee's members.
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Each committee shall keep a record of its acts and proceedings, and all
actions of each committee shall be reported to the Board of Directors at its
next meeting.
Each committee shall fix its own rules of procedure not inconsistent
with these Bylaws or the resolution of the Board of Directors designating such
committee and shall meet at such times and places and upon such call or notice
as shall be provided by such rules.
Section 2.21 Reliance upon Records. Every director, and every member of
any committee of the Board of Directors, shall, in the performance of his or her
duties, be fully protected in relying in good faith upon the records of the
Corporation and upon such information, opinions, reports or statements presented
to the Corporation by any of the Corporation's officers or employees, or
committees of the Board of Directors, or by any other person as to matters the
director or member reasonably believes are within such other person's
professional or expert competence and who has been selected with reasonable care
by or on behalf of the Corporation, including, but not limited to, such records,
information, opinions, reports or statements as to the value and amount of the
assets, liabilities and/or net profits of the Corporation, or any other facts
pertinent to the existence and amount of surplus or other funds from which
dividends might properly be declared and paid, or with which the Corporation's
capital stock might properly be purchased or redeemed.
Section 2.22 Interested Directors. The presence of a director, who is
directly or indirectly a party in a contract or transaction with the
Corporation, or between the Corporation and any other corporation, partnership,
association or other organization in which such director is a director or
officer or has a financial interest, may be counted in determining whether a
quorum is present at any meeting of the Board of Directors or a committee
thereof at which such contract or transaction is discussed or authorized, and
such director may participate in such meeting to the extent permitted by
applicable law, including Section 144 of the General Corporation Law of the
State of Delaware.
ARTICLE III
OFFICERS
Section 3.1 Number and Qualifications. The officers of the Corporation
shall be the Chairman of the Board of Directors, the Chief Executive Officer,
President or Presidents, Vice President or Vice Presidents, Treasurer and
Secretary. Any two or more offices may be held by the same person. Such officers
shall be elected from time to time by the Board of Directors, each to hold
office until the meeting of the Board of Directors following the next annual
meeting of the stockholders, or until such officer's
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successor shall have been duly elected and shall have qualified, or until such
officer's death, or until such officer shall have resigned, or have been
removed, as hereinafter provided in these Bylaws. The Board of Directors may
from time to time elect, or the Chairman may appoint, such other officers
(including one or more Vice Presidents, Assistant Vice Presidents, Assistant
Secretaries and Assistant Treasurers), and such other officers, agents and
representatives, as may be necessary or desirable for the business of the
Corporation. Such other officers, agents and representatives shall have such
duties and shall hold their offices or appointments for such terms as may be
prescribed by the Board of Directors or by the appointing authority.
Notwithstanding anything to the contrary contained in this Article, in no event
shall the term of any such officer, agent or representative appointed pursuant
to this Article shorten or lengthen the employment term of such officer, agent
or representative as set forth in any Employment Agreement between such
individual and the Corporation or its subsidiaries.
Section 3.2 Resignations. Any officer, agent or representative of the
Corporation may resign at any time by giving written notice of such officer's
resignation to the Board of Directors, the President or the Secretary. Any such
resignation shall take effect at the time specified therein or, if the time when
it shall become effective shall not be specified therein, immediately upon its
receipt; and unless otherwise specified therein, the acceptance of such
resignation shall not be necessary to make it effective.
Section 3.3 Removal. Any officer, agent or representative of the
Corporation may be removed, either with or without cause, at any time, by the
vote of the majority of the entire Board of Directors. Such removal shall be
without prejudice to the contractual rights, if any, of the person so removed.
Section 3.4 Vacancies. A vacancy in any office, whether arising from
death, resignation, removal or any other cause, may be filled for the unexpired
portion of the term of the office which shall be vacant, in the manner
prescribed in these Bylaws for the regular election or appointment of such
office.
Section 3.5 Officers' Bonds or Other Security. If required by the Board
of Directors, any officer, agent or representative of the Corporation shall give
a bond or other security for the faithful performance of such officer's duties,
in such amount and with such surety or sureties as the Board of Directors may
require. Such bond may be at the expense of the Corporation.
Section 3.6 Compensation. The compensation of the officers, including
the Chairman of the Board of the Corporation, for their services as such
officers shall be fixed from time to
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time by the Board of Directors or the Compensation Committee, if any, provided,
however, that the Board of Directors may delegate to the Chairman the power to
fix the compensation of officers, agents and representatives appointed by the
Chairman. An officer of the Corporation shall not be prevented from receiving
compensation by reason of the fact that such officer is also a director of the
Corporation.
Section 3.7 Chief Executive Officer. The Chief Executive Officer of the
Corporation shall have the general and active management of the business of the
Corporation and general and active supervision and direction over the other
officers, agents, representatives and employees and shall see that their duties
are properly performed. The Chief Executive Officer shall, if present, preside
at each meeting of the Stockholders and of the Board of Directors and shall be
an ex-officio member of all committees of the Board of Directors. The Chief
Executive Officer shall perform all duties incident to the office of Chief
Executive Officer and such other duties as may from time to time be assigned to
such by the Board of Directors. The Chief Executive Officer may also be named
the Chairman of the Board of Directors, which title shall also be considered an
officership of the Corporation.
Section 3.8 President or Presidents. The President or Presidents shall
perform such duties as from time to time shall be assigned to such President by
the Board of Directors, or the Chairman or the Chief Executive Officer, and in
the absence or inability of the Chairman and Chief Executive Officer, shall
perform the duties of the Chief Executive Officer, in the order designated, or
in the absence of any designation, then in the order of their election, and when
so acting, shall have all the powers of and be subject to all the restrictions
upon the Chief Executive Officer. The Board of Directors may designate certain
Presidents as being in charge of designated divisions, plants or functions of
the Corporation's business and add appropriate descriptions to their titles.
Section 3.9 The Vice Presidents. In the event of the absence of the
President or Presidents or in the event of his or their inability or refusal to
act, each Vice President, in the order designated, or in the absence of any
designation, then in the order of their election, shall perform the duties of
such President or Presidents, when so acting, shall have all the powers of and
be subject to all the restrictions upon such President. The Board of Directors
may also designate certain Vice Presidents as being in charge of designated
divisions, plants or functions of the Corporation's business and add appropriate
descriptions to their titles. The Vice Presidents shall also perform such other
duties as from time to time may be assigned to them by the Board of Directors or
by the chief executive officer of the Corporation.
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Section 3.10 Secretary and Assistant Secretaries. The Secretary shall:
(a) keep or cause to be kept in one or more books provided for that
purpose, the minutes of the meetings of the Board of Directors, the committees
of the Board of Directors and the stockholders;
(b) see that all notices are duly given in accordance with the
provisions of these Bylaws and as required by law;
(c) be custodian of the records and the seal of the Corporation and
affix and attest the seal to all stock certificates of the Corporation (unless
the seal of the Corporation on such certificates shall be a facsimile, as
hereinafter provided), if necessary and affix and attest the seal to all other
documents to be executed on behalf of the Corporation under its seal, if
necessary;
(d) see that the books, reports, statements, certificates, stock
transfer books and other documents and records required by law to be kept and
filed are properly kept and filed; and
(e) in general, perform all the duties incident to the office of
Secretary and such other duties as from time to time may be assigned to such
Secretary by the Board of Directors or the President.
The assistant secretary, or if there be more than one, the assistant
secretaries, in the order determined by the Board of Directors (or if there be
no such determination, then in the order of their election) shall, in the
absence of the secretary or in the event of the secretary's inability or refusal
to act, perform the duties and exercise the powers of the secretary and shall
perform such other duties and have such other powers as the Board of Directors
may from time to time prescribe.
Section 3.11 Treasurer and Assistant Treasurers. The Treasurer shall:
(a) have the custody of the corporate funds and securities and shall
keep full and accurate accounts of receipts and disbursements in books belonging
to the Corporation and shall deposit all moneys and other valuable effects in
the name and to the credit of the Corporation in such depositories as may be
designated by the Board of Directors;
(b) disburse the funds of the Corporation as may be ordered by the
Board of Directors or the Chairman or the Chief Executive Officer, taking proper
vouchers for such disbursements, and shall render to the Chairman and the Board
of Directors, at its regular meetings, or when the Chairman or Board of
Directors so requires,
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an account of all such treasurer's transactions as treasurer and of the
financial condition of the Corporation; and
(c) if required by the Board of Directors, give the Corporation, at the
Corporation's cost, a bond (which shall be renewed every six years) in such sum
and with such surety or sureties as shall be satisfactory to the Board of
Directors for the faithful performance of the duties of such treasurer's office
and for the restoration to the Corporation, in case of such treasurer's death,
resignation, retirement or removal from office, of all the books, papers,
vouchers, money and other property of whatever kind in such treasurer's
possession or under such treasurer's control belonging to the Corporation.
(d) in general, perform all the duties incident to the office of
Treasurer and such other duties as from time to time may be assigned to such
Treasurer by the Board of Directors or Chairman or the Chief Executive Officer.
The assistant treasurer, or if there shall be more than one, the
assistant treasurers in the order determined by the Board of Directors (or if
there be no such determination, then in the order of their election), shall, in
the absence of the treasurer or in the event of such treasurer's inability or
refusal to act, perform the duties and exercise the powers of the treasurer and
shall perform such other duties and have such other powers as the Board of
Directors may from time to time prescribe.
ARTICLE IV
INDEMNIFICATION
The Corporation shall indemnify its officers, directors, agents and
representatives pursuant to Article Sixth of the Corporation's amended and
Restated Certificate of Incorporation.
ARTICLE V
CERTIFICATES OF STOCK AND THEIR TRANSFER
Section 5.1 Certificates of Stock. Shares of capital stock of the
Corporation shall be represented by certificates which shall be in such form as
may be determined by the Board of Directors, shall be numbered and shall be
entered on the books of the Corporation as they are issued. Such certificates
shall indicate the holder's name and the number of shares evidenced thereby and
shall be signed by the Chief Executive Officer, a President or a Vice President
and by the Secretary or an Assistant Secretary. If any stock certificate shall
be manually signed (i) by a transfer agent or an assistant transfer agent or
(ii) by a transfer clerk acting on behalf of the Corporation and a registrar,
the signature of any officer of the Corporation may be facsimile. In case any
such officer whose facsimile signature has been used on any such stock
certificate shall cease to be
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such officer, whether because of death, resignation, removal or otherwise,
before such stock certificate shall have been delivered by the Corporation, such
stock certificate may nevertheless be delivered by the Corporation as though the
person whose facsimile signature has been used thereon had not ceased to be such
officer.
Section 5.2 Lost, Stolen or Destroyed Certificates. The Board of
Directors in individual cases, or by general resolution or by delegation to the
transfer agent for the Corporation, may direct that a new stock certificate or
certificates for shares of capital stock of the Corporation be issued in place
of any stock certificate or certificates theretofore issued by the Corporation
claimed to have been lost, stolen or destroyed, upon the filing of an affidavit
to that effect by the person claiming such loss, theft or destruction. When
authorizing such an issuance of a new stock certificate or certificates, the
Board of Directors may, in its discretion and as a condition precedent to such
issuance, require the owner of such lost, stolen or destroyed stock certificate
or certificates to advertise the same in such manner as the Corporation shall
require and/or to give the Corporation a bond in such sum as it may direct as
indemnity against any claim that may be made against the Corporation with
respect to the stock certificate or certificates claimed to have been lost,
stolen or destroyed.
Section 5.3 Transfers of Stock. Upon surrender to the Corporation or
the transfer agent of the Corporation of a stock certificate for shares of
capital stock of the Corporation duly endorsed or accompanied by proper evidence
of succession, assignment or authority to transfer or, if the relevant stock
certificate for shares of capital stock of the Corporation is claimed to have
been lost, stolen or destroyed, upon compliance with the provisions of Section
5.2 of these Bylaws, and upon payment of applicable taxes with respect to such
transfer, and in compliance with any restrictions on transfer applicable to such
stock certificate or the shares represented thereby of which the Corporation
shall have notice and subject to such rules and regulations as the Board of
Directors may from time to time deem advisable concerning the transfer and
registration of stock certificates for shares of capital stock of the
Corporation, the Corporation shall issue a new stock certificate or certificates
for such shares to the person entitled thereto, cancel the old stock certificate
and record the transaction upon its books. Transfers of shares shall be made
only on the books of the Corporation by the registered holder thereof or by such
holder's attorney or successor duly authorized as evidenced by documents filed
with the Secretary or transfer agent of the Corporation. Whenever any transfer
of shares of capital stock of the Corporation shall be made for collateral
security, and not absolutely, it shall be so expressed in the entry of transfer
if, when the stock certificate or certificates representing such
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shares are presented to the Corporation for transfer, both the transferor and
transferee request the Corporation to do so.
ARTICLE VI
CONTRACTS, LOANS, CHECKS, AND DEPOSITS
Section 6.1 Contracts. The Board of Directors may authorize any officer
or officers, or agent or agents, to enter into any contract or execute and
deliver any instrument in the name of and on behalf of the Corporation, and such
authority may be general or confined to specific instances.
Section 6.2 Loans. No loans shall be contracted on behalf of the
Corporation and no evidences of indebtedness shall be issued in the name of the
Corporation unless authorized by or pursuant to a resolution adopted by the
Board of Directors. Such authority may be general or confined to specific
instances.
Section 6.3 Checks, Drafts, Etc. All checks, drafts or other orders for
payment of money issued in the name of the Corporation shall be signed by such
officers, employees or agents of the Corporation as shall from time to time be
designated by the Board of Directors, the Chairman, the Chief Executive Officer
or the Treasurer.
Section 6.4 Deposits. All funds of the Corporation not otherwise
employed shall be deposited from time to time to the credit of the Corporation
in such banks, trust companies or other depositories as shall be designated from
time to time by the Board of Directors, the Chairman, the Chief Executive
Officer or the Treasurer; and such officers may designate any type of depository
arrangement (including, but not limited to, depository arrangements resulting in
net debits against the Corporation) as may from time to time be offered or made
available.
ARTICLE VII
MISCELLANEOUS
Section 7.1 Fiscal Year. The fiscal year of the Corporation shall end
on the Saturday closest to June 30th, or as otherwise designated by the Board of
Directors.
Section 7.2 Seal. The Board of Directors may provide a corporate seal,
which shall be in the form of the name of the Corporation and the words
"Corporate Seal Delaware." Such seal may be used, if necessary, by causing it,
or a facsimile thereof, to be impressed or affixed or otherwise reproduced.
Section 7.3 Registered Office. The registered office of the Corporation
in the State of Delaware shall be located at 32
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Loockerman Square, Suite L-100 in the City of Dover, County of Kent, and the
name of its registered agent is The Prentice-Hall Corporation System, Inc.
Section 7.4 Other Offices. The Corporation may have offices at such
other places, both within or without the State of Delaware, as shall be
determined from time to time by the Board of Directors or as the business of the
Corporation may require.
Section 7.5 Waiver of Notice of Meetings of Stockholders, Directors and
Committees. Whenever any notice is required to be given under any provisions of
the laws of the State of Delaware, the Certificate of Incorporation or these
Bylaws, any written waiver of notice, signed by the person or persons entitled
to notice, whether before or after the time stated therein, shall be deemed
equivalent to such notice. Attendance of a person at a meeting shall constitute
a waiver of notice of such meeting, except when the person attends a meeting for
the express purpose of objecting, at the beginning of the meeting, to the
transaction of any business because the meeting is not lawfully called or
convened. Neither the business to be transacted at, nor the purpose of any
regular or special meeting of the Stockholders, directors, or members of a
committee of directors need be specified in any written waiver of notice unless
so required by the laws of the State of Delaware, the Certificate of
Incorporation or these Bylaws.
Section 7.6 Contracts with Interested Parties. No contract or
transaction between the Corporation and one or more of its directors or
officers, or between the Corporation and any other Corporation, partnership,
association, or other organization in which one or more of its directors or
officers are directors or officers, or have a financial interest, shall be void
or voidable solely for this reason, or solely because the director or officer is
present at or participates in the meeting of the Board of Directors or committee
thereof which authorizes the contract or transaction, or solely because any one
or more of such officer's or director's votes are counted for such purpose, if:
(i) the material facts as to such director's or officer's relationship or
interest and as to the contract or transaction are disclosed or are known to the
Board of Directors or the committee, and the Board of Directors or committee in
good faith authorizes the contract or transaction by the affirmative votes of a
majority of the disinterested directors, even though the disinterested directors
be less than a quorum; or (ii) the material facts as to such director's or
officer's relationship or interest and as to the contract or transaction are
disclosed or are known to the Stockholders entitled to vote thereon, and the
contract or transaction is specifically approved in good faith by a vote of the
Stockholders; or (iii) the contract or transaction is fair as to the Corporation
as of the time it is authorized, approved or ratified, by the Board of
Directors, a committee thereof, or the
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Stockholders. All directors may be counted in determining the presence of a
quorum at a meeting of the Board of Directors or of a committee which authorizes
the contract or transaction.
Section 7.7 Form of Records. Any records maintained by the Corporation
in the regular course of its business, including its stock ledger, books of
account, and minute books, may be kept on, or be in the form of, punch cards,
magnetic tape, photographs, microphotographs, or any other information storage
device, provided that the records so kept can be converted into clearly legible
form within a reasonable time. The Corporation shall so convert any records so
kept upon the request of any person entitled to inspect the same.
Section 7.8 Stock in Other Corporations. Any shares of stock in any
other corporation which may from time to time be held by this Corporation may be
represented and voted at any meeting of stockholders of such corporation by the
Chairman or Chief Executive Officer, or by any other person or persons thereunto
authorized by the Board of Directors, or by any proxy designated by written
instrument of appointment executed in the name of this Corporation by its
Chairman or Chief Executive Officer or a President or a Vice President. Shares
of stock belonging to the Corporation need not stand in the name of the
Corporation, but may be held for the benefit of the Corporation in the
individual name of the Treasurer or of any other nominee designated for the
purpose by the Board of Directors. Certificates for shares so held for the
benefit of the Corporation shall be endorsed in blank or have proper stock
powers attached so that said certificates are at all times in due form for
transfer, and shall be held for safekeeping in such manner as shall be
determined from time to time by the Board of Directors.
Section 7.9 Amendment of Bylaws. Notwithstanding the foregoing, the
Stockholders of the Corporation, shall have the power to adopt new Bylaws and to
alter, amend of repeal any Bylaw, whether adopted by them or otherwise, in each
case only by the affirmative vote of not less than sixty-five percent (65%) of
the Stock entitled to vote thereon, cast at a meeting of Stockholders called and
held for that purpose.
Section 7.10 Dividends. The Board of Directors of the Corporation,
subject to any restrictions contained in the Certificate of Incorporation and
other lawful commitments of the Corporation, may declare and pay dividends upon
the outstanding shares of its capital stock in cash, in property or in shares of
capital stock of the Corporation. Dividends may be paid either out of the
surplus of the Corporation, as defined in and computed in accordance with the
General Corporation Law of the State of Delaware, or in case there shall be no
such surplus, out of the net profits of the Corporation for the fiscal year in
which the
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dividend is declared and/or the preceding fiscal year. If the capital of the
Corporation, computed in accordance with the General Corporation Law of the
State of Delaware, shall have been diminished by depreciation in the value of
its property, or by losses, or otherwise, to an amount less than the aggregate
amount of the capital represented by the issued and outstanding stock of all
classes having a preference upon the distribution of assets, the Board of
Directors of the Corporation shall not declare and pay out of such net profits
any dividends upon any shares of any classes of its capital stock until the
deficiency in the amount of capital represented by the issued and outstanding
stock of all classes having a preference upon the distribution of assets shall
have been repaid.
Section 7.11 Reserves. The Board of Directors of the Corporation may
set apart, out of any of the funds of the Corporation available for dividends, a
reserve or reserves for any proper purpose and may abolish any such reserve.
Section 7.12 Restriction on Transfer of Securities. A restriction on
the transfer or registration of transfer of securities of the Corporation may be
imposed either by the Certificate of Incorporation or by these Bylaws or by an
agreement among any number of security holders or among such holders and the
Corporation. No restriction so imposed shall be binding with respect to
securities issued prior to the adoption of the restriction unless the holders of
the securities are parties to an agreement or voted in favor of the restriction.
A restriction on the transfer of securities of the Corporation is
permitted by this Section 7.12 if it:
(a) Obligates the holder of the restricted securities to offer to the
Corporation or to any other holders of securities of the Corporation or to any
other person or to any combination of the foregoing a prior opportunity, to be
exercised within a reasonable time, to acquire the restricted securities; or
(b) Obligates the Corporation or any holder of securities of the
Corporation or any other person or any combination of the foregoing to purchase
the securities which are the subject of an agreement respecting the purchase and
sale of the restricted securities; or
(c) Requires the Corporation or the holders of any class of securities
of the Corporation to consent to any proposed transfer of the restricted
securities or to approve the proposed transferee of the restricted securities;
or
(d) Prohibits the transfer of the restricted securities to designated
persons or classes of persons; and such designation is not manifestly
unreasonable; or
- 24 -
<PAGE>
(e) Restricts transfer or registration of transfer in any other lawful
manner.
Unless noted conspicuously on the security, a restriction, even though
permitted by this Section, is ineffective except against a person with actual
knowledge of the restriction.
- 25 -
RESTATED AND AMENDED
BELL SPORTS CORP.
1993 OUTSIDE DIRECTORS STOCK OPTION PLAN
ARTICLE I. Purpose
The purpose of this 1993 Outside Directors Stock Option Plan (the "Plan") is
to encourage stock ownership by each Outside Director (as defined herein) of
Bell Sports Corp., a Delaware corporation (the "Corporation"), so that such
Outside Director may acquire a proprietary interest in the success of the
Corporation. The Plan is intended to provide an incentive for maximum effort in
the successful operation of the Corporation, to attract Outside Directors to the
Corporation and to encourage Outside Directors to remain directors of the
Corporation. The term Outside Director refers to each member of the
Corporation's Board of Directors (the "Board") who is not an employee of the
Corporation or any of its subsidiaries.
ARTICLE II. Eligibility
Each Outside Director shall be granted options ("Plan Options") to purchase
shares of the Corporation's Common Stock, par value $.01 ("Common Stock"), in
accordance with the terms hereof. Plan Options are not intended to constitute
"Incentive Stock Options" within the meaning of Section 422 of the Internal
Revenue Code of 1986, as amended (the "Code"), or any successor provision.
ARTICLE III. Common Stock To Be Issued Under The Plan
Subject to adjustment as provided herein, the aggregate number of shares of
Common Stock that may be issued upon the exercise of Plan Options shall not
exceed 200,000. Shares of Common Stock to be delivered under the Plan shall be
authorized and unissued shares of Common Stock, or authorized and issued shares
of Common Stock reacquired and held as treasury shares or otherwise, or a
combination thereof. In the event that any outstanding Plan Option expires or is
terminated, the shares of Common Stock allocable to the unexercised portion of
such Plan Option may again be covered by an option granted under the Plan.
ARTICLE IV. Administration
The Plan shall be administered by the Board. Subject to the terms of the
Plan, the Board may establish rules and regulations for the administration of
the Plan and interpret the Plan, including any Plan Options. All such rules,
regulations and interpretations relating to the Plan adopted by the Board shall
be conclusive and binding on all parties.
ARTICLE V. Grants of Plan Options
On November 17, 1993, each person serving as an Outside Director immediately
after the adjournment of the Corporation's 1993 Annual Meeting of Stockholders
(or, if later, on the date on which a person is first elected or begins to serve
as an Outside Director), shall be granted a Plan Option (an "Initial Option") to
purchase 5,000 shares of Common Stock.
On the date of the Corporation's annual meeting of stockholders next
succeeding the date on which an Outside Director receives an Initial Option and,
thereafter, on the date of each succeeding annual meeting of stockholders of the
Corporation, such Outside Director, if re-elected to the Board as an Outside
Director at such meeting or if continuing in office as an Outside Director after
such meeting, shall be granted a Plan Option (a "Subsequent Option") to purchase
2,000 shares of Common Stock.
Each Outside Director eligible to receive a retainer fee (the "Retainer Fee")
in accordance with such criteria as may be established from time to time by the
Board, or a duly authorized committee of the Board, on the date the Retainer Fee
is to be paid, shall be granted a Plan Option (a "Retainer Fee Option") to
purchase that number of whole shares of Common Stock determined by rounding up
to the
<PAGE>
nearest whole number, that number determined by dividing the amount of the
Retainer Fee payable to such Outside Director on such date by one-half of the
Fair Market Value (as defined in Article VII) of a share of Common Stock on such
date. Retainer Fee Options shall be in lieu of the payment of cash retainer
fees.
Each Plan Option shall be evidenced by a written agreement (an "Agreement")
between the Corporation and the optionee and, upon execution by the Corporation
and the optionee and delivery of the Agreement to the Corporation, such Plan
Option shall be effective as of its date of grant.
ARTICLE VI. Period of Exercisability
No Plan Option shall be exercisable after the expiration of ten years from
its date of grant. Except as otherwise provided herein, no Initial Option or
Subsequent Option shall be exercisable during the first year following its date
of grant. Thereafter, such Initial Option or Subsequent Option may be exercised:
(i) on or after the first anniversary of the date of grant, for up to one-third
of the total shares of Common Stock covered thereby, (ii) on or after the second
anniversary of the date of grant, for up to an additional one-third (two-thirds
on a cumulative basis) of the total shares of Common Stock covered thereby or
(iii) on or after the third anniversary of the date of grant, for all of the
shares of Common Stock covered thereby. Each Retainer Fee Option shall be
exercisable in full on and after its date of grant. An exercisable Plan Option,
or a portion thereof, may be exercised only with respect to whole shares of
Common Stock.
ARTICLE VII. Purchase Price
The per share purchase price (the "Purchase Price") of shares of Common Stock
covered by an Initial Option or a Subsequent Option shall be equal to the Fair
Market Value of a share of Common Stock on the date of grant of such option. The
purchase price per share of Common Stock covered by a Retainer Fee Option shall
be equal to one-half of the Fair Market Value of a share of Common Stock on the
date of grant of such option. The Fair Market Value of a share of Common Stock
on a date shall mean the average of the high and low transaction prices of a
share of Common Stock as reported by The Nasdaq Stock Market on such date or, if
the Common Stock does not trade on The Nasdaq Stock Market, the average of the
high and low transaction prices of a share of Common Stock on the principal
national stock exchange on which the Common Stock is traded on the date as of
which such value is being determined, or, if there shall be no reported
transactions for such date, on the next preceding date for which transactions
were reported; provided, however, that if Fair Market Value for any date cannot
be so determined, Fair Market Value shall be determined by the Board by whatever
means or method as the Board, in the good faith exercise of its discretion,
shall at such time deem appropriate.
ARTICLE VIII. Exercise of Plan Options
A Plan Option may be exercised (i) by giving written notice to the Secretary
of the Corporation specifying the number of whole shares of Common Stock to be
purchased and accompanied by payment of the Purchase Price therefor in full (or
arrangement made for such payment to the satisfaction of the Corporation) either
(A) in cash, (B) in previously owned whole shares of Common Stock (for which the
optionee has good title free and clear of all liens and encumbrances) having a
Fair Market Value determined as of the date of exercise, (C) a combination of
(A) and (B), or (D) in cash by a broker-dealer to whom the optionee has
submitted an irrevocable notice of exercise and (ii) by executing such documents
as the Corporation may reasonably request. No shares of Common Stock shall be
issued until the full Purchase Price therefor has been paid.
The Corporation shall not be required to issue or deliver any certificate for
shares of Common Stock purchased upon the exercise of all or any part of a Plan
Option before (i) such shares are approved for inclusion on The Nasdaq Stock
Market or, if applicable, such shares are admitted for listing on any stock
exchange on which the Common Stock may then be listed, and (ii) completion of
any registration or other qualification of such shares under any state or
federal law, or ruling or regulation of any governmental regulatory body that
the Board shall, in its sole discretion, determine is necessary or advisable.
2
<PAGE>
An optionee shall have no rights as a stockholder with respect to any shares
of Common Stock covered by a Plan Option until such optionee becomes a holder of
record with respect to such shares of Common Stock and no adjustment shall be
made for dividends or distributions or other rights prior thereto, except as
provided in Article XI hereof.
ARTICLE IX. Termination of Directorship
No Plan Option may be exercised after the termination of the optionee as a
director of the Corporation (a "Termination"), except as hereinafter provided:
(a) Retirement. Each Plan Option may be exercised within three (3) months
after the Retirement (as defined herein) of the optionee, but in no event
after the expiration of such Plan Option, and such Plan Option shall be
exercisable for all of the shares of Common Stock covered thereby. For the
purposes of the Plan, the term "Retirement" shall mean the retirement of the
optionee as a director of the Corporation after such optionee shall have
attained the age of sixty-five (65) and completed three (3) years of service
as a director of the Corporation.
(b) Disability. Each Plan Option may be exercised within three (3) months
after the Termination of the optionee by reason of the Disability (as defined
herein) of the optionee, but in no event after the expiration of such Plan
Option, and such Plan Option shall be exercisable for all of the shares of
Common Stock covered thereby. For the purposes of the Plan, an optionee shall
be deemed to have incurred a "Disability" if the Corporation determines that
the optionee is totally and permanently prevented, as a result of physical or
mental infirmity, injury or disease, either occupational or nonoccupational
in cause, from continuing as a director of the Corporation (provided,
however, that disability here under shall not include any disability incurred
or resulting from the optionee's having engaged in a criminal act or
enterprise, or any disability consisting of or resulting from the optionee's
chronic alcoholism, addiction to narcotics or an intentionally self-inflicted
injury).
(c) Death.
(1) If an optionee shall die while a director of the Corporation, each
Plan Option granted to such deceased optionee shall be exercisable within
one (1) year after the date of the optionee's death, but in no event after
the expiration of such Plan Option, and such Plan Option shall be
exercisable for all of the shares of Common Stock covered thereby.
(2) If an optionee shall die within three (3) months after Termination,
each Plan Option granted to such deceased optionee shall be exercisable
within one (1) year after the date of the optionee's death, but in no
event after the expiration of such Plan Option, and each Plan Option shall
be exercisable for such number of shares of Common Stock, if any, as are
purchasable immediately prior to the optionee's death.
(3) The legal representative, if any, of such deceased optionee's
estate, otherwise the appropriate legatees or distributees of such
deceased optionee's estate, may exercise the Plan Options granted to such
deceased optionee.
(d) Involuntary Termination. Each Plan Option may be exercised within
three (3) months after the Involuntary Termination (as hereinafter defined)
of the optionee, but in no event after the expiration of such Plan Option,
and such Plan Option shall be exercisable for all of the shares of Common
Stock covered thereby. For purposes of the Plan, the term "Involuntary
Termination" shall mean any Termination by reason of resignation after
request by the Corporation or other involuntary termination of the optionee's
directorship by action of the Corporation other than a Termination
constituting a Termination for Cause under subparagraph (f) of this Article
IX.
(e) Voluntary Termination. Each Plan Option may be exercised within three
(3) months after a Voluntary Termination (as hereinafter defined) of the
optionee, but in no event after the expiration of such Plan Option, and such
Plan Option may not be exercised for more than the number of shares of Common
Stock covered thereby, if any, as to which such Plan Option was exercisable
by the optionee immediately prior to such Termination. For the purposes of
the Plan, "Voluntary Termination" shall mean any Termination by reason of the
optionee's resignation or other voluntarily
3
<PAGE>
departure from the Board other than (i) an Involuntary Termination, (ii)
Retirement, (iii) termination by reason of Disability, or (iv) a Termination
constituting a Termination for Cause under subparagraph (f) of this Article
IX.
(f) Termination for Cause. Anything contained herein to the contrary
notwithstanding, if Termination is a result of or caused by (i) the
optionee's fraud or intentional misrepresentation, (ii) embezzlement,
misappropriation or conversion of assets or opportunities of the Corporation
or a subsidiary of the Corporation, or (iii) disclosure by the optionee of
confidential information of the Corporation or a subsidiary, then each Plan
Option and any and all rights granted to such optionee thereunder, to the
extent not yet effectively exercised, shall become null and void effective as
of the date of the occurrence of the event which results in the optionee's
Termination and any purported exercise of such Plan Option by or on behalf of
said optionee on or following such date shall be of no effect.
ARTICLE X. Transfer of Plan Options
No Plan Option shall be transferable other than by will or the laws of
descent and distribution and shall be exercisable during the optionee's lifetime
only by the optionee or the optionee's guardian, legal representative or similar
person. Except as permitted by the preceding sentence, no Plan Option shall be
sold, transferred, assigned, pledged, hypothecated, encumbered or otherwise
disposed of (whether by operation of law or otherwise) or be subject to
execution, attachment or similar process. Upon any attempt to so sell, transfer,
assign, pledge, hypothecate, encumber or otherwise dispose of any Plan Option,
such Plan Option and all rights thereunder shall immediately become null and
void.
ARTICLE XI. Adjustments for Changes in Capitalization
In the event of any stock split, stock dividend, recapitalization,
reorganization, merger, consolidation, combination, exchange of shares,
liquidation, spin-off or other similar change in capitalization or event, or any
distribution to holders of Common Stock other than a cash dividend, (i) the
number and class of securities available under the Plan, (ii) the number,
Purchase Price and class of securities subject to each outstanding Plan Option,
and (iii) the number and kind of securities subject to each Plan Option to be
granted to Outside Directors pursuant to Article V hereof shall be appropriately
adjusted by the Board, such adjustments to be made in the case of outstanding
Plan Options without a change in the aggregate Purchase Price for the securities
covered thereby.
The grant of a Plan Option shall not affect in any way the right or power of
the Corporation to make adjustments, reclassifications, reorganizations or
changes of its capital or business structure or to merge or to consolidate or to
dissolve, liquidate or sell, or transfer all or any part of its business or
assets.
ARTICLE XII. Acceleration of Exercisability
Upon the approval by the stockholders of the Corporation of a reorganization,
merger, consolidation, dissolution or liquidation of the Corporation, each
outstanding Plan Option, other than a Plan Option with a period of
exercisability modified pursuant to subparagraphs (e) or (f) of Article IX
hereof, shall immediately become exercisable for all of the shares of Common
Stock covered thereby. The foregoing sentence shall not apply to any
reorganization, merger or consolidation of the Corporation where immediately
after such reorganization, merger or consolidation at least 66 2/3 % of the
members of the board of directors of the corporation resulting from such
reorganization, merger or consolidation were members of the Board at the time of
the execution of the initial agreement or action of the Board providing for such
reorganization, merger or consolidation.
ARTICLE XIII. Plan Amendments
The Plan may be amended or terminated by the Board in any respect, at any
time, subject to any required stockholder approval, provided that (i) the Plan
may not be amended more than once every six months, other than to comport with
changes in the Code, the Employee Retirement Income Security Act, or the rules
thereunder, and (ii) the Plan shall not be amended in a manner which would
result in the Plan failing to comply with Rule 16b-3 under the Exchange Act. No
amendment may impair the rights of a holder of an outstanding Plan Option
without the consent of such holder.
4
<PAGE>
ARTICLE XIV. Effective Date and Term of Plan
The Plan shall be submitted to the stockholders of the Corporation for
approval and, if approved, shall become effective as of the date of such
approval. The Plan shall terminate ten years after its effective date unless
terminated prior thereto by action of the Board. No Plan Option shall be granted
after termination of the Plan, but termination of the Plan shall not affect the
rights of any optionee under any Plan Option granted prior to such termination.
5
The following form of restricted stock award agreement was entered into between
Bell and each of the executive officers named below with respect to the number
of shares of common stock set opposite after each executive officer name.
Terry G. Lee 7,082
Howard A. Kosick 7,082
Mary J. George 7,082
Bernard A. Kotlier 3,541
William Hanneman 2,125
John L. Carenza 1,416
<PAGE>
BELL SPORTS CORP.
RESTRICTED STOCK AWARD AGREEMENT
Bell Sports Corp., a Delaware corporation (the "Company"),
hereby grants to _________ (the "Holder") as of August 27, 1996 (the "Grant
Date"), a restricted stock award (the "Award") of _______ shares of the
Company's Common Stock, $.01 par value ("Common Stock"), upon and subject to the
restrictions, terms and conditions set forth below.
1. Award Subject to Acceptance of Agreement. The Award shall
be null and void unless the Holder shall (a) accept this Agreement by executing
it in the space provided below and returning it to the Company and (b) execute
and return one or more irrevocable stock powers to facilitate the transfer to
the Company (or its assignee or nominee) of all or a portion of the shares
subject to the Award, if shares are forfeited pursuant to Paragraph 4 hereof or
if required under applicable laws or regulations. As soon as practicable after
the Holder has executed this Agreement and such stock power or powers and
returned the same to the Company, the Company shall cause to be issued in the
Holder's name a stock certificate or certificates representing the total number
of shares of Common Stock subject to the Award.
2. Rights as a Stockholder. The Holder shall have the right to
vote the shares of Common Stock subject to the Award and to receive dividends
and other distributions thereon unless and until, and only to the extent, such
shares are forfeited pursuant to Paragraph 4 hereof; provided, however, that a
dividend or other distribution with respect shares of Common Stock (including,
without limitation, a stock dividend or stock split), other than a regular cash
dividend, shall be delivered to the Company (and the Holder shall, if requested
by the Company, execute and return one or more irrevocable stock powers related
thereto) and shall be subject to the same restrictions as the shares of Common
Stock with respect to which such dividend or other distribution was made.
3. Custody and Delivery of Certificates Representing Shares.
The Company shall hold the certificate or certificates representing the shares
of Common Stock subject to the Award until such Award shall have vested, in
whole or in part, pursuant to Paragraph 4 hereof, and the Company shall as soon
thereafter as practicable, subject to Section 6.2, deliver the certificate or
certificates for the vested shares to the Holder and destroy the stock power or
powers relating to the vested shares. If such stock power or powers also relates
to unvested shares, the Company may require, as a condition precedent to
delivery of any certificate pursuant to this Section 3, the execution and
delivery to the Company of one or more stock powers relating to such unvested
shares.
4. Restriction Period and Vesting. (a) The Award shall vest
(i) with respect to one-third of the aggregate number of shares of Common Stock
subject to the Award on the first anniversary of the Grant Date, (ii) with
respect to one half of the unvested shares then subject to the Award on the
second anniversary of the Grant Date, (iii) with respect to all of the unvested
shares then subject to the Award on the third anniversary of the Grant Date or
(iv) earlier pursuant to Sections 4(b) and 4(c) hereof.
(b) If the Holder's employment by the Company terminates by reason of:
(i) retirement on or after age 62 and a minimum of 5 years of employment with
the Company, (ii) an Involuntary Termination of Employment, (iii) disability or
(iv) death, the Award shall become fully vested as of the effective date of the
Holder's termination of employment or the date of death, as the case may be.
(c) The Award shall become fully vested upon a Change of Control of the
Company.
(d) Except as set forth in Sections 4(b) and 4(c) hereof, the portion
of the Award which is not vested as of the effective date of the Holder's
termination of employment with the Company shall be forfeited by the Holder as
of the effective date of the Holder's termination of employment and such portion
shall be canceled by the Company.
<PAGE>
5. Termination of Award. In the event that the Holder shall
forfeit all or a portion of the shares of Common Stock subject to the Award, the
Holder shall, upon the Company's request, promptly return this Agreement to the
Company for full or partial cancellation, as the case may be. Such cancellation
shall be effective regardless of whether the Holder returns this Agreement.
6. Additional Terms and Conditions of Award.
6.1. Nontransferability of Award. During the Restriction
Period, the shares of Common Stock subject to the Award and not then vested may
not be transferred by the Holder other than by will, the laws of descent and
distribution or pursuant to beneficiary designation procedures approved by the
Company. Except to the extent permitted by the foregoing, during the Restriction
Period, the shares of Common Stock subject to the Award and not then vested may
not be sold, transferred, assigned, pledged, hypothecated, encumbered or
otherwise disposed of (whether by operation of law or otherwise) or be subject
to execution, attachment or similar process. Upon any attempt to so sell,
transfer, assign, pledge, hypothecate or encumber, or otherwise dispose of such
shares, the Award shall immediately become null and void.
6.2. Withholding Taxes. As a condition precedent to the
delivery to the Holder of any shares of Common Stock subject to the Award, the
Holder shall, upon request by the Company, pay to the Company such amount of
cash as the Company may be required, under all applicable federal, state, local
or other laws or regulations, to withhold and pay over as income or other
withholding taxes (the "Required Tax Payments") with respect to the Award. If
the Holder shall fail to advance the Required Tax Payments after request by the
Company, the Company may, in its discretion, deduct any Required Tax Payments
from any amount then or thereafter payable by the Company to the Holder.
6.3. Adjustment. In the event of any stock split, stock
dividend, recapitalization, reorganization, merger, consolidation, combination,
exchange of shares, liquidation, spin-off or other similar change in
capitalization or event, or any distribution to holders of Common Stock other
than a regular cash dividend, the number and class of securities subject to the
Award shall be appropriately adjusted by the Company. If any adjustment would
result in a fractional security being subject to the Award, the Company shall
pay the Holder in connection with the vesting, if any, of such fractional
security, an amount in cash determined by multiplying (i) such fraction (rounded
to the nearest hundredth) by (ii) the Fair Market Value on the vesting date. The
decision of the Company regarding any such adjustment shall be final, binding
and conclusive.
6.4. Compliance with Applicable Law. The Award is subject to
the condition that if the listing, registration or qualification of the shares
subject to the Award upon any securities exchange or under any law, or the
consent or approval of any governmental body, or the taking of any other action
is necessary or desirable as a condition of, or in connection with, the vesting
or delivery of shares hereunder, the shares of Common Stock subject to the Award
may not be delivered, in whole or in part, unless such listing, registration,
qualification, consent or approval shall have been effected or obtained, free of
any conditions not acceptable to the Company. The Company agrees to use
reasonable efforts to effect or obtain any such listing, registration,
qualification, consent or approval.
6.5. Delivery of Certificates. Subject to Section 6.3 and the
vesting of the Award, in whole or in part, the Company shall deliver or cause to
be delivered one or more certificates representing the number of vested shares.
The Company shall pay all original issue or transfer taxes and all fees and
expenses incident to such delivery, except as otherwise provided in Section 6.2.
<PAGE>
6.6. Award Confers No Rights to Continued Employment. In no
event shall the granting of the Award or its acceptance by the Holder give or be
deemed to give the Holder any right to continued employment by the Company or
any affiliate of the Company.
6.7. Decisions of Board. The Board or a duly authorized
committee thereof shall have the right to resolve all questions which may arise
in connection with the Award. Any interpretation, determination or other action
made or taken by the Board or such committee regarding this Agreement shall be
final, binding and conclusive.
7. Miscellaneous Provisions.
7.1. Meaning of Certain Terms.
(a) As used herein, the term "vest" shall mean no longer subject to
forfeiture.
(b) As used herein, employment by the Company shall include employment
by a corporation which is a "subsidiary corporation" of the Company, as such
term is defined in section 424 of the Code.
(c) As used herein, the term "Restriction Period" shall mean any period
during which any portion of the Common Stock subject to the Award is subject to
forfeiture.
(d) As used herein, the "Fair Market Value" of a share of Common Stock
on a date shall mean the average of the high and low transaction prices of a
share of Common Stock as reported by the Nasdaq Stock Market on such date or, if
the Common Stock does not trade on The Nasdaq Stock Market, the average of the
high and low transaction prices of a share of Common Stock on the principal
national stock exchange on which the Common Stock is traded on the date as of
which such value is being determined, or, if there shall be no reported
transactions for such date, on the next preceding date for which transactions
were reported; provided, however, that if Fair Market Value for any date cannot
be so determined, Fair Market Value shall be determined by the Board or a duly
authorized committee thereof, by whatever means or method as the Board, or such
committee, in the good faith exercise of its discretion, shall at such time deem
appropriate.
(e) As used herein, the term "Change of Control of the Company" shall
include the consummation by the Company of a reorganization, merger,
consolidation, dissolution or liquidation of the Company, provided, that such
term shall not include any reorganization, merger or consolidation of the
Company where immediately after such reorganization, merger or consolidation at
least two-thirds of the members of the board of directors of the corporation
resulting from such reorganization, merger or consolidation were members of the
Board at the time of the execution of the initial agreement or action of the
Board providing for such reorganization, merger or consolidation.
(f) As used herein, the term "Involuntary Termination of Employment"
shall mean any termination of employment by the Company by reason of resignation
at the request of the Company or any other involuntary termination of the
Holder's employment with the Company by action of the Company other than a
termination for cause.
(g) References in this Agreement to sections of the Code shall be
deemed to refer to any successor section of the Code or any successor internal
revenue law.
7.2. Successors. This Agreement shall be binding upon and
inure to the benefit of any successor or successors of the Company and any
person or persons who shall, upon the death of the Holder, acquire any rights
hereunder in accordance with this Agreement.
<PAGE>
7.3. Notices. All notices, requests or other communications
provided for in this Agreement shall be made, if to the Company, to 15170 N.
Hayden Rd., Suite 1, Scottsdale, Arizona 85260, Attention: Corporate Secretary,
and if to the Holder, to _____________, __________________________. All notices,
requests or other communications provided for in this Agreement shall be made in
writing either (a) by personal delivery to the party entitled thereto, (b) by
facsimile with confirmation of receipt, (c) by mailing in the United States
mails to the last known address of the party entitled thereto or (d) by express
courier service. The notice, request or other communication shall be deemed to
be received upon personal delivery, upon confirmation of receipt of facsimile
transmission, or upon receipt by the party entitled thereto if by United States
mail or express courier service; provided, however, that if a notice, request or
other communication is not received during regular business hours, it shall be
deemed to be received on the next succeeding business day of the Company.
7.4. Governing Law. This Agreement, the Award and all
determinations made and actions taken pursuant hereto and thereto, to the extent
not otherwise governed by the laws of the United States, shall be governed by
the laws of the State of Delaware and construed in accordance therewith without
giving effect to conflicts of laws principles.
7.5. Counterparts. This Agreement may be executed in two
counterparts each of which shall be deemed an original and both of which
together shall constitute one and the same instrument.
Bell Sports Corp.
By:________________________________
Name:
Title:
Accepted as of the 27th day of
August, 1996
_________________________________
Name
BELL SPORTS CORP.
EXHIBIT - 11 - STATEMENT RE:
COMPUTATION OF PER SHARE EARNINGS
(In Thousands, Except Per Share Amounts)
<TABLE>
<CAPTION>
Six Months Ended Three Months Ended
Dec. 28, Dec. 30, Dec. 28, Dec. 30,
1996 1995 1996 1995
----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net (loss) income $ (472) $ (13,094) $ (475) $ (7,724)
Net effect on net (loss) income
from conversion of other pontentially
dilutive securties 1,133 1,618 566 809
----------------------------------------------------------------------------
Adjusted net (loss) income $ 661 $(11,476) $ 91 $ (6,915)
============================================================================
Weighted average number of common
and common equivalent shares outstanding
- - primary 13,759 13,944 13,764 13,757
Net effect of other potentially dilutive
securities 1,595 1,595 1,595 1,595
----------------------------------------------------------------------------
Adjusted average shares outstanding for
fully diluted computation 15,354 15,539 15,359 15,352
============================================================================
Per share amount - fully diluted $ 0.04 $ (0.74) $ 0.01 $ (0.45)
============================================================================
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-28-1997
<PERIOD-START> JUN-30-1996
<PERIOD-END> DEC-28-1996
<EXCHANGE-RATE> 1
<CASH> 28,424
<SECURITIES> 0
<RECEIVABLES> 70,091
<ALLOWANCES> 2,906
<INVENTORY> 75,951
<CURRENT-ASSETS> 186,921
<PP&E> 42,933
<DEPRECIATION> 16,889
<TOTAL-ASSETS> 302,106
<CURRENT-LIABILITIES> 29,913
<BONDS> 135,909
0
0
<COMMON> 142
<OTHER-SE> 136,142
<TOTAL-LIABILITY-AND-EQUITY> 302,106
<SALES> 118,691
<TOTAL-REVENUES> 118,691
<CGS> 85,177
<TOTAL-COSTS> 85,177
<OTHER-EXPENSES> 33,121
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,526
<INCOME-PRETAX> (841)
<INCOME-TAX> (369)
<INCOME-CONTINUING> (472)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (472)
<EPS-PRIMARY> (.03)
<EPS-DILUTED> .04
</TABLE>
