<PAGE> 1
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
[ X ] Definitive Proxy Statement the Commission Only
[ ] Definitive Additional Materials (as permitted by
[ ] Soliciting Material Pursuant to Rule 14a-6(e))
Rule 14a-11(c) or Rule 14a-12
GT BICYCLES, INC.
.........................................................................
(Name of Registrant as Specified In Its Charter)
GT BICYCLES, INC.
.........................................................................
(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:
.................................................................
Notes:
.................................................................
.................................................................
<PAGE> 2
GT BICYCLES, INC.
2001 EAST DYER ROAD
SANTA ANA, CALIFORNIA 92705
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
JUNE 3, 1997
TO THE STOCKHOLDERS OF GT BICYCLES, INC.
The 1997 Annual Meeting of Stockholders of GT Bicycles, Inc. (the
"Company"), will be held at The Sutton Place Hotel, 4500 MacArthur Boulevard,
Newport Beach, California, on June 3, 1997, at 10:00 A.M., for the following
purposes as more fully described in the accompanying Proxy Statement:
(1) To elect the following Class II nominees to serve as directors
for three-year terms or until their successors are elected and
have qualified:
Geoffrey S. Rehnert
William K. Duehring
(2) To approve an amendment to the Company's 1993 Incentive Stock
Option, Nonqualified Stock Option and Restated Stock Purchase
Plan to increase the number of shares subject thereto to a total
of 1,000,000;
(3) To ratify the appointment of KPMG Peat Marwick LLP as independent
certified public accountants of the Company for the fiscal year
ending December 31, 1997; and
(4) To transact such other business as may properly come before the
meeting or any adjournment or postponement thereof.
Only stockholders of record at the close of business on April 22, 1997
will be entitled to vote at the meeting or any adjournment or postponement
thereof.
By Order of the Board of Directors
Michael C. Haynes
President and Chief Executive Officer
April 29, 1997
YOUR VOTE IS IMPORTANT. THEREFORE, WHETHER OR NOT YOU PLAN TO ATTEND THE
MEETING YOU SHOULD COMPLETE, DATE, SIGN AND RETURN THE ENCLOSED PROXY. Any
stockholder present at the meeting may withdraw his or her proxy and vote
personally on each matter brought before the meeting. Stockholders attending the
meeting whose shares are held in the name of a broker or other nominee who
desire to vote their shares at the meeting should bring with them a proxy or
letter from that firm confirming their ownership of shares.
<PAGE> 3
GT BICYCLES, INC.
2001 EAST DYER ROAD
SANTA ANA, CALIFORNIA 92705
---------------
PROXY STATEMENT
---------------
INTRODUCTION
This Proxy Statement is being furnished in connection with the
solicitation of proxies by the Board of Directors of GT Bicycles, Inc., a
Delaware corporation (the "Company"), for use at its 1997 Annual Meeting of
Stockholders ("Annual Meeting") to be held on June 3, 1997, at 10:00 A.M., at
The Sutton Place Hotel, 4500 MacArthur Boulevard, Newport Beach, California. It
is contemplated that this solicitation of proxies will be made exclusively by
mail; however, if it should appear desirable to do so in order to ensure
adequate representation at the meeting, directors, officers and employees of the
Company may communicate with stockholders, brokerage houses and others by
telephone, telegraph or in person to request that proxies be furnished and may
reimburse banks, brokerage houses, custodians, nominees and fiduciaries for
their reasonable expenses in forwarding proxy materials to the beneficial owners
of the shares held by them. All expenses incurred in connection with this
solicitation shall be borne by the Company.
Holders of shares of Common Stock, $.001 par value ("Common Stock") of
the Company ("stockholders") who execute proxies retain the right to revoke them
at any time before they are voted. Any proxy given by a stockholder may be
revoked or superseded by executing a later dated proxy, by giving notice of
revocation to the Secretary, GT Bicycles, Inc., 2100 East Dyer Road, Santa Ana,
California 92705, in writing prior to or at the meeting or by attending the
meeting and voting in person. A proxy, when executed and not so revoked, will be
voted in accordance with the instructions given in the proxy. If a choice is not
specified in the proxy, the proxy will be voted "FOR" the Class II nominees for
election of directors named in this Proxy Statement, "FOR" the amendment of the
1993 Incentive Stock Option, Nonqualified Stock Option and Restated Purchase
Plan and "FOR" the ratification of KPMG Peat Marwick LLP as the Company's
independent certified public accountants. This Proxy Statement is first being
mailed to stockholders on or about May 5, 1997.
VOTING SECURITIES
The shares of Common Stock constitute the only outstanding class of
voting securities of the Company. Only the stockholders of the Company of record
as of the close of business on April 22,1997 (the "Record Date"), will be
entitled to vote at the meeting or any adjournment or postponement thereof. As
of the Record Date, there were 9,796,499 shares of Common Stock outstanding and
entitled to vote. No shares of the Company's preferred stock, $0.001 par value,
were outstanding. A majority of shares entitled to vote represented in person or
by proxy will constitute a quorum at the meeting. Each stockholder is entitled
to one vote for each share of Common Stock held as of the Record Date.
Abstentions and broker non-votes are each included in the determination of the
number of shares present and voting for the purpose of determining whether a
quorum is present. Abstentions will be treated as shares present and entitled to
vote for purposes of any matter requiring the affirmative vote of a majority or
other proportion of the shares present and entitled to vote. With respect to
shares relating to any proxy as to which a broker non-vote is indicated on a
proposal, those shares will not be considered present and entitled to vote with
respect to any such proposal. Abstentions or broker non-votes or other failures
to vote will have no such effect in the election of directors, who will be
elected by a plurality of the affirmative votes cast. With respect to any matter
brought before the Annual Meeting requiring the affirmative vote of a majority
or other proportion of the outstanding shares, an abstention or broker non-vote
will have the same effect as a vote against the matter being voted upon.
<PAGE> 4
PROPOSAL ONE
ELECTION OF DIRECTORS
Currently, there are four (4) members of the Board of Directors. The
Company's bylaws provide for a classified Board of Directors with one class of
directors elected each year for a term extending to the third succeeding annual
meeting after such election. Accordingly, the director in Class II, Geoffrey S.
Rehnert, holds office until the 1997 annual meeting of stockholders, the
directors in Class III, Michael C. Haynes and Joseph J. Pretlow, hold office
until the 1998 annual meeting of stockholders, and the director in Class I,
Robert C. Gay, holds office until the 1999 annual meeting of stockholders. There
is currently a vacancy in Class II. Unless otherwise instructed, the proxy
holders named in the enclosed proxy will vote the proxies received by them for
the Class II nominees named below. One of the Class II nominees, Mr. Rehnert, is
presently a director of the Company. The other Class II nominee is William K.
Duehring, the Company's Chief Operating Officer.
If either nominee becomes unavailable for any reason before the
election, the enclosed proxy will be voted for the election of such substitute
nominee, if any, as shall be designated by the Board of Directors. The Board of
Directors has no reason to believe that either nominee will be unavailable to
serve.
Under Delaware law, the nominees receiving the highest number of votes
will be elected as directors at the annual meeting. As a result, proxies voted
to "Withhold Authority," which will be counted, and broker non-votes, which will
not be counted, will have no practical effect.
The names and certain information concerning the nominees for election
as directors and the other directors continuing in office are set forth below.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" THE ELECTION OF THE
NOMINEES NAMED BELOW.
DIRECTORS AND NOMINEES
<TABLE>
<CAPTION>
NAME AGE POSITION WITH THE COMPANY
---- --- -------------------------
<S> <C> <C>
CLASS II NOMINEES
Geoffrey S. Rehnert............... 39 Director
William K. Duehring............... 40 Chief Operating Officer and Nominee
CLASS I DIRECTOR
Robert C. Gay..................... 45 Director
CLASS III DIRECTORS
Michael C. Haynes................. 44 President, Chief Executive Officer and Director
Joseph J. Pretlow................. 18 Director
</TABLE>
Geoffrey S. Rehnert has served as a director of the Company since
November 1993. Mr. Rehnert has been a managing director and general partner of
Bain Capital since 1984. Mr. Rehnert also serves on the boards of FTD
Corporation (which is a floral services organization), ICON Health & Fitness,
Inc. (which manufactures and markets home health equipment), Kollmorgen Corp.
(which manufactures specialty motors and associated electronic amplifiers), and
WorldCorp (which owns positions in World Airways, Inc., a provider of worldwide
passenger and cargo air transportation, and InteliData Technologies Corporation,
which provides consumer telecommunications, electronic commerce and interactive
services).
William K. Duehring has served as Chief Operating Officer of the Company
since October 1996. From May 1992 to October 1996, Mr. Duehring served as Vice
President, Product Development of the Company. From
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<PAGE> 5
January 1987 to May 1992, Mr. Duehring served in the position of Senior Product
Manager of the Company. Prior to joining the Company, Mr. Duehring worked for
Cycles U.S.A. as a product manager for seven years.
Robert C. Gay has served as a director of the Company since November
1993. Mr. Gay has been a managing director and general partner of Bain Capital,
a private equity firm, since 1989. Mr. Gay also serves on the boards of Alliance
Entertainment Corp. (which distributes music and music-related products), GS
Technologies Corporation (which makes consumable products for the mining
industry) and ICON Health & Fitness Inc.
Michael C. Haynes has served as the President and Chief Executive
Officer of the Company since July 1996. From 1989 to July 1996, Mr. Haynes
served as the Vice-President, Finance and Chief Financial Officer of the
Company. Mr. Haynes was appointed as a member of the Company's Board of
Directors in November 1993. Prior to joining the Company, Mr. Haynes was a
certified public accountant and a partner in the certified public accounting
firm of Comoglio & Haynes for eight years.
Joseph J. Pretlow has served as a director of the Company since April
1997. Mr. Pretlow joined Bain Capital in 1992 and has been a principal of Bain
Capital since 1996. Prior to joining Bain Capital, Mr. Pretlow worked in
Investment Banking at Lehman Brothers.
OTHER EXECUTIVE OFFICER
Charles Cimitile, 42, has served as Vice-President, Finance and Chief
Financial Officer since December 1996. From August 1995 to November 1996, Mr.
Cimitile served as Executive Vice President and Chief Financial Officer of
Cruise Phone, Inc., a telecommunications company. From April 1986 to July 1995,
Mr. Cimitile served in various capacities with ARC Holdings, Inc. and its
predecessor American Recreation Group, L.P., a designer, marketer and
distributor of bicycles and related parts and accessories, most recently serving
as Secretary, Treasurer and Vice President of Finance from April 1993 to July
1995.
BOARD MEETINGS AND ATTENDANCE
The Board of Directors of the Company held five (5) meetings during the
fiscal year ended December 31, 1996. Each incumbent Director who served on the
Board during the fiscal year ended December 31, 1996 attended at least
seventy-five percent (75%) of the aggregate of the number of meetings of the
Board and the number of meetings held by all committees of the Board on which he
or she served. There are no family relationships among any of the directors or
executive officers of the Company.
COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors has an Audit Committee and a Compensation
Committee. The Audit Committee is presently comprised of two (2) directors
selected by the Board of Directors of the Company. The members of the Audit
Committee are Geoffrey S. Rehnert and Robert C. Gay. The Audit Committee is
authorized to handle all matters which it deems appropriate regarding the
Company's independent accountants and to otherwise communicate and act upon
matters relating to the review and audit of the Company's books and records,
including the scope of the annual audit and the accounting methods and systems
to be utilized by the Company. In addition, the Audit Committee also makes
recommendations to the Board of Directors with respect to the selection of the
Company's independent accountants. The Audit Committee held no meetings during
the fiscal year ended December 31, 1996.
The Compensation Committee is presently comprised of two (2) directors
selected by the Board of Directors of the Company. The members of the
Compensation Committee are Geoffrey S. Rehnert and Robert C. Gay. The functions
of the Compensation committee include advising the Board of Directors on officer
and employee compensation. The Board of Directors, based on input from the
Compensation Committee, establishes the annual compensation rates for the
Company's executive officers. The Compensation Committee held no meetings during
the fiscal year ended December 31, 1996.
3
<PAGE> 6
The Company does not have a nominating committee. Instead, the Board of
Directors, as a whole, identifies and screens candidates for membership on the
Company's Board of Directors.
COMPENSATION OF EXECUTIVE OFFICERS
The following table sets forth compensation received for the two fiscal
years ended December 31, 1996, by the Company's Chief Executive Officer, and the
other most highly compensated executive officers (collectively, the "Named
Executive Officers") whose aggregate salary and bonus exceeded $100,000 for the
fiscal year ended December 31, 1996.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual Compensation
----------------------------------------
All Other
Name and Principal Position(1) Year Salary($)(2) Bonus($) Compensation($)
- - ---------------------------------- ---------- ------------- --------------- ------------------
<S> <C> <C> <C> <C>
Michael C. Haynes............... 1996 260,794 70,000 6,700(3)
President and Chief Executive 1995 222,533 87,500 7,043(3)
Officer 1994 213,500 243,000 7,050(3)
William K. Duehring............. 1996 189,702 55,000 7,295(4)
Chief Operating Officer 1995 161,558 87,500 7,638(5)
1994 155,000 232,000 7,645(6)
Richard W. Long(7).............. 1996 342,790 125,000 --
Former Chairman, President and 1995 543,250 262,500 7,043(3)
Chief Executive Officer 1994 530,000 580,000 7,050(3)
</TABLE>
- - ------------------
(1) Charles Cimitile, the Company's Vice-President, Finance and Chief
Financial Officer, joined the Company in October 1996. His current
salary, on an annualized basis, is $175,000.
(2) Includes annual guaranteed salaries pursuant to employment agreements
with the Company for Messrs. Haynes and Duehring of $28,296 and $16,980,
respectively, for each fiscal year. These guaranteed salaries will
terminate on October 31, 1998.
(3) Consists of annual allocated contributions under the Company's qualified
Profit Sharing Plan.
(4) Consists of $6,700 of annual allocated contributions under the Company's
qualified Profit Sharing Plan and $595 for premiums paid for term life
insurance.
(5) Consists of $7,043 of annual allocated contributions under the Company's
qualified Profit Sharing Plan and $595 for premiums paid for term life
insurance.
(6) Consists of $7,050 of annual contributions under the Company's qualified
Profit Sharing Plan and $595 for premiums paid for term life insurance.
(7) Mr. Long was killed in a traffic accident in July 1996. The amounts
listed for 1996 represent payments made to him prior to his death or
accrued at the time of his death and subsequently paid to his estate.
4
<PAGE> 7
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
% of Total
Number of Options Potential Realizable Value at
Securities Granted to Assumed Annual Rates of
Underlying Employees in Exercise or Stock Price Appreciation for
Options Fiscal Base Price Expiration Option Term(4)
Name(1) Granted(#) Year(2) ($/Share) Date(3) 5%($) 10%($)
- - --------------------------- ------------- --------------- --------------- ------------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
Michael C. Haynes.......... 75,000 19.6 12.00 09/10/06 566,005 1,424,368
William K. Duehring........ 50,000 13.1 12.00 09/10/06 377,337 956,245
Richard W. Long............ -- -- -- -- -- --
</TABLE>
(1) Mr. Cimitile was granted an option to purchase 60,000 shares at an
exercise price of $12.00 per share.
(2) Options to purchase an aggregate of 382,597 shares of Common Stock were
granted to employees, including the Named Executive Officers, during the
year ended December 31, 1996.
(3) Options granted have a term of 10 years, subject to earlier termination
in certain events related to termination of employment.
(4) Based on fair market value, in accordance with the rules and regulations
of the Securities and Exchange Commission, such gains are based on
assumed rates of annual compound stock appreciation of 5% and 10% from
the date on which the options were granted over the full term of the
options. The rates do not represent the Company's estimate or projection
of future Common Stock prices, and no assurance can be given that the
rates of annual compound stock appreciation assumed for the purposes of
the following table will be achieved.
AGGREGATE OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
Number of Securities Underlying
Unexercised Options Value of Unexercised in-the-Money
at Fiscal Year-End(#) Options at Fiscal Year-End($)(1)
Shares Acquired Value -------------------------------------- ----------------------------------
Name on Exercise(#) Realized($)(1) Exercisable Unexercisable Exercisable Unexercisable
- - --------------------- ---------------- -------------- -------------- --------------- -------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Michael C. Haynes -- -- -- 75,000 -- 65,625
William K. Duehring -- -- -- 50,000 -- 43,750
Richard W. Long -- -- -- -- -- --
</TABLE>
- - -----------------
(1) Market value of underlying securities at exercise date or year-end, as the
case may be, minus the exercise or base price of "in-the-money" options. The
closing sale price for the Company's Common Stock as of December 31, 1996 on the
Nasdaq National Market was $12.875.
EMPLOYMENT AGREEMENTS
The Company has entered into Employment Agreements with Michael C.
Haynes, William K. Duehring and Charles Cimitile. The agreements require each
employee to devote his full business time and his best efforts, business
judgment, skill and knowledge to the advancement of the business and interests
of the Company during the term of the agreements. The agreements provide for an
annual base salary with annual increases and annual bonuses based on the
Company's attainment of certain net income. The agreements for Messrs. Haynes
and Duehring were amended effective as of October 1, 1996 to increase the annual
base salaries thereunder to $312,000 and $228,000, respectively, as a result of
the new positions of Messrs. Haynes and Duehring within the Company. The
agreements for Messrs. Haynes and Duehring have five-year terms ending on
October 31, 1998 and may be terminated by the Company with or without cause as
defined in the agreements. The agreements for Messrs. Haynes and Duehring also
provide for guaranteed severance payments upon any termination of employment and
additional severance payments upon termination of employment without cause or
upon a change in control of the Company. The agreement for Mr. Cimitile has a
three-year term ending on November 30, 1999
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<PAGE> 8
and may be terminated by the Company with or without cause as defined in the
agreement. All of the agreements further contain confidentiality, proprietary
rights and dispute resolution provisions.
DIRECTOR'S FEES
The Company's directors do not receive any cash compensation for service
on the Board of Directors or any committee thereof, but directors may be
reimbursed for certain expenses in connection with attendance at board and
committee meetings. The Company intends to compensate future independent
directors for their service on the Board and any committee at rates that are
comparable to the compensation paid to independent directors of other similarly
situated companies.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Based solely upon its review of the copies of reports furnished to the
Company, or written representations that no annual Form 5 reports were required,
the Company believes that all filing requirements under Section 16(a) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act") applicable to
its directors, officers and any persons holding ten percent (10%) or more of the
Company's Common Stock were made with respect to the Company's fiscal year ended
December 31, 1996.
6
<PAGE> 9
SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN BENEFICIAL OWNERS
Set forth below is certain information as of the Record Date regarding
the beneficial ownership of the Company's Common Stock by (i) any person who was
known by the Company to own more than five percent (5%) of the voting securities
of the Company, (ii) all directors and nominees, (iii) each of the Named
Executive Officers identified in the Summary Compensation Table, and (iv) all
current directors and executive officers as a group.
<TABLE>
<CAPTION>
Amount and Nature of
Beneficial
Name and Address of Beneficial Owners Ownership(1) Percent of Class
- - ------------------------------------------- ---------------------- ---------------------
<S> <C> <C>
Bain Funds (2)........................... 2,230,081 22.8%
c/o Bain Capital
Two Copley Place, 7th Floor
Boston, Massachusetts 02116
T. Rowe Price Associates, Inc. (3)....... 1,115,000 11.4%
100 East Pratt Street
Baltimore, Maryland 21202
Wanda Long............................... 959,550 9.8%
c/o GT Bicycles, Inc.
2001 East Dyer Road
Santa Ana, California 92705
Jackson National Life Insurance Company.. 524,505 5.4%
5901 Executive Drive
Lansing, Michigan 48909
Robert C. Gay (4)........................ 2,230,081 22.8%
c/o Bain Capital
Two Copley Place, 7th Floor
Boston, Massachusetts 02116
Geoffrey S. Rehnert (4).................. 2,230,081 22.8%
c/o Bain Capital
Two Copley Place, 7th Floor
Boston, Massachusetts 02116
Joseph P. Pretlow........................ 2,230,081 22.8%
c/o Bain Capital
Two Copley Place, 7th Floor
Boston, Massachusetts 02116
Michael C. Haynes........................ 336,000 3.4%
William K. Duehring (5).................. 264,514 2.7%
All current executive officers and
directors as a
group (6 persons)(4)(5)............... 2,830,595 28.9%
</TABLE>
- - ---------------------
(1) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission and generally includes voting or
investment power with respect to securities. Shares of Common Stock
subject to options, warrants and convertible notes currently exercisable
or convertible, or exercisable or convertible within 60 days of the
Record Date, are deemed outstanding for computing the percentage of the
person holding such options but are not deemed outstanding for computing
the
7
<PAGE> 10
percentage of any other person. Except as indicated by footnote, and
subject to community property laws where applicable, the persons named
in the table have sole voting and investment power with respect to all
shares of Common Stock shown as beneficially owned by them.
(2) Includes (i) 102,388 shares owned by BCIP Associates, (ii) 49,023 shares
owned by BCIP Trust Associates, L.P., (iii) 1,109,328 shares owned by
Bain Capital Fund IV-B, L.P., and (iv) 969,342 shares owned by Bain
Capital Fund IV, L.P.
(3) These securities are owned by various individual and institutional
investors which T. Rowe Price Associates, Inc. ("Price Associates")
serves as investment advisor with power to direct investments and/or
sole power to vote securities. For the purposes of the reporting
requirements of the Securities Exchange Act of 1934, as amended, Price
Associates is deemed to be a beneficial owner of such securities;
however, Price Associates expressly disclaims that it is, in fact, the
beneficial owner of such securities.
(4) Includes shares described in Note (2) above. Messrs. Gay, Rehnert and
Pretlow are Directors of the Company. Messrs. Gay and Rehnert are
managing directors of Bain Capital Investors, Inc., the general partner
of Bain Capital Partners IV, L.P., which is the general partner of Bain
Capital Fund IV-B, L.P. and Bain Capital Fund IV, L.P. and are general
partners of BCIP Associates and BCIP Trust Associates, L.P., and
accordingly, may be deemed to beneficially own such shares. Mr. Pretlow
is a principal of Bain Capital Investors, Inc., the management company
for Bain Capital Fund IV-B, L.P. and Bain Capital Fund IV, L.P., and
accordingly, may be deemed to beneficially own such shares. Each of Mr.
Gay, Mr. Rehnert and Mr. Pretlow disclaims beneficial ownership of the
shares held by BCIP Associates, BCIP Trust Associates, L.P., Bain
Capital Fund IV-B, L.P. and Bain Capital Fund IV, L.P., except to the
extent of each of their pecuniary interests therein.
(5) Includes 264,000 shares held in the William K. Duehring Trust, dated
December 6, 1994.
8
<PAGE> 11
REPORT OF THE BOARD OF DIRECTORS
The following report is submitted by the Board of Directors with respect
to the executive compensation policies established by the Board of Directors and
compensation paid or awarded to executive officers for the fiscal year ended
December 31, 1996.
COMPENSATION POLICIES AND OBJECTIVES
In establishing and evaluating the effectiveness of compensation
programs for executive officers, as well as other employees of the Company, the
Board of Directors is guided by three basic principles:
o The Company must offer competitive salaries to be able to attract
and retain highly-qualified and experienced executives and other
management personnel.
o Annual executive compensation in excess of base salaries should
be tied to individual and Company performance.
o The financial interests of the Company's executive officers
should be aligned with the financial interests of the
stockholders, primarily through stock option grants which reward
executives for improvements in the market performance of the
Company's Common Stock.
Salaries and Employee Benefits Programs. In order to retain executives
and other key employees, and to be able to attract additional well-qualified
executives when the need arises, the Company strives to offer salaries, and
health care and other employee benefit programs, to its executives and other key
employees that are comparable to those offered to persons with similar skills
and responsibilities by competing businesses in the local geographic area.
In recommending salaries and bonuses for executive officers and other
key employees, the Board of Directors considers both the Company's overall
performance as well as the individual's performance and informally reviews
available information, including information published in secondary sources,
regarding prevailing salaries and compensation programs offered by competing
businesses that are comparable to the Company in terms of size, revenue,
financial performance and industry group.
In order to retain qualified management personnel, the Company has
followed the practice of seeking to promote executives from within the Company
whenever practicable. The Board of Directors believes that this policy enhances
employee morale and provides continuity of management. Typically, modest salary
increases are made in conjunction with such promotions.
Performance-Based Compensation. The Board of Directors believes that the
motivation of executives and key employees increases as the market value of the
Company's Common Stock increases. Nevertheless, the Company provides a merit
bonus in cash or stock options to executives and key employees which is
dependent on the Company's achievements and the direct contributions made by
each executive and other key employees. Accordingly, at the beginning of each
fiscal year, the Company establishes short term and long term plans, and at the
end of the fiscal year, the collective and individual contributions of the
executives to the Company's achievements are evaluated.
In certain instances, bonuses are awarded not only on the basis of the
Company's overall strategic accomplishments, but also on the achievement by an
executive of specific objectives within his or her area of responsibility. For
example, a bonus may be awarded for any executive's efforts in achieving greater
than anticipated cost savings, or completing a new product on target.
Stock Options and Equity-Based Programs. In order to align the financial
interests of executive officers and other key employees with those of the
stockholders, the Company grants stock options to its executive officers
9
<PAGE> 12
and other key employees on a periodic basis, taking into account the size and
terms of previous grants of equity-based compensation and stock holdings in
determining awards. Stock option grants, in particular, reward executive
officers and other key employees for performance that results in increases in
the market price of the Company's Common Stock, which directly benefit all
stockholders. Moreover, the Board of Directors generally has followed the
practice of granting options on terms which provide that the options become
exercisable in cumulative annual installments, generally over a three to
five-year period. The Board of Directors believes that this feature of the
option grants not only provides an incentive for executive officers to remain in
the employ of the Company, but also makes longer term growth in share prices
important for the executives who receive stock options.
Profit Sharing Plan. All employees who have worked for the Company at
least twelve (12) months are eligible to participate in the profit sharing plan
(the "Plan"). The Company makes annual contributions to the Plan at the
discretion of the Board of Directors. The amount of the profit sharing allocated
to participants is dependent upon their base compensation levels and the length
of time during the fiscal year that they are employed by the Company. Each
eligible participant's allocation of the Company's profit sharing contribution
is deposited into an established individual profit sharing account. Company
contributions deposited into profit sharing accounts for each employee become
fully vested after six years of service or upon retirement, death or disability.
Benefits are generally payable following retirement, disability, death, hardship
or termination of employment.
Executive officers participate in the Plan.
FISCAL YEAR 1996 COMPENSATION
The Chief Executive Officer's and other executive officers' compensation
are based on Employment Agreements that provide for an annual base salary with
annual increases and annual bonuses based on the Company's attainment of certain
net income. The agreements have three to five year terms ending on October 31,
1998 and November 30, 1999 and may be terminated by the Company with or without
cause as defined in the agreements. Mr. Haynes received an annual base salary of
$232,701 from January 1, 1996 to September 30, 1996 and $312,000 from October 1,
1996 to December 31, 1996. Mr. Haynes received a bonus of $70,000 in 1996 based
on the Company's net income.
THE BOARD OF DIRECTORS
Michael C. Haynes
Robert C. Gay
Geoffrey S. Rehnert
Notwithstanding anything to the contrary set forth in the Company's
previous filings under the Securities Act of 1933, as amended, or the Securities
Exchange Act of 1934, as amended, that might incorporate future filings,
including this Proxy Statement, in whole or in part, the foregoing Report and
the performance graph on page 11 shall not be incorporated by reference into any
such filings.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During the year ended December 31, 1996, the Company's Board of
Directors established the levels of compensation for the Company's executive
officers. Michael C. Haynes, a director and the President and Chief Executive
Officer of the Company, participated in the deliberations of the Board regarding
executive compensation, but did not participate in proceedings or decisions of
the Board of Directors regarding his own compensation.
10
<PAGE> 13
STOCK PERFORMANCE GRAPH
Set forth below is a line graph comparing the cumulative stockholder
return on the Company's Common Stock with the cumulative total return of the
Nasdaq Non-Financial Index and the Nasdaq Stock Market -- US Index for the
period that commenced October 13, 1995, (the date on which the Company's Common
Stock was first registered under the Exchange Act) and ended on December 31,
1996
COMPARISON OF CUMULATIVE TOTAL RETURN*
AMONG GT BICYCLES, INC., THE NASDAQ NON-FINANCIAL INDEX
AND THE NASDAQ STOCK MARKET -- US INDEX
<TABLE>
<CAPTION>
10/13/95 12/95 12/96
-------- ----- -----
<S> <C> <C> <C>
GT BICYCLES, INC. 100 70 97
NASDAQ STOCK MARKET-US 100 104 128
NASDAQ NON-FINANCIAL 100 103 125
</TABLE>
11
<PAGE> 14
PROPOSAL TWO
AMENDMENT TO THE 1993 PLAN TO INCREASE THE
TOTAL NUMBER OF SHARES ISSUABLE THEREUNDER
INTRODUCTION
The Board of Directors adopted and the stockholders of the Company
originally approved by written consent the 1993 Incentive Stock Option,
Nonqualified Stock Option and Restricted Stock Purchase Plan (the "1993 Plan")
in March 1994. Subject to approval by the Company's stockholders, the Board of
Directors amended the 1993 Plan in April 1997 to increase the authorized number
of shares of Common Stock issuable thereunder by 340,000 shares and to reserve
the additional shares for issuance under the 1993 Plan, bringing the total
number of shares of Common Stock subject to the 1993 Plan to 1,000,000.
Approval of the amendments to the 1993 Plan will require the affirmative
vote of the holders of a majority of the outstanding shares of Common Stock
present or represented at the annual meeting of stockholders and entitled to
vote thereat. Proxies solicited by management for which no specific direction is
included will be voted FOR the amendment of the 1993 Plan to add 340,000 shares
of Common Stock to the pool of shares reserved for issuance thereunder.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE AMENDMENT TO THE 1993
PLAN.
The principal features of the 1993 Plan are summarized below, but the
summary is qualified in its entirety by reference to the 1993 Plan itself.
Copies of the 1993 Plan can be obtained by writing to the Secretary, GT
Bicycles, Inc., 2001 East Dyer Road, Santa Ana, California 92705.
1993 PLAN TERMS
The 1993 Plan provides currently for the grant by the Company of options
and/or rights to purchase up to an aggregate of 660,000 shares of Common Stock
of the Company to its officers, directors, key employees, consultants and other
business persons having important business relationships with the Company, or
any parent or subsidiary corporation of the Company. As of the Record Date,
approximately six (6) executive officers and directors of the Company and
approximately 730 other employees were eligible to participate. The purpose of
the 1993 Plan is to enable the Company to attract and retain persons of ability
as employees, officers, directors and consultants and to motivate such persons
by providing them with an equity participation in the Company. The 1993 Plan
expires in November 2003 unless terminated earlier by the Board of Directors.
The 1993 Plan provides that it is to be administered by the Board of
Directors or a committee appointed by the Board. Presently, the Company's Board
of Directors administers the 1993 Plan (the "Administrator"). The Administrator
has broad discretion to determine the persons entitled to receive options and/or
rights to purchase under the 1993 Plan, the terms and conditions on which
options and/or rights to purchase are granted and the number of shares subject
thereto. The Administrator also has discretion to determine the nature of the
consideration to be paid upon the exercise of an option and/or right to purchase
granted under the 1993 Plan. Such consideration may generally consist of cash or
shares of Common Stock of the Company or, in the case of rights to purchase, a
promissory note.
Options granted under the 1993 Plan may be either "incentive stock
options," within the meaning of Section 422 of the Internal Revenue Code (the
"Code"), or "nonqualified stock options," as determined by the Administrator.
Options may be granted under the 1993 Plan for terms of up to ten (10) years.
The exercise price of options and the purchase price of rights to purchase must
be at least equal to the fair market value of the Common Stock of the Company as
of the date of grant. No optionee may be granted incentive stock options under
the 1993 Plan to the extent that the aggregate fair market value (determined as
of the date of grant) of the shares of Common Stock with respect to which
incentive options are exercisable for the first time by the optionee during any
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<PAGE> 15
calendar year would exceed $100,000. There is no limitation on the amount of
nonqualified stock options and/or rights to purchase granted under the 1993
Plan. Options granted under the 1993 Plan to officers, employees, directors, or
consultants of the Company may be exercised only while the optionee is employed
or retained by the Company or within three to six months after termination for
any reason, with the exact date of expiration to be determined by the
Administrator.
Upon the occurrence of a consolidation or merger in which the Company is
not the surviving corporation, the sale of substantially all of the Company's
assets and certain other similar events, the 1993 Plan provides that the 1993
Plan itself and all outstanding options shall terminate unless provision is made
in writing for the continuance of the 1993 Plan and for the assumption of
outstanding options and rights to purchase previously granted. In the event that
the outstanding shares of Common Stock while the 1993 Plan is in effect are
increased or decreased or changed into or exchanged for a different number or
kind of shares or other securities of the Company by reason of merger,
consolidation or reorganization in which the Company is the surviving
corporation, or of a recapitalization, stock split, combination of shares,
reclassification, reincorporation, stock dividend (in excess of 2%) or of
another change in the corporate structure of the Company, appropriate
adjustments will be made by the Board of Directors to the aggregate number and
kind of shares subject to the 1993 Plan and the number and kind of shares and
the price per share subject to outstanding incentive options, nonqualified
options and rights to purchase in order to preserve, but not to increase, the
benefits to persons then holding incentive options, nonqualified options or
rights to purchase.
Payment for shares upon exercise of an option or upon issuance of
restricted stock must be made in full at the time of exercise, or issuance with
respect to restricted stock. The form of consideration payable upon exercise of
an option or purchase of restricted stock shall, at the discretion of the
Compensation Committee, be (i) by tender of United States dollars in cash, check
or bank draft; (ii) subject to any legal restriction against the Company's
acquisition or purchase of the Company's shares of Common Stock, shares of
Common Stock, which shall be deemed to have a value equal to the aggregate fair
market value of such shares determined on the date of exercise or purchase as
described in the immediately preceding paragraph hereof; (iii) by the issuance
of a promissory note acceptable to the Compensation Committee; or (iv) pursuant
to other methods described in the 1993 Plan.
As of the Record Date, options to purchase an aggregate of 566,011
shares of Common Stock (net of canceled options) have been granted under the
1993 Plan to the following persons or groups: (i) Michael C. Haynes, 75,000
shares; (ii) William K. Duehring, 50,000 shares, (iii) all current executive
officers (as a group), 185,000 shares; and (iv) all other employees who are not
executive officers (as a group), 381,011 shares.
FEDERAL TAX CONSEQUENCES OF THE 1993 PLAN
The following is a brief summary of the tax effects under the Code that
may accrue to participants in the 1993 Plan.
Incentive Stock Options. No taxable income will be recognized by an
optionee under the 1993 Plan upon either the grant or the exercise of an
incentive stock option; provided the optionee holds the stock for at least two
years after the grant of the options and one year after the exercise of the
option. If an incentive stock option is exercised more than three months after a
termination due to retirement, it will be treated as a sale or other disposition
of the shares acquired upon exercise of an incentive stock option, and the tax
treatment of the gain or loss realized will depend upon how long the shares were
held before their sale or disposition. The Company receives no tax benefit from
incentive stock options granted unless the optionee fails to meet the holding
requirements set forth above.
Nonqualified Stock Options. No taxable income is recognized by an
optionee upon the grant of a nonqualified stock option. Upon exercise, however,
the optionee will recognize ordinary income in the amount by which the fair
market value of the shares purchased, on the date of exercise, exceeds the
exercise price paid for such shares. The income recognized by the optionee will
be subject to income tax withholding by the Company out of the optionee's
current compensation. If such compensation is insufficient to pay the taxes due,
the optionee will be required to make a direct payment to the Company for the
balance of the tax withholding obligation. The
12
<PAGE> 16
Company will be entitled to a tax deduction equal to the amount of ordinary
income recognized by the optionee, provided the applicable withholding
requirements are satisfied.
Restricted Stock. The receipt of restricted stock will not result in a
taxable event until the applicable period(s) of restriction lapse, unless the
participant makes an election under Section 83(b) of the Code to be taxed as of
the date of grant. If a Section 83(b) election is made, the participant will
recognize ordinary income in an amount equal to the excess of the fair market
value of such shares on the date of grant over the amount paid for such shares.
If no amount is paid for such shares, the participant will recognize ordinary
income in an amount equal to the fair market value of such shares on the date of
the grant. Even if the amount paid and the fair market value of the shares are
the same (in which case there would be no ordinary income), a Section 83(b)
election must be made to avoid deferral of the date ordinary income is
recognized. If no Section 83(b) election is made, a taxable event will occur on
each date the participant's ownership rights vest (i.e., when the period(s) of
restriction lapse) as to the number of shares that vest on that date, and the
holding period for long-term capital gain purposes will not commence until the
date the shares vest. The participant will recognize ordinary income on each
date shares vest in an amount equal to the excess of the fair market value of
such shares on that date over the amount paid for such shares.
PROPOSAL THREE
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors has selected KPMG Peat Marwick LLP, independent
certified public accountants, to audit the financial statements of the Company
for the fiscal year ending December 31, 1997, and recommends that stockholders
vote for ratification of such appointment. In the event of a negative vote on
such ratification, the Board of Directors will reconsider its selection.
KPMG Peat Marwick LLP has audited the Company's financial statements
annually since fiscal year 1993. Its representatives are expected to be present
at the meeting with the opportunity to make a statement if they desire to do so
and are expected to be available to respond to appropriate questions.
STOCKHOLDER PROPOSALS
Any stockholder desiring to submit to the Company for consideration a
proposal for action at the 1998 Annual Meeting of Stockholders and presentation
in the Company's Proxy Statement with respect to such meeting should arrange for
such proposal to be delivered to the Company at its principal place of business
no later than December 31, 1997 in order to be considered for inclusion in the
Company's proxy statement relating to that meeting. Matters pertaining to such
proposals, including the number and length thereof, eligibility of persons
entitled to have such proposals included and other aspects are regulated by the
Exchange Act, Rules and Regulations of the Securities and Exchange Commission
and other laws and regulations to which interested persons should refer.
14
<PAGE> 17
OTHER MATTERS
Management is not aware of any other matters to come before the meeting.
If any other matter not mentioned in this Proxy Statement is brought before the
meeting, the proxy holders named in the enclosed Proxy will have discretionary
authority to vote all proxies with respect thereto in accordance with their
judgment.
By Order of the Board of Directors
Michael C. Haynes
President, Chief Executive Officer and
Secretary
April 29, 1997
The Annual Report to Stockholders of the Company for the fiscal year
ended December 31, 1996 is being mailed concurrently with this Proxy Statement
to all stockholders of record as of April 22, 1997. The Annual Report is not to
be regarded as proxy soliciting material or as a communication by means of which
any solicitation is to be made.
COPIES OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996
WILL BE PROVIDED TO STOCKHOLDERS WITHOUT CHARGE UPON WRITTEN REQUEST TO THE
CHIEF FINANCIAL OFFICER, GT BICYCLES, INC., 2001 EAST DYER ROAD, SANTA ANA,
CALIFORNIA 92705.
15
<PAGE> 18
PROXY
GT BICYCLES, INC.
PROXY SOLICITED BY THE BOARD OF DIRECTORS
ANNUAL MEETING OF THE STOCKHOLDERS - JUNE 3, 1997
The undersigned hereby nominates, constitutes and appoints Michael C.
Haynes and Charles Cimitile, and each of them individually, the attorney, agent
and proxy of the undersigned, with full power of substitution, to vote all stock
of GT BICYCLES, INC. which the undersigned is entitled to represent and vote at
the 1997 Annual Meeting of Stockholders of the Company to be held at The Sutton
Place Hotel, 4500 MacArthur Boulevard, Newport Beach, California, on June 3,
1997, at 10:00 A.M., and at any and all adjournments or postponements thereof,
as fully as if the undersigned were present and voting at the meeting, as
follows:
THE DIRECTORS RECOMMEND A VOTE "FOR" ITEMS 1, 2 AND 3
1. ELECTION OF DIRECTORS:
[ ] FOR all nominees listed below [ ] WITHHOLD AUTHORITY
(except as marked to the contrary below) to vote for all nominees
listed below
Election of the following nominees as Class II directors
for three-year terms: Geoffrey S. Rehnert
William K. Duehring
INSTRUCTIONS: To withhold authority to vote for any nominee, print that
nominee's name in the space provided below:
- - --------------------------------------------------------------------------------
2. APPROVAL OF AMENDMENT TO THE INCENTIVE STOCK OPTION, NON-QUALIFIED STOCK
OPTION AND RESTRICTED STOCK PURCHASE PLAN - 1993 TO INCREASE THE TOTAL
NUMBER OF SHARES ISSUABLE THEREUNDER BY 340,000 FOR A TOTAL OF 1,000,000:
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. RATIFICATION OF KPMG PEAT MARWICK LLP AS INDEPENDENT CERTIFIED PUBLIC
ACCOUNTANTS:
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. IN THEIR DISCRETION, ON SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE
MEETING OR ANY ADJOURNMENT THEREOF.
IMPORTANT--PLEASE SIGN AND DATE ON OTHER SIDE AND RETURN PROMPTLY
<PAGE> 19
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS DIRECTED BY THE
STOCKHOLDER ON THE REVERSE SIDE. WHERE NO DIRECTION IS GIVEN, SUCH SHARES WILL
BE VOTED "FOR" THE ELECTION OF THE DIRECTORS NAMED ON THE REVERSE SIDE OF THIS
PROXY, "FOR" APPROVAL OF THE AMENDMENT TO THE INCENTIVE STOCK OPTION,
NON-QUALIFIED STOCK OPTION AND RESTRICTED STOCK PURCHASE PLAN - 1993 AND "FOR"
RATIFICATION OF KPMG PEAT MARWICK LLP AS INDEPENDENT CERTIFIED PUBLIC
ACCOUNTANTS.
Date ______________, 1997
-------------------------------------------
(Signature of stockholder)
Please sign your name exactly as it appears
hereon. Executors, administrators,
guardians, officers of corporations and
others signing in a fiduciary capacity
should state their full titles as such.
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, YOU ARE URGED TO SIGN AND
RETURN THIS PROXY, WHICH MAY BE REVOKED AT ANY TIME PRIOR TO ITS USE.
