-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, LC0W8RXpz4b2FKd8e8fyow7+X+r7GgqMUzfk4mAAERpjhVpLJ1Xca4fa5G8ro/83 CdDv5qzibDH1FBaYg+LQBw== 0000950147-97-000296.txt : 19970514 0000950147-97-000296.hdr.sgml : 19970514 ACCESSION NUMBER: 0000950147-97-000296 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19970329 FILED AS OF DATE: 19970513 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: BELL SPORTS CORP CENTRAL INDEX KEY: 0000884063 STANDARD INDUSTRIAL CLASSIFICATION: [3949] IRS NUMBER: 363671789 STATE OF INCORPORATION: DE FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 033-92344 FILM NUMBER: 97602820 BUSINESS ADDRESS: STREET 1: 10601 N HAYDEN RD STREET 2: STE I-100 CITY: SCOTTSDALE STATE: AR ZIP: 85260 BUSINESS PHONE: 6029510033 MAIL ADDRESS: STREET 1: 10601 N. HAYDEN ROAD STREET 2: SUITE I-100 CITY: SCOTTSDALE STATE: AZ ZIP: 85260 10-Q 1 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-Q (Mark One) |X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal quarterly period ended March 29, 1997 --------------------------- OR |_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to --------------- --------------------- Commission file number 0-19873 BELL SPORTS CORP. - -------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) Delaware 36-3671789 - -------------------------------------------------------------------------------- (State or other jurisdiction of (I.R.S. employer incorporation or organization) identification no.) 15170 N. Hayden Rd. Suite 1, Scottsdale, Arizona 85260 - -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) (602) 951-0033 - -------------------------------------------------------------------------------- (Registrant's telephone number, including area code) N/A - -------------------------------------------------------------------------------- Former name, former address and former fiscal year, if changed since last report. Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) Yes X No and (2) has been subject to such filing requirements for the past 90 days. Yes X No . --- --- APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the last practicable date. Common Stock, $.01 par value May 7, 1997 13,751,542 - ---------------------------- ------------------ ---------------- Class Date Number of shares BELL SPORTS CORP. INDEX TO FORM 10-Q PART I
Page Number Bell Sports Corp. and Subsidiaries Consolidated Balance Sheets as of March 29, 1997 and June 29, 1996 3 Bell Sports Corp. and Subsidiaries Consolidated Statements of Operations for the nine months and three months ended March 29, 1997 and March 30, 1996 4 Bell Sports Corp. and Subsidiaries Consolidated Condensed Statements of Cash Flows for the nine months ended March 29, 1997 and March 30, 1996 5 Notes to Consolidated Financial Statements 6 - 11 Management's Discussion and Analysis of Financial Condition and Results of Operations 12 - 16 PART II Items 1 to 6 17 Signatures 18
2 PART 1. Financial Information Item 1. Financial Statements BELL SPORTS CORP. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (in thousands)
March 29, June 29, 1997 1996 ------------------ ---------------- (unaudited) ASSETS - ------ Cash and cash equivalents $ 26,755 $ 23,140 Marketable securities -- 7,996 Accounts receivable 89,305 75,651 Inventories 72,390 59,413 Other current assets 22,875 17,285 ------------------ ---------------- Total current assets 211,325 183,485 Property, plant and equipment 25,577 24,722 Goodwill 56,962 71,245 Intangibles and other assets 15,912 19,183 ------------------ ---------------- Total assets $ 309,776 $ 298,635 ================== ================ LIABILITIES AND STOCKHOLDERS' EQUITY - ------------------------------------ Accounts payable $ 12,282 $ 11,797 Accrued expenses 22,707 16,752 Accrued compensation and employee benefits 3,182 4,392 Notes payable and current maturities of long-term debt and capital lease obligations 2,843 1,070 ------------------ ---------------- Total current liabilities 41,014 34,011 Long-term debt and capital lease obligations 150,346 124,501 Other liabilities 4,152 4,082 ------------------ ---------------- Total liabilities 195,512 162,594 Stockholders' equity: Preferred stock; $.01 par value; authorized 1,000,000 shares, none issued Common stock; $.01 par value; authorized 25,000,000 shares, issued 14,246,614 and 14,224,360 shares, respectively, outstanding 13,751,542 and 13,700,960 shares, respectively 142 142 Additional paid-in capital 141,761 141,647 Unrealized holding losses on marketable securities -- (461) Foreign currency translation adjustments (155) 81 (Accumulated deficit) retained earnings (22,266) 149 ------------------ ---------------- 119,482 141,558 Less-495,072 and 523,400 shares of common stock in treasury, at cost, respectively (5,218) (5,517) ------------------ ---------------- Total stockholders' equity 114,264 136,041 ------------------ ---------------- Total liabilities and stockholders' equity $ 309,776 $ 298,635 ================== ================
See accompanying notes to these consolidated financial statements. 3 BELL SPORTS CORP. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited; in thousands, except per share data)
Nine Months Ended Three Months Ended ----------------- ------------------ March 29, March 30, March 29, March 30, 1997 1996 1997 1996 ---------------- --------------- --------------- ------------- Net sales $ 189,267 $ 181,331 $ 70,575 $ 67,442 Cost of sales 135,037 142,838 49,862 47,526 ---------------- --------------- --------------- ------------- Gross profit 54,230 38,493 20,713 19,916 Selling, general and administrative expenses 45,342 47,428 15,417 17,069 Loss on disposal of product line 25,360 -- 25,360 -- Amortization of goodwill and intangible assets 2,592 1,915 864 736 Restructuring charges 4,142 1,894 2,675 836 Net investment income (2,610) (2,419) (323) (455) Interest expense 5,467 6,636 1,943 2,308 ---------------- --------------- --------------- ------------- Loss before income taxes (26,063) (16,961) (25,223) (578) Benefit from income taxes (3,649) (4,579) (3,280) (1,291) ---------------- --------------- --------------- ------------- Net (loss) income $ (22,414) $ (12,382) $ (21,943) $ 713 ================ =============== =============== ============= Net (loss) income per common and common equivalent share $ (1.63) $ (0.90) $ (1.59) $ 0.05 ================ =============== =============== ============= Weighted average number of common and common equivalent shares outstanding 13,764 13,764 13,774 13,645 ================ =============== =============== =============
See accompanying notes to these consolidated financial statements. 4 BELL SPORTS CORP. AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (unaudited; in thousands)
Nine Months Ended ----------------- March 29, March 30, 1997 1996 ---------------- ---------------- CASH FLOWS USED IN OPERATING ACTIVITIES: Net cash used in operating activities $ (26,568) $ (49,443) ---------------- ---------------- CASH FLOWS PROVIDED BY (USED IN) INVESTING ACTIVITIES: Capital expenditures (5,768) (5,641) Net sale of marketable securities 8,105 24,897 Acquisition of other businesses (519) (16,789) ---------------- ---------------- Net cash provided by investing activities 1,818 2,467 ---------------- ---------------- CASH FLOWS PROVIDED BY (USED IN) FINANCING ACTIVITIES: Proceeds from issuance of stock - 79 Treasury stock purchases - (5,517) Payments on notes payable, long-term debt and capital leases 831 825 Advances taken on credit lines 50,143 87,044 Payments made on credit lines (22,540) (87,700) ---------------- ---------------- Net cash provided by (used in) financing activities 28,434 (5,269) ---------------- ---------------- Effect of exchange rate changes on cash (69) (105) ---------------- ---------------- Net increase (decrease) in cash and cash equivalents 3,615 (52,350) Cash and cash equivalents at beginning of period 23,140 72,018 ---------------- ----------------- Cash and cash equivalents at end of period $ 26,755 $ 19,668 ================ =================
See accompanying notes to these consolidated financial statements. 5 BELL SPORTS CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1 - THE COMPANY AND ITS SIGNIFICANT ACCOUNTING POLICIES Bell Sports Corp. and its wholly-owned subsidiaries (collectively, the "Company") design, manufacture and market bicycle helmets, related bicycle parts and accessories and automotive racing helmets. Consolidation - ------------- The consolidated financial statements include the accounts of Bell Sports Corp. and its wholly-owned subsidiaries. All material intercompany transactions and balances have been eliminated in consolidation. Accounting Period - ----------------- The Company's fiscal year is either a fifty-two or fifty-three week accounting period ending on the Saturday that is nearest to the last day of June. Unaudited Information and Basis of Presentation - ----------------------------------------------- The consolidated balance sheet as of March 29, 1997 and statements of operations and condensed cash flows for all periods included in the accompanying financial statements have not been audited. In the opinion of management these financial statements include all normal and recurring adjustments necessary for a fair presentation of such financial information. The results of operations for the interim periods are not necessarily indicative of the results of operations to be expected for the full year. The financial information included herein has been prepared pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been omitted pursuant to such rules and regulations. The interim financial information and the notes thereto should be read in conjunction with the audited financial statements for the fiscal years ended June 29, 1996, July 1, 1995 and July 2, 1994 which are included in the Company's 1996 annual report to stockholders. Income Per Share Information - ---------------------------- Income per common and common equivalent share is computed using the weighted average number of common stock and common stock equivalent shares outstanding during the periods, using the treasury stock method for stock options and warrants. Common equivalent shares are excluded from the computation if their effect is anti-dilutive except that, pursuant to Staff Accounting Bulletin No. 83 of the Securities and Exchange Commission, certain stock options that were granted at prices below the initial public offering price during the twelve month period immediately preceding the April 1992 initial public stock offering have been treated as common stock equivalents for all periods presented. Fully diluted net income per common share for all periods included in the accompanying financial statements has not been presented since an assumed conversion (using the if converted method, which includes the adjustment of reported net income for interest charges on a net-of-tax basis) of the Company's 4 1/4% convertible debentures (see Note 4) would be anti-dilutive. 6 Marketable Securities - --------------------- All marketable securities, consisting of preferred equity securities and U.S. Government Agency instruments have been classified as available-for-sale securities and are reported at fair value with unrealized holding gains and losses reported in stockholders' equity. The fair value of the marketable securities was obtained from published market quotes or outside professional pricing sources. The cost of the Company's marketable securities available for sale exceeded the fair market value of such securities by approximately $461,000 at June 29, 1996. Such excess was recorded as a reduction to the Company's stockholders' equity at June 29, 1996. During the first quarter of fiscal 1997, the Company was successful in an arbitration case related to the handling of certain marketable securities by an outside investment advisor. The settlement proceeds, net of related expenses and expected losses to sell certain securities in the net amount of $1.3 million, is included in net investment income. Accounts Receivable - ------------------- Accounts receivable at March 29, 1997 and June 29, 1996 are net of allowances for doubtful accounts of $5.5 million and $3.4 million, respectively. Property, Plant and Equipment - ----------------------------- Property, plant and equipment at March 29, 1997 and June 29, 1996 are net of accumulated depreciation of $16.8 million and $14.1 million, respectively. NOTE 2 - INVENTORIES Inventories consist of the following: March 29, June 29, (in thousands) 1997 1996 ---- ---- Raw materials $ 7,684 $ 5,330 Work in process 2,394 2,315 Finished goods 62,312 51,768 ------------- ------------ $ 72,390 $ 59,413 ============= ============ 7 NOTE 3 - PRODUCT LIABILITY AND CONTINGENCIES Product Liability - ----------------- The Company is subject to various product liability claims and/or suits brought against it for claims involving damages for personal injuries or deaths. Allegedly, these injuries or deaths relate to the use by claimants of products manufactured by the Company and, in certain cases, products manufactured by others. The ultimate outcome of these existing claims and any potential future claims cannot presently be determined. Other than for the February 1996 case described below, management believes that existing product liability claims/suits are defensible and that, based on the Company's past experience and assessment of current claims, the aggregate of defense costs and any uninsured losses will not have a material adverse impact on the Company's liquidity or financial position. The cost of product liability insurance fluctuated greatly in past years and the Company opted to self-insure claims for certain periods. The Company has been covered by product liability insurance since July 1, 1991. This insurance is subject to a self-insured retention. There is no assurance that insurance coverage will be available or economical in the future. The Company sold its motorcycle helmet manufacturing business in June 1991 in a transaction in which the purchaser assumed all responsibility for product liability claims arising out of helmets manufactured prior to the date of disposition and the Company agreed to use its in-house defense team to defend these claims at the purchaser's expense. If the purchaser is for any reason unable to pay any judgment, settlement amount or defense costs arising out of these claims, the Company could be held responsible for the payment of such amounts or costs. The Company believes that the purchaser does not currently have the financial resources to pay any significant judgment, settlement amount, or defense costs. On February 2, 1996, a Toronto, Canada jury returned a verdict against Bell based on injuries arising out of a 1986 motorcycle accident. The jury found that Bell was 25% responsible for the injuries with the remaining 75% of the fault assigned to the plaintiff and the other defendant. Unless reversed on appeal, the verdict is estimated to be between $3.0 and $4.0 million, which includes associated legal fees and tax implications. The Company has filed an appeal of the Canadian verdict. Although the Company cannot predict the outcome of an appeal, the Company currently has adequate cash balances and sources of capital available to satisfy the judgment if the appeal is unsuccessful. Accordingly, the Company currently does not believe the claim will have a material adverse effect on liquidity or the financial condition of the Company. Although the Company maintains product liability insurance, this claim arose during a period in which the Company was self-insured. The Company currently does not have a reserve for this judgment. Environmental Issues - -------------------- In the ordinary course of its business, the Company is required to dispose of certain waste at off-site locations. During 1993, the Company became aware of an investigation by the Illinois Environmental Protection Agency (the "Illinois Agency") of a waste disposal site, owned by a third party, which was previously utilized by the Company. As a result of that investigation, the Illinois Agency informed the Company that certain of the Company's practices with respect to the identification, storage and disposal of hazardous waste and related reporting requirements may not have complied with the applicable law. On March 14, 1995, the State of Illinois filed a complaint with the Illinois Pollution Control Board against the Company and the disposal site owner based on the same allegations. The complaint seeks penalties not exceeding statutory maximums and such other relief as the Pollution Control Board determines appropriate. The disposal site owner filed a cross-claim against the Company that seeks to have penalties assessed against the Company and not against the disposal site owner. Any penalties as a result of the cross-claim would be payable to the State. The Illinois Pollution Control Board has approved a settlement between the State and the Company pursuant to which the Company paid $69,000 to the State and disposed of certain materials in a container at the waste 8 disposal site at an authorized disposal facility. The cross-claim by the landfill owner is still pending, the outcome of this cannot presently be determind. Additionally, the Illinois Agency has been negotiating with the disposal site owner with respect to the procedures and actions necessary to close the disposal site. The extent and nature of any actions which may be taken against the Company with respect to this matter can not presently be determined. Shareholder Litigation - ---------------------- On February 16, 1995, an AMRE shareholder filed a lawsuit, on his own behalf, and a purported class action, against AMRE and its directors in the Chancery Court of the State of Delaware, alleging various breaches of fiduciary and common law duties and requesting both monetary and injunctive relief. The alleged basis for the claims are the action of AMRE and its directors in connection with the authorization and approval of the AMRE Merger with Bell Sports Corp. The AMRE Merger was consummated on July 3, 1995 and the case has been inactive since that date. On October 2, 1995, the Company filed a motion to dismiss the case. NOTE 4 - NOTES PAYABLE, LONG TERM DEBT AND CAPITAL LEASE OBLIGATIONS The Company has approximately $153.2 million in notes payable, long term debt and capital lease obligations outstanding at March 29, 1997. Of this amount, $86.25 million relates to the outstanding balance on the 4 1/4% convertible subordinated debentures. Maturing November 15, 2000, the debentures are convertible into common stock at any time prior to maturity at a conversion price of $54.06 per share. Interest on the debentures is payable semi-annually. The debentures are redeemable at the Company's option at any time on or after November 15, 1996, at specified redemption prices. In February 1996, the Company entered into a $100 million multicurrency, revolving line of credit (the "Revolving Credit") with a syndicated bank group. In August 1996, the Company amended the Revolving Credit to grant to the syndicated bank group a security interest in U.S. accounts receivable and inventories. The security interest was subject to automatic release by the bank group upon the achievement of certain financial ratios after September 1, 1997. The amendment, among other things, waived a default in the interest coverage ratio covenant as of June 29, 1996. At March 29, 1997, a total of $62.2 million was outstanding under the credit facility. In April 1997, upon the sale of the Service Cycle/Mongoose inventory to Brunswick Corporation, the Company amended the Revolving Credit to reduce the amount of the line of credit to $60 million ("Amended Credit Agreement"). The Amended Credit Agreement grants to the syndicated bank group a security interest in the U.S. accounts receivable and inventories for the term of the facility. The amendment added a clean-down provision requiring the Amended Credit Agreement to be maintained below $15 million for a period of thirty consecutive days between July 1st and September 30th of each fiscal year. The Amended Credit Agreement, which expires in December 1999, provides the Company with several interest rate options, including U.S. prime, LIBOR plus a margin, Canadian prime plus the applicable LIBOR margin less 0.50%, the Canadian banker's acceptance plus the LIBOR margin plus 0.125%, and short-term fixed rates offered by the agent bank in the loan syndication. The LIBOR margin is currently 1.50% per annum, but it can range between 1.00% and 1.50% depending on the Company's interest coverage ratio. Under the Amended Credit Agreement, the Company is required to pay a quarterly commitment fee on the unused portion of the facility at a rate that ranges from 0.20% to 0.30% per annum. At March 29, 1997, the quarterly commitment fee was 0.25% per annum. 9 The Amended Credit Agreement contains certain financial covenants, the most restrictive of which are a minimum interest coverage ratio, a maximum funded debt ratio and a minimum adjusted net worth amount. The Amended Credit Agreement also contains covenants that prohibit the payment of cash dividends as well as restrict the amount that the Company can repurchase of its subordinated debt and common stock. NOTE 5 - COMMON STOCK From time to time, the Company has granted to its executive officers, non-employee directors and certain other employees options to purchase shares of the Company's Common Stock. At March 29, 1997, options to purchase approximately 1,910,500 shares of Common Stock were outstanding. On August 24, 1995, the Company announced a stock repurchase program authorizing the repurchase of up to 10% of the outstanding shares of the Company's Common Stock from time to time in open market or private transactions. The timing of any repurchase and the price and number of shares repurchased will depend on market conditions and other factors. To date, the Company has repurchased a total of 523,400 shares at an aggregate purchase price of approximately $5.5 million, of which 28,328 shares were utilized under a Restricted Stock Award Program. Shares repurchased may be retired or used for general corporate purposes. NOTE 6 - RESTRUCTURING CHARGES On June 27, 1995, the Company's stockholders approved the issuance of Common Stock in connection with the Agreement and Plan of Merger dated February 15, 1995 among the Company, Bell Merger Co., a wholly-owned subsidiary of the Company, and American Recreation Company Holdings, Inc. ("AMRE"). In contemplation of the merger, the Company formulated a program (the "Program") to consolidate and integrate the operations of Bell, SportRack (acquired May 15, 1995) and AMRE, as well as combine certain product lines. This Program called for the consolidation of certain sales and marketing, research and development, manufacturing, finance and management information systems functions. During fiscal 1996, the Company commenced significant organizational and office consolidations including closing the Cerritos, Providence, Commack and Calgary offices. Most U.S. sales, marketing and research and development operations were consolidated in San Jose, California and all corporate functions in Scottsdale, Arizona. Substantially all of the Canadian operations were consolidated into one facility in Granby, Quebec. Included in fiscal 1997 pre-tax income are $1.5 million of restructuring charges related to the Program, including facility closing costs, severance benefits and relocation expenses. 10 During the third quarter of fiscal 1997, the Company announced plans to significantly downsize the Scottsdale, Arizona corporate office by consolidating certain Scottsdale functions with the San Jose, California office. Included in the third quarter of fiscal 1997 pre-tax income are $2.7 million of restructuring charges related to this consolidation plan. The following table sets forth the details of activity during fiscal 1997 for restructuring charges:
(in thousands) Accrual at Restructuring Cash Accrual at June 29, 1996 Charges Payments March 29, 1997 --------------- ----------------- ------------- ---------------- Lease payments and other facility expenses $ 942 $ 983 ($ 749) $1,176 Severance and other related benefits 2,832 1,627 ( 2,578) 1,881 Relocation and other 1,383 1,531 ( 1,736) 1,178 --------------- ----------------- ------------- ---------------- Total $ 5,157 $ 4,141 ($5,063) $4,235 =============== ================= ============= ================
NOTE 7 - LOSS ON DISPOSAL OF PRODUCT LINE On April 29, 1997, the Company completed the sale of its Service Cycle/Mongoose inventory, trademarks and certain other assets to Brunswick Corporation. The purchase price approximated $21 million and includes providing Brunswick Corporation a three year option to purchase 600,000 shares of the Company's common stock at an exercise price of $7.50 per share. The Company retained and will collect the accounts receivable for the Service Cycle/Mongoose business, which were approximately $19 million at April 29, 1997. As a result of the Service Cycle/Mongoose disposal the Company announced plans to reorganize North American distribution network and operations to better utilize facilities. Included in the third quarter of fiscal 1997 pre-tax income are $25.4 million of costs associated with the disposition of the Service Cycle/Mongoose business and distribution changes. The write-off of goodwill and intangibles related to the Service Cycle/Mongoose business were $14.8 million, Service Cycle disposal and exit costs were $5.4 million, and reorganization costs associated with the distribution network and operations related to the sale of Service Cycle/Mongoose were $5.2 million. 11 Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FINANCIAL POSITION AND LIQUIDITY The Company's current ratio decreased to 5.2 to 1 at March 29, 1997 from 5.4 to 1 at June 29, 1996. Cash, cash equivalents and marketable securities decreased to $26.8 million at March 29, 1997 from $31.1 million at June 29, 1996. The decline primarily relates to cash used in operations. The Company anticipates an increase in cash of approximately $40 million related to the sale of the Service Cycle/Mongoose inventory and from the collections of related receivables. Management expects to use the proceeds to repay a portion of the Company's Amended Credit Agreement, and other general corporate purposes, which may include the repurchase of the Company's common stock and/or its convertible subordinated debentures. Accounts receivable at March 29, 1997 increased $13.7 million from June 29, 1996 due to the use of extended dating programs for sales to independent bicycle dealers. Management expects accounts receivable to decline by approximately $13 million during the fourth quarter related to the collection of Service Cycle/Mongoose receivables. Inventories increased $13.0 million in fiscal 1997 compared to the balance at June 29, 1996. The increase is due to the build-up of inventory in preparation for the spring selling season. Management expects inventory to decline during the fourth quarter by approximately $18 million related to the sale of Service Cycle/Mongoose inventory. In February 1996, the Company entered into a $100 million multicurrency, revolving line of credit (the "Revolving Credit") with a syndicated bank group. This facility replaced prior revolving credit facilities that were used by the Company's North American operations. In August 1996, the Company amended the Revolving Credit to grant to the syndicated bank group a security interest in U.S. accounts receivable and inventories. The security interest was subject to automatic release by the bank group upon the achievement of certain financial ratios after September 1, 1997. The amendment, among other things, waived a default in the interest coverage covenant as of June 29, 1996. At March 29, 1997, a total of $62.2 million was outstanding under the credit facility. In April 1997, upon the sale of the Service Cycle/Mongoose inventory to Brunswick Corporation, the Company amended the Revolving Credit to reduce the amount of the line of credit to $60 million ("Amended Credit Agreement"). The Amended Credit Agreement grants to the syndicated bank group a security interest in the U.S. accounts receivable and inventories for the term of the facility. The amendment added a clean-down provision requiring the Amended Credit Agreement to be maintained below $15 million for a period of thirty consecutive days between July 1st and September 30th of each fiscal year. The Amended Credit Agreement facility outstanding borrowings have been significantly reduced due to the proceeds related to sale of the Service Cycle/Mongoose business and management anticipates that they will be reduced further due to cash generated from operations, including collection of the Service Cycle/Mongoose receivables. The Amended Credit Agreement, which expires in December 1999, provides the Company with several interest rate options, including U.S. prime, LIBOR plus a margin, Canadian prime plus the applicable LIBOR margin less 0.50%, Canadian banker's acceptance plus the LIBOR margin plus 0.125%, and short-term fixed rates offered by the agent bank in the loan syndication. The LIBOR margin is currently 1.50% per annum, but it can range between 1.00% and 1.50% depending on the Company's interest coverage ratio. Under the Amended Credit Agreement, the Company is required to pay a quarterly commitment fee on the unused portion of the facility at a rate that ranges from 0.20% to 0.30% per annum. At March 29, 1997 the quarterly commitment fee was 0.25% per annum. 12 The Amended Credit Agreement contains certain financial covenants, the most restrictive of which are a minimum interest coverage ratio, a maximum funded debt ratio and a minimum adjusted net worth amount. It also contains covenants that prohibit the payment of cash dividends as well as restrict the amount that the Company can repurchase of its subordinated debt and common stock. Capital expenditures were $5.8 million for the first nine months of fiscal 1997. The Company expects to spend approximately $6.5 million on capital expenditures in fiscal year 1997, primarily for computer systems and new product tooling. A principal business strategy of the Company has been to pursue acquisitions of businesses, products or technologies that will complement its current business. The Company has identified bicycle related and sporting goods industries as possible areas of focus. Such acquisitions may be funded with available cash, debt financing, issuance of common stock or a combination thereof. With respect to acquisitions prior to fiscal 1997, the Company has contingent earnout payments that could approximate $1.9 million, subject to future financial results. In November 1996, the Company acquired a distributor in Sydney, Australia to directly market its products. Additionally, from time to time the Company evaluates the strategic fit and financial performance of its various operating units and product lines. As a result of such evaluations, the Company could decide to divest or discontinue certain portions of the business. The Company believes its available cash flows from operations, the proceeds from the sale of the Service Cycle/Mongoose business and the Amended Credit Agreement should be adequate to satisfy its working capital requirements in fiscal 1997. The Company does not anticipate paying dividends on its Common Stock in the foreseeable future. Certain matters contained herein are forward-looking statements that involve risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements. These include, but are not limited to: seasonality, adverse outcome from pending litigation, competitive actions, loss of significant customers, timing of major customer shipments, adverse weather conditions, retail environment, pending accounting pronouncements, economic conditions and currency fluctuations. 13 RESULTS OF OPERATIONS Net Sales. Net sales increased by 5% to $70.6 million during the three months ended March 29, 1997 as compared to $67.4 million in the same period of 1996. Bicycle accessories sales increased 16% over prior year. This increase was offset by a decrease in bicycle sales of 8% and bicycle helmet sales of 5% compared to a year ago. Bicycle helmets have increased in the independent bicycle dealer channel, but have decreased in the mass merchant channel from the prior year. On a year-to-date basis net sales increased 4% to $189.3 million from $181.3 million in the previous year. The year-to-date increase can be attributed to IBD bicycle helmet sales and increased bicycle accessories sales offset by lower bicycle and mass merchant helmet sales. The product line sales mix for the nine month and three month periods are as follows: Nine Months Ended Three Months Ended ----------------- ------------------ March 29, March 30, March 29, March 30, 1997 1996 1997 1996 ---- ---- ---- ---- Product Line Sales Mix: Bicycle accessories 49% 48% 50% 45% Bicycle helmets 32% 31% 35% 38% Bicycles 18% 20% 13% 15% Auto Racing helmets 1% 1% 2% 2% Management is cautiously optimistic about the fourth quarter of fiscal 1997 due to recent helmet growth in the IBD channel and strong accessory sales in the mass merchant channel. Gross Margin. Gross margins decreased to 29% of net sales in the third quarter of fiscal 1997, compared to 31% in the comparable prior year period, excluding the impact of the inventory write-up related to the January 1996 acquisition of Giro Sport Design. This decrease is attributed to lower gross margins on bicycle sales due to end of season close-out sales during the quarter as compared to prior year, as well as a shift of bicycle helmet sales volumes to lower price point helmets. For the first nine months of fiscal 1997, gross margins remained at 29% of net sales, compared to the same period of fiscal 1996, excluding the impact of the inventory write-up related to the merger with AMRE and the acquisitions of SportRack and Giro. During the third quarter and the first nine months of fiscal 1996, $1.0 million and $14.1 million, respectively, were charged to cost of sales for the write-up of inventory related to the merger with AMRE and the acquisitions of SportRack and Giro. Selling, General and Administrative. Selling, general and administrative costs were 22% of net sales in the third quarter of fiscal 1997 compared to 25% in fiscal 1996. Actual selling, general and administrative costs decreased $1.7 million to $15.4 million for the quarter. On a comparative basis, selling, general and administrative costs declined by $2.1 million or 13%, when excluding Giro costs not included for the full prior year quarter. On a year to date basis, selling, general and administrative costs decreased 2% to $45.3 million. When excluding Giro, costs declined by $5.2 million or 11%. Year-to-date selling, general and administrative costs represented 24% of sales compared to 26% in the same period of fiscal 1996. These reductions result from the Company's recent restructuring activities and management's continuing efforts to reduce the Company's overall selling, general and administrative cost structure. 14 Management anticipates the trend of declining selling, general and administrative expenses as a percent of net sales to continue in the fourth quarter. Additionally, based upon the April 1997 consolidation plan and the plan to reorganize the Company's distribution network and operations, management anticipates that the cost structure can be further reduced after successful completion of such plans. Loss on Disposal of Product Line. On April 29, 1997, the Company completed the sale of its Service Cycle/Mongoose inventory, trademarks and certain other assets to Brunswick Corporation. Included in the third quarter of fiscal 1997 pre-tax income are $25.4 million of costs associated with the disposition of the Service Cycle/Mongoose business and distribution changes. The write-off of goodwill and intangibles related to the Service Cycle/Mongoose business were $14.8 million, Service Cycle disposal and exit cost were $5.4 million, and the sale of Service Cycle/Mongoose reorganization costs associated with distribution network and were $5.2 million. Amortization of intangibles. Amortization of goodwill and intangible assets increased to $864,000 in the third quarter of 1997 from $736,000 in the third quarter of 1996, and to $2.6 million in the first nine months of fiscal 1997 from $1.9 million in the first nine months of fiscal 1996. The increase is due to the acquisition of Giro in January 1996. Amortization expense in the fourth quarter is expected to decline by $137,000 due to the write -off of $14.8 million of Service Cycle/Mongoose goodwill and intangibles related to the sale of such business. Restructuring charges. During the third quarter of fiscal 1997, the Company announced plans to significantly downsize the Scottsdale, Arizona corporate office by consolidating certain Scottsdale functions with the San Jose, California office. Included in the third quarter of fiscal 1997 pre-tax income are $2.7 million of restructuring charges related to this plan. During fiscal 1996, the Company commenced significant organizational and office consolidations including closing four offices. Most U.S. sales, marketing and research and development operations were consolidated in San Jose, California and all corporate functions in Scottsdale, Arizona. Substantially all of the Canadian operations were consolidated into one facility in Granby, Quebec. Restructuring charges were $1.5 million and $1.9 million for fiscal 1997 and 1996 for the nine month period, respectively relating to these activities. Total restructuring charges were approximately $4.1 million and $1.9 million for fiscal 1997 and 1996 for the nine month period, respectively. Net investment income and interest expense. For the fiscal 1997 third quarter, net investment income decreased to $323,000, compared to $455,000 in fiscal 1996. This decline is due to lower levels of cash and marketable securities invested during the quarter. Net investment income increased to $2.6 million for the first nine months in fiscal 1997, compared to $2.4 million in fiscal 1996. The increase is due to settlement of an arbitration case related to the handling of certain marketable securities by an outside investment advisor during the first quarter of fiscal 1997. The settlement proceeds, net of related expenses and expected losses to sell certain securities, of $1.3 million, were included in net investment income. Interest expense decreased to $1.9 million in the third quarter of fiscal 1997 from $2.3 million in the third quarter of fiscal 1996. On a year-to-date basis, interest expense decreased to $5.5 million for fiscal 1997 from $6.6 million for fiscal 1996. The decreases are due to lower debt balances outstanding and lower interest rates for the first nine months of fiscal 1997 compared to the prior year. 15 Income taxes. The effective tax rate was 39% for the quarter and 40% for the nine month period of fiscal 1997, excluding restructuring charges and the impact of the loss on the disposal of a product line, compared to 51% for the comparable prior year quarter and 42% for the nine month period of fiscal 1996, before restructuring charges and the effect of the inventory write-up. The effective rate was 13% and 14%, respectively, if such costs were included for both periods in fiscal 1997 and 27% for both the quarter and the nine month period of fiscal 1996. The current year's effective rates differ significantly from the federal statutory rate of 34% due to several large expense items which are not deductible for federal or state income tax purposes. Net income and weighted average shares. Results from operations for fiscal 1997 third quarter, before restructuring charges and the loss on disposal of product line, were net income of $1.7 million, or $0.12 on a per share basis, compared to net income, before restructuring charges and the effect of the inventory write-up, of $623,000, or $0.05 per share, in the previous year. For the first nine months of fiscal 1997, net income increased to $2.1 million or $0.15 per share, before restructuring charges and the loss on disposal of product line compared to a net loss of $560,000, or $0.04 per share, in the previous year before restructuring charges and the effect of the inventory write-up. Results from operations including the effects of restructuring charges and the loss on disposal of product line for the fiscal 1997 third quarter was a loss of $21.9 million, or $1.59 per share, compared to income of $713,000 or $0.05 per share for the fiscal 1996 third quarter. For the nine month period ending March 29, 1997, results from operations were a loss of $22.4 million, or $1.63 per share, compared to a loss of $12.4 million, or $0.90 per share, for the same period of fiscal 1996. The fiscal 1996 results included a $14.1 million charge for the inventory write-up arising from the acquisition of SportRack in May 1995, the merger with AMRE, Inc. in July 1995 and the acquisition of Giro in January 1996. Weighted average shares outstanding for the fiscal three month periods ended March 29, 1997 and March 30, 1996 were 13.8 million and 13.6 million, respectively. Year-to-date outstanding shares for both fiscal 1997 and fiscal 1996 were 13.7 million shares. 16 BELL SPORTS CORP. PART II Item 1 Legal Proceedings None Item 2 Changes in Securities None Item 3 Defaults Upon Senior Securities None Item 4 Submission of Matters to a Vote of Security Holders None Item 5 Other Information None Item 6 Exhibits and Reports on Form 8-K (a.) Exhibit Index page 19 17 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Date: May 13, 1997 BELL SPORTS CORP. /s/ Linda K. Bounds Executive Vice President and Chief Financial Officer - --------------------- ---------------------------------------------------- Linda K. Bounds (Principal financial officer) /s/ John A. Williams Vice President and Corporate Controller - --------------------- --------------------------------------- John A. Williams (Principal accounting officer) 18 BELL SPORTS CORP. INDEX TO EXHIBITS Exhibit Number Description Page - -------------------------------------------------------------------------------- 10.1 Employment Agreement with Mary J. George Page 20 10.2 Employment Agreement with Linda K. Bounds Page 29 11 Statement re: computation of per share earnings Page 39 27 Financial Data Schedule Page 40 19 EX-10.1 2 EMPLOYMENT AGREEMENT WITH MARY J. GEORGE EMPLOYMENT AGREEMENT -------------------- THIS EMPLOYMENT AGREEMENT is entered into on April 11, 1997, effective as of February 15, 1997, among Mary J. George (the "Executive"), Bell Sports Corp., a Delaware corporation (the "Holding Company"), and Bell Sports, Inc., a California corporation (the "Operating Company"). The Holding Company and the Operating Company are collectively referred to herein as the "Company." WHEREAS, the Company is engaged primarily in the business of designing, manufacturing, producing, distributing, marketing, advertising and selling auto racing helmets, bicycle helmets, bicycle accessories and related products; WHEREAS, the Executive currently serves as the President, North America of the Operating Company; WHEREAS, the Executive's abilities and services are unique and essential to the prospects of the Company; and WHEREAS, the Company and the Executive desire to enter into this Agreement to provide for the employment of the Executive by the Company upon the terms and subject to the conditions set forth herein. NOW, THEREFORE, in consideration of the premises and the mutual agreements contained herein, the parties hereby agree as follows: 1. Employment; Term. The Company hereby employs the Executive and the Executive hereby agrees to be employed by the Company upon the terms and subject to the conditions contained in this Agreement. The term of this Agreement shall commence as of February 15, 1997 and shall end on February 15, 2000, unless earlier terminated pursuant to Section 4 hereof. As used herein, the term "Employment Period" shall mean the period from February 15, 1997 until the expiration of the term of this Agreement or the earlier termination of the term hereof pursuant to Section 4 hereof. 2. Position; Duties; Responsibilities. The Company shall employ the Executive as the President and Chief Operating Officer of the Holding Company and the Operating Company. The Executive shall faithfully and loyally perform to the best of her abilities all the duties reasonably assigned to her hereunder, shall devote such business time, attention and effort to the affairs of the Company as is reasonably necessary for the proper performance of such duties and shall use her reasonable best efforts to promote the interests of the Company. Notwithstanding the foregoing, the Executive may serve as a director, officer or paid consultant of business corporations other than the Company or civic or community organizations or entities, provided that such activities do not violate the terms of any of the covenants set forth in Section 7 hereof and such activities are approved prior to the commencement thereof by the Chairman of the Board and Chief Executive Officer of the Holding Company and the Operating Company (the "Company CEO"). 3. Compensation. (a) Base Salary. During the Employment Period, the Company shall pay to the Executive an annual base salary at the rate of $247,500 per annum, payable in accordance with the Company's executive payroll policy. Such base salary shall be reviewed annually, commencing July 1, 1997, and may be 20 increased (but shall not be decreased) annually, in the sole discretion of the Company. The Executive's base salary, as such base salary may be increased annually hereunder, is referred to herein as the "Base Salary." (b) Annual Performance Bonus. (i) The Executive shall be entitled to receive an annual performance bonus payable in cash for each full fiscal year of the Company during the term of this Agreement in accordance with the Company's management incentive program, as in effect from time to time. The annual performance bonus to which the Executive is entitled pursuant to this Section 3(b) is referred to herein as the "Bonus." (ii) The payment of each Bonus shall be made within 30 days after the Company's independent accountants shall have certified the Company's consolidated financial statements for the fiscal year to which such Bonus relates. (iii) If the Company's fiscal year changes, the Executive's opportunity to earn the Bonus shall not be materially and adversely affected. (c) Restricted Phantom Stock Units. (i) If during any 30 consecutive calendar day period (each such period being referred to herein as a "Measuring Period") within the Employment Period after July 15, 1997, the average of the closing prices of Holding Company common stock ("Common Stock"), as reported in The Wall Street Journal NASDAQ National Market Issues, equals or exceeds for the first time during the Employment Period after July 15, 1997 a dollar amount set forth below under "Stock Price," the Company's Management Stock Incentive Committee shall, within 15 days following the end of such Measuring Period, award the Executive the number of restricted phantom stock units (rounded to the nearest whole unit) having a value equal to the number set forth below under "Phantom Stock Award Multiple" multiplied by a fraction, the numerator of which is the Executive's Base Salary on the last day of such Measuring Period and the denominator of which is the closing price of the Common Stock (reported as described above) on the last day of such Measuring Period (or if such day is not a day on which the Common Stock is traded, then on the next preceding day on which the Common Stock was traded): Phantom Stock Stock Price Award Multiple ----------- -------------- $ 8.00 one $ 9.00 one $11.00 one $13.00 two The Executive shall be awarded restricted phantom stock units as described in this Section 3(c)(i) for each dollar amount set forth above under "Stock Price" which is exceeded as described above, notwithstanding that more than one such dollar amount is exceeded during a single Measuring Period. A restricted phantom stock unit is an amount of cash equal to the closing price of the Common Stock (reported as described above) on the date of the determination of the value of such unit, which unit is subject to the restrictions on vesting described in this Section 3(c)(i). The Executive shall have no right to receive the amount of any restricted phantom stock unit awarded to the Executive until such unit becomes fully vested. All restricted phantom stock units awarded pursuant to this Section 3(c)(i) shall become fully vested upon termination of the Employment Period; provided, however, that in the event of the termination of the Executive's employment voluntarily 21 by the Executive pursuant to Section 4(e) hereof or by the Company for "Cause" pursuant to Section 4(c) hereof (as such term is defined in such section), no such restricted phantom stock units shall vest, and all such restricted phantom stock units shall be forfeited. No interest shall accrue on restricted phantom stock units awarded pursuant to this Section 3(c)(i). In the event of a stock split, stock dividend, recapitalization, reorganization, merger, consolidation, combination, exchange of shares, liquidation, spin-off or other similar event, each dollar amount set forth above under "Stock Price" shall be appropriately adjusted so that the Executive's opportunity to be awarded restricted phantom stock units shall not be materially and adversely affected. (ii) If the Board of Directors of the Company adopts an incentive plan which provides for the award of shares of restricted Common Stock and such plan is approved by the stockholders of the Company, shares of restricted Common Stock issuable pursuant to such plan shall be substituted for the restricted phantom stock units described in Section 3(c)(i) hereof, as provided in this Section 3(c)(ii). As of the date of approval of such plan by the stockholders of the Company (the "Approval Date") (A) the Executive shall have no further right to be awarded restricted phantom stock units pursuant to Section 3(c)(i) hereof and, in lieu of such right, the Executive shall have the right to be awarded one share of restricted Common Stock pursuant to such plan for each restricted phantom stock unit to which the Executive would otherwise have been entitled pursuant to Section 3(c)(i) hereof, and (B) one share of restricted Common Stock issuable pursuant to such plan shall be substituted for each restricted phantom stock unit awarded to the Executive pursuant to Section 3(c)(i) hereof prior to the Approval Date. The shares of restricted Common Stock issuable to the Executive pursuant to this Section 3(c)(ii) shall be subject to the same terms and conditions with respect to vesting as are applicable to the restricted phantom stock units which may be awarded pursuant to Section 3(c)(i) hereof. Prior to the vesting of a share of restricted Common Stock issued to the Executive pursuant to this Section 3(c)(ii), the Executive shall have the right to vote such share, but shall have no right to any dividends payable on shares of Common Stock. (d) Stock Options. In the discretion of the Company's Management Stock Incentive Committee, the Executive shall be eligible to receive options to purchase shares of Common Stock pursuant to the terms of the Bell Sports Management Stock Incentive Plans. (e) Perquisites. During the Employment Period, the Executive shall be entitled to a cash automobile allowance in the amount of $400 per month. (f) Reimbursement of Expenses. The Company shall reimburse the Executive for all expenses necessarily and reasonably incurred by her in connection with the business of the Company, upon presentation of proper receipts or other proof of expenditure and subject to such reasonable guidelines or limitations provided to the Executive and applied prospectively, as established by the Company. (g) Vacation. During the Employment Period, the Executive shall be entitled to paid vacation and sick leave in accordance with Company policy. (h) Participation in Benefit Plans. During the Employment Period, the Executive shall be entitled to participate in any profit sharing plan, retirement plan, group life insurance plan or other insurance plan or medical expense plan maintained by the Company for its senior executives generally, which plans shall not differ in value in any manner materially 22 adverse to the Executive from those in which the Executive currently participates. 4. Termination. (a) Death. Upon the death of the Executive, this Agreement shall automatically terminate and all rights of the Executive and her heirs, executors and administrators to compensation and other benefits hereunder shall cease, except (i) for Base Salary which shall have accrued to the date of death, (ii) any restricted phantom stock units awarded pursuant to Section 3(c)(i) hereof which have not been replaced by shares of restricted Common Stock, or any shares of restricted Common Stock issued pursuant to Section 3(c)(ii) hereof, shall be immediately 100% vested and (iii) for rights to indemnification under Section 5 hereof. (b) Disability. The Company may, at its option, terminate this Agreement upon written notice to the Executive if the Executive, because of physical or mental incapacity or disability, fails in any material respect to perform the services required of her hereunder for a continuous period of 120 days or any 180 days out of any 12-month period. Upon such termination, all obligations of the Company hereunder shall cease, except (i) for Base Salary which shall have accrued to the date of termination, (ii) any restricted phantom stock units awarded pursuant to Section 3(c)(i) hereof which have not been replaced by shares of restricted Common Stock, or any shares of restricted Common Stock issued pursuant to Section 3(c)(ii) hereof, shall be immediately 100% vested and (iii) for the rights to indemnification under Section 5 hereof. In the event of any dispute regarding the existence of the Executive's incapacity hereunder, the matter shall be resolved by the determination of a majority of three physicians qualified to practice medicine in the state of the Executive's residence, one to be selected by each of the Executive and the Company and the third to be selected by such two designated physicians. For this purpose, the Executive shall submit to appropriate medical examinations. (c) Cause. (i) The Company may, at its option, terminate the Executive's employment under this Agreement for "Cause" (as hereinafter defined). A termination for Cause shall not take effect until and unless the Company complies with this Section 4(c)(i). The Executive shall be given written notice by the Company of the intention to terminate her employment hereunder for Cause (the "Cause Notice"). The Cause Notice shall state the particular action(s) or inaction(s) giving rise to termination for Cause. The Executive shall have 10 days after the Cause Notice is given to cure the particular action(s) or inaction(s), to the extent a cure is possible. If the Executive so effects a cure, the Cause Notice shall be deemed rescinded and of no force or effect. (ii) As used in this Agreement, the term "Cause" shall mean any one or more of the following: (A) the Executive's refusal to perform specific directives of the Company CEO, which directives are consistent with the scope and nature of the Executive's duties and responsibilities as set forth herein; (B) the Executive's admission or conviction of a felony or of any crime involving moral turpitude, fraud, embezzlement, theft or misrepresentation; (C) any gross or willful misconduct of the Executive resulting in substantial loss to the Company or substantial damage to the Company's reputation; or 23 (D) any breach by the Executive of any one or more of the covenants contained in Section 6 or 7 hereof, other than an inadvertent and unintentional breach of a covenant contained in Section 6 having an inconsequential effect upon the Company or any of its controlled affiliates. (iii) The exercise of the right of the Company to terminate this Agreement pursuant to this Section 4(c) shall not abrogate the rights or remedies of the Company in respect of the breach giving rise to such termination. (iv) If the Company terminates the Executive's employment for Cause, she shall be entitled to: (A) accrued Base Salary through the date of the termination of her employment; (B) any Bonus owing but not yet paid for any fiscal year ended on or before the Executive's termination of employment for Cause; (C) any amounts owing but not yet paid pursuant to Section 3(e); and (D) other or additional benefits in accordance with applicable plans and programs of the Company. (v) Notwithstanding anything to the contrary contained in this Agreement, if, following a termination of the Executive's employment for Cause, a court of competent jurisdiction, in a final determination, determines that the Executive was not guilty of the conduct that formed the basis for the termination, the Executive shall be entitled to the payments and the economic equivalent of the benefits she would have received had her employment been terminated by the Company without Cause. (d) Termination Without Cause. If, during the Employment Period, the Company terminates the employment of the Executive hereunder for any reason other than a reason set forth in Section 4(a), 4(b) or 4(c): (i) such termination shall be effective 90 days following written notice thereof by the Company to the Executive; (ii) concurrent with such termination, the Company shall pay to the Executive an amount equal to her Base Salary accrued through the date of termination; (iii) the Company shall continue to pay the Executive her Base Salary and all other benefits (excluding Bonus) which would otherwise be payable hereunder for a period of 18 months following the date of termination; (iv) any restricted phantom stock units awarded pursuant to Section 3(c)(i) hereof which have not been replaced with shares of restricted Common Stock, or any shares of restricted Common Stock issued pursuant to Section 3(c)(ii) hereof, shall be immediately 100% vested; (v) all of the Executive's options to purchase Common Stock shall be immediately 100% exercisable; (vi) the Executive shall be entitled to any amounts owing but not yet paid pursuant to Section 3(f); and 24 (vii) the Executive shall be entitled to her rights to indemnification under Section 5 hereof. (e) Voluntary Termination. If, during the Employment Period, the Executive voluntarily terminates her employment hereunder for any reason whatsoever, such termination shall be effective 90 days following written notice thereof by the Executive to the Company and the Executive shall be entitled to the payments and benefits specified by Sections 4(d)(ii), (iii), (vi) and (vii) hereof, inclusive. 5. Indemnification. To the fullest extent permitted by law, the Restated Certificate of Incorporation of the Holding Company and the Articles of Incorporation of the Operating Company, the Executive (and her heirs, executors and administrators) shall be indemnified by the Company and its successors and assigns. The obligations of the Company pursuant to this Section 5 shall survive the termination of the Employment Period, except as otherwise provided herein. 6. Confidentiality. The Executive shall at all times during the Employment Period and thereafter hold in confidence any and all Confidential Information (as hereinafter defined) that may have come or may come into her possession or within her knowledge concerning the products, services, processes, businesses, suppliers, customers and clients of the Company or its controlled affiliates. The Executive agrees that neither she nor any person or enterprise controlled by her will for any reason directly or indirectly, for herself or any other person, use or disclose any trade secrets, proprietary or confidential information, inventions, manufacturing or industrial processes or procedures, patents, trademarks, trade names, customer lists, service marks, service names, copyrights, applications for any of the foregoing, or licenses of other rights in respect thereof (collectively, "Confidential Information"), owned or used by, or licensed to, the Company or any of its controlled affiliates, provided that the Executive may disclose Confidential Information which has become generally available to the public other than as a result of a breach of this Agreement by the Executive or pursuant to an order of a court of competent jurisdiction or of a governmental agency, department or commission. Upon termination of her employment under this Agreement, the Executive shall promptly surrender to the Company all documents she believes contain Confidential Information and that are within her possession or control, other than documents to which the Executive is or was a party or that relate to the Executive or the basis, or purported basis, on which her employment was terminated. 7. Noncompetition and Nonsolicitation. (a) Subject to the following sentence, the Executive agrees that from the date hereof and subsequent to the termination of her employment under this Agreement and continuing for a period of two years (the "Noncompete Period"), neither she nor any person or enterprise controlled by her will become a stockholder, lender, director, officer, agent or employee of a corporation or member of or lender to a partnership, engage as a sole proprietor in any business, act as a consultant to any of the foregoing or otherwise engage directly or indirectly in any business, that is in competition with the business then conducted by the Company or any of its controlled affiliates in any state in the United States or any other country in which the Company or any of its controlled affiliates has engaged in such business during the term of the Executive's employment under this Agreement; provided, however, that the foregoing shall not prohibit the Executive from owning less than two percent of the outstanding securities of any class of capital stock of a corporation the securities of which are regularly traded or quoted on a national securities exchange or on an inter-dealer quotation system. 25 (b) The Executive agrees that during the Noncompete Period, neither she nor any person or enterprise controlled by her will (i) solicit for employment or employ any person who was employed by the Company or any of its controlled affiliates at any time within one year prior to the time of the act of solicitation or (ii) in any way cause, influence, induce or attempt to persuade any person who was employed by the Company or any of its controlled affiliates at any time within one year prior to the time of such act to terminate her employment relationship with the Company or any of its affiliates. (c) Relief, Reformation; Severability. The Executive acknowledges that there is no adequate remedy at law for a breach of this Section 7 and that, in the event of such a breach or attempted breach, the Company shall be entitled to injunctive or other equitable relief to prevent any such breach, attempted breach or continuing breach, without prejudice to any other remedies for damages or otherwise. The Executive agrees that the covenants contained in this Agreement are separate and are reasonable in their scope and duration and that the Executive shall not raise any issue of reasonableness as a defense in any proceeding to enforce any of such covenants. Notwithstanding the foregoing, in the event that a covenant contained in this Agreement shall be deemed by any court to be unreasonably broad in any respect, the parties agree that the court may modify such covenant for the purpose of making such covenant reasonable in scope and duration. The validity, legality or enforceability of the remaining provisions of this Agreement shall not be affected by any such modification. 8. Inventions. The Executive hereby assigns to the Company her entire right, title and interest in and to all discoveries and improvements, patentable or otherwise, trade secrets and ideas, writings and copyrightable material, which may be conceived by the Executive or developed or acquired by her during the term of her employment by the Company, which may pertain directly or indirectly to the Company's business. The Executive agrees to disclose fully all such developments to the Company upon its request, which disclosure shall be made in writing promptly following any such request. The Executive shall, upon the Company's request, execute, acknowledge and deliver to the Company all instruments and do all other acts which are necessary or desirable to enable the Company to file and prosecute applications for, and to acquire, maintain and enforce, all patents, trademarks and copyrights in all countries. 9. Remedies. The Executive acknowledges that any material breach of this Agreement will cause irreparable harm to the Company, that such harm will be difficult if not impossible to ascertain, and that the Company shall be entitled to equitable relief, including injunction, against any actual or threatened breach hereof, without bond and without liability should such relief be denied, modified or vacated. Neither the right to obtain such relief nor the obtaining of such relief shall be exclusive of or preclude the Company from any other remedy. 10. Insurance. The Company may, at its election and for its benefit, insure the Executive against disability, accidental loss or death and the Executive shall submit to such physical examinations and supply such information as may be required in connection therewith. 11. Assignment. The rights and benefits of the Executive hereunder shall not be assignable, whether by voluntary or involuntary assignment or transfer. This Agreement shall be binding upon, and inure to the benefit of, the successors and assigns of the Company, and the heirs, executors and administrators of the Executive, and shall be assignable by the Company to any entity acquiring substantially all of the assets of the 26 Company, whether by merger, consolidation, sale of assets or similar transaction. 12. Notices. Any notice required or permitted to be given under this Agreement shall be sufficient if in writing and personally delivered, sent by certified or registered mail or sent by overnight courier service as follows: if to the Executive, to her address as set forth in the records of the Company, and if to the Company, to the address of its principal executive offices, attention: Chief Executive Officer, with a copy to Larry A. Barden, Esq., Sidley & Austin, One First National Plaza, Chicago, Illinois 60603, or to any other address designated by any party hereto by notice similarly given. 13. Waiver of Breach. A waiver by the Company or the Executive of any breach of any provision of this Agreement by the other party shall not operate or be construed as a waiver of any other or subsequent breach by the other party. 14. Entire Agreement. This Agreement contains the entire agreement of the parties with respect to the subject matter hereof. This Agreement may be modified only by an agreement in writing signed by the parties hereto. 15. Costs. In the event that a dispute shall arise between the parties hereto and such dispute is resolved by a court of competent jurisdiction, all reasonable attorneys' fees and costs of the Company and the Executive and all other costs and expenses of the Company and the Executive associated with such dispute shall be borne by the Company; provided that if it is determined that the claims of the Executive were without reasonable basis, each party shall bear her or its own attorneys' fees and costs. 16. Applicable Law. The terms of this Agreement shall be governed by and construed in accordance with the internal laws (as opposed to the conflict of laws provisions) of the State of Illinois. 17. Prior Agreements. This Agreement supersedes all prior agreements between the Executive and the Company concerning the Executive's employment with the Company, including the Employment Agreement effective as of June 13, 1995 between the Executive and the Operating Company, and none of such agreements shall be of any further force or effect whatsoever. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written. BELL SPORTS CORP. By -------------------------------------- Terry G. Lee Chairman of the Board and Chief Executive Officer BELL SPORTS, INC. By -------------------------------------- Terry G. Lee 27 Chairman of the Board and Chief Executive Officer EXECUTIVE: -------------------------------------- Mary J. George 28 EX-10.2 3 EMPLOYMENT AGREEMENT WITH LINDA K. BOUNDS EMPLOYMENT AGREEMENT -------------------- THIS EMPLOYMENT AGREEMENT is entered into on April 25, 1997, effective as of April 1, 1997, among Linda K. Bounds (the "Executive"), Bell Sports Corp., a Delaware corporation (the "Holding Company"), and Bell Sports, Inc., a California corporation (the "Operating Company"). The Holding Company and the Operating Company are collectively referred to herein as the "Company." WHEREAS, the Company is engaged primarily in the business of designing, manufacturing, producing, distributing, marketing, advertising and selling auto racing helmets, bicycles, bicycle helmets, bicycle accessories and related products; WHEREAS, the Executive serves as Senior Vice President, Chief Financial Officer, Treasurer and Secretary of the Holding Company and the Operating Company; WHEREAS, the Executive's abilities and services are unique and essential to the prospects of the Company; and WHEREAS, the Company and the Executive desire to enter into this Agreement to provide for the continued employment of the Executive by the Company upon the terms and subject to the conditions set forth herein. NOW, THEREFORE, in consideration of the premises and the mutual agreements contained herein, the parties hereby agree as follows: 1. Employment; Term. The Company hereby employs the Executive and the Executive hereby agrees to be employed by the Company upon the terms and subject to the conditions contained in this Agreement. The term of this Agreement shall commence as of April 1, 1997 and shall end on March 31, 2000, unless earlier terminated pursuant to Section 4 hereof. As used herein, the term "Employment Period" shall mean the period from April 1, 1997 until the expiration of the term of this Agreement or the earlier termination of the term hereof pursuant to Section 4 hereof. 2. Position; Duties; Responsibilities. The Company shall employ the Executive as the Senior Vice President, Chief Financial Officer, Treasurer and Secretary of the Holding Company and the Operating Company. The Executive's principal office for the performance of her duties under this Agreement shall be located in San Jose, California. The Executive shall faithfully and loyally perform to the best of her abilities all the duties reasonably assigned to her hereunder, shall devote such business 29 time, attention and effort to the affairs of the Company as is reasonably necessary for the proper performance of such duties and shall use her reasonable best efforts to promote the interests of the Company. Notwithstanding the foregoing, the Executive may serve as a director, officer or paid consultant of business corporations other than the Company or civic or community organizations or entities, provided that such activities do not violate the terms of any of the covenants set forth in Section 7 hereof and such activities are approved prior to the commencement thereof by the Chairman of the Board and Chief Executive Officer of the Holding Company (the "Company CEO"). 3. Compensation. (a) Base Salary. During the Employment Period, the Company shall pay to the Executive an annual base salary at the rate of $160,000 per annum, payable in accordance with the Company's executive payroll policy. Such base salary shall be reviewed annually, commencing April 1, 1998, and may be increased (but shall not be decreased) annually, in the sole discretion of the Company. The Executive's base salary, as such base salary may be increased annually hereunder, is referred to herein as the "Base Salary." (b) Annual Performance Bonus. (i) The Executive shall be entitled to receive an annual performance bonus payable in cash for each full fiscal year of the Company during the term of this Agreement in accordance with the Company's management incentive program, as in effect from time to time. The Executive shall participate in such program at a level which would result in a performance bonus equal to 50% of her Base Salary if the target level of performance were achieved. The annual performance bonus to which the Executive is entitled pursuant to this Section 3(b) is referred to herein as the "Bonus." (ii) The payment of each Bonus shall be made within 30 days after the Company's independent accountants shall have certified the Company's consolidated financial statements for the fiscal year to which such Bonus relates. (iii) If the Company's fiscal year changes, the Executive's opportunity to earn the Bonus shall not be materially and adversely affected. (c) Stock Options. In the discretion of the Company's Management Stock Incentive Committee, the Executive shall be eligible to receive options to purchase shares of Holding Company common stock ("Common Stock") pursuant to the terms of the Bell Sports Management Stock Incentive Plans. 30 (d) Perquisites. During the Employment Period, the Executive shall be entitled to a cash automobile allowance in the amount of $400 per month. (e) Reimbursement of Expenses. The Company shall reimburse the Executive for all expenses necessarily and reasonably incurred by her in connection with the business of the Company, upon presentation of proper receipts or other proof of expenditure and subject to such reasonable guidelines or limitations provided to the Executive and applied prospectively, as established by the Company. (f) Vacation. During the Employment Period, the Executive shall be entitled to paid vacation and sick leave in accordance with Company policy. (g) Participation in Benefit Plans. During the Employment Period, the Executive shall be entitled to participate in any profit sharing plan, retirement plan, group life insurance plan or other insurance plan or medical expense plan maintained by the Company for its senior executives generally, which plans shall not differ in value in any manner materially adverse to the Executive from those in which the Executive currently participates. 4. Termination. (a) Death. Upon the death of the Executive, this Agreement shall automatically terminate and all rights of the Executive and her heirs, executors and administrators to compensation and other benefits hereunder shall cease, except for (i) Base Salary which shall have accrued to the date of death and (ii) the rights to indemnification under Section 5 hereof. (b) Disability. The Company may, at its option, terminate this Agreement upon written notice to the Executive if the Executive, because of physical or mental incapacity or disability, fails in any material respect to perform the services required of her hereunder for a continuous period of 120 days or any 180 days out of any 12-month period. Upon such termination, all obligations of the Company hereunder shall cease, except for (i) Base Salary which shall have accrued to the date of termination and (ii) the rights to indemnification under Section 5 hereof. In the event of any dispute regarding the existence of the Executive's incapacity hereunder, the matter shall be resolved by the determination of a majority of three physicians qualified to practice medicine in the state of the Executive's residence, one to be selected by each of the Executive and the Company and the third to be selected by such two designated physicians. For this purpose, the Executive shall submit to appropriate medical examinations. 31 (c) Cause. (i) The Company may, at its option, terminate the Executive's employment under this Agreement for "Cause" (as hereinafter defined). A termination for Cause shall not take effect until and unless the Company complies with this Section 4(c)(i). The Executive shall be given written notice by the Company of the intention to terminate her employment hereunder for Cause (the "Cause Notice"). The Cause Notice shall state the particular action(s) or inaction(s) giving rise to termination for Cause. The Executive shall have 10 days after the Cause Notice is given to cure the particular action(s) or inaction(s), to the extent a cure is possible. If the Executive so effects a cure, the Cause Notice shall be deemed rescinded and of no force or effect. (ii) As used in this Agreement, the term "Cause" shall mean any one or more of the following: (A) the Executive's refusal to perform specific directives of the Company CEO or such other officer of the Company to whom the Executive reports, which directives are consistent with the scope and nature of the Executive's duties and responsibilities as set forth herein; (B) the Executive's admission or conviction of a felony or of any crime involving moral turpitude, fraud, embezzlement, theft or misrepresentation; (C) any gross or willful misconduct of the Executive resulting in substantial loss to the Company or substantial damage to the Company's reputation; or (D) any breach by the Executive of any one or more of the covenants contained in Section 6 or 7 hereof, other than an inadvertent and unintentional breach of a covenant contained in Section 6 having an inconsequential effect upon the Company or any of its controlled affiliates. (iii) The exercise of the right of the Company to terminate this Agreement pursuant to this Section 4(c) shall not abrogate the rights or remedies of the Company in respect of the breach giving rise to such termination. (iv) If the Company terminates the Executive's employment for Cause, she shall be entitled to: (A) accrued Base Salary through the date of the termination of her employment; (B) any Bonus owing but not yet paid for any fiscal year ended on or before the Executive's termination of employment for Cause; 32 (C) any amounts owing but not yet paid pursuant to Section 3(e); and (D) other or additional benefits in accordance with applicable plans and programs of the Company. (v) Notwithstanding anything to the contrary contained in this Agreement, if, following a termination of the Executive's employment for Cause, a court of competent jurisdiction, in a final determination, determines that the Executive was not guilty of the conduct that formed the basis for the termination, the Executive shall be entitled to the payments and the economic equivalent of the benefits she would have received had her employment been terminated by the Company without Cause. (d) Termination Without Cause. If, during the Employment Period, the Company terminates the employment of the Executive hereunder for any reason other than a reason set forth in Section 4(a), 4(b) or 4(c): (i) concurrent with such termination, the Company shall pay to the Executive an amount equal to her Base Salary accrued through the date of termination; (ii) the Company shall continue to pay the Executive her Base Salary and all other benefits (excluding Bonus) which would otherwise be payable hereunder for a period of 18 months following the date of termination and the Executive's coverage under the medical, dental, life and long-term disability insurance policies maintained by the Company shall remain in effect during such period; (iii) all of the Executive's options to purchase Common Stock shall be immediately 100% exercisable; (iv) the Executive shall be entitled to any amounts owing but not yet paid pursuant to Section 3(e); and (v) the Executive shall be entitled to her rights to indemnification under Section 5 hereof. (e) Termination for Good Reason. (i) If, during the Employment Period, the Executive terminates her employment hereunder for "Good Reason" (as such term is defined in Section 4(e)(ii) hereof, she shall be entitled to all of the payments and benefits specified by Sections 4(d)(i) through 4(d)(v) hereof, inclusive. (ii) For purposes of this Agreement, "Good Reason" shall mean, without the Executive's express written consent, the occurrence of any one or more of the following events: 33 (A) a material breach of this Agreement by the Company; (B) any change in the Executive's responsibilities described in Section 2 in any respect which is materially adverse to the Executive; (C) a diminution of any of the Executive's significant duties or the assignment to the Executive of any duties inconsistent with her duties or the material impairment of the Executive's ability to function in the positions described in Section 2 hereof, in each case only after the Company shall have had an opportunity to cure (any such cure to be effected within 30 days after appropriate written notice of the basis for Good Reason is given to the Company by the Executive); (D) a material reduction of any benefit or perquisite enjoyed by the Executive, unless a plan providing a substantially similar economic opportunity is substituted or all comparable executives suffer a substantially similar reduction or failure; (E) the relocation of the Executive's office to a location more than 50 miles from San Jose, California; or (F) the failure of the Company to obtain the assumption in writing of its obligation to perform this Agreement by any successor to all or substantially all of the assets of the Company within 15 days after a merger, consolidation, sale of assets or similar transaction. (f) Voluntary Termination. If, during the Employment Period, the Executive voluntarily terminates her employment hereunder for any reason other than Good Reason, she shall be entitled to the payments specified by Sections 4(c)(iv)(A) through 4(c)(iv)(D) hereof, inclusive. 5. Indemnification. To the fullest extent permitted by law, the Restated Certificate of Incorporation of the Holding Company and the Articles of Incorporation of the Operating Company, the Executive (and her heirs, executors and administrators) shall be indemnified by the Company and its successors and assigns. The obligations of the Company pursuant to this Section 5 shall survive the termination of the Employment Period, except as otherwise provided herein. 6. Confidentiality. The Executive shall at all times during the Employment Period and thereafter hold in confidence any and all Confidential Information (as hereinafter defined) that may have come or may come into her possession or within her knowledge concerning the products, services, processes, businesses, suppliers, customers and clients of the Company or 34 its controlled affiliates. The Executive agrees that neither she nor any person or enterprise controlled by her will for any reason directly or indirectly, for herself or any other person, use or disclose any trade secrets, proprietary or confidential information, inventions, manufacturing or industrial processes or procedures, patents, trademarks, trade names, customer lists, service marks, service names, copyrights, applications for any of the foregoing, or licenses of other rights in respect thereof (collectively, "Confidential Information"), owned or used by, or licensed to, the Company or any of its controlled affiliates, provided that the Executive may disclose Confidential Information which has become generally available to the public other than as a result of a breach of this Agreement by the Executive or pursuant to an order of a court of competent jurisdiction or of a governmental agency, department or commission. Upon termination of her employment under this Agreement, the Executive shall promptly surrender to the Company all documents she believes contain Confidential Information and that are within her possession or control, other than documents to which the Executive is or was a party or that relate to the Executive or the basis, or purported basis, on which her employment was terminated. 7. Noncompetition and Nonsolicitation. (a) Subject to the following sentence, the Executive agrees that from the date hereof and subsequent to the termination of her employment under this Agreement and continuing for a period of two years (the "Noncompete Period"), neither she nor any person or enterprise controlled by her will become a stockholder, lender, director, officer, agent or employee of a corporation or member of or lender to a partnership, engage as a sole proprietor in any business, act as a consultant to any of the foregoing or otherwise engage directly or indirectly in any business, that is in competition with the business then conducted by the Company or any of its controlled affiliates in any state in the United States or any other country in which the Company or any of its controlled affiliates has engaged in such business during the term of the Executive's employment under this Agreement; provided, however, that the foregoing shall not prohibit the Executive from owning less than two percent of the outstanding securities of any class of capital stock of a corporation the securities of which are regularly traded or quoted on a national securities exchange or on an inter-dealer quotation system. (b) The Executive agrees that during the Noncompete Period, neither she nor any person or enterprise controlled by her will (i) solicit for employment or employ any person who was employed by the Company or any of its controlled affiliates at any time within one year prior to the time of the act of solicitation or (ii) in any way cause, influence, induce or attempt to persuade any person who was employed by the Company or any of its controlled affiliates at any time within one year 35 prior to the time of such act to terminate her employment relationship with the Company or any of its affiliates. (c) Relief, Reformation; Severability. The Executive acknowledges that there is no adequate remedy at law for a breach of this Section 7 and that, in the event of such a breach or attempted breach, the Company shall be entitled to injunctive or other equitable relief to prevent any such breach, attempted breach or continuing breach, without prejudice to any other remedies for damages or otherwise. The Executive agrees that the covenants contained in this Agreement are separate and are reasonable in their scope and duration and that the Executive shall not raise any issue of reasonableness as a defense in any proceeding to enforce any of such covenants. Notwithstanding the foregoing, in the event that a covenant contained in this Agreement shall be deemed by any court to be unreasonably broad in any respect, the parties agree that the court may modify such covenant for the purpose of making such covenant reasonable in scope and duration. The validity, legality or enforceability of the remaining provisions of this Agreement shall not be affected by any such modification. 8. Inventions. The Executive hereby assigns to the Company her entire right, title and interest in and to all discoveries and improvements, patentable or otherwise, trade secrets and ideas, writings and copyrightable material, which may be conceived by the Executive or developed or acquired by her during the term of her employment by the Company, which may pertain directly or indirectly to the Company's business. The Executive agrees to disclose fully all such developments to the Company upon its request, which disclosure shall be made in writing promptly following any such request. The Executive shall, upon the Company's request, execute, acknowledge and deliver to the Company all instruments and do all other acts which are necessary or desirable to enable the Company to file and prosecute applications for, and to acquire, maintain and enforce, all patents, trademarks and copyrights in all countries. 9. Remedies. The Executive acknowledges that any material breach of this Agreement will cause irreparable harm to the Company, that such harm will be difficult if not impossible to ascertain, and that the Company shall be entitled to equitable relief, including injunction, against any actual or threatened breach hereof, without bond and without liability should such relief be denied, modified or vacated. Neither the right to obtain such relief nor the obtaining of such relief shall be exclusive of or preclude the Company from any other remedy. 10. Insurance. The Company may, at its election and for its benefit, insure the Executive against disability, accidental loss or death and the Executive shall submit to such physical examinations and supply such information as may be required in connection therewith. 36 11. Assignment. The rights and benefits of the Executive hereunder shall not be assignable, whether by voluntary or involuntary assignment or transfer. This Agreement shall be binding upon, and inure to the benefit of, the successors and assigns of the Company, and the heirs, executors and administrators of the Executive, and shall be assignable by the Company to any entity acquiring substantially all of the assets of the Company, whether by merger, consolidation, sale of assets or similar transaction. 12. Notices. Any notice required or permitted to be given under this Agreement shall be sufficient if in writing and personally delivered, sent by certified or registered mail or sent by overnight courier service as follows: if to the Executive, to her address as set forth in the records of the Company, and if to the Company, to the address of its principal executive offices, attention: Chief Executive Officer, with a copy to Larry A. Barden, Esq., Sidley & Austin, One First National Plaza, Chicago, Illinois 60603, or to any other address designated by any party hereto by notice similarly given. 13. Waiver of Breach. A waiver by the Company or the Executive of any breach of any provision of this Agreement by the other party shall not operate or be construed as a waiver of any other or subsequent breach by the other party. 14. Entire Agreement. This Agreement contains the entire agreement of the parties with respect to the subject matter hereof. This Agreement may be modified only by an agreement in writing signed by the parties hereto. 15. Costs. In the event that a dispute shall arise between the parties hereto and such dispute is resolved by a court of competent jurisdiction, all reasonable attorneys' fees and costs of the Company and the Executive and all other costs and expenses of the Company and the Executive associated with such dispute shall be borne by the Company; provided that if it is determined that the claims of the Executive were without reasonable basis, each party shall bear her or its own attorneys' fees and costs. 16. Applicable Law. The terms of this Agreement shall be governed by and construed in accordance with the internal laws (as opposed to the conflict of laws provisions) of the State of Illinois. 17. Prior Agreements. This Agreement supersedes all prior agreements between the Executive and the Company concerning the Executive's employment with the Company, and none of such agreements shall be of any further force or effect whatsoever. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written. 37 BELL SPORTS CORP. By_________________________________ Terry G. Lee Chairman of the Board and Chief Executive Officer BELL SPORTS, INC. By_________________________________ Terry G. Lee Chairman of the Board and Chief Executive Officer EXECUTIVE: ----------------------------------- Linda K. Bounds 38 EX-11 4 COMPUTATION OF PER SHARE EARNINGS BELL SPORTS CORP. EXHIBIT - 11 - STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS (Unaudited; In Thousands, Except Per Share Amounts)
Nine Months Ended Three Months Ended Mar. 29, Mar. 30, Mar. 29, Mar. 30, 1997 1996 1997 1996 -------------------------------------------- Net (loss) income $(22,414) $(12,382) $(21,943) $ 713 Net effect on net (loss) income from conversion of other pontentially dilutive securties 1,820 2,215 819 738 -------------------------------------------- Adjusted net (loss) income $(20,594) $(10,167) $(21,124) $ 1,451 ============================================ Weighted average number of common and common equivalent shares outstanding - - primary 13,774 13,876 13,774 13,738 Net effect of other potentially dilutive securities 1,595 1,595 1,595 1,595 -------------------------------------------- Adjusted average shares outstanding for fully diluted computation 15,369 15,471 15,369 15,333 ============================================ Per share amount - fully diluted $ (1.34) $ (0.66) $ (1.37) $ 0.09 ============================================
39 EX-27 5 FINANCIAL DATA SCHEDULE
5 1,000 U.S. DOLLARS 9-MOS JUN-28-1997 JUN-30-1996 MAR-29-1997 1 26,755 0 94,780 5,474 76,863 211,325 42,421 16,843 309,776 41,014 154,498 0 0 142 114,122 309,776 189,267 189,267 135,037 135,037 74,826 0 5,467 (26,063) (3,649) (22,414) 0 0 0 (22,414) (1.63) (1.34)
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