Escrow Agreement & Instructions

ESCROW AGREEMENT AND INSTRUCTIONS
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This Escrow Agreement and Instructions dated as of April 28, 1997 (this "Agreement") is made by and among Brunswick Corporation, a Delaware corporation ("Brunswick"), American Recreation Company, Inc., a Delaware corporation ("Seller"), Bell Sports Corp., a Delaware corporation ("Parent"), and The First National Bank of Chicago ("Bank").


RECITALS
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A. Brunswick, Parent and Seller have entered into an Asset Purchase Agreement dated April 1, 1997 (the "Purchase Agreement") pursuant to which, among other things, Brunswick has agreed to pay into the escrow created hereby the sum of $500,000 to be disbursed as provided in this Agreement. Bank is not a party to the Purchase Agreement.


B. Brunswick, Parent and Seller desire Bank to act as escrowee of the total amount paid into escrow and income earned thereon as provided herein, and Bank is willing to so act. Bank has agreed to act in accordance with the terms of this Agreement.


AGREEMENT
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It is agreed as follows:


1. Creation of Escrow Fund. Brunswick has paid, or will pay to the Bank, to be held in escrow pursuant hereto, the sum of $500,000 (the "Escrow Fund").


2. Income. The Escrow Fund shall be invested pursuant to Section 6 hereof until it is released and paid as provided herein. Income earned by the Escrow Fund shall accrue and become part of the Escrow Fund to be used as provided herefor. Parent and Seller shall be responsible for, and report, all taxes on income earned by the Escrow Fund.


3. Disbursements from Escrow Fund.
3.1 Disbursement from Escrow Fund for Breach of Representations and Warranties, Covenants and Agreements. Whenever Brunswick demands payment from the Escrow Fund for breach of any representation or warranty, covenant or agreement of Parent and Seller pursuant to Section 2.6 or Section 9.2 of the Purchase Agreement, Brunswick shall give notice thereof to Bank and to Parent (acting on behalf of Parent and Seller), which notice ("Claim Notice") shall specify the amount claimed and the basis for the claim. If after fifteen (15) business days after such Claim Notice is so received, Parent has not given notice to Bank of Parent's objection to the disbursement of such funds in the amount claimed by Brunswick in such Claim Notice, Bank shall disburse to Brunswick from the Escrow Fund the full amount so claimed. If, on the other hand, Parent gives written notice to Bank objecting to the distribution of the claimed amount or any portion thereof within fifteen (15) business days of the giving of a Claim Notice, Bank shall not disburse any funds to Brunswick with respect to the amount disputed under such Claim Notice, unless and until Bank has either received the written notice of Parent evidencing Parent's acceptance of such disbursement or a non-appealable court order has been issued, in a court of competent jurisdiction, providing that such funds be disbursed.


3.2 Final Disbursement. Unless this Agreement is terminated earlier in accordance with Section 4 hereof, the full amount of the Escrow Fund, less any amounts previously disbursed to Brunswick pursuant hereto, shall be disbursed to Seller on the date written direction to disburse is delivered to the Escrow Agent by Brunswick and Parent (acting on behalf of Parent and Seller). Brunswick and Parent covenant to each other that such written notice shall be delivered on the fifteenth day after the final determination of the Final Inventory Value (as defined in the Purchase Agreement), such fifteenth day being the "Disbursement Date". Notwithstanding anything to the contrary herein, if on the Disbursement Date there is pending one or more Claim Notices which have not been the subject of a disbursement or other final resolution, Bank shall not disburse from the Escrow Fund amounts which would deplete the Escrow Fund below the amount so claimed by Brunswick unless and until final resolution of such matters is made.


4. Termination. This Escrow Agreement shall terminate and be of no further force and effect upon the earlier of (a) the date that no funds remain in the Escrow Fund to be disbursed hereunder,


2 and (b) the Disbursement Date, unless one or more pending Claim Notices exist on such date, in which case this Escrow Agreement will terminate upon final resolution of such pending Claim Notices.


5. Investments. Bank shall invest and reinvest any cash in the Escrow Fund in any one of the following investments: (i) direct obligations of or obligations guaranteed by the United States of America; (ii) in repurchase agreements collateralized by investments in (i) above, (iii) commercial paper rated A-1 by Standard & Poor's Corporation or Prime-1 by Moody's Investors Services, Inc., or better; (iv) certificates of deposit issued by United States commercial banks having capital and surplus of at least $500,000,000; (v) investments in institutional money market funds of Bank investing principally in obligations permitted by clauses (i) through (iv) above; (vi) such other investments as may be mutually agreed upon by Brunswick and Parent ("Permitted Investments"), provided, that, in any case any investments shall be with such maturities as Parent and Brunswick may determine are compatible with the payments which may be required hereunder. The parties agree that the Escrow Fund shall initially be invested in the Bank's Pegasus U.S. Government Securities Cash Management Fund. Bank acknowledges that it has no interest in any cash or investments held in the Escrow Fund from time to time, and further acknowledges that the Escrow Fund is to be held for the benefit of Brunswick, Parent and Seller in the manner contemplated in the Purchase Agreement. Bank covenants and agrees that (i) it will keep all cash and Permitted Investments in the Escrow Fund in an account conspicuously marked on the records of Bank as "Escrow Account for the benefit of Brunswick, Parent and Seller", together with the account number thereof, (ii) it will issue Form 1099 to Parent and Seller with respect to income earned by them, to the extent required by the Internal Revenue Code of 1986, as amended, (iii) it will report all income earned by the Escrow Fund to Parent and Seller and (iv) it will give such further assurances as Brunswick and Parent may reasonably request from time to time in order to ensure that Bank is in compliance with the provisions of this Agreement.


6. General Terms.


6.1 Duties. The duties and responsibilities of Bank shall be limited to those expressly set forth herein.


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6.2 No Additional Liability. Bank shall not be personally liable for any act taken or omitted hereunder if taken or omitted by it in good faith and in the exercise of its own best judgment and Bank shall also be fully protected in relying upon any written notice, demand, certificate, or document which it in good faith believes to be genuine.


6.3 Assumed Validity of Documents. Bank shall not be responsible for the sufficiency or accuracy of the form, execution, validity or genuineness of documents deposited hereunder, or of any endorsement thereon or for lack of endorsement thereon, or for any description therein, nor shall Bank be responsible or liable in any respect on the account of the identity, authority or right of the persons executing or delivering or purporting to execute or deliver any such document or endorsement.


6.4 Fees. Bank shall be paid a reasonable fee for its services and shall be reimbursed for its reasonable expenses incurred in connection with the ordinary administration of the Escrow Fund, including charges for the acceptance, disbursement and investment of the Escrow Fund. Brunswick and Parent shall each pay one-half of Bank's reasonable fees and expenses.


6.5 Indemnification. Brunswick, Parent and Seller each agree to hold Bank harmless and to indemnify Bank against any loss, liability or expenses (including reasonable attorneys' fees and expenses) incurred by Bank and arising out of or in connection with the performance of its obligations in accordance with the provisions of this Agreement, except for any loss, liability or expense incurred as a result of the negligence or willful misconduct of Bank. The foregoing indemnity in this paragraph shall survive the resignation of Bank or the termination of this Agreement.


6.6 Notices. All claims, notices, requests, demands, or other communications hereunder shall be in writing and be given in person, by express mail service or by mail, and shall become effective (a) on delivery if given in person, (b) on the date of delivery if sent by facsimile or by express mail service, retur ...