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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996
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 1-14360
BEC GROUP, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 13-3868804
(State of incorporation) (I.R.S. Employer
Identification No.)
555 THEODORE FREMD AVENUE, RYE, NY 10580
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code: (914) 967-9400
Securities Registered Pursuant to Section 12(b) of the Act:
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
------------------- ---------------------
Common Stock, par value $.01 New York Stock Exchange
Securities Registered Pursuant to Section 12(g) of the Act: NONE
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), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
--- ---
The aggregate market value of the voting stock held by non affiliates of
the registrant at March 26, 1997 was $54,901,691, computed by reference to the
closing price as of that date.
The number of shares outstanding of the Registrant's only class of Common
Stock as of March 26, 1997 was 17,686,736 shares.
Documents incorporated by reference: None.
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein and will not be contained to the
best of registrant's knowledge in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
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BEC GROUP, INC.
ANNUAL REPORT ON FORM 10-K
FOR THE YEAR ENDED DECEMBER 31, 1996
TABLE OF CONTENTS
PART I
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Page
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<S> <C> <C>
Item 1. Business ............................................. 3
Item 2. Properties ........................................... 8
Item 3. Legal Proceedings .................................... 8
Item 4. Submission of Matters to a Vote of Security Holders .. 8
PART II
Item 5. Market for Registrant's Common Equity
and Related Stockholder Matters ...................... 9
Item 6. Selected Financial Data .............................. 9
Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations ........ 10
Item 8. Financial Statements and Supplementary Data .......... 15
Item 9. Changes In and Disagreements With Accountants
on Accounting and Financial Disclosure ............... 38
PART III
Item 10. Directors and Executive Officers of the Registrant ... 38
Item 11. Executive Compensation ............................... 40
Item 12. Security Ownership of Certain Beneficial
Owners and Management ................................ 45
Item 13. Certain Relationships and Related Transactions ....... 46
PART IV
Item 14. Exhibits, Financial Statement Schedules,
and Reports on Form 8-K .............................. 47
</TABLE>
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PART I
ITEM 1. BUSINESS
GENERAL
BEC Group, Inc., a Delaware corporation (the "Company" or "BEC Group"), was
incorporated on December 28, 1995, as a wholly owned subsidiary of Benson
Eyecare Corporation, a Delaware corporation ("Benson"), in connection with the
Merger (as defined below), pursuant to which Benson stockholders received all
of the outstanding shares of common stock of the Company in a pro rata
distribution (the "Spinoff"). The Spinoff and Merger of Essilor Acquisition
Corporation with and into Benson (the "Merger") occurred on May 3, 1996 (the
"Effective Date"). On May 3, 1996, Benson also consummated the sale to
Monsanto Company of the assets of its Orcolite ophthalmic lens manufacturing
operation (the "Asset Sale"). Prior to the Spinoff, Benson contributed to the
Company all of the assets of its then non-prescription eyewear and optics
related businesses and the Company assumed all of the liabilities of Benson's
non prescription eyewear and optics related businesses.
In December 1996, the Company sold to Foster Grant Holdings, Inc. ("Holdings")
all of the issued and outstanding shares of capital stock of the entities
comprising the Foster Grant Group ("FGG"). Holdings, a recently formed
Delaware corporation, is a wholly owned subsidiary of Accessories Associates,
Inc. ("AAi"), a Rhode Island corporation.
Following the divestiture of its prescription eyewear business in May 1996 in
connection with the Merger and Asset Sale and the sale of FGG in December 1996,
the Company has two core businesses: the Optical Technologies Group, which
manufactures and distributes lighting, electronic and electroformed products to
a diverse customer base, and Bolle America, the exclusive marketer and
distributor of Bolle(R) premium sunglasses, sport shields and goggles in the
U.S., Mexico and Costa Rica.
In February 1997, the Company announced the signing of a letter of intent to
acquire SNC Bolle and its affiliated entities (collectively, "Bolle France").
Bolle France's interests include investments in distributors in Brazil, Canada,
France, Japan and the United Kingdom. The Company announced its intent to
combine Bolle France and Bolle America as part of a long term strategy to build
the Bolle(R) brand worldwide. Bolle France is an established designer and
manufacturer of premium sunglasses, sports shields, ski goggles, safety eyewear
and related optical products, with a manufacturing facility located in Oyonnax,
France. Under the letter of intent, the Company expects to pay approximately
$60 million in cash to acquire Bolle France; the Company additionally expects
to issue to the selling shareholders warrants to acquire up to 2.13 million
shares of common stock of the resulting combined Bolle entity. The transaction
is conditioned upon completion by the Company of its due diligence
investigation, negotiation and delivery of a definitive agreement, government
approval, stockholder approval, and other conditions. The Company further
announced its intention, contingent upon various considerations including the
closing of the Bolle France acquisition, to separate the Bolle business and the
Optical Technologies Group business into two discrete independent publicly
traded entities. Because the consummation of these transactions is contingent
as of the date hereof, the information set forth in this Annual Report on Form
10-K is limited to the Company's existing businesses as constituted at December
31, 1996 and the date hereof.
OPTICAL TECHNOLOGIES GROUP
The Optical Technologies Group consists of ORC Lighting Products, ORC
Electronic Products and ORC Electroformed Products.
Products
ORC Lighting Products designs and manufactures specialty lighting used in high
intensity illumination systems and mini-systems that incorporate lamps, optics
and electronic components. Three primary markets are served by ORC Lighting
Products: industrial, medical and cinema. Lamps for the industrial market are
used in photo exposure systems, specialty lighting applications and in various
other high technology equipment. The medical market is serviced with
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fiber optic illumination components and systems used with medical endoscopes as
illumination for diagnostic and minimally invasive surgical procedures.
Products include a specially designed ceramic lamp with integral parabolic
reflector, optical components, power supply and fiber optic illumination
systems. ORC Lighting Products supports the worldwide cinema market with a
wide range of short-arc xenon lamps used in projectors and building, stadium
and theater lighting.
ORC Electronic Products manufactures photoexposure systems, including the
Opti-Beam(R) and ProForm(TM) lines. These highly sophisticated systems are
used in the production of high density, fine-line circuit boards,
microcircuits, flexible circuits and flat panel displays. The business has
focused on the upper end of the market where its proprietary optics technology,
vision alignment systems and superior automated material handling capabilities
allow for imaging fine line circuitry with exceptional throughput.
ORC Electroformed Products supplies a wide range of electroformed products to
third party customers. Its products include (i) electroformed nickel and
copper components such as cold shields, flashlight and search light reflectors,
abrasion resistant shields for use on airplane and helicopter rotor blades and
highly polished spheres, parabolas and ellipses for industrial uses and, (ii)
tooling used in the manufacture of hard resin and polycarbonate ophthalmic
lenses.
Supply Agreements
The Optical Technologies Group does not have any significant supply agreements
and most materials used are available from more than one vendor. ORC Lighting
Products is subject to a sole source for three of its lamp components but
through strong supplier relationships has not encountered significant
difficulties with delivery or price and continues to identify and qualify
alternate sources.
Competition
The three businesses in the Optical Technologies Group compete in different but
parallel markets in that all three businesses are affected by changes and
growth in technological, specifically optics related, industries. For example,
both ORC Lighting Products and ORC Electronic Products supply products used in
manufacturing printed circuit boards and flat panel displays, both high growth
technological markets. Competition in these markets is intense and no one
competitor dominates.
ORC Lighting Products competes in the highly competitive international
specialty discharge lighting market. The business distinguishes itself by
providing high quality, competitively priced products accompanied by superior
service. Within ORC Lighting Products' served portion of the market, it
competes primarily with three competitors, one of which is United States based.
ORC Electronic Products competes in the worldwide photo exposure system market
and is considered one of the market leaders for producing "next generation"
equipment for its customers. Because of the growth potential of the market, an
increasing number of the competitors are entering the markets served by ORC
Electronic Products. Although U.S. and international patents are obtained
wherever appropriate, products can be and are being replicated by competitors,
sometimes at a lower cost to the customer. ORC Electronic Products'
competitive advantages include advanced, effective research and development and
quality products.
ORC Electroformed Products' core markets include metal optics and erosion
shields for helicopter rotor blades and propellers. The business also
continues to find new uses for its electroformed technology. Because it
produces specialty products for specific customers, repeat business is common
and electroforming competitors are few in the markets served.
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Customers
The Optical Technologies Group is not dependent upon a single customer or a few
customers, and no one customer of the Optical Technologies Group accounts for
more than 10% of the Company's consolidated revenues. ORC Lighting Products
serves a wide range of customers in the medical, industrial and entertainment
industries; therefore, its top 25 customers represent less than 40% of its
business. ORC Electronic Products sells capital equipment to international
technologically-based customers. Its products sell for price points ranging
from $150,000 to $1,000,000 and its customer base changes each year. ORC
Electroformed Products provides custom products to its customers. Its customer
base has grown each year and includes a wide range of industrial manufacturing
businesses.
Cyclical Results
The Optical Technologies Group is subject to cyclical capital spending trends
by certain of its customers. As a result, operating results may be subject to
considerable fluctuation from quarter to quarter.
Intellectual Property.
The Optical Technologies Group has several patents protecting certain of its
products. These patents have expiration dates ranging from 2010 to 2011.
Management believes that the loss of any single patent would not have a
material adverse effect on the business of the Company as a whole. The Optical
Technologies Group vigorously defends its patent rights and additionally relies
on trade secrets and unpatented proprietary know-how to protect its competitive
position. The Company believes that product improvement, product quality and
customer service are as important as patent protection in maintaining the
competitive position of the Optical Technologies Group.
BOLLE AMERICA, INC.
Products
The Bolle(R) trademark is recognized around the world for premium sunglasses,
sport shields and ski goggles. Bolle America offers a broad selection of
sunglasses and sport shields ranging in price from $30 to $135 at retail and
ski goggles at most price points. With an offering of approximately 65 models
in 10 collections, every pair of Bolle(R) sunglasses blocks 100% of harmful
ultraviolet ("UV") rays, as well as offers protection against infrared ("IR")
radiation. Utilizing a patented process developed by Bolle France, the nylon
frames used in Bolle(R) sunglasses are world renowned for being light weight,
resilient and comfortable.
With the introduction in recent years of new collections such as the
Madness(TM), Metals(TM), Glass Polarized(TM), Snakes(TM) and Golf(TM),
management believes that Bolle America is in step with changes in consumer
preferences in areas such as style, fashion, function and technological
innovation. Such responsiveness in product offering is important to the
continued success of Bolle America. With its patented Sports Optical
System(TM), Bolle America provides the same function and style of many of its
most popular sunglasses to persons who require vision correction.
Bolle America sells specialized sport shields and sunglasses suitable for most
athletic endeavors, from recreational activities to hard-core competition.
Substantially all of these products feature polycarbonate lenses which have
proven to be more shatter-resistant and lighter weight than either glass or
CR-39(R) plastic lenses. Whether worn for everyday activities or serious
sporting activities, Bolle America offers a wide range of appropriate sport
shields and sunglasses.
Bolle(R) ski goggles offer outstanding performance and protection when facing
the elements encountered in skiing, snowboarding and other winter sports.
Designed with contoured frames offering the best in flexibility, durability,
aerodynamics, ventilation and peripheral vision, Bolle(R) goggles also feature
lenses which incorporate treatments for anti-fog and which provide 100% UV and
IR protection. Available in a full range of colors and styles and price
points, many Bolle(R) ski goggles also accept the Sports Optical System(TM)
prescription adapter to accommodate persons needing vision correction.
Bolle(R) ski goggles are worn by many of the top downhill skiers in the world.
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Supply Agreements
Pursuant to an exclusive distributor agreement, Bolle France is Bolle America's
exclusive supplier of most Bolle America products. In the event Bolle France is
unable or unwilling, for any reason, to supply products, the Company believes
that alternative sources of supply could be developed. Such alternate sourcing
is permitted under specified conditions and subject to quality standards
imposed by Bolle France and may be subject to a 4% royalty on any such products
sold by Bolle America.
Competition
The premium sunglass industry is dominated by three large competitors, Oakley,
Luxxotica and Bausch & Lomb, with a combined U.S. market share estimated at
approximately 60%. The rest of the market is fragmented, with Bolle(R) being
one of the leading brands competing with many similar sized competitors for
market share. Industry sources show the $1.7 billion U.S. retail non
prescription sunglass market has a historical average growth rate of
approximately 5%. Bolle America is a niche player in the premium sunglass
market's sports segment and enjoys widespread name recognition. There are few
barriers to entry to the market, which is highly competitive. The principal
methods of competition are style, product performance and brand recognition.
Customers
Bolle America is not dependent upon a single customer or a few customers.
Bolle America's top 25 customers represent approximately half of its total net
sales. None of its customers account for 10% of the Company's consolidated
revenues. In addition to its relationships with large chains, Bolle America
has an established distribution network to thousands of smaller customers.
Seasonality
Bolle America's business is seasonal in nature with the second quarter having
the highest sales due to the increased demand for sunglasses during that
period.
Intellectual Property
Bolle America owns a number of United States registered trademarks, including
Bolle(R); Bolle PC(R); ACRYLEX(R); ALIEN(R); CONTOUR(R); CHRONOSHIELD(R); MICRO
EDGE(R); GEOMETRIC(R); TIGER SNAKE(R); SUNSPENDER(R); Bolle EYEZONE(R); PUT 'EM
ON YOUR FACE(R); EAGLE VISION(R); TACTICAL(R); AVANT EDGE(R); bf(R); MAURICE
BOLLE(R); CARBO GLAS(R); AQUASHIELD(R); HORIZON(R); and the Snakes design. In
addition, Bolle America has applications pending to register a number of
additional trademarks, including NORTHERN LIGHTS(TM); SEE BETTER, PLAY
BETTER(TM); Bolle MADNESS(TM); Bolle ATTACK(TM); Bolle ESCAPE(TM); Bolle
CARBONEX(TM); VAPOR TRAIL(TM); and TOUR ELITE(TM).
Bolle France has a number of design and utility patents registered in the
United States and other countries. Bolle France's U.S. patents have expiration
dates ranging from 2001 to 2015. Bolle America is a licensee under such
patents. These patents are intended to protect the unique design and
functional characteristics of certain Bolle America products from duplication
by competitors. Protection of intellectual property rights owned by Bolle
France requires the active participation of Bolle France in such efforts.
There can be no assurance that any individual patent will provide substantial
protection or be of commercial value. Historically, Bolle France and Bolle
America have shared the costs of obtaining, asserting and defending these
patents. The loss of any one patent would not have a material adverse effect
on the business of Bolle America or of the Company as a whole.
OTHER INFORMATION
EMPLOYEES
The Company employs approximately 380 employees. None of the Company's
employees are covered by any collective bargaining agreements. The Company
considers its relations with its employees to be satisfactory.
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ENVIRONMENTAL MATTERS
The Company's facilities are subject to federal, state and local environmental
laws and regulations that apply to its operations, buildings, products and real
property. For example, under the federal Comprehensive Environmental Response,
Compensation and Liability Act ("CERCLA"), commonly known as "Superfund", and
various state and local laws and regulations, a current or previous owner or
operator of real property may be liable for the costs of removal or remediation
of certain hazardous or toxic substances on, in, or under such property. Such
laws often impose liability without regard to whether the owner or operator
knew of, or was responsible for, the presence of such hazardous or toxic
substances. The costs of removal or remediation of such substances may
adversely affect the owner's or operator's ability to use, sell or rent such
property or to borrow using such property as collateral. Persons who arrange
for the disposal or treatment of hazardous or toxic wastes may also be liable
for the costs of the removal or remediation of such wastes at a disposal or
treatment facility regardless of whether such facility was owned or operated by
such person.
The Company's Azusa, California facility is located in a portion of the San
Gabriel Valley Aquifer (the "site") in which volatile organic compounds
("VOCs") were discovered in 1979. In 1990, the Company was notified by the U.S.
Environmental Protection Agency ("EPA") that it was a "Potentially Responsible
Party," along with several hundred other companies, under CERCLA for the
remediation of contaminated groundwater. Soil and subsurface samples of
properties in the area, including the Company's Azusa facility, were begun in
1992 and continued into 1994. Most of the costs of this investigation were
borne by the Company's neighbor and former owner of much of the property where
the Company's facilities are located. In 1995, the Company initiated
discussions with the EPA and Regional Water Quality Board ("WQB") in an effort
to clarify the Company's status and obtain confirmation that the EPA would take
no action against the Company with respect to the site. Pursuant to requests
from the WQB, the Company performed additional deep well and shallow zone
testing, the results of which support the Company's position that the Company's
activities have not contributed to the ground water contamination at the site.
The WQB concurred and has ordered no further testing. The WQB additionally has
informed the Company that it will not require any remediation efforts at the
facility. After further technical and legal review, the EPA informed the
Company that it will take no action against it with respect to the site and
will not require it to participate in the Steering Committee of parties
preparing a remediation plan for the site. Based on current information, the
Company anticipates that it also will be given the opportunity to participate
in a lump sum cash settlement and consent decree to be negotiated with de
minimus contributors, providing the Company protection against any potential
third party claims for contribution with respect to the site. The cost of any
such cash settlement is not anticipated to have a material effect on the
Company, its operations or its financial results. In addition, if the Company
were required to bear any portion of the remediation costs, the Company
believes it would have a claim against the prior owner of the property for
contribution or cost recovery. There can be no assurance, however, that such a
claim would be successful.
Compliance with environmental laws and regulations has not had a material
effect on the Company's earnings to date and is not expected to have a material
effect in the future, nor has the Company been required to undertake
significant capital expenditures to meet environmental regulations. It is
management's view at this time that compliance with federal, state and local
provisions regulating the discharge of materials into the environment or
otherwise relating to the protection of the environment will not have a
material adverse effect upon the capital expenditures, earnings, or competitive
position of the Company.
FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS
See "Financial Statements and Supplemental Data" - Note 16.
For additional data describing the Registrant's operations, see "Management's
Discussion and Analysis of Financial Conditions and Results of Operations."
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ITEM 2. PROPERTIES
As of March 26, 1997, the locations of the Company's principal facilities are
as follows:
<TABLE>
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APPROXIMATE SQUARE
LOCATION PRINCIPAL USE/USER(S) FEET OF SPACE
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<S> <C> <C>
OWNED:
Azusa, CA Office and manufacturing facilities/Optical Technologies Group 188,750
LEASED:
Rye, NY Principal executive office of the Company 3,000
Denver, CO Warehouse and office space/Bolle America 30,000
</TABLE>
In addition, the Company owns an approximately 150,000 square foot building
located in Farmer's Branch, Texas, which it leases to the Foster Grant Group;
the property is subject to a mortgage of approximately $3.7 million.
The Company's facilities are substantially fully utilized. The Company
believes that its facilities are reasonably suitable for the purpose to which
they are put and that, subject to possible changes to accommodate
centralization and consolidation of its business activities, they are adequate
for the Company's immediate foreseeable needs.
ITEM 3. LEGAL PROCEEDINGS
While the Company is engaged in routine litigation incidental to the business,
the Company believes it is not currently a party to any "material" pending
legal proceedings as defined in Item 103 of Regulation S-K except as disclosed
herein. In an action filed on December 3, 1996, in the United States
Bankruptcy Court for the Northern District of Texas, Dallas Division, the
trustee in bankruptcy for Optical Corporation of America Creditors' Trust seeks
to recover as alleged preferences the value of certain assets allegedly
transferred by Benson Optical Co., Inc. and Superior Optical Co., Inc.
(jointly, "Debtors") to the Company's predecessor, Benson. The Company has
been named a defendant as successor and assignee of Benson. The plaintiff
seeks approximately $4 million in damages. The Company believes that the
plaintiff's allegations are factually and legally insupportable and has
initiated a vigorous defense. The action is entitled: Alan Katz, Trustee v.
Essomega Corporation, f/k/a, Benson Eyecare Corporation, et al; Adversary
Proceeding No. 396-3658, in the United States Bankruptcy Court for the Northern
District of Texas, Dallas Division.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of the Company's stockholders during the
fourth quarter of 1996.
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PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
The Company's common stock commenced trading publicly from May 3, 1996, the
date of the Spinoff and Merger. The Company's common stock is listed on the
New York Stock Exchange under the symbol "EYE." The following table sets forth
the high and low sale prices of the Company's common stock as reported on the
composite tape of the exchange for each of the quarters indicated.
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FISCAL YEAR HIGH LOW
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1996
Fourth Quarter .. $5.25 $4.00
Third Quarter ... $5.75 $3.63
Second Quarter .. $7.75(1) $4.00(1)
First Quarter ... N/A(1) N/A(1)
</TABLE>
(1) BEC Group common stock commenced trading publicly from May 3, 1996.
Common stock of BEC Group's predecessor, Benson, also traded publicly
prior to that date under the symbol "EYE." High and low sale prices of
Benson common stock during the first quarter of 1996 were, respectively,
$9.38 and $7.88; high and low sale prices of Benson common stock for the
period April 1, 1996 through May 3, 1996 were, respectively, $9.25 and
$9.00 In connection with the Merger and Spinoff, each Benson stockholder
received one share of BEC Group common stock for each two shares of Benson
common stock then held.
As of March 26, 1997, there were approximately 640 stockholders of record of
the Company's common stock (representing approximately 5,000 beneficial owners
of the Company's common stock). No dividends have ever been declared on the
Company's common stock. However, for accounting purposes, cash proceeds
received by the holders of Benson common stock in connection with the Merger
were reflected as dividends. The Company has no intention of paying dividends
in the foreseeable future. It is the present policy of the Company's Board of
Directors that any retained earnings accumulated will be used to finance future
acquisitions and expansion of the Company's operations.
ITEM 6. SELECTED FINANCIAL DATA
The following selected historical financial data have been derived from audited
historical financial statements and should be read in conjunction with the
consolidated financial statements of the Company included herein. The
discontinued operations include the Prescription Eyewear business and FGG.
The Prescription Eyewear business was discontinued in conjunction with a Merger
and Asset Sale consummated May 3, 1996. Also as a result of the Merger and
Asset Sale, BEC Group was treated as the continuing accounting entity.
Accordingly, the Benson historical consolidated financial statements serve as
the historical consolidated financial statements of BEC. The FGG business was
discontinued on July 30, 1996 upon the approval of the sale by the Company's
Board of Directors. The sale of FGG was completed on December 12, 1996.
The Company is the successor, for accounting purposes, of Benson. A number of
entities, including Benson Optical Co., Inc. ("Benson Optical"), Pembridge
Optical Partners, Inc. ("Pembridge Optical"), Superior Optical Company, Inc.
("Superior Optical"), and Superior Eye Care, Inc. ("Superior"), which were
included in Benson's consolidated financial statements and consequently are
considered continuing operations of the Company for accounting purposes during
certain periods, are included in the selected financial data set forth below.
Accordingly, the 1996 results of continuing operations are not comparable to
the historical results presented for earlier periods.
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The selected financial data for the five (5) years ended December 31, 1996 are
as follows:
<TABLE>
<CAPTION>
(Dollars in thousands
except per share data) 1996(A) 1995(A) 1994(A) 1993(A) 1992(A)
-------- --------- --------- --------- ---------
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<S> <C> <C> <C> <C> <C>
Net Sales $ 66,996 $ 66,073 $ 62,141 $ 62,139 $ 32,237
Income (loss) from
continuing operations 4,921 (1,736) 453 (1,545) (2,072)
Income (loss) from
discontinued operations 77,835 (5,024) 9,713 393 (C)
Net income (loss) 82,756 (6,760) 10,166 (1,152) (2,072)
Income (loss) per share
from continuing operations 0.28 (0.10) 0.03 (0.09) (0.35)
Income (loss) per share
from discontinued operations 4.40 (0.28) 0.55 0.02 (C)
Net income (loss)
per share 4.68 (0.38) 0.58 (0.07) (0.35)
Total assets 79,531 273,278 232,179 67,346 26,602
Long-term debt 3,597 18,606 15,294 633 3,234
Stockholders' equity(B) 7,604 131,134 111,093 41,054 5,725
</TABLE>
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(A) The comparability of the selected financial data presented is
significantly affected by business combinations and divestitures (other
than discontinued operations) consummated during each of the years
presented. See accompanying notes to consolidated financial statements.
(B) Dividends of $50 were declared and paid in 1994 by Bolle America prior to
its acquisition by Benson.
(C) Not applicable.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
ACQUISITIONS AND DIVESTITURES
For the year ended December 31, 1996
BEC Group was incorporated on December 28, 1995, as a wholly owned subsidiary
of Benson Eyecare Corporation, a Delaware corporation ("Benson"), in connection
with the Merger (as defined below), pursuant to which Benson stockholders
received all of the outstanding shares of common stock of the Company in a pro
rata distribution (the "Spinoff"). The Spinoff and Merger of Essilor
Acquisition Corporation with and into Benson (the "Merger") occurred on May 3,
1996 (the "Effective Date"). As a result thereof, Essilor purchased Benson and
the Omega Group, Benson's
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wholesale optical laboratory business. On May 3, 1996, Benson also consummated
the sale to Monsanto Company of the assets of its Orcolite ophthalmic lens
manufacturing operation (the "Asset Sale"). Prior to the Spinoff, Benson
contributed to the Company all of the assets of its then non-prescription
eyewear and optics related businesses and the Company assumed all of the
liabilities of Benson's non-prescription eyewear and optics related businesses.
In December 1996, the Company sold to Foster Grant Holdings, Inc. ("Holdings")
all of the issued and outstanding shares of capital stock of the entities
comprising Foster Grant Group ("FGG"). Holdings, a recently formed Delaware
corporation, is a wholly owned subsidiary of Accessories Associates, Inc.
("AAi"), a Rhode Island corporation.
The above transactions were presented as discontinued operations in the
consolidated financial statements for the periods presented.
For the Year Ended December 31 ,1995
Effective November 2, 1995, the Company acquired all of the issued and
outstanding capital stock of Bolle America in exchange for 3,265,000 shares of
the Benson Common stock, valued at $31 million. The business combination was
accounted for as a pooling of interests and accordingly, the financial
statements of Bolle America were combined with those of the Company for all
years presented. Bolle America had revenues of $19,663 and income before
income taxes of $1,279 for the nine month period prior to the combination with
the Company.
Effective June 30, 1995, the Company sold 100% of the issued and outstanding
capital stock of Superior Eye Care, Inc. for aggregate consideration of $5
million. No gain or loss was recorded on the sale.
For The Year Ended December 31, 1994
In August 1994, the Company sold the assets of certain retail optical stores
owned by its wholly owned subsidiary, Pembridge Optical Partners, Inc., for
consideration of $1.25 million in interest bearing promissory notes receivable
due September 1997. Such notes were later adjusted down to $1.14 million.
Effective September 30, 1994, Superior Vision Services, Inc. ("SVS"), issued
new shares of stock representing 80% of total shares issued. The shares were
acquired by a non-executive director and shareholder whose holding in SVS was
subsequently diluted by the issuance of additional shares representing a 40%
interest in SVS on a fully diluted basis, to an unrelated third party. During
1996, SVS underwent a recapitalization which resulted in the issuance of Series
B preferred shares to BEC Group in exchange for the forgiveness of $500 of
indebtedness in lieu of cash. The carrying value of the Company's investment in
SVS was reduced to $245 at December 31, 1996 to reflect the investment on a
lower of cost or market basis.
On October 12, 1994, the Company acquired Optical Radiation Corporation ("ORC")
for approximately $143 million. The cash portion of the purchase consideration
was funded in part through cash on hand of the Company and ORC, and borrowings
under a revolving credit facility. The Omega and Orcolite businesses were
subsequently divested on May 3, 1996, as discussed above and in Note 2 to the
accompanying consolidated financial statements. The operating results of the
remaining three ORC business are reflected in continuing operations from date
of acquisition and referred to as the Optical Technologies Group ("OTG").
On October 13, 1994, the Company sold the businesses and assets of the
Ophthalmic Surgical Products Division of ORC for aggregate consideration of
$4.6 million in cash and 61,000 shares of Mentor Corporation common stock.
On October 20, 1994, the Company completed the divestiture of its retail
operations through the sale of Benson Optical Co., Inc. and Superior Optical
Co., Inc. to OCA, for an aggregate consideration of $3.5 million in notes
receivable and $1.5 million of convertible preferred stock, which represented a
19.9% equity interest in OCA, on an if converted basis. During 1995, the
Company disposed of these notes and the OCA convertible preferred stock.
11
<PAGE> 12
RESULTS OF OPERATIONS
Year Ended December 31, 1996 Compared to Year Ended December 31, 1995
Net sales for the year ended December 31, 1996 were $67.0 million compared to
$66.1 million for the year ended December 31, 1995. Sales of $2.6 million from
Superior Eye Care, Inc., which was sold on June 28, 1995, were included in
1995. The growth primarily resulted from growth at OTG. The premium sunglass
market softened during 1996, especially in the fourth quarter, while the
technological markets, which OTG serves, continue to grow.
Adjusted for the fee income from Superior Eye Care, Inc., the gross profit
margin remained relatively flat, decreasing from 44.0% in 1995 to 43.6% in
1996.
Selling, general and administrative expenses decreased from $24.1 million or
36.4% of net sales to $20.6 million or 30.8% of sales, reflecting both a total
dollar and percentage of sales decrease despite increased sales. This decrease
was affected by head office cost savings achieved at BEC and Bolle and
operating cost savings at OTG. Bolle America's savings result from the
elimination of the costs of being a stand-alone public company through November
2, 1995. BEC's costs have decreased with the smaller size of BEC as compared
to Benson. OTG continues to combine sales growth with cost efficiencies while
maintaining strong operating margins.
Interest expense for 1996 was $2.6 million, down from $3.8 million in 1995,
reflecting both lower credit facility balances and lower average interest
rates.
Other income consists primarily of equity income from the Company's investment
in Eyecare Products plc and interest income from notes receivable. Equity
income decreased from $525 in 1995 to $275 in 1996. In 1995 other income was
also higher due to nonrecurring income earned from the sale of assets.
The Company's 1996 provision for income taxes of $2.5 million or 34% of income
from continuing operations before taxes represents the effective tax rate of
the Company in its present structure. In 1995, the effective tax rate used
for continuing operations was 36% reflecting the then effective tax rate for
the businesses not sold in May 1996.
Year ended December 31, 1995 compared to year ended December 31, 1994
Net sales increased from $62.1 million in 1994 to $66.1 million in 1995. In
1994, net sales included $29.9 of sales from divested businesses but only
included one quarter of OTG sales ($9.1 million) from the date of acquisition.
The results are therefore not comparable.
Gross margin decreased from $36.9 million or 59.4% of net sales in 1994 to
$30.2 or 45.6% of net sales in 1995. This is primarily due to the shift in
business from retail to manufacturing in nature.
Selling, general and administrative expenses were $24.1 million for the year
ended December 31, 1995 compared to $34.0 million for the year ended December
31, 1994. This decrease also reflects the shift in business toward
manufacturing and the elimination of ORC's costs of being a stand-alone public
company through October 12, 1994.
Special charges of $5.2 million primarily include (i) $4.3 million charge to
reflect the impairment of certain notes receivable and trade accounts
receivable from OCA prior to the exchange of such assets for a non-interest
bearing convertible note receivable from Sterling Vision, Inc., valued at $2.1
million, and (ii) the write of $500 of deferred financing costs in connection
with a change in the Company's banking syndicate in September 1995. Merger
related expenses represent the transaction costs for the purchase of Bolle
America, which was accounted for as a pooling of interests.
Interest expense for the year ended December 31, 1995 increased to $3.8 million
from $3.5 million in 1994 primarily due to higher credit facility balances
outstanding and the issuance of Benson's convertible notes in April 1994.
12
<PAGE> 13
Other income in 1995 was $3.3 million versus $1.3 million in 1994. The
increase was primarily due to equity income recorded on the Company's
investment in Eyecare Products plc in 1995 versus an equity loss in 1994 and
nonrecurring gains recorded on the sales of certain assets in 1995.
The Company recorded a net tax benefit of $1.0 million or 36% of income from
continuing operations in 1995. The 1995 effective tax rate for continuing
operations of 36% was unchanged from 1994. Acquisitions made during 1995 and
1994 had a significant impact on the tax rate.
LIQUIDITY AND CAPITAL RESOURCES
For the Year Ended December 31, 1996
Net cash provided by continuing operations in 1996 was $4.4 million with net
income plus non-cash expenses being offset by increases in inventories and
other assets. Movements in accounts receivable and accounts payable also
provided cash to operations.
During 1996, the disposition of the Prescription Eyewear business and FGG
provided total cash proceeds of approximately $285 million in addition to the
cash provided by those operations from January 1, 1996 through the respective
dates of disposition. Most of the cash received for the sale of the
Prescription Eyewear business was used to pay a dividend of $230 million to
stockholders in conjunction with the Merger and Spinoff. The remaining cash
proceeds were used to pay down short and long term debt leaving the Company
with lower debt levels at the end of 1996.
On April 3, 1996, the Company and certain of its subsidiaries entered into a
Credit Agreement (the "Credit Agreement") with a syndicate of lenders (the
"Lenders"), led by NationsBank, N.A., ("NationsBank"). The Credit Agreement,
as amended effective December 12, 1996, provides for a $25 million revolving
credit facility, which includes a letter of credit subfacility.
The Company expects cash flow from operations combined with available borrowing
capacity under the Company's existing revolving credit facility to be
sufficient to fund the Company's operating needs. Future acquisitions may be
financed by debt or equity offerings. In the short term, liquidity needs were
met from cash flow from operations, working capital management and the
Company's Credit Agreement. On a long term basis, the Company's management has
had a successful track record of being able to access the public equity and
debt markets for capital and liquidity.
For the Year Ended December 31, 1995
In 1995, the Company's loss from continuing operations of $1.7 million included
non-cash special charges and merger related expenses and depreciation and
amortization expense of $6.8 million. Changes in assets and liabilities all
resulted in uses of cash except for the $2.1 million increase in accounts
payable resulting in cash used by continuing operations of $7.7 million.
In 1995, the Prescription Eyewear business completed acquisitions which, in
addition to capital expenditures, resulted in the use of cash by discontinued
operations investing activities.
Capital expenditures in 1995 included $763 for the installation and
implementation of a new management information system at OTG in additional to
normal course of business expenditures.
In June 1995, Benson completed a primary public stock offering of approximately
2.35 million shares of common stock at an offering price of $10.125 per share.
Net proceeds to the Company aggregating approximately $22.1 million were used
to pay down debt, to fund acquisitions and for general corporate purposes,
including working capital needs.
13
<PAGE> 14
On March 6, 1995, all borrowings under the Second Amended and Restated Loan and
Security Agreement (the "Agreement") were refinanced under a Third Amended and
Restated Loan and Security Agreement (the "Amended Agreement"), with the
Company becoming the Borrower. Borrowings under the Amended Agreement bear
interest at variable rates based upon the Eurodollar Rate, with an initial base
rate equivalent to LIBOR plus 112 basis points. The facility is secured by
inventory, trade receivables and intangible assets until various requirements
are met, after which time the collateral will be released.
For the Year Ended December 31, 1994
The Company and certain of its wholly owned subsidiaries entered into an
Amended and Restated Loan and Security Agreement (the "March Agreement"), dated
as of March 21, 1994. Under the March Agreement, the lenders agreed to make
available to The Bonneau Company ("Bonneau"), Pennsylvania Optical Company and
Opti-Ray, Inc. ("Opti-Ray") (referred to as the "Borrowers") an aggregate loan
amount of up to $33 million. On March 30, 1994, the Borrowers borrowed an
aggregate $13.4 million under the March Agreement in connection with the
purchase of Opti-Ray, to provide working capital financing for Opti-Ray's first
quarter operations and to pay certain fees and expenses incurred in connection
with the acquisition. The March Agreement was amended by an agreement dated as
of October 12, 1994 (the "October Agreement"). Under the October Agreement,
the lenders agreed to make available to Bonneau, Opti-Ray, ORC and Omega, an
aggregate loan amount of up to $75 million.
On May 9, 1994, Benson completed a public offering of $41 million convertible
subordinated notes due 2001, with a coupon rate of 8% per annum, and a
conversion price of $9.056 per share. The net proceeds of this offering were
used primarily to repay a portion of the outstanding balances under a revolving
credit facility, fund capital expenditures, and for general corporate purposes.
On December 22, 1994, Bolle America completed an initial public offering (the
"Offering") for the sale of 1.3 million shares of common stock at the Offering
price of $9.00 per share. Bolle America received proceeds of $10.5 million,
net of the underwriting discount. Offering costs were approximately $0.5
million. From the proceeds of the Offering, Bolle America repaid approximately
$4.5 million to satisfy all amounts outstanding under the Company's revolving
line of credit and notes payable.
SEASONALITY AND CYCLICAL RESULTS
The Optical Technologies Group is subject to cyclical capital spending trends
by certain of its customers. As a result, operating results may be subject to
considerable fluctuation from quarter to quarter. Bolle America's business is
seasonal in nature with the second quarter having the highest sales due to the
increased demand for sunglasses during that period.
14
<PAGE> 15
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Report of Independent Accountants
To the Board of Directors and
Stockholders of BEC Group, Inc. (formerly Benson Eyecare Corporation)
In our opinion, based upon our audits and the report of other auditors, the
accompanying consolidated balance sheets and the related consolidated
statements of operations, of stockholders' equity and of cash flows present
fairly, in all material respects, the financial position of BEC Group, Inc.
(formerly Benson Eyecare Corporation) and its subsidiaries at December 31, 1996
and 1995, and the results of their operations and their cash flows for each of
the three years in the period ended December 31, 1996, in conformity with
generally accepted accounting principles. These financial statements are the
responsibility of the Company's management; our responsibility is to express an
opinion on these financial statements based on our audits. We did not audit
the financial statements of Bolle America, Inc., a wholly-owned subsidiary,
which statements reflect total revenues of $23,093,819 for the year ended
December 31, 1994. Those statements were audited by other auditors whose
report thereon has been furnished to us, and our opinion expressed herein,
insofar as it relates to the amounts included for Bolle America, Inc., is based
solely on the report of the other auditors. We conducted our audits of these
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits and the report of
other auditors provide a reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
Dallas, Texas
March 10, 1997
15
<PAGE> 16
Independent Auditors' Report
TO THE BOARD OF DIRECTORS AND STOCKHOLDERS
BOLLe AMERICA, INC.
We have audited the statements of operations, stockholders' equity, and
cash flows of Bolle America, Inc. for the year ended December 31, 1994, which
financial statements are not separately presented herein. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the results of its operations and cash flows of Bolle
America, Inc. for the year ended December 31, 1994, in conformity with
generally accepted accounting principles.
KPMG PEAT MARWICK LLP
Denver, Colorado
January 20, 1995
16
<PAGE> 17
BEC GROUP, INC.
CONSOLIDATED BALANCE SHEETS
(Amounts in thousands)
<TABLE>
December 31,
------------
ASSETS
1996 1995
--------- ---------
<S> <C> <C>
Current assets
Cash and cash equivalents $ 2,475 $ 4,404
Trade receivables, less allowance for doubtful
accounts of $948 and $747 12,175 12,856
Inventories 17,705 14,936
Investment in discontinued operations -- 191,673
Other current assets 4,476 3,106
--------- ---------
Total current assets 36,831 226,975
Property and equipment, net 13,648 13,999
Goodwill, net 11,372 11,599
Intangible assets, net 1,942 2,325
Equity in and notes receivable
from affiliated companies 11,435 10,564
Other assets 4,303 7,816
--------- ---------
Total assets $ 79,531 $ 273,278
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term debt $ 17,645 $ 62,870
Accounts payable 6,346 4,637
Accrued compensation 2,278 2,366
Other accrued expenses 9,385 7,198
--------- ---------
Total current liabilities 35,654 77,071
Long-term debt 3,597 18,606
Convertible subordinated notes 21,922 40,950
Other long-term liabilities 10,754 5,517
--------- ---------
Total liabilities 71,927 142,144
--------- ---------
Commitments and contingencies
Stockholders' equity:
Preferred stock - par value $1;
500 shares authorized; none outstanding
Common stock - par value $.01; 50,000 shares
authorized; 17,631 and 32,101 issued 176 321
Additional paid-in capital 28,703 131,553
Treasury stock - 116 and 195 shares at cost (557) (1,365)
Retained earnings (20,718) 625
--------- ---------
Total stockholders' equity 7,604 131,134
--------- ---------
Total liabilities and stockholders' equity $ 79,531 $ 273,278
========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
17
<PAGE> 18
BEC GROUP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in thousands, except per share data)
<TABLE>
<CAPTION>
For the year ended December 31,
-------------------------------
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Net sales $ 66,996 $ 66,073 62,141
Costs and expenses:
Costs of sales 37,805 35,906 25,219
Selling, general and administrative expense 20,630 24,095 34,030
Special charges -- 5,237 --
Merger related expenses -- 3,050 --
Interest expense 2,588 3,785 3,458
Other income, net (1,453) (3,289) (1,273)
-------- -------- --------
Total costs and expenses 59,570 68,784 61,434
Income (loss) from continuing
operations before income taxes 7,426 (2,711) 707
Provision (benefit) for incomes taxes 2,505 (975) 254
-------- -------- --------
Income (loss) from continuing operations 4,921 (1,736) 453
Income (loss) from discontinued operations 77,835 (5,024) 9,713
-------- -------- --------
Net income (loss) $ 82,756 $ (6,760) $ 10,166
======== ======== ========
Pro forma weighted average common
shares outstanding 17,669 17,600 17,600
======== ======== ========
Income (loss) per share:
Income (loss) from continuing operations $ 0.28 $ (0.10) $ 0.03
Income (loss) from discontinued operations 4.40 (0.28) 0.55
-------- -------- --------
Net income (loss) per share $ 4.68 $ (0.38) $ 0.58
======== ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
18
<PAGE> 19
BEC GROUP, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
(Amounts in thousands)
<TABLE>
<CAPTION>
Additional Retained
paid-in earnings Treasury
Shares Par value capital (deficit) stock
-------- ---------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C>
1994:
Balance - beginning of year 20,556 $ 206 $ 43,579 $ (2,731)
Shares issued for acquisitions 7,118 71 49,041
Shares issued through public
offering, net of expenses 969 10 9,952
Exercise of stock options 310 3 1,420
Conversion of convertible debt 78 1 349
Compensation accrued for stock options 161
Other issuances of common stock 20 150
Stock contributed to pension plan 19 130
Cash dividend to stockholders (50)
Treasury stock (195) $ (1,365)
Net income 10,166
--------- --------- --------- --------- ---------
Balance - December 31, 1994 28,875 291 104,782 7,385 (1,365)
1995:
Shares issued for acquisitions 316 3 2,843
Shares issued through public
offering, net of expenses 2,356 24 22,012
Exercise of stock options 317 3 1,410
Compensation accrued for stock options 146
Other issuances of common stock 17 115
Stock contributed to pension plan 25 245
Net loss (6,760)
--------- --------- --------- --------- ---------
Balance - December 31, 1995 31,906 321 131,553 625 (1,365)
1996:
Exercise of stock options 415 4 2,323
Dividend to stockholders (125,972) (104,099)
Shares issued for acquisitions 2 12
Other issuances of common stock 22 174
Treasury stock (116) (2) (1,363) 808
Effect of Spinoff (reverse split) (16,008) (160) 1,541
Conversion of 8 % Convertible Notes
due 2001 1,294 13 20,435
Net income 82,756
--------- --------- --------- --------- ---------
Balance - December 31, 1996 17,515 $ 176 $ 28,703 $ (20,718) $ (557)
========= ========= ========= ========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
19
<PAGE> 20
BEC GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
<TABLE>
<CAPTION>
For the year ended December 31,
-------------------------------
1996 1995 1994
--------- -------- --------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 4,921 $ (1,736) $ 453
Adjustments to reconcile income (loss) to net
cash provided (used) by operating activities:
Special charges and merger related
expenses, net of payments -- 4,219 --
Depreciation and amortization 1,384 2,557 2,050
Bad debt expense 99 463 347
Loss (gain) on sale of property and equipment 415 (316) --
Stock compensation expense -- 15 161
Changes in current assets and liabilities (net of
effect of companies acquired):
Accounts receivable 732 (2,404) 2,042
Inventories (2,841) (1,807) 7,273
Other assets (1,763) (4,872) 3,385
Accounts payable 1,491 2,060 4,131
Accrued expenses and other (81) (5,908) (20,268)
Cash provided (used) by discontinued operations 4,330 (4,763) 19,079
--------- --------- ---------
Net cash provided (used) by operating activities 8,687 (12,492) 18,653
--------- --------- ---------
Cash flows from investing activities:
Cash expended in acquisitions,
net of cash received -- (3,865) (62,142)
Capital expenditures (939) (1,750) (2,369)
Proceeds from sale of fixed assets 157 3,648 80
Investments in affiliated companies -- -- (7,481)
Cash provided (used) by discontinued operations 276,431 (36,756) (18,632)
--------- --------- ---------
Net cash provided (used) by investing activities 275,649 (38,723) (90,544)
--------- --------- ---------
Cash flows from financing activities:
Net proceeds from issuance of long-term debt -- 4,000 44,958
Payments on notes payable and mortgages (15,385) (1,068) (3,583)
Proceeds (payments) from revolving credit line (45,000) (8,938) 10,587
Proceeds from issuance of common stock 1,944 23,548 11,534
Cash dividends to stockholders (230,071) -- (50)
Cash provided (used) by discontinued operations 2,247 20,844 20,653
--------- --------- ---------
Net cash provided (used) by financing activities (286,265) 38,386 84,099
--------- --------- ---------
Effect on cash of changes in foreign exchange rates -- -- --
--------- --------- ---------
Net increase (decrease) in cash (1,929) (12,829) 12,208
Cash and cash equivalents at beginning of year 4,404 17,233 5,025
--------- --------- ---------
Cash and cash equivalents at end of year $ 2,475 $ 4,404 $ 17,233
========= ========= =========
</TABLE>
(Continued)
20
<PAGE> 21
BEC GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Continued)
<TABLE>
<CAPTION>
For the year ended December 31,
-------------------------------
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Supplemental disclosures of cash flow information:
Interest paid $6,715 $9,142 $4,274
Income taxes paid 2,581 910 2,222
</TABLE>
Noncash transactions:
1996
o $20,448 of convertible notes were converted into equity during 1996 in
conjunction with the Merger and Asset Sale.
o $500 of notes receivable from SVS was forgiven during 1996.
o Recorded $1 million of non-interest bearing convertible preferred stock as
partial consideration on the sale of Foster Grant.
1995
o Recorded a $1.9 million non-interest bearing convertible note receivable
in exchange for notes and trade receivables.
o Certain business combinations and divestitures were consummated during the
year. The acquisitions were funded through a combination of cash, equity
and debt. The fair values of the assets and liabilities at the dates of
acquisition are presented as follows:
<TABLE>
<S> <C>
Accounts receivable $ 2,888
Inventories (275)
Property and equipment 622
Goodwill 13,841
Intangible assets 1,350
Other assets 633
Short-term debt (92)
Accounts payable and accrued liabilities (1,840)
Other long-term liabilities 2,508
---------
Net assets acquired $19,635
=========
</TABLE>
(Continued)
21
<PAGE> 22
BEC GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Continued)
1994
o Received 195 shares of common stock as partial payment of management fee
from Superior Eye Care.
o Received notes receivable and stock in connection with dispositions of
retail assets.
o Certain business combinations were consummated during the year. The
acquisitions were funded through a combination of cash, equity and debt.
The fair values of the assets and liabilities at the dates of acquisition
are presented as follows:
<TABLE>
<S> <C>
Accounts receivable $ 21,507
Inventories 37,822
Property and equipment 34,250
Goodwill 67,086
Intangible assets 7,886
Other assets 58,615
Short-term debt (966)
Accounts payable and accrued liabilities (46,430)
Other long-term liabilities (22,712)
-----------
Net assets acquired $157,058
===========
</TABLE>
See accompanying notes to consolidated financial statements.
22
<PAGE> 23
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except per share data, unless otherwise noted)
NOTE 1 - BUSINESS, POOLING OF INTERESTS AND BASIS OF PRESENTATION
Business
BEC Group, Inc. ("BEC Group" or the "Company") has two core businesses: the
Optical Technologies Group ("OTG") which manufactures and markets lighting,
electronic and electroformed products to a diverse customer base and Bolle
America, Inc. ("Bolle America"), the exclusive marketer and distributor of
Bolle(R) premium sunglasses, sport shields and goggles in the U.S., Mexico and
Costa Rica. The evolution of the Company to its present composition was
accomplished through a series of acquisitions and divestitures which were
consummated during the period from October 1992 through December 1996 (Notes 2
and 5).
Pooling of Interests and Basis of Presentation
The consolidated financial statements include the accounts of BEC Group and
Bolle America to reflect the pooling of interests, consummated on November 2,
1995, for all periods presented (Note 5).
Results of continuing operations of the previously separate companies described
above for the year ended December 31, 1994 and the nine months ended September
30, 1995, the end of the interim period nearest the date that the combination
was consummated, are as follows:
<TABLE>
<CAPTION>
BEC Bolle America Combined
--- ------------- --------
<S> <C> <C> <C>
Nine months ended September 30, 1995 (unaudited)
Net sales $ 30,257 $ 19,663 $ 49,920
Income from continuing operations 3,114 1,279 4,393
Year ended December 31, 1994
Net sales $ 39,048 $ 23,093 $ 62,141
Income (loss) from continuing operations (1,484) 1,937 453
</TABLE>
There were no pre-merger transactions between the companies.
NOTE 2 - DISCONTINUED OPERATIONS AND 1996 DIVESTITURES
Foster Grant Group and Dallas Corporate Headquarters
On December 12, 1996, the Company sold to Foster Grant Holdings, Inc.
("Holdings") all of the issued and outstanding shares of capital stock of the
entities comprising the Foster Grant Group ("FGG"). At closing, the Company
received $29 million in cash and 100 shares of non-voting preferred stock with
a maximum redemption value of $6 million (the "Preferred Stock"). By agreement
with Accessories Associates, Inc. ("AAi"), the Company may, at its option,
exchange the Preferred Stock for shares of AAi common stock if AAi completes an
initial public offering ("IPO") at any time within three (3) years of closing.
Upon any such exchange, the Company will receive the number of shares of AAi
common stock equal to $6 million divided by 85% of the IPO offering price, as
set forth in the AAi final IPO prospectus. Any such shares of AAi common stock
will not be registered for resale under federal securities laws, but will bear
"piggyback" registration rights. If the Preferred Stock is not converted, it
will be redeemed by Foster Grant Holdings, Inc. ("Holdings") on or before
February 28, 2000 for up to $6 million, based on the FGG's net sales for the
year ending December 31, 1999. The cash consideration was used to pay down the
Company's credit facility and pay transaction expenses. The results of
operations for FGG and the Dallas Corporate Headquarters, which is being closed
in connection with the sale of FGG, are presented as discontinued operations of
the Company. The assets of FGG, net of liabilities, are presented as
investment in discontinued operations at December 31, 1995. A loss of $26.1
million including transaction expenses and phase-out losses, net of taxes was
recorded on the sale.
23
<PAGE> 24
Prescription Eyewear Business
On May 3, 1996, Benson Eyecare Corporation ("Benson"), BEC Group (the "Company"
or "BEC"), Essilor International, S.A. ("Essilor"), Essilor of America, Inc.
("Essilor of America"), a wholly owned subsidiary of Essilor and Essilor
Acquisition Corporation, Inc. ("Essilor Sub"), a wholly owned subsidiary of
Essilor of America, entered into an Agreement and Plan of Merger, as amended
pursuant to which Essilor purchased Benson and the Omega Group, Benson's
wholesale optical laboratory business (the "Merger"). Benson also entered into
an Asset Purchase Agreement, pursuant to which Benson's lens manufacturing
business, Orcolite, was purchased by the Monsanto Company (the "Asset Sale").
The Omega Group and Orcolite comprised the Prescription Eyewear Business of
Benson.
Pursuant to the Merger, each outstanding share of Benson common stock was
exchanged for $6.60 in cash and one share of BEC's common stock was received
for every two shares of Benson common stock. Upon consummation of the Merger,
the equity interest in Benson of its stockholders ceased and Benson became a
wholly owned subsidiary of Essilor of America. Also upon consummation of the
Merger, BEC became a Registrant whose common shares are traded on the New York
Stock Exchange.
For accounting purposes, BEC is considered the continuing entity. Accordingly,
in substance, the Merger and Asset Sale were considered to be a sale of Omega
and Orcolite by BEC to Essilor and Monsanto Company, respectively. Upon
approval of the Merger, Benson's historical consolidated financial statements,
adjusted for the sale of the Prescription Eyewear business, became the
historical financial statements of BEC Group. The gain on the sale of these
businesses of $100.7 million and the results of operations for these businesses
are presented as discontinued operations of BEC. The cash merger consideration
is treated as a dividend by BEC Group. The assets of the discontinued
operations, net of liabilities, are presented as investment in discontinued
operations at December 31, 1995. The accounting treatment of the Merger and
Asset Sale differs from the legal and federal income tax treatment.
During the third quarter, the final Closing Balance Sheet for the sale of Omega
was agreed upon by the Company and Essilor. According to the terms of the
Merger, a purchase price adjustment of $2.1 million was paid to Essilor on
October 3, 1996, decreasing the gain on the sale. Additionally, Essilor and
the Company agreed to settle the Contingent Valuation Right (the "CVR") early
for cash of $2.2 million payable by the Company to Essilor in January 1997.
Accordingly, the gain on the sale increased by approximately $2.4 million. The
net result of the described adjustments, in addition to the adjustment of
certain accruals relating to the Merger, was a $791 incremental gain on the sale
of the Prescription Eyewear Business recorded in discontinued operations in the
third quarter.
Summarized information on the combined discontinued operations, excluding the
net gain on the transactions follows. The 1996 amounts represent the operating
results of FGG and the Prescription Eyewear business through their respective
measurement dates.
<TABLE>
<CAPTION>
For the year ended
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Net sales $101,565 $235,762 $130,090
Income (loss) before income taxes 4,368 (4,251) 10,719
Income tax expense 1,542 773 1,006
---------- -------- ---------
Net income (loss) $ 2,826 $ (5,024) $ 9,713
========== ======== =========
</TABLE>
BEC Group also entered into an indemnification agreement, whereby BEC Group has
agreed to indemnify Essilor against all federal income and other taxes for any
taxable period before the Merger was consummated. BEC Group has also agreed to
indemnify the above named parties against all losses or liabilities arising
from misrepresentation or breaches of warranty.
Pursuant to the Merger, all Benson stock options were canceled. Continuing BEC
Group option holders received cash and new options in exchange for their Benson
options. Option holders from discontinued operations received cash and BEC
Group stock in exchange for their Benson options.
24
<PAGE> 25
NOTE 3 - SPECIAL CHARGES AND MERGER RELATED EXPENSES
The Company's special charges of $5.2 million for the year 1995 included
primarily: (i) a $4.3 million charge to reflect the impairment of certain notes
receivable and trade accounts receivable from OCA Acquisition, Inc., d/b/a
Optical Corporation of America ("OCA") prior to the exchange of such assets for
non-interest bearing convertible note receivable from Sterling Vision, Inc.
(Note 5) valued at $2.1 million; (ii) the write-off of $500 of deferred
financing costs in connection with a change in the Company's banking syndicate
in September 1995. Merger related expense represents $3.1 million of
transaction costs associated with the Bolle America pooling of interests.
NOTE 4 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The consolidated financial statements include the accounts of the Company and
its wholly owned subsidiaries. Investments in certain less than 50% owned
affiliates are accounted for by the equity method, investments in less than 20%
owned affiliates are accounted for by the cost method (Note 9). All
significant intercompany transactions, profits and accounts have been
eliminated in consolidation.
Cash Equivalents
Cash equivalents include all temporary cash investments with original
maturities of three months or less. The carrying value is equal to market
value.
Revenue Recognition
OTG recognizes revenue upon shipment or delivery of products. Bolle America
recognizes revenue at the time of shipment with estimates provided for returns
based on historical experience.
Concentration of Credit Risk and Major Customers
The Company is not subject to significant concentrations of credit risk.
However, trade receivables arising from sales to customers are not
collateralized and as a result management continually monitors the financial
condition of these customers to reduce the risk of loss. Notes receivable
relate to the divestiture of certain businesses and related assets in 1995 and
1994. The carrying values of notes receivable approximate fair value.
Foreign Currency Transactions
The Company has entered into a series of agreements with a vendor providing a
series of fixed exchange rates on the French franc/U.S. dollar exchange rate
for inventory purchases from that vendor. From time to time, the Company may
also enter into foreign currency forward contracts to hedge against the effects
of foreign currency fluctuations on inventory purchases and the settlement of
trade accounts payable. Foreign currency transaction gains and losses are
recorded in other income.
Inventories
Inventories, which consist primarily of raw materials and finished goods held
for resale, are stated at the lower of cost or market value. Costs include
material, direct labor, and overhead. Inventory at OTG is determined on a
first-in-first-out basis; inventory at Bolle America is determined on an
average cost basis.
Warranties
Certain sales are subject to warranty against defects in material and
workmanship for varying periods. The Company provides for such potential
future costs at the time the sales are recorded.
25
<PAGE> 26
Property and Equipment
Property and equipment are stated at cost. Additions and improvements are
capitalized. Maintenance and repairs are expensed as incurred. Depreciation
is computed on a straight line basis for financial reporting purposes, and on
an accelerated basis for tax purposes, over the estimated useful lives of the
assets. Useful lives range from 3 to 5 years for office equipment to 30 years
for buildings. Asset cost and accumulated depreciation amounts are removed for
dispositions and retirements, with resulting gains and losses reflected in
earnings.
Goodwill and Intangible Assets
Goodwill represents the excess cost over the fair value of net assets acquired
in business combinations accounted for under the purchase method. Intangible
assets consist principally of trademarks and other identifiable intangible
assets.
Goodwill and intangible assets are amortized on a straight line basis over
estimated useful lives which approximate 40 years for goodwill, 20 years for
trademarks, and from 3-10 years for other identifiable intangibles. At each
balance sheet date, the Company evaluates the realizability of goodwill and
intangible assets based upon expectations of undiscounted cash flows of each
subsidiary having a significant goodwill or intangible asset balance. Should
this review indicate that goodwill or intangible assets will not be
recoverable, the Company's carrying value of the goodwill or intangible assets
will be reduced by the estimated shortfall of discounted cash flows. Based
upon its most recent analysis, the Company believes that no material impairment
of goodwill or intangible assets exists.
Income Taxes
Deferred income taxes are provided on the difference in basis of assets and
liabilities between financial reporting and tax returns using enacted tax
rates. A valuation allowance is recorded when realization of deferred tax
assets is not assured.
Investments in Affiliates
Investments in affiliates owned less than 20% are carried on the balance sheet
according to the cost method. Investments in more than 20% owned affiliates
are carried on the balance sheet according to the equity method.
Earnings Per Share
Earnings per share is computed by dividing net earnings or loss by the weighted
average number of shares of common stock and common stock equivalents
outstanding during each year. Common stock equivalents consist of the dilutive
effect of common shares which may be issued upon exercise of stock options and
warrants.
The number of common shares issued and outstanding as of December 31, 1995 has
not been adjusted to reflect the Merger and Asset Sale and represents the
historical stockholders' equity in Benson.
The pro forma weighted average shares outstanding in 1995 and 1994 reflect the
effect of the Merger and Asset Sale and represent the approximate number of
common shares outstanding including common stock equivalents of BEC Group
following the Merger and Asset Sale.
New Accounting Pronouncements
Statement of Financial Accounting Standards (SFAS) No. 123, Accounting for
Stock-Based Compensation, establishes financial accounting and reporting
requirements for stock-based employee compensation plans. The Company adopted
the reporting requirements in SFAS 123 in 1996.
SFAS No. 121, Accounting for the Impairment of Long Lived Assets and for Long
Lived Assets to be Disposed Of, establishes financial accounting standards for
the impairment of long lived assets. The Company adopted SFAS 121 in 1996.
26
<PAGE> 27
Reclassifications
Certain amounts in the 1995 and 1994 financial statements have been
reclassified to conform with the 1996 presentation.
Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that effect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from these estimates.
NOTE 5 - BUSINESS COMBINATIONS AND DIVESTITURES
1996 DIVESTITURES (NOTE 2)
1995 BUSINESS COMBINATIONS
Bolle America, Inc.
Effective November 2, 1995, the Company acquired all of the outstanding common
stock of Bolle America in exchange for 3,265 shares of the Company's common
stock, valued at $31 million. The business combination was accounted for as a
pooling of interests and accordingly, the financial statements of Bolle were
combined with those of the Company. The Company entered into employment,
consulting and noncompete agreements with the former president of Bolle America
providing for annual payments of $255 from 1996 through 2000.
1995 DIVESTITURES
Effective September 15, 1995, the Company exchanged its interests in notes
receivable and trade accounts receivable from OCA for a non interest-bearing
convertible note receivable from Sterling Vision, Inc. ($2.1 million carrying
value) (Note 3).
Effective June 30, 1995, the Company sold 100% of the issued and outstanding
capital stock of Superior Eye Care for aggregate consideration of $5 million.
There was no gain or loss recorded on the transaction.
1994 BUSINESS COMBINATIONS
Optical Radiation Corporation
On October 12, 1994, the Company acquired all of the issued and outstanding
capital stock of Optical Radiation Corporation ("ORC"). The consideration was
$143 million which consisted of $95 million of cash, and the issuance of 7.1
million shares of the Company's common stock, valued at $48 million. The
acquisition was accounted for as a purchase with the operating results of ORC
included in the consolidated financial statements from October 12, 1994. The
allocation of purchase price included assignment of $7 million to trademarks
and other identifiable intangible assets and $68 million to goodwill.
Pro forma information for the acquisition of ORC is not presented herein as the
majority of the ORC business purchased was sold in connection with the Merger
and Asset Sale on May 3, 1996 (Note 2).
27
<PAGE> 28
1994 DIVESTITURES
On October 13, 1994, the Company sold the businesses and assets of the
Ophthalmic Surgical Products Division of ORC for aggregate consideration of
$4.6 million in cash and 61 shares of Mentor Corporation common stock. The
consolidated financial statements do not include any operating results for this
business. Other income, net for the year ended December 31, 1995 includes a
realized gain of $515 from the sale of the Mentor stock.
On October 20, 1994, the Company sold 100% of the issued and outstanding
capital stock of Benson Optical Co., Inc. ("Benson Optical") and Superior
Optical Company, ("Superior Optical") for aggregate consideration of $3.5
million in notes receivable and $1.5 million of convertible preferred stock of
OCA, which, if converted, represented a 19.9% equity interest. There was no
gain or loss recorded on the sale. The note receivable was due October 2000,
with interest payments due quarterly until October 1996, and interest and
principal payments due quarterly thereafter. The fair value of the preferred
stock approximated its carrying value at December 31, 1994, subject to
adjustment based upon certain purchase price adjustments provided for in the
purchase agreement. The Company's holdings in OCA were sold in 1995.
In August 1994, the Company sold the assets of certain retail optical stores
owned by its subsidiary, Pembridge Optical Partners, Inc. ("Pembridge
Optical"), to Sterling Vision, Inc. for consideration of $1.14 million in notes
receivable due September 1997 which bear interest at prime plus 1.5%, payable
monthly.
NOTE 6 - INVENTORIES
Inventories consist of the following at December 31:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Raw materials $ 4,534 $4,165
Work in progress 2,655 2,549
Finished goods 11,139 8,818
Reserves (623) (596)
-------- ------------
$17,705 $14,936
======== ============
</TABLE>
NOTE 7 - PROPERTY AND EQUIPMENT
Property and equipment consists of the following at December 31:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Land $ 1,631 $1,849
Buildings 10,401 9,700
Machinery and equipment 4,186 3,815
Furniture and fixtures 301 192
Leasehold improvements 47 47
-------- ------------
16,566 15,603
Less accumulated depreciation (2,918) (1,604)
-------- ------------
Net property and equipment $13,648 $13,999
======== ============
</TABLE>
Depreciation expense for the years ended December 31, 1996, 1995 and 1994 was
$964, $914 and $1,678, respectively.
28
<PAGE> 29
Land and buildings totaling $6.3 million net of accumulated depreciation are
subject to operating leases. The minimum future rental income is as follows:
<TABLE>
<S> <C>
1997 $ 1,233
1998 753
1999 318
2000 and thereafter --
-------
$ 2,304
=======
</TABLE>
NOTE 8 - GOODWILL AND INTANGIBLE ASSETS
Intangible assets and accumulated amortization at December 31, consist of the
following:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Goodwill $11,939 $11,881
Trademarks 1,498 1,496
Other identifiable intangible assets 800 1,199
Less accumulated amortization (923) (652)
------- ----------
$13,314 $13,924
======= ==========
</TABLE>
Amortization expense for goodwill and intangible assets for the years ended
December 31, 1996, 1995 and 1994, was $527, $574 and $378, respectively.
NOTE 9 - EQUITY IN AND NOTES RECEIVABLE FROM AFFILIATED COMPANIES
Eyecare Products plc
On August 8, 1994, the Company, through its wholly owned subsidiary, Ashfield
Development, Inc. ("Ashfield"), a British Virgin Islands corporation,
subscribed for shares of Eyecare Products plc ("Eyecare Products"), in order to
maintain the Company's holdings in Eyecare Products at 26.44%. Ashfield
accounted for its interest in Eyecare Products under the equity method. On
September 1, 1994, the Company sold 51% of its holdings in Ashfield to an Asian
joint venture partner. During September 1994, the Company sold its holdings in
Eyecare Products to Ashfield. No profit or losses were recorded on these
transactions because the transactions were between companies under common
control. From September 1, 1994 to April 30, 1996, the Company accounted for
its investment in Ashfield on the equity method of accounting.
As part of the series of transactions leading up to the Merger on May 3, 1996,
the assets and liabilities of Ashfield were distributed to its shareholders and
Ashfield was subsequently liquidated. No gain or loss was recorded on the
distribution. BEC Group now holds its investment in Eyecare Products directly.
For the years ended December 31, 1996 and 1995, the Company recognized equity
earnings of $275 and $525, respectively, on its investment in Eyecare Products.
The Company has entered into an agreement, dated November 14, 1996, as amended,
with Lantis Eyewear Corporation ("Lantis"), whereby the Company sold 3,500
shares of Eyecare Products to Lantis and has granted Lantis an option to
acquire the Company's remaining interest in Eyecare Products. A $250 deposit
received from Lantis in December 1996 was recorded as deferred income. The
Company currently maintains a 23% interest in Eyecare Products. Eyecare
Products is the largest frame manufacturer and distributor in France having
sales of approximately $90 million in 1996.
Eyecare Products shares two common directors with the Company, and the
Company has a management agreement with Eyecare Products under which a
management fee is paid to the Company, not to exceed .5% of Eyecare Products
net sales. The Company recognized management fee income of $100 and $300
during each of the years December 31, 1996 and 1995, respectively.
29
<PAGE> 30
Superior Vision Services, Inc.
The Company's investment in Superior Vision Services, Inc. ("SVS") is
currently accounted for on the cost basis. Additionally, the Company has a
fully funded $500 line of credit outstanding to SVS. Both of these balances
net of a reserve are included in "Equity in and notes receivable from
affiliated companies." During 1996, SVS underwent a recapitalization which
resulted in the issuance of Series B preferred shares to BEC Group in exchange
for the forgiveness of $500 of indebtedness in lieu of cash. The carrying
value of the Company's investment in SVS was reduced to $245 at December 31,
1996 to reflect the investment on a lower of cost or market basis.
Benson Partners I, L.P.
In December 1993, a partnership was formed in which a wholly owned subsidiary
of the Company maintained a 1% general partnership interest. The primary
business of the partnership was to invest in ORC. In October 1994, following
the acquisition of ORC by the Company, Benson Partners distributed its assets.
Immediately prior to the completion of the acquisition, the Company received 40
shares as its distribution. Through the Company's investment in Benson
Partners, prior to June 30, 1994, the Company recognized income of $744
representing gain on the stock.
NOTE 10 - CREDIT FACILITIES
Short-Term Debt
Short-term debt consists of the following at December 31:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Revolving credit facility $17,500 $62,500
Current maturities of long-term debt 145 370
-------- ----------
$17,645 $62,870
======== ==========
</TABLE>
Credit Agreement
On April 3, 1996, the Company and certain of its subsidiaries entered into a
$75 million credit facility (the "Credit Agreement") with a syndicate of
lenders (the "Lenders"), led by NationsBank, N.A., ("NationsBank"). The Credit
Agreement, as amended effective December 12, 1996, provides for a $25 million
revolving credit facility maturing on December 11, 1997, which includes a
letter of credit subfacility of $5 million. The interest rate applicable to
the credit facilities will equal the Base Rate or the Eurodollar Rate (each, as
defined in the Credit Agreement), as the Company may from time to time elect.
The Base Rate will generally be equal to the sum of (a) the greater of (i) the
prime rate as announced from time to time by NationsBank or (ii) the Federal
Funds Rate plus one-half percent (0.5%), and (b) a margin ranging from 0% to
.375%, depending upon the Company's satisfaction of certain financial criteria.
The Eurodollar Rate will generally be equal to the interbank offered rate for
Eurodollar deposits, as adjusted to give effect to Eurodollar reserve
requirements, plus a margin ranging from .625% to 1.625%, depending upon the
Company's satisfaction of certain financial criteria. A commitment fee of $175
was paid upon closing the Credit Agreement in April 1996.
At December 31, 1996, the Company had aggregate borrowing capacity under the
Credit Agreement of $25 million. During 1996, the weighted average interest
rate on borrowings under the facility was 7.1%, the average outstanding balance
was $42.3 million, and the maximum balance outstanding was $68 million.
At December 31, 1996, the Company was in compliance with all applicable debt
covenants.
30
<PAGE> 31
Revolving Credit Facility
At December 31, 1995, the Company, through its subsidiaries, had aggregate
borrowing capacity under a revolving credit agreement of $90 million. During
1995, the weighted average interest rate on borrowings under the facility was
7.7%, the average outstanding balance was $61 million, and the maximum balance
outstanding was $86.5 million.
The revolving credit facility had a five-year term and interest accrued at
variable rates based upon the Eurodollar Rate, 6.97% at December 31, 1995, with
an initial rate equivalent to LIBOR plus 112 base points. The facility was
secured by inventory, trade accounts receivable and intangible assets. This
facility was replaced by the Credit Agreement on April 3, 1996.
The Company was not in compliance with all debt covenants during 1995,
primarily due to the special charges and merger related expenses; however, a
waiver for non-compliance was received from the lenders.
Long-Term Debt
Long-term debt consists of the following at December 31:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Mortgages $3,742 $18,823
Capitalized lease obligations -- 153
------- ----------
3,742 18,976
Less current maturities (145) (370)
------- ----------
$3,597 $18,606
======= ==========
</TABLE>
Aggregate maturities of long-term debt are as follows:
<TABLE>
<S> <C>
1997 $ 145
1998 159
1999 175
2000 191
2001 210
Thereafter 2,862
--------
$3,742
========
</TABLE>
The fair value of long term debt is estimated using incremental borrowing rates
currently available to the Company. The carrying value of long-term debt
approximates fair value.
Convertible Subordinated Notes
On May 9, 1994, Benson completed a public offering of $40,950 Convertible
Subordinated Notes, due 2001 with a coupon rate of 8% and a conversion price of
$9.056 per share. In connection with the Merger, holders of $40,896
Convertible Subordinated Notes due 2001 accepted a Conversion and Exchange
Agreement whereby they exchanged one-half of their principal amount and a
portion of accrued interest for new BEC Group 8% Convertible Notes due 2002
(the "BEC Group Notes"). The other half of their notes was converted into
Merger Consideration using a $7.90 conversion price. The BEC Group Notes
accrue interest semi-annually but do not pay interest until conversion or
maturity. Accordingly, $849 of accrued interest is included in the Convertible
Subordinated Notes balance. Interest may be paid in cash or in kind at the
option of the Company. The conversion price for the BEC Group Notes is $5.75.
As of December 31, 1996, there were $21,019 BEC Group Notes and $54 Benson
Notes outstanding. The Company registered the BEC Group Notes with the
Securities and Exchange Commission effective January 28, 1997.
31
<PAGE> 32
Mortgages
The Company has a $3,742 mortgage bearing interest at LIBOR plus 1.85 basis
points, secured by land and buildings in Dallas, Texas, with monthly principal
and interest payments of $41 due through April 2001. Such payments are paid
using rental income from FGG which occupies the building.
NOTE 11 - INCOME TAXES
The provision (benefit) from income taxes consists of the following:
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Continuing operations:
Current:
Federal $ 2,907 $ 478 $ 1,095
State and local 222 76 182
Deferred (624) (1,529) (1,023)
------- ------- -------
$ 2,505 $ (975) $ 254
======= ======= =======
Discontinued operations
Deferred $ (251) $ 775 $ 1,006
======= ======= =======
Total provision (benefit) from income taxes $ 2,254 $ (200) $ 1,260
======= ======= =======
</TABLE>
The Company's effective tax rates for continuing and discontinued operations
differ from the Federal statutory rate as follows:
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Expected tax (benefit) at statutory rate 35.0% (35.0%) 35.0%
State income taxes 2.0% (2.0%) 2.0%
Effects of acquisitions and divestitures (32.9%) 4.2% (11.4%)
Valuation allowance (1.6%) 16.9% (9.2%)
Goodwill amortization 1.3% 10.9% (1.7%)
Other, net (1.1%) 2.1% (3.7%)
---- --- ----
2.7% (2.9%) 11.0%
=== ==== ====
</TABLE>
Significant components of deferred income taxes for continuing and discontinued
operations are as follows at December 31:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Loss carryforward $2,263 $778
Accounts receivable 341 294
Notes receivable 959 1,350
Office closing 848 --
Inventories 319 234
Assets of discontinued operations -- 18,141
Other, net 553 1,295
------ ------
Gross deferred tax asset 5,283 22,092
Valuation allowance (2,263) (3,665)
------ ------
Deferred tax asset 3,020 18,427
------ ------
Liabilities of discontinued operations -- (7,826)
Fixed assets (650) (559)
Intangible assets (128) (1,774)
------ ------
Deferred tax liability (778) (10,159)
------ ------
Net deferred tax asset $2,242 $8,268
====== ======
</TABLE>
32
<PAGE> 33
Discontinued Operations
The Company recorded gross deferred tax assets of $18,141 for discontinued
operations for the year ended December 31, 1995. The related valuation
allowance of $3,665 reflects an increase of $1,181 from the 1994 balance of
$2,484. The increase in the valuation allowance for discontinued operations
was recorded as a result of the performance of the businesses in 1995. In the
event these deferred tax assets become fully realizable, the valuation
allowance will be released. The effect on the income tax provision related to
the valuation allowance was a charge of $1,181 for the year ended December 31,
1995.
In connection with the divestitures in 1996, substantially all net operating
loss carryforwards were utilized to reduce income taxes currently payable. The
balance of the valuation allowance at December 31, 1995 was released in 1996 as
the utilization of the net operating loss carryforwards was assured due to the
gains recognized on the divestitures. Net operating loss carryforwards related
to discontinued operations amount to approximately $0 and $37 million at
December 31, 1996 and 1995, respectively. No deferred assets or liabilities
related to discontinued operations remain on the balance sheet at December 31,
1996.
Continuing Operations
The Company recorded gross deferred tax assets of $5,283 and related valuation
allowance of $2,263 for continuing operations for the year ended December 31,
1996. A capital loss carryforward was generated through the sale of the Foster
Grant Group. A valuation allowance of $2,263 was established for the entire
net tax benefit of the capital loss carryforward as the realization was not
assured. The effect on the income tax provision for continuing operations
related to the valuation allowance was a charge of $2,263. The capital loss
carryforward expires in the year 2001. Net operating loss carryforwards
related to continuing operations amount to approximately $0 an $2 million at
December 31, 1996 and 1995, respectively.
NOTE 12 - SHARE REPURCHASE PROGRAM
On September 9, 1996, the Company adopted a share repurchase program whereby
the Company may repurchase, pursuant to Rule 10(b)-18 under the Securities
Exchange Act of 1934, shares of its common stock in the open market. The
repurchase program became active in December 1996 following the FGG disposal.
Repurchased shares may be issued from time to time upon (i) exercise of options
granted under the Company's 1996 Stock Incentive Plan and/or (ii) under the
Company's 1996 Employee Stock Purchase Plan. As of December 31, 1996, the
Company had purchased 116 shares of its common stock at an average price of
$4.80 per share.
NOTE 13 - STOCK OPTION PLANS
The Company applies APB Opinion No. 25 and related Interpretations in
accounting for its stock option plans, which are described below. Accordingly,
no compensation cost has been recognized for its stock option plans. Had
compensation cost been determined based on the fair market value at the grant
dates for awards under those plans consistent with the method provided by SFAS
No. 123, the Company's net income (loss) and net income (loss) per share would
have been as follows:
<TABLE>
<CAPTION>
Year ended December 31
----------------------
1996 1995 1994
---- ---- ----
<S> <C> <C> <C> <C>
Net income (loss) As reported $82,756 $(6,760) $10,166
Pro Forma 78,592 (10,236) 6,618
Net income (loss) per share As reported $ 4.68 $(0.38) $ 0.58
Pro Forma 4.45 (0.58) 0.38
</TABLE>
33
<PAGE> 34
The fair value of each option grant is estimated on the date of grant using the
Black-Scholes option pricing model with the following weighted average
assumptions used for all grants:
<TABLE>
<S> <C>
Dividend yield 0%
Expected volatility 64%
Risk free rate of return 5%
Expected turnover 7%
Expected term 5 years
</TABLE>
The weighted average fair values of the Benson options granted during the years
ended December 31, 1994, 1995, and 1996 were $3.72, $4.80 and $5.12,
respectively. The weighted average fair value of the BEC Group options granted
during 1996 was $2.55.
The Company may grant nonqualified stock options, incentive stock options or
stock appreciation rights to officers, directors, consultants and key employees
of the Company.
Options under nonqualified stock option plans are granted to officers,
directors and key employees at prices determined by the Company's Board of
Directors based upon market value on the date of grant. There were 3,046,633
shares available under these plans for future grants at December 31, 1996.
As a result of the Merger and Asset Sale, all Benson options were canceled.
Option holders received consideration (including new BEC Group options) for
their Benson options. Accordingly, all options were issued under the BEC Group
Stock Compensation Plan on or after May 3, 1996.
A summary of Benson option transactions is as follows:
<TABLE>
Option price Number
range per of Expiration
share shares date
----- ------ ----
<S> <C> <C> <C>
Outstanding
at 12/31/93 $1.50-10.00 1,182 2000 - 2003
Granted $2.65-7.92 1,834
Exercised $1.50-6.99 (310)
Cancelled $2.00-10.00 (419)
-------
Outstanding
at 12/31/94 $1.50-8.45 2,287 1995 - 2001
Granted $6.13-9.87 568
Exercised $1.50-7.25 (317)
Cancelled $7.00-7.25 (125)
-------
Outstanding
at 12/31/95 $1.50-9.87 2,413 1996 - 2002
Granted $7.87-9.50 268
Exercised $2.50-7.25 (326)
Cancelled $1.50-9.75 (15)
Cancelled in
connection with Merger
and Asset Sale (2,340)
-------
Outstanding
at 12/31/96 -0-
=======
</TABLE>
34
<PAGE> 35
A summary of BEC Group option transactions is follows:
<TABLE>
Weighted Average Number
Exercise of
Price shares
------------ -------
<S> <C> <C>
Outstanding
at 12/31/95 -0-
Granted $ 4.63 2,050
Exercised $ 2.71 (89)
Cancelled $ 4.94 (146)
----
Outstanding
at 12/31/96 $ 4.70 1,815
=====
Exercisable
at 12/31/96 $ 3.90 390
=====
</TABLE>
Options generally vest evenly over a three- or four- year period beginning one
year from the date of grant and expire seven years from the date of grant. The
390 exercisable options at 12/31/96 had an option price range of $0.83-$5.26.
The weighted average remaining contractual life of the 1,815 options
outstanding at December 31, 1996 was 6.46 years.
NOTE 14 - RELATED PARTY TRANSACTIONS
On December 12, 1996, in connection with the sale of the Foster Grant Group by
the Company, Marlin Capital, LP ("Marlin"), a Delaware limited partnership,
invested $2.5 million in convertible preferred stock of the buyer Accessories
Associates, Inc. ("AAi"); upon conversion, AAi common stock received by Marlin
would bear demand and piggyback registration rights. Marlin Holdings, Inc.
("MH"), a Delaware corporation, is the general partner of Marlin. Mr. Martin
E. Franklin, the Company's Chairman and Chief Executive Officer, is the Chief
Executive Officer and principal stockholder of MH. Mr. Ashken, the Company's
Chief Financial Officer and a Director, also is a stockholder and executive
officer of MH. Mr. Franklin also has been named a member of AAi's Board of
Directors.
Ms. Nora Bailey, a member of the Company's Board of Directors since May 1996,
is an attorney specializing in federal tax law. In her professional capacity
she has rendered legal advice and related services to both the Company and its
predecessor, Benson. Ms. Bailey has rendered such services both prior to and
subsequent to her appointment to the Company's Board of Directors, and it is
anticipated that from time to time in the future she will be engaged to provide
similar legal services to the Company. All fees paid to Ms. Bailey in
connection with such services have been agreed in arms' length negotiations and
are in accordance with Ms. Bailey's usual and customary billing practices.
Fees paid to Ms. Bailey by the Company in connection with such services are not
paid in consideration of her services as a director. Aggregate fees billed to
Benson and the Company by Ms. Bailey during 1996 were approximately $73.
Mr. Franklin serves as non-executive chairman of Eyecare Products and a
director of SVS. Mr. Ashken serves as a director of Eyecare Products.
NOTE 15 - COMMITMENTS AND CONTINGENCIES
ORC has been named a potentially responsible party ("PRP"), along with several
other entities with significant operations, by the U.S. Environmental
Protection Agency ("EPA"), under the Comprehensive Environmental Response,
Compensation, and Liability Act ("CERCLA") of 1980, with respect to the cleanup
of hazardous substances and ground water contamination in the San Gabriel
Valley Aquifer (the "site"), which has been designated a "Superfund Site" by
the EPA. Other entities have been named by the EPA as responsible parties.
Although CERCLA technically imposes joint and several liability upon each PRP
at each site, the extent of ORC's required financial contribution to the
cleanup is expected to be limited based on the documented contribution of
contaminants by each of the PRP's as well as the number and relative financial
strength of the primary contributors of pollutants. Furthermore, ORC has
conducted additional testing at its facility, the result of which support ORC's
position that its activities have not contributed to the groundwater
contamination. Both EPA and the Regional Water Quality Board have reviewed
reports based on such testing and have advised ORC that (i) no further testing
will be required and (ii) no remediation will be required by ORC. The EPA has
advised ORC and the steering committee that it will not require ORC's
participation in the steering committee and will not require ORC to take any
further action with respect to the site.
35
<PAGE> 36
The Company is subject to various litigation incidental to business.
Irrespective of any indemnification that may be received, the Company does not
believe that exposure on any matter will result in a significant impact on the
Company or its results of operations.
NOTE 16 - SUBSEQUENT EVENTS
In February 1997, the Company announced the signing of a letter of intent to
acquire SNC Bolle and its affiliated entities (collectively, "Bolle France").
Bolle France's interests include investments in distributors in Brazil, Canada,
France, Japan and the United Kingdom. The Company announced its intent to
combine Bolle France and Bolle America as part of a long term strategy to build
the Bolle(R) brand worldwide. Bolle France is an established designer and
manufacturer of premium sunglasses, sports shields, ski goggles, safety eyewear
and related optical products, with a manufacturing facility located in Oyonnax,
France. Under the letter of intent, the Company expects to pay approximately
$60 million in cash to acquire Bolle France; the Company additionally expects
to issue to the selling shareholders warrants to acquire up to 2.13 million
shares of common stock of the resulting combined Bolle entity. The transaction
is conditioned upon completion by the Company of its due diligence
investigation, negotiation and delivery of a definitive agreement, government
approval, stockholder approval, and other conditions. The Company further
announced its intention, contingent upon various considerations including the
closing, of the Bolle France acquisition, to separate the Bolle business and
the Optical Technologies Group business into two discrete entities. Because
the consummation of these transactions is contingent as of the date hereof, the
information set forth in this Annual Report on Form 10-K is limited to the
Company's existing businesses as constituted at December 31, 1996 and the date
hereof.
NOTE 17 - INDUSTRY SEGMENTS
The Company currently classifies its continuing operations in two core business
segments: the OTG and Bolle America. The OTG consists of ORC Lighting
Products, ORC Electronic Products and ORC Electroformed Products which were
acquired as part of ORC in October 12, 1994. Accordingly, the 1994 segment
information includes the results of OTG from date of acquisition to December
31, 1994. Corporate and other consists primarily of parent company expenses
and results of divested businesses not included in discontinued operations.
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
NET SALES
Optical Technologies Group $41,891 $38,122 9,154
Bolle America 24,422 24,829 23,094
Corporate and Other 683 3,122 29,893
------ ------ ------
Total Net Sales 66,996 66,073 62,141
OPERATING INCOME (LOSS)
AFTER SPECIAL CHARGES AND
MERGER RELATED EXPENSES
Optical Technologies Group 8,288 7,094 2,170
Bolle America 1,757 (430) 3,513
Corporate and Other (31) (5,590) (1,518)
------ ------ ------
Total Operating Income 10,014 1,074 4,165
IDENTIFIABLE ASSETS
Optical Technologies Group 48,922 41,481 35,228
Bolle America 15,408 14,795 17,549
Corporate and Other 15,201 217,002 179,402
------ ------- -------
Total Indentifiable Assets 79,531 273,278 232,179
</TABLE>
36
<PAGE> 37
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
DEPRECIATION AND AMORTIZATION
Optical Technologies Group 925 1,208 57
Bolle America 387 251 199
Corporate and Other 72 1,098 1,794
----- ----- -----
Total Depreciation and Amortization 1,384 2,557 2,050
CAPITAL EXPENDITURES
Optical Technologies Group 653 1,274 1,660
Bolle America 244 216 344
Corporate and Other 42 260 365
----- ----- -----
Total Capital Expenditures 939 1,750 2,369
</TABLE>
Operating income represents earnings before special charges, merger related
expenses, interest expense and income taxes. Identifiable assets are those
assets employed in each segment's operation including goodwill allocated to
each segment.
NOTE 18 - QUARTERLY FINANCIAL DATA
(Unaudited)
<TABLE>
<CAPTION>
For the year ended December 31, 1996
Q1 Q2 Q3 Q4
- ----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net sales $16,989 $18,559 $16,252 $15,196
Gross profit 7,532 8,340 6,962 6,357
Net income
from continuing operations 1,040 2,224 1,128 529
Income per share
from continuing operations $ 0.06 $ 0.13 $ 0.06 $ 0.03
</TABLE>
<TABLE>
<CAPTION>
For the year ended December 31, 1995
Q1 Q2 Q3 Q4
- ----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net sales $ 14,837 $ 18,242 $ 16,517 $ 16,477
Gross profit 7,198 8,781 6,876 7,312
Net income (loss)
from continuing operations 348 1,398 (2,409) (1,073)
Income (loss) per share
from continuing operations $ 0.02 $ 0.08 $ (0.14) $ (0.06)
</TABLE>
<TABLE>
<CAPTION>
For the year ended December 31, 1994
Q1 Q2 Q3 Q4
- ----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net sales $ 14,518 $ 16,361 $ 13,395 $ 17,867
Gross profit 9,188 9,767 8,612 9,355
Net income (loss)
from continuing operations 157 166 605 (475)
Income (loss) per share
from continuing operations $ 0.01 $ 0.01 $ 0.03 0.03
</TABLE>
37
<PAGE> 38
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
There were no disagreements with the Company's independent accountants on any
matter of accounting principles or practices, financial disclosure, or auditing
scope or procedure, which if not resolved to such accountants' satisfaction
would have caused them to make reference to the subject matter of the
disagreement in connection with their report.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
<TABLE>
<CAPTION>
NAME AGE OFFICE
- ---- --- ------
<S> <C> <C>
Martin E. Franklin(1)(2) 32 Chairman of the Board of Directors and Chief
Executive Officer
Ian G. H. Ashken(1)(2) 36 Executive Vice President of Finance and
Administration, Chief Financial Officer,
Assistant Secretary and Director
Nora A. Bailey(3) 55 Director
Richard W. Hanselman(3)(4) 69 Director
David L. Moore(3)(4) 40 Director
William T. Sullivan 53 Director
Charles F. Sydnor(2)(4) 54 Director
</TABLE>
- -------------------------------------------------------------------------------
(1) Member of Executive Committee
(2) Member of Nominating Committee
(3) Member of Audit Committee
(4) Member of Compensation/Stock Option Committee
Directors of the Company are elected annually at the Annual Meeting of
Stockholders. Their respective terms of office continue until the next Annual
Meeting of Stockholders and until their successors have been elected and
qualified in accordance with the Company's Restated By-laws. There are no
family relationships among any of the directors or executive officers of the
Company.
Martin E. Franklin was elected Chairman of the Board and Chief Executive
Officer of the Company in December 1995. Mr. Franklin was Chairman of the
Board and Chief Executive officer of Benson from October 1992 to May 1996 and
President from November 1993 to May 1996. Mr. Franklin has been the Chairman
and Chief Executive Officer of Pembridge Holdings, Inc. since 1990. From 1988
to 1990, Mr. Franklin was Managing Director of Pembridge Associates, Inc. Both
Pembridge Associates, Inc. and Pembridge Holdings, Inc., specialized in
merchant banking and related services. Mr. Franklin has been Chairman and
Chief Executive Officer of Marlin Holdings, Inc., the general partner of Marlin
Capital, L.P., since October 1996. Mr. Franklin is non-executive Chairman and
a director of Eyecare Products plc and also serves on the boards of Specialty
Catalog Corp. and certain private companies. Mr. Franklin received his B.A. in
Political Science from the University of Pennsylvania.
Ian G.H. Ashken, A.C.A. was elected Executive Vice President, Chief Financial
Officer, Assistant Secretary and a Director of the Company in December 1995.
Mr. Ashken was Chief Financial Officer of Benson and a director of Benson from
October 1992 to May 1996. Mr. Ashken also served as Benson's Executive Vice
President from October 1994 to May 1996; Secretary from October 1992 to
December 1993; and, Assistant Secretary from December 1993 to May 1996. Mr.
Ashken has been the Executive Vice President and a director of Pembridge
Holdings, Inc. since 1990.
38
<PAGE> 39
Since October 1996, Mr. Ashken has been Vice Chairman of Marlin Holdings, Inc.,
the general partner of Marlin Capital, L.P. Mr. Ashken is a director of
Eyecare Products plc. Mr. Ashken received his B.A. (Hons) in Economics and
Accounting from the University of Newcastle in England.
Nora A. Bailey, Esq. became a member of the Company's Board of Directors in May
1996. Ms. Bailey is a federal income tax attorney with a specialty in mergers
and acquisitions and has many multinational clients. Ms. Bailey and her firm
from time to time have been engaged to provide legal advice to the Company.
Until 1993, she was a partner in Ivins, Phillips & Barker in Washington D.C.,
which she joined in 1972. Ms. Bailey received her J.D. from The University of
Michigan Law School.
Richard W. Hanselman, was elected a director of Benson Eyecare Corporation in
August 1994, and of BEC Group, Inc. in May 1996. Mr. Hanselman also serves on
the board of Arvin Industries, Inc.; Becton, Dickinson and Company; The
Bradford Funds, Inc.; Foundation Health Corporation; Gryphon Holdings, Inc.;
Healthtrust, Inc.; Incom Recycling, Inc.; and, Daisy Manufacturing Co. From
1981 to 1986, Mr. Hanselman was Chairman, President and Chief Executive Officer
and director of Genesco, Inc., a diversified footwear and apparel business.
Mr. Hanselman also served as Genesco's President and Chief Operating Officer
from 1980 to 1981. Prior to that time, Mr. Hanselman held senior management
posts at the Beatrice Companies, Samsonite Corporation, RCA and RCA Sales
Corporation, and the Crosley-Bendix divisions of AVCO.
David L. Moore became a member of the Company's Board of Directors in May 1996.
Mr. Moore is President and Chief Executive Officer of Century 21 Home
Improvements, Garden State Brickface, Inc., a leading New York metropolitan
area residential and commercial remodeling firm. Mr. Moore received his B.A.
in Economics from Amherst College and his M.B.A. from Harvard University.
William T. Sullivan was elected President and Chief Operating Officer of the
Company on April 2, 1996. Mr. Sullivan became a member of the Company's Board
in May 1996. Upon Benson's acquisition of Optical Radiation Corporation ("ORC")
in October 1994, Mr. Sullivan was appointed Benson's Executive Vice President
of Operations. From July 1993 to October 1994, Mr. Sullivan served as the
President of the Consumer Optical Group of ORC. From August 1987 through July
1993, Mr. Sullivan served as Group Vice President of the Consumer Optical Group
of ORC. Prior to joining ORC, Mr. Sullivan was President of Pearle Vision
Centers. Mr. Sullivan has announced his resignation as an executive officer
and employee of the Company, effective March 29, 1997; Mr. Sullivan will remain
a member of the Company's Board of Directors.
Charles F. Sydnor, M.D., was elected a director of Benson Eyecare Corporation
in October 1992, and of BEC Group, Inc. in May 1996. Dr. Sydnor has practiced
general ophthalmology and neuro-ophthalmology in Burlington, North Carolina
since 1982. Dr. Sydnor served on the faculty at Duke University for eight
years before going into private practice in 1982. Dr. Sydnor is a member of
the American Academy of Ophthalmology's Managed Care Committee and is a
consultant to the Academy's Secretariat for Governmental Relations. He also is
the immediate past Chairman of the legislative committee and President of
Excellence in Primary Eye Care, Inc. Dr. Sydnor is President of Alamance Eye
Center P.A.
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934 (the "Exchange "Act")
requires the Company's directors and executive officers, and persons who own
more than ten percent (10%) of a registered class of the Company's equity
securities, to file with the Securities and Exchange Commission ("SEC") and the
stock exchange upon which the Company's stock is listed, initial reports of
ownership and reports of changes in ownership of common stock and other equity
securities of the Company. Officers, directors and greater than ten-percent
shareholders are required by SEC regulation to furnish the Company with copies
of all Section 16(a) forms they file.
To the Company's knowledge, based solely on review of the copies of such
reports furnished to the Company during the last fiscal year ended December 31,
1996, all Section 16(a) filing requirements applicable to its officers,
directors and greater than ten-percent beneficial owners were complied with.
39
<PAGE> 40
ITEM 11. EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following Table sets forth all compensation paid to, deferred or accrued
for the benefit of the Company's Chief Executive Officer and of all other
executive officers of the Company who earned total compensation for 1995
exceeding $100,000 (the "Executive Group"). Except as disclosed below, no
executive officer of the Company had a total annual salary and bonus for 1996
exceeding $100,000.
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
ANNUAL COMPENSATION(1) AWARDS
---------------------- ------
OPTIONS/ ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS SARS(2) COMPENSATION
- --------------------------- ---- ------ ----- ------- ------------
<S> <C> <C> <C> <C> <C>
Martin E. Franklin(3) 1996 $ 277,455 $ 602,477 550,000 $ 5,700(8)
Chairman, Chief Executive 1995 $ 300,000 $ 50,000 -0- -0-
Officer 1994 $ 131,610 $ 250,000 -0- -0-
Ian G.H. Ashken(3) 1996 $ 212,981 $ 86,813 275,000 $132,275(8)
Chief Financial Officer, 1995 $ 190,000 -0- -0- -0-
Executive Vice President of 1994 $ 145,620 $ 67,000 100,000(7) -0-
Finance and Administration,
and Assistant Secretary
William T. Sullivan(2)(4) 1996 $ 212,981 $ 84,775 372,250 $961,618(8)
Chief Operating Officer and 1995 $ 195,000 -0- 40,000(7) $106,340(6)
President 1994 (5) -0- 304,000(7) -0-
</TABLE>
- -------------------------------------------------------------------------------
(1) Included in the table are amounts received as compensation from Benson
during the periods in question and prior to the Spinoff on May 3, 1996.
(2) All awards reflected in this column represent stock options granted under
the Company's 1996 Stock Incentive Plan.
(3) In addition to compensation reflected in this or any other table below,
the Company maintains "split dollar" life insurance policies for Messrs.
Franklin and Ashken, respectively, in amounts of $5 million and $3
million.
(4) Mr. Sullivan became Executive Vice President of Operations of Benson on
October 17, 1994; prior to that time he served as an executive officer of
ORC. Compensation earned by Mr. Sullivan as an executive officer of ORC
prior to its acquisition and his employment by Benson is not included.
(5) Less than $100,000.
(6) Includes reimbursed relocation expenses of $101,890 and a contribution to
the ORC profit sharing plan of $4,450.
(7) These figures represent stock options granted under the former Benson
stock option plan, all of which were canceled in connection with the
Merger and Spinoff. Options granted in 1996 under the Company's 1996
Stock Incentive Plan included options granted in replacement of such
canceled options. See "Options/SAR Grant Table", below.
40
<PAGE> 41
(8) Includes an employer matching contribution in the amount of $5,700 to
each member of the Executive Group under the Company's 401(k) Retirement
Plan. The remainder (if any) represents cash payments in connection with
the cancellation on May 3, 1996 of then outstanding Benson stock options
upon the consummation of the Merger and Spinoff.
OPTIONS/SAR GRANTS TABLE
Except as stated below, no stock options or stock appreciation rights (SARs)
were granted in 1996 to the named executive officers.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL
----------------- REALIZED VALUE AT
ASSUMED ANNUAL
NUMBER OF % OF TOTAL RATES OF STOCK PRICE
SECURITIES OPTIONS APPRECIATION FOR
UNDERLYING GRANTED TO EXERCISE OPTION TERM(2)
OPTIONS EMPLOYEES IN OR BASE EXPIRATION ----------------
NAME GRANTED (#)(1) FISCAL YEAR PRICES($/SH) DATE(3) 5% 10%
- ---------- -------------- ----------- ------------ ---------- -- ---
<S> <C> <C> <C> <C> <C> <C>
Martin E. Franklin 500,000(3) 24% $5.05 05/03/2003 73,540 165,283
50,000(4) 2% $4.25 12/16/2003 129,561 251,001
Ian G.H. Ashken 50,000(5)(6) 2% $4.08 05/03/2003 153,149 280,977
200,000(3) 10% $5.05 05/03/2003 29,416 66,113
25,000(4) 1% $4.25 12/16/2003 64,780 125,500
William T. Sullivan 26,100(5)(7) 1% $2.11 05/03/2003 N/A N/A
13,050(5)(7) (9) $2.90 05/03/2003 N/A N/A
26,100(5)(7) 1% $2.19 05/03/2003 N/A N/A
12,000(5)(7) (9) $3.87 05/03/2003 N/A N/A
75,000(5) 4% $3.87 09/30/1998 161,240 206,163
20,000(5) 1% $4.57 09/30/1998 11,245 16,542
200,000(8) 10% $5.05 09/30/1998 7,998 15,155
</TABLE>
- ------------------------
(1) For additional information concerning stock options, see "Executive
Compensation-Compensation Under Plans."
(2) These columns illustrate the hypothetical appreciation of the stock
options under the assumption that each option appreciates at the rate of
5% and 10%, respectively, compounded annually until the date of
expiration.
(3) These options vest annually in equal quarterly installments from May 3,
1997 through May 3, 2000.
(4) These options vest annually in equal quarterly installments from December
16, 1997 through December 16, 2000.
(5) These options represent options granted in replacement of Benson options
canceled in connection with the Merger and Spinoff. Options granted in
replacement of vested Benson options were vested at the time of grant, and
unless otherwise noted were fully vested at May 3, 1996. Exercise prices
of all such options were adjusted in relation to the exercise prices of
the prior Benson options.
(6) These options vest annually in equal quarterly installments from August 10,
1995 through August 10, 1998.
(7) These options were exercised during 1996. See following table.
41
<PAGE> 42
(8) These options will be fully vested as of March 31, 1997.
(9) Less than 1%.
OPTIONS/SAR EXERCISE AND FISCAL YEAR-END OPTION/SAR VALUE TABLE
The following table provides information on options/SARs exercised during
fiscal 1996 by the Executive Group and the value of each such officer's
unexercised options/SARs as of the end of such fiscal year.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTIONS/SAR VALUES
<TABLE>
<CAPTION>
SHARES ACQUIRED ON NUMBER OF UNEXERCISED IN- VALUE OF UNEXERCISED IN-THE-MONEY
------------------ ------------------------- ---------------------------------
EXERCISE THE-MONEY OPTIONS/SARS AT FY-END OPTIONS/SARS AT FY-END($)
-------- -------------------------------- -------------------------
(#)
--- -----------------------------------------
NAME (#) VALUE
---- --- REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
-------- ----------- ------------- ----------- -------------
($)
---
<S> <C> <C> <C> <C> <C> <C>
Martin E. Franklin -0- N/A -0- 550,000 N/A $81,250(2)
Ian G.H. Ashken -0- N/A 50,000 225,000 $ 52,250(3) $89,125(3)
William T. Sullivan 77,250 $193,597.50(1) 95,000 200,000 $105,225(4) $15,000(5)
</TABLE>
- -------------------------------------------------------------------------------
(1) Based on exercise prices ranging from $2.11 to $3.87 per share and a
market value per share on the date of exercise of $5.05, computed with
reference to the closing price of Benson common stock on the New York
Stock Exchange on such date, the date of the Spinoff and Merger.
(2) Based on the closing price of the Company's common stock on the New York
Stock Exchange on December 31, 1996 of $5.125 and the exercise price of
$4.25 to $5.05 per share.
(3) Based on the closing price of the Company's common stock on the New York
Stock Exchange on December 31, 1996 of $5.125 and the exercise prices
ranging from $4.08 to $5.05 per share.
(4) Based on the closing price of the Company's common stock on the New York
Stock Exchange on December 31, 1996 of $5.125 and the exercise price
ranging from $3.87 to $4.57 per share.
(5) Based on the closing price of the Company's common stock on the New York
Stock Exchange on December 31, 1996 of $5.125 per share and an exercise
price of $5.05 per share.
DIRECTORS' COMPENSATION
Except as stated below, the Company's directors received no compensation in
connection with their services as directors on the Board of Directors in 1996.
For services rendered in 1996, all non-executive directors received fees or
remuneration in the amount of $15,000; fees are paid quarterly, in arrears.
Ms. Bailey's law firm has received payment for legal services from time to time
provided to the Company, but such payments were not made in consideration of
Ms. Bailey's services as a director. Additionally, all non-executive directors
are entitled to receive automatic grants of stock options of the Company's
common stock in compensation for their services. See "Compensation Under
Plans-1996 Stock Incentive Plan."
42
<PAGE> 43
EMPLOYMENT AGREEMENTS
Martin E. Franklin. Mr. Franklin has entered into an employment agreement with
the Company (the "Franklin Employment Agreement"), pursuant to which he serves
as Chief Executive Officer of the Company for an initial period of three years,
subject to annual renewal. Pursuant to the Franklin Employment Agreement, Mr.
Franklin receives an annual base salary which is subject to (i) increase each
year by a minimum of the annual rate of increase in the Consumer Price Index,
and (ii) discretionary increases determined by the Compensation Committee of
the Board of Directors from time to time; Mr. Franklin also may receive a bonus
based on performance criteria to be approved by the Board of Directors. Mr.
Franklin's annual base salary for 1997 has been set at $257,700. The agreement
may be terminated by either party upon at least 90 days' notice prior to the
end of the initial term or any subsequent renewal term. The Company may
terminate the agreement with cause in the event of the death, permanent
disability or certain misconduct of Mr. Franklin. The Company may terminate
Mr. Franklin's employment without cause upon 30 days' notice, in which event
Mr. Franklin will be entitled to receive a severance payment equal to one
year's current base salary and his existing benefits for a period of one year
and any non-vested stock options then outstanding will automatically vest. The
agreement contains noncompetition and nonsolicitation restrictions effective
during the employment term and for a period of one year thereafter.
Ian G.H. Ashken. Mr. Ashken has entered into an employment agreement with the
Company. Under the agreement, Mr. Ashken serves as Chief Financial Officer of
the Company and receives an annual base salary which is subject to (i) an
increase each year by a minimum of the annual rate of increase in the Consumer
Price Index, and (ii) discretionary increases determined by the Compensation
Committee of the Board of Directors from time to time; Mr. Ashken also may
receive a bonus based on performance criteria to be determined by the Board of
Directors. Mr. Ashken's annual base salary for 1997 has been set at $206,000.
The other terms of Mr. Ashken's employment agreement are the same as the terms
of the Franklin Employment Agreement.
William T. Sullivan. In connection with Mr. Sullivan's resignation as an
executive officer and employee of the Company, to be effective March 29, 1997
Mr. Sullivan will receive payment of $350,000. The Company additionally has
agreed to vest at March 29, 1997 all options previously granted to Mr. Sullivan
then outstanding and not yet vested; all presently unexercised options granted
to Mr. Sullivan will remain exercisable through September 30, 1998.
COMPENSATION UNDER PLANS
1996 STOCK INCENTIVE PLAN.
On April 2, 1996, the Company's Board of Directors adopted the 1996 Stock
Incentive Plan (the "Plan") and on April 2, 1996 Benson, as the then sole
shareholder of BEC Group, approved the Plan, under which 4,350,000 shares of
BEC Group common stock are reserved for issuance pursuant to the grant of stock
based awards under the Plan, subject to the restriction that at no time shall
the number of shares of BEC Group common stock issued pursuant to the Plan or
subject to awards issued pursuant to the Plan, except for the number of shares
issued pursuant to the exercise of options issued pursuant to the Plan, exceed
fifteen percent of the total number of shares of BEC Group common stock
outstanding or ten percent on a fully diluted basis. Pursuant to the Plan,
employees and consultants of the Company and its subsidiaries and affiliates
(other than employees subject to a collective bargaining agreement) are
eligible to be selected by the Compensation Committee as participants to
receive discretionary awards of various forms of equity-based incentive
compensation, including stock options, stock appreciation rights, restricted
stock awards, performance share unit awards and phantom stock unit awards, and
awards consisting of combination of such incentives. Approximately 150 persons
are eligible to participate in the Plan.
The Plan is administered by the Compensation Committee of the Company's Board
of Directors (the "Compensation Committee"). The Compensation Committee, in
its sole discretion, will determine which eligible employees and consultants of
the Company and its subsidiaries may participate in the Plan and the type,
extent and terms of the equity-based awards to be granted to them. Members of
the Compensation Committee, because of their status as non-employee Directors,
will receive automatic non-discretionary annual grants of stock options
pursuant to the Plan.
43
<PAGE> 44
Under the Plan, at the time of the Merger and Spinoff, each non-employee
Director automatically was granted an option to purchase 10,000 shares of the
Company's common stock. Thereafter, on the date that a person first becomes a
non-employee Director, he or she will automatically be granted an option to
purchase 10,000 shares of the Company's common stock. Thereafter, beginning in
1997, on the date of each annual meeting of stockholders of the Company, each
non-employee Director will automatically be granted an option to purchase 2,500
shares of the Company's common stock. All such automatic grants to
non-employee Directors are hereafter called "Director Options." Each Director
Option has an exercise price per share equal to the fair market value of one
share of the Company's common stock on the date of grant and vests and becomes
Exercisable over a four year period beginning on the first anniversary of the
date of grant at the rate of 25% of each Director Option on each of the four
years immediately following the date of grant. These grants are the only
grants made to non-employee Directors under the Plan. The Compensation
Committee has no discretion to make any grants under the Plan to non-employee
Directors. All Director Options will be NQSO's (as defined below).
Stock options granted by the Compensation Committee under the Plan may be
"incentive stock options" (ISOs"), within the meaning of Section 422 of the
Code, or "non qualified stock options" ("NQSO's"). The exercise price of the
options will be determined by the Compensation Committee when the options are
granted, subject to a minimum price in the case of ISOs of the fair market
value of the Company's common stock on the date of grant, unless the
Compensation Committee, in its sole discretion, determines to grant a discount
NQSO in lieu of a reasonable amount of salary or cash bonus, in which case 85%
of the fair market value of the Company's common stock on the date of grant.
The option exercise price for all options granted under the Plan may be paid in
cash or in shares of the Company's common stock having a fair market value on
the date of exercise equal to the exercise price or, in the discretion of the
Compensation Committee, by delivery to the Company of (i) other property having
a fair market value on the date of exercise equal to the option exercise price,
or (ii) a copy of irrevocable instructions to a stockbroker to deliver promptly
to the Company an amount of sale or loan proceeds sufficient to pay the
exercise price.
An SAR may be granted by the Compensation Committee as a supplement to a
related stock option or may be granted independent of any option. SARs granted
in connection with an option will become exercisable and lapse according to the
same vesting schedule and lapse rules that are established for the
corresponding option. SARs granted independent of any option will vest and
lapse according to the terms and conditions set by the Compensation Committee.
An SAR will entitle is holder to be paid an amount equal to the excess of the
fair market value of the Company's common stock subject to the SAR on the date
of exercise over the exercise price of the related stock options, in the case
of an SAR granted in connection with an option, or the fair market value of the
Company's common stock on the date of grant in the case of an SAR granted
independent of an option.
Shares of the Company's common stock covered by a restricted stock award will
not be issued to the recipient at the time the award is granted but will be
deposited with an escrow agent until the end of the restricted period set by
the Compensation Committee. During the restricted period, restricted stock
will be subject to transfer restrictions and forfeiture in the event of
termination of employment with the Company or a subsidiary and other
restrictions and conditions established by the Compensation Committee at the
time the award is granted.
A phantom stock unit award will provide for the future payment of cash or the
issuance of shares of the Company's common stock to the recipient if continued
employment or other conditions established by the Compensation Committee at the
time of grant are attained.
A performance share unit award will provide for the future payment of cash or
the issuance of shares of the Company's common stock to the recipient upon the
attainment of certain corporate performance goals established by the
Compensation Committee over three to five year performance award periods. At
the end of each performance award period, the Compensation Committee decides
the extent to which the corporate performance goals have been attained and the
amount of cash or the Company's common stock to be distributed to the
participant.
1996 EMPLOYEE STOCK PURCHASE PLAN. The Company has authorized the 1996
Employee Stock Purchase Plan (the "Stock Purchase Plan") for persons who have
been employed full-time by the Company or its subsidiaries for at least one
year, pursuant to which 500,000 shares of common stock will be reserved for
issuance, subject to adjustment. Eligible employees will be able to
contribute, for each semi-annual period beginning on the first business day
after January 1 and July 1 (each, an "Enrollment Date") and ending excess of
$10,000 per semi-annual period, to purchase shares of common stock on the
Exercise Date. The purchase price for each share of common stock purchased
pursuant
44
<PAGE> 45
to the 1996 Employee Stock Purchase Plan will be the lesser of 85% of the fair
market value of the common stock on the Enrollment Date or 85% of the fair
market value of the common stock on the Exercise Date. The Stock Purchase Plan
has not yet been formally implemented, and consequently no shares of common
stock have been issued thereunder.
OTHER
The Company does not maintain a pension plan or other actuarial or defined
benefit retirement plan for its named executive officers. The Company does not
maintain any long term incentive plans, and there were no repricing of
outstanding options or SARs held by any of the Company's executive officers
during fiscal year 1996. The Company's named executive officers are eligible
to participate in benefit plans generally available to the Company's employees,
including a 401(k) savings plan and the health and life insurance programs.
The Company's Compensation Committee is composed of Mr. Hanselman, Mr. Moore
and Dr. Sydnor, who serves as Committee Chairman. For information concerning
certain transactions between members of the Compensation Committee and the
Company, see "Executive Compensation-Directors' Compensation."
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, to the knowledge of BEC and as of March 21,
1997, (unless otherwise indicated), (i) the number of shares of Common stock
owned of record or beneficially, or both, by each person who owned of record,
or is known by BEC to have beneficially owned, individually, or with his
associates, more than 5% of such shares then outstanding; (ii) the number of
shares owned beneficially by each director of the Company; and (iii) the number
of shares owned beneficially by all directors and executive officers as a
group. Unless otherwise noted, each person holds sole voting and investment
power with respect to the shares shown opposite his name.
<TABLE>
AMOUNT AND NATURE OF PERCENT OF
NAME AND ADDRESS OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP(1) CLASS
- ------------------------------------ ----------------------- ----------
<S> <C> <C>
Martin E. Franklin............................ 1,420,564(2) 8.0%
555 Theodore Fremd Avenue
Suite B-302
Rye, New York
Ian G.H. Ashken............................... 275,000(3) 1.6%
Nora Bailey................................... 17,500(4) *
Richard Hanselman............................. 7,286(4) *
David Moore................................... 17,850(4) *
William T. Sullivan........................... 378,095(5) 2.1%
Dr. Charles F. Sydnor......................... 54,883(4) *
All Executive Officers and Directors.......... 2,171,178(6) 11.93%
as a group (6 persons)
Millbrook Partners, L.P....................... 2,655,200(7) 15.07%(7)
2102 Sawgrass Village Dr., Ponte Vedra Beach
Florida 32082
Palisade Capital Management, L.L.C............ 1,226,313(8) 6.49%(8)
One Bridge Plaza, Ste. 695, Fort Lee, NJ 07204
</TABLE>
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<PAGE> 46
- -------------------------------------------------------------------------------
* Less than 1%.
(1) Shares not outstanding but deemed beneficially owned by virtue of the
right of an individual to acquire them within 60 days upon the exercise of
an option are treated as outstanding for purposes of determining
beneficial ownership and the percent beneficially owned by such individual
and for the executive officers and directors as a group.
(2) Includes 125,000 shares that Mr. Franklin has a right to acquire within
60 days upon the exercise of options. Excludes 15,383 shares held in
trust for Mr. Franklin's minor children, as to which shares Mr. Franklin
disclaims beneficial ownership.
(3) Includes 75,000 shares that Mr. Ashken has a right to acquire within 60
days upon the exercise of options. Excludes 2,500 shares held in trust for
Mr. Ashken's minor children, as to which shares Mr. Ashken disclaims
beneficial ownership.
(4) Includes 2,500 shares that the Director has a right to acquire within 60
days upon the exercise of options.
(5) Includes 295,000 shares that Mr. Sullivan has a right to acquire within
60 days upon the exercise of options and 1,697 shares with respect to
which Mr. Sullivan shares voting and investment power with his spouse.
(6) Includes 505,000 shares that members of the group have a right to acquire
within 60 days upon the exercise of options. Excludes 17,883 shares held
in trust for directors' children, as to which they disclaim beneficial
ownership.
(7) Millbrook Partners, L.P. ("Millbrook") and Mark M. Mathes, its general
partner, have informed the Company that, as of December 31, 1996 they hold
an aggregate 2,655,200 shares of the Company's common stock, or 15.07% of
the shares then outstanding. Millbrook has informed the Company that it
is preparing a Form 13-D, reflecting such holdings, for filing. The
Company has been informed that 2,577,200 of such shares, or 14.62% of the
shares outstanding, are held beneficially by Millbrook, while Mr. Mathes
beneficially holds 78,000 of such shares.
(8) In a Schedule 13-G dated February 1, 1997, Palisade Capital Management,
L.L.C. ("Palisade") reported that it is the beneficial owner of 1,226,313
shares of the Company's common stock, constituting 6.49% of the total
shares outstanding as of December 31, 1996. Palisade reported that such
shares include 449,913 shares of the Company's common stock issuable upon
conversion of BEC Group, Inc. 8% Convertible Notes held by Palisade.
Palisade reported that all such shares are held on behalf of Palisade's
clients, in accounts over which Palisade has complete investment
discretion.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company has entered into indemnification agreements with each of its
directors, officers and certain executives, pursuant to which the Company has
agreed to indemnify each indemnitee to the fullest extent authorized by law
against any and all damages, judgments, settlements and fines ("losses") in
connection with any action, suit, arbitration or proceeding or any inquiry or
investigation, whether brought by or in the right of the Company or otherwise,
whether civil, criminal, administrative, investigative or other, or any appeal
therefrom, by reason of an indemnitee's serving as a director of the Company.
An indemnitee is not entitled to indemnification for any losses that are (i)
based or attributable to the indemnitee gaining in fact any personal profit or
advantage to which the indemnitee is not entitled, (ii) for the return by the
indemnitee of any remuneration paid to the indemnitee without the previous
approval of the Stockholders of the Company which is illegal, (iii) for
violations of Section 16 of the Securities Exchange Act of 1934 or similar
provisions of state law, (iv) based upon knowingly fraudulent, dishonest or
willful misconduct and (v) not permitted to be covered by applicable law. The
agreements provide that the indemnification under the agreement is not
exclusive of any other rights the indemnitee may have under the Company's
Restated Certificate of Incorporation, Restated By-laws, applicable Delaware
corporate statutes or any agreement or vote of stockholders.
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<PAGE> 47
The Company's non-employee Directors receive automatically stock option grants
under the terms of the Company's 1996 Stock Incentive Plan. Each of Mr.
Franklin, Mr. Ashken and Mr. Sullivan also has received stock option grants
under the terms of the 1996 Stock Incentive Plan, and Messrs. Franklin and
Ashken have entered into employment agreements with the Company. See
"EXECUTIVE COMPENSATION."
On December 12, 1996, in connection with the sale of the Foster Grant Group by
the Company, Marlin Capital, LP ("Marlin"), a Delaware limited partnership,
invested $2.5 million in convertible preferred stock of the buyer Accessories
Associates, Inc. ("AAi"); upon conversion, AAi common stock received by Marlin
would bear demand and piggyback registration rights. Marlin Holdings, Inc.
("MH"), a Delaware corporation, is the general partner of Marlin. Mr. Martin
E. Franklin, the Company's Chairman and Chief Executive Officer, is the Chief
Executive Officer and principal stockholder of MH. Mr. Ashken, the Company's
Chief Financial Officer and a Director, also is a stockholder and executive
officer of MH. Mr. Franklin also has been named a member of AAi's Board of
Directors.
Ms. Nora Bailey, a member of the Company's Board of Directors since May 1996,
is an attorney specializing in federal tax law. In her professional capacity
she has rendered legal advice and related services to both the Company and its
predecessor, Benson. Ms. Bailey has rendered such services both prior to and
subsequent to her appointment to the Company's Board of Directors, and it is
anticipated that she from time to time in the future will be engaged to provide
similar legal services to the Company. All fees paid to Ms. Bailey in
connection with such services have been agreed in arms' length negotiations and
are in accordance with Ms. Bailey's usual and customary billing practices.
Fees paid to Ms. Bailey by the Company in connection with such services are not
paid in consideration of her services as a director. Aggregate fees billed to
Benson and the Company by Ms. Bailey during 1996 were approximately $73,500.
No other significant transactions, business relationships, or indebtedness are
known to exist between the Company and related parties (defined as directors,
executive officers, nominees for director, security holders of more than 5% of
the voting stock or any members of the immediate family of any of the foregoing
persons).
PART IV
<TABLE>
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) 1. FINANCIAL STATEMENTS:
CONSOLIDATED FINANCIAL STATEMENTS: PAGE:
---------------------------------- -----
<S> <C> <C>
Reports of Independent Accounts ................................... 15
Consolidated Balance Sheets at December 31, 1996 and 1995 ......... 17
Consolidated Statements of Operations for the three years
ended December 31, 1996, 1995 and 1994 ........................... 18
Consolidated Statements of Stockholders' Equity for the three years
ended December 31, 1996, 1995 and 1994 ........................... 19
Consolidated Statements of Cash Flows for the three years ended
December 31, 1996, 1995 and 1994 ................................. 20
Notes to Consolidated Financial Statements ........................ 23
</TABLE>
2. FINANCIAL STATEMENT SCHEDULES:
All other schedules for which provision is made in the applicable
accounting regulation of the Securities and Exchange Commission are
not required under the related instructions or are inapplicable,
and therefore have been omitted.
47
<PAGE> 48
3. EXHIBITS:
The following exhibits are filed herewith:
3.1 Restated Certificate of Incorporation of the Company. Incorporated
by reference to Exhibit 3.1 to the Company's Registration Statement
on Form S-1 (Registration No. 333-3186).
3.2 By-laws of the Company. Incorporated by reference to Exhibit 3.2 to
the Company's Registration Statement on Form S-1 (Registration No.
333-3186).
4.1 1996 BEC Group, Inc. Stock Incentive Plan. Incorporated by
reference to Exhibit 4.1 to the Company's Registration Statement on
Form S-1 (Registration No. 333-3186).
4.2 Form of Agreement for Conversion and Exchange of Note, by and among
Benson Eyecare Corporation, BEC Group, Inc., and Convertible Note
holders. Incorporated by reference to Annex F to Benson Eyecare
Corporation's Proxy Statement dated April 5, 1996 (Commission File
No. 1-9435).
4.3 BEC Group, Inc. 1996 Employee Stock Purchase Plan (This exhibit as
filed includes the subscription and withdrawal forms for Plan
participants). Incorporated by reference to Exhibit 4.2 to the
Company's Quarterly Report on Form 10-Q for the period ended June
30, 1996.
4.4 Form of Registration Rights Agreement, dated as of May 3, 1996, by
and among the Company and Convertible Note holders. Incorporated by
reference to Exhibit 4.4 to the Company's Registration Statement on
Form S-3 (Registration No. 333-18947).
4.5 Form of Indenture, dated as of May 3, 1996, including form of
Convertible Note. Incorporated by reference to Exhibit 4.5 to the
Company's Registration Statement on Form S-3 (Registration No.
333-18947).
10.1 Agreement and Plan of Merger, dated as of February 11, 1996,
between Essilor International, S.A., Essilor of America, Inc.,
Essilor Acquisition Corporation, Benson Eyecare Corporation, BEC
Group, Inc. and Omega Opco, Inc. Incorporated by reference to
Exhibit 10.1 to the Company's Registration Statement on Form S-1
(Registration No. 333-3186).
10.2 Form of Spinoff Agreement between Benson Eyecare Corporation and
BEC Group, Inc. Incorporated by reference to Exhibit 10.2 to the
Company's Registration Statement on Form S-1 (Registration No.
333-3186).
10.3 Indemnification Agreement, dated as of February 11, 1996, by and
among Essilor International, S.A., Essilor of America, Inc.,
Essilor Acquisition Corporation, Benson Eyecare Corporation, and
BEC Group, Inc. Incorporated by reference to Exhibit 10.3 to the
Company's Registration Statement on Form S-1 (Registration No.
333-3186).
10.4 Form of Indemnification Agreement entered into by and between the
Company and its directors and certain officers. Incorporated by
reference to Exhibit 10.4 to the Company's Report on Form 10-Q for
the period ending March 31, 1996.
10.5 Asset Purchase Agreement, dated as of February 11, 1996, by and
among Benson Eyecare Corporation, BEC Group, Inc. and Optical
Radiation Corporation and Monsanto Company. Incorporated by
reference to Exhibit 10.2 to Benson Eyecare Corporation's Current
Report on Form 8-K, dated February 12, 1996.
10.6 Credit Agreement among BEC Group, Inc. and NationsBank, N.A., et
al, dated as of April 3, 1996. Filed together with such Exhibit
10.6 are copies of the following ancillary
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<PAGE> 49
agreements. Incorporated by reference to Exhibit 10.6 to the
Company Quarterly Report on Form 10-Q for the period ended June 30,
1996.
(a) Subsidiary Guaranty Agreement, dated as of April 3, 1996, among
certain subsidiaries of BEC Group, Inc. and NationsBank, N.A.
(b) Assignment of Patents, Trademarks, Copyrights and Licenses,
dated as of April 3, 1996.
(c) Intellectual Property Security Agreement, dated as of April 3,
1996.
(d) Stock Pledge Agreement, dated as of April 3, 1996.
(e) Collateral Assignment of Partnership Interests, dated as of
April 3, 1996.
(f) Security Agreement, dated as of April 3, 1996.
10.7 Amendment No. 1 to Credit Agreement (see Exhibit 10.6, above),
dated as of June 17, 1996, by and among the Company, et al. Filed
electronically herewith.
10.8 Amendment No. 2 to Credit Agreement (see Exhibit 10.6, above),
dated as of October 31, 1996, by and among the Company, et al.
Incorporated by reference to Exhibit 10.1 to the Company's
Quarterly Report on Form 10-Q for the period ended September 30,
1996.
10.9 Amendment No. 3 to Credit Agreement (see Exhibit 10.6, above),
dated December 1996, by and among the Company, et al. Filed
electronically herewith.
10.10 Stock Purchase Agreement, dated as of November 13, 1996, by and
among BEC Group, Inc., Foster Grant Group, L.P., Foster Grant
Holdings, L.P. and Accessories Associates, Inc., Schedules and
other attachments to such agreement are not filed herewith, but
will be provided supplementally to the Commission upon request.
Incorporated by reference to Exhibit 2.1 to the Company's Quarterly
Report on Form 10-Q/A for the period ended September 30, 1996.
10.11 Employment Agreement, dated as of July 1, 1993, between the Company
and Mr. Martin E. Franklin. Incorporated by reference to Exhibit
10.34 to Benson Eyecare Corporation's Registration Statement on
Form S-1 (Registration No. 33-63864).
10.12 Amendment No. 1, dated as of October 31, 1996, to Employment
Agreement dated July 1, 1993, between the Company and Mr. Martin E.
Franklin. Filed electronically herewith.
10.13 Employment Agreement, dated as of July 1, 1993, between the Company
and Mr. Ian G.H. Ashken. Incorporated by reference to Exhibit 10.2
to Benson Eyecare Corporation's Registration Statement on Form S-1
(Registration No. 33-63864).
10.14 Amendment No. 1, dated as of October 31, 1996, to Employment
Agreement dated July 1, 1993, between the Company Mr. Ian G.H.
Ashken. Filed electronically herewith.
10.15 Merger Agreement, dated as of June 30, 1994, among the Company (as
assignee), Benson Acquisition Company, Inc. and Optical Radiation
Corporation. Incorporated by reference to Exhibit 99.1 to Benson
Eyecare Corporation's Current Report on Form 8-K, dated of event
June 30, 1994 (Commission File No. 1-9435).
10.16 Amendment No. 1 to Merger Agreement, dated as of July 6, 1994,
among the company (as assignee), Benson Acquisition Company, Inc.
and Optical Radiation Corporation. Incorporated by reference to
Exhibit 99.2 to Benson Eyecare Corporation's Current Report on Form
8-K, date of event June 30, 1994 (Commission File No. 1-9435)
49
<PAGE> 50
10.17 Amendment No. 2 to Merger Agreement, dated as of August 29, 1994,
by and among the Company, Optical Radiation Corporation and Benson
Acquisition Corporation. Incorporated by reference to Annex E to
Benson Eyecare Corporation's Registration Statement on Form S-4,
dated September 12, 1994 (Commission File No. 1-9435).
10.18 Agreement and Plan of Reorganization, dated as of September 30,
1994, by and among Superior Vision Services, Inc., the Company (as
assignee) and Charles D. Fritch, M.D. The Company agrees to furnish
supplementally to the commission upon request a copy of any omitted
schedules or exhibits. Incorporated by reference to Exhibit 10.2 to
Benson Eyecare Corporation's Quarterly Report on Form 10-Q for the
period ended September 30, 1994 (Commission File No. 1-9435).
10.19 Loan Agreement by and among the Company (as assignee) and First
Interstate Bank of Texas, N.A., relating to the real property
located in Dallas, Texas. Incorporated by reference to Exhibit
10.24 to Benson Eyecare Corporation's Annual Report on Form 10-K
for the year ended December 31, 1995 (Commission File No. 1-9435).
10.20 First Amendment to Loan Agreement (see Exhibit 10.19, above) and
Other Loan Documents, dated May 3, 1996, by and among Foster Grant
Group, L.P., the Company, and, First Interstate Bank of Texas, N.A.
Filed electronically herewith.
10.21 Second Amendment to Loan Agreement (see Exhibit 10.19, above) and
Other Loan Documents, dated December 12, 1996, by and among Wells
Fargo Bank (Texas), N.A. (as successor to First Interstate Bank of
Texas, N.A.), ORC Management Corporation, Foster Grant Group, L.P.,
and the Company. Filed electronically herewith.
10.22 Deed of Trust, Security Agreement and Financing Statement, dated
March 31, 1995, relating to mortgage of real property located in
Dallas, Texas. Filed electronically herewith.
10.23 Agreement and Plan of Merger, dated as of July 26, 1995, among
Benson Eyecare Corporation, Benson Acquisition Corp., and, Bolle
America, Inc. Incorporated by reference to Exhibit 10.1 to Benson
Eyecare Corporation's Current Report on Form 8-K, dated August 3,
1995 (Commission File No. 1-9435).
10.24 Separation Agreement by and between the Company and Mr. William T.
Sullivan. Filed electronically herewith.
21 Subsidiaries of the Registrant. Filed electronically herewith.
24.1 Consent of Price Waterhouse LLP. Filed electronically herewith.
` 24.2 Consent of KPMG Peat Marwick LLP. Filed electronically herewith.
27 Financial Data Schedule (for electronic filing only). Filed
electronically herewith.
(b) Reports on Form 8-K in the fourth quarter of 1996:
(i) The Company filed no Reports on Form 8-K in the fourth quarter of
1996.
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<PAGE> 51
BEC GROUP, INC.
SIGNATURES
Pursuant to the requirements 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 on the 31st day of March, 1997.
BEC GROUP, INC.
By: /s/ Martin E. Franklin
-----------------------------------
Martin E. Franklin
Chairman of the Board and
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities indicated.
<TABLE>
<S> <C>
/s/ Martin E. Franklin /s/ Richard W. Hanselman
------------------------------------ --------------------------------
Martin E. Franklin Richard W. Hanselman
Chairman and Chief Executive Officer Director
Dated: March 31, 1997 Dated: March 31, 1997
/s/ Ian G.H. Ashken /s/ David L. Moore
------------------------------------ --------------------------------
Ian G. H. Ashken David L. Moore
Chief Financial Officer, Director
Executive Vice President of
Finance and Administration;
Dated: March 31, 1997 Dated: March 24, 1997
/s/ Nora A. Bailey /s/ William T. Sullivan
------------------------------------ --------------------------------
Nora A. Bailey William T. Sullivan
Director Director
Dated: March 24, 1997 Dated: March 31, 1997
/s/ Charles F. Sydnor
------------------------------------
Charles F. Sydnor, M.D.
Director
Dated: March 25, 1997
</TABLE>
51
<PAGE> 52
EXHIBIT INDEX
The following documents heretofore filed by the Company with the Securities and
Exchange Commission ("SEC") are hereby incorporated by reference:
<TABLE>
<CAPTION>
EXHIBIT NO. EXHIBIT PAGE NO.
- ----------- ------- --------
<S> <C> <C>
3.1 Restated Certificate of Incorporation Incorporated by reference to Exhibit 3.1 to the
of the Company. Company's Registration Statement on Form S-1
(Registration No. 333-3186).
3.2 By-laws of the Company. Incorporated by reference to Exhibit 3.2 to the
Company's Registration Statement on Form S-1
(Registration No. 333-3186).
4.1 1996 BEC Group, Inc. Stock Incentive Plan. Incorporated by reference to Exhibit 4.1 to the
Company's Registration Statement on Form S-1
(Registration No. 333-3186).
4.2 Form of Agreement for Conversion and Incorporated by reference to Annex F to
Exchange of Note, by and among Benson Benson Eyecare Corporation's Proxy
Eyecare Corporation; BEC Group, Inc.; and Statement dated April 5, 1996 (Commission
Convertible Note holders. File No. 1-9435).
4.3 BEC Group, Inc. 1996 Employee Stock Incorporated by reference to Exhibit 4.2 to the
Purchase Plan (this exhibit as filed includes Company's Quarterly Report on Form 10-Q for
the subscription and withdrawal forms for the period ended June 30, 1996.
Plan participants).
4.4 Form of Registration Rights Agreement, Incorporated by reference to Exhibit 4.4 to the
dated as of May 3, 1996, by and among the Company's Registration Statement on Form S-3
Company and Convertible Note holders. (Registration No. 333-18947).
4.5 Form of Indenture, dated as of May 3, 1996, Incorporated by reference to Exhibit 4.5 to the
including form of Convertible Note. Company's Registration Statement on Form S-3
Registration No. 333-18947).
10.1 Agreement and Plan of Merger, dated as of Incorporated by reference to Exhibit 10.1 to the
February 11, 1996, between Essilor Company's Registration Statement on Form S-1
International, S.A., Essilor of America, Inc., (Registration No. 333-3186).
Essilor Acquisition Corporation, Benson
Eyecare Corporation, BEC Group, Inc. and
Omega Opco, Inc.
10.2 Form of Spinoff Agreement between Benson Incorporated by reference to Exhibit 10.2 to the
Eyecare Corporation and BEC Group, Inc. Company's Registration Statement on Form S-1
(Registration No. 333-3186).
10.3 Indemnification Agreement, dated as of Incorporated by reference to Exhibit 10.3 to the
February 11, 1996, by and among Essilor Company's Registration Statement on Form S-1
International, S.A., Essilor of America, Inc., (Registration No. 333-3186).
Essilor Acquisition Corporation, Benson
Eyecare Corporation, and BEC Group, Inc.
</TABLE>
52
<PAGE> 53
<TABLE>
<CAPTION>
EXHIBIT NO. EXHIBIT PAGE NO.
- ----------- ------- --------
<S> <C> <C>
10.4 Form of Indemnification Agreement entered Incorporated by reference to Exhibit 10.4 to the
into by and between the Company and its Company's Current Report on Form 10-Q for
10.5 Asset Purchase Agreement, dated as of Incorporated by reference to Exhibit 10.2 to
February 11, 1996, by and among Benson Benson Eyecare Corporation's Current Report
Eyecare Corporation, BEC Group, Inc. on Form 8-K, dated February 12, 1996.
and Optical Radiation Corporation and
Monsanto Company.
10.6 Credit Agreement among BEC Group, Inc. Incorporated by reference to Exhibit 10.6 to
and NationsBank, N.A., et al, dated as of the Company's Quarterly Report on Form 10-Q
April 3, 1996. Filed together with such for the period ended June 30, 1996.
Exhibit 10.6 are copies of the following
ancillary agreements:
(a) Subsidiary Guaranty Agreement, dated as
of April 3, 1996, among certain subsidiaries
of BEC Group, Inc. and NationsBank, N.A.
(b) Assignment of Patents, Trademarks,
Copyrights and Licenses, dated as of
April 3, 1996.
(c) Intellectual Property Security Agreement,
dated as of April 3, 1996.
(d) Stock Pledge Agreement, dated as of
April 3, 1996.
(e) Collateral Assignment of Partnership
Interests, dated as of April 3, 1996.
(f) Security Agreement, dated as of April 3,
1996.
10.7 Amendment No. 1 to Credit Agreement (see Filed electronically herewith.
Exhibit 10.6, above) dated as of June 17, 1996,
by and among the Company, et al.
10.8 Amendment No. 2 to Credit Agreement (see Incorporated by reference to Exhibit 10.1 to the
Exhibit 10.6, above), dated as of October 31, Company's Quarterly Report on Form 10-Q for
1996, by and among the Company, et al. the period ended September 30, 1996.
10.9 Amendment No. 3 to Credit Agreement (see Filed electronically herewith.
Exhibit 10.6, above), dated December 1996,
by and among the Company, et al
</TABLE>
53
<PAGE> 54
<TABLE>
<CAPTION>
EXHIBIT NO. EXHIBIT PAGE NO.
- ----------- ------- --------
<S> <C> <C>
10.10 Stock Purchase Agreement, dated as of Incorporated by reference to Exhibit 2.1 to the
November 13, 1996, by and among BEC Group, Company's Quarterly Report on Form 10-Q/A
Inc., Foster Grant Group, L.P., Foster Grant for the period ended September 30, 1996.
Holdings, L.P. and Accessories Associates, Inc.
Schedules and other attachments to such
agreement are not filed herewith, but will be
provided supplementally to the Commission
upon request.
10.11 Employment Agreement, dated as of July 1, Incorporated by reference to Exhibit 10.34 to
1993, between the Company and Mr. Martin Benson Eyecare Corporation's Registration
E. Franklin. Statement on Form S-1 (Registration
No. 33-63864).
10.12 Amendment No. 1, dated as of October 31, Filed electronically herewith.
1996, to Employment Agreement dated
July 1, 1993, between the Company and
Mr. Martin E. Franklin.
10.13 Employment Agreement, dated as of July 1, Incorporated by reference to Exhibit 10.2 to
1993, between the Company and Mr. Ian G.H. Benson Eyecare Corporation's Registration
Ashken. Statement on Form S-1 (Registration No.
33-63864).
10.14 Amendment No. 1, dated as of October 31, 1996, Filed electronically herewith.
to Employment Agreement dated July 1, 1993,
between the Company Mr. Ian G.H. Ashken.
10.15 Merger Agreement, dated as of June 30, 1994, Incorporated by reference to Exhibit 99.1 to
among the Company (as assignee), Benson Benson Eyecare Corporation's Current Report
Acquisition Company, Inc. and Optical on Form 8-K, date of event June 30, 1994
Radiation Corporation. (Commission File No. 1-9435).
10.16 Amendment No. 1 to Merger Agreement, dated Incorporated by reference to Exhibit 99.2 to
as of July 6, 1994, among the company (as Benson Eyecare Corporation's Current Report
assignee), Benson Acquisition Company, Inc. on Form 8-K, date of event June 30, 1994,
and Optical Radiation Corporation. (Commission File No. 1-9435).
10.17 Amendment No. 2 to Merger Agreement, dated Incorporated by reference to Annex E to
as of August 29, 1994, by and among the Benson Eyecare Corporation's Registration
Company, Optical Radiation Corporation and Statement on Form S-4, dated September 12,
Benson Acquisition Corporation. 1994 (Commission File No. 1-9435).
10.18 Agreement and Plan of Reorganization, dated Incorporated by reference to Exhibit 10.2 to
as of September 30, 1994, by and among Benson Eyecare Corporation's Quarterly Report
Superior Vision Services, Inc., the Company on Form 10-Q for the period ended September
(as assignee) and Charles D. Fritch, M.D. The 30, 1994 (Commission File No. 1-9435).
Company agrees to furnish supplementally to
the commission upon request a copy of any
omitted schedules or exhibits.
10.19 Loan Agreement by and among the Company Incorporated by reference to Exhibit 10.24 to
(as assignee) and First Interstate Bank of Benson Eyecare Corporation's Annual Report
Texas, N.A., relating to the real property on Form 10-K for the year ended December 31,
located in Dallas, Texas. 1995 (Commission File No. 1-9435).
</TABLE>
54
<PAGE> 55
<TABLE>
<CAPTION>
EXHIBIT NO. EXHIBIT PAGE NO.
- ----------- ------- --------
<S> <C> <C>
10.20 First Amendment to Loan Agreement (see Filed electronically herewith.
Exhibit 10.19, above) and Other Loan
Documents, dated May 3, 1996, by and
among Foster Grant Group, L.P., the
Company, and, First Interstate Bank of Texas,
N.A.
10.21 Second Amendment to Loan Agreement (see Filed electronically herewith.
Exhibit 10.19, above) and Other Loan
Documents, dated December 12, 1996, by
and among Wells Fargo Bank (Texas), N.A.
(as successor to First Interstate Bank of
Texas, N.A.), ORC Management Corporation,
Foster Grant Group, L.P., and the Company.
10.22 Deed of Trust, Security Agreement and Filed electronically herewith.
Financing Statement, dated March 31, 1995,
relating to mortgage of real property located
in Dallas, Texas.
10.23 Agreement and Plan of Merger, dated as of Incorporated by reference to Exhibit 10.1 to
July 26, 1995, among Benson Eyecare Benson Eyecare Corporation's Current Report
Corporation, Benson Acquisition Corp., and, on Form 8-K, dated August 3, 1995.
Bolle America, Inc. (Commission File No. 1-9435).
10.24 Separation Agreement by and between the Filed electronically herewith.
Company and Mr. William T. Sullivan
21 Subsidiaries of the Registrant. Filed electronically herewith.
24.1 Consent of Price Waterhouse LLP. Filed electronically herewith.
24.2 Consent of KPMG Peat Marwick Filed electronically herewith.
27 Financial Data Schedule (for electronic Filed electronically herewith.
filing only).
</TABLE>
55
<PAGE> 1
EXHIBIT 10.7
AMENDMENT NO.1 TO CREDIT AGREEMENT
THIS AMENDMENT NO. 1 TO CREDIT AGREEMENT (this "Agreement") is made and
entered into as of this 17th day of June, 1996 among:
BEC GROUP, INC., a Delaware corporation ("Borrower"), BEC
DISTRIBUTION, INC., a Delaware corporation ("BEC Distribution"), BONNEAU
HOLDINGS, INC., a Delaware corporation ("Bonneau Holdings"), BONNEAU GENERAL,
INC., a Delaware corporation ("Bonneau General"), FOSTER GRANT GROUP, L.P., a
Delaware limited partnership ("Foster Grant LP"), OPTICAL RADIATION
CORPORATION, a Delaware corporation ("Optical Radiation"), OPTI-RAY, INC., a
New York corporation ("Opti-Ray"), O-RAY HOLDINGS, INC., a Delaware
corporation ("X-Ray"), ORC CARIBE, a California corporation ("ORC Caribe"), THE
BONNEAU COMPANY, a Texas corporation ("Bonneau") (each of BEC Distribution,
Bonneau Holdings, Bonneau General, Foster Grant LP, Optical Radiation,
Opti-Ray, O-Ray, ORC Caribe and Bonneau sometimes being hereinafter referred
to individually as a "Guarantor" and collectively referred to as the
"Guarantors"), EACH LENDER EXECUTING AND DELIVERING A SIGNATURE PAGE HERETO
(individually, a "Lender" and collectively, the "Lenders"); and
NATIONSBANK, N.A., a national banking association organized under the
laws of the United States of America, in its capacity as agent for the Lenders
(in such capacity, the "Agent");
W I T N E S S E T H:
WHEREAS, the Borrower, the Guarantors, the Lenders and the Agent have
entered into a Credit Agreement, dated as of April 3, 1996, as amended hereby
(the "Credit Agreement"), pursuant to which the Lenders agreed to make certain
Advances to the Borrower; and
WHEREAS, the Borrower has requested that the Credit Agreement be
amended in the manner set forth herein and the Agent and the Lenders are
willing to agree to such amendment;
NOW, THEREFORE, in consideration of the mutual covenants and the
fulfillment of the conditions set forth herein, the parties hereto do hereby
agree as follows:
1. Definitions. Any capitalized terms used herein without
definition shall have the meaning set forth in the Credit Agreement.
2. Amendment. Subject to the terms and conditions set forth
herein, the Credit Agreement is hereby amended as follows:
(a) The definition of "Consolidated EBITDA" in Section
1.1 of the Credit Agreement is hereby deleted in its entirety and the
following is inserted in replacement thereof:
<PAGE> 2
"Consolidated EBITDA" means, with respect to the Borrower and
its Subsidiaries for any period of computation thereof, the sum of,
without duplication, (i) Consolidated Net Income, (ii) Consolidated
Interest Expense, (iii) taxes on income, (iv) amortization, and (v)
depreciation, all determined on a consolidated basis in accordance
with Generally Accepted Accounting Principles applied on a Consistent
Basis; provided, however, that for the purposes only of computing
Consolidated EBITDA, there shall be excluded from the determination of
Consolidated Net Income all Consolidated Net Worth Adjustment Amounts
as they from time to time are realized during such period by the
Borrower which, in accordance with Generally Accepted Accounting
Principles, otherwise would be included in Consolidated Net Income;
(b) A new definition of "Consolidated Net Worth Adjustment
Amounts" is hereby set forth in alphabetical sequence in Section 1.1 of the
Credit Agreement which shall read in its entirety as follows:
"Consolidated Net Worth Adjustment Amounts" means at any time
as of which the amount thereof is to be determined, the sum of the
following, each of which was incurred by the Company in connection
with the Spinoff and Merger and has been recorded in the books and
records of the Borrower in accordance with Generally Accepted
Accounting Principles at the amount set forth opposite its name below:
Contingent valuation right $ 4,570,000
Tax liabilities $ 3,000,000
Supply agreement in connection
with Orcolite Lenses $ 3,700,000
-----------
$11,270,000
(c) Section 11.3 of the Credit Agreement is hereby deleted in its
entirety and the following is inserted in replacement thereof:
"SECTION 11.3 CONSOLIDATED NET WORTH. Permit at any time
Consolidated Net Worth to be less than an amount equal to $25,000,000,
such amount to be increased (i) in an amount equal to the amount of
any Consolidated Net Worth Adjustment Amount realized by the Borrower
and to be included in Consolidated Net Income in accordance with
Generally Accepted Accounting Principles effective as of the date of
such realization and (ii) as at the first day of each Fiscal Year,
beginning with
2
<PAGE> 3
the Fiscal Year ending December 31, 1997, by fifty percent (50%) of
(a) Consolidated Net Income (without including in Consolidated
Net Income any realization of Consolidated Net Worth Adjustment
Amounts) for the immediately preceding Fiscal Year and (b) the Net
Proceeds of any Equity Offering consummated during the immediately
preceding fiscal year; provided, however, in no event shall the
Consolidated Net Worth requirement be decreased as a result of a net
loss of the Borrower and its Subsidiaries (i.e., negative Consolidated
Net Income) for any Fiscal Year. Any increase calculated pursuant
hereto shall be determined based upon financial statements delivered
in accordance with Section 9.1(a) hereof; provided, "however such
increase shall be deemed effective as of the first day of the Fiscal
Year in which such financial statements are delivered.
3. Representations and Warranties. In order to induce the Agent
and the Lenders to enter into this Agreement, the Borrower represents and
warrants to the Agent and the Lenders as follows:
(a) The representations and warranties made by Borrower
in Article 8 of the Credit Agreement are true and correct on and as of
the date hereof, except to the extent that such representations and
warranties expressly relate to an earlier date;
(b) There has been no material adverse change in the
condition, financial or otherwise, of the Borrower and its
Subsidiaries, taken as a whole, since the date of the most recent
financial reports of the Borrower received by the Agent and the
Lenders under Section 9.1 of the Credit Agreement;
(c) No event has occurred and is continuing which
constitutes, and no condition exists which upon the consummation of
the transaction contemplated hereby would constitute, a Default or an
Event of Default on the part of the Borrower under the Credit
Agreement.
4. Conditions Precedent. The effectiveness of this Agreement is
subject to the receipt by the parties hereto of the following:
(a) The Agent shall have received:
(i) six (6) counterparts of this Agreement duly
executed by all signatories hereto; and
(ii) copies of all additional agreements,
instruments and documents which the Agent may reasonably
request, such documents, when appropriate, to be certified by
appropriate governmental authorities.
3
<PAGE> 4
(b) All proceedings of the Borrower relating to the
matters provided for herein shall be satisfactory to the Lenders, the
Agent and their counsel.
5. Entire Agreement. This Agreement sets forth the entire
understanding and agreement of the parties hereto in relation to the subject
matter hereof and supersedes any prior negotiations and agreements among the
parties relative to such subject matter. No promise, condition, representation
or warranty, express or implied, not herein set forth shall bind any party
hereto, and not one of them has relied on any such promise, condition,
representation or warranty. Each of the parties hereto acknowledges that,
except as otherwise expressly stated in this Agreement, no representations,
warranties or commitments, express or implied, have been made by any party to
the other. None of the terms or conditions of this Agreement may be changed,
modified, waived or canceled orally or otherwise, except by writing, signed by
all the parties hereto, specifying such change, modification, waiver or
cancellation of such terms or conditions, or of any proceeding or succeeding
breach thereof.
6. Limitation of Waiver and Consents. The waiver and consents
contained herein are limited as specified herein and shall remain in effect
only so long as the Borrower is in compliance with the terms of this Agreement.
The waiver and consents are granted only for the specific instance specified
herein and in no manner creates a course of dealing or otherwise impairs the
future ability of the Agent or the Lenders to declare a default under or
otherwise enforce the terms of the Credit Agreement.
7. Full Force and Effect of Agreement. Except as hereby
specifically amended, modified or supplemented, the Credit Agreement and all
other Loan Documents are hereby confirmed and ratified in all respects and
shall remain in full force and effect according to their respective terms.
Each Guarantor hereby acknowledges and agrees to the amendments of the Credit
Agreement set forth herein and hereby confirms and ratifies in all respects the
Guaranty and enforceability of the Guaranty against such Guarantor in
accordance with its terms.
8. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original as against any party
whose signature appears thereon, and all of which shall together constitute one
and the same instrument.
9. Governing Law. This Agreement shall in all respects be
governed by the laws and judicial decisions of the state of New York, without
giving effect to the conflict of laws provisions thereof.
10. Enforceability. Should any one or more of the provisions of
this Agreement be determined to be illegal or unenforceable as to one or more
of the parties hereto, all other provisions
4
<PAGE> 5
nevertheless shall remain effective and binding on the parties hereto.
11. Credit Agreement. All references in any of the Loan Documents
to the "Credit Agreement" shall mean the Credit Agreement as amended hereby.
12. Successors and Assigns. This Agreement shall be binding upon
and inure to the benefit of each of the Borrower, the Lenders and the Agent
and their respective successors, assigns and legal representatives; provided,
however, that the Borrower, without the prior consent of the Agent, may not
assign any rights, powers, duties or obligations hereunder.
13. Expenses. Borrower agrees to pay to the Agent all reasonable
out-of-pocket expenses incurred or arising in connection with the negotiation
and preparation of this Agreement.
[Signature pages follow]
5
<PAGE> 6
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed by their duly authorized officers, all as of the day and year
first above written.
BORROWER:
BEC GROUP, INC.
By: /s/ IAN ASHKEN
----------------------------------------
Name: Ian Ashken
--------------------------------------
Title:
-------------------------------------
LENDERS:
NATIONSBANK, N.A.
By: /s/ CHRISTOPHER C. BROWDER
----------------------------------------
Name: Christopher C. Browder
--------------------------------------
Title: Senior Vice President
-------------------------------------
EUROPEAN AMERICAN BANK
By: /s/ BRIAN A. FOSTER
----------------------------------------
Name: Brian A. Foster
--------------------------------------
Title: Vice President
-------------------------------------
NATIONAL CITY BANK, KENTUCKY
By: /s/ DON PULLEN
----------------------------------------
Name: Don Pullen
--------------------------------------
Title: Vice President
-------------------------------------
NATIONAL BANK OF CANADA
By: /s/ [ILLEGIBLE/ILLEGIBLE]
----------------------------------------
Name:
--------------------------------------
Title: Vice President/Asst. Vice President
-------------------------------------
<PAGE> 7
AGENT:
NATIONSBANK, N.A., as Agent for the
Lenders
By: /s/ CHRISTOPHER C. BROWDER
----------------------------------------
Name: CHRISTOPHER C. BROWDER
--------------------------------------
Title: SENIOR VICE PRESIDENT
-------------------------------------
<PAGE> 8
ACKNOWLEDGED AND AGREED this
day of May, 1996:
- -------
BEC DISTRIBUTION, INC.
BONNEAU HOLDINGS, INC.
BONNEAU GENERAL, INC.
FOSTER GRANT GROUP, L.P.
OPTICAL RADIATION CORPORATION
OPTI-RAY, INC.
O-RAY HOLDINGS, INC.
ORC CARIBE
THE BONNEAU COMPANY
By: /s/ IAN ASHKEN
-------------------------------
Name: Ian Ashken
-----------------------------
Title:
----------------------------
<PAGE> 1
EXHIBIT 10.9
AMENDMENT NO. 3 TO CREDIT AGREEMENT
THIS AMENDMENT NO. 3 TO CREDIT AGREEMENT(this "Agreement") is made and
entered into as of this __________ st day of December, 1996 among:
BEC GROUP, INC., a Delaware corporation ("Borrower"), OPTICAL
RADIATION CORPORATION, a Delaware corporation ("Optical Radiation"), ORC
CARIBE, a California corporation ("ORC Caribe"), ORC MANAGEMENT, INC., a
Delaware corporation ("ORC Management"), BOLLE AMERICA, INC., a Delaware
corporation ("Bolle"), (each of Optical Radiation, ORC Caribe, ORC Management
and Bolle sometimes being hereinafter referred to individually as a "Guarantor"
and collectively referred to as the "Guarantors"), EACH LENDER EXECUTING AND
DELIVERING A SIGNATURE PAGE HERETO (individually, a "Lender" and collectively,
the "Lenders"); and
NATIONSBANK, N.A., a national banking association organized under the
laws of the United States of America, in its capacity as agent for the Lenders
(in such capacity, the "Agent");
W I T N E S S E:
WHEREAS, the Borrower, the Guarantors, the Lenders and the Agent have
entered into a Credit Agreement, dated as of April 3, 1996, as amended hereby
and as amended pursuant to that certain Amendment No.1 to Credit Agreement
dated as of June 17, 1996 and that certain Amendment No. 2 to Credit Agreement
dated as of October 31, 1996 (collectively, the "Credit Agreement"), pursuant
to which the Lenders agreed to make certain Advances to the Borrower; and
WHEREAS, the Borrower has requested that the Credit Agreement be
amended in the manner set forth herein and the Agent and the Lenders are
willing to agree to such amendment;
NOW, THEREFORE,in consideration of the mutual covenants and the
fulfillment of the conditions set forth herein, the parties hereto do hereby
agree as follows:
1. Definitions. Any capitalized terms used herein without
definition shall have the meaning set forth in the Credit Agreement.
2. Amendment. Subject to the terms and conditions set forth
herein, the Credit Agreement is hereby amended as follows:
(a) The definition of "Permitted Stock Repurchases" in
Section 1.1 of the Credit Agreement is hereby amended by inserting
after the words "equals or exceeds $20,000,000" in the last line
thereof the following:
<PAGE> 2
"provided, however, for purposes solely of determining
Permitted Stock Repurchases pursuant to this definition,
Consolidated Funded Indebtedness shall not include the
principal amount outstanding from time to time and owing by
ORC Management to Wells Fargo Bank (Texas), National
Association and secured by that certain Deed of Trust and
Security Agreement dated as of March 31, 1995, as amended from
time to time, originally granted by Foster Grant Group, L.P.
in favor of First Interstate Bank of Texas, N.A., relating to
certain real property located in Farmers Branch, Texas."
3. Representations and Warranties. In order to induce the Agent
and the Lenders to enter into this Agreement, the Borrower represents and
warrants to the Agent and the Lenders as follows:
(a) The representations and warranties made by Borrower
in Article 8 of the Credit Agreement are true and correct on and as of
the date hereof, except to the extent that such representations and
warranties expressly relate to an earlier date;
(b) There has been no material adverse change in the
condition, financial or otherwise, of the Borrower and its
Subsidiaries, taken as a whole, since the date of the most recent
financial reports of the Borrower received by the Agent and the
Lenders under Section 9.1 of the Credit Agreement;
(c) No event has occurred and is continuing which
constitutes, and no condition exists which upon the consummation of
the transaction contemplated hereby - would constitute, a Default or
an Event of Default on the part of the Borrower under the Credit
Agreement.
4. Conditions Precedent. The effectiveness of this Agreement is
subject to the receipt by the parties hereto of the following:
(a) The Agent shall have received:
(i) eight (8) counterparts of this Agreement duly
executed by all signatories hereto; and
(ii) copies of all additional agreements,
instruments and documents which the Agent may reasonably
request, such documents, when appropriate, to be certified by
appropriate governmental authorities.
(b) All proceedings of the Borrower relating to the
matters provided for herein shall be reasonably satisfactory to the
Lenders, the Agent and their counsel.
5. Entire Agreement. This Agreement sets forth the entire
understanding and agreement of the parties hereto in relation to
2
<PAGE> 3
the subject matter hereof and supersedes any prior negotiations and agreements
among the parties relative to such subject matter. No promise, condition,
representation or warranty, express or implied, not herein set forth shall bind
any party hereto, and not one of them has relied on any such promise,
condition, representation or warranty. Each of the parties hereto acknowledges
that, except as otherwise expressly stated in this Agreement, no
representations, warranties or commitments, express or implied, have been made
by any party to the other. None of the terms or conditions of this Agreement
may be changed, modified, waived or canceled orally or otherwise, except by
writing, signed by all the parties hereto, specifying such change,
modification, waiver or cancellation of such terms or conditions, or of any
proceeding or succeeding breach thereof.
6. Limitation of Waiver and Consents. The waiver and consents
contained herein are limited as specified herein and shall remain in effect
only so long as the Borrower is in compliance with the terms of this Agreement.
The waiver and consents are granted only for the specific instance specified
herein and in no manner creates a course of dealing or otherwise impairs the
future ability of the Agent or the Lenders to declare a default under or
otherwise enforce the terms of the Credit Agreement.
7. Full Force and Effect of Agreement. Except as hereby
specifically amended, modified or supplemented, the Credit Agreement and all
other Loan Documents are hereby confirmed and ratified in all respects and
shall remain in full force and effect according to their respective terms. Each
Guarantor hereby acknowledges and agrees to the amendments of the Credit
Agreement set forth herein and hereby confirms and ratified in all respects the
Guaranty and enforceability of the Guaranty against such Guarantor in
accordance with its terms.
8. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original as against any party
whose signature appears thereon, and all of which shall together constitute one
and the same instrument.
9. Governing Law. This Agreement shall in all respects be
governed by the laws and judicial decisions of the state of New York, without
giving effect to the conflict of laws provisions thereof.
10. Enforceability. Should any one or more of the provisions of
this Agreement be determined to be illegal or unenforceable as to one or more
of the parties hereto, all other provisions nevertheless shall remain effective
and binding on the parties hereto.
11. Credit Agreement. All references in any of the Loan Documents
to the "Credit Agreement" shall mean the Credit Agreement as amended hereby.
3
<PAGE> 4
12. Successors and Assigns. This Agreement shall be binding upon
and inure to the benefit of each of the Borrower, the Lenders and the Agent and
their respective successors, assigns and legal representatives; provided,
however, that the Borrower, without the prior consent of the Agent and each of
the Lenders, may not assign any rights, powers, duties or obligations
hereunder.
13. Expenses. Borrower agrees to pay to the Agent all reasonable
out-of-pocket expenses incurred or arising in connection with the negotiation
and preparation of this Agreement.
[Signature pages follow]
4
<PAGE> 5
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed by their duly authorized officers, all as of the day and year
first above written.
BORROWER:
BEC GROUP, INC.
By: /s/ IAN ASHKEN
-----------------------------------------
Name: Ian Ashken
---------------------------------------
Title:
--------------------------------------
LENDERS:
NATIONSBANK, N.A.
By: /s/ PETER C. HALL
-----------------------------------------
Name: Peter C. Hall
---------------------------------------
Title: Vice President
--------------------------------------
EUROPEAN AMERICAN BANK
By: /s/ BRIAN A. FOSTER
-----------------------------------------
Name: Brian A. Foster
---------------------------------------
Title: Vice President
--------------------------------------
NATIONAL CITY BANK, KENTUCKY
By: /s/ DON PULLEN
-----------------------------------------
Name: Don Pullen
---------------------------------------
Title: Vice President
--------------------------------------
NATIONAL BANK OF CANADA
By: /s/ GAETAN F. FROSINA/VINCENT LIMA
-----------------------------------------
Name: Gaetan R. Frosina/Vincent Lima
---------------------------------------
Title: Vice President/Asst. Vice President
--------------------------------------
<PAGE> 6
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed by,their duly authorized officers, all
as of the day and year first above written.
KEYBANK NATIONAL ASSOCIATION
By: /s/ KAREN A. LEE
-----------------------------------------
Name: Karen A. Lee
--------------------------------------
Title: Vice President
--------------------------------------
AGENT:
NATIONSBANK, N.A. as Agent for the
Lenders
By: /s/ PETER C. HALL
-----------------------------------------
Name: Peter C. Hall
---------------------------------------
Title: Vice President
--------------------------------------
ACKNOWLEDGED AND AGREED this
day of December, 1996:
- -----
OPTICAL RADIATION CORPORATION
By: /s/ IAN ASHKEN
--------------------------------
Name: Ian Ashken
------------------------------
Title:
-----------------------------
ACKNOWLEDGED AND AGREED this
day of December, 1996:
- -----
ORC CARIBE
By: /s/ IAN ASHKEN
--------------------------------
Name: Ian Ashken
------------------------------
Title:
-----------------------------
<PAGE> 7
ACKNOWLEDGED AND AGREED this
day of December, 1996:
- -----
ORC MANAGEMENT, INC.
By:
--------------------------------
Name: Ian Ashken
------------------------------
Title:
-----------------------------
ACKNOWLEDGED AND AGREED this
day of December, 1996:
- -----
BOLLE AMERICA, INC.
By:
--------------------------------
Name: Ian Ashken
------------------------------
Title:
-----------------------------
<PAGE> 1
EXHIBIT 10.12
AMENDMENT NO, I
TO
EMPLOYMENT AGREEMENT
dated July 1, 1993
THIS AMENDMENT (the "Amendment"), dated as of October 31, 1996, is entered into
by and between BEC GROUP, INC., a Delaware corporation ("Company") and Martin
E. Franklin ("Employee").
RECITALS
A. The Employee and the Company (as assignee of Benson Eyecare
Corporation) are parties to that certain Employment Agreement (the
"Agreement"), dated as of July 1, 1993.
B. The parties mutually desire to amend the Agreement on the terms and
conditions set forth more fully below.
NOW, THEREFORE, in consideration of the mutual covenants and agreements set
forth in this Amendment, and for other good and valuable consideration, receipt
of which is acknowledged hereby, the parties agree as follows:
AGREEMENTS:
1. Section I of the Agreement is hereby amended in its entirety to read
as follows:
"Employment. The Company hereby employs the Employee as Chairman and
Chief Executive Officer of the Company, and the Employee accepts such
employment, upon the terms and subject to the conditions set forth in
this Agreement. Notwithstanding the foregoing, it is understood and
agreed that the Employee from time to time may (a) be appointed to
additional offices or to different offices than those set forth above,
(b) perform such duties other than those set forth above, and/or (c)
relinquish one or more of such offices or other duties, as may be
mutually agreed by and between the Company and the Employee; and, that
no such action shall be deemed or construed to otherwise amend or
modify any of the remaining terms or conditions of this Agreement."
2. Section 3 of the Agreement is hereby amended in its entirety to read
as follows:
"Duties. During the term of this Agreement, the Employee
shall, subject to the provisions of Section I above, serve as Chairman
and Chief Executive Officer of the Company and shall perform all
duties commensurate with his position and as may be assigned to him by
the Board of Directors of the Company consistent with such position.
The Employee shall devote such time and energy to the business and
affairs of the Company as he deems reasonably necessary to perform the
duties of his position and shall use his best efforts, skills and
abilities to promote the interests of the Company. It is
<PAGE> 2
acknowledged and agreed that the Employee may not be required to
devote his full time and energy to the affairs of the Company, except
as he from time to time, in the exercise of his business judgment, may
deem necessary or appropriate. Without limiting the generality of the
foregoing, the Company hereby acknowledges that the Employee has
certain responsibilities to Pembridge Holdings, Inc.; Marlin Capital,
L.P.; Marlin Holdings, Inc.; and Marlin Management, L.L.C., and the
Company agrees that nothing contained in this Agreement shall
interfere with such responsibilities, provided that the Employee
otherwise has performed his duties on behalf of the Company
hereunder."
3. Notwithstanding anything contained in the Agreement to the contrary,
it is understood and agreed that the Employee shall be entitled to a
severance payment equal to one year's current base salary
compensation, plus continuance of his existing benefits for such one
year period at the Company's expense, "in the event of any termination
without cause or in the event the Company at any time permits the
Agreement to expire or elects not to renew the Agreement.
4. Except as set forth expressly herein, the Agreement shall remain in
full force and effect as originally set forth, and all remaining terms
and conditions of the Agreement shall apply to this Amendment, except
to the extent expressly amended or modified hereby.
IN WITNESS WHEREOF, the parties have executed this Amendment as of the date
first written above.
BEC GROUP, INC.
By: /s/ IAN ASHKEN
-------------------------------
Its: CFO
------------------------------
/s/ MARTIN E. FRANKLIN
- ----------------------------------
Martin E. Franklin
<PAGE> 1
EXHIBIT 10.14
AMENDMENT NO. 1
TO
EMPLOYMENT AGREEMENT
dated July 1, 1993
THIS AMENDMENT (the "Amendment"), dated as of October 31, 1996, is entered into
by and between BEC GROUP, INC., a Delaware corporation ("Company") and IAN G.
H. ASHKEN ("Employee").
RECITALS:
A. The Employee and the Company (as assignee of Benson Eyecare
Corporation) are parties to that certain Employment Agreement (the
"Agreement"), dated as of July 1, 1993.
B. The parties mutually desire to amend the Agreement on the terms and
conditions set forth more fully below.
NOW, THEREFORE, in consideration of the mutual covenants and agreements set
forth in this Amendment, and for other good and valuable consideration,
receipt of which is acknowledged hereby, the parties agree as follows:
AGREEMENTS:
1. Section 1 of the Agreement is hereby amended in its entirety to read
as follows:
"EMPLOYMENT. The Company hereby employs the Employee as Executive Vice
President and Chief Financial Officer of the Company, and the Employee
accepts such employment, upon the terms and subject to the conditions
set forth in this Agreement. Notwithstanding the foregoing, it is
understood and agreed that the Employee from time to time may (a) be
appointed to additional offices or to different offices than those set
forth above, (b) perform such duties other than those set forth above,
and/or (c) relinquish one or more of such offices or other duties, as
may be mutually agreed by and between the Company and the Employee;
and, that no such action shall be deemed or construed to otherwise
amend or modify any of the remaining terms or conditions of this
Agreement."
2. Section 3 of the Agreement is hereby amended in its entirety to read
as follows:
"DUTIES. During the term of this Agreement, the Employee shall,
subject to the provisions of Section 1 above, serve as Executive Vice
President and Chief Financial Officer of the Company and shall perform
all duties commensurate with his position and as may be assigned to
him by the Board of Directors of the Company consistent with such
position. The Employee shall devote such time and energy to the
business and affairs of the Company as he deems reasonably necessary
to perform the duties of his position and shall use his best efforts,
skills and abilities to promote the interests of the Company. It is
<PAGE> 2
acknowledged and agreed that the Employee may not be required to
devote his full time and energy to the affairs of the Company, except
as he from time to time, in the exercise of his business judgment, may
deem necessary or appropriate. Without limiting the generality of the
foregoing, the Company hereby acknowledges that the Employee has
certain responsibilities to Pembridge Holdings, Inc.; Marlin Capital,
L.P.; Marlin Holdings, Inc.; and Marlin Management, L.L.C., and the
Company agrees that nothing contained in this Agreement shall
interfere with such responsibilities, provided that the Employee
otherwise has performed his duties on behalf of the Company
hereunder."
3. Notwithstanding anything contained in the Agreement to the contrary,
it is understood and agreed that the Employee shall be entitled to a
severance payment equal to one year's current base salary
compensation, plus continuance of his existing benefits for such one
year period at the Company's expense, in the event of any termination
without cause or in the event the Company at any time permits the
Agreement to expire or elects not to renew the Agreement.
4. Except as set forth expressly herein, the Agreement shall remain in
full force and effect as originally set forth, and all remaining terms
and conditions of the Agreement shall apply to this Amendment, except
to the extent expressly amended or modified hereby.
IN WITNESS WHEREOF, the parties have executed this Amendment as of the date
first written above.
BEC GROUP, INC.
By: /s/ MARTIN E. FRANKLIN
-------------------------------
Its: CEO
-------------------------------
/s/ IAN G. H. ASHKEN
- -----------------------------------
Ian G. H. Ashken
<PAGE> 1
EXHIBIT 10.20
FIRST AMENDMENT TO LOAN AGREEMENT
AND OTHER LOAN DOCUMENTS
THIS FIRST AMENDMENT TO LOAN AGREEMENT AND OTHER LOAN DOCUMENTS (this
"Amendment") is made and entered into this 3rd day of May, 1996, by and among
FOSTER GRANT GROUP, L.P., a Delaware limited partnership (the "Company"), BEC
GROUP, INC., a Delaware corporation (the "Guarantor"), and FIRST INTERSTATE
BANK OF TEXAS, N.A., a national banking association (the "Bank").
PRELIMINARY STATEMENTS
A. The Company, Benson Eyecare Corporation, a Delaware
corporation (the "Original Guarantor"), and the Bank have entered into that
certain Loan Agreement, dated March 31, 1995 (the "Loan Agreement");
B. The Original Guarantor desires to (i) sell a portion of its
assets to, and in connection therewith, merge with and into Essilor Acquisition
Corporation (the "Merger Transaction"), and (ii) transfer its remaining assets
not sold to Essilor Acquisition Corporation in connection with the Merger
Transaction to the Guarantor (the "Transfer");
C. In connection with the Merger Transaction and Transfer, the
Original Guarantor desires to be released from its obligations under the Loan
Agreement and the Other Loan Documents, and the Guarantor desires to assume all
of such obligations; and
D. The Company, the Original Guarantor, the Guarantor and the
Bank desire to amend the Loan Agreement and the other Loan Documents (as
defined in the Loan Agreement) as set forth in this Amendment.
NOW, THEREFORE, in consideration of the premises herein contained and
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties, intending to be legally bound, agree as
follows:
ARTICLE I
DEFINITIONS
1.01 Capitalized terms used in this Amendment are defined in the
Loan Agreement, as amended hereby, unless otherwise stated.
ARTICLE II
AMENDMENTS
2.01 AMENDMENT TO PREAMBLE OF THE LOAN AGREEMENT. Effective as of
the date hereof, the preamble of the Loan Agreement is hereby amended by
deleting therefrom the name "BENSON EYECARE CORPORATION" and substituting in
lieu thereof the name "BEC GROUP, INC.".
-1-
<PAGE> 2
2.02 AMENDMENT TO SECTION 5(f) OF THE LOAN AGREEMENT. Effective as
of the date hereof, Section 5(f) of the Loan Agreement is hereby amended by
deleting therefrom the words "Facility A and Facility B (each as hereinafter
defined)" and substituting in lieu thereof the words "Credit Agreement (as
hereinafter defined)".
2.03 AMENDMENT TO SECTION 9(a) TO THE LOAN AGREEMENT. Effective as
of the date hereof, Section 9(a) of the Loan Agreement is hereby amended and
restated in its entirety to read as follows:
"(a)(1) Consolidated Fixed Charge Ratio. Maintain, on a
rolling four quarter basis (i.e. as of the end of each calendar
quarter for the twelve-month period ended as of the end of each
quarter for which any determination is being made) ending during the
periods set forth below, a Consolidated Fixed Charge Ratio of not less
than the ratio set forth opposite the respective periods set forth
below:
<TABLE>
<CAPTION>
Period Ratio
------ -----
<S> <C>
May 31, 1996 through June 30, 1997 1.50 to 1.00
July 1, 1997 through June 30, 1998 1.25 to 1.00
July 1, 1997 and thereafter 1.50 to 1.00
</TABLE>
(a)(2) Consolidated Funded Indebtedness to Consolidated
EBITDA. Maintain, on a rolling four quarter basis (i.e. as of the end
of each calendar quarter for the twelve-month period ended as of the
end of each quarter for which any determination is being made) ending
during the periods set forth below, a ratio of Consolidated Funded
Indebtedness at the end of such rolling four quarters to Consolidated
EBITDA for such rolling four quarters of less than the ratio set forth
opposite the respective periods set forth below:
<TABLE>
<CAPTION>
Period Ratio
------ -----
<S> <C>
May 31, 1996 through June 30, 1997 3.50 to 1.00
July 1, 1997 through September 30, 1999 3.25 to 1.00
October 1, 1999 and thereafter 3.00 to 1.00
</TABLE>
(a)(3) Consolidated Net Worth. Maintain at all times
Consolidated Net Worth not less than an amount equal to Consolidated
Net Worth on April 3, 1996, less $9,000,000, such amount to be
increased as at the first day of each Fiscal Year, beginning with the
Fiscal Year ending December 31, 1997, by fifty percent (50%) of (a)
Consolidated Net Income for the immediately preceding Fiscal Year and
(b) the Net Proceeds of any Equity Offering consummated during the
immediately preceding fiscal year; provided, however, in no event
shall the Consolidated Net Worth requirement be decreased as a result
of a net loss of the Guarantor and its subsidiaries (i.e., negative
-2-
<PAGE> 3
Consolidated Net Income) for any Fiscal Year. Any increase calculated
pursuant hereto shall be determined based upon financial statements
delivered in accordance with Section 8(a) hereof; provided, however
such increase shall be deemed effective as of the first day of the
Fiscal Year in which such financial statements are delivered.
(a)(4) Capital Expenditures. Not make or become committed to
make (a) Capital Expenditures with respect to Displays which exceed
$10,000,000 in the aggregate in any Fiscal Year and (b) Capital
Expenditures with respect to any asset other than Displays which
exceed $5,000,000 in the aggregate in any Fiscal Year (all on a
noncumulative basis, with the effect that amounts not expended in any
Fiscal Year may not be carried forward to a subsequent period;
provided, however, in no event shall the sum of all Capital
Expenditures (for all assets, including Displays) otherwise permitted
under clause (a) and (b) exceed the aggregate amount of $25,000,000
for any period of two consecutive Fiscal Years).
(a)(5) Special Calculations. Notwithstanding anything in this
Agreement to the contrary, prior to June 30, 1997, all calculations of
Consolidated EBITDA and Consolidated Net Income shall be based upon
the pro forma financial information of the Guarantor.
For purposes of this Section 9(a), the foregoing terms shall have the
corresponding meanings set forth:
"Asset Disposition" means any voluntary disposition, whether
by sale, lease or transfer, other than as permitted under Section 10.4
of the Credit Agreement as in effect on the date hereof, of (a) any or
all of the assets of the Guarantor or its subsidiaries, and (b) any of
the capital stock, or securities or investments exchangeable,
exercisable or convertible for or into, or otherwise entitling the
holder to receive, any of the capital stock of any subsidiary of the
Guarantor (other than a disposition to a Guarantor (as such term is
defined in the Credit Agreement as in effect on April 3, 1996)).
"Capital Expenditures" means, with respect to the Guarantor
and its subsidiaries for any period of computation thereof, the sum of
(without duplication) (i) all expenditures (whether paid in cash or
accrued as liabilities) by the Guarantor or any subsidiary during such
period for items that would be classified as "property, plant or
equipment" or comparable items on the consolidated balance sheet of
the Guarantor and its subsidiaries, including without limitation all
transactional costs incurred in connection with such expenditures
provided the same have been capitalized, excluding, however, the
amount of any Capital Expenditures paid for with proceeds of casualty
insurance as evidenced in writing and submitted to the Bank, and (ii)
with respect to any Capital Lease entered into by the Guarantor or its
subsidiaries during such period, the present value of the lease
payments due under such Capital Lease over the term of such Capital
Lease applying a discount rate equal to the interest rate provided in
such lease, all of the foregoing in accordance with generally accepted
accounting principles applied on a consistent basis; provided,
however, for the purposes of calculating the Guarantor's
-3-
<PAGE> 4
Consolidated Fixed Charge Ratio, "Capital Expenditures" shall only
include capital expenditures for the purchase of Displays in excess of
$6,000,000 during the period of determination.
"Capital Leases" means all leases which have been or should be
capitalized in accordance with generally accepted accounting
principles, including Statement No. 13 of the Financial Accounting
Standards Board and any successor thereof, applied on a consistent
basis.
"Common Stock" means the common stock, par value $.01 per
share, of the Guarantor.
"Consolidated EBITDA" means, with respect to the Guarantor and
its subsidiaries for any period of computation thereof, the sum of,
without duplication, (i) Consolidated Net Income, (ii) Consolidated
Interest Expense, (iii) taxes on income, (iv) amortization, and (v)
depreciation, all determined on a consolidated basis in accordance
with generally accepted accounting principles applied on a consistent
basis.
"Consolidated Fixed Charge Ratio" means, with respect to the
Guarantor and its subsidiaries for any period of computation thereof,
the ratio of (i) Consolidated EBITDA for such period less (A) Capital
Expenditures for such period and (B) the amount of depreciation during
such period in excess of $6,000,000 attributable to Displays, to (ii)
Consolidated Fixed Charges for such period.
"Consolidated Fixed Charges" means, with respect to the
Guarantor and its subsidiaries for any period of computation thereof,
the sum of, without duplication, (i) Consolidated Interest Expense
less non-cash interest expense with respect to the Subordinated Debt,
(ii) the principal amount of Consolidated Funded Indebtedness due and
payable during such period, (iii) all dividends and other
distributions (other than distributions in the form of any stock
(including without limitation capital stock of the Guarantor),
security, note or other instrument) paid during such period
(regardless of when declared) on any shares of capital stock of the
Guarantor then outstanding, including without limitation its Common
Stock, (iv) all payments under Capital Leases made during such period
and (v) all state and federal taxes paid in cash during such period,
all determined on a consolidated basis in accordance with generally
accepted accounting principles applied on a consistent basis.
"Consolidated Funded Indebtedness" means, with respect to the
Guarantor and its subsidiaries at any time as of which the amount
thereof is to be determined, the sum of (i) Indebtedness for Money
Borrowed of the Guarantor and its subsidiaries at such time, less the
amount of all outstanding Subordinated Debt at such time and (ii) the
face amount of all outstanding letters of credit issued for the
account of the Guarantor or any of its subsidiaries and all
obligations (to the extent not duplicative) arising under such letters
of credit, all determined on a consolidated basis in accordance with
generally accepted accounting principles applied on a consistent
basis.
-4-
<PAGE> 5
"Consolidated Interest Expense" means, with respect to the
Guarantor and its subsidiaries for any period of computation thereof,
the gross interest expense of the Guarantor and its subsidiaries,
including without limitation (i) the current amortized portion of debt
discounts to the extent included in gross interest expense, (ii) the
current amortized portion of all fees (including, without limitation,
fees payable in respect of any interest rate swap agreements) payable
in connection with the incurrence of Indebtedness to the extent
included in gross interest expense and (iii) the portion of any
payments made in connection with Capital Leases allocable to interest
expense, all determined on a consolidated basis in accordance with
generally accepted accounting principles applied on a consistent
basis.
"Consolidated Net Income" means, with respect to the Guarantor
and its subsidiaries for any period of computation thereof, the net
income of the Guarantor and its subsidiaries, but excluding as income
any net gain or credit of an extraordinary nature, all determined on a
consolidated basis in accordance with generally accepted accounting
principles applied on a consistent basis.
"Consolidated Net Worth" means, at any time as of which the
amount thereof is to be determined, Consolidated Shareholders' Equity.
"Consolidated Shareholders' Equity" means, at any time as of
which the amount thereof is to be determined, the sum of the following
in respect of the Guarantor and its subsidiaries (determined on a
consolidated basis and excluding intercompany items among the
Guarantor and its subsidiaries and any upward adjustment after April
3, 1996, due to revaluation of assets): (i) the amount of issued and
outstanding share capital, plus (ii) the amount of additional paid-in
capital and retained income (or, in the case of a deficit, minus the
amount of such deficit), plus (iii) the amount of any foreign currency
translation adjustment (if positive, or, if negative, minus the amount
of such translation adjustment) minus (iv) the amount of any treasury
stock, all as determined in accordance with generally accepted
accounting principles applied on a consistent basis.
"Debt Offering" means the incurrence of any Indebtedness For
Money Borrowed permitted hereunder whether in connection with a public
or private offering of debt securities of the Guarantor or any
subsidiary (other than debt securities issued to the Guarantor or a
Guarantor (as such term is defined in the Credit Agreement as in
effect on April 3, 1996) or otherwise.
"Displays" means all displays for retail sales of
non-prescription eyeware purchased by the Guarantor or any subsidiary
in the ordinary course of business.
"Equity Offering" means a public or private offering of
equity securities (including, without limitation, any security or
investment not constituting Indebtedness exchangeable, exercisable or
convertible for or into, or otherwise entitling the holder to receive,
equity securities) of the Guarantor or any subsidiary (other than
securities issued
-5-
<PAGE> 6
to the Guarantor or any subsidiary); provided, however, the term
"Equity Offering" shall not include any Equity Offering that does not
result in any Net Proceeds to the Guarantor or any subsidiary.
"Fiscal Year" means the twelve (12) month period ended
December 31 of each calendar year;
"Indebtedness" of a person shall mean, without duplication,
(i) all Indebtedness for Money Borrowed, (ii) all obligations of such
person arising under acceptance facilities, (iii) the undrawn face
amount of, and unpaid reimbursement obligations in respect of, all
letters of credit issued for the account of such person, (iv) all
obligations of such person upon which interest charges are customarily
paid, other than trade payables incurred in the ordinary course of
business, operating leases and taxes, (v) all obligations of such
person under conditional sale or other title retention agreements
relating to property purchased by such person (even though the rights
and remedies of the seller or lender under such agreement in the event
of default are limited to repossession or sale of such property), (vi)
all executory obligations of such person in respect of Rate Hedging
Obligations and (vii) all Contingent Obligations (as defined in the
Credit Agreement as in effect on April 3, 1996) in respect of
Indebtedness of other persons.
"Indebtedness for Money Borrowed" of any person shall mean all
indebtedness in respect of money borrowed, including without
limitation all Capital Leases and the deferred purchase price of any
property or asset, evidenced by a promissory note, bond, debenture or
similar written obligation for the payment of money, other than trade
payables incurred in the ordinary course of business (including, but
not limited to, with respect to the Guarantor and its subsidiaries,
all Subordinated Debt, the TIA Debt, and all conditional sales or
similar title retention agreements).
"Indenture" means that certain Indenture dated on or about
April 3, 1996 between IBJ Schroder Bank and Trust Company, as Trustee
and the Guarantor.
"Lien" means any interest in property securing any obligation
owed to, or a claim by, a person other than the owner of the property,
whether such interest is based on common law, statute or contract, and
including but not limited to any lien or security interest arising
from a mortgage, encumbrance, pledge, security agreement, conditional
sale or trust receipt or a lease, consignment or bailment for security
purposes. For purposes of this Agreement, the Guarantor and its
subsidiaries shall be deemed to be the owners of any property which
either of them have acquired or hold subject to a conditional sale
agreement, financing lease, or other arrangement pursuant to which
title to the property has been retained by or vested in some other
person for security purposes.
"Net Proceeds" (a) from any Equity Offering or Debt Offering
means cash payments received by the Guarantor therefrom as and when
received, net of all legal, accounting, banking and underwriting fees
and expenses, commissions, discounts and other issuance expenses
incurred in connection therewith and all taxes required to be paid
-6-
<PAGE> 7
or accrued as a consequence of such issuance; and (b) from any Asset
Disposition means cash payments received by the Guarantor therefrom
(including any cash payments received pursuant to any note or other
debt security received in connection with any Asset Disposition) as
and when received, net of (i) all legal fees and expenses and other
fees and expenses paid to third parties and incurred in connection
therewith, (ii) all taxes required to be paid or accrued as a
consequence of such sale and (iii) all amounts applied to repayment of
Indebtedness (other than the Obligations (as such term is defined in
the Credit Agreement as in effect on April 3, 1996)) secured by a Lien
on the asset or property disposed.
"Rate Hedging Obligations" means any and all obligations of
the Guarantor, whether absolute or contingent and howsoever and
whensoever created, arising, evidenced or acquired (including all
renewals, extensions and modifications thereof and substitutions
therefor), under (i) any and all agreements, devices or arrangements
designed to protect at least one of the parties thereto from the
fluctuations of interest rates, exchange rates or forward rates
applicable to such party's commodities, assets, liabilities or
exchange transactions, including, but not limited to,
dollar-denominated or cross-currency interest rate exchange
agreements, forward currency exchange agreements, interest rate cap or
collar protection agreements, forward rate currency or interest rate
options, puts, warrants and those commonly known as interest rate
"swap" agreements, and forward commodity price options, puts, warrants
and those commonly known as commodity "swap" agreements; and (ii) any
and all cancellations, buybacks, reversals, terminations or
assignments of any of the foregoing.
"Subordinated Debt" means the Guarantor's 8% Convertible
Subordinated Notes due 2002 issued in the original principal amount of
up to $22,000,000 to IBJ Schroder Bank and Trust Company pursuant to
that certain Indenture.
"TIA Debt" means the Indebtedness of Optical Radiation, Inc.,
a wholly owned Subsidiary of the Guarantor, to Teachers Insurance and
Annuity Association of America in the original principal amount of
$15,000,000 as evidenced by that certain Deed of Trust Note dated May
15, 1989, executed by Optical Radiation, Inc. and payable to the order
of Teachers Insurance and Annuity Association of America."
2.04 AMENDMENT TO SECTION 9(b) OF THE LOAN AGREEMENT. Effective as
of the date hereof, Section 9(b) of the Loan Agreement is hereby amended and
restated in its entirety to read as follows:
"(b) Other Covenants. Comply in all respects with each covenant set
forth in any agreement evidencing Indebtedness for Money Borrowed including,
without limitation, the covenants set forth in that certain Credit Agreement
dated as of April 3, 1996, by and among the Guarantor, its subsidiaries named
therein and the financial institutions from time to time a party thereto (the
"Credit Agreement"), as such covenants are in effect on April 3, 1996."
-7-
<PAGE> 8
2.05 AMENDMENT TO SECTION 11(h) OF THE LOAN AGREEMENT. Effective as
of the date hereof, Section 11(h) of the Loan Agreement is hereby amended by
deleting therefrom the words "Facility A and Facility B" and substituting in
lieu thereof the words "Credit Agreement".
2.06 AMENDMENT TO LOAN DOCUMENTS. Effective as of the date hereof,
all Loan Documents other than the Agreement are hereby amended by deleting
therefrom all references to the name "Benson Eyecare Corporation" and
substituting in lieu thereof the name "BEC Group, Inc."
ARTICLE III
CONDITIONS PRECEDENT
3.01 CONDITIONS TO EFFECTIVENESS. The effectiveness of this
Amendment is subject to the satisfaction of the following conditions precedent,
unless specifically waived in writing by the Bank:
(a) The Bank shall have received the following documents,
each in form and substance satisfactory to the Bank and its legal
counsel:
(i) this Amendment duly executed by the Company and the
Guarantor;
(ii) the Release of Indemnitor, in the form of Exhibit A
attached hereto, duly executed by the Bank and agreed
and accepted by the Original Guarantor;
(iii) the Release of Guarantor, in the form of Exhibit B
attached hereto, duly executed by the Bank and agreed
and accepted by the Original Guarantor;
(iv) the Guaranty Agreement, in the form of Exhibit C
attached hereto, duly executed by the Guarantor in
favor of the Bank;
(v) the Indemnity Agreement, in the form of Exhibit D
attached hereto, duly executed by the Company and the
Guarantor in favor of the Bank;
(vi) a Company General Certificate certified by the
Secretary of Bonneau General, Inc. (the "General
Partner"), the general partner of the Company, in the
name and on behalf of the Company, acknowledging that
(A) the General Partner's Board of Directors has met
and has adopted resolutions which authorize in the
name and on behalf of the Company the execution,
delivery and performance by the Company of this
Amendment and all other Loan Documents to which the
Company is or will be a party, and (B) the names of
the officers of the General Partner authorized to
sign this Amendment and all other Loan Documents to
which the Company is or will be a party, together
with specimen signatures of such officers; and
-8-
<PAGE> 9
(vii) a Company General Certificate certified by the
Secretary of the Guarantor acknowledging that (A) the
Guarantor's Board of Directors has met and has
adopted resolutions which authorize the execution,
delivery and performance by the Guarantor of this
Amendment and all other Loan Documents to which the
Guarantor is or will be a party, and (B) the names of
the officers of the Guarantor authorized to sign this
Amendment and all other Loan Documents to which the
Guarantor is or will be a party, together with
specimen signatures of such officers.
(b) The representations and warranties contained herein
and in the Loan Agreement and the other Loan Documents, as each is
amended hereby, shall be true and correct as of the date hereof, as if
made on the date hereof;
(c) No default or Event of Default shall have occurred
and be continuing under the Loan Agreement, unless such default or
Event of Default has been specifically waived in writing by the Bank;
(d) All partnership and corporate proceedings, as
applicable, taken in connection with the transactions contemplated by
this Amendment and all documents, instruments and other legal matters
incident thereto shall be satisfactory to the Bank and its legal
counsel; and
(e) The Company shall have paid the Bank an amendment fee
of $6,500, which fee shall be fully earned and nonrefundable upon the
effectiveness of this Amendment, and which fee shall be applied by
Bank to the Bank's legal counsel for costs and expenses incurred in
connection with the preparation and negotiation of this Amendment.
ARTICLE IV
LIMITED WAIVER
4.01 By execution of this Amendment, the Bank hereby consents to
the Merger Transaction and the Transfer and waives any default or Event of
Default which would otherwise arise under the Loan Agreement solely by reason
of the Merger Transaction or the Transfer. Except as specifically provided in
the preceding sentence, nothing contained herein shall be construed as a waiver
by the Bank of any covenant or provision of the Loan Agreement, the other Loan
Documents, this Amendment, or of any other contract or instrument between the
Bank and the Company and/or the Guarantor, and the failure of the Bank at any
time or times hereafter to require strict performance by the Company and/or the
Guarantor of any provision thereof shall not waive, affect or diminish any
right of the Bank to thereafter demand strict compliance therewith. The Bank
hereby reserves all rights granted under the Loan Agreement, the other Loan
Documents, this Amendment and any other contract or instrument between the Bank
and the Company and/or the Guarantor.
-9-
<PAGE> 10
ARTICLE V
RATIFICATIONS, REPRESENTATIONS AND WARRANTIES
5.01 RATIFICATIONS. The terms and provisions set forth in this
Amendment shall modify and supersede all inconsistent terms and provisions set
forth in the Loan Agreement and the other Loan Documents, and, except as
expressly modified and superseded by this Amendment, the terms and provisions
of the Loan Agreement and the other Loan Documents are ratified and confirmed
and shall continue in full force and effect. The Company, the Guarantor and the
Bank agree that the Loan Agreement and the other Loan Documents, as amended
hereby, shall continue to be legal, valid, binding and enforceable in
accordance with their respective terms.
5.02 REPRESENTATIONS AND WARRANTIES. The Company and the Guarantor
hereby represent and warrant to the Bank that (a) the execution, delivery and
performance of this Amendment and any and all other Loan Documents executed
and/or delivered in connection herewith have been authorized by proper
corporate or partnership proceedings, as appropriate, and will not contravene
any provision of the Amended and Restated Agreement of Limited Partnership of
the Company or the Certificate of Incorporation or Bylaws of the Guarantor; (b)
the representations and warranties contained in the Loan Agreement, as amended
hereby, and the other Loan Documents are true and correct on and as of the date
hereof and on and as of the date of execution hereof as though made on and as
of each such date; (c) no default or Event of Default under the Loan Agreement,
as amended hereby, has occurred and is continuing, unless such default or Event
of Default has been specifically waived in writing by the Bank; (d) the Company
and the Guarantor, respectively, are in full compliance with all covenants and
agreements contained in the Loan Agreement and the other Loan Documents, as
amended hereby; and (e) the Company has not amended its Amended and Restated
Agreement of Limited Partnership since the date of the Loan Agreement.
ARTICLE VI
MISCELLANEOUS PROVISIONS
6.01 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All
representations and warranties made in the Loan Agreement or any other Loan
Documents, including, without limitation, any document furnished in connection
with this Amendment, shall survive the execution and delivery of this Amendment
and the other Loan Documents, and no investigation by the Bank or any closing
shall affect the representations and warranties or the right of the Bank to
rely upon them.
6.02 REFERENCE TO LOAN AGREEMENT. Each of the Loan Agreement and
the other Loan Documents, and any and all other agreements, documents or
instruments now or hereafter executed and delivered pursuant to the terms
hereof or pursuant to the terms of the Loan Agreement or the other Loan
Documents, as amended hereby, are hereby amended so that any reference in the
Loan Agreement and such other Loan Documents to the Loan Agreement shall mean a
reference to the Loan Agreement as amended hereby.
6.03 EXPENSES OF THE BANK. As provided in the Loan Agreement, the
Company and the Guarantor agree to pay on demand all reasonable costs and
expenses incurred by the Bank in connection with any and all amendments,
modifications, and supplements to the Loan Documents,
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<PAGE> 11
including, without limitation, the costs and fees of the Bank's legal counsel
(such costs and fees to Bank's legal counsel in connection with the preparation
and negotiation of this Amendment to be limited to the amount specified in
Section 3.01(e) hereof), and all costs and expenses incurred by the Bank in
connection with the enforcement or preservation of any rights under the Loan
Agreement or any other Loan Documents, as amended hereby, including, without,
limitation, the costs and fees of the Bank's legal counsel.
6.04 SEVERABILITY. Any provision of this Amendment held by a court
of competent jurisdiction to be invalid or unenforceable shall not impair or
invalidate the remainder of this Amendment and the effect thereof shall be
confined to the provision so held to be invalid or unenforceable.
6.05 SUCCESSORS AND ASSIGNS. This Amendment is binding upon and
shall inure to the benefit of the Bank, the Company and the Guarantor and their
respective successors and assigns.
6.06 COUNTERPARTS. This Amendment may be executed in one or more
counterparts, each of which when so executed shall be deemed to be an original,
but all of which when taken together shall constitute one and the same
instrument.
6.07 EFFECT of Waiver. No consent or waiver, express or implied, by
the Bank to or for any breach of or deviation from any covenant or condition by
the Company or the Guarantor shall be deemed a consent to or waiver of any
other breach of the same or any other covenant, condition or duty.
6.08 HEADINGS. The headings, captions, and arrangements used in
this Amendment are for convenience only and shall not affect the interpretation
of this Amendment.
6.09 APPLICABLE LAW. THIS AMENDMENT AND ALL OTHER AGREEMENTS
EXECUTED PURSUANT HERETO SHALL BE DEEMED TO HAVE BEEN MADE AND TO BE
PERFORMABLE IN AND SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF TEXAS.
6.10 FINAL AGREEMENT. THE LOAN AGREEMENT AND THE OTHER LOAN
DOCUMENTS, EACH AS AMENDED HEREBY, REPRESENT THE ENTIRE EXPRESSION OF THE
PARTIES WITH RESPECT TO THE SUBJECT MATTER HEREOF ON THE DATE THIS AMENDMENT IS
EXECUTED. THE LOAN AGREEMENT AND THE OTHER LOAN DOCUMENTS, AS AMENDED HEREBY,
MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT
ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN
THE PARTIES. NO MODIFICATION, RESCISSION, WAIVER, RELEASE OR AMENDMENT OF ANY
PROVISION OF THIS AMENDMENT SHALL BE MADE, EXCEPT BY A WRITTEN AGREEMENT SIGNED
BY THE COMPANY, THE GUARANTOR AND THE BANK.
6.11 RELEASE. EACH OF THE COMPANY AND THE GUARANTOR HEREBY
ACKNOWLEDGES THAT IT HAS NO DEFENSE, COUNTERCLAIM, OFFSET,
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<PAGE> 12
CROSS-COMPLAINT, CLAIM OR DEMAND OF ANY KIND OR NATURE WHATSOEVER THAT CAN BE
ASSERTED TO REDUCE OR ELIMINATE ALL OR ANY PART OF ITS LIABILITY TO REPAY THE
"INDEBTEDNESS" OR TO SEEK AFFIRMATIVE RELIEF OR DAMAGES OF ANY KIND OR NATURE
FROM THE BANK. EACH OF THE COMPANY AND THE GUARANTOR HEREBY VOLUNTARILY AND
KNOWINGLY RELEASES AND FOREVER DISCHARGES THE BANK, ITS PREDECESSORS, AGENTS,
OFFICERS, DIRECTORS, EMPLOYEES, SUCCESSORS AND ASSIGNS, FROM ALL POSSIBLE
CLAIMS, DEMANDS, ACTIONS, CAUSES OF ACTION, DAMAGES, COSTS, EXPENSES, AND
LIABILITIES WHATSOEVER, KNOWN OR UNKNOWN, ANTICIPATED OR UNANTICIPATED,
SUSPECTED OR UNSUSPECTED, FIXED, CONTINGENT, OR CONDITIONAL, AT LAW OR IN
EQUITY, ORIGINATING IN WHOLE OR IN PART ON OR BEFORE THE DATE THIS AMENDMENT IS
EXECUTED, WHICH EITHER OF THE COMPANY OR THE GUARANTOR MAY NOW OR HEREAFTER
HAVE AGAINST THE BANK, ITS PREDECESSORS, AGENTS, OFFICERS, DIRECTORS,
EMPLOYEES, SUCCESSORS AND ASSIGNS, IF ANY, AND IRRESPECTIVE OF WHETHER ANY SUCH
CLAIMS ARISE OUT OF CONTRACT, TORT, VIOLATION OF LAW OR REGULATIONS, OR
OTHERWISE, AND ARISING FROM ANY LOANS OR EXTENSIONS OF CREDIT FROM THE BANK TO
THE COMPANY OR THE GUARANTOR UNDER THE LOAN AGREEMENT OR THE OTHER LOAN
DOCUMENTS, INCLUDING, WITHOUT LIMITATION, ANY CONTRACTING FOR, CHARGING,
TAKING, RESERVING, COLLECTING OR RECEIVING INTEREST IN EXCESS OF THE HIGHEST
LAWFUL RATE APPLICABLE, THE EXERCISE OF ANY RIGHTS AND REMEDIES UNDER THE LOAN
AGREEMENT OR OTHER LOAN DOCUMENTS, AND THE NEGOTIATION OF AND EXECUTION OF THIS
AMENDMENT.
6.12 AGREEMENT FOR BINDING ARBITRATION. Each party to this
Amendment hereby acknowledges that it has agreed to be bound by the terms and
provisions of the Arbitration Program (dated 9/l/92), a copy of which is
attached to the Loan Agreement as Exhibit A, and which is incorporated by
reference herein and is acknowledged as received by the parties pursuant to
which any and all disputes shall be resolved by mandatory binding arbitration
upon the request of any party.
[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
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<PAGE> 13
IN WITNESS WHEREOF, this Amendment has been executed and is effective
as of the date first above-written.
COMPANY:
FOSTER GRANT GROUP, L.P.
By: Bonneau General, Inc.
its General Partner
By: /s/ MARIANNE CARTER
----------------------------------
Name: Marianne Carter
--------------------------------
Title: Vice President
-------------------------------
GUARANTOR:
BEC GROUP, INC.
By: /s/ MARIANNE CARTER
----------------------------------
Name: Marianne Carter
--------------------------------
Title: Vice President
-------------------------------
BANK:
FIRST INTERSTATE BANK OF TEXAS, N.A.
By: /s/ JEFFREY S.A. COOK
----------------------------------
Jeffrey S.A. Cook,
Vice President
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<PAGE> 1
EXHIBIT 10.21
SECOND AMENDMENT TO LOAN AGREEMENT AND
OTHER LOAN DOCUMENTS
THIS SECOND AMENDMENT TO LOAN AGREEMENT AND OTHER LOAN DOCUMENTS
(herein called the "Second Amendment"), dated as of December , 1996, by and
among WELLS FARGO BANK (TEXAS), NATIONAL ASSOCIATION, successor by merger to
First Interstate Bank of Texas, N.A. (the "Bank"), the ORC MANAGEMENT
CORPORATION, a Delaware corporation, FOSTER GRANT GROUP, L.P., a Delaware
Limited Partnership ("TFGG") and BEC GROUP, INC., a Delaware corporation
("Guarantor").
WITNESSETH
WHEREAS, Bank, TFGG and Benson Eyecare Corporation are parties to that
certain Loan Agreement, dated as of March 31, 1995, as amended by that certain
First Amendment to Loan Agreement and Other Loan Documents dated May 3, 1996 by
and among Bank, TFGG and Guarantor (the "Loan Agreement");
WHEREAS, in connection with and according to the terms of the Loan
Agreement, (a) Bank and TFGG entered into various agreements, documents,
instruments and certificates, including that certain (i) $4,000,000
Commercial/Real Estate Note, dated March 31, 1995, executed by TFGG in favor of
Bank (the "Note"), and (ii) Deed of Trust, Security Agreement and Financing
Statement, dated March 31, 1995, executed by TFGG in favor of Collateral
Services, Inc., as trust, for the use and benefit of Bank and recorded with the
office of the County Clerk of Dallas County, Texas at Volume 95064, Page 05483
of the Deed of Trust Records of such office (the "Deed of Trust"), pursuant to
which Deed of Trust TFGG granted to Bank a first lien security interest in
certain real estate located in Dallas County, Texas, more particularly
described on Exhibit A attached to the Deed of Trust (the "Premises"), and (b)
Guarantor and Bank entered into various agreements, documents and instruments,
including that certain (i) Guaranty Agreement (herein so called), dated May 3,
1996, executed by Guarantor in favor of Bank, and (ii) Indemnity Agreement
(herein so called), dated May 3, 1996, executed by Guarantor in favor of Bank;
WHEREAS, the indebtness evidenced by the Note is secured by, among
other things, the Deed of Trust;
WHEREAS, TFGG desires to transfer the Premises to ORC, and TFGG has
requested that Bank consent to such transfer (the "Transfer");
WHEREAS, ORC desires to take title to the Premises and, in connection
therewith, assume all obligations of TFGG to Bank- contained in the Loan
Agreement, the Note and the other Loan Documents (as defined in the Loan
Agreement);
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<PAGE> 2
WHEREAS, Bank is willing to consent to the Transfer provided that ORC
takes title to the Premises and, in connection therewith, assumes all
obligations of TFGG to Bank contained in the Loan Agreement, the Note and the
other Loan Documents;
WHEREAS, the parties hereto desire to (i) modify the Loan Agreement,
the Note, the Deed of Trust, that certain Indemnity Agreement, dated as of May
3, 1996, from TFGG and Guarantor to Bank (the "Indemnity Agreement") and the
other Loan Documents as hereinafter set forth to allow and provide for the
Transfer. and (ii) allow and provide for certain other matters as hereinafter
set forth;
NOW, THEREFORE, in consideration of the premises and for good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto hereby agree as follows:
ARTICLE I
Definitions
Capitalized terms used in this Second Amendment are defined in the
Loan Agreement, as modified hereby, unless otherwise stated.
ARTICLE II
Modifications to the Loan Agreement
2.1 Amendments to Section 5(a) of the Loan Agreement. Effective as
of,the date hereof, Section 5(a) of the Loan Agreement is hereby modified such
that (i) each reference therein to "limited partnership" shall be deemed to be
a reference to "corporation" and (ii) each reference therein to "Amended and
Restated Agreement of Limited Partnership shall be deemed to be a reference to
"Certificate of Incorporation."
2.2 Addition of Section 8(l) to the Loan Agreement. Effective as of
the date hereof, a new Section 8(l) is hereby added to the Loan Agreement as
follows:
"(l) Financial Statements of Foster Grant Group). L.P. Furnish
the Bank, within forty-five (45) days after the end of each calendar
quarter (or, with respect to each calendar quarter ending on the last
day of each fiscal year of Borrower, within ninety (90) days after the
end of each such calendar quarter) during the term hereof, a copy of
Foster Grant Group, L.P.'s (or their successor or assign) unaudited
consolidated financial statements for such fiscal quarter, consisting
of at least a consolidated balance sheet and related consolidated
statement of income."
2.3 Addition of Section 8(m) to the Loan Agreement. Effective as of
the date hereof, a new Section 8(m) is hereby added to the Loan Agreement as
follows:
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<PAGE> 3
"(m) Maintenance of Dominion Accounts. On or before December
31, 1996, establish and maintain a special payment account at the Bank
(the "Central Dominion Account"). Upon the request of the Bank at its
sole discretion upon and after the occurrence of an Event of Default,
the Company shall cause all rents and other sums chargeable pursuant to
that certain Standard Net Commercial Lease dated as of December 11,
1996 by and between Borrower and Foster Grant Group, L.P. (as amended,
the "Lease") to be paid directly to the Central Dominion Account for
application on account of (i) the outstanding principal balance of, and
any accrued interest then due and owing on, the Term Note, and (ii) all
fees and expenses of the Bank that are payable or reimbursable by the
Company whether pursuant to the terms of this Agreement or otherwise.
All funds deposited in the Central Dominion Account shall immediately
become the property of Bank. The Bank assumes no responsibility for
such dominion account arrangements, including, without limitation, any
claim of accord and satisfaction or release with respect to deposits
accepted by any bank thereunder."
2.4 Amendments to Section 9(a) of the Loan Agreement
(a) Effective as of the date hereof, Section 9(a)(1) is hereby
deleted in its entirety and the following is inserted in lieu thereof:
"(a)(1) Consolidated Fixed Charge Ratio. Maintain, on
a rolling four quarter basis (i.e. as of the end of each
calendar quarter for the twelve-month period ended as of the
end of each quarter for which any determination is being made)
a Consolidated Fixed Charge Ratio of not less than 2.75 to
1.00."
(b) Effective as of the date hereof, Section 9(a)(2) is hereby
deleted in its entirety and the following is inserted in lieu thereof.
"(a)(2) Consolidated Funded Indebtedness to
Consolidated EBITDA. Maintain, on a rolling four quarter basis
(i.e. as of the end of each calendar quarter for the
twelve-month period ended as of the end of each quarter for
which any determination is being made) a ratio of Consolidated
Funded Indebtedness at the end of such rolling four quarters
to Consolidated EBITDA for such rolling four quarters of less
than 2.50 to 1.00."
(c) Effective as of the date hereof, Section 9(a)(3) is hereby
deleted in its entirety and the following is inserted in lieu thereof:
"(a)(3) Consolidated Net Worth. Maintain at all times
Consolidated Net Worth not less than (i) $5,000,000 from
October 31, 1996 until the earlier of November 14, 1996 and
the date on which the financial statements of the Guarantor and
its subsidiaries for the fiscal quarter ending September 30,
1996 are delivered to Bank in accordance with Section 8(b)
(such earlier date being the "Third Quarter Net Worth Date"),
and (ii) at all times on and after the Third Quarter Net Worth
Date, the greater of (A) $5,000,000 and (B) the difference of
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<PAGE> 4
Consolidated Net Worth as reported in the consolidated balance
sheet of the Guarantor and its subsidiaries delivered on the
Third Quarter Net Worth Date less $5,000,000."
(d) Effective as of the date hereof Section 9(a)(4) is hereby
deleted in its entirety and the following is inserted in lieu thereof.
"(a)(4) Capital Expenditures. Not make or become
committed to make Capital Expenditures with respect to any
asset which exceed $5,000,000 in the aggregate in any Fiscal
Year of the Guarantor (all on a noncumulative basis, with the
effect that amounts not expended in any Fiscal Year may not be
carried forward to a subsequent period); provided, however,
that the calculation of Capital Expenditures in the Fiscal
Year in which the FGG Disposition is effective, shall be
determined as if the FGG Disposition had occurred immediately
prior to such Fiscal Year."
(e) Effective as of the date hereof, a new defined term "FGG
Disposition" is hereby inserted in alphabetical position in Section
9(a) of the Loan Agreement and shall read as follows:
"FGG Disposition" means the sale of all of the issued
and outstanding capital stock of The Bonneau Company,
Opti-Ray, Inc. and Asian Buying Source, Inc., upon terms and
conditions acceptable to Bank, resulting in net proceeds to
the Guarantor of at least $31,000,000."
(f) Effective as of the date hereof, the definition of
"Consolidated EBITDA" in Section 9(a) of the Loan Agreement is hereby
amended by inserting after the words "applied on a Consistent Basis"
in the last line thereof the following:
"provided, however, for any four-quarter period during which
the FGG Disposition was effective, the Guarantor's
Consolidated EBITDA shall be determined on a pro forma basis
as if the FGG Disposition had occurred immediately prior to
such four-quarter period."
(g) Effective as of the date hereof, the definition of
"Consolidated Fixed Charge Ratio" in Section 9(a) of the Loan
Agreement is hereby amended by inserting after the words "for such
period" in the last line thereof the following:
"provided, however, for any four-quarter period during which
the FGG Disposition was effective, the Guarantor's
Consolidated Fixed Charge Coverage Ratio shall be determined
on a pro forma basis as if the FGG Disposition had occurred
immediately prior to such four-quarter period."
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<PAGE> 5
(h) Effective as of the date hereof, the definition of
"Consolidated Funded Indebtedness" is hereby amended by inserting
after the words "for such period" in the last line thereof the
following:
"provided, however, for any four-quarter period during which
the FGG Disposition was effective, the Guarantor's Consolidated
Funded Indebtedness shall be determined on a pro forma basis
as if the FGG Disposition had occurred immediately prior to
such four-quarter period."
2.5 Amendment to Section 9(b) of the Loan Agreement. Effective as of
the date hereof, Section 9(b) of the Loan Agreement is hereby modified in its
entirety and the following is substituted in lieu thereof:
"(b) Other Covenants. Comply in all respects with each
covenant set forth in any agreement evidencing Indebtedness for Money
Borrowed including, without limitation, the covenants set forth in that
certain Credit Agreement dated as of April 3, 1996, by and among the
Guarantor, its subsidiaries named therein and the financial
institutions from time to time a party thereto (as amended from time to
time, the "Credit Agreement"), as such covenants are in effect on
October 31, 1996, and, if consented to by Bank, as such covenants are
amended from time to time."
2.6 Amendments to all references to "Company" in the Loan Agreement.
Effective as of the date hereof, the Loan Agreement is hereby modified such
that every reference therein to, and every indebtedness, liability and
obligation therein of, the "Company" shall be deemed to be a reference to, and
an indebtedness, liability and obligation of ORC.
2.7 Amendments to all references to "First Interstate Bank of Texas,
N.A." in the Loan Agreement and the other Loan Documents. Effective as of the
date hereof, the Loan Agreement and the other Loan Documents are hereby
modified such that each and every reference therein to "First Interstate Bank
of Texas, N.A." shall be deemed to be a reference to "Wells Fargo Bank (Texas),
National Association."
2.8 Schedule 5(d) - Litigation. Effective as of the date hereof, all
references in the Loan Agreement to Schedule 5(d), which is entitled
"Litigation", shall be deemed references to the Schedule 5(d) which is attached
hereto as Annex A.
2.9 Schedule 5(f) - Liens. Effective as of the date hereof, all
references in the Loan Agreement to Schedule 5(f), which is entitled "Liens",
shall be deemed references to the Schedule 5(f) which is attached hereto as
Annex B.
2.10 Schedule 5(j) - Subsidiaries. Effective as of the date hereof,
all references in the Loan Agreement to Schedule 5(S), which is entitled
"Subsidiaries", shall be deemed references to the schedule 5(S), which is
attached hereto as Annex C.
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<PAGE> 6
ARTICLE III
Modification to the Deed of Trust
3.1 Amendments to all references to "Grantor" in the Deed of
Trust. Effective as of the date hereof, the Deed of Trust is hereby modified
such that every reference therein to, and every indebtedness, liability and
obligation therein of, the "Grantor" shall be deemed to be a reference to, and
an indebtedness, liability and obligation of ORC.
3.2 Amendment to Section 1.01.A. of the Deed of Trust. Effective
as of the date hereof, Section 1.01.A. is hereby amended by adding thereto the
words "as amended from time to time" immediately prior to the words "herein
called the 'Note'".
3.3 Amendment to Section 2.01(K) of the Deed of Trust. Effective
as of the date hereof, Section 2.01(K) of the Deed of Trust is hereby deleted
in its entirety and the following is substituted in lieu thereof:
(K)(1) Assignment: Grantor hereby grants, assigns, transfers
and sets over unto Beneficiary, its successors and assigns, all of
Grantor's right, title and interest in and to the Rents (as hereafter
defined) and Leases (as hereafter defined) together with (a) all
rights, remedies, benefits and advantages to be derived therefrom, (b)
after the occurrence of an Event of Default, all of the right, power
and authority of Grantor to alter, modify or change the terms of the
Leases, or to surrender, cancel or terminate the same and (c) all
Rents, arising from the Leases and renewals thereof, if any.
Notwithstanding any other provision herein contained, the assignment
of Rents and Leases contained herein is intended by Grantor and
Beneficiary to be an absolute and unconditional assignment.
(2) Modification and Termination: Grantor shall not modify or
terminate any existing Lease or enter into any new Lease without the
prior written consent of Beneficiary.
(3) Collection of Rents: Grantor shall have a license (which
license may, at the option of Beneficiary, be terminated upon the
occurrence of an Event of Default) to collect, upon but not prior to
accrual, all Rents from the Mortgaged Property; provided, however, that
all such Rents that are ever received by Grantor shall be applied
first to pay the sums due and to be due upon the Indebtedness and
otherwise to discharge the remaining items referred to in subparts
(a), (b) and (c) of Section 2.01(K)4 below, and Grantor covenants and
agrees, and represents and warrants to Beneficiary that upon the
occurrence of an Event of Default, a constructive trust is hereby
imposed upon such Rents for the benefit of Beneficiary for the uses
and purposes set forth in such subparts (a), (b) and (c).
Notwithstanding anything contained herein or otherwise to the
contrary, possession of the Mortgaged Property by Beneficiary shall
not be a prerequisite to Beneficiary's right to collect Rents upon the
occurrence of an Event of Default, it being hereby declared that the
Assignment of Rents and Leases set forth herein is absolute and
6
<PAGE> 7
unconditional and, subject only to the license hereinabove granted,
shall entitle Beneficiary to collect all Rents.
(4) Default: Upon or at any time after the occurrence of an
Event of Default, Beneficiary, without in any way waiving such default,
may at its option take possession of the Mortgaged Property and have,
hold, manage, lease and operate the same, on such terms and for such
period of time as Beneficiary may deem proper, and may collect and
receive all Rents of the Mortgaged Property, with full power to make
from time to time all alterations, renovations, repairs or
replacements thereto as may seem proper to Beneficiary, and to apply
such Rents to the payment of (a) the cost of all such alterations,
renovations, repairs and replacements, and expenses incident to taking
and retaining possession of the Mortgaged Property, and the management
and operation thereof, and keeping the same properly insured, and (b)
all taxes, charges, claims, assessments, water rents, and any other
liens which may be prior in lien or payment to the mortgage debt, and
premiums for said insurance, with interest on all such items and (c)
the Indebtedness, together with all costs and attorney's fees, in such
order of priority as to any of such items as Beneficiary in its sole
discretion may determine.
(5) Possession: Grantor hereby authorizes Beneficiary, at
Beneficiary's option, upon any taking by Beneficiary of possession of
the Mortgaged Property hereunder, to let or relet the Mortgaged
Property or any part thereof, to cancel and modify leases, evict
tenants, bring or defend any suits in connection with the possession
of the Mortgaged Property in its own name or Grantor's name, make
repairs as Beneficiary deems appropriate, and perform such other acts
in connection with the management and operation of the Mortgaged
Property as Beneficiary, in its discretion, may deem proper. The
receipt by Beneficiary of any rents, issues or profits pursuant to
this assignment after the institution of foreclosure proceedings under
this Deed of Trust shall not cure any default nor affect such
proceedings or sale pursuant thereto.
(6) Grantor's Obligations: Beneficiary shall not be obligated
to perform or discharge, nor does it hereby undertake to perform or
discharge, any obligation, duty or liability under the Leases or under
or by reason of this assignment; and Grantor shall and does hereby
agree to perform and discharge any and all obligations, duties and
liabilities of Grantor under the terms of any of the Leases and to
indemnify Beneficiary for and to hold Beneficiary harmless of and from
any and all liability, loss or damage which it may or might incur
under the Leases or under or by reason of this assignment, and of and
from any and all claims and demands whatsoever which may be asserted
against it by reason of any alleged obligations or undertakings on its
part to perform or discharge any of the terms, covenants or agreements
contained in the Leases, except for matters caused by Beneficiary's
gross negligence or willful acts. Should Beneficiary incur any
liability, loss or damage under the Leases or under or by reason of
this assignment, or in the defense of any such claims or demands, the
amounts thereof, including costs, expenses and reasonable attorney's
fees, shall be secured by this Deed of Trust; and Grantor shall
reimburse Beneficiary therefor immediately upon demand, and upon
failure of Grantor so
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<PAGE> 8
to do Beneficiary may declare all sums secured by this Deed of Trust
immediately due and payable.
(7) Payment of Indebtedness: Upon payment in full of all
Indebtedness secured hereby, this assignment shall become and be void
and of no effect; but the affidavit, certificate, letter or statement
of any officer, supervisor or attorney of Beneficiary, showing any
part of said Indebtedness to remain unpaid, shall be and constitute
conclusive evidence of the validity, effectiveness and continuing
force of this assignment, and any person may be and is hereby
authorized to rely thereon. A demand on the tenants by Beneficiary for
the payment of the rents on any default claimed by Beneficiary shall
be sufficient notice to said tenants to make future payments of rents
to Beneficiary, without the necessity of further consent by said
Grantor.
(8) Release: Beneficiary may take or release other security,
may release any party primarily or secondarily liable for any
Indebtedness secured hereby, may grant extensions, renewals or
indulgences with respect to such Indebtedness, and may apply any other
security therefor held by it to the satisfaction of such indebtedness,
without prejudice to any of its rights hereunder.
(9) Waiver: Nothing herein contained and no act done or
omitted by Beneficiary pursuant to the powers and rights granted it
herein shall be deemed to be a waiver by Beneficiary of its rights and
remedies under the Note, the Loan Agreement or any of the other Loan
Documents (as defined in the Loan Agreement), but this assignment is
made and accepted without prejudice to any of the rights and remedies
possessed by Beneficiary under the terms thereof. The right of
Beneficiary to collect said Indebtedness and to enforce any other
security therefor owned by it may be exercised by Beneficiary either
prior to, simultaneously with, or subsequent to any action taken by it
under this assignment. This assignment and the powers and rights
granted are separate and independent from any obligation contained
elsewhere in this Deed of Trust and may be enforced without regard to
whether Beneficiary institutes foreclosure proceedings under this Deed
of Trust.
For purposes of this Section 2.01(K), (i) the term "Rents" shall mean
all of the rents, revenues, income, proceeds, royalties, issues,
profits and other benefits paid or payable for using, leasing,
licensing, possessing, operating from or in, residing in, selling,
mining, extracting or otherwise enjoying or using the Mortgaged
Property; and (ii) the term "Leases" shall mean any and all leases,
subleases, licenses, concessions or other agreements (written or
verbal, now or hereafter in effect) which grant a possessory interest
in and to, or the right to extract, mine, reside in, sell or use the
Mortgaged Property, and all other agreements, including, but not
limited to, utility contracts, maintenance agreements and service
contracts, which in any way relate to the use, occupancy, operation,
maintenance, enjoyment or ownership of the Mortgaged Property, save
and except any and all leases, subleases or other agreements pursuant
to which Grantor is granted a possessory interest in the Land."
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3.3 Amendment to Section 2.01(S) of the Deed of Trust. Effective as of
the date hereof, Section 2.01(S) of the Deed of Trust is hereby amended by
adding the words "Except for that second priority lien on the Mortgaged
Property in favor of NationsBank, N.A.," to the beginning of such paragraph.
3.4 Amendment to "Address of Grantor" in the Deed of Trust. Effective
as of the date hereof, the "Address of GRANTOR" ON the signature page of the
Deed of trust is hereby deleted in its entirety and the following is
substituted in lieu thereof.
"Address of GRANTOR: 555 Theodore Fremd Avenue
Suite B-302
Rye, New York 10580"
ARTICLE IV
MODIFICATIONS TO THE NOTE
Effective as of the date hereof, the Note is hereby modified such that
every reference therein to, and every indebtedness, liability and obligation
therein of, TFGG shall be deemed to be a reference to, and an indebtedness,
liability and obligation therein of ORC.
ARTICLE V
MODIFICATIONS TO THE GUARANTY
5.1 Amendment to the preamble of the Guaranty. Effective as of the
date hereof, the Guaranty is hereby amended by deleting the preamble thereto
and substituting in lieu thereof the following:
"Borrower (give name and address) Bank (give name and address)
ORC Management Corporation Wells Fargo Bank (Texas), National
555 Theodore Fremd Avenue Association
Suite B-302 1445 Ross Avenue
Rye, New York 10580 Dallas Texas 75202
(herein called "Borrower") (herein called "Bank")"
whether one or more
5.1 Amendment to the paragraph 1 of the Guaranty. Effective as of the
date hereof, the Guaranty is hereby amended by deleting paragraph 1 thereof and
substituting in lieu thereof the following:
"1. FOR VALUE RECEIVED, and in consideration of credit and
financial accommodations extended, to be extended, or continued to or
for the account of
9
<PAGE> 10
Borrower, and for other good and valuable considerations, the
undersigned (the "Guarantor"), absolutely and unconditionally
guarantees the prompt and punctual payment and performance when due
(whether at its stated maturity, by acceleration or otherwise in
accordance with the loan documents) of the Guaranteed Obligations of
Borrower to Bank, as provided herein. This is a specific guaranty
applicable to and guaranteeing any and all amounts of principal,
interest, attorneys' fees, costs of collection and other amounts owing
or which hereafter become owing on or in connection with certain
indebtedness, obligations or liabilities of Borrower to Bank arising
under that certain Loan Agreement dated as of March 31, 1995 by and
among Foster Grant Group, L.P., Benson Eyecare Corporation and Bank, as
amended by that certain First Amendment to Loan Agreement and other
Loan Documents dated as of May 3, 1996 by and among Foster Grant Group,
L.P., Guarantor and Bank, as further amended by that certain Second
Amendment to Loan Agreement and other Loan Documents (the "Second
Amendment") dated as of December __, 1996 by and among Borrower,
Guarantor and Bank (as amended, the "Loan Agreement"), (ii) that
certain Commercial/Real Estate Note dated as of March 31, 1995 in the
original principal amount of $4,000,000 executed by Foster Grant Group,
L.P. in favor of Bank (as amended by the Second Amendment, the "Note"),
and (iii) that certain Deed of Trust, Security Agreement and Financing
Statement dated as of March 31, 1995, executed by Foster Grant Group,
L.P. in favor of Bank, as amended by the Second Amendment, in each
case, together with all renewals and extensions thereof, even though
represented by new instruments (hereinafter called the "Guaranteed
Obligations").
ARTICLE VI
Modifications to the Indemnity Agreement
6.1 Amendment to the first paragraph of the Indemnity Agreement.
Effective as of the date hereof, the Indemnity Agreement is hereby amended by
deleting the first paragraph thereof and substituting in lieu thereof the
following:
"INDEMNITY AGREEMENT made as of May 3, 1996, from ORC
Management Corporation, a Delaware limited partnership, having an
office at 555 Theodore Fremd Avenue, Suite B-302, Rye, New York 10580
("Company"), BEC Group, Inc., a Delaware corporation, having an office
at 555 Theodore Fremd Avenue, Suite B-302, Rye, New York 10580 (the
"Indemnitor"), to Wells Fargo Bank (Texas), National Association, a
national banking association ("Lender").
6.2 Amendment to the third paragraph of the Indemnity Agreement.
Effective as of the date hereof, the Indemnity Agreement is hereby amended by
deleting the third paragraph thereof and substituting in lieu thereof the
following:
"WHEREAS, Lender has lent to Company the sum of $4,000,000.00
(the "Loan"), of which $________ is currently outstanding, which Loan
is evidenced by that certain Commercial/Real Estate Note executed by
Foster Grant Group, L.P. in favor
10
<PAGE> 11
of Lender, dated as of March 31, 1995, in the amount of the Loan (as
amended by that certain Second Amendment to Loan Agreement and other
Loan Documents dated of even date herewith by and among the Company,
Indemnitor and Bank, the "Note"), and secured by, among other things, a
mortgage or deed of trust from Company to Lender which will encumber
the Property (said mortgage or deed of trust, together with all
amendments, modifications, consolidations, increases, supplements and
spreaders thereof being herein collectively called the "Mortgage ");"
ARTICLE VII
Other Agreements
7.1. Transfer of the Premises. TFGG has concurrently herewith conveyed
title to the Premises to ORC. ORC hereby acknowledges and agrees that title to
the Premises and its interest therein, is encumbered by and subject to the
liens, security interests, assignments and other terms, covenants, restrictions
and provisions of the Deed of Trust.
7.2. Assumption of Liability by ORC: Effect of Existing- Defaults.
(a) ORC hereby and agrees, effective immediately upon the
transfer of the Premises to ORC, to perform, observe and confirm all and
singular the covenants, agreements, terms, conditions, obligations, duties and
liabilities of TFGG under the Loan Agreement, the Note, the Deed of Trust and
all of the other Loan Documents to which TFGG was a party prior to giving
effect to this Second Amendment, and agrees to pay the outstanding principal
balance of the Term Loan, with interest thereon, in accordance with the
provisions of the Loan Agreement and Note. For purposes of this Second
Amendment, the transfer of the Premises shall be deemed to which title to the
Premises is conveyed by TFGG to ORC.
(b) Any Event of Default which exists or arises out of or
comes into being as a result of conditions, acts or omissions occurring prior
to the transfer of the Premises shall continue as a default subsequent to such
transfer, such that Bank shall have the right to exercise the rights and
remedies set forth in the Loan Agreement and Other Loan Documents against ORC.
Bank represents to ORC that, as of the date hereof, (i) it has no knowledge of
any present default under the Loan Agreement or Other Loan Documents and (ii)
to the best of Bank's knowledge based solely upon Bank's review of the
documents provided to Bank by the Company none of the transactions contemplated
by this Amendment or in connection with the Transfer constitute or with the
passage of time will constitute an Event of Default-
(c) Each of ORC and Guarantor represents, warrants and agrees
that upon the consummation of the Transfer (i) ORC shall thereby have assumed,
and hereby expressly assumes and agrees to perform, observe and confirm, all
and singular, the covenants, agreements, terms, conditions, obligations,
appointments, duties and liabilities of TFGG under the Loan Agreement, the
Note, the Deed of Trust, and any other document or instrument executed and
delivered or furnished by TFGG in connection therewith, and (ii) ORC shall
thereby succeed to all of the estate, rights, privileges, powers and franchises
of TFGG in the Premises and is the lawful record owner of good and marketable
title to the Premises. By virtue of the foregoing
11
<PAGE> 12
ORC hereby accepts and assumes any liability of TFGG related to any
representation or warranty made by TFGG therein and confirms and restates all
such representations and wan-antics as though made by ORC as of the date
hereof. ORC also confirms and acknowledges that it is a " assignee" to TFGG to
the Loan Agreement, the Note, the Deed of Trust and the other Loan Documents,
and as a "assignee" it is obligated to and hereby agrees to perform and observe
all the conditions, agreements, terms, conditions, obligations, appointments,
duties and liabilities of ORC under the Loan Agreement, the Note, the Deed of
Trust and the other Loan Documents as if it were a signatory thereto.
ARTICLE VII
Conditions Precedent
Each of the following conditions precedent shall be fulfilled to the
satisfaction of Bank prior to this Second Amendment becoming effective against
Bank:
(a) ORC shall have furnished to Bank, in form, content and
amounts and with companies satisfactory to Bank casualty insurance
policies endorsed in favor of Bank as loss payee and as mortgagee
under a standard mortgage clause relating to the Premises;
(b) This Second Amendment, duly executed by the Company and
Guarantor.
(c) Bank shall have approved the deed conveying title to the
Premises and any other documents transferring the Premises and the
assets associated therewith from TFGG to ORC;
(d) Bank shall have received a copy of any surveys,
environmental study and other studies or reports commissioned by ORC
with respect to the physical condition of the Premises;
(e) Bank shall have received an endorsement to Lawyers Title
Insurance Corporation Policy No- 91-00- 518957 (i) extending the
effective date of such policy to the date and time of the recording of
the deed conveying title to the Premises to ORC, (ii) with Schedule A
of such policy reflecting that title to the Premises is vested in ORC
and reflecting that the name of insured is Wells Fargo Bank (Texas),
National Association, and (iii) reflecting the recordation of this
Agreement and the deed transferring ownership of the Premises from
TFGG to ORC;
(f) The representations and warranties contained herein shall
be true and correct as of the date hereof as if made on the date
hereof;
(g) No Event of Default shall have occurred and be continuing
and no event or condition shall have occurred that with the giving of
notice or lapse of time or both would be an Event of Default unless
such Event of Default has been specifically waived in writing by Bank;
12
<PAGE> 13
(h) Bank shall have received true, correct and complete copies
of all documents and instruments relating to the Transfer;
(i) Effective with the consummation of the Transfer, ORC will
be legally responsible for and will assume, pay, perform and discharge
all the obligations, duties and liabilities of TFGG under the Loan
Agreement, the Note, the Deed of Trust and the other Loan Documents,
and by execution below of this Second Amendment by ORC, ORC agrees
that (i) ORC will be legally responsible for, and hereby assumes, and
agrees to pay, perform and discharge, all the obligations, duties and
liabilities of TFGG under the Loan Agreement, the Note, the Deed of
Trust and the other Loan Documents, and (ii) that ORC will execute
such documentation, as shall be required by Bank, in its sole
discretion, in connection with the Transfer;
(j) Bank shall have received each of the following, in form
and substance acceptable to Bank:
(i) copies, certified by each of TFGG and ORC, of all
consents, authorizations, filings, licenses and approvals, if
any, required in connection with the execution, delivery and
performance by TFGG and ORC, and the validity and
enforceability, of this Second Amendment, the Loan Agreement,
the Note, the Deed of Trust, the Indemnity Agreement and the
other Loan Documents, each as modified hereby, and each of the
agreements, documents and instruments executed in connection
herewith and therewith;
(ii) a Company General Certificate of ORC, in form
and substance satisfactory to Bank, together with:
(A) the Certificate of Incorporation,
including all amendments thereto, certified by the Secretary
of State of the state of Delaware and dated within 30 days
prior to the date hereof,
(B) the Bylaws of ORC, including all
amendments thereto;
(C) the unanimous consent of the directors of
ORC authorizing the execution, delivery and performance by ORC
of this Second Amendment and each of the agreements, documents
and instruments executed in connection herewith;
(D) certificates of the appropriate
government officials of the state of incorporation of ORC as
to its existence and good standing, and certificates of the
appropriate government officials in each state where ORC is
required by the nature of the business it conducts within such
state to qualify as a foreign corporation and where failure to
be so qualified would have a material adverse effect on ORC,
as to its good standing and
13
<PAGE> 14
due qualification to do business in such state, each
dated within 30 days prior to the date hereof;
(iii) such other information, documents, agreements,
commitments and undertakings relating to ORC, TFGG as Bank
shall reasonably request; and
(k) Bank shall have received the Subordination Agreement,
duly executed by NationsBank, N.A., in form and substance satisfactory
to Bank;
(l) Bank shall have received in form and substance
satisfactory to Bank, a duly executed copy of that certain Deed of
Trust, Assignment and Security Agreement, dated as of December 12,
1996, executed by ORC in favor of NationsBank, N.A.;
(m) Bank shall have received in form and substance
satisfactory to Bank, a duly executed copy of that certain Standard Net
Commercial Lease, dated as of December 11, 1996, executed by TFGG and
ORC;
(n) Bank shall have received in form and substance
satisfactory to Bank, a duly executed copy of that certain
Subordination, Non-Disturbance and Attornment Agreement, executed by
TFGG, ORC and Bank;
(o) All partnership and corporate proceedings taken in
connection with the transactions contemplated by this Second Amendment
and all documents, instruments and other legal matters incident thereto
shall be satisfactory to Bank and its legal counsel, Hughes & Luce,
L.L.P; and
(p) The Company shall have paid the Bank an amendment fee
of $25,000, which fee shall be fully earned and nonrefundable upon the
effectiveness of this Amendment, and shall have paid Bank's legal
counsel for reasonable costs, fees and expenses incurred in connection
with the preparation and negotiation of this Amendment.
ARTICLE IX
RATIFICATIONS, REPRESENTATIONS, AND WARRANTIES AND COVENANTS
SECTION 9.01. RATIFICATIONS. The terms and provisions set forth in this
Second Amendment shall modify and supersede all inconsistent terms and
provisions set forth in the Loan Agreement, the Note, the Deed of Trust, the
Indemnity Agreement and the Other Loan Documents, and except as expressly
modified and superseded by this Second Amendment, the terms and provisions of
the Loan Agreement, the Note, the Deed of Trust, the Indemnity Agreement and
the other Loan Documents are ratified and confirmed and shall continue in full
force and effect. Each of the parties hereto hereby agrees that the Loan
Agreement, the Note, the Deed of Trust, the Indemnity Agreement, and the other
Loan Documents, as modified hereby, and each of the agreements, documents and
instruments executed in connection therewith shall continue to be legal, valid,
binding and enforceable in accordance with their respective terms.
14
<PAGE> 15
Section 9.02. Representations and Warranties of ORC, TFGG and
Guarantor. ORC, TFGG and Guarantor hereby jointly and severally represent and
warrant to Bank that:
(a) the execution, delivery and performance of this Second
Amendment and any and all documents, agreements, instruments and
certificates executed and/or delivered in connection herewith have
been authorized by all requisite corporate and partnership action, as
the case may be, on the part of each of ORC, TFGG and Guarantor and
will not violate the Certificate of Limited Partnership or the Amended
and Restated Agreement of Limited Partnership of TFGG, the Articles
and/or Certificate of Incorporation or Bylaws of ORC or the Articles
and/or Certificate of Incorporation or Bylaws of Guarantor;
(b) the representations and warranties contained in the Loan
Agreement, as modified hereby, and any documents, agreements,
instruments and certificates executed and/or delivered in connection
herewith are true and correct on and as of the date hereof as though
made on and as of the date hereof;
(c) no Event of Default under the Loan Agreement has occurred
and is continuing and no event or condition has occurred and is
continuing that with the giving of notice or lapse of time or both
would be an Event of Default, unless such Event of Default has been
specifically waived in writing by Bank, and
Section 9.03. Representations and Warranties of ORC. In addition to
the representations and warranties made by ORC under the Loan Agreement, the
Note, and the Deed of Trust, ORC hereby represents and warrants to Bank that,
except as otherwise contemplated by this Amendment:
(a) ORC (i) is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware, (ii) has
all requisite corporate power and authority to own its property and
assets and the property it will acquire upon consummation of the
Transfer and to carry on its business as now conducted and as proposed
to be conducted by it and as proposed to be conducted by it upon
consummation of the Transfer and the other transactions contemplated
by the Loan Agreement as modified by this Second Amendment, (iii) Is
duly qualified to do business in every jurisdiction where such
qualification is necessary or will be so qualified as of the date of
this Second Amendment, (iv) has the partnership power and authority to
execute, deliver and perform this Second Amendment and each other Loan
Document to which it is or will be a party, and (v) has taken all
corporate action necessary to authorize the execution, delivery and
performance of this Second Amendment and each other the Loan Document
to which it is or will be a party.
(b) ORC has no subsidiaries and has no equity or other
interest in any Person;
15
<PAGE> 16
(c) Upon consummation of the Transfer, ORC will possess all
franchises, certificates, licenses, permits and other authorizations
from governmental political subdivisions or regulatory authorities,
free from burdensome restrictions, that are necessary in any material
respect for the ownership, maintenance and operation of its properties
and assets and for the conduct of the businesses currently conducted
by ORC will not be in violation of any thereof in any material
respect;
(d) Upon consummation of the Transfer, ORC will be legally
responsible for, and will have assumed all of the obligations, duties
and liabilities under the Loan Agreement, the Note, the Deed of Trust
and the other Loan Documents;
(e) ORC is in full compliance with all covenants and
agreements contained in the Loan Agreement, as modified hereby;
(i) ORC is paying ORC's debts as such debts become due;
(j) ORC is not "insolvent" as that term is defined in Section
10 1 (3 1) of Title II of the United States Code (11 U.S.C. Section
101, et.seq.) (the "Bankruptcy Code"); and
(k) ORC has not filed a petition with the bankruptcy court
under the Bankruptcy Code, nor commenced any proceeding relating to
ORC under any bankruptcy or reorganization statute or under any
arrangement, insolvency, readjustment of debt, dissolution or
liquidation law of any jurisdiction.
ARTICLE X
Limited Waiver
By execution of this Second Amendment and upon satisfaction of the
conditions set forth in Article IX of this Second Amendment, Bank hereby (i)
consents to the Transfer and waives any Default or Event of Default which would
otherwise arise under the Loan Agreement or other Loan Documents solely by
reason of the consummation of the Transfer, (ii) waives any Default or Event of
Default which would otherwise arise under Section 10(d) of the Loan Agreement
solely by reason of that certain Standard Net Commercial Lease dated as of
December 11, 1996 entered into by and between TFGG and ORC, (iii) waives any
Default or Event of Default which would otherwise arise under Section 11(g) of
the Loan Agreement solely by reason of the incurrence of certain Indebtedness
for Money Borrowed by Guarantor pursuant to the Credit Agreement as of the date
hereof by and among Guarantor, NationsBank, N.A. and the other financial
institutions a party thereto, and (iv) represents and warrants that the unpaid
principal balance of the Term Loan is $.... Except as specifically provided in
this Article X, nothing contained in this Second Amendment shall be construed
as a waiver by Bank of any covenant or provision of the Loan Agreement, the
other Loan Documents, this Second Amendment, or of any other contract or
instrument between Bank and TFGG, ORC and/or Guarantor, and the failure of
Bank at any time or times hereafter to require strict performance by the
Guarantor, TFGG and/or ORC of any provision thereof shall not waive, affect
or diminish
16
<PAGE> 17
any right of Bank to thereafter demand strict compliance therewith. Bank hereby
reserves all rights granted under the Loan Agreement, the other Loan Documents,
this Second Amendment and any other contract or instrument between the Bank and
the Guarantor, TFGG and/or ORC.
ARTICLE XI
Miscellaneous
Section 11.01. Survival of Representations and Warranties. All
representations and warranties made in the Loan Agreement or any other
documents, agreements, instruments and certificates relating thereto, shall
survive the execution and delivery of this Second Amendment and such document,
agreement, instrument or certificate, and no investigation by Bank or any
closing shall affect the representations and warranties or the right of Bank to
rely upon them.
Section 11.02. Reference to Loan Agreement. For purposes of clarity,
as used herein, the term "Loan Agreement" and the "Note", and the "Deed of
Trust" shall specifically include all addendums, attachments, riders and
exhibits thereto, each being herein referred to by the name or title of each as
used therein. The Loan Agreement, the Note, and the Deed of Trust and any and
all other agreements, documents, instruments or certificates now or hereafter
executed and delivered pursuant to the terms hereof or pursuant to the terms
thereof as modified hereby, are hereby modified so that any reference in such
agreement, document instrument or certificate thereto shall mean a reference
thereto.
Section 11.03. Expenses of Bank. As provided in the Loan Agreement, as
modified hereby, TFGG, ORC and Guarantor, jointly and severally, agree to pay
on demand all costs and expenses incurred by Bank in connection with the
preparation, negotiation and execution of this Second Amendment and the
agreements, documents, instruments and certificates executed pursuant hereto
and any and all amendments, modifications, and supplements thereto, including,
without limitation, the costs and fees of Bank's legal counsel, and all costs
and expenses incurred by Bank in connection with the enforcement or
preservation of any rights under the Loan Agreement, as modified hereby, and
any and all other agreement, documents, instruments or certificates, including,
without limitation, the costs and fees of Bank's legal counsel.
Section 11.04. Severability. Any provision of this Second Amendment
held by a court of competent jurisdiction to be invalid or unenforceable shall
not impair or invalidate the remainder of this Second Amendment and the effect
thereof shall be confined to the provision so held to be invalid or
unenforceable.
Section 11.05. APPLICABLE LAW. THIS SECOND AMENDMENT AND ALL OTHER
DOCUMENTS EXECUTED PURSUANT HERETO SHALL BE DEEMED TO HAVE BEEN MADE AND TO BE
PERFORMABLE IN, AND SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH, THE
LAWS OF THE STATE OF TEXAS.
17
<PAGE> 18
Section 11.06. Successors and Assigns. This Second Amendment is
binding upon and shall inure to the benefit of the parties hereto and their
respective successors and assigns.
Section 11.07. Counterparts, This Second Amendment may be executed in
one or more counterparts, each of which when so executed shall be deemed to be
an original, but all of which when taken together shall constitute one and the
same instrument.
Section 11.08. Amendment; Effect of Waiver. No modification of or
amendment to this Second Amendment shall be effective unless the same is in
writing and signed by ORC, Guarantor and Bank. No consent or waiver, express or
implied, by Bank to or for any breach of or deviation from any covenant or
condition by ORC or Guarantor shall be deemed a consent to or waiver of any
other breach of the same or any other covenant, condition or duty.
Section 11.09. Headings. The headings, captions, and arrangements used
in this Second Amendment are for convenience only and shall not affect the
interpretation of this Second Amendment.
Section 11.10. Renewal and Extension of Security Interests and
Assignments. The security interests and assignments referenced in this Second
Amendment shall, to the maximum extent applicable, be deemed to be renewals and
extensions of the security interests and assignments in favor of Bank
previously existing, which prior security interests and assignments shall in no
manner be waived, impaired or otherwise adversely affected hereby, the purpose
of this Second Amendment being, in part, to carry forward all preexisting
security interests and assignments securing the obligations which are
acknowledged by ORC or Guarantor to be valid and subsisting.
Section 11.11. FINAL AGREEMENT. THE LOAN AGREEMENT, AS MODIFIED HEREBY
AND THE OTHER LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES
AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT
ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN
THE PARTIES.
Section 11.12. RELEASE. EACH OF ORC AND GUARANTOR HEREBY ACKNOWLEDGES
THAT IT HAS NO DEFENSE, COUNTERCLAIM, OFFSET, CROSS-COMPLAINT, CLAIM OR DEMAND
OF ANY KIND OR NATURE, WHATSOEVER THAT CAN BE ASSERTED TO REDUCE OR ELIMINATE
ALL OR ANY PART OF ITS LIABILITY TO REPAY THE "INDEBTEDNESS" OR TO SEEK
AFFIRMATIVE, RELIEF OR DAMAGES OF ANY KIND OR NATURE FROM BANK. EACH OF ORC
AND GUARANTOR HEREBY VOLUNTARILY AND KNOWINGLY RELEASES AND FOREVER DISCHARGES
BANK, ITS PREDECESSORS, AGENTS, OFFICERS, DIRECTORS, EMPLOYEES, SUCCESSORS AND
ASSIGNS, FROM ALL POSSIBLE CLAIMS, DEMANDS, ACTIONS, CAUSES OF ACTION, DAMAGES,
COSTS, EXPENSES, AND LIABILITIES WHATSOEVER, KNOWN OR UNKNOWN, ANTICIPATED OR
UNANTICIPATED, SUSPECTED OR UNSUSPECTED, FIXED,
18
<PAGE> 19
CONTINGENT, OR CONDITIONAL, AT LAW OR IN EQUITY, ORIGINATING IN WHOLE OR IN
PART ON OR BEFORE THE DATE THIS SECOND AMENDMENT IS EXECUTED, WHICH ORC AND
GUARANTOR MAY NOW OR HEREAFTER HAVE AGAINST BANK, ITS PREDECESSORS, AGENTS,
OFFICERS, DIRECTORS, EMPLOYEES, SUCCESSORS AND ASSIGNS, IF ANY, AND
IRRESPECTIVE OF WHETHER ANY SUCH CLAIMS ARISE OUT OF CONTRACT, TORT, VIOLATION
OF LAW OR REGULATIONS, OR OTHERWISE, AND ARISING FROM ANY "LOANS", INCLUDING,
WITHOUT LIMITATION, ANY CONTRACTING FOR, CHARGING, TAKING, RESERVING,
COLLECTING OR RECEIVING INTEREST IN EXCESS OF THE HIGHEST LAWFUL RATE
APPLICABLE, THE EXERCISE OF ANY RIGHTS AND REMEDIES UNDER THE LOAN AGREEMENT OR
THE OTHER LOAN DOCUMENTS, AND NEGOTIATION FOR AND EXECUTION OF THIS SECOND
AMENDMENT.
Section 11.13. Release of TFGG. By execution of this Second Amendment,
Bank does hereby release and forever discharge TFGG from any obligations it had
to the Bank under the Loan Agreement or the other Loan Documents; provided,
however, that in the event that TFGG shall have committed any fraud or made any
other intentional misrepresentation to the Bank which has a Material Adverse
Effect, it shall be deemed that TFGG shall not have been released or discharged
pursuant to this Section 11.13, and all of TFGG's obligations under the Loan
Agreement and Other Loan Documents shall be in full force and effect
notwithstanding anything to the contrary contained herein.
19
<PAGE> 20
IN WITNESS WHEREOF, this Second Amendment has been executed and is
effective as of the date first above-written.
TFGG:
FOSTER GRANT GROUP, L.P.
By: Bonneau General, Inc.
its General Partner
By:/s/ PETER H. TREMBATH
---------------------------------
Name: Peter H. Trembath
-------------------------------
Title: Secretary
------------------------------
COMPANY:
ORC MANAGEMENT CORPORATION
By:/s/ PETER H. TREMBATH
---------------------------------
Name: Peter H. Trembath
-------------------------------
Title: Secretary
------------------------------
GUARANTOR:
BEC GROUP, INC.
By: /s/ IAN ASHKEN
---------------------------------
Name: Ian Ashken
-------------------------------
Title:
------------------------------
WELLS FARGO BANK (TEXAS), NATIONAL
ASSOCIATION
By:
---------------------------------
Jeffrey S.A. Cook,
Vice President
20
<PAGE> 21
STATE OF TEXAS )
)
COUNTY OF DALLAS )
This instrument was acknowledged before me on December .., 1996, by
Jeffrey S. A. Cook, Vice President of Wells Fargo Bank (Texas), National
Association, on behalf of said banking association.
-------------------------------------------
Notary Public in and for the State of Texas
Print Name:
---------------------------------
Commission Expires:
- -----------------------------
STATE OF RHODE ISLAND )
)
COUNTY OF PROVIDENCE )
This instrument was acknowledged before me on December .., 1996, by
Peter H. Trembath, Secretary of ORC Management Corporation, on behalf of said
corporation.
LAURIE C. WILKINS
-------------------------------------------
Notary Public
Print Name
---------------------------------
Laurie C. Wilkins, Notary Public
State of Rhode Island and
Providence Plantations
My Commission Expires: 6/25/97
Commission Expires:
- -----------------------------
21
<PAGE> 22
STATE OF RHODE ISLAND )
)
COUNTY OF PROVIDENCE )
This instrument was acknowledged before me on December 12, 1996 by
Peter H. Frembath, the Secretary of Bonneau General, Inc., the general partner
of Foster Grant Group, L.P., on behalf of said corporation and partnership.
/s/ LAURIE C. WILKINS
-------------------------------------------
Notary Public
Print Name
---------------------------------
Laurie C. Wilkins, Notary Public
State of Rhode Island and
Providence Plantations
Commission Expires:
June 25, 1997
- -----------------------------
STATE OF RHODE ISLAND )
)
COUNTY OF PROVIDENCE )
This instrument was acknowledged before me on December 12, 1996, by
Ian G. H. Ashkin, the CFO of BEC Group, a Delaware corporation on behalf of
said corporation.
s/s LAURIE C. WILKINS
-------------------------------------------
Notary Public
Print Name
---------------------------------
Laurie C. Wilkins, Notary Public
State of Rhode Island and
Providence Plantations
Commission Expires:
June 25, 1997
- -----------------------------
22
<PAGE> 1
EXHIBIT 10.22
DEED OF TRUST, SECURITY AGREEMENT
AND FINANCING STATEMENT
THE STATE OF TEXAS
COUNTY OF DALLAS
FOSTER GRANT GROUP, L.P. (herein called "Grantor", whether one or more),
for and in consideration of the indebtedness hereinafter described, has
granted, bargained, sold and conveyed, and by these presents does grant,
bargain, sell and convey, in trust, unto COLLATERAL SERVICES, INC., Trustee
(herein called "Trustee") and unto Trustee's successors and assigns, forever,
all and singular the property hereinafter described, situated in the County of
Dallas and State of Texas, to-wit: (a) all real property owned by Grantor and
described on Exhibit A attached hereto (herein sometimes called the "Land");
(b) all rights, titles, interests, estates, reversions and remainders now owned
or hereafter acquired by Grantor in and to the Land; (c) all improvements now
or hereafter situated on the Land and in and to the properties covered hereby;
(d) all rights, titles and interests now owned or hereafter acquired by Grantor
in and to all easements, streets and rights-of-way of every kind and nature
next to or adjoining the Land and all public or private utility connections
thereto and all appurtenances, servitudes, rights, ways, privileges and
prescriptions thereto; (e) all fixtures (herein called the "Fixtures") now
owned or hereafter acquired by Grantor and now or hereafter affixed to the Land
or improvements, including without limitation, all rights, titles and interests
of Grantor now owned or hereafter acquired in and to any of the Fixtures that
may be subject to any title retention or security agreement superior in lien or
security interest to the lien or security interest of this Deed of Trust,
Security Agreement and Financing Statement (herein called "Deed of Trust"); (f)
all rights and interests of Grantor now owned or hereafter acquired in and to
all (i) contracts, subcontracts and plans and specifications relating to the
improvements and all deposits, funds, accounts, contract rights, instruments,
documents, general intangibles (including trademarks, tradenames and symbols
used in connection therewith), notes or chattel paper arising from or by virtue
of any transactions relating to the Land or the improvements; (ii) all permits,
licenses, franchises, certificates, and other rights and privileges obtained in
connection with the Land and the improvements; (iii) all proceeds arising from
or by virtue of the sale, lease or other disposition of any of the real
property described herein; (iv) all proceeds (including premium refunds)
payable or to be
DEED OF TRUST -- Page 1
<PAGE> 2
payable under each policy of insurance relating to the Land or the
improvements; and (v) all proceeds arising from the taking of all or any part
of the Land or any rights appurtenant thereto, including change of grade of
streets, curb cuts or other rights of access, for any public or quasi-public
use under any law, or by right of eminent domain, or by private or other
purchase in lieu thereof; and (g) without limiting the foregoing, any and all
rights, royalties, rents, revenues, benefits, leases, contracts, accounts,
general intangibles, money, instruments, insurance proceeds, documents,
tenements, hereditaments and appurtenances now owned or hereafter acquired by
Grantor and appertaining to, generated from, arising out of or belonging to any
of the foregoing (all of the foregoing, (a) through (g) inclusive, being herein
called the "Mortgaged Property").
TO HAVE AND TO HOLD the Mortgaged Property unto Trustee, and Trustee's
successors in this trust and Trustee's assigns, forever, and Grantor does
hereby bind Grantor, and Grantor's respective heirs, personal representatives,
successors and assigns, to warrant and forever defend the Mortgaged Property
unto Trustee, and Trustee's successors and assigns, forever, against the claim
or claims of all persons whomsoever claiming or to claim the same, or any part
thereof.
ARTICLE 1: INDEBTEDNESS SECURED
1.01. This conveyance is made in trust to secure and enforce the payment
and performance of all of the following obligations (herein collectively called
the "Indebtedness");
A. All sums due pursuant to that certain Commercial/Real Estate Note
in the original principal amount of $4,000,000.00 (herein called the
"Note"), dated March 31, 1995, executed by Grantor, payable to the order of
First Interstate Bank of Texas, N.A., (said party or any subsequent owner
or holder of the Note being herein called "Beneficiary"), whose address is
as specified below, bearing interest at the rates therein stated with final
maturity being as therein provided, the Note providing, that if default
occurs, the unpaid principal thereof and all accrued unpaid interest
thereon may, at Beneficiary's option, be declared due and payable prior to
the stated maturity thereof and providing further for the payment of
attorneys' fees and other expenses of collection under certain
circumstances;
B. All funds advanced by Beneficiary to or for the benefit of Grantor
pursuant hereto, pursuant to any other document securing or relating to the
Indebtedness, or otherwise and all other debts, obligations and liabilities
of Grantor to Beneficiary of whatever kind or
DEED OF TRUST -- Page 2
<PAGE> 3
character, whether now existing or hereafter arising, secured or
unsecured,' direct or indirect, fixed or contingent, primary or secondary,
joint or several or both, including, without limitation, all present and
future debts, obligations and liabilities of Grantor (i) as principal,
surety, endorser, guarantor, accommodation party or otherwise, (ii) arising
by operation of law or otherwise, (iii) as a member of any partnership,
joint venture, firm, trust or other association or (iv) payable to or in
favor of third parties and hereafter acquired by Beneficiary with or
without the knowledge, consent or insistence of Grantor. The payment of all
such debts, obligations and liabilities of Grantor shall not terminate this
Deed of Trust unless the lien created hereby is released by Beneficiary, it
being contemplated that Grantor will from time to time become additionally
indebted to Beneficiary, all of which indebtedness shall be secured by this
Deed of Trust until the lien hereof is released by Beneficiary; and
C. All renewals, rearrangements and extensions of any of the
foregoing.
1.02. The Indebtedness shall be payable at the address specified in the
Note or at such other place as Beneficiary may from time to time hereafter
designate in writing; and, unless otherwise expressly provided in the
instruments evidencing the Indebtedness, all portions of the Indebtedness shall
bear interest from the due date thereof until paid at the same rate per annum
as provided in the Note for interest accruing on past due amounts.
1.03. All payments received by Beneficiary, whether designated as
payments of principal or interest, shall be applied to the principal or
interest of the Indebtedness or to expenses provided for herein, or any
combination of the foregoing, as directed by Beneficiary at Beneficiary's
option, exercised in its sole discretion.
ARTICLE II: COVENANTS OF GRANTOR
2.01. In order to secure payment of the Indebtedness, and performance of
Grantor's obligations hereunder, Grantor covenants and agrees with Beneficiary
and with Trustee as follows:
A. Grantor shall pay when due all of the Indebtedness, together with
the interest and all other charges accruing thereon and thereunder in
accordance with the terms of the Note and all other instruments
DEED OF TRUST -- Page 3
<PAGE> 4
evidencing, securing or otherwise relating to, the Indebtedness.
B. Grantor represents and warrants that (i) Grantor has good and
indefeasible title in fee simple to the Mortgaged Property, (ii) unless
otherwise herein provided, the Mortgaged Property is free from
restrictions, easements, outstanding mineral or royalty interests, liens
and security interests and (iii) Grantor has full right and authority to
make this conveyance. Grantor agrees to maintain and preserve Grantor's
legal existence and all related rights, franchises and privileges. If
Grantor is an entity other than an individual, Grantor shall not amend its
Articles of Organization or change its name or identity without
Beneficiary's prior written consent. For purposes hereof, the term
"Articles of Organization" shall mean (i) Grantor's Articles of
Incorporation and By-Laws if Grantor is a corporation, (ii) Grantor's
Partnership Agreement or Joint Venture Agreement if Grantor is a general
partnership or joint venture, (iii) Grantor's Limited Partnership Agreement
and Certificate of Limited Partnership if Grantor is a limited partnership,
or (iv) Grantor's Trust Agreement if Grantor is a trust.
C. Grantor shall promptly obtain and deliver to Beneficiary
certificates of insurance for policies with premiums paid providing
extended coverage for all buildings and other property covered by this Deed
of Trust against damage by fire and lightning and against such other risks
as Beneficiary may require, all in amounts approved by Beneficiary not
exceeding 100% of full replacement cost of all improvements, such insurance
to be written on a replacement cost form promulgated by the Texas State
Board of Insurance and with companies having an A.M. Best Rating of B+ or
better, with (i) loss made payable to Beneficiary pursuant to the standard
mortgagee clause promulgated by the Texas State Board of Insurance, without
contribution; (ii) provision that (a) each of said policies shall not be
terminated, reduced or limited regardless of any breach of the
representations and agreements set forth therein, and (b) no such policy
shall be canceled, endorsed or amended to any extent unless the issuer
thereof shall have first given Beneficiary at least 30 days' prior written
notice. In case Grantor fails to furnish such policies, Beneficiary, at
Beneficiary's option, may procure such insurance at Grantor's expense. All
renewal and substitute policies of insurance shall be delivered to the
office of Beneficiary, premiums paid, on or before expiration of the
insurance protection to be replaced by such renewal or substituted
policies. In case of loss, Beneficiary,
DEED OF TRUST -- Page 4
<PAGE> 5
at Beneficiary's option, shall, subject to the following sentence, be
entitled to receive and retain the proceeds of the insurance policies,
applying the same toward payment of the Indebtedness in such manner as
Beneficiary may elect If (i) the amount of any loss regarding any
improvements is less than $1,000,000.00 and (a) the Grantor proposes to
repair or replace the improvements and (b) Beneficiary approves of the
details of such proposal (which approval shall not be unreasonably withheld
or delayed), and (ii) the amount of such insurance proceeds, together with
other funds of the Grantor, shall be sufficient to fund such repair or
replacement, then Beneficiary shall pay such proceeds to Grantor for the
repair of said improvements or for the erection of new improvements in
their place, or for any other purpose satisfactory to Beneficiary, but
Beneficiary shall not be obligated to see to the proper application of any
amounts so paid to Grantor. If Beneficiary elects to allow such payments to
Grantor, disbursement shall be on such terms subject to such conditions as
Beneficiary may specify. Regardless of whether any insurance proceeds
payable to them are sufficient to pay the costs of repair and restoration
of the Mortgaged Property, Grantor shall promptly commence and carry out
the repair, replacement, restoration and rebuilding of any and all of the
improvements damaged or destroyed so as to return same, to the extent
practicable, to the same condition as immediately prior to such damage to
or destruction thereof. Grantor shall not permit or carry on any activity
within or relating to the Mortgaged Property that is prohibited by the
terms of any insurance policy covering any part of the Mortgaged Property
or which permits cancellation or increase in the premium payable for any
insurance policy covering any part of the Mortgaged Property. In the event
of a foreclosure of this Deed of Trust, the purchaser of the Mortgaged
Property shall succeed to all the rights of Grantor, including any right to
unearned premiums, in and to all policies of insurance assigned and
delivered to Beneficiary pursuant to the provisions of this instrument.
Regardless of the types or amounts of insurance required and approved by
Beneficiary, Grantor shall assign and deliver to Beneficiary all policies
of insurance that insure against any loss or damage to the Mortgaged
Property, as collateral and further security for the payment of the
Indebtedness. Grantor shall also obtain and maintain in force and effect at
Grantor's expense such liability and other insurance policies and
protection as Beneficiary may from time to time reasonably require.
DEED OF TRUST -- Page 5
<PAGE> 6
D. Grantor shall pay all taxes and assessments against the Mortgaged
Property, as the same become due and payable, and shall furnish proof,
satisfactory in form and substance to Beneficiary, of such payment. In the
event of the passage after date of this Deed of Trust of any law,
ordinance, or regulation, deducting from the Mortgaged Property for the
purposes of taxation any lien thereon, or changing in any way the laws now
in force for the taxation of mortgages, deeds of trust, or indebtedness
secured thereby, or the manner of the operation of any such taxes so as to
affect the interest of Beneficiary, then and in such event, Grantor shall
bear and pay the full amount of such taxes, unless the payment thereof by
Grantor would be unlawful or if the payment thereof would constitute usury
or render the Indebtedness wholly or partially usurious; provided, however,
that if for any reason payment by Grantor any such new or additional taxes
would constitute usury or render the Indebtedness wholly or partially
usurious, Beneficiary may, at Beneficiary's option, (i) pay the amount or
portion of such taxes which would otherwise render the Indebtedness
unlawful or usurious, in which event Grantor shall concurrently therewith
pay the remaining lawful and non-usurious portion or balance of said taxes
or (ii) declare the unpaid Indebtedness with all accrued interest thereon
to be immediately due and payable.
E. All judgments, decrees, recoveries and awards or payment for injury
or damage to the Mortgaged Property or any part thereof, including, without
limitation, interest thereon, all awards pursuant to proceedings or
threatened proceedings for condemnation thereof are hereby assigned in
their entirety to Beneficiary and shall be paid to Beneficiary, and
Beneficiary shall apply the same first to reimbursement of all costs and
expenses incurred by Beneficiary in connection therewith and the balance
shall be applied to the Indebtedness in such manner as Beneficiary may
elect, or, at Beneficiary's option, may be applied to restoration of the
Mortgaged Property or the remaining part thereof. Beneficiary is hereby
authorized, in the name of Grantor, to execute and deliver valid
satisfactions of, and to appeal from, any such award, judgment, decree or
other matter. If Beneficiary elects to allow a portion of the proceeds to
be paid to Grantor to be used in rebuilding, restoration or repair of the
Mortgaged Property, then the disbursement of such proceeds shall be on such
terms and subject to such conditions as Beneficiary may specify. Grantor
shall promptly notify Beneficiary of the institution or threatened
institution of any proceeding relating to injury, damage or condemnation of
any of the
DEED OF TRUST -- Page 6
<PAGE> 7
Mortgaged Property. Beneficiary shall have the right to participate in any
such proceeding. In the event Beneficiary, as a result of any such
judgment, decree or award, determines that the payment of the debt or
performance of any obligations under this Deed of Trust is impaired,
Beneficiary may, without notice, declare all of the indebtedness
immediately due and payable.
F. Grantor shall keep every part of the Mortgaged Property in
first-class condition and presenting a first-class appearance, make
promptly all repairs, renewals and replacements necessary to such end,
prevent waste to any part of the Mortgaged Property, and do promptly all
else necessary to such end; and Grantor shall promptly discharge all claims
for labor performed and material furnished therefor, and shall not suffer
any lien of mechanics or materialmen therefor to attach to any part of the
Mortgaged Property. Notwithstanding anything to the contrary contained in
this Deed of Trust, Grantor (i) may contest the validity or amount of any
claim of any contractor, consultant, architect or other person providing
labor, materials or services with respect to the Mortgaged Property, (ii)
may contest any tax or special assessments levied by any governmental
authority and (iii) may contest the enforcement of or compliance with any
governmental requirements, and such contest on the part of Grantor shall
not constitute a default hereunder; provided, however, that during the
pendency of any such contest, Grantor shall furnish to Beneficiary and the
title company issuing Beneficiary's mortgagee title insurance policy a Bond
Indemnifying Against Liens (pursuant to Tex. Property Code Ann. Section
53.171) with corporate surety satisfactory to Beneficiary and such title
company or other security acceptable to them in an amount equal to the
amount being contested plus a reasonable additional sum to cover possible
costs, interest and penalties, and provided further that Grantor shall pay
any amount adjudged by a court of competent jurisdiction to be due, with
all costs, interest and penalties thereon, before such judgment becomes a
lien on the Mortgaged Property. Grantor shall guard every part of the
Mortgaged Property from removal, destruction and damage, and shall not do
or suffer to be done any act whereby the value of any part of the Mortgaged
Property may be lessened. No building or other property now or hereafter
covered by the lien or security interest of this Deed of Trust shall be
removed, demolished or materially altered or enlarged, nor shall any new
building be constructed, without the prior written consent of Beneficiary.
Grantor shall not initiate, join in, or consent to any change in any
private restrictive covenants, zoning ordinances or other
DEED OF TRUST -- Page 7
<PAGE> 8
public or private restrictions limiting or defining the uses that may be
made of the Mortgaged Property or any part thereof without the prior
express written consent of Beneficiary. Grantor shall at all times comply
with and perform all obligations under any applicable laws, statutes,
regulations, ordinances or restrictive covenants relating to the Mortgaged
Property and the use and operation thereof. Beneficiary and Beneficiary's
agents or representatives shall have access to the Mortgaged Property at
all reasonable times in order to inspect same and verify Grantor's
compliance with Grantor's duties and obligations under this document.
Grantor shall not, without the prior written consent of Beneficiary, engage
in or permit any mining or drilling activities on the Land.
G. If, without the prior written consent of Beneficiary, which consent
may be given or withheld by Beneficiary in the exercise of its sole and
absolute discretion, (a) all or any part of the Mortgaged Property, or any
interest therein, or any beneficial interest in Grantor (if Grantor is not
a natural person or persons but is a corporation, partnership, trust or
other legal entity) is sold, transferred or otherwise conveyed, or (b)
Grantor enters into any contract agreeing to sell, transfer or otherwise
convey the Mortgaged Property, or any interest therein, or (c) there is a
sale or exchange of the majority of the ownership interest in Grantor (if
Grantor is not a natural person or persons) or (d) Grantor creates any lien
or encumbrance subordinate to this Deed of Trust, or (e) Grantor grants any
easement, right-of-way or any other right whatsoever with respect to the
Mortgaged Property, or (f) Grantor conveys any leasehold interest for any
purpose whatsoever covering all or any portion of the Mortgaged Property,
including without limitation, one or more oil, gas or other mineral leases
covering the Land or any portion thereof, for a period longer than one (1)
year (all and any of the above being hereinafter collectively called
"Transfers"), and irrespective of whether any such Transfers are evidenced
by written instruments, irrespective if such a written instrument is filed
for record, then Beneficiary may, at its option, declare all or part of the
Indebtedness immediately due and payable, and Beneficiary shall be entitled
to exercise any and all remedies provided under this Deed of Trust.
Beneficiary, in the exercise of its sole and absolute discretion and
without any duty or obligation to do so, may waive such option to
accelerate, if, prior to any Transfers, the proposed transferee has
executed a written assumption agreement accepted in writing by Beneficiary,
containing such terms as Beneficiary, in its
DEED OF TRUST -- Page 8
<PAGE> 9
sole discretion may require, including without limitation, an increase in
the rate of interest payable on the Indebtedness and/or a modification of
the maturity of the Indebtedness.
H. In the event the ownership of the Mortgaged Property or any part
thereof becomes vested in a person other than Grantor, Beneficiary may, at
Beneficiary's option, deal with such successor or successors in interest
with reference to this Deed of Trust and to the Indebtedness in the same
manner as with Grantor, without in any way vitiating or discharging
Grantor's liability hereunder or upon the Indebtedness. No sale of the
Mortgaged Property and no forbearance on the part of Beneficiary, or
extension of the time for the payment of the Indebtedness, shall operate to
release, discharge, modify, change or affect, either in whole or in part,
any liability of Grantor or the liability of the guarantors or sureties of
Grantor or of any other party liable for payment of the Indebtedness.
I. Grantor hereby authorizes Beneficiary, if and whenever Beneficiary
shall desire, to demand and receive, in Grantor's right, all sums that may
become due under any and all leases, including without limitation oil, gas
and mineral leases, rental contracts or easements pertaining to all or any
part of the Mortgaged Property, and when received to apply the same on the
Indebtedness in accordance with Section 1.03 of this Deed of Trust. No
demand for, no receipt or application of, any such sum shall be deemed to
minimize, subordinate or affect in any way the lien, security interest or
rights hereunder of Beneficiary, or any rights of a purchaser of the
Mortgaged Property at a trustee's or foreclosure sale hereunder.
J. In the event any portion of the Indebtedness is not, for any
reason whatsoever, secured by this Deed of Trust, the full amount of all
payments made on the Indebtedness shall first be applied to such unsecured
portion of the Indebtedness until the same has been fully paid.
K. All of the rents, royalties, issues. profits, revenue, income and
other benefits derived from the Mortgaged Property or arising from the use
or enjoyment of any portion thereof or from any lease or agreement
pertaining thereto (hereinafter called the "Rents and Profits") are hereby
absolutely and unconditionally assigned, transferred, conveyed and set
over to Beneficiary to be applied by Beneficiary in accordance with the
terms hereof. Prior to the occurrence of any
DEED OF TRUST -- Page 9
<PAGE> 10
default hereunder, or the exercise by Beneficiary of the option
granted in Paragraph I above, Grantor shall collect and receive all Rents
and Profits as the trustee for the benefit of Beneficiary and Grantor, and
Grantor shall apply the funds so collected first to the payment of the
principal and interest and all other sums payable on the Indebtedness and
thereafter, so long as no default hereunder has occurred, the balance shall
be distributed to the account of Grantor. Grantor will not (i) execute an
assignment of any of its right, title or interest in the Rents and Profits,
or (ii) except where the lessee is in default thereunder, terminate or
consent to the cancellation or surrender of any lease of the Mortgaged
Property or any part thereof, now or hereafter existing, except that any
lease may be canceled, provided that promptly after the cancellation or
surrender thereof a new lease is entered into with a new lessee having a
credit standing, in the judgment of Beneficiary, at least equivalent to
that of the lessee whose lease was canceled, on substantially the same
terms as the terminated or canceled lease, (iii) modify any lease of the
Mortgaged Property or any part thereof so as to shorten the unexpired term
thereof or so as to decrease the amount of rent payable thereunder, or (iv)
accept prepayment of any installments of rent to become due under any of
such leases in excess of one month, except prepayments in the nature of
security for the performance of the lessee thereunder, or (v) in any other
manner impair the value of the Mortgaged Property or, the security of this
Deed of Trust. Grantor will not execute any lease of all or any substantial
portion of the Mortgaged Property except for actual occupancy by the lessee
thereunder, and will at all times promptly and faithfully perform, or cause
to be performed, each covenant, condition and agreement contained in each
lease of the Mortgaged Property now or hereafter existing, on the part of
lessor thereunder to be kept and performed. Grantor shall furnish to
Beneficiary, within ten (10) days after a request by Beneficiary to do so,
a written statement containing the names of all lessees of the Mortgaged
Property, the terms of their respective leases, the space occupied and the
rentals payable thereunder together with copies of any and all written
leases then existing which affect or pertain to the Mortgaged Property.
L. To the extent that any advance of funds by Beneficiary is used to
pay any indebtedness secured by an outstanding lien, security interest,
charge or encumbrance against the Mortgaged Property, such funds have been
advanced by Beneficiary at Grantor's request; and Beneficiary shall be
subrogated to any and all
DEED OF TRUST -- Page 10
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rights, powers, equities, liens and security interests owned or granted by
any owner or holder of such indebtedness, irrespective of whether said
security interests, liens, charges or encumbrances are released of record.
M. Grantor agrees that Grantor shall execute and deliver such other
and further documents and do and perform such other acts as may be
reasonably necessary and proper in Beneficiary's judgment to carry out the
intention of the parties as herein expressed and to effect the purposes of
this document and the loan transaction referred to herein. Without
limitation of the foregoing, Grantor agrees to (i) execute and deliver such
documents as may be necessary to cause the liens and security interests
granted hereby to cover and apply to any property placed in, on or about
the Mortgaged Property in addition to, or replacement or substitute for,
any of the Mortgaged Property and (ii) furnish to Beneficiary, upon
Beneficiary's request from time to time, an appraisal of the Mortgaged
Property prepared in accordance with FIRREA standards; provided, however,
that so long as no Event of Default (as defined in the Loan Agreement) has
occurred and is continuing, Grantor shall not be required to furnish to
Beneficiary more than two (2) appraisals of the Mortgaged Property during
the term of the Note.
N. Upon and after the occurrence of a Event of Default, if requested
by Beneficiary, Grantor shall pay in addition to the payments of the
Indebtedness, such sums as Beneficiary determines, in its sole and absolute
discretion, as are necessary to pay the estimated annual taxes, assessments
and insurance premiums (as estimated by Beneficiary), next due on the
Mortgaged Property. Such payment shall be made in such amounts and at such
time as Beneficiary may determine and Beneficiary shall not be required to
pay interest to Grantor with respect to any such payment. If the amount so
paid is not sufficient to pay such taxes, assessments and insurance
premiums when due, then Grantor shall deposit immediately with Beneficiary
an amount sufficient to pay such taxes, assessments and insurance premiums.
If there is a default under any of the provisions of this Deed of Trust
resulting in a sale of the Mortgaged Property on foreclosure, or if
Beneficiary acquires the Mortgaged Property otherwise after default, any
amounts held by Beneficiary pursuant to this provision shall become, at the
time of commencement of such proceedings or at the time the Mortgaged
Property is otherwise acquired, the property solely of Beneficiary to be
applied in payment of taxes, assessments or insurance premiums, or at the
DEED OF TRUST -- Page 11
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election of Beneficiary, as a credit against the amount then remaining
unpaid under the Note. In the event of a default resulting in foreclosure,
such conversion of such amounts so deposited with Beneficiary to the
exclusive and sole ownership of Beneficiary shall be automatic without the
necessity of any action on the part of Beneficiary.
O. Grantor shall keep proper books of record and account in accordance
with generally accepted accounting principles and set aside on Grantor's
books from its earnings for each fiscal year reserves for depreciation,
depletion, obsolescence and amortization of Grantor's properties during
such fiscal year determined in accordance with generally accepted
accounting principles consistently applied and all other proper reserves,
similarly determined, which should be set aside from such earnings in
connection with Grantor's business. Beneficiary shall have the right to
examine the books of account of Grantor and to discuss the affairs,
finances and accounts of Grantor and also the Mortgaged Property and
Grantor's operation thereof, and to be informed as to the same by Grantor's
officers, all at such times designated by Beneficiary, and Grantor shall
further furnish from time to time to Beneficiary upon request copies of
balance sheets of Grantor and copies of statements of income and retained
earnings of Grantor, covering such periods of time and containing such
reasonable detail as Beneficiary shall from time to time request, and
stating changes in the financial position of Grantor for the same periods
and prepared and certified by a person acceptable to Beneficiary.
P. With respect to each Grantor who is an individual, such Grantor
warrants that no part of the Mortgaged Property constitutes any part of his
business or rural homestead.
Q. Grantor shall, at any time and from time to time, furnish promptly,
upon request, a written statement or affidavit, in such form as may be
required by Beneficiary, stating the unpaid balance of the Note, and that
there are no offsets or defenses against full payment of the Note and
performance of the terms hereof, or if there are any such offsets and
defenses, specifying them.
R. Grantor shall comply with all laws, ordinances, rules and
regulations of all federal or state governmental agencies relating to the
Mortgaged Property or any part thereof and shall secure and maintain all
contracts, franchises, permits and licenses necessary or
DEED OF TRUST -- Page 12
<PAGE> 13
desirable for the construction and/or the efficient operation of the
improvements and/or business conducted on the Mortgaged Property.
S. Grantor will not, without the prior written consent of Beneficiary,
create, place, suffer or permit to be created or placed or, through any act
or failure to act, acquiesce in the placing of or allow to remain, any
mortgage, pledge, lien (statutory, constitutional or contractual), security
interest, encumbrance or charge on, or conditional sale or other title
retention agreement, regardless of whether same are expressly subordinate
to the liens of the Beneficiary, with respect to the Mortgaged Property,
other than the outstanding liens, easements, building lines, restrictions
and other matters described on Exhibit B attached hereto (hereinafter
called "Permitted Liens"), and other than any other mortgage, pledge, lien
or security interest of which Beneficiary herein is the beneficiary.
2.02. If, while this trust is in force, the title of Trustee to the
Mortgaged Property, or any part thereof, shall be endangered or shall be
attacked directly or indirectly, Grantor, at Grantor's cost and expense, shall
have the right to take all necessary and proper steps for the defense of said
title, including the employment of counsel, the prosecution or defense of
litigation, and the compromise or discharge of claims made against said title,
but only if and for so long as (i) no Default or Event of Default has occurred
and is continuing hereunder, and (ii) such defense is, in Beneficiary's
judgment, being actively and diligently conducted in good faith and by
appropriate proceedings. If Grantor elects to engage its own counsel to defend
the title of Trustee to the Mortgaged Property, Beneficiary shall have the
right to participate in the defense of said title and shall retain the right to
settle any such matter on terms and conditions satisfactory to Beneficiary. If,
at any time, Beneficiary determines in its good faith credit judgment that
Grantor is not actively and diligently conducting any defense of the title of
Trustee to the Mortgaged Property, Beneficiary shall have the right to take all
necessary and proper steps to defend such title, and following receipt of
notice that Beneficiary intends to defend such title, Grantor shall have no
further right to conduct or participate in any such defense of title and
Grantor will, in such event, reimburse Beneficiary for any costs or expenses
incurred in connection with any such defense of title.
2.03. All costs, expenses, and attorneys' fees incurred in performing and
complying with Grantor's covenants herein shall be borne solely by Grantor. If,
in pursuance of any covenants herein contained, Beneficiary shall pay out any
DEED OF TRUST -- Page 13
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money chargeable to Grantor, or subject to reimbursement by Grantor under the
terms hereof, Grantor shall repay the same to Beneficiary immediately at the
place where the Note is payable, together with interest thereon at the Default
Rate (as defined in the Note) from and after the date of Beneficiary's making
such payment. The sum of each such payment shall be added to the Indebtedness
and thereafter shall form a part of the same and shall be secured by this Deed
of Trust and by subrogation of Beneficiary to all the rights of the person,
corporation, or body politic receiving such payment.
2.04. Grantor, or Grantor's heirs, personal representatives, successors or
assigns, shall not have or assert, and do hereby waive to the full extent
permitted by law, any right, under any statute or rule of law pertaining to the
marshalling of assets, a sale in inverse order of alienation, the exemption of
homestead, the administration of estate of decedents, or other matter whatever,
to defeat, reduce or affect the lien, security interest and rights of
Beneficiary under the terms hereof to a sale of the Mortgaged Property for the
collection of the Indebtedness (without any prior or different resort for
collection), or the right of Beneficiary, under the terms hereof, to the
payment of the Indebtedness out of the proceeds of sale of the Mortgaged
Property in preference to every other person and claimant whatever.
2.05. In the event that there be a trustee's, sale hereunder, and, if at
the time of such sale, Grantor, or Grantor's heirs, personal representatives,
successors or assigns, is occupying the Mortgaged Property so sold, each and
all shall immediately become the tenant of the purchaser at such sale, which
tenancy shall be a tenancy from day to day, terminable at the will of either
tenant or landlord, at a reasonable rental per day based upon the value of said
property, such rental to be due daily to the purchaser. An action of forcible
entry and detainer and any other legal proceedings may be brought if the tenant
holds over after a demand in writing for possession of any of the Mortgaged
Property; and this Deed of Trust and trustee's deed shall constitute the lease
and agreement under which the tenant's possession arose and continued.
2.06. The covenants herein contained shall inure to the benefit of
Beneficiary and Trustee, their respective heirs, personal representatives,
successors and assigns, and shall be binding upon the respective heirs,
personal representatives, successors and assigns of Grantor, but nothing in
this paragraph shall constitute an authorization for Grantor to sell, transfer,
lease or in any way dispose of
DEED OF TRUST -- Page 14
<PAGE> 15
the Mortgaged Property or any part thereof if otherwise prohibited by any of
the terms hereof.
ARTICLE III: DEFAULT AND REMEDIES
3.01 The term "Default" or "Event of Default" as used in this Deed of Trust
shall mean the occurrence of one or more of the following:
A. The occurrence of any "Event of Default", as such term is defined
in the Loan Agreement (as hereinafter defined); or
B. Any representation or warranty made by Grantor in, under or
pursuant to this Deed of Trust or any documents executed in connection
herewith or therewith proves to be false, erroneous or misleading in any
material respect; or
C. Grantor fails to perform, observe or keep any covenant, agreement
or condition set forth in this Deed of Trust and such failure is not cured
to Beneficiary's satisfaction within thirty (30) days after the occurrence
of Grantor's failure to so perform, observe or keep any such covenant,
agreement or condition; or
D. The Mortgaged Property or any property owned by a person liable for
payment of the Indebtedness, or any portion thereof, is placed under
control or in, the custody of any court or receiver; or
E. The holder of any lien or security interest on the Mortgaged
Property (without implying Beneficiary's consent to the existence, placing,
creating or permitting of any such lien or security interest) institutes
foreclosure or other proceedings for the enforcement of its remedies
thereunder; or
F. Any involuntary change in ownership of the Mortgaged Property, in
whole or in part; or
G. Any sale, lease, exchange, assignment, conveyance, transfer of
possession or other disposition of the Mortgaged Property or any interest
therein or any part thereof by Grantor to any party whatsoever without the
prior written consent of Beneficiary; or
H. If title of Grantor to any or all of the Mortgaged Property or the
status of the Mortgage as a first and prior lien and security interest on
the Mortgaged Property shall be challenged or endangered by
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<PAGE> 16
any party whatsoever, and Grantor shall fail to cure the same upon
demand by Beneficiary; or
I. Grantor abandons any of the Mortgaged Property.
Upon the occurrence of any Event of Default, Beneficiary, at Beneficiary's
option, and without notice of intention to accelerate, notice of acceleration
or notice of any kind or nature whatsoever, demand or presentment, all of which
are hereby expressly waived by Grantor, may, to the extent permitted by the
documents executed by Grantor or by law, declare the entire unpaid indebtedness
immediately due and payable, whereupon it shall be so due and payable, and may
exercise all rights and remedies granted hereunder or in any other instrument
securing payment of the Indebtedness.
3.02. In addition, upon the occurrence of an Event of Default, Beneficiary
shall have the option, without declaring the entire Indebtedness due, to
proceed with foreclosure in satisfaction of such Default either through the
courts or by directing Trustee or Trustee's successors in trust to proceed as
if under a full foreclosure, conducting the sale as hereinafter provided. Such
sale may be made subject to the unmatured part of the Note or other
Indebtedness without any effect on the unmatured portion of the Indebtedness,
but as to such unmatured portion of the Indebtedness, this Deed of Trust shall
remain in full force and effect just as though no sale had been made under the
provisions of this paragraph. In addition, several sales may be made hereunder
without exhausting the right of sale for any unmatured portion of the
Indebtedness, it being the intention of the parties hereto to provide for a
foreclosure and sale of the security for any matured portion of the
Indebtedness without exhausting the power to foreclose and to sell the security
for any other portion of the Indebtedness whether matured at the time or
subsequently maturing. An assignee holding any installment or part of any
installment of the Note or other portion of the Indebtedness shall have the
same powers as are hereby conferred on Beneficiary to proceed with foreclosure
on a matured installment or installments, and also to request Trustee or
successors in trust to sell the Mortgaged Property or any part thereof; but if
said assignee forecloses or causes a sale to be made to satisfy any
installment, part of an installment, or installments, then such foreclosure or
sale shall be made subject to all of the terms and provisions hereof with
respect to the unmatured part of the Note and other portions of the
Indebtedness owned by Beneficiary.
3.03. Upon the occurrence of an Event of Default, Grantor hereby authorizes
and empowers Trustee, and each and all of Trustee's successors in this trust,
at any time thereafter, at the request of Beneficiary (which request is
DEED OF TRUST -- Page 16
<PAGE> 17
hereby conclusively presumed) to sell at public vendue the Mortgaged Property
or any part thereof, or any interest therein, to the highest bidder, for cash,
at the door of the County Courthouse of the county in Texas in which the
property to be sold or any part thereof is situated, between the hours of 10:00
a.m. and 4:00 p.m. of the first Tuesday of any month, after advertising the
time, place and terms of said sale, and the property to be sold (in this
Article 3.03 called the "Posted Mortgaged Property"), by posting (or by having
any person acting for Trustee post), for at least twenty-one (21) days
preceding the date of the sale, written notice of the proposed sale at the
Courthouse door of said county in which the Posted Mortgaged Property is
situated and by filing a copy of the written notice in the office of the county
clerk in the county in which the sale is to be made at least twenty-one (21)
days preceding the date of the sale. If the Posted Mortgaged Property is in
more than one county, one such notice of sale shall be posted at the Courthouse
door and filed with the county clerk of each county in which part of the Posted
Mortgaged Property is situated and the Posted Mortgaged Property may be sold at
the courthouse door of any one of such counties, and the notice so posted and
filed shall designate in which county the Posted Mortgaged Property shall be
sold; in addition to giving such notices, Beneficiary (or any person acting for
Beneficiary) shall at least twenty-one (21) days preceding the date of the sale
serve written notice of the proposed sale by certified mail, return receipt
requested, on each debtor obligated to pay the Indebtedness according to
records of Beneficiary. Service of such notice shall be completed upon deposit
of the notice, enclosed in a postpaid wrapper, properly addressed to such
debtor at said debtor's most recent address as shown by the records of
Beneficiary, in a post office or official depository under the care and custody
of the United States Postal Service. The affidavit of any person having
knowledge of the facts to the effect that such service was completed shall be
prima facie evidence of the fact of service. Grantor agrees that no notice of
any sale other than as set out in this paragraph need be given by Trustee,
Beneficiary or any other person. Grantor designates as Grantor's address for
the purposes of such notice, the address set out below opposite Grantor's
signature, and each other debtor, if any, obligated to pay the Indebtedness
agrees that such address shall likewise constitute such other debtor's address
for such notice, unless a different address is designated by such other debtor;
no change of such address or designation of a different address shall be
binding on Beneficiary until thirty (30) days after Beneficiary has received
notice of such change sent to Beneficiary by certified mail postage prepaid,
return receipt requested, addressed to Beneficiary at the address for
Beneficiary set out herein (or to such other address as Beneficiary may have
designated by notice given as above provided to Grantor and
DEED OF TRUST -- Page 17
<PAGE> 18
such other debtors). Any change of address of Beneficiary shall be effective
three (3) business days after written notice thereof addressed to Grantor and
sent by regular United States mail, postage prepaid has been deposited in the
care and custody of the United States Postal Service. Grantor authorizes and
empowers Trustee, and each and all of Trustee's successors in this trust, to
sell the Posted Mortgaged Property, or any part thereof (which partial sale
shall be governed by Article 3.08 hereof) or any interest therein, as an
entirety or in parcels, by one sale or by several sales held at one time or at
different times as the Trustee shall deem advisable at the time of sale, and to
execute and deliver to the purchaser or purchasers thereof good and sufficient
deed or deeds of conveyance thereof and bills of sale with covenants of general
warranty binding on Grantor and Grantor's heirs, personal representatives,
successors and assigns. Trustee making such sale shall receive the proceeds
thereof and shall apply the same as follows: (i) Trustee shall pay, in addition
to the attorneys' fees authorized in the Note, the reasonable expense of
executing this trust, including a commission to Trustee of five percent (5%) of
the gross proceeds of the sale; (ii) after paying such expenses, Trustee shall
pay so far as may be possible the Indebtedness, discharging first that portion
of the Indebtedness arising under the covenants or agreements herein contained
and not evidenced by the Note; (iii) Trustee shall pay the residue, if any, to
Grantor, Grantor's respective heirs, personal representatives, successors or
assigns. Payment of the purchase price to Trustee shall satisfy the obligation
of the purchaser at such sale therefor, and such purchaser shall not be bound
to look after the application thereof.
3.04. Grantor hereby ratifies and confirms any and all acts that Trustee,
or Trustee's successor or successors in this trust, shall do lawfully by virtue
hereof. Grantor hereby agrees, on behalf of Grantor and of Grantor's respective
heirs, personal representatives, successors and assigns, that the recitals
contained in any deed or deeds or other instrument executed in due form by any
Trustee or substitute trustee, acting under the provisions of this instrument,
shall be the prima facie evidence of the facts recited, and that it shall not
be necessary to prove in any court, otherwise than by such recitals, the
existence of the facts essential to authorize the execution and delivery of
such deed or deeds or other instrument and the passing of title thereby, and
all prerequisites and requirements of any sale or sales shall be conclusively
presumed to have been performed, and all persons subsequently dealing with the
Mortgaged Property purported to be conveyed by such deed or deeds or other
instrument, including without limitation, the purchaser or purchasers thereof,
shall be fully protected in relying upon the truthfulness of such recitals.
Trustee or
DEED OF TRUST -- Page 18
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any successor Trustee acting in accordance with the terms hereof shall not be
personally liable for any action taken pursuant hereto.
3.05. Beneficiary may bid and being the highest bidder therefor, become the
purchaser of any or all of the Mortgaged Property at any trustee's or
foreclosure sale hereunder and shall have the right to credit the amount of the
bid upon the amount of the Indebtedness, in lieu of cash payment.
3.06. The purchaser at any trustee's or foreclosure sale hereunder may
disaffirm any easement granted, or lease, or agreement made, in violation of
any provision of this Deed of Trust, and may take immediate possession of the
Mortgaged Property free from, and despite the terms of, such grant of easement
and lease or agreement.
3.07. In the event of default by Grantor as set out in Article 3.01.
Beneficiary may, at Beneficiary's option, enter upon and take exclusive
possession of the Mortgaged Property and thereafter manage, use, lease and
otherwise operate same in such manner and by and through such persons, objects
or employees as it may deem proper and necessary. Beneficiary shall be
likewise entitled to possession of all books and records of Grantor that relate
to the Mortgaged Property. The rights of Beneficiary under this paragraph may
be enforced through an action for forcible entry and detainer or any other
means authorized by law. Any and all rents or other issues or profits received
by Beneficiary shall be accounted for in the manner provided for in Article
2.01(K) hereof.
3.08. The sale or sales by Trustee of less than the whole of the Mortgaged
Property shall not exhaust the power of sale herein granted, and Trustee is
specifically empowered to make successive sale or sales under such power until
the whole of the Mortgaged Property shall be sold; and if the proceeds of such
sale or sales of less than the whole of such Mortgaged Property shall be less
than the aggregate of the Indebtedness and the expense of executing this trust,
this Deed of Trust and the lien, security interest and assignment hereof shall
remain in full force and effect as to the unsold portion of the Mortgaged
Property just as though no sale or sales had been made; provided, however, that
Grantor shall never have the right to require sale or sales of less than the
whole of the Mortgaged Property, but Beneficiary shall have the right, at its
sole election, to request Trustee to sell less than the whole of the Mortgaged
Property. If default is made hereunder, the holder of the Indebtedness or any
part thereof on which the payment is delinquent shall have the option to
proceed with foreclosure in satisfaction of such item either
DEED OF TRUST -- Page 19
<PAGE> 20
through judicial proceedings or by directing the Trustee to proceed as if under
a full foreclosure, conducting the sale as herein provided without declaring
the entire Indebtedness due, and if sale is made because of default of an
installment, or part of an installment, such sale may be made subject to the
unmatured part of the Indebtedness; and it is agreed that such sale, if so
made, shall not in any manner affect the unmatured part, but as to such
unmatured part, this Deed of Trust shall remain in full force and effect as
though no sale had been made hereunder. Several sales may be made hereunder
without exhausting the right of sale for any unmatured part of the
Indebtedness.
ARTICLE IV: SUBSTITUTE AND SUCCESSOR TRUSTEE
4.01. If the Trustee shall die or become disqualified from acting in the
execution of this trust, or shall fail or refuse to execute the same when
requested by Beneficiary so to do, or if, for any reason, Beneficiary shall
prefer to appoint a substitute trustee to act instead of the herein named
Trustee, Beneficiary shall have full power to appoint, at any time by written
instrument, a substitute trustee, and, if necessary, several substitute
trustees in succession, who shall succeed to all the estate, rights, powers and
duties of Trustee named herein, and no notice of such appointment need be given
to Grantor or to any other person or filed for record in any public office.
Such appointment may be executed by any agent of Beneficiary and, if
Beneficiary is a corporation, such appointment shall be conclusively presumed
to be executed with authority and shall be valid and sufficient without proof
of any action by the board of directors or any executive officer of the
corporation.
ARTICLE V: DEFEASANCE
5.01. All of the covenants and agreements of Grantor herein shall survive
the execution and delivery of this document and shall continue in force until
the Indebtedness is paid in full and a written release hereof is executed by
Beneficiary. Accordingly, if Grantor shall perform faithfully each and all of
the covenants and agreements herein contained, then, and then only, this
conveyance shall become null and void and shall be released in due form, upon
Grantor's written request and at Grantor's expense. No release of this
conveyance or the lien thereof shall be valid unless executed by Beneficiary.
ARTICLE VI: SECURITY AGREEMENT
6.01. To further secure the Indebtedness, Grantor hereby grants a security
interest to Beneficiary in and to all the Fixtures (all of the Fixtures and the
proceeds thereof
DEED OF TRUST -- Page 20
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being herein called the "Collateral"), provided, however, (a) the mention of
proceeds of collateral herein shall not be construed as an authorization for
the sale or surrender by Grantor of Collateral and (b) Collateral as used in
this Deed of Trust shall be included in the term "Mortgaged Property" when used
herein. This document shall constitute a security agreement as well as a
mortgage and deed of trust. The following applies with respect to Collateral:
A. In addition to and cumulative of any other remedies granted in this
Deed of Trust to Beneficiary, Beneficiary may, upon default hereunder,
proceed under Chapter 9 of the Texas Business and Commerce Code as now
adopted and existing and as it may hereafter be amended or succeeded
(hereinafter called "Uniform Commercial Code") as to all or any part of the
Collateral and shall have and may exercise with respect to all or any part
of the Collateral all of the rights, remedies and powers of a secured party
under the Uniform Commercial Code, including, without limitation, the right
and power to repossess, retain and to sell, at public or private sale or
sales, or otherwise dispose of, lease or utilize the Collateral or any part
thereof and to dispose of the proceeds in any manner authorized or
permitted under the applicable provisions of the Uniform Commercial Code,
and to apply the proceeds thereof toward payment of Beneficiary's
attorneys' fees and other expenses and costs of pursuing, searching for,
receiving, taking, keeping, storing, advertising, and selling the
Collateral thereby incurred by Beneficiary, and toward payment of the
Indebtedness in such order and manner as Beneficiary may elect consistent
with the provisions of the Uniform Commercial Code. Nothing in this Article
VI shall be construed to impair or limit any other right or power to which
Beneficiary may be entitled at law or in equity.
B. Among the rights of Beneficiary upon default and acceleration of
the Indebtedness pursuant to the provisions hereof, and without limitation,
Beneficiary shall have the right (but not the obligation), without being
deemed guilty of trespass and without liability for damages thereby
occasioned (i) to enter upon any premises where the Collateral may be
situated and take possession of the Collateral, or render it unusable, or
dispose of the Collateral on Grantor's premises, and Grantor agrees not to
resist or to interfere, and (ii) to take any action deemed necessary or
appropriate or desirable by Beneficiary at Beneficiary's option and in
Beneficiary's discretion, to repair, refurbish or otherwise prepare the
Collateral for sale, lease or other use or disposition as herein
authorized. Beneficiary may, at Beneficiary's discretion, require Grantor
to assemble the Collateral
DEED OF TRUST -- Page 21
<PAGE> 22
and make it available to Beneficiary at a place designated by
Beneficiary that is reasonably convenient to both parties.
C. Beneficiary shall give Grantor notice, by certified mail, postage
prepaid, of the time and place of any public sale of any of the Collateral
or of the time after which any private sale or other intended disposition
thereof is to be made by sending notice to Grantor at the address of
Grantor as specified below at least five (5) days before the time of the
sale or other disposition, which provisions for notice Grantor and
Beneficiary agree are reasonable; provided, however, that nothing herein
shall preclude Beneficiary from proceeding as to both real and personal
property in accordance with Beneficiary's rights and remedies in respect to
real property as provided in the Uniform Commercial Code, and without any
notice to Grantor except for the notices provided for in Article 3.03
hereof.
D. To the extent such may now or hereafter be permitted under Texas
law, Beneficiary is authorized to execute and file financing statements and
continuation statements under the Uniform Commercial Code with respect to
the Collateral without joinder of Grantor in such execution or filing.
Grantor shall execute and deliver to Beneficiary such financing statements,
continuation statements and other documents relating to the Collateral or
any portion thereof as Beneficiary may reasonably request from time to time
to preserve and maintain the priority of the security interest created by
this Deed of Trust and shall pay to Beneficiary on demand any expenses and
attorneys' fees incurred by Beneficiary in connection with the preparation,
execution, filing and perfection and continuation of the liens and security
interest of this Deed of Trust and of any financing statements,
continuation statements, partial releases, termination statements or other
documents necessary or desirable to continue or confirm Beneficiary's
security interest, or any modification thereof and in connection with any
Uniform Commercial Code searches performed by Beneficiary. This document,
and any carbon, photographic or other reproduction of this document may be
filed by Beneficiary and shall be sufficient as a financing statement. All
or part of the Collateral is or is to become fixtures on the real estate
constituting a portion of the Mortgaged Property, but this statement shall
not impair or limit the effectiveness of this document as a security
agreement or financing statement for other purposes, and without limitation
of any other provision hereof, this Deed of Trust shall constitute a
fixture financing statement and, as such, shall be filed for
DEED OF TRUST -- Page 22
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record in the real estate records of the county in which the Land is
located. Grantor shall not change Grantor's name without the prior express
written consent of Beneficiary. The name of the record owner of the Land is
the party or parties defined herein as Grantor.
E. Grantor agrees that, except for the security interest granted
hereby in the Collateral, Grantor is the owner of the Collateral free of
any adverse claim, security interest or encumbrance, and Grantor shall
defend the Collateral against all claims and demands of any person at any
time claiming the same or any interest therein. Grantor has not heretofore
signed any financing statement and no financing statement signed by Grantor
is now on file in any public office except those statements, true and
correct copies of which have been delivered to Beneficiary. So long as any
amount remains unpaid on the Indebtedness, Grantor shall not execute and
there shall not be filed in any public office any such financing statement
or statements affecting the Collateral other than financing statements in
favor of Beneficiary hereunder.
F. The security interest granted herein shall not be construed or
deemed to constitute Beneficiary or Trustee as a trustee or mortgagee in
possession of the Mortgaged Property so as to obligate Beneficiary or
Trustee to lease the Mortgaged Property or attempt to do the same, or to
take any action, incur any expenses or perform or discharge any obligation,
duty or liability with respect to the Mortgaged Property or any part
thereof or otherwise.
G. Grantor's address is as hereinbelow set forth and Beneficiary's
address is as hereinabove set forth. Either party may notify the other of a
new address in the manner specified in Article 3.03 above.
ARTICLE VII: MISCELLANEOUS
7.01. In the event Beneficiary shall elect to invoke any of the rights or
remedies provided for herein, but shall thereafter determine to withdraw or
discontinue same for any reason, Beneficiary shall have the unqualified right
to do so, whereupon all parties shall be automatically restored to their
respective positions regarding the Indebtedness and this document as shall have
existed prior to the invocation of Beneficiary's rights hereunder and the
rights, powers and remedies of Beneficiary hereunder shall be and remain in
full force and effect.
DEED OF TRUST -- Page 23
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7.02. Any part of the Mortgaged Property may be released by Beneficiary
without affecting Beneficiary's liens, security interests and rights against
the remainder of the Mortgaged Property. The lien, security interest and rights
hereby granted shall not affect or be affected by any other security taken or
acquired by the Beneficiary for the Indebtedness or any part thereof. The
taking of additional security, or the extension or renewal of the Indebtedness
or any part thereof, shall at no time release or impair the lien, security
interest and rights granted hereby, or affect the liability of any endorser,
guarantor or surety, or improve the right of any junior lien holder; and this
Deed of Trust, as well as any instrument given to secure any renewal or
extension of the Indebtedness, or any part thereof, shall be and remain a first
and prior lien and security interest on all of the Mortgaged Property not
expressly released, until the Indebtedness is completely paid.
7.03. The invalidity, or unenforceability in particular circumstances, of
any provision of this Deed of Trust shall not extend beyond such provision or
such circumstances and no other provision of this instrument shall be affected
thereby. It is the intention of the parties hereto to comply with the
applicable usury laws; accordingly; it is agreed that notwithstanding any
provisions to the contrary in the Note or any instrument or instruments
evidencing the Indebtedness, in this Deed of Trust or in any of the documents
or instrument or instruments securing payment of the Indebtedness or otherwise
related thereto, in no event shall the Note or such documents require the
payment or permit tile collection of interest in excess of the maximum amount
permitted by such laws. If any such excess of interest is contracted for,
charged or received, under the Note or any instrument evidencing the
Indebtedness, under this Deed of Trust or under the terms of any of the other
documents securing payment of the Indebtedness or otherwise relating thereto,
or in the event the maturity of any of the Indebtedness is accelerated in whole
or in part, or in the event that all or part of the principal or interest of
the Indebtedness shall be prepaid, so that under any of such circumstances, the
amount of interest contracted for, charged or received, under the Note or any
instrument or instruments evidencing the Indebtedness, under this Deed of Trust
or under any of the instrument or instruments securing payment of the
Indebtedness or otherwise relating thereto, on the amount of principal actually
outstanding from time to time under the Note and other instrument or
instruments evidencing the Indebtedness, shall exceed the maximum amount of
interest permitted by the applicable usury laws, now or hereafter enacted, then
in any such event (a) the provisions of this paragraph shall govern and
control, (b) neither Grantor nor any other person or entity now or hereafter
liable for the
DEED OF TRUST -- Page 24
<PAGE> 25
payment of the Note or any instrument evidencing the Indebtedness shall be
obligated to pay the amount of such interest to the extent that it is in excess
of the maximum amount of interest permitted by the applicable usury laws, now
or hereafter enacted, (c) any Such excess that may have been collected shall be
either applied as a credit against the then unpaid principal amount hereof or
refunded to Grantor, at Beneficiary's option, and (d) the effective rate of
interest shall be automatically reduced to the maximum lawful contract rate
allowed under the applicable usury laws, now or hereafter enacted. It is
further agreed that without limitation of the foregoing, all calculations of
the rate of interest contracted for, charged or received under the Note, or any
instrument evidencing the Indebtedness, under this Deed of Trust or under such
other documents that are made for the purpose of determining whether such rate
exceeds the maximum lawful contract rate, shall be made, to the extent
permitted by the applicable usury laws, now or hereafter enacted, by
amortizing, prorating, allocating and spreading in equal parts during the
period of the full stated term of the loans evidenced by the Note or the
instrument or instruments evidencing the Indebtedness, all interest at any time
contracted for, charged or received from Grantor or otherwise by Beneficiary in
connection with such loans.
7.04. It is expressly agreed that (i) no waiver of any default on the part
of Grantor or breach of any of the provisions of this Deed of Trust shall be
considered a waiver of any other or subsequent default or breach, and no delay
or omission in exercising or enforcing the rights and powers herein granted
shall be construed as a waiver of such rights and powers, and likewise no
exercise or enforcement of any rights or powers hereunder shall be held to
exhaust such rights and powers, and every such right and power may be exercised
from time to time; (ii) any failure by Beneficiary to insist upon the strict
performance by Grantor of any of the terms and provisions hereof shall not be
deemed to be a waiver of any of the terms and provisions hereof, and
Beneficiary, notwithstanding any such failure, shall have the right thereafter
to insist upon the strict performance by Grantor of any and all of the terms
and provisions of this Deed of Trust; (iii) neither Grantor nor any other
person now or hereafter obligated for the payment of the whole or any part of
said indebtedness shall be relieved of such obligation by reason of the failure
of Beneficiary or Trustee to comply with any request of Grantor, or of any
other person so obligated, to take action to foreclose this Deed of Trust or
otherwise enforce any of the provisions of this Deed of Trust or of any
obligations secured by this Deed of Trust, or by reason of the release,
regardless of consideration, of the whole or any part of the security held for
the Indebtedness, or by reason of the subordination in whole or in part by
Beneficiary of the lien,
DEED OF TRUST -- Page 25
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security interests or rights evidenced hereby, or by reason of any agreement or
stipulation with any subsequent owner or owners of the Mortgaged Property
extending the time of payment or modifying the terms of the Indebtedness or
this Deed of Trust without first having obtained the consent of Grantor or such
other person, and in the latter event, Grantor and all such other persons shall
continue liable to make such payments according to the terms of any such
agreement of extension or modification unless expressly released and discharged
in writing by Beneficiary; (iv) regardless of consideration, and without the
necessity for any notice to or consent by the holder of any subordinate lien or
security interest on the Mortgaged Property, Beneficiary may release the
obligation of anyone at any time liable for any of the Indebtedness or any part
of the security held for the Indebtedness and may extend the time of payment or
otherwise modify the terms of the Indebtedness and/or this Deed of Trust
without, as to the security or the remainder thereof, in anywise impairing or
affecting the lien or security interest of this Deed of Trust or the priority
of such lien or security interest, as security for the payment of the
Indebtedness as it may be so extended or modified, over any subordinate lien or
security interest; (v) the holder of any subordinate lien or security interest
shall have no right to terminate any lease affecting the Mortgaged Property
whether or not such lease be subordinate to this Deed of Trust; and (vi)
Beneficiary may resort for the payment of the Indebtedness to any security
therefor held by Beneficiary in such order and manner as Beneficiary may elect.
7.05. Capitalized terms used in this Deed of Trust but not otherwise
defined herein shall have the meanings ascribed to such terms in that certain
Loan Agreement dated March 31, 1995, by and between Grantor and Beneficiary
(herein called the "Loan Agreement"). Wherever used in this document, unless
the context clearly indicates a contrary intent or unless otherwise
specifically provided herein, the words "Deed of Trust" shall mean this Deed of
Trust, Security Agreement and Financing Statement and any supplement or
supplements hereto, the word "Grantor" shall mean "Grantor, Grantor's heir's,
personal representatives, successors and assigns, and/or subsequent owner or
owners of the Mortgaged Property", the word "Note" shall mean "Note secured by
this Deed of Trust and any renewals, extensions and rearrangements thereof",
the word "person" shall mean "an individual, corporation, trust, partnership or
unincorporated association", and the pronouns of any gender shall include the
other genders, and either the singular or plural shall include the other.
7.06. AGREEMENT FOR BINDING ARBITRATION. The parties agree to be bound by
the terms and provisions of the Arbitration Program (dated 9/l/92) attached to
the Loan Agreement and which is incorporated by reference herein and is
DEED OF TRUST -- Page 26
<PAGE> 27
acknowledged as received by the parties pursuant to which any and all disputes
shall be resolved by mandatory binding arbitration upon the request of any
party, as more fully specified in the Arbitration Program.
DEED OF TRUST -- Page 27
<PAGE> 28
Executed this 31st day of March, 1995.
-GRANTOR-
FOSTER GRANT GROUP, L.P.
By: Bonneau General, Inc.,
as General Partner
By: /s/ IAN ASHKEN
------------------------------------
Name: Ian Ashken
----------------------------------
Title: Chief Financial Officer
---------------------------------
Address of GRANTOR: 555 Theodore Fremd Avenue
Suite B-302
Rye, New York 10580
Address of BENEFICIARY: 1445 Ross Avenue, Suite 300,
Dallas, Texas 75202
Address of TRUSTEE: 1717 Main Street, Suite 2800,
Dallas, Texas 75201
THE STATE OF TEXAS )
)
COUNTY OF DALLAS )
This instrument was acknowledged before me on March 31 1995, by Ian Ashken,
the Chief Financial Officer of Bonneau General, Inc., a Delaware corporation,
the general partner of Foster Grant Group, L.P., a Delaware limited
partnership, on behalf of said partnership.
/s/ JAUVANEE CARPENTER
Notary Public
My Commission Expires:
(SEAL)
DEED OF TRUST -- Page 28
<PAGE> 1
EXHIBIT 10.24
[BEC GROUP, INC. LETTERHEAD]
December 5, 1996
Martin E. Franklin
BEC Group, Inc.
555 Theodore Fremd Avenue
Suite B-302
Rye, New York 10580
Dear Martin:
After several discussions, I believe you and I came to the following
agreement regarding my departure from the company. I have listed these below:
1) Continue in current role through 3/29/97. Bonus for 1996 as
per current arrangement. No bonus program in 1997.
2) Accrued PTO paid 3/29/97
3) Resign effective 3/29/97 with $350,000 severance payment and
full vesting of 200,000 options issued at $5.05 on 5/3/96. All
options to be exercised no later than 9/30/98.
4) If the 200,000 options in #3 above are at a market price of
$5.55 or less on 9/30/98, BEC Group will pay to me $100,000
cash, if I have not previously exercised these options.
5) Available by phone to assist with any transition item or
questions until 3/29/98.
6) Sign confidentiality agreement, but no non-compete or general
release
7) We will agree on a low-key information release toward
year-end. You and I will agree on wording.
8) You will provide an excellent reference for me.
If you are in agreement, please send me a letter to this effect.
Sincerely,
/s/ BILL
William T. Sullivan
<PAGE> 2
BEC GROUP, INC.
555 THEODORE FREMD AVENUE
SUITE B-302
RYE, NEW YORK 10580
TEL: (914) 967-9400
FAX: (914) 967-9405/7
E-MAIL: BECGroup.com
MARTIN E. FRANKLIN
CHAIRMAN OF THE BOARD
January 2, 1997
Mr. Bill Sullivan
BEC Group, Inc.
1601 Valley View Lane
Dallas, TX 75234
Dear Bill:
Thank you for your letter dated December 5, 1996. The Compensation Committee
has approved the terms of your departure from the company in line with the
points outlined in your letter, with the following changes:
Point 4 becomes: " If the 200,000 options in #3 above are not at or above a
market price of $6.00 per share for at least 20 days prior to 9/30/98, BEC
Group will pay me $100,000 in cash on 10/l/98. If the shares trade at or above
$6.00 for at least 20 days prior to 9/30/98 no additional payment will be due."
Point 7 becomes: "BEC Group will issue a mutually acceptable press release on
3/29/97 announcing my departure from the company."
New Point 9: "I will be proposed as a continuing board nominee at the 1997
annual meeting, but will receive no compensation for providing director
services unless proposed for re-election again at the shareholders meeting in
1998."
Bill, I look forward to working with you during the first quarter of 1997 and
as a director thereafter.
Yours sincerely,
/s/ MARTIN E. FRANKLIN
Martin E. Franklin
<PAGE> 1
EXHIBIT 21
LIST OF MATERIAL BEC SUBSIDIARIES
<TABLE>
<CAPTION>
Name State of
incorporation
<S> <C>
1. Bolle Inc. Delaware
2. Bolle America, Inc. Delaware
3. Optical Radiation Corporation Delaware
4. Optical Radiation Foreign Sales Corp. U.S. Virgin Islands
5. ORC Caribe California
6. ORC Management Corporation Delaware
</TABLE>
<PAGE> 1
EXHIBIT 24.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus
constituting part of the Registration Statement on Amendment No. 1 to Form S-3
(No. 333-18947) and in the Registration Statement on Form S-8 (No. 333-4562) of
BEC Group, Inc. of our report dated March 10, 1997 appearing on page 15 of this
Annual Report on Form 10-K.
PRICE WATERHOUSE LLP
Dallas, Texas
March 25, 1997
<PAGE> 1
EXHIBIT 24.2
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statement
on Form S-3 (No. 333-18947) and in the Registration Statement on Form S-8 (No.
333-4562) of BEC Group, Inc. of our report dated January 20, 1995, with respect
to the statements of operations, stockholders' equity, and cash flows of Bolle
America, Inc. for the year ended December 31, 1994, which report appears in the
December 31, 1996 Annual Report on Form 10-K of BEC Group, Inc.
KPMG PEAT MARWICK LLP
Denver, Colorado
March 25, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 2,475
<SECURITIES> 0
<RECEIVABLES> 12,175
<ALLOWANCES> 0
<INVENTORY> 17,075
<CURRENT-ASSETS> 36,831
<PP&E> 13,648
<DEPRECIATION> 0
<TOTAL-ASSETS> 79,531
<CURRENT-LIABILITIES> 35,654
<BONDS> 3,597
0
0
<COMMON> 176
<OTHER-SE> 7,428
<TOTAL-LIABILITY-AND-EQUITY> 79,531
<SALES> 66,996
<TOTAL-REVENUES> 66,996
<CGS> 37,805
<TOTAL-COSTS> 37,805
<OTHER-EXPENSES> 19,177
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,588
<INCOME-PRETAX> 7,426
<INCOME-TAX> 2,505
<INCOME-CONTINUING> 4,921
<DISCONTINUED> 77,835
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 82,756
<EPS-PRIMARY> 4.68
<EPS-DILUTED> 0
</TABLE>
