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 March 29, 1997
---------------------------
OR
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 0-19873
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 May 7, 1997 13,751,542
- ---------------------------- ------------------ ----------------
Class Date Number of shares
<PAGE>
BELL SPORTS CORP.
INDEX TO FORM 10-Q
PART I
<TABLE>
<CAPTION>
Page
Number
<S> <C> <C>
Bell Sports Corp. and Subsidiaries Consolidated Balance Sheets
as of March 29, 1997 and June 29, 1996 3
Bell Sports Corp. and Subsidiaries Consolidated Statements of Operations
for the nine months and three months ended March 29, 1997
and March 30, 1996 4
Bell Sports Corp. and Subsidiaries Consolidated Condensed Statements of Cash Flows
for the nine months ended March 29, 1997 and March 30, 1996 5
Notes to Consolidated Financial Statements 6 - 11
Management's Discussion and Analysis of
Financial Condition and Results of Operations 12 - 16
PART II
Items 1 to 6 17
Signatures 18
</TABLE>
2
<PAGE>
PART 1. Financial Information
Item 1. Financial Statements
BELL SPORTS CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands)
<TABLE>
<CAPTION>
March 29, June 29,
1997 1996
------------------ ----------------
(unaudited)
<S> <C> <C>
ASSETS
- ------
Cash and cash equivalents $ 26,755 $ 23,140
Marketable securities -- 7,996
Accounts receivable 89,305 75,651
Inventories 72,390 59,413
Other current assets 22,875 17,285
------------------ ----------------
Total current assets 211,325 183,485
Property, plant and equipment 25,577 24,722
Goodwill 56,962 71,245
Intangibles and other assets 15,912 19,183
------------------ ----------------
Total assets $ 309,776 $ 298,635
================== ================
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Accounts payable $ 12,282 $ 11,797
Accrued expenses 22,707 16,752
Accrued compensation and employee benefits 3,182 4,392
Notes payable and current maturities of long-term
debt and capital lease obligations 2,843 1,070
------------------ ----------------
Total current liabilities 41,014 34,011
Long-term debt and capital lease obligations 150,346 124,501
Other liabilities 4,152 4,082
------------------ ----------------
Total liabilities 195,512 162,594
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
14,246,614 and 14,224,360 shares, respectively, outstanding 13,751,542
and 13,700,960 shares, respectively 142 142
Additional paid-in capital 141,761 141,647
Unrealized holding losses on marketable securities -- (461)
Foreign currency translation adjustments (155) 81
(Accumulated deficit) retained earnings (22,266) 149
------------------ ----------------
119,482 141,558
Less-495,072 and 523,400 shares of common stock in treasury, at cost,
respectively (5,218) (5,517)
------------------ ----------------
Total stockholders' equity 114,264 136,041
------------------ ----------------
Total liabilities and stockholders' equity $ 309,776 $ 298,635
================== ================
</TABLE>
See accompanying notes to these consolidated
financial statements.
3
<PAGE>
BELL SPORTS CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited; in thousands, except per share data)
<TABLE>
<CAPTION>
Nine Months Ended Three Months Ended
----------------- ------------------
March 29, March 30, March 29, March 30,
1997 1996 1997 1996
---------------- --------------- --------------- -------------
<S> <C> <C> <C> <C>
Net sales $ 189,267 $ 181,331 $ 70,575 $ 67,442
Cost of sales 135,037 142,838 49,862 47,526
---------------- --------------- --------------- -------------
Gross profit 54,230 38,493 20,713 19,916
Selling, general and administrative expenses 45,342 47,428 15,417 17,069
Loss on disposal of product line 25,360 -- 25,360 --
Amortization of goodwill and intangible assets 2,592 1,915 864 736
Restructuring charges 4,142 1,894 2,675 836
Net investment income (2,610) (2,419) (323) (455)
Interest expense 5,467 6,636 1,943 2,308
---------------- --------------- --------------- -------------
Loss before income taxes (26,063) (16,961) (25,223) (578)
Benefit from income taxes (3,649) (4,579) (3,280) (1,291)
---------------- --------------- --------------- -------------
Net (loss) income $ (22,414) $ (12,382) $ (21,943) $ 713
================ =============== =============== =============
Net (loss) income per common and common equivalent
share $ (1.63) $ (0.90) $ (1.59) $ 0.05
================ =============== =============== =============
Weighted average number of common and
common equivalent shares outstanding 13,764 13,764 13,774 13,645
================ =============== =============== =============
</TABLE>
See accompanying notes to these
consolidated financial statements.
4
<PAGE>
BELL SPORTS CORP. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(unaudited; in thousands)
<TABLE>
<CAPTION>
Nine Months Ended
-----------------
March 29, March 30,
1997 1996
---------------- ----------------
<S> <C> <C>
CASH FLOWS USED IN OPERATING ACTIVITIES:
Net cash used in operating activities $ (26,568) $ (49,443)
---------------- ----------------
CASH FLOWS PROVIDED BY (USED IN) INVESTING ACTIVITIES:
Capital expenditures (5,768) (5,641)
Net sale of marketable securities 8,105 24,897
Acquisition of other businesses (519) (16,789)
---------------- ----------------
Net cash provided by investing activities 1,818 2,467
---------------- ----------------
CASH FLOWS PROVIDED BY (USED IN) FINANCING ACTIVITIES:
Proceeds from issuance of stock - 79
Treasury stock purchases - (5,517)
Payments on notes payable, long-term debt and capital leases 831 825
Advances taken on credit lines 50,143 87,044
Payments made on credit lines (22,540) (87,700)
---------------- ----------------
Net cash provided by (used in) financing activities 28,434 (5,269)
---------------- ----------------
Effect of exchange rate changes on cash (69) (105)
---------------- ----------------
Net increase (decrease) in cash and cash equivalents 3,615 (52,350)
Cash and cash equivalents at beginning of period 23,140 72,018
---------------- -----------------
Cash and cash equivalents at end of period $ 26,755 $ 19,668
================ =================
</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 bicycle helmets, related bicycle parts
and accessories 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 March 29, 1997 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
<PAGE>
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
- -------------------
Accounts receivable at March 29, 1997 and June 29, 1996 are net of allowances
for doubtful accounts of $5.5 million and $3.4 million, respectively.
Property, Plant and Equipment
- -----------------------------
Property, plant and equipment at March 29, 1997 and June 29, 1996 are net of
accumulated depreciation of $16.8 million and $14.1 million, respectively.
NOTE 2 - INVENTORIES
Inventories consist of the following:
March 29, June 29,
(in thousands) 1997 1996
---- ----
Raw materials $ 7,684 $ 5,330
Work in process 2,394 2,315
Finished goods 62,312 51,768
------------- ------------
$ 72,390 $ 59,413
============= ============
7
<PAGE>
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 Issues
- --------------------
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 filed a complaint with the Illinois 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
Illinois Pollution Control Board has approved a settlement between the State and
the Company pursuant to which the Company paid $69,000 to the State and disposed
of certain materials in a container at the waste
8
<PAGE>
disposal site at an authorized disposal facility. The cross-claim by the
landfill owner is still pending, the outcome of this cannot presently be
determind.
Additionally, the Illinois Agency has been negotiating with the disposal site
owner with respect to the procedures and actions necessary to close the disposal
site. The extent and nature of any actions which may be taken against the
Company with respect to this matter can not 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 $153.2 million in notes payable, long term debt
and capital lease obligations outstanding at March 29, 1997. Of this amount,
$86.25 million relates to the outstanding balance on the 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.
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 was 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. At March 29, 1997, a total of $62.2 million
was outstanding under the credit facility. In April 1997, upon the sale of the
Service Cycle/Mongoose inventory to Brunswick Corporation, the Company amended
the Revolving Credit to reduce the amount of the line of credit to $60 million
("Amended Credit Agreement"). The Amended Credit Agreement grants to the
syndicated bank group a security interest in the U.S. accounts receivable and
inventories for the term of the facility. The amendment added a clean-down
provision requiring the Amended Credit Agreement to be maintained below $15
million for a period of thirty consecutive days between July 1st and September
30th of each fiscal year.
The Amended Credit Agreement, 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%, the 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 1.50% per annum, but it can range between 1.00% and 1.50% depending on
the Company's interest coverage ratio. Under the Amended Credit Agreement, the
Company is required to pay a quarterly commitment fee on the unused portion of
the facility at a rate that ranges from 0.20% to 0.30% per annum. At March 29,
1997, the quarterly commitment fee was 0.25% per annum.
9
<PAGE>
The Amended Credit Agreement contains certain financial covenants, the most
restrictive of which are a minimum interest coverage ratio, a maximum funded
debt ratio and a minimum adjusted net worth amount. The Amended Credit Agreement
also contains covenants that prohibit the payment of cash dividends as well as
restrict the amount that the Company can repurchase of its subordinated debt and
common stock.
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 March 29, 1997, options to purchase approximately
1,910,500 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. To date, the Company has repurchased a
total of 523,400 shares at an aggregate purchase price of approximately $5.5
million, of which 28,328 shares were utilized under a Restricted Stock Award
Program. 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 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.
10
<PAGE>
During the third quarter of fiscal 1997, the Company announced plans to
significantly downsize the Scottsdale, Arizona corporate office by consolidating
certain Scottsdale functions with the San Jose, California office. Included in
the third quarter of fiscal 1997 pre-tax income are $2.7 million of
restructuring charges related to this consolidation plan.
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, 1996 Charges Payments March 29, 1997
--------------- ----------------- ------------- ----------------
<S> <C> <C> <C> <C>
Lease payments and other facility expenses $ 942 $ 983 ($ 749) $1,176
Severance and other related benefits 2,832 1,627 ( 2,578) 1,881
Relocation and other 1,383 1,531 ( 1,736) 1,178
--------------- ----------------- ------------- ----------------
Total $ 5,157 $ 4,141 ($5,063) $4,235
=============== ================= ============= ================
</TABLE>
NOTE 7 - LOSS ON DISPOSAL OF PRODUCT LINE
On April 29, 1997, the Company completed the sale of its Service Cycle/Mongoose
inventory, trademarks and certain other assets to Brunswick Corporation. The
purchase price approximated $21 million and includes providing Brunswick
Corporation a three year option to purchase 600,000 shares of the Company's
common stock at an exercise price of $7.50 per share. The Company retained and
will collect the accounts receivable for the Service Cycle/Mongoose business,
which were approximately $19 million at April 29, 1997.
As a result of the Service Cycle/Mongoose disposal the Company announced plans
to reorganize North American distribution network and operations to better
utilize facilities.
Included in the third quarter of fiscal 1997 pre-tax income are $25.4 million of
costs associated with the disposition of the Service Cycle/Mongoose business and
distribution changes. The write-off of goodwill and intangibles related to the
Service Cycle/Mongoose business were $14.8 million, Service Cycle disposal and
exit costs were $5.4 million, and reorganization costs associated with the
distribution network and operations related to the sale of Service
Cycle/Mongoose were $5.2 million.
11
<PAGE>
Item 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FINANCIAL POSITION AND LIQUIDITY
The Company's current ratio decreased to 5.2 to 1 at March 29, 1997 from 5.4 to
1 at June 29, 1996. Cash, cash equivalents and marketable securities decreased
to $26.8 million at March 29, 1997 from $31.1 million at June 29, 1996. The
decline primarily relates to cash used in operations.
The Company anticipates an increase in cash of approximately $40 million related
to the sale of the Service Cycle/Mongoose inventory and from the collections of
related receivables. Management expects to use the proceeds to repay a portion
of the Company's Amended Credit Agreement, and other general corporate purposes,
which may include the repurchase of the Company's common stock and/or its
convertible subordinated debentures.
Accounts receivable at March 29, 1997 increased $13.7 million from June 29, 1996
due to the use of extended dating programs for sales to independent bicycle
dealers. Management expects accounts receivable to decline by approximately $13
million during the fourth quarter related to the collection of Service
Cycle/Mongoose receivables.
Inventories increased $13.0 million in fiscal 1997 compared to the balance at
June 29, 1996. The increase is due to the build-up of inventory in preparation
for the spring selling season. Management expects inventory to decline during
the fourth quarter by approximately $18 million related to the sale of Service
Cycle/Mongoose inventory.
In February 1996, the Company entered into a $100 million multicurrency,
revolving line of credit (the "Revolving Credit") with a syndicated bank group.
This facility replaced prior revolving credit facilities that were used by the
Company's North American operations. 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 was 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. At March 29,
1997, a total of $62.2 million was outstanding under the credit facility. In
April 1997, upon the sale of the Service Cycle/Mongoose inventory to Brunswick
Corporation, the Company amended the Revolving Credit to reduce the amount of
the line of credit to $60 million ("Amended Credit Agreement"). The Amended
Credit Agreement grants to the syndicated bank group a security interest in the
U.S. accounts receivable and inventories for the term of the facility. The
amendment added a clean-down provision requiring the Amended Credit Agreement to
be maintained below $15 million for a period of thirty consecutive days between
July 1st and September 30th of each fiscal year.
The Amended Credit Agreement facility outstanding borrowings have been
significantly reduced due to the proceeds related to sale of the Service
Cycle/Mongoose business and management anticipates that they will be reduced
further due to cash generated from operations, including collection of the
Service Cycle/Mongoose receivables.
The Amended Credit Agreement, 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 1.50% per annum, but it can range between 1.00% and 1.50% depending on
the Company's interest coverage ratio. Under the Amended Credit Agreement, the
Company is required to pay a quarterly commitment fee on the unused portion of
the facility at a rate that ranges from 0.20% to 0.30% per annum. At March 29,
1997 the quarterly commitment fee was 0.25% per annum.
12
<PAGE>
The Amended Credit Agreement contains certain financial covenants, the most
restrictive of which are a minimum interest coverage ratio, a maximum funded
debt ratio and a minimum adjusted net worth amount. It also contains covenants
that prohibit the payment of cash dividends as well as restrict the amount that
the Company can repurchase of its subordinated debt and common stock.
Capital expenditures were $5.8 million for the first nine months of fiscal 1997.
The Company expects to spend approximately $6.5 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 bicycle related 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 contingent earnout
payments that could approximate $1.9 million, subject to future financial
results. In November 1996, the Company acquired a distributor in Sydney,
Australia to directly market its products.
Additionally, from time to time the Company evaluates the strategic fit and
financial performance of its various operating units and product lines. As a
result of such evaluations, the Company could decide to divest or discontinue
certain portions of the business.
The Company believes its available cash flows from operations, the proceeds from
the sale of the Service Cycle/Mongoose business and the Amended Credit Agreement
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.
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.
13
<PAGE>
RESULTS OF OPERATIONS
Net Sales. Net sales increased by 5% to $70.6 million during the three
months ended March 29, 1997 as compared to $67.4 million in the same period of
1996. Bicycle accessories sales increased 16% over prior year. This increase was
offset by a decrease in bicycle sales of 8% and bicycle helmet sales of 5%
compared to a year ago. Bicycle helmets have increased in the independent
bicycle dealer channel, but have decreased in the mass merchant channel from the
prior year. On a year-to-date basis net sales increased 4% to $189.3 million
from $181.3 million in the previous year. The year-to-date increase can be
attributed to IBD bicycle helmet sales and increased bicycle accessories sales
offset by lower bicycle and mass merchant helmet sales.
The product line sales mix for the nine month and three month periods are as
follows:
Nine Months Ended Three Months Ended
----------------- ------------------
March 29, March 30, March 29, March 30,
1997 1996 1997 1996
---- ---- ---- ----
Product Line Sales Mix:
Bicycle accessories 49% 48% 50% 45%
Bicycle helmets 32% 31% 35% 38%
Bicycles 18% 20% 13% 15%
Auto Racing helmets 1% 1% 2% 2%
Management is cautiously optimistic about the fourth quarter of fiscal 1997 due
to recent helmet growth in the IBD channel and strong accessory sales in the
mass merchant channel.
Gross Margin. Gross margins decreased to 29% of net sales in the third
quarter of fiscal 1997, compared to 31% in the comparable prior year period,
excluding the impact of the inventory write-up related to the January 1996
acquisition of Giro Sport Design. This decrease is attributed to lower gross
margins on bicycle sales due to end of season close-out sales during the quarter
as compared to prior year, as well as a shift of bicycle helmet sales volumes to
lower price point helmets. For the first nine months of fiscal 1997, gross
margins remained at 29% of net sales, compared to the same period of fiscal
1996, excluding the impact of the inventory write-up related to the merger with
AMRE and the acquisitions of SportRack and Giro.
During the third quarter and the first nine months of fiscal 1996, $1.0 million
and $14.1 million, respectively, were charged to cost of sales for the write-up
of inventory related to the merger with AMRE and the acquisitions of SportRack
and Giro.
Selling, General and Administrative. Selling, general and
administrative costs were 22% of net sales in the third quarter of fiscal 1997
compared to 25% in fiscal 1996. Actual selling, general and administrative costs
decreased $1.7 million to $15.4 million for the quarter. On a comparative basis,
selling, general and administrative costs declined by $2.1 million or 13%, when
excluding Giro costs not included for the full prior year quarter. On a year to
date basis, selling, general and administrative costs decreased 2% to $45.3
million. When excluding Giro, costs declined by $5.2 million or 11%.
Year-to-date selling, general and administrative costs represented 24% of sales
compared to 26% in the same period 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.
14
<PAGE>
Management anticipates the trend of declining selling, general and
administrative expenses as a percent of net sales to continue in the fourth
quarter. Additionally, based upon the April 1997 consolidation plan and the plan
to reorganize the Company's distribution network and operations, management
anticipates that the cost structure can be further reduced after successful
completion of such plans.
Loss on Disposal of Product Line. On April 29, 1997, the Company
completed the sale of its Service Cycle/Mongoose inventory, trademarks and
certain other assets to Brunswick Corporation. Included in the third quarter of
fiscal 1997 pre-tax income are $25.4 million of costs associated with the
disposition of the Service Cycle/Mongoose business and distribution changes. The
write-off of goodwill and intangibles related to the Service Cycle/Mongoose
business were $14.8 million, Service Cycle disposal and exit cost were $5.4
million, and the sale of Service Cycle/Mongoose reorganization costs associated
with distribution network and were $5.2 million.
Amortization of intangibles. Amortization of goodwill and intangible
assets increased to $864,000 in the third quarter of 1997 from $736,000 in the
third quarter of 1996, and to $2.6 million in the first nine months of fiscal
1997 from $1.9 million in the first nine months of fiscal 1996. The increase is
due to the acquisition of Giro in January 1996.
Amortization expense in the fourth quarter is expected to decline by $137,000
due to the write -off of $14.8 million of Service Cycle/Mongoose goodwill and
intangibles related to the sale of such business.
Restructuring charges. During the third quarter of fiscal 1997, the
Company announced plans to significantly downsize the Scottsdale, Arizona
corporate office by consolidating certain Scottsdale functions with the San
Jose, California office. Included in the third quarter of fiscal 1997 pre-tax
income are $2.7 million of restructuring charges related to this plan.
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 $1.5 million and $1.9 million for fiscal 1997 and
1996 for the nine month period, respectively relating to these activities.
Total restructuring charges were approximately $4.1 million and $1.9 million for
fiscal 1997 and 1996 for the nine month period, respectively.
Net investment income and interest expense. For the fiscal 1997 third
quarter, net investment income decreased to $323,000, compared to $455,000 in
fiscal 1996. This decline is due to lower levels of cash and marketable
securities invested during the quarter. Net investment income increased to $2.6
million for the first nine months in fiscal 1997, compared to $2.4 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 of fiscal 1997. The settlement proceeds, net of related
expenses and expected losses to sell certain securities, of $1.3 million, were
included in net investment income. Interest expense decreased to $1.9 million in
the third quarter of fiscal 1997 from $2.3 million in the third quarter of
fiscal 1996. On a year-to-date basis, interest expense decreased to $5.5 million
for fiscal 1997 from $6.6 million for fiscal 1996. The decreases are due to
lower debt balances outstanding and lower interest rates for the first nine
months of fiscal 1997 compared to the prior year.
15
<PAGE>
Income taxes. The effective tax rate was 39% for the quarter and 40%
for the nine month period of fiscal 1997, excluding restructuring charges and
the impact of the loss on the disposal of a product line, compared to 51% for
the comparable prior year quarter and 42% for the nine month period of fiscal
1996, before restructuring charges and the effect of the inventory write-up. The
effective rate was 13% and 14%, respectively, if such costs were included for
both periods in fiscal 1997 and 27% for both the quarter and the nine month
period of fiscal 1996. The current year's effective rates differ significantly
from the federal statutory rate of 34% due to several large expense items which
are not deductible for federal or state income tax purposes.
Net income and weighted average shares. Results from operations for
fiscal 1997 third quarter, before restructuring charges and the loss on disposal
of product line, were net income of $1.7 million, or $0.12 on a per share basis,
compared to net income, before restructuring charges and the effect of the
inventory write-up, of $623,000, or $0.05 per share, in the previous year. For
the first nine months of fiscal 1997, net income increased to $2.1 million or
$0.15 per share, before restructuring charges and the loss on disposal of
product line compared to a net loss of $560,000, or $0.04 per share, in the
previous year before restructuring charges and the effect of the inventory
write-up. Results from operations including the effects of restructuring charges
and the loss on disposal of product line for the fiscal 1997 third quarter was a
loss of $21.9 million, or $1.59 per share, compared to income of $713,000 or
$0.05 per share for the fiscal 1996 third quarter. For the nine month period
ending March 29, 1997, results from operations were a loss of $22.4 million, or
$1.63 per share, compared to a loss of $12.4 million, or $0.90 per share, for
the same period of fiscal 1996. The fiscal 1996 results included a $14.1 million
charge for the inventory write-up arising from the acquisition of SportRack in
May 1995, the merger with AMRE, Inc. in July 1995 and the acquisition of Giro in
January 1996.
Weighted average shares outstanding for the fiscal three month periods ended
March 29, 1997 and March 30, 1996 were 13.8 million and 13.6 million,
respectively. Year-to-date outstanding shares for both fiscal 1997 and fiscal
1996 were 13.7 million shares.
16
<PAGE>
BELL SPORTS CORP.
PART II
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
None
Item 5 Other Information
None
Item 6 Exhibits and Reports on Form 8-K
(a.) Exhibit Index page 19
17
<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: May 13, 1997
BELL SPORTS CORP.
/s/ Linda K. Bounds Executive Vice President and Chief Financial Officer
- --------------------- ----------------------------------------------------
Linda K. Bounds (Principal financial officer)
/s/ John A. Williams Vice President and Corporate Controller
- --------------------- ---------------------------------------
John A. Williams (Principal accounting officer)
18
<PAGE>
BELL SPORTS CORP.
INDEX TO EXHIBITS
Exhibit
Number Description Page
- --------------------------------------------------------------------------------
10.1 Employment Agreement with Mary J. George Page 20
10.2 Employment Agreement with Linda K. Bounds Page 29
11 Statement re: computation of per share earnings Page 39
27 Financial Data Schedule Page 40
19
EMPLOYMENT AGREEMENT
--------------------
THIS EMPLOYMENT AGREEMENT is entered into on April 11, 1997,
effective as of February 15, 1997, among Mary J. George (the "Executive"), Bell
Sports Corp., a Delaware corporation (the "Holding Company"), and Bell Sports,
Inc., a California corporation (the "Operating Company"). The Holding Company
and the Operating Company are collectively referred to herein as the "Company."
WHEREAS, the Company is engaged primarily in the business of
designing, manufacturing, producing, distributing, marketing, advertising and
selling auto racing helmets, bicycle helmets, bicycle accessories and related
products;
WHEREAS, the Executive currently serves as the President,
North America of the Operating Company;
WHEREAS, the Executive's abilities and services are unique and
essential to the prospects of the Company; and
WHEREAS, the Company and the Executive desire to enter into
this Agreement to provide for the employment of the Executive by the Company
upon the terms and subject to the conditions set forth herein.
NOW, THEREFORE, in consideration of the premises and the
mutual agreements contained herein, the parties hereby agree as follows:
1. Employment; Term.
The Company hereby employs the Executive and the Executive
hereby agrees to be employed by the Company upon the terms and subject to the
conditions contained in this Agreement. The term of this Agreement shall
commence as of February 15, 1997 and shall end on February 15, 2000, unless
earlier terminated pursuant to Section 4 hereof. As used herein, the term
"Employment Period" shall mean the period from February 15, 1997 until the
expiration of the term of this Agreement or the earlier termination of the term
hereof pursuant to Section 4 hereof.
2. Position; Duties; Responsibilities. The Company shall
employ the Executive as the President and Chief Operating Officer of the Holding
Company and the Operating Company. The Executive shall faithfully and loyally
perform to the best of her abilities all the duties reasonably assigned to her
hereunder, shall devote such business time, attention and effort to the affairs
of the Company as is reasonably necessary for the proper performance of such
duties and shall use her reasonable best efforts to promote the interests of the
Company. Notwithstanding the foregoing, the Executive may serve as a director,
officer or paid consultant of business corporations other than the Company or
civic or community organizations or entities, provided that such activities do
not violate the terms of any of the covenants set forth in Section 7 hereof and
such activities are approved prior to the commencement thereof by the Chairman
of the Board and Chief Executive Officer of the Holding Company and the
Operating Company (the "Company CEO").
3. Compensation.
(a) Base Salary. During the Employment Period, the Company
shall pay to the Executive an annual base salary at the rate of $247,500 per
annum, payable in accordance with the Company's executive payroll policy. Such
base salary shall be reviewed annually, commencing July 1, 1997, and may be
20
<PAGE>
increased (but shall not be decreased) annually, in the sole discretion of the
Company. The Executive's base salary, as such base salary may be increased
annually hereunder, is referred to herein as the "Base Salary."
(b) Annual Performance Bonus. (i) The Executive shall be
entitled to receive an annual performance bonus payable in cash for each full
fiscal year of the Company during the term of this Agreement in accordance with
the Company's management incentive program, as in effect from time to time. The
annual performance bonus to which the Executive is entitled pursuant to this
Section 3(b) is referred to herein as the "Bonus."
(ii) The payment of each Bonus shall be made within 30 days
after the Company's independent accountants shall have certified the Company's
consolidated financial statements for the fiscal year to which such Bonus
relates.
(iii) If the Company's fiscal year changes, the Executive's
opportunity to earn the Bonus shall not be materially and adversely affected.
(c) Restricted Phantom Stock Units. (i) If during any 30
consecutive calendar day period (each such period being referred to herein as a
"Measuring Period") within the Employment Period after July 15, 1997, the
average of the closing prices of Holding Company common stock ("Common Stock"),
as reported in The Wall Street Journal NASDAQ National Market Issues, equals or
exceeds for the first time during the Employment Period after July 15, 1997 a
dollar amount set forth below under "Stock Price," the Company's Management
Stock Incentive Committee shall, within 15 days following the end of such
Measuring Period, award the Executive the number of restricted phantom stock
units (rounded to the nearest whole unit) having a value equal to the number set
forth below under "Phantom Stock Award Multiple" multiplied by a fraction, the
numerator of which is the Executive's Base Salary on the last day of such
Measuring Period and the denominator of which is the closing price of the Common
Stock (reported as described above) on the last day of such Measuring Period (or
if such day is not a day on which the Common Stock is traded, then on the next
preceding day on which the Common Stock was traded):
Phantom Stock
Stock Price Award Multiple
----------- --------------
$ 8.00 one
$ 9.00 one
$11.00 one
$13.00 two
The Executive shall be awarded restricted phantom stock units as described in
this Section 3(c)(i) for each dollar amount set forth above under "Stock Price"
which is exceeded as described above, notwithstanding that more than one such
dollar amount is exceeded during a single Measuring Period. A restricted phantom
stock unit is an amount of cash equal to the closing price of the Common Stock
(reported as described above) on the date of the determination of the value of
such unit, which unit is subject to the restrictions on vesting described in
this Section 3(c)(i). The Executive shall have no right to receive the amount of
any restricted phantom stock unit awarded to the Executive until such unit
becomes fully vested. All restricted phantom stock units awarded pursuant to
this Section 3(c)(i) shall become fully vested upon termination of the
Employment Period; provided, however, that in the event of the termination of
the Executive's employment voluntarily
21
<PAGE>
by the Executive pursuant to Section 4(e) hereof or by the Company for "Cause"
pursuant to Section 4(c) hereof (as such term is defined in such section), no
such restricted phantom stock units shall vest, and all such restricted phantom
stock units shall be forfeited. No interest shall accrue on restricted phantom
stock units awarded pursuant to this Section 3(c)(i). In the event of a stock
split, stock dividend, recapitalization, reorganization, merger, consolidation,
combination, exchange of shares, liquidation, spin-off or other similar event,
each dollar amount set forth above under "Stock Price" shall be appropriately
adjusted so that the Executive's opportunity to be awarded restricted phantom
stock units shall not be materially and adversely affected.
(ii) If the Board of Directors of the Company adopts an
incentive plan which provides for the award of shares of restricted Common Stock
and such plan is approved by the stockholders of the Company, shares of
restricted Common Stock issuable pursuant to such plan shall be substituted for
the restricted phantom stock units described in Section 3(c)(i) hereof, as
provided in this Section 3(c)(ii). As of the date of approval of such plan by
the stockholders of the Company (the "Approval Date") (A) the Executive shall
have no further right to be awarded restricted phantom stock units pursuant to
Section 3(c)(i) hereof and, in lieu of such right, the Executive shall have the
right to be awarded one share of restricted Common Stock pursuant to such plan
for each restricted phantom stock unit to which the Executive would otherwise
have been entitled pursuant to Section 3(c)(i) hereof, and (B) one share of
restricted Common Stock issuable pursuant to such plan shall be substituted for
each restricted phantom stock unit awarded to the Executive pursuant to Section
3(c)(i) hereof prior to the Approval Date. The shares of restricted Common Stock
issuable to the Executive pursuant to this Section 3(c)(ii) shall be subject to
the same terms and conditions with respect to vesting as are applicable to the
restricted phantom stock units which may be awarded pursuant to Section 3(c)(i)
hereof. Prior to the vesting of a share of restricted Common Stock issued to the
Executive pursuant to this Section 3(c)(ii), the Executive shall have the right
to vote such share, but shall have no right to any dividends payable on shares
of Common Stock.
(d) Stock Options. In the discretion of the Company's
Management Stock Incentive Committee, the Executive shall be eligible to receive
options to purchase shares of Common Stock pursuant to the terms of the Bell
Sports Management Stock Incentive Plans.
(e) Perquisites. During the Employment Period, the Executive
shall be entitled to a cash automobile allowance in the amount of $400 per
month.
(f) Reimbursement of Expenses. The Company shall reimburse the
Executive for all expenses necessarily and reasonably incurred by her in
connection with the business of the Company, upon presentation of proper
receipts or other proof of expenditure and subject to such reasonable guidelines
or limitations provided to the Executive and applied prospectively, as
established by the Company.
(g) Vacation. During the Employment Period, the Executive
shall be entitled to paid vacation and sick leave in accordance with Company
policy.
(h) Participation in Benefit Plans. During the Employment
Period, the Executive shall be entitled to participate in any profit sharing
plan, retirement plan, group life insurance plan or other insurance plan or
medical expense plan maintained by the Company for its senior executives
generally, which plans shall not differ in value in any manner materially
22
<PAGE>
adverse to the Executive from those in which the Executive currently
participates.
4. Termination.
(a) Death. Upon the death of the Executive, this Agreement
shall automatically terminate and all rights of the Executive and her heirs,
executors and administrators to compensation and other benefits hereunder shall
cease, except (i) for Base Salary which shall have accrued to the date of death,
(ii) any restricted phantom stock units awarded pursuant to Section 3(c)(i)
hereof which have not been replaced by shares of restricted Common Stock, or any
shares of restricted Common Stock issued pursuant to Section 3(c)(ii) hereof,
shall be immediately 100% vested and (iii) for rights to indemnification under
Section 5 hereof.
(b) Disability. The Company may, at its option, terminate this
Agreement upon written notice to the Executive if the Executive, because of
physical or mental incapacity or disability, fails in any material respect to
perform the services required of her hereunder for a continuous period of 120
days or any 180 days out of any 12-month period. Upon such termination, all
obligations of the Company hereunder shall cease, except (i) for Base Salary
which shall have accrued to the date of termination, (ii) any restricted phantom
stock units awarded pursuant to Section 3(c)(i) hereof which have not been
replaced by shares of restricted Common Stock, or any shares of restricted
Common Stock issued pursuant to Section 3(c)(ii) hereof, shall be immediately
100% vested and (iii) for the rights to indemnification under Section 5 hereof.
In the event of any dispute regarding the existence of the Executive's
incapacity hereunder, the matter shall be resolved by the determination of a
majority of three physicians qualified to practice medicine in the state of the
Executive's residence, one to be selected by each of the Executive and the
Company and the third to be selected by such two designated physicians. For this
purpose, the Executive shall submit to appropriate medical examinations.
(c) Cause. (i) The Company may, at its option, terminate the
Executive's employment under this Agreement for "Cause" (as hereinafter
defined). A termination for Cause shall not take effect until and unless the
Company complies with this Section 4(c)(i). The Executive shall be given written
notice by the Company of the intention to terminate her employment hereunder for
Cause (the "Cause Notice"). The Cause Notice shall state the particular
action(s) or inaction(s) giving rise to termination for Cause. The Executive
shall have 10 days after the Cause Notice is given to cure the particular
action(s) or inaction(s), to the extent a cure is possible. If the Executive so
effects a cure, the Cause Notice shall be deemed rescinded and of no force or
effect.
(ii) As used in this Agreement, the term "Cause" shall mean
any one or more of the following:
(A) the Executive's refusal to perform specific
directives of the Company CEO, which directives are consistent with the scope
and nature of the Executive's duties and responsibilities as set forth herein;
(B) the Executive's admission or conviction of a
felony or of any crime involving moral turpitude, fraud, embezzlement, theft or
misrepresentation;
(C) any gross or willful misconduct of the Executive
resulting in substantial loss to the Company or substantial damage to the
Company's reputation; or
23
<PAGE>
(D) any breach by the Executive of any one or more of
the covenants contained in Section 6 or 7 hereof, other than an inadvertent and
unintentional breach of a covenant contained in Section 6 having an
inconsequential effect upon the Company or any of its controlled affiliates.
(iii) The exercise of the right of the Company to terminate
this Agreement pursuant to this Section 4(c) shall not abrogate the rights or
remedies of the Company in respect of the breach giving rise to such
termination.
(iv) If the Company terminates the Executive's employment for
Cause, she shall be entitled to:
(A) accrued Base Salary through the date of the
termination of her employment;
(B) any Bonus owing but not yet paid for any fiscal
year ended on or before the Executive's termination of employment for Cause;
(C) any amounts owing but not yet paid pursuant to
Section 3(e); and
(D) other or additional benefits in accordance with
applicable plans and programs of the Company.
(v) Notwithstanding anything to the contrary contained in this
Agreement, if, following a termination of the Executive's employment for Cause,
a court of competent jurisdiction, in a final determination, determines that the
Executive was not guilty of the conduct that formed the basis for the
termination, the Executive shall be entitled to the payments and the economic
equivalent of the benefits she would have received had her employment been
terminated by the Company without Cause.
(d) Termination Without Cause. If, during the Employment
Period, the Company terminates the employment of the Executive hereunder for any
reason other than a reason set forth in Section 4(a), 4(b) or 4(c):
(i) such termination shall be effective 90 days following
written notice thereof by the Company to the Executive;
(ii) concurrent with such termination, the Company shall pay
to the Executive an amount equal to her Base Salary accrued through the date of
termination;
(iii) the Company shall continue to pay the Executive her Base
Salary and all other benefits (excluding Bonus) which would otherwise be payable
hereunder for a period of 18 months following the date of termination;
(iv) any restricted phantom stock units awarded pursuant to
Section 3(c)(i) hereof which have not been replaced with shares of restricted
Common Stock, or any shares of restricted Common Stock issued pursuant to
Section 3(c)(ii) hereof, shall be immediately 100% vested;
(v) all of the Executive's options to purchase Common Stock
shall be immediately 100% exercisable;
(vi) the Executive shall be entitled to any amounts owing but
not yet paid pursuant to Section 3(f); and
24
<PAGE>
(vii) the Executive shall be entitled to her rights to
indemnification under Section 5 hereof.
(e) Voluntary Termination. If, during the Employment Period,
the Executive voluntarily terminates her employment hereunder for any reason
whatsoever, such termination shall be effective 90 days following written notice
thereof by the Executive to the Company and the Executive shall be entitled to
the payments and benefits specified by Sections 4(d)(ii), (iii), (vi) and (vii)
hereof, inclusive.
5. Indemnification. To the fullest extent permitted by law,
the Restated Certificate of Incorporation of the Holding Company and the
Articles of Incorporation of the Operating Company, the Executive (and her
heirs, executors and administrators) shall be indemnified by the Company and its
successors and assigns. The obligations of the Company pursuant to this Section
5 shall survive the termination of the Employment Period, except as otherwise
provided herein.
6. Confidentiality. The Executive shall at all times during
the Employment Period and thereafter hold in confidence any and all Confidential
Information (as hereinafter defined) that may have come or may come into her
possession or within her knowledge concerning the products, services, processes,
businesses, suppliers, customers and clients of the Company or its controlled
affiliates. The Executive agrees that neither she nor any person or enterprise
controlled by her will for any reason directly or indirectly, for herself or any
other person, use or disclose any trade secrets, proprietary or confidential
information, inventions, manufacturing or industrial processes or procedures,
patents, trademarks, trade names, customer lists, service marks, service names,
copyrights, applications for any of the foregoing, or licenses of other rights
in respect thereof (collectively, "Confidential Information"), owned or used by,
or licensed to, the Company or any of its controlled affiliates, provided that
the Executive may disclose Confidential Information which has become generally
available to the public other than as a result of a breach of this Agreement by
the Executive or pursuant to an order of a court of competent jurisdiction or of
a governmental agency, department or commission. Upon termination of her
employment under this Agreement, the Executive shall promptly surrender to the
Company all documents she believes contain Confidential Information and that are
within her possession or control, other than documents to which the Executive is
or was a party or that relate to the Executive or the basis, or purported basis,
on which her employment was terminated.
7. Noncompetition and Nonsolicitation. (a) Subject to the
following sentence, the Executive agrees that from the date hereof and
subsequent to the termination of her employment under this Agreement and
continuing for a period of two years (the "Noncompete Period"), neither she nor
any person or enterprise controlled by her will become a stockholder, lender,
director, officer, agent or employee of a corporation or member of or lender to
a partnership, engage as a sole proprietor in any business, act as a consultant
to any of the foregoing or otherwise engage directly or indirectly in any
business, that is in competition with the business then conducted by the Company
or any of its controlled affiliates in any state in the United States or any
other country in which the Company or any of its controlled affiliates has
engaged in such business during the term of the Executive's employment under
this Agreement; provided, however, that the foregoing shall not prohibit the
Executive from owning less than two percent of the outstanding securities of any
class of capital stock of a corporation the securities of which are regularly
traded or quoted on a national securities exchange or on an inter-dealer
quotation system.
25
<PAGE>
(b) The Executive agrees that during the Noncompete Period,
neither she nor any person or enterprise controlled by her will (i) solicit for
employment or employ any person who was employed by the Company or any of its
controlled affiliates at any time within one year prior to the time of the act
of solicitation or (ii) in any way cause, influence, induce or attempt to
persuade any person who was employed by the Company or any of its controlled
affiliates at any time within one year prior to the time of such act to
terminate her employment relationship with the Company or any of its affiliates.
(c) Relief, Reformation; Severability. The Executive
acknowledges that there is no adequate remedy at law for a breach of this
Section 7 and that, in the event of such a breach or attempted breach, the
Company shall be entitled to injunctive or other equitable relief to prevent any
such breach, attempted breach or continuing breach, without prejudice to any
other remedies for damages or otherwise. The Executive agrees that the covenants
contained in this Agreement are separate and are reasonable in their scope and
duration and that the Executive shall not raise any issue of reasonableness as a
defense in any proceeding to enforce any of such covenants. Notwithstanding the
foregoing, in the event that a covenant contained in this Agreement shall be
deemed by any court to be unreasonably broad in any respect, the parties agree
that the court may modify such covenant for the purpose of making such covenant
reasonable in scope and duration. The validity, legality or enforceability of
the remaining provisions of this Agreement shall not be affected by any such
modification.
8. Inventions. The Executive hereby assigns to the Company her
entire right, title and interest in and to all discoveries and improvements,
patentable or otherwise, trade secrets and ideas, writings and copyrightable
material, which may be conceived by the Executive or developed or acquired by
her during the term of her employment by the Company, which may pertain directly
or indirectly to the Company's business. The Executive agrees to disclose fully
all such developments to the Company upon its request, which disclosure shall be
made in writing promptly following any such request. The Executive shall, upon
the Company's request, execute, acknowledge and deliver to the Company all
instruments and do all other acts which are necessary or desirable to enable the
Company to file and prosecute applications for, and to acquire, maintain and
enforce, all patents, trademarks and copyrights in all countries.
9. Remedies. The Executive acknowledges that any material
breach of this Agreement will cause irreparable harm to the Company, that such
harm will be difficult if not impossible to ascertain, and that the Company
shall be entitled to equitable relief, including injunction, against any actual
or threatened breach hereof, without bond and without liability should such
relief be denied, modified or vacated. Neither the right to obtain such relief
nor the obtaining of such relief shall be exclusive of or preclude the Company
from any other remedy.
10. Insurance. The Company may, at its election and for its
benefit, insure the Executive against disability, accidental loss or death and
the Executive shall submit to such physical examinations and supply such
information as may be required in connection therewith.
11. Assignment. The rights and benefits of the Executive
hereunder shall not be assignable, whether by voluntary or involuntary
assignment or transfer. This Agreement shall be binding upon, and inure to the
benefit of, the successors and assigns of the Company, and the heirs, executors
and administrators of the Executive, and shall be assignable by the Company to
any entity acquiring substantially all of the assets of the
26
<PAGE>
Company, whether by merger, consolidation, sale of assets or similar
transaction.
12. Notices. Any notice required or permitted to be given
under this Agreement shall be sufficient if in writing and personally delivered,
sent by certified or registered mail or sent by overnight courier service as
follows: if to the Executive, to her address as set forth in the records of the
Company, and if to the Company, to the address of its principal executive
offices, attention: Chief Executive Officer, with a copy to Larry A. Barden,
Esq., Sidley & Austin, One First National Plaza, Chicago, Illinois 60603, or to
any other address designated by any party hereto by notice similarly given.
13. Waiver of Breach. A waiver by the Company or the Executive
of any breach of any provision of this Agreement by the other party shall not
operate or be construed as a waiver of any other or subsequent breach by the
other party.
14. Entire Agreement. This Agreement contains the entire
agreement of the parties with respect to the subject matter hereof. This
Agreement may be modified only by an agreement in writing signed by the parties
hereto.
15. Costs. In the event that a dispute shall arise between the
parties hereto and such dispute is resolved by a court of competent
jurisdiction, all reasonable attorneys' fees and costs of the Company and the
Executive and all other costs and expenses of the Company and the Executive
associated with such dispute shall be borne by the Company; provided that if it
is determined that the claims of the Executive were without reasonable basis,
each party shall bear her or its own attorneys' fees and costs.
16. Applicable Law. The terms of this Agreement shall be
governed by and construed in accordance with the internal laws (as opposed to
the conflict of laws provisions) of the State of Illinois.
17. Prior Agreements. This Agreement supersedes all prior
agreements between the Executive and the Company concerning the Executive's
employment with the Company, including the Employment Agreement effective as of
June 13, 1995 between the Executive and the Operating Company, and none of such
agreements shall be of any further force or effect whatsoever.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the day and year first above written.
BELL SPORTS CORP.
By
--------------------------------------
Terry G. Lee
Chairman of the Board and
Chief Executive Officer
BELL SPORTS, INC.
By
--------------------------------------
Terry G. Lee
27
<PAGE>
Chairman of the Board and
Chief Executive Officer
EXECUTIVE:
--------------------------------------
Mary J. George
28
EMPLOYMENT AGREEMENT
--------------------
THIS EMPLOYMENT AGREEMENT is entered into on April 25, 1997, effective
as of April 1, 1997, among Linda K. Bounds (the "Executive"), Bell Sports Corp.,
a Delaware corporation (the "Holding Company"), and Bell Sports, Inc., a
California corporation (the "Operating Company"). The Holding Company and the
Operating Company are collectively referred to herein as the "Company."
WHEREAS, the Company is engaged primarily in the business of designing,
manufacturing, producing, distributing, marketing, advertising and selling auto
racing helmets, bicycles, bicycle helmets, bicycle accessories and related
products;
WHEREAS, the Executive serves as Senior Vice President, Chief Financial
Officer, Treasurer and Secretary of the Holding Company and the Operating
Company;
WHEREAS, the Executive's abilities and services are unique and
essential to the prospects of the Company; and
WHEREAS, the Company and the Executive desire to enter into this
Agreement to provide for the continued employment of the Executive by the
Company upon the terms and subject to the conditions set forth herein.
NOW, THEREFORE, in consideration of the premises and the mutual
agreements contained herein, the parties hereby agree as follows:
1. Employment; Term.
The Company hereby employs the Executive and the Executive hereby
agrees to be employed by the Company upon the terms and subject to the
conditions contained in this Agreement. The term of this Agreement shall
commence as of April 1, 1997 and shall end on March 31, 2000, unless earlier
terminated pursuant to Section 4 hereof. As used herein, the term "Employment
Period" shall mean the period from April 1, 1997 until the expiration of the
term of this Agreement or the earlier termination of the term hereof pursuant to
Section 4 hereof.
2. Position; Duties; Responsibilities. The Company shall employ the
Executive as the Senior Vice President, Chief Financial Officer, Treasurer and
Secretary of the Holding Company and the Operating Company. The Executive's
principal office for the performance of her duties under this Agreement shall be
located in San Jose, California. The Executive shall faithfully and loyally
perform to the best of her abilities all the duties reasonably assigned to her
hereunder, shall devote such business
29
<PAGE>
time, attention and effort to the affairs of the Company as is reasonably
necessary for the proper performance of such duties and shall use her reasonable
best efforts to promote the interests of the Company. Notwithstanding the
foregoing, the Executive may serve as a director, officer or paid consultant of
business corporations other than the Company or civic or community organizations
or entities, provided that such activities do not violate the terms of any of
the covenants set forth in Section 7 hereof and such activities are approved
prior to the commencement thereof by the Chairman of the Board and Chief
Executive Officer of the Holding Company (the "Company CEO").
3. Compensation.
(a) Base Salary. During the Employment Period, the Company shall pay to
the Executive an annual base salary at the rate of $160,000 per annum, payable
in accordance with the Company's executive payroll policy. Such base salary
shall be reviewed annually, commencing April 1, 1998, and may be increased (but
shall not be decreased) annually, in the sole discretion of the Company. The
Executive's base salary, as such base salary may be increased annually
hereunder, is referred to herein as the "Base Salary."
(b) Annual Performance Bonus. (i) The Executive shall be entitled to
receive an annual performance bonus payable in cash for each full fiscal year of
the Company during the term of this Agreement in accordance with the Company's
management incentive program, as in effect from time to time. The Executive
shall participate in such program at a level which would result in a performance
bonus equal to 50% of her Base Salary if the target level of performance were
achieved. The annual performance bonus to which the Executive is entitled
pursuant to this Section 3(b) is referred to herein as the "Bonus."
(ii) The payment of each Bonus shall be made within 30 days after the
Company's independent accountants shall have certified the Company's
consolidated financial statements for the fiscal year to which such Bonus
relates.
(iii) If the Company's fiscal year changes, the Executive's opportunity
to earn the Bonus shall not be materially and adversely affected.
(c) Stock Options. In the discretion of the Company's Management Stock
Incentive Committee, the Executive shall be eligible to receive options to
purchase shares of Holding Company common stock ("Common Stock") pursuant to the
terms of the Bell Sports Management Stock Incentive Plans.
30
<PAGE>
(d) Perquisites. During the Employment Period, the Executive shall be
entitled to a cash automobile allowance in the amount of $400 per month.
(e) Reimbursement of Expenses. The Company shall reimburse the
Executive for all expenses necessarily and reasonably incurred by her in
connection with the business of the Company, upon presentation of proper
receipts or other proof of expenditure and subject to such reasonable guidelines
or limitations provided to the Executive and applied prospectively, as
established by the Company.
(f) Vacation. During the Employment Period, the Executive shall be
entitled to paid vacation and sick leave in accordance with Company policy.
(g) Participation in Benefit Plans. During the Employment Period, the
Executive shall be entitled to participate in any profit sharing plan,
retirement plan, group life insurance plan or other insurance plan or medical
expense plan maintained by the Company for its senior executives generally,
which plans shall not differ in value in any manner materially adverse to the
Executive from those in which the Executive currently participates.
4. Termination.
(a) Death. Upon the death of the Executive, this Agreement shall
automatically terminate and all rights of the Executive and her heirs, executors
and administrators to compensation and other benefits hereunder shall cease,
except for (i) Base Salary which shall have accrued to the date of death and
(ii) the rights to indemnification under Section 5 hereof.
(b) Disability. The Company may, at its option, terminate this
Agreement upon written notice to the Executive if the Executive, because of
physical or mental incapacity or disability, fails in any material respect to
perform the services required of her hereunder for a continuous period of 120
days or any 180 days out of any 12-month period. Upon such termination, all
obligations of the Company hereunder shall cease, except for (i) Base Salary
which shall have accrued to the date of termination and (ii) the rights to
indemnification under Section 5 hereof. In the event of any dispute regarding
the existence of the Executive's incapacity hereunder, the matter shall be
resolved by the determination of a majority of three physicians qualified to
practice medicine in the state of the Executive's residence, one to be selected
by each of the Executive and the Company and the third to be selected by such
two designated physicians. For this purpose, the Executive shall submit to
appropriate medical examinations.
31
<PAGE>
(c) Cause. (i) The Company may, at its option, terminate the
Executive's employment under this Agreement for "Cause" (as hereinafter
defined). A termination for Cause shall not take effect until and unless the
Company complies with this Section 4(c)(i). The Executive shall be given written
notice by the Company of the intention to terminate her employment hereunder for
Cause (the "Cause Notice"). The Cause Notice shall state the particular
action(s) or inaction(s) giving rise to termination for Cause. The Executive
shall have 10 days after the Cause Notice is given to cure the particular
action(s) or inaction(s), to the extent a cure is possible. If the Executive so
effects a cure, the Cause Notice shall be deemed rescinded and of no force or
effect.
(ii) As used in this Agreement, the term "Cause" shall mean any one or
more of the following:
(A) the Executive's refusal to perform specific directives of
the Company CEO or such other officer of the Company to whom the
Executive reports, which directives are consistent with the scope and
nature of the Executive's duties and responsibilities as set forth
herein;
(B) the Executive's admission or conviction of a felony or of
any crime involving moral turpitude, fraud, embezzlement, theft or
misrepresentation;
(C) any gross or willful misconduct of the Executive resulting
in substantial loss to the Company or substantial damage to the
Company's reputation; or
(D) any breach by the Executive of any one or more of the
covenants contained in Section 6 or 7 hereof, other than an inadvertent
and unintentional breach of a covenant contained in Section 6 having an
inconsequential effect upon the Company or any of its controlled
affiliates.
(iii) The exercise of the right of the Company to terminate this
Agreement pursuant to this Section 4(c) shall not abrogate the rights or
remedies of the Company in respect of the breach giving rise to such
termination.
(iv) If the Company terminates the Executive's employment for Cause,
she shall be entitled to:
(A) accrued Base Salary through the date of the termination of
her employment;
(B) any Bonus owing but not yet paid for any fiscal year ended
on or before the Executive's termination of employment for Cause;
32
<PAGE>
(C) any amounts owing but not yet paid pursuant to Section
3(e); and
(D) other or additional benefits in accordance with applicable
plans and programs of the Company.
(v) Notwithstanding anything to the contrary contained in this
Agreement, if, following a termination of the Executive's employment for Cause,
a court of competent jurisdiction, in a final determination, determines that the
Executive was not guilty of the conduct that formed the basis for the
termination, the Executive shall be entitled to the payments and the economic
equivalent of the benefits she would have received had her employment been
terminated by the Company without Cause.
(d) Termination Without Cause. If, during the Employment Period, the
Company terminates the employment of the Executive hereunder for any reason
other than a reason set forth in Section 4(a), 4(b) or 4(c):
(i) concurrent with such termination, the Company shall pay to the
Executive an amount equal to her Base Salary accrued through the date of
termination;
(ii) the Company shall continue to pay the Executive her Base Salary
and all other benefits (excluding Bonus) which would otherwise be payable
hereunder for a period of 18 months following the date of termination and the
Executive's coverage under the medical, dental, life and long-term disability
insurance policies maintained by the Company shall remain in effect during such
period;
(iii) all of the Executive's options to purchase Common Stock shall be
immediately 100% exercisable;
(iv) the Executive shall be entitled to any amounts owing but not yet
paid pursuant to Section 3(e); and
(v) the Executive shall be entitled to her rights to indemnification
under Section 5 hereof.
(e) Termination for Good Reason. (i) If, during the Employment Period,
the Executive terminates her employment hereunder for "Good Reason" (as such
term is defined in Section 4(e)(ii) hereof, she shall be entitled to all of the
payments and benefits specified by Sections 4(d)(i) through 4(d)(v) hereof,
inclusive.
(ii) For purposes of this Agreement, "Good Reason" shall mean, without
the Executive's express written consent, the occurrence of any one or more of
the following events:
33
<PAGE>
(A) a material breach of this Agreement by the Company;
(B) any change in the Executive's responsibilities described
in Section 2 in any respect which is materially adverse to the
Executive;
(C) a diminution of any of the Executive's significant duties
or the assignment to the Executive of any duties inconsistent with her
duties or the material impairment of the Executive's ability to
function in the positions described in Section 2 hereof, in each case
only after the Company shall have had an opportunity to cure (any such
cure to be effected within 30 days after appropriate written notice of
the basis for Good Reason is given to the Company by the Executive);
(D) a material reduction of any benefit or perquisite enjoyed
by the Executive, unless a plan providing a substantially similar
economic opportunity is substituted or all comparable executives suffer
a substantially similar reduction or failure;
(E) the relocation of the Executive's office to a location
more than 50 miles from San Jose, California; or
(F) the failure of the Company to obtain the assumption in
writing of its obligation to perform this Agreement by any successor to
all or substantially all of the assets of the Company within 15 days
after a merger, consolidation, sale of assets or similar transaction.
(f) Voluntary Termination. If, during the Employment Period, the
Executive voluntarily terminates her employment hereunder for any reason other
than Good Reason, she shall be entitled to the payments specified by Sections
4(c)(iv)(A) through 4(c)(iv)(D) hereof, inclusive.
5. Indemnification. To the fullest extent permitted by law, the
Restated Certificate of Incorporation of the Holding Company and the Articles of
Incorporation of the Operating Company, the Executive (and her heirs, executors
and administrators) shall be indemnified by the Company and its successors and
assigns. The obligations of the Company pursuant to this Section 5 shall survive
the termination of the Employment Period, except as otherwise provided herein.
6. Confidentiality. The Executive shall at all times during the
Employment Period and thereafter hold in confidence any and all Confidential
Information (as hereinafter defined) that may have come or may come into her
possession or within her knowledge concerning the products, services, processes,
businesses, suppliers, customers and clients of the Company or
34
<PAGE>
its controlled affiliates. The Executive agrees that neither she nor any person
or enterprise controlled by her will for any reason directly or indirectly, for
herself or any other person, use or disclose any trade secrets, proprietary or
confidential information, inventions, manufacturing or industrial processes or
procedures, patents, trademarks, trade names, customer lists, service marks,
service names, copyrights, applications for any of the foregoing, or licenses of
other rights in respect thereof (collectively, "Confidential Information"),
owned or used by, or licensed to, the Company or any of its controlled
affiliates, provided that the Executive may disclose Confidential Information
which has become generally available to the public other than as a result of a
breach of this Agreement by the Executive or pursuant to an order of a court of
competent jurisdiction or of a governmental agency, department or commission.
Upon termination of her employment under this Agreement, the Executive shall
promptly surrender to the Company all documents she believes contain
Confidential Information and that are within her possession or control, other
than documents to which the Executive is or was a party or that relate to the
Executive or the basis, or purported basis, on which her employment was
terminated.
7. Noncompetition and Nonsolicitation. (a) Subject to the following
sentence, the Executive agrees that from the date hereof and subsequent to the
termination of her employment under this Agreement and continuing for a period
of two years (the "Noncompete Period"), neither she nor any person or enterprise
controlled by her will become a stockholder, lender, director, officer, agent or
employee of a corporation or member of or lender to a partnership, engage as a
sole proprietor in any business, act as a consultant to any of the foregoing or
otherwise engage directly or indirectly in any business, that is in competition
with the business then conducted by the Company or any of its controlled
affiliates in any state in the United States or any other country in which the
Company or any of its controlled affiliates has engaged in such business during
the term of the Executive's employment under this Agreement; provided, however,
that the foregoing shall not prohibit the Executive from owning less than two
percent of the outstanding securities of any class of capital stock of a
corporation the securities of which are regularly traded or quoted on a national
securities exchange or on an inter-dealer quotation system.
(b) The Executive agrees that during the Noncompete Period, neither she
nor any person or enterprise controlled by her will (i) solicit for employment
or employ any person who was employed by the Company or any of its controlled
affiliates at any time within one year prior to the time of the act of
solicitation or (ii) in any way cause, influence, induce or attempt to persuade
any person who was employed by the Company or any of its controlled affiliates
at any time within one year
35
<PAGE>
prior to the time of such act to terminate her employment relationship with the
Company or any of its affiliates.
(c) Relief, Reformation; Severability. The Executive acknowledges that
there is no adequate remedy at law for a breach of this Section 7 and that, in
the event of such a breach or attempted breach, the Company shall be entitled to
injunctive or other equitable relief to prevent any such breach, attempted
breach or continuing breach, without prejudice to any other remedies for damages
or otherwise. The Executive agrees that the covenants contained in this
Agreement are separate and are reasonable in their scope and duration and that
the Executive shall not raise any issue of reasonableness as a defense in any
proceeding to enforce any of such covenants. Notwithstanding the foregoing, in
the event that a covenant contained in this Agreement shall be deemed by any
court to be unreasonably broad in any respect, the parties agree that the court
may modify such covenant for the purpose of making such covenant reasonable in
scope and duration. The validity, legality or enforceability of the remaining
provisions of this Agreement shall not be affected by any such modification.
8. Inventions. The Executive hereby assigns to the Company her entire
right, title and interest in and to all discoveries and improvements, patentable
or otherwise, trade secrets and ideas, writings and copyrightable material,
which may be conceived by the Executive or developed or acquired by her during
the term of her employment by the Company, which may pertain directly or
indirectly to the Company's business. The Executive agrees to disclose fully all
such developments to the Company upon its request, which disclosure shall be
made in writing promptly following any such request. The Executive shall, upon
the Company's request, execute, acknowledge and deliver to the Company all
instruments and do all other acts which are necessary or desirable to enable the
Company to file and prosecute applications for, and to acquire, maintain and
enforce, all patents, trademarks and copyrights in all countries.
9. Remedies. The Executive acknowledges that any material breach of
this Agreement will cause irreparable harm to the Company, that such harm will
be difficult if not impossible to ascertain, and that the Company shall be
entitled to equitable relief, including injunction, against any actual or
threatened breach hereof, without bond and without liability should such relief
be denied, modified or vacated. Neither the right to obtain such relief nor the
obtaining of such relief shall be exclusive of or preclude the Company from any
other remedy.
10. Insurance. The Company may, at its election and for its benefit,
insure the Executive against disability, accidental loss or death and the
Executive shall submit to such physical examinations and supply such information
as may be required in connection therewith.
36
<PAGE>
11. Assignment. The rights and benefits of the Executive hereunder
shall not be assignable, whether by voluntary or involuntary assignment or
transfer. This Agreement shall be binding upon, and inure to the benefit of, the
successors and assigns of the Company, and the heirs, executors and
administrators of the Executive, and shall be assignable by the Company to any
entity acquiring substantially all of the assets of the Company, whether by
merger, consolidation, sale of assets or similar transaction.
12. Notices. Any notice required or permitted to be given under this
Agreement shall be sufficient if in writing and personally delivered, sent by
certified or registered mail or sent by overnight courier service as follows: if
to the Executive, to her address as set forth in the records of the Company, and
if to the Company, to the address of its principal executive offices, attention:
Chief Executive Officer, with a copy to Larry A. Barden, Esq., Sidley & Austin,
One First National Plaza, Chicago, Illinois 60603, or to any other address
designated by any party hereto by notice similarly given.
13. Waiver of Breach. A waiver by the Company or the Executive of any
breach of any provision of this Agreement by the other party shall not operate
or be construed as a waiver of any other or subsequent breach by the other
party.
14. Entire Agreement. This Agreement contains the entire agreement of
the parties with respect to the subject matter hereof. This Agreement may be
modified only by an agreement in writing signed by the parties hereto.
15. Costs. In the event that a dispute shall arise between the parties
hereto and such dispute is resolved by a court of competent jurisdiction, all
reasonable attorneys' fees and costs of the Company and the Executive and all
other costs and expenses of the Company and the Executive associated with such
dispute shall be borne by the Company; provided that if it is determined that
the claims of the Executive were without reasonable basis, each party shall bear
her or its own attorneys' fees and costs.
16. Applicable Law. The terms of this Agreement shall be governed by
and construed in accordance with the internal laws (as opposed to the conflict
of laws provisions) of the State of Illinois.
17. Prior Agreements. This Agreement supersedes all prior agreements
between the Executive and the Company concerning the Executive's employment with
the Company, and none of such agreements shall be of any further force or effect
whatsoever.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
37
<PAGE>
BELL SPORTS CORP.
By_________________________________
Terry G. Lee
Chairman of the Board and
Chief Executive Officer
BELL SPORTS, INC.
By_________________________________
Terry G. Lee
Chairman of the Board
and Chief Executive Officer
EXECUTIVE:
-----------------------------------
Linda K. Bounds
38
BELL SPORTS CORP.
EXHIBIT - 11 - STATEMENT RE:
COMPUTATION OF PER SHARE EARNINGS
(Unaudited; In Thousands, Except Per Share Amounts)
<TABLE>
<CAPTION>
Nine Months Ended Three Months Ended
Mar. 29, Mar. 30, Mar. 29, Mar. 30,
1997 1996 1997 1996
--------------------------------------------
<S> <C> <C> <C> <C>
Net (loss) income $(22,414) $(12,382) $(21,943) $ 713
Net effect on net (loss) income
from conversion of other pontentially
dilutive securties 1,820 2,215 819 738
--------------------------------------------
Adjusted net (loss) income $(20,594) $(10,167) $(21,124) $ 1,451
============================================
Weighted average number of common
and common equivalent shares outstanding
- - primary 13,774 13,876 13,774 13,738
Net effect of other potentially dilutive
securities 1,595 1,595 1,595 1,595
--------------------------------------------
Adjusted average shares outstanding for
fully diluted computation 15,369 15,471 15,369 15,333
============================================
Per share amount - fully diluted $ (1.34) $ (0.66) $ (1.37) $ 0.09
============================================
</TABLE>
39
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-28-1997
<PERIOD-START> JUN-30-1996
<PERIOD-END> MAR-29-1997
<EXCHANGE-RATE> 1
<CASH> 26,755
<SECURITIES> 0
<RECEIVABLES> 94,780
<ALLOWANCES> 5,474
<INVENTORY> 76,863
<CURRENT-ASSETS> 211,325
<PP&E> 42,421
<DEPRECIATION> 16,843
<TOTAL-ASSETS> 309,776
<CURRENT-LIABILITIES> 41,014
<BONDS> 154,498
0
0
<COMMON> 142
<OTHER-SE> 114,122
<TOTAL-LIABILITY-AND-EQUITY> 309,776
<SALES> 189,267
<TOTAL-REVENUES> 189,267
<CGS> 135,037
<TOTAL-COSTS> 135,037
<OTHER-EXPENSES> 74,826
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5,467
<INCOME-PRETAX> (26,063)
<INCOME-TAX> (3,649)
<INCOME-CONTINUING> (22,414)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (22,414)
<EPS-PRIMARY> (1.63)
<EPS-DILUTED> (1.34)
</TABLE>
