SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
Bell Sports Corp.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
3) Per unit price or other underlying value of transaction computed pursuant to
Exchange Act Rule 0-11 (set forth the amount on which the filing fee is
calculated and state how it was determined):
- --------------------------------------------------------------------------------
4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
5) Total fee paid:
- --------------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the form or schedule and the date of its filing.
1) Amount previously paid:
----------------------------------------------------------------------------
2) Form, Schedule or Registration Statement No.
----------------------------------------------------------------------------
3) Filing Party:
----------------------------------------------------------------------------
4) Date Filed:
----------------------------------------------------------------------------
<PAGE>
[GRAPHIC OMITTED]
BELL SPORTS CORP.
6350 San Ignacio Avenue
San Jose, CA 95119
(408) 574-3400
Dear Stockholder:
You are cordially invited to attend the 1997 Annual Meeting of Stockholders
of Bell Sports Corp. to be held at 10:00 a.m. local time on Wednesday, November
19, 1997, at The Radisson Resort Scottsdale, 7171 N. Scottsdale Road,
Scottsdale, Arizona 85253. Directions to The Radisson Resort Scottsdale are
included at the back of the accompanying Proxy Statement.
The matters to be considered at the meeting are described in the Proxy
Statement. Regardless of your plans for attending in person, it is important
that your shares be represented at the meeting. Therefore, please mark, date
and sign the enclosed proxy card and return it in the enclosed, business reply
envelope. This will enable you to vote on the business to be transacted whether
or not you attend the meeting.
We hope that you can attend the 1997 Annual Meeting.
Sincerely,
/s/ Terry G. Lee
TERRY G. LEE
Chairman and Chief Executive Officer
October 17, 1997
<PAGE>
BELL SPORTS CORP.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held On November 19, 1997
TO OUR STOCKHOLDERS:
The Annual Meeting of Stockholders (the "Annual Meeting") of Bell Sports
Corp., a Delaware corporation (the "Company"), will be held at 10:00 a.m. local
time on Wednesday, November 19, 1997, at The Radisson Resort Scottsdale, 7171 N.
Scottsdale Road, Scottsdale, Arizona 85253, for the following purposes:
1. To elect three (3) members of the Board of Directors of the Company
to serve three years;
2. To ratify the appointment of Price Waterhouse LLP as independent
public accountants for the Company for its fiscal year ending June 27,
1998; and
3. To transact such other business as may properly come before the
Annual Meeting or any adjournment or postponement thereof.
Only stockholders of record at the close of business on September 19, 1997
are entitled to receive notice of and to vote at the Annual Meeting or any
adjournment or postponement thereof.
Your attention is directed to the accompanying proxy card, Proxy Statement
and 1997 Annual Report to Stockholders. Whether or not you plan to attend the
Annual Meeting in person, you are urged to specify your voting preferences by
marking, dating and signing the enclosed proxy card and returning it in the
enclosed business reply envelope. If you wish to vote in accordance with the
Directors' recommendations, all you need to do is date and sign the proxy card
and return it in such envelope. If you attend the Annual Meeting and wish to
vote in person, you may withdraw your proxy and vote your shares personally.
A complete list of the holders of record of the Company's Common Stock
entitled to vote at the Annual Meeting will be open to examination during
ordinary business hours at the Company's offices located at 15170 N. Hayden
Rd., Suite 1, Scottsdale, Arizona 85260 for 10 days preceding the Annual
Meeting, by any stockholder of the Company for any purpose germane to the
Annual Meeting.
By Order of the Board of Directors
/s/ Linda K. Bounds
LINDA K. BOUNDS
Chief Financial Officer, Secretary
and Treasurer
October 17, 1997
<PAGE>
BELL SPORTS CORP.
PROXY STATEMENT
FOR THE ANNUAL MEETING OF STOCKHOLDERS
To Be Held On November 19, 1997
GENERAL INFORMATION
This Proxy Statement (the "Proxy Statement") is being furnished to the
holders of Common Stock, $.01 par value ("Common Stock"), of Bell Sports Corp.,
a Delaware corporation (the "Company"), in connection with the solicitation of
proxies by the Board of Directors (the "Board of Directors" or the "Board") of
the Company for use at the 1997 Annual Meeting of Stockholders of the Company
to be held at 10:00 a.m. local time on Wednesday, November 19, 1997, at The
Radisson Resort Scottsdale, 7171 N. Scottsdale Road, Scottsdale, Arizona 85253,
and at any and all adjournments or postponements thereof (the "Annual
Meeting"). The Company's principal executive offices are located at 6350 San
Ignacio Avenue, San Jose, California 95119.
Each holder of Common Stock at the close of business on September 19, 1997
(the "Record Date") is entitled to receive notice of and to vote at the Annual
Meeting. At the close of business on the Record Date, there were 13,832,373
shares of Common Stock outstanding, each of which entitles the registered
holder thereof to one vote.
If you are unable to attend the Annual Meeting, you may vote by proxy. The
proxies will vote your shares according to your instructions. If you return a
properly signed and dated proxy card but do not mark a choice on one or more
items, your shares will be voted in accordance with the recommendations of the
Board of Directors as set forth in this Proxy Statement. The proxy card gives
authority to the proxies to vote your shares in their discretion on any other
matter presented at the Annual Meeting.
You may revoke your proxy at any time prior to voting at the Annual
Meeting by delivering written notice to the Secretary of the Company, by
submitting a subsequently dated proxy card or by attending and voting in person
at the Annual Meeting.
The Company will bear the cost of preparing, handling, printing and
mailing this Proxy Statement, the accompanying proxy card and any additional
material which may be furnished to holders of Common Stock, and the actual
expense incurred by brokerage houses, fiduciaries and custodians in forwarding
such materials to beneficial owners of Common Stock held in their names. The
solicitation of proxies will be made by the use of the mails and through direct
communication with certain holders of Common Stock or their representatives by
officers, directors or employees of the Company who will receive no additional
compensation for such solicitation. This Proxy Statement was first sent or
given to holders of Common Stock on or about October 17, 1997.
VOTING INFORMATION
The holders of a majority of the shares of Common Stock outstanding and
entitled to vote must be present in person or represented by proxy at the
Annual Meeting in order for a quorum to be present.
A holder of Common Stock may, with respect to the election of directors
(i) vote for the election of all named director nominees, (ii) withhold
authority to vote for all named director nominees or (iii) vote for the
election of all named director nominees other than any nominee with respect to
whom the holder of Common Stock withholds authority to vote by so indicating in
the appropriate space on the proxy card. A holder of Common Stock may, with
respect to the proposal to ratify the appointment of Price Waterhouse LLP (i)
vote "FOR" such proposal, (ii) vote "AGAINST" such proposal or (iii) "ABSTAIN"
from voting on such proposal.
Properly executed proxy cards which are received by the Company prior to
the Annual Meeting and not revoked, will be voted as directed therein on all
matters presented at the Annual Meeting. In the absence of specific direction
from a holder of Common Stock, proxies will be voted for the election of all
1
<PAGE>
named director nominees and for approval of the ratification of the appointment
of Price Waterhouse LLP. If a proxy card indicates that all or a portion of the
shares of Common Stock represented by such proxy card are not being voted with
respect to a particular proposal, such non-voted shares will not be considered
present and entitled to vote on such proposal, although such shares of Common
Stock may be considered present and entitled to vote on other proposals and
will count for the purpose of determining the presence of a quorum at the
Annual Meeting.
ELECTION OF DIRECTORS (Proposal 1)
The Board of Directors consists of nine persons and is divided into three
classes. The terms of the Class III Directors expire with the Annual Meeting.
Each of the nominees for Class III Director, if elected, will serve three years
until the 2000 Annual Meeting of Stockholders and until a successor has been
elected and qualified. The current Class I and Class II Directors will continue
in office until the 1998 and 1999 Annual Meetings, respectively.
Unless otherwise instructed, the proxy holders will vote the proxies
received by them FOR the three Class III nominees of the Board of Directors
named below. Holders of Common Stock do not have the right to cumulate votes in
the election of directors. Directors are elected by a plurality of the votes
cast. Thus, assuming a quorum is present, with respect to Proposal 1, the three
persons receiving the greatest number of votes will be elected to serve as
members of Class III of the Board of Directors. Accordingly, non-votes with
respect to the election of directors will not affect the outcome of the
election of directors. In the event that any nominee of the Company is unable
or declines to serve as a director at the time of the Annual Meeting, the
proxies will be voted for any nominee who shall be designated by the Board of
Directors to fill the vacancy. It is not expected that any nominee will be
unable or will decline to serve as a director. In the event that additional
persons are nominated for election as directors, the proxy holders intend to
vote all proxies received by them FOR the nominees recommended by the Board of
Directors.
CB Capital Investors, Inc., a Delaware corporation ("CBCI"), Harry H.
Manko, Stephen A. Silverstein and the Company are parties to a Post-Merger
Stockholders Agreement (the "Post-Merger Stockholders Agreement") pursuant to
which CBCI and Messrs. Manko and Silverstein have agreed, with respect to each
election of directors of the Company conducted prior to January 3, 1998, among
other things, to vote their shares of Common Stock in favor of the election of
each of the nominees proposed, recommended or otherwise supported by the Board
of Directors, subject to their right to withhold such vote with respect to not
more than one such nominee, in the aggregate, in their sole discretion. The
Post-Merger Stockholders Agreement also contains certain limitations on the
acquisition and disposition of shares of Common Stock by CBCI and Messrs. Manko
and Silverstein. The Post-Merger Stockholders Agreement was entered into in
connection with the merger (the "AMRE Merger") of a subsidiary of the Company
and American Recreation Company Holdings, Inc. ("AMRE"), pursuant to which AMRE
became a wholly-owned subsidiary of the Company. The AMRE Merger was completed
on July 3, 1995. Mr. Manko is a Director and Vice Chairman of the Company.
Arnold L. Chavkin and Michael R. Hannon, Directors of the Company, are General
Partners of Chase Capital Partners ("CCP"), an affiliate of CBCI. As of
September 19, 1997, CBCI and Mr. Manko owned 2,281,080 and 296,806 shares of
Common Stock, respectively, representing 16.5% and 2.1%, respectively, of the
shares of Common Stock then outstanding. Mr. Silverstein held no shares as of
September 19, 1997.
It is expected that all shares of Common Stock owned by CBCI and Mr. Manko
will be voted FOR the election of the nominees of the Board of Directors named
below.
The Board of Directors recommends a vote FOR election of the named
nominees as directors of the Company (Proposal 1).
Nominees for Directors
Class III -- Nominees to Serve Three Years:
Arnold L. Chavkin, Director, age 46. Mr. Chavkin has been a Director of
the Company since July 1995. Mr. Chavkin served as a Director of AMRE from
April 1993 to July 1995. Mr. Chavkin is a General
2
<PAGE>
Partner of CCP and the President of Chemical Investments, Inc. ("CII"), an
affiliate of CCP. Mr. Chavkin has been a General Partner of CCP since January
1992 and has served as the President of CII since March 1991. CII is an
affiliate of the Chase Manhattan Corporation. Mr. Chavkin is also a Director of
Reading & Bates Corporation, American Radio Systems, Inc. and Wireless One,
Inc. Prior to joining CII, Mr. Chavkin was a specialist in investment and
merchant banking at Chemical Bank for six years.
Phillip D. Matthews, Director, age 59. Mr. Matthews has been a Director of
the Company since November 1989. Mr. Matthews is a business consultant to the
Company and other companies. He served as Chairman of the Board of Wolverine
World Wide, Inc. (a footwear manufacturer and retailer) from 1993 to 1996 and
currently serves as the Lead Director and Chairman of the Executive Committee
of their Board. Mr. Matthews is also a Director of H.F. Ahmanson & Company,
Home Savings of America, Sizzler International, Inc., Wolverine World Wide,
Inc. and several privately held companies.
Christopher Wright, Director, age 40. Mr. Wright has been a Director of
the Company since November 1989. Mr. Wright is a Director of Kleinwort Benson
Limited, an English merchant bank with which he has been employed since 1978,
and an Executive Vice President of Dresdner Kleinwort Benson North America. He
is General Manager of Kleinwort Benson (USA) Inc., the investment advisor to
The KB Mezzanine Fund, L.P. which is a stockholder of the Company. Mr. Wright
is also a Director of Roper Industries, Inc. (a fluid handling and controls
company).
Members of Board of Directors Continuing in Office
Class I -- Serving Until 1998 Annual Meeting:
Michael R. Hannon, Director, age 37. Mr. Hannon has been a Director of the
Company since July 1995. He served as a Director of AMRE from April 1993 to
July 1995. Mr. Hannon has been a General Partner of CCP since January 1997. Mr.
Hannon served as a Principal of Chase Venture Partners, an affiliate of CBCI,
from January 1992 to January 1997. Mr. Hannon chiefly focuses on the
media/telecom and financial services industries at CCP. He is also a Director
of New Cap Reinsurance Holdings Ltd. and several privately-held companies.
W. Leo Kiely III, Director, age 50. Mr. Kiely has been a Director of the
Company since January 1995. Mr. Kiely has been the President and Chief
Operating Officer of Coors Brewing Company since March 1993. From 1982 until he
joined Coors, Mr. Kiely oversaw various operations at Frito-Lay Inc., a
subsidiary of PepsiCo, Inc. Mr. Kiely serves on the Wharton Marketing Advisory
Board and the Wharton Graduate Executive Board. He is also a director of
Signature Resorts, Inc.
Terry G. Lee, Director, Chairman and Chief Executive Officer, age 48. Mr.
Lee also served as President of the Company until the completion of the AMRE
Merger. He joined Bell Helmets, Inc. (a predecessor of the Company, "Bell
Helmets") as Director and the President and Chief Operating Officer in 1984,
and became Chief Executive Officer in 1986. He was also a stockholder and
consultant to Echelon Sports Corporation (a predecessor of the Company) prior
to its acquisition by the Company in 1989. Prior to joining Bell Helmets, Mr.
Lee spent 14 years with Wilson Sporting Goods where his last position was
Senior Vice President -- Sales and Distribution. Mr. Lee became Chief Executive
Officer and Chairman of the Company in November 1989.
Class II -- Serving Until 1999 Annual Meeting:
Kenneth K. Harkness, Director, age 63. Mr. Harkness has been a Director of
the Company since February 1992. Mr Harkness specializes in personally managing
and investing in undeveloped companies. Since 1996, Mr. Harkness has been part
owner and Chief Executive Officer of Ceratech Holdings (a giftware holding
company). From 1993 until 1996, he was Chief Executive Officer of Ramco
Industries, Inc. and of Cirgon Technologies. Mr. Harkness was the Director of
and the Chief Executive Officer and Guidance Technologies, Inc. from 1989
through 1992.
Harry H. Manko, Director and Vice Chairman, age 70. Mr. Manko has been a
Director of the Company and the Vice Chairman of the Company since July 1995.
Mr. Manko headed AMRE and its predecessors for 41 years. Mr. Manko has served
as Chairman of the Board and a Director of AMRE since April 1993. From 1984 to
1993, Mr. Manko was President and Chief Executive Officer of American
Recreation Group, L.P., a predecessor of AMRE. Mr. Manko currently serves as
the President of the
3
<PAGE>
Bicycle Products Supplier Association, previously named Bicycle Wholesale
Distributor Association ("BWDA"). He formerly served as the Treasurer of BWDA
and as President of the Bicycle Institute of America.
Frederick W. Winter, Director, age 52. Mr. Winter has been a Director of
the Company since October 1991. Mr. Winter has been the Dean of the Joseph M.
Katz Graduate School of Business at the University of Pittsburgh since August
1997. He previously served as the Dean of the School of Management at the
University of Buffalo from 1994 to 1997 and as the Head of the Department of
Business Administration at the University of Illinois from 1986 to 1993. He
specializes in the areas of marketing management and marketing strategy. Mr.
Winter is also a Director of Alkon Corporation and Rand Capital Corp.
Directors Meetings and Committees
The Board of Directors held six meetings during the Company's fiscal year
ended June 28, 1997 ("Fiscal 1997"), including four regular meetings and two
special meetings. No Director attended fewer than 75% of the meetings of the
Board or committees thereof on which he served, except for Messrs. Kiely and
Winter.
The Board of Directors has an Audit Committee comprised of Messrs. Hannon,
Winter and Wright. The Audit Committee reviews the results and scope of the
audit and other services provided by the Company's independent public
accountants and recommends the appointment of independent public accountants to
the Board of Directors. See "Ratification of Appointment of Independent Public
Accountants". The Audit Committee met two times during Fiscal 1997.
The Board of Directors has a Compensation Committee comprised of Messrs.
Chavkin, Harkness, Kiely and Matthews. The Compensation Committee approves all
executive compensation other than certain matters relating to stock options.
The Compensation Committee met four times during Fiscal 1997.
The Board of Directors has a Management Stock Incentive Committee
comprised of Messrs. Chavkin, Kiely and Harkness. The Management Stock
Incentive Committee has responsibility for granting stock options to eligible
members of management under, and otherwise administers, the Company's Restated
and Amended 1991 Management Stock Incentive Plan (the "1991 Plan"), its
Restated and Amended 1992 Management Stock Incentive Plan (the "1992 Plan"),
and its 1996 Stock Option Plan (the "1996 Plan"). The Management Stock
Incentive Committee met three times during Fiscal 1997.
The Board of Directors has an Outside Directors Stock Option Committee
with Mr. Lee as its sole member.
The Board has no nominating committee. Selection of nominees for the Board
is made by the entire Board of Directors. The names of potential nominees for
the Company's Board should be directed to the Company's Secretary, Linda K.
Bounds, at Bell Sports Corp., 6350 San Ignacio Avenue, San Jose, California
95119.
Members of the Board of Directors who are employees of the Company do not
receive compensation for services on the Board or any committees thereof.
Non-employee directors receive an immediately exercisable option to purchase
Common Stock granted under the Restated and Amended Bell Sports Corp. 1993
Outside Directors Stock Option Plan (the "1993 Plan"), with an exercise price
per share equal to 50% of the fair market value of a share of Common Stock on
the date of grant. The number of shares of Common Stock subject to each such
option is determined by dividing $10,000 by 50 percent of the fair market value
of a share of Common Stock on the date of grant. For purposes of the 1993 Plan,
the fair market value of a share of Common stock on a given day is deemed to be
the average of the high and low sales price of a share of Common Stock as
reported by The Nasdaq Stock Market on that day.
In addition, each non-employee director of the Company receives, pursuant
to the terms of the 1993 Plan, an option to purchase 2,000 shares of Common
Stock on the date of each annual meeting of stockholders, assuming the
continued service of such person as a non-employee director immediately
following such meeting. Any person commencing service as a non-employee
director will also receive, upon commencement of such service, an option to
purchase 5,000 shares of Common Stock. Each stock option described in this
paragraph has an exercise price per share equal to the fair market value of a
share
4
<PAGE>
of Common Stock on the date of grant, becomes exercisable incrementally in
equal amounts on the first three anniversaries of its date of grant, and in the
event of (i) the dissolution or liquidation of the Company or (ii) under
certain circumstances, the reorganization, merger or consolidation of the
Company, will become exercisable in full.
In Fiscal 1997, each non-employee director received 3,200 options at
$3.125 per share in lieu of a cash retainer fee and 2,000 options at $6.25 per
share for continuing service on the Board.
In Fiscal 1997, Mr. Matthews received aggregate compensation of $51,600
for consulting services provided to the Company. See also "Compensation
Committee Interlocks and Insider Participation".
EXECUTIVE OFFICER COMPENSATION
General
This section of the Proxy Statement sets forth certain information
pertaining to compensation of the Chief Executive Officer of the Company and
the five other most highly compensated executive officers of the Company during
Fiscal 1997 (collectively, the "Named Executive Officers"):
Summary Compensation Table
The table below summarizes the annual and long-term compensation paid to
each of the Named Executive Officers for all services rendered to the Company
during the last three fiscal years, in accordance with the Securities and
Exchange Commission ("SEC") rules relating to disclosure of executive
compensation.
<TABLE>
<CAPTION>
Long-Term
Compensation
Annual Compensation Awards
-------------------------------------- --------------------------------
Restricted Securities
Name and Fiscal Other Annual Stock Underlying All Other
Principal Position Year Salary Bonus Compensation(1) Awards ($)(2) Options (#)(3) Compensation(4)
- ------------------------------ -------- ---------- --------- ----------------- --------------- ---------------- ----------------
<S> <C> <C> <C> <C> <C> <C> <C>
Terry G. Lee ............... 1997 $392,885 $50,000 209,363 $5,155
Chairman and Chief 1996 375,027 100,000 2,124
Executive Officer 1995 365,385 $ 46,669 248,938 4,030
Harry H. Manko ............ 1997 $251,967 $8,480
Vice Chairman (5) 1996 352,296 $684,200 35,000 3,644
Mary J. George ............ 1997 $239,962 $50,000 148,500 $3,193
President and Chief 1996 207,069 $167,726 125,000 1,626
Operating Officer (6) 1995 101,269 25,000 1,200
Howard A. Kosick ............ 1997 $195,039 $50,000 111,855 $4,581
U.S. Group President 1996 165,016 50,000 4,181
1995 170,959 $50,000 $ 49,813 136,425 4,243
Robert Alan McCaughen ...... 1997 $128,573 $34,357 $ 79,531
President -- Canada (7) 1996 260,524 10,000
Bernie M. Kotlier ......... 1997 $177,515 $45,000 $110,099 $25,000 70,000 $4,232
President--Specialty Retail 1996 132,501 156,666 10,000 1,688
and Service Cycle
Division (8)
</TABLE>
- ------------
(1) The Fiscal 1997 amount includes, in part, payment of auto expenses for Mr.
Kotlier of $4,717. The Fiscal 1997 amounts also include relocation
reimbursements paid by the Company to Mr. McCaughen of $79,531 and to Mr.
Kotlier of $105,382,which includes a non-taxable amount of $21,393. Fiscal
1996 amounts include, in part, relocation reimbursements paid by the
Company to Mr. Kotlier of $156,666 and to Ms. George of $163,326, which
includes a non-taxable amount of $5,846. Mr. Lee's Fiscal 1995 amount
includes, in part, payment of auto expenses totaling $26,776 and club dues
of $18,392. The Fiscal 1995 amount includes relocation reimbursements paid
by the Company to Mr. Kosick of $49,813. See footnotes 5 and 7 with
respect to Messrs. Manko and McCaughen, respectively.
5
<PAGE>
(2) The number and value of the aggregate restricted stock holdings at the end
of fiscal 1997 for each Named Executive Officer is as follows: For each of
Mr. Lee, Ms. George and Mr. Kosick: 7,082 shares, $55,332 and Mr. Kotlier
no shares. The restricted stock awards reflected in the table vest
incrementably in equal amounts on the first three anniversaries of the
date of the grant.
(3) Certain Fiscal 1997, Fiscal 1996 and Fiscal 1995 amounts include the grant
of replacement stock options. See "Ten-Year Option Repricing."
(4) The Fiscal 1997 amounts include the following annual Company contributions
to the Bell Sports Corp. Employees' Retirement and 401(k) Plan: Mr. Lee
$4,673, Mr. Manko $4,506, Ms. George $2,717, Mr. Kosick $4,299, and Mr.
Kotlier $4,018. The Fiscal 1997 amounts also include the following life
insurance premiums paid by the Company: Mr. Lee $482, Mr. Manko $3,974,
Ms. George $475, Mr. Kosick $283, and Mr. Kotlier $214.
(5) Mr. Manko became an employee of the Company on July 3, 1995, upon
consummation of the AMRE Merger. Pursuant to a prior employment agreement
with AMRE, the Company paid Mr. Manko $684,200 in lieu of signing and
annual bonuses through June 30, 1996.
(6) Ms. George became an employee of the Company on October 19, 1994.
(7) Mr. McCaughen's Fiscal 1997 and Fiscal 1996 salary includes $2,625 and
$90,585, respectively, of sales commissions paid pursuant to an agreement
entered into by AMRE in connection with the acquisition of Denrich
Sporting Goods by AMRE in 1991. Mr. McCaughen became an employee of the
Company on July 3, 1995, upon consummation of the AMRE Merger.
(8) Mr. Kotlier became an employee of the Company on July 3, 1995, upon
consummation of the AMRE Merger. Effective April 28, 1997, Mr. Kotlier
ceased to be employed by the Company.
Option Grants in Last Fiscal Year
The table below provides information relating to grants of stock options
by the Company during Fiscal 1997 to each of the Named Executive Officers
(including replacement stock options). See "Ten-Year Option Repricing". The
Company has never granted any stock appreciation rights.
<TABLE>
<CAPTION>
% of Total Potential Realizable Value
Number of Stock at Assumed Annual Rates of
Securities Options Stock Price Appreciation for
Underlying Granted to Ten-Year Option Term(2)
Options Employees Exercise Expiration -----------------------------
Name Granted (#)(1) in Fiscal Year Price Date 5% 10%
- ------------------------- ---------------- ---------------- ---------- ------------ ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Terry G. Lee ......... 209,363 15% $7.06 8/26/06 $ 929,571 $ 2,355,715
Mary George ............ 148,500 11% $7.06 8/26/06 659,339 1,670,896
Howard A. Kosick ...... 111,855 8% $7.06 8/26/06 496,636 1,258,573
Bernie M. Kotlier ...... 70,000 5% $7.06 8/26/06 310,800 787,628
Increase in market value of Common Stock for all stockholders at assumed
annual rates of stock price appreciation over 10-year period above. (3) .............. $68,000,000 $172,200,000
</TABLE>
- ------------
(1) These awards were made pursuant to the 1992 Plan. Under this plan, the
exercise price per share must not be less than 100% of the fair market
value of one share of Common Stock on the date of grant of option. The
options vest ratably in one-third increments over either an eighteen-month
or a three-year period, and may not be exercised ten years after the date
of grant. In the event of a change in control, the Board of Directors may
accelerate the vesting of these options.
(2) The gains shown in these columns result from calculations assuming 5% and
10% growth rates as set by the SEC and are not intended to forecast future
stock price performance.
(3) These amounts represent the increase in the market value of outstanding
shares of Common Stock (approximately 13.8 million) as of June 28, 1997
that would result from the same stock price assumptions used to show the
Potential Realizable Values for the Named Executive Officers.
Aggregated Option Exercises in Last Fiscal Year and Fiscal Year End Option
Values
The table below provides certain information relating to the stock options
held by each of the Named Executive Officers at the end of Fiscal 1997. No
stock options were exercised by the Named Executive Officers during Fiscal
1997.
6
<PAGE>
<TABLE>
<CAPTION>
Value of Unexercised
In-the-Money
Number of Securities Underlying Options at FY-End
Unexercised Options at FY-End (based upon $7.813 per share)
------------------------------- ------------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
- ---------------------------- ------------- --------------- ------------- --------------
<S> <C> <C> <C> <C>
Terry G. Lee ............ 85,408 139,575 $ 52,515 $105,030
Harry Manko ............... 52,077 23,333 246,497 0
Mary George ............... 25,000 123,500 18,813 92,934
Howard A. Kosick ......... 49,005 74,570 28,057 56,114
Robert A. McCaughen ...... 3,333 6,667 0 0
Bernie M. Kotlier ......... 3,333 0 2,508 0
</TABLE>
Ten-Year Option Repricing
The table below provides certain information relating to certain grants of
stock options made by the Company in exchange for previously granted options.
No such replacement grants were made by the Company before March 31, 1995.
<TABLE>
<CAPTION>
Exercise
Market Price Price at Length of Original
Number of of Stock at Time of Option Term
Options Time of Repricing New Remaining at
Repriced or Repricing or or Exercise Date of Repricing
Name Date Amended Amendment Amendment Price or Amendment
- -------------------------------- ---------- ------------- -------------- ----------- ---------- -------------------
<S> <C> <C> <C> <C> <C> <C>
1997:
Terry G. Lee .................. 08/27/96 100,000 $ 7.06 $12.94 $ 7.06 8 years
Chairman and Chief 08/27/96 109,363 $ 7.06 $13.87 $ 7.06 9 years
Executive Officer(1)
Mary J. George ............... 08/27/96 75,000 $ 7.06 $ 8.69 $ 7.06 9 years
President and
Chief Operating Officer
Howard A. Kosick ............ 08/27/96 50,000 $ 7.06 $12.94 $ 7.06 8 years
U.S. Group President(1) 08/27/96 61,855 $ 7.06 $13.87 $ 7.06 9 years
John L. Carenza ............... 08/27/96 32,000 $ 7.06 $13.87 $ 7.06 9 years
Executive Vice President(1)
Bernie M. Kotlier ............ 08/27/96 10,000 $ 7.06 $ 9.13 $ 7.06 9 years
President--Specialty Retail and
Service Cycle Division
Linda K. Bounds ............... 08/27/96 5,000 $ 7.06 $11.88 $ 7.06 9 years
Senior Vice President, 08/27/96 20,000 $ 7.06 $13.87 $ 7.06 9 years
Chief Financial Officer, 08/27/96 5,000 $ 7.06 $15.12 $ 7.06 8 years
Secretary and Treasurer
1996:
Mary J. George ............... 01/15/96 25,000 $ 8.69 $15.12 $ 8.69 8 years
President and Chief 01/15/96 50,000 $ 8.69 $12.94 $ 8.69 9 years
Operating Officer
1995:
Terry G. Lee .................. 03/31/95 200,000 $13.87 $24,87 $13.87 6 years
Chairman and Chief 03/31/95 21,000 $13.87 $35.50 $13.87 7 years
Executive Officer
Howard A. Kosick ............ 03/31/95 100,000 $13.87 $24.87 $13.87 6 years
U.S. Group President 03/31/95 20,000 $13.87 $35.50 $13.87 7 years
Linda K. Bounds ............... 03/31/95 10,000 $13.87 $24.87 $13.87 6 years
Senior Vice President, 03/31/95 10,000 $13.87 $35.50 $13.87 7 years
Chief Financial Officer,
Secretary and Treasurer
John L. Carenza ............... 03/31/95 35,000 $13.87 $24.87 $13.87 6 years
Executive Vice President 03/31/95 10,000 $13.87 $35.50 $13.87 7 years
</TABLE>
- ------------
(1) Messrs. Lee, Kosick and Carenza returned options to purchase 348,938,
186,426 and 53,212 shares of Common Stock, respectively, during Fiscal
1997 in exchange for options to purchase 209,363, 111,855 and 32,000
shares of Common Stock, respectively. See "Report Of Management Stock
Incentive Committee Regarding the Grant of Replacement Options During
Fiscal 1997".
7
<PAGE>
Report of Management Stock Incentive Committee Regarding the Grant of
Replacement Options During Fiscal 1997
After the Company completed the AMRE Merger in July 1995, it became
apparent to the Management Stock Incentive Committee that the Company's
existing stock option program was in need of restructuring. There were few
stock options remaining available to grant, yet many new executives in either
new or broader positions that might effectively be motivated by stock
incentives. In addition, the Management Stock Incentive Committee wanted to
broaden the overall participation in the stock option program. Rather than
expand the number of options available to grant and increase the grants to
employees, the Management Stock Incentive Committee determined to focus on the
stock option program and the Company's bonus program as a part of an integrated
incentive program. As a result of this focus on August 27, 1996, the Management
Stock Incentive Committee adopted a program permitting employees eligible to
participate in the Company's bonus program to elect to forego their Fiscal 1997
operating bonus and return all outstanding stock options granted after April
1992 in exchange for replacement stock options (the "Replacement Program"). In
general, employees eligible to participate in the Company's bonus program are
eligible for 10%-to-125% of their annual base salary if the Company meets or
exceeds certain Board approved net operating income goals.
Senior management with long tenure, including Messrs. Lee and Kosick,
agreed to cancel 40% of their existing stock options granted after April 1992
in order to increase the number of stock options available for grant, thereby
facilitating the broadening of participation in the stock option program and
enabling the Company to create a voluntary program by which other employees
participating in the Company's bonus program would be able to replace existing
stock options in exchange for foregoing their Fiscal 1997 operating bonus. See
"Ten-Year Option Repricing".
THE MANAGEMENT STOCK INCENTIVE
COMMITTEE OF THE BOARD OF DIRECTORS
W. Leo Kiely III
Arnold L. Chavkin
Kenneth K. Harkness
Employment Agreements
The Company has an employment agreement with Mr. Lee which provides that
he will serve as Chairman of the Board and Chief Executive Officer of the
Company and an employment agreement with Mr. Kosick which provides that he will
serve as the Executive Vice President, Chief Financial Officer, Secretary and
Treasurer of the Company. As described below, Mr. Kosick became U.S. Group
President in Fiscal 1997. The employment agreements with Messrs. Lee and Kosick
are each for a term expiring on June 30, 1999 unless terminated earlier in the
event of the employee's death or disability, termination by the Company with or
without cause (as defined in the agreement) or termination by the employee with
or without good reason (as defined in the agreement), with automatic renewals
for successive one-year periods after the initial term thereof unless either
the Company or the employee terminates such renewal provision at least one year
prior to any such renewal. Each agreement provides for an initial annual base
salary, which in the case of Mr. Lee is $375,000 and in the case of Mr. Kosick
is $165,000, annual salary increases and annual cash bonuses based on actual
operating income as compared to projected operating income targets approved by
the Board of Directors, up to a maximum annual bonus of 125% of the then
existing base salary for each of Mr. Lee and Mr. Kosick. Under the employment
agreements, Messrs. Lee and Kosick are entitled to participate in the Company's
benefit plans and programs, and Mr. Lee is also entitled to reimbursement for
any deductibles and co-payments related to medical expenses. In the event of
change in control of the Company during the two year period ending June 30,
1999, the terms of each employment agreement will automatically be extended for
a two-year period following such change in control. Under each employment
agreement, in the event of early termination of employment by the Company
without cause or by the employee for good reason, the Company will continue to
pay the employee his base salary, bonus and all other benefits payable for two
years or until the end of the term of the employment agreement, whichever is
longer. In the event of early termination of employment due to the disability
of the employee, the Company will continue to pay the employee his base salary
until the
8
<PAGE>
end of the term of the agreement, less all payments under any disability plan
covering the employee. In the event of early termination of employment due to
the death of the employee, the Company will pay the employee's executor or
administrator four months of base salary and bonus. In the event that the
Company terminates the automatic renewal provision, the Company will continue
to pay the employee his base salary, bonus and all other benefits otherwise
payable for six months following the expiration of the term of the employment
agreement. Each agreement provides for an employee noncompetition period
following termination of employment prior to a change in control of the Company
which will extend for two years or the period of salary continuation payments,
whichever is longer.
In connection with the relocation of the Company's corporate offices to
San Jose, California during 1997, Mr. Kosick and the Company entered into an
agreement dated September 24, 1997 which provides that Mr. Kosick will continue
to serve as U.S. Group President of the Company and the Company will continue
to reimburse Mr. Kosick for his commuting expenses and his living expenses in
San Jose. The agreement also provides that, due to such relocation, Mr. Kosick
may elect early termination of his employment for good reason and that upon any
such termination Mr. Kosick would receive pursuant to his employment agreement
the payments and benefits described above for early termination of his
employment for good reason. In addition, unvested restricted stock and unvested
phantom stock units would vest and his unexercisable stock options would become
exercisable for a period ending 90 days after the end of the two-year period
following any such termination of employment.
The Company has an employment agreement with Mr. Manko, which provides
that Mr. Manko will serve as Vice Chairman of the Board of Directors of the
Company and as Chairman of AMRE and of the specialty retail division of the
Company. The employment agreement is for a term ending on December 31, 1998,
unless terminated earlier for any reason which is the same as those provided in
the employment agreements with Messrs. Lee and Kosick. The employment agreement
provides for an annual base salary of $250,000 through June 28, 1996 and
thereafter, annual salary increases, and annual cash bonuses for fiscal years
ending on or after June 30, 1997 based on actual operating income as compared
to projected operating income targets approved by the Board of Directors, up to
a maximum annual bonus of 125% of his then existing base salary. Mr. Manko may
elect to relinquish his duties as Chairman of the specialty retail division, in
which event any annual bonus otherwise payable would be reduced in a manner
mutually agreeable to Mr. Manko and the Company based upon his duties as the
non-line Vice Chairman of the Board of Directors of the Company and other
responsibilities. Under the employment agreement, Mr. Manko is entitled to
participate in the Company's benefit plans and programs. The employment
agreement provides that in the event of early termination of employment by the
Company without cause (as defined in the agreement) or by Mr. Manko for good
reason (as defined in the agreement), the Company will continue to pay Mr.
Manko his base salary and all other benefits otherwise payable until the end of
the term of the employment agreement, and if such termination occurs following
a change in control of the Company, Mr. Manko will be entitled to receive a
lump sum amount equal to the present value of such payments. In the event of
early termination of employment due to the disability or death of Mr. Manko,
the Company will continue to pay Mr. Manko, or his executor or administrator in
the event of his death, his base salary, bonus and all other benefits otherwise
payable for a period of four months following such termination of employment.
Mr. Manko's employment agreement also provides for a noncompetition period
following termination of employment which would extend for two years or the
period of salary continuation payments, whichever is longer.
The Company has an employment agreement with Ms. George which provides
that she will serve as President and Chief Operating Officer of the Company.
The employment agreement is for a term ending on February 15, 2000 unless
terminated earlier in the event of Ms. George's death or disability,
termination by the Company with or without cause (as defined in the agreement)
or termination by Ms. George. The agreement, which was amended effective July
1, 1997, provides for an annual base salary of $300,000, subject to annual
increases in the discretion of the Company, annual cash bonuses in accordance
with the Company's management incentive program and grants of restricted
phantom stock units if the Common Stock trades at specified prices, the number
of such Units to be based upon a multiple of one or two times the amount of Ms.
George's base salary divided by the market price of the Common Stock. Such
restricted phantom stock units vest upon the earlier of the termination of Ms.
George's employment
9
<PAGE>
or a Change in Control of the Company (as defined in the agreement), provided
that unvested restricted phantom stock units are forfeited if Ms. George's
employment is terminated by the Company for cause or voluntarily by Ms. George.
Under the agreement, as amended, Ms. George is entitled to participate in the
Company's benefit plans and programs, reimbursement for any deductibles and
co-payments related to medical expenses and reimbursement of automobile
expenses and her expenses for commuting to San Jose. In the event of early
termination of Ms. George's employment by the Company without cause or
voluntarily by Ms. George, the Company will continue to pay Ms. George her base
salary and all other benefits, excluding bonus, for 18 months and, in the case
of termination of her employment by the Company without cause, Ms. George's
restricted phantom stock units vest and her unexercisable stock options become
exercisable.
The Company has a memorandum of understanding with Mr. McCaughen which
provides that he will serve as President of the Company's Canadian operations
for a term ending on June 30, 1999. Effective July 1, 1997, Mr. McCaughen is
entitled to an annual base salary of $150,000 and is eligible to receive an
annual cash bonus of up to 50% of such base salary in accordance with the
Company's management incentive programs. In addition, Mr. McCaughen is entitled
to a payment of $80,000 as reimbursement of his expenses of relocating to
Granby, Quebec, Canada.
The Company has entered into a severance agreement with Mr. Lee which
provides that if Mr. Lee's employment with the Company is terminated upon
certain circumstances (a "Qualifying Termination") during the two-year period
after a change in control (as defined in the agreement), Mr. Lee will receive a
severance payment and certain insurance benefits. A Qualifying Termination
includes a termination of employment with the Company, except for cause, death
or disability, or by Mr. Lee during such two-year period for good reason (as
defined in the agreement) or for any reason during the 30-day period commencing
six months after the change in control. The severance payments and other
benefits to be provided to Mr. Lee upon a Qualifying Termination would be
determined in accordance with his severance agreement and not his employment
agreement.
Upon a Qualifying Termination, in addition to the payment of any earned
unpaid base salary, deferred compensation and accrued vacation pay, Mr. Lee
will be entitled to receive a pro-rated bonus plus an amount equal to three
times his annual base salary (at the highest rate paid to him during the prior
twelve months) plus three times the average bonus paid to him over the prior
five fiscal years. Mr. Lee will also be entitled to receive the value of any
unvested employer contributions for his benefit under the Company's 401(k)
Plan. For the one- year period commencing with the Qualifying Termination, Mr.
Lee will be entitled to cause the Company to repurchase certain shares of
Common Stock owned by him in the same manner as provided in his employment
agreement. Mr. Lee will also be entitled to receive certain insurance benefits
for the three-year period commencing with the date of the termination.
If it is determined that payments made to Mr. Lee under his severance
agreement or otherwise would be subject to the excise tax imposed by Section
4999 of the Internal Revenue Code of 1986, as amended (the "Code") and it is
determined that the payments made to Mr. Lee after imposition of such excise
tax would be less than the amount he would receive if he received the maximum
amount that could be paid to him without the imposition of such excise tax,
then the amount paid under his severance agreement will be reduced so that the
payments made to him will be one dollar less than the amount that would require
payment of such excise tax.
The Company has also entered into a severance agreement with Mr. Kosick,
the terms of which, including the amounts to be paid thereunder, are the same
as Mr. Lee's, except that (i) upon a Qualifying Termination, Mr. Kosick's
severance payment would include an amount equal to two times his annual base
salary plus two times the average bonus paid to him over the prior five fiscal
years, (ii) Mr. Kosick would be entitled to receive insurance benefits for two
years commencing with the date of termination and (iii) Mr. Kosick would be
entitled to receive reimbursement for certain outplacement expenses.
In the case of a merger, consolidation, dissolution or liquidation of the
Company, or in any other case in which the Management Stock Incentive Committee
determines that it is in the Company's best interest, the Management Stock
Incentive Committee may accelerate the exercisability of any outstanding stock
options issued under the 1991 Plan, the 1992 Plan or the 1996 Plan.
10
<PAGE>
Compensation Committee Interlocks and Insider Participation
Mr. Lee and Mr. Matthews are the general partners of Mission Leasing and
Hayden Leasing ("Hayden Leasing"), general partnerships. On November 1, 1995,
the Company entered into a lease agreement with Hayden Leasing pursuant to
which the Company leased an airplane for a monthly fee of $3,000 during Fiscal
1997. This lease agreement terminates on June 30, 1999. The Company also leases
automobiles for certain of its employees from Hayden Leasing. Payments under
these leases, excluding operating expenses, approximated $55,100 during Fiscal
1997. Operating expenses approximated $61,500 during Fiscal 1997.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
Compensation Policies
The Compensation Committee of the Board of Directors (the "Compensation
Committee") develops and recommends to the Board of Directors the executive
compensation policies of the Company. The Company also administers the
Company's compensation plans and recommends for approval by the Board of
Directors the compensation to be paid to the Chief Executive Officer and with
the advice of the Chief Executive Officer, the other executive officers of the
Company. The Compensation Committee consists of 4 non-employee directors.
The Compensation Committee has, from time to time, sought the advice of an
independent compensation consulting firm concerning the Company's compensation
policies, specific compensation packages and appropriate levels of executive
compensation.
The philosophy of the Compensation Committee and the Company is to provide
competitive salaries as well as competitive incentives designed to:
* Attract and retain well-qualified executives necessary to the Company's
long-term success;
* Provide incentives relating to achievement of short-term individual,
divisional and corporate goals;
* Provide incentives for achievement of long-term divisional and corporate
financial goals; and
* Align the interests of management with those of the stockholders to
encourage the achievement of continuing increases in stockholder value.
The compensation mix reflects a balance of annual base salary payments,
annual incentive bonus payments, long-term stock based incentives and other
competitive executive benefits.
Base Salary
It is the Compensation Comittee's policy to establish base salaries at
levels and provide benefit packages that are considered to be competitive to
attract and retain well-qualified executives. Base salaries of senior
executives are determined by the Compensation Committee by comparing each
executive's position with similar positions in companies of similar type, size
and financial performance. The Compensation Committee uses surveys to make this
comparison. Although some of the companies included in the peer index used in
the graph of cumulative total stockholder return are among the companies
included in the surveys, the surveys are not limited to those companies since
the Company competes for talent with a wide range of corporations. Other
factors considered by the Compensation Committee are the executive's
performance, the executive's current compensation and the Company's or the
applicable business unit's performance. Although the Compensation Committee
does not give specific weight to any particular factor, the most weight is
given to the executive's performance. In general, base salaries for the
Company's executive officers during Fiscal 1997 were equal to or slightly below
the median of salaries paid by companies included in the surveys. The Fiscal
1997 average base salary of senior executives increased over the previous
year's level as a result of a combination of factors, including improved
individual performance, improved performance by the Company, promotions and
increased responsibilities.
11
<PAGE>
Annual Bonus Plan
The existing annual bonus plan was designed to provide incentives and
rewards for achievement of short-term individual and business unit goals by
giving salaried employees the opportunity for bonuses based on individual
performance and the performance of the business unit to which the employee is
assigned. In the case of senior executive officers, the bonus is based solely
on the performance of the Company. In the case of all other employees, the
bonus is based on the achievement of individual performance goals (25%
weighting) and the performance of the Company and/or the applicable business
unit (75% weighting). Individual performance goals are tailored to each
individual's position and duties and vary in terms of number, scope and
substance among the eligible employees. Individual performance goals for
employees are recommended by management, reviewed, modified (to the extent
appropriate) and approved by a supervisor and then reviewed with the employee.
The performance goals for each business unit and the Company as a whole relate
to the achievement of predetermined net operating income levels . Company and
business unit goals are established before the start of each fiscal year and
are reviewed and approved by the Compensation Committee. Awards under the
annual bonus plan are based on a percentage of earned salary. Bonuses are
conditioned on achieving minimum or "threshold" goals, and are capped at a
maximum amount (10% to 125% of salary) and may not exceed specified levels.
During Fiscal 1997, bonuses were paid out for employee's achievement of
individual performance goals and certain business unit operating results. As
the Company as a whole did not meet the net operating income goals, no bonuses
were paid which were based on total Company performance.
See "Report of Management Stock Incentive Committee Regarding the Grant of
Replacement Options During Fiscal 1997". Some level of annual bonus may
currently be earned by approximately 285 salaried employees.
Long-Term Stock Based Incentives
Stock option, restricted stock and phantom unit awards are designed to
encourage long-term investment in the Company by participating executives, more
closely align executive and stockholder interests and reward executives and
other key employees for building stockholder value. The Compensation Committee
believes stock ownership by management is beneficial and stock based awards
have been granted by the Company to executives and other key employees over the
last five years.
Stock options are granted at the fair market value price of the Common
Stock on the date of grant, are subject to vesting over time and only have
future value for the employees if the stock price appreciates from the date of
grant. Restricted stock and phantom unit awards are subject to vesting
criteria, including, in some instances, performance goals. Factors influencing
stock based grants to employees include performance of the Company, relative
levels of responsibility, contributions to the business of the Company and
competitiveness with other growth oriented companies. As of September 19, 1997,
approximately 140 management employees hold stock options.
Benefits
Benefits offered to key executives are largely those that are offered to
the general employee population, such as group health and life insurance
coverage and participation in the Bell Sports Corp. Employees' Retirement and
401(k) Plan. In addition, certain executives are provided a Company automobile,
use of a club membership or reimbursement of any deductibles and co-payments
related to health expenses. Benefits are not tied directly to corporate
performance.
12
<PAGE>
Chief Executive Officer
The Chief Executive Officer's Compensation is based upon the policies and
objectives discussed above. Mr. Lee's annual base salary was $405,000 at the
end of Fiscal 1997, an increase of 8% above the Fiscal 1996 level. Mr. Lee
participated in the voluntary Replacement Program and did not receive a cash
bonus during Fiscal 1997. Going forward, 100% of Mr. Lee's bonus opportunity is
based on the net operating income goal for the Company established at the
beginning of the fiscal year.
In Fiscal 1997, Mr. Lee was granted options to purchase 209,363 shares of
Common Stock at an exercise price of $7.06 per share. These options replaced
options to purchase 348,938 shares of Common Stock. See "Ten-Year Option
Repricing" and "Report of Management Stock Incentive Committee
Regarding the Grant of Replacement Options During Fiscal 1997". Mr. Lee was
also awarded 7,082 shares of restricted stock. See "Summary Compensation
Table".
The Compensation Committee believes that the Company's executive
compensation policies and programs serve the interests of the Company and its
stockholders. All actions and recommendations of the Compensation Committee
attributable to Fiscal 1997 compensation were unanimous and all recommendations
were approved and adopted by the Board of Directors without modification.
THE COMPENSATION COMMITTEE OF
THE BOARD OF DIRECTORS
Phillip D. Matthews (Chairman)
Arnold L. Chavkin
Kenneth K. Harkness
W. Leo Kiely III
13
<PAGE>
PERFORMANCE GRAPH
The following performance graph compares the cumulative return on the
Common Stock since June 27, 1992 with The Nasdaq Market Index and the Media
General Financial Services Sporting Goods Index (which includes the Company).
The graph assumes an initial investment of $100 on June 27, 1992, and the
reinvestment of dividends, if any.
<TABLE>
<CAPTION>
06/27/92 07/03/93 07/02/94 07/01/95 06/29/96 06/28/97
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Bell Sports Corp. 100 137.8 112.8 56.1 35.98 38.11
Media General Financial
Services Sporting Goods 100 117.09 168.22 148.52 181.37 202.44
Nasdaq Market Index 100 122.76 134.61 157.88 198.73 239.4
</TABLE>
14
<PAGE>
SECURITY OWNERSHIP OF DIRECTORS, EXECUTIVE OFFICERS
AND PRINCIPAL STOCKHOLDERS
The following table sets forth information as of September 19, 1997
concerning beneficial ownership of Common Stock by each person known by the
Company to own beneficially more than five percent of the outstanding shares of
Common Stock, each director, each director nominee, each Named Executive
Officer and all directors and executive officers of the Company as a group.
Unless otherwise noted, the listed persons have sole voting and dispositive
power with respect to the shares of Common Stock held in their names, subject
to community property laws if applicable.
<TABLE>
<CAPTION>
Number of
Shares of Percent of Total
Common Stock Outstanding
Name of Beneficial Holder Beneficially Owned Shares
- ------------------------------------------------------- -------------------- -----------------
<S> <C> <C>
Terry G. Lee (1) .............................. 326,663 2.4%
Harry H. Manko (2) ............................ 360,550 2.6%
Mary J. George (3) ............................ 81,582 *
Howard A. Kosick (4) .......................... 101,777 *
Robert Alan McCaughen (5) ..................... 21,307 *
Bernie M. Kotlier ............................. 4,479 *
W. Leo Kiely III (6) .......................... 9,335 *
Kenneth K. Harkness (7) ....................... 14,701 *
Frederick D. Winter (7) ....................... 14,701 *
Phillip D. Matthews (8) ....................... 26,515 *
Christopher Wright (9) ........................ 254,137 1.8%
Michael R. Hannon (10) ........................ 2,289,615 16.5%
Arnold L. Chavkin (10) ........................ 2,289,615 16.5%
CB Capital Investors, Inc. (11) ............... 2,281,080 16.5%
Dimensional Fund Advisors Inc. (12) ........... 856,479 6.2%
CG Acquisition Group (13) ..................... 772,500 5.6%
All directors and executive officers as a group
(16 persons)(14) ............................ 3,566,368 25.8%
</TABLE>
- ------------
* Less than one percent.
(1) The shares of Common Stock beneficially owned by Mr. Lee include 155,196
shares issuable upon the exercise of options which are exercisable or
which will become exercisable within 60 days following the date of this
Proxy Statement and 4,721 shares with respect to which Mr. Lee has sole
voting power but not dispositive power.
(2) The shares of Common Stock beneficially owned by Mr. Manko include 52,076
shares issuable upon the exercise of options which are exercisable or
which will become exercisable within 60 days following the date of this
Proxy Statement. Shares of Common Stock beneficially owned by Mr. Manko
are subject to the Post-Merger Stockholders Agreement. See "Election of
Directors."
(3) The shares of Common Stock beneficially owned by Ms. George include 74,500
shares issuable upon the exercise of options which are exercisable or
which will become exercisable within 60 days following the date of this
Proxy Statement and 4,721 shares with respect to which Ms. George has sole
voting power but not dispositive power.
(4) The shares of Common Stock beneficially owned by Mr. Kosick include 86,290
shares issuable upon the exercise of options which are exercisable or
which will become exercisable within 60 days following the date of this
Proxy Statement and 4,721 shares with respect to which Mr. Kosick has sole
voting power but not dispositive power.
(5) The shares of Common Stock beneficially owned by Mr. McCaughen include
6,666 shares issuable upon the exercise of options which are exercisable
or which will become exercisable within 60 days following the date of this
Proxy Statement.
(6) The shares of Common Stock beneficially owned by Mr. Kiely include 8,535
shares issuable upon the exercise of options which are exercisable or
which will become exercisable within 60 days following the date of this
Proxy Statement.
15
<PAGE>
(7) The shares of Common Stock beneficially owned are shares issuable upon the
exercise of options which are exercisable or which will become exercisable
within 60 days following the date of this Proxy Statement.
(8) The shares of Common Stock beneficially owned by Mr. Matthews include
12,201 shares issuable upon the exercise of options which are exercisable
or which will become exercisable within 60 days following the date of this
Proxy Statement.
(9) Mr. Wright is the general manager of the investment advisor to The KB
Mezzanine Fund, L.P. Mr. Wright beneficially owns 12,201 shares issuable
upon the exercise of options which are exercisable or which will become
exercisable within 60 days following the date of this Proxy Statement. The
remaining 241,936 shares of Common Stock shown above are owned by the KB
Mezzanine Fund, L.P.; however, by reason of his position with respect to
the investment advisor to The KB Mezzanine Fund, L.P., Mr. Wright may be
deemed to beneficially own all of the shares owned by The KB Mezzanine
Fund, L.P., with shared voting and investment power over the shares. Mr.
Wright disclaims beneficial ownership of shares owned by The KB Mezzanine
Fund L.P.
(10) These shares of Common Stock beneficially owned by Messrs. Chavkin and
Hannon include, for each, 8,535 shares issuable upon the exercise of
options which are exercisable or which will become exercisable within 60
days following the date of this Proxy Statement. Mr. Chavkin and Mr.
Hannon are General Partners of CCP, an affiliate of CBCI. Accordingly,
Messrs. Chavkin and Hannon may be deemed to be the beneficial owners of
the 2,289,615 shares of Common Stock held by CBCI. Each of Messrs. Chavkin
and Hannon disclaims beneficial ownership of shares owned
by CBCI.
(11) Shares of Common Stock beneficially owned by CBCI are subject to the
Post-Merger Stockholders Agreement. See "Election of Directors". CBCI's
address is 270 Park Avenue, Fifth Floor, New York, New York 10017. CBCI is
a wholly-owned subsidiary of the Chase Manhattan Corporation.
(12) Based on the most recent report on Schedule 13G filed with the SEC. The
address of Dimensional Fund Advisors Inc. is 1299 Ocean Ave., 11th Floor,
Santa Monica, California 90401.
(13) Based on the most recent report on Schedule 13G filed with the SEC. The
address of CG Acquisition Corp. is Two North Riverside Plaza, Chicago,
Illinois 60606.
(14) All directors and executive officers as a group is calculated to include
all shares owned by The KB Mezzanine Fund L.P. and CBCI.
RATIFICATION OF APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors has appointed Price Waterhouse LLP as independent
public accountants of the Company for the fiscal year ending June 27, 1998.
Price Waterhouse LLP has audited the Company's financial statements beginning
with the Company's 1991 fiscal year. A representative of Price Waterhouse LLP
is expected to be at the Annual Meeting and will be available to respond to
appropriate questions. Price Waterhouse LLP will also have the opportunity to
make a statement at the meeting if they desire to do so.
If a quorum is present, in order to approve the proposal to ratify the
appointment of Price Waterhouse LLP as the Company's independent public
accountants, a majority of the shares present in person or by proxy at the
Annual Meeting and entitled to vote on such proposal must vote in favor of it.
Accordingly, abstentions will have the same effect as votes against and
non-votes will reduce the number of shares considered present and entitled to
vote on the proposal. If the proposal to ratify the appointment of Price
Waterhouse LLP as the Company's independent public accountants is not approved,
the Board will reconsider whether to retain such firm.
The Board of Directors recommends a vote FOR ratification of the selection
of Price Waterhouse LLP as the Company's independent public accountants
(Proposal 2).
16
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During Fiscal 1997, the Company made a non-interest bearing secured loan
of $65,000, which remains outstanding as of October 1, 1997. The loan is due
upon the earlier of (i) termination of employment, (ii) dissolution or
liquidation of Bell Sports, Inc., or (iii) September 24, 1999. Half of any cash
bonus award earned by Ms. George will be applied to reduce the outstanding
balance of such loan. The loan is secured by a collateral pledge agreement with
respect to security which includes Common Stock issuable upon the exercise of
options granted to Ms. George.
The Company also made a non-interest bearing bridge loan, in connection
with the relocation of Ms. Linda K. Bounds', Executive Vice President, Chief
Financial Officer, Secretary and Treasurer, primary residence for $77,000
pending the sale of her former residence. Such loan was outstanding for
approximately three months.
STOCKHOLDER PROPOSALS
Proposals of stockholders that are intended to be presented at the
Company's 1998 Annual Meeting of Stockholders must be received by the Company no
later than June 5, 1998. Such proposals may be included in next year's Proxy
Statement if they comply with certain rules and regulations promulgated by the
SEC. The Company's By-laws set forth additional requirements and procedures
regarding the submission by stockholders of matters for consideration at an
annual meeting of stockholders.
SECTION 16 BENEFICIAL OWNERSHIP COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's officers and directors and persons who own more than ten percent of a
registered class of the Company's equity securities ("Reporting Persons") to
file reports of ownership and changes in ownership with the SEC. Reporting
Persons are required by SEC regulations to furnish the Company with copies of
all Section 16(a) reports they file.
Based solely on its review of the copies of such forms received by it and
written representations from certain Reporting Persons, the Company believes
that during Fiscal 1997 its Reporting Persons complied with all filing
requirements applicable to them, except for Arnold L. Chavkin, who filed one
late report with respect to one transaction.
ANNUAL REPORT TO STOCKHOLDERS
The Company's Annual Report to Stockholders for the fiscal year ended June
28, 1997 accompanies this Proxy Statement.
A copy, without exhibits, of the Company's Annual Report on Form 10-K for
Fiscal 1997 filed with the SEC will be provided without charge to any
stockholder submitting a written request for such report to the Company's
Secretary, Linda K. Bounds, at Bell Sports Corp., 6350 San Ignacio Avenue, San
Jose, California 95119.
OTHER BUSINESS
The Board of Directors knows of no other matters to be presented at the
Annual Meeting, but if any other matters should properly come before the
meeting, it is intended that the persons named in the accompanying proxy card
will vote on such matters in accordance with their best judgment.
October 17, 1997
By Order of the Board of Directors
/s/ Linda K. Bounds
LINDA K. BOUNDS
Chief Financial Officer, Secretary
and Treasurer
17
<PAGE>
BELL SPORTS CORP.
ANNUAL MEETING OF STOCKHOLDERS
To Be Held On November 19, 1997
The Radisson Resort Scottsdale
7171 N. Scottsdale Road
Scottsdale, AZ 85253
(602) 991-3800
SKY HARBOR INTERNATIONAL AIRPORT TO THE
RADISSION RESORT SCOTTSDALE
Exit Airport using the 44th Street North exit; proceed north for
approximately 8 miles. 44th Street North will curve east and turn into McDonald
Drive. Drive for approximately 5 miles on McDonald Drive and turn north (left)
on Scottsdale Road. The entrance to The Radisson Resort Scottsdale will be on
the east (right) side of Scottsdale Road.
[MAP SHOWING ROUTE FROM SKY HARBOR AIRPORT TO THE RADISSON RESORT, SCOTTSDALE]
18
<PAGE>
PROXY PROXY
BELL SPORTS CORP.
This Proxy is Solicited on Behalf of the Board of Directors for
the Annual Meeting of Stockholders to be held on November 19, 1997
The undersigned stockholder of Bell Sports Corp. (the "Company") does
hereby acknowledge receipt of Notice of said Annual Meeting and the accompanying
Proxy Statement and does hereby constitute and appoint Terry G. Lee and Linda K.
Bounds, or either of them, with full power of substitution, to vote all shares
of the Company that the undersigned is entitled to vote, as fully as the
undersigned could do if personally present, at the Annual Meeting of
Stockholders of the Company to be held on Thursday, November 19, 1997 at 10:00
a.m., local time at The Radisson Resort, Scottsdale, 7171 N. Scottsdale Road,
Scottsdale, Arizona 85253, and at any adjournment thereof.
This Proxy when properly executed will be voted in the manner directed
by the undersigned stockholder. If no direction is made, this Proxy will be
voted for the three nominees listed in Proposal 1 and for Proposal 2. If other
business is presented at said Annual Meeting, this Proxy will be voted on those
matters, in accordance with the best judgment of the named proxies.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY
USING THE ENCLOSED ENVELOPE.
(Continued and to be signed on reverse side.)
- --------------------------------------------------------------------------------
<PAGE>
<TABLE>
<CAPTION>
BELL SPORTS CORP.
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY. ()
[ ]
The Board of Directors recommends a vote "FOR" each of the nominees listed in Proposal 1 and "FOR" Proposal 2.
<S> <C> <C> <C> <C>
Election of Directors -- For Withhold For All For Against Abstain
1. Nominees: Arnold L. Chavkin, All All Except 2. To ratify the appointment of () () ()
Phillip D. Matthews and () () () Price Waterhouse as independent
Christopher Wright public accountants for the
Company for its fiscal year
ending June 27, 1998.
- --------------------------------------
(Except Nominess(s) written above)
This proxy shall be voted in accordance with the instructions
given and, in the absence of such instructions, shall be voted
for the nominees listed and in favor of proposal 2. If other
business is presented at said Annual Meeting, this proxy shall
be voted on those matters in accordance with the best judgment
of the named proxies.
Dated: _____________________, 1997
Signature(s) _________________________________
______________________________________________
When signing the proxy, please take care to
have the signature conform to the
stockholder's name as it appears on this side
of the proxy. If shares are registered in the
names of two or more persons, each person
should sign. Executors, administrators,
trustees and guardians should so indicate when
signing. Corporations and partnerships should
sign in their full corporate or partnership
names by a duly authorized person.
- ------------------------------------------------------------------------------------------------------------------------------------
^ FOLD AND DETACH HERE ^
YOUR VOTE IS IMPORTANT!
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY
USING THE ENCLOSED ENVELOPE.
</TABLE>
