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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, 1997 OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
COMMISSION FILE NUMBER 001-14210
LUMEN TECHNOLOGIES, 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 APRIL 9, 1998 WAS $157,818,658, 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 APRIL 9, 1998 WAS 19,667,415 SHARES.
<PAGE>
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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LUMEN TECHNOLOGIES, INC.
(F/K/A BEC GROUP, INC.)
ANNUAL REPORT ON FORM 10-K
FOR THE YEAR ENDED DECEMBER 31, 1997
TABLE OF CONTENTS
PAGE
PART I
Item 1. Business.................................................. 4
Item 2. Properties................................................ 8
Item 3. Legal Proceedings......................................... 9
Item 4. Submission of Matters to a Vote of Security Holders....... 9
PART II
Item 5. Market for Registrant's Common Equity
and Related Stockholder Matters........................... 10
Item 6. Selected Financial Data................................... 11
Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations............. 13
Item 7A. Quantitative and Qualitative
Disclosure About Market Risk.............................. 17
Item 8. Financial Statements and Supplementary Data............... 18
Item 9. Changes In and Disagreements With Accountants
on Accounting and Financial Disclosure.................... 43
PART III
Item 10. Directors and Executive Officers of the Registrant........ 44
Item 11. Executive Compensation.................................... 46
Item 12. Security Ownership of Certain Beneficial
Owners and Management..................................... 52
Item 13. Certain Relationships and Related Transactions............ 54
PART IV
Item 14. Exhibits, Financial Statement Schedules,
and Reports on Form 8-K................................... 55
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PART I
ITEM 1. BUSINESS
GENERAL
Lumen Technologies, Inc., a Delaware corporation (the "Company" or
"Lumen"), is a manufacturer and marketer of products and systems for specialty
light source markets. On March 12, 1998, the Company completed the merger of
ILC Technology, Inc. ("ILC") into a wholly-owned subsidiary of the Company
(the "ILC Merger"), and on March 11, 1998 the Company consummated the Bolle
Spinoff (as defined below). Prior to March 12, 1998 the Company was known as
BEC Group, Inc. ("BEC"). The Company was incorporated on December 28, 1995,
under the name BEC Group, Inc., as a wholly owned subsidiary of Benson Eyecare
Corporation, a Delaware corporation ("Benson"). As a result of the ILC Merger
and the Bolle Spinoff (as defined below), the Company is presently positioned
to focus on its specialty lighting and related businesses. Although the
consummation of these transactions occurred after the end of the fiscal year
reported herein, the information set forth in this Annual Report on Form 10-K
is limited to the Company's continuing businesses as constituted as of the
date hereof, without descriptive narrative of discontinued operations.
Financial Statements included herein reflect the Bolle operations as
discontinued, but do not reflect the ILC Merger.
The Company was formed in connection with the Essilor 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 "BEC Spinoff"). The BEC Spinoff and merger of Essilor Acquisition
Corporation with and into Benson (the "Essilor Merger") occurred on May 3,
1996 (the "Effective Date"). On May 3, 1996, Benson also consummated the sale
to the Monsanto Company of the assets of its Orcolite ophthalmic lens
manufacturing operation (the "Asset Sale"). Prior to the BEC 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 Delaware
corporation, is a 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 Essilor Merger and Asset Sale and the sale of FGG
in December 1996, the Company had two core businesses: ORC Technologies, Inc.
("ORC"), which manufactures and distributes 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. On
July 10, 1997, the Company, through its then subsidiary Bolle Inc. ("Bolle")
acquired Holding B.F. ("Bolle France"), a French holding company owning the
Bolle(R) trademark and Bolle design and manufacturing rights worldwide,
together with certain additional distribution rights. The Company thereby
combined in Bolle worldwide rights to the Bolle(R) trademark and brand and the
associated design manufacturing rights, as well as a substantial worldwide
distribution network.
Effective March 11, 1998, the Company distributed to its stockholders
of record as of such date, on a pro rata basis, all of the Company's equity
interest in Bolle and the Bolle business (the "Bolle Spinoff"). The Company's
stockholders of record on that date received one share of Bolle common stock
for every three shares of the Company's common stock then held. In connection
with the Bolle Spinoff, the Company assigned to Bolle, and Bolle assumed, all
of the Company's business, assets and liabilities then existing, other than
those relating to the Company's specialty lighting business, ORC Electronics
Products and ORC Electroformed Products and certain additional assets and
liabilities retained by the Company. The Bolle operations are, for accounting
purposes, treated as discontinued operations in the consolidated financial
statements included herein.
On March 12, 1998, the Company effected the merger of ILC with and
into BILC Acquisition Corp., a wholly owned subsidiary of the Company (the
"ILC Merger") pursuant to the terms of an Agreement and Plan of
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Merger, dated as of October 30, 1997, as amended (the "ICL Merger Agreement").
ILC designs, develops, manufactures and markets high intensity lamps and
lighting products for the medical, industrial, aerospace, scientific,
entertainment and military industries. Effective October 30, 1997, the Company
also acquired a 30% common stock equity interest in Voltarc Technologies, Inc.,
a Delaware corporation ("Voltarc"), preferred stock convertible at any time by
Lumen into the additional number of shares to Voltarc's common stock which
would give the Company 40% of Voltarc's then outstanding common stock and an
option to acquire the remaining equity of Voltarc. Voltarc also is engaged in
the design, manufacture and distribution of specialty lighting products.
BUSINESS AND PRODUCTS
The Company conducts its core business primarily through its primary
subsidiaries, ORC and ILC which are involved in the design, manufacture and
distribution of specialty lighting products.
ORC's operations consist of three related businesses located at the
Company's facilities in Azusa, California: Lighting Products, Electronic
Products and Electroformed Products. ILC's operations are located at the
Company's facilities in Sunnyvale, California.
The Company's specialty lighting operations design, manufacture and
market lighting products for the medical, industrial, aerospace, scientific,
entertainment, cinema and military industries. Its products are used in a
variety of applications, including high intensity illumination systems and
mini-systems that incorporate lamps, optics and electronic systems. 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 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. The Company supports the worldwide cinema market with a
wide range of short-arc xenon lamps used in projectors and buildings, stadium
and theater lighting.
The Company's products include pulsed and direct current arc lamps
that are designed to satisfy a wide variety of laser and industrial
applications requiring rigorous, high-performance standards ("flashlamps");
Cermax(R) lamps, which are short arc xenon lamps that are optically
pre-aligned, encased in a safe ceramic body bonded to a metallized sapphire
window, and are capable of transmitting the full spectrum from infrared to UV
wavelengths and fully-encased and open frame power supplies, lamp holders,
fiber optic light sources and other equipment to support its Cermax(R) product
line; high intensity lamps for video projection utilizing the Company's
proprietary Daymax(R) and Cemax(R) technologies and, mercury xenon short arc
lamps which are used to expose patterns during the fabrication of
semiconductor products ("stepper lamps"). The Company's other products include
mercury capillary lamps, Daymax(R) metal halide lamps and products for the
aerospace and military markets.
The primary market for the Company's Cermax(R) product line is fiber
optic illumination for medical procedures such as endoscopy. The market for
Cermax(R) lightsources and related equipment used in endoscopy is composed of
two segments: a high-intensity or critical segment and a low-intensity or
non-critical segment. Critical endoscopy applications require high-intensity
Cermax(R) lightsources with specialized power supplies. The low-intensity
market is dominated by manufacturers of halogen lightsources. Ancillary
industrial uses for Cermax(R) lightsources include illuminating areas that are
difficult to inspect, such as nuclear reactors or jet engines; also analytical
instruments, and, spot UV curing lightsources. Daymax(R) lamps simulate stable
daylight conditions. These products are now used primarily in the
entertainment business. Applications include: indoor and outdoor lighting for
motion picture and television productions, high speed and special effects
lighting, concert and stadium lighting and theatrical lighting. The Company
also has developed a series of integral low-power metal halide lamps (less
than 500 watts) for commercial projection, stage and medical applications. The
Company also manufactures mercury capillary lamps using technology and
processes that are similar to those developed for stepper lamps. The primary
applications for mercury capillary lamps include the photolithography of grid
patterns on color television screens and printed circuit boards for computers.
In the aerospace market, the Company offers standard, modified and customer
systems covering the visible, infrared and UV spectrum to meet each space
lighting requirement. The Company is the only domestic manufacturer of space
lighting qualified to serve NASA
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and other government agencies in Japan and Europe. The Company's products for
the military market include infrared lamps used by the military on tanks and
aircraft to deflect offensive heat seeking missiles.
ORC Electronic Products manufactures photoexposure systems, including
the Opti-Beam(R) and ProForm(R) 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 a variety of industrial 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.
CUSTOMERS
The Company is not dependent upon a single customer or a few
customers, and no one customer of the Company accounts for more than 10% of
the Company's consolidated revenues. The Company serves a wide range of
customers in the medical, industrial and entertainment industries. The
Company's top 25 customers represent less than 40% of its specialty lighting
business. ORC Electronic Products sells capital equipment to international
technologically based customers. Its products sell for price points ranging
from $30,000 to in excess of $1.0 million and its customer base changes each
year.
SUPPLY AGREEMENTS
The Company does not have any significant supply agreements and most
materials used are available from more than one vendor. The Company continues
to identify and qualify alternate sources of supply.
MARKETING AND SALES
The Company markets and sells its products both to original equipment
manufacturers ("OEMs") through a direct sales force and also to end-users
through sales representatives and distributors. The Company's sales
organization includes regional sales managers and teams of market development
managers with global responsibilities aligned along specific markets such as
the semiconductor, video projection and medical markets. In addition, the
Company maintains customer service groups at its facilities in California and
Cambridge, England to provide sales and customer service support to its
customer base and network of domestic and foreign sales representatives and
distributors.
The Company's European sales office, which is located at the
facilities of Q-Arc in Cambridge, England, markets and sells the complete line
of lamp and equipment products and provides local customer support for
European customers.
MANUFACTURING
The Company has built substantial expertise in the fields of sealing
technology (ceramic-to-metal, quartz-to-metal, vacuum sealing), materials
research, plasma physics, electrical engineering, optoelectronics and
electrode technology. The manufacturing of most of lamp and power supply
products is labor and capital intensive, and accordingly, the labor force is
highly skilled and experienced.
The Company's specialty lighting facilities in California and in
Cambridge, England are all ISO 9002 certified. ISO certification ensures
customers that the Company's specialty lighting business has a quality system
that will result in continuous product quality improvement. It is a
recognition of a commitment to quality through all sections of the
organization.
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INTELLECTUAL PROPERTY
The Company holds several United States and foreign patents related
to the key features of several of its products and has several patent
applications pending in the United States. While these patents tend to enhance
the Company's competitive position, the Company believes that success depends
primarily upon its proprietary technological, engineering, production and
marketing skills and the high quality of its products. The names of several of
the Company's products are registered as trademarks in the United States
Patent and Trademark Office and in several other countries in which the
Company's products are sold. Registered trademarks include Opti-Beam(R),
ProForm(R), Cermax(R) and Daymax(R).
The Company's patents expire at various dates between 1998 and 2013.
There can be no assurance that any patents held by the Company will not be
challenged and invalidated, that patents will issue from any of the Company's
pending patent applications or that any claim allowed from existing or pending
patents will be of sufficient scope or strength to provide meaningful
protection or any commercial advantage to the Company. Competitors also may be
able to design around the Company's patents.
COMPETITION
The markets in which the Company competes are different but parallel
in that all of the Company's operations are affected by changes and growth in
technological, specifically optics related, industries.
The Company's specialty lighting businesses compete on the basis of
product quality performance, competitive pricing, applications engineering,
superior customer service, reputation and price. The Company competes in many
markets in which technology develops and improves rapidly, stimulating the
Company to enhance the capability of its products and technologies.
Competitors consist of both large and small companies located in the United
States, Japan and Europe. They include EG&G, Inc., Osram GmbH, Philips
Electronics N.V., Ushio and Koto. In many market segments, the competition has
established the benchmark for product acceptance at a very high level, which
requires the Company to improve continuously all phases of its processes for
customer satisfaction. The Company believes that by exploiting market areas in
which the Company has technological, manufacturing and marketing strengths,
the Company can compete effectively. At the same time, by focusing its product
development and acquisition activities in these areas, the Company believes
that it can defend its strengths and maintain its leadership in selected
markets.
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 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 Electronics
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.
EMPLOYEES
The Company employs approximately 1,210 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.
ENVIRONMENTAL MATTERS
Compliance with environmental laws and regulations has not had a
material effect on BEC's earnings to date and is not expected to have a
material effect in the future, nor has BEC been required to undertake
significant capital expenditures to meet environmental regulations. It is
management's view at this time that compliance with
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federal, state and local provisions regulating the discharge of material 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.
The Company was named as a "Potentially Responsible Party" with
regard to pollution contained in the aquifer below the Company's Azusa
facility. After further technical and legal review, the Environmental
Protection Agency informed the Company that it will take no action against the
Company with respect to the site and will not require the Company to
participate with the 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 a nominal 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.
For additional data describing the Registrant's operations, see
"Management's Discussion and Analysis of Financial Conditions and Results of
Operations."
ITEM 2. PROPERTIES
As of March 31, 1998, the locations of the Company's principal facilities are
as follows:
<TABLE>
<CAPTION>
APPROXIMATE SQUARE
LOCATION PRINCIPAL USE/USER FEET OF SPACE
- ---------------------------------------------------------------------------------------------------
<S> <C> <C>
OWNED:
Azusa, CA Office and manufacturing facilities/ORC 188,750
Sunnyvale, CA Office and manufacturing facilities/ILC 97,000
Santa Clara, CA Office and manufacturing facilities/ORC 20,000
Cambridge, England Office and manufacturing facilities/Q-Arc 36,000
LEASED:
Rye, NY Principal executive office of the Company 3,000
Santa Clara, CA Office and manufacturing facilities/ILC 7,700
</TABLE>
The Company's facilities are substantially fully utilized; however,
Q-Arc presently occupies approximately two-thirds of the facility in
Cambridge, England, leaving approximately 11,000 square feet available for
future expansion. 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.
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ITEM 3. LEGAL PROCEEDINGS
The Company believes that there are no material pending legal
proceedings to which it is a party or to which any of its property is subject.
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 1997.
At a Special Meeting of the Stockholders held on March 11, 1998, the
Company's Stockholder's approved the following proposals, by the votes
indicated:
<TABLE>
<CAPTION>
PROPOSAL VOTE:
YES NO ABSTAIN
<S> <C> <C> <C> <C>
1. To ratify and confirm the ILC Merger and
related issuance of shares of common stock 11,492,429 56,757 286,757
2. To effect a one-for-two reverse split of
the Company's common stock 11,607,789 130,687 309,625
3. To elect Messrs. Augur, Baumgartner, Capra
and Clairmont Directors of the Company
(votes given are in respective order) 11,715,520 -0- 332,501
11,556,371 -0- 481,730
11,729,416 -0- 318,685
11,730,480 -0- 317,613
4. To effect the change of the Company's name
to "Lumen Technologies, Inc." 11,696,885 63,663 287,553
5. To ratify and approve an amendment of the
Company's 1996 Incentive Stock Plan 10,762,830 563,332 509,781
Martin E. Franklin, Ian G.H. Ashken, David L. Moore, William T.
Sullivan and Nora A. Bailey continued to serve as directors of the Company
after the ILC merger.
</TABLE>
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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 on May 3, 1996,
the date of the BEC Spinoff and Essilor Merger. The Company's common stock is
listed on The New York Stock Exchange. Until March 12, 1998, the Company's
common stock was listed under the symbol "EYE." Since March 12, 1998, the
Company's common stock has been listed under the symbol "LNM".
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.
<TABLE>
<CAPTION>
FISCAL YEAR HIGH LOW
----------- ---- ---
<S> <C> <C>
1997
Fourth Quarter....................................... $5.13 $4.25
Third Quarter........................................ $4.63 $4.25
Second Quarter....................................... $5.38 $4.25
First Quarter........................................ $6.13 $4.94
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) The Company's common stock commenced trading publicly on May 3, 1996.
Common stock of the Company's predecessor, Benson, also previously
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 Essilor
Merger and BEC Spinoff, each Benson stockholder received one share of
the Company's common stock for each two shares of Benson common stock
then held.
As of April 8, 1998, there were approximately 1,000 stockholders of
record of the Company's common stock (representing approximately 7,000
beneficial owners of the Company's common stock). No dividends have ever been
declared on the Company's common stock, other than in connection with the
distribution of shares of Bolle common stock in connection with the Bolle
Spinoff and common stock of the Company in connection with the BEC Spinoff.
However, for accounting purposes, cash proceeds received by the holders of
Benson common stock in connection with the Essilor Merger were reflected as
dividends. The Company has no intention of paying dividends in the foreseeable
future. Additionally, the terms of the Company's senior debt agreement
prohibit payment of any cash dividends. 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.
Pursuant to the terms of the Amended and Restated Share Purchase
Agreement, dated July 9, 1997, by and among Bolle, on the one hand and Mr.
Robert Bolle, Mr. Maurice Bolle, Mr. Franck Bolle, Ms. Patricia Bolle
Pasaquay, Ms. Brigitte Bolle and Ms. Christelle Roche (collectively, the
"Sellers") on the other hand, among other things, the Company issued (i)
warrants to the Sellers to purchase an aggregate of up to 2,130,000 shares of
Common Stock at an exercise price of $3.10 per share, subject to adjustment,
and (ii) 10,000 shares of Series A Preferred Stock of the Company having a
value of approximately $9.3 million. The issuance of such securities was
exempt from the registration provisions of the Securities Act of 1933 pursuant
to Section 4(2) thereof and the rules promulgated thereunder, and the
securities issued in connection therewith were deemed to be restricted
securities. No underwriter was engaged in connection with such sales of
securities.
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ITEM 6. SELECTED FINANCIAL DATA
SELECTED HISTORICAL FINANCIAL DATA
(IN THOUSANDS EXCEPT FOR PER SHARE DATA)
The following selected historical combined financial data have been
derived from audited historical financial statements and should be read in
conjunction with the unaudited interim historical financial statements of the
Company. All per share and per share information has been restated to give
effect to the May 3, 1996 and March 11, 1998 reverse stock splits.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------
Actual Actual Actual Actual Actual
------ ------ ------ ------ ------
1997 1996(2) 1995 1994(1)(2) 1993(3)
---- ------- ---- ---------- -------
<S> <C> <C> <C> <C> <C>
Statement of Operations Data:
Net Sales ........................................................... $ 48,128 $ 42,574 $ 41,244 $ 39,047 $ 43,762
Cost of sales ....................................................... 30,603 25,676 23,725 14,405 14,417
-------- -------- -------- -------- --------
Gross profit ........................................................ 17,525 16,898 17,519 24,642 29,345
Selling, general and administrative expenses ........................ 10,905 10,020 13,820 25,159 31,936
Special charges and spinoff expenses ................................ 9,571 ---- 5,237 ---- ----
Interest expense .................................................... 3,458 2,942 4,087 3,142 492
Other expense (income) .............................................. (1,102) (1,378) (3,337) (1,169) (121)
-------- -------- -------- -------- --------
Income (loss) from continuing operations before income taxes......... (5,307) 5,314 (2,288) (2,490) (2,962)
Provision for (benefit from) income taxes ........................... (1,656) 1,870 (1,339) (1,006) (291)
-------- -------- -------- -------- --------
Income (loss) from continuing operations ............................ (3,651) 3,444 (949) (1,484) (2,671)
Income (loss) from discontinued operations .......................... (1,282) 79,312 (5,811) 11,650 1,519
-------- -------- -------- -------- --------
Net income (loss) ................................................... $ (4,933) $ 82,756 $ (6,760) $ 10,166 $ (1,152)
======== ======== ======== ======== ========
Basic EPS Earnings (loss) per share:
From continuing operations ........................................ $ (0.44) $ 0.40 $ (0.12) $ (0.26) $ (0.58)
-------- -------- -------- -------- --------
From discontinued operations ...................................... (0.15) 9.29 (0.77) 2.01 0.33
$ (0.59) $ 9.69 $ (0.89) $ 1.75 $ (0.25)
======== ======== ======== ======== ========
Weighted average shares outstanding ............................. 8,803 8,537 7,620 5,810 4,640
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Diluted EPS
From continuing operations ....................................... $(0.44) $0.40 $(0.12) $(0.26) $(0.58)
From discontinued operations ..................................... (0.15) 9.22 (0.77) 2.01 0.33
-------- -------- -------- -------- --------
$(0.59) $ 9.62 $(0.89) $ 1.75 $(0.25)
======== ======== ======== ======== ========
Weighted average shares outstanding ................................. 8,803 8,600 7,620 5,810 4,640
BALANCE SHEET DATA:
Working capital ..................................................... 34,337 2,385 151,270 110,712 25,650
Total Assets ........................................................ 119,689 75,071 269,739 214,630 57,717
Long term debt ...................................................... 31,349 3,597 18,606 56,187 584
Convertible subordinated debt ....................................... 23,742 21,922 40,950 40,950 ---
Other long term liabilities ......................................... 8,307 10,754 5,517 5,868 2,705
Mandatorily Redeemable Preferred Stock .............................. 9,294 --- --- --- ---
Stockholders' equity ................................................ $ 3,163 $ 7,604 $131,134 $111,093 $41,054
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Includes the results of operations of ORC from the date of purchase
October 12, 1994. Remaining results of operations represent divested
businesses. See the accompanying audited consolidated financial
statements of the Company.
(2) No dividends were declared or paid in the periods presented except
for the dividend paid in 1996 by Benson as a result of the Essilor
Merger in 1996 and $50 paid in 1994 by Bolle America before it was
acquired by Benson in a pooling of interests transaction.
(3) All results of operations shown represent divested business.
12
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
General
The Company was incorporated on December 28, 1995, as a wholly owned
subsidiary of Benson Eyecare Corporation, a Delaware corporation ("Benson"),
in connection with the Essilor 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 "BEC Spinoff"). The BEC Spinoff
and Essilor Merger occurred on May 3, 1996. As a result thereof, Essilor
purchased Benson and the Omega Group, Benson's wholesale optical laboratory
business. On May 3, 1996, Benson also consummated the sale to the Monsanto
Company of the assets of its Orcolite ophthalmic lens manufacturing operation
(the "Asset Sale"). Prior to the BEC 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.
On March 11, 1998, the Company consummated its spin off of Bolle to
the Company's stockholders. The Company's stockholders of record on that date
received one share of Bolle common stock for every three shares of the
Company's common stock held at the time of the Bolle Spinoff. Bolle is listed
on NASDAQ (under the symbol "BEYE"). In connection with the Bolle Spinoff, the
Company assigned to Bolle, and Bolle assumed, all of the Company's business,
assets and liabilities, other than those relating to the Company's specialty
lighting business, ORC Electronic Products and ORC Electroformed Products
operations and certain additional assets and liabilities retained by the
Company.
The above transactions are presented as discontinued operations in
the consolidated financial statements for the periods presented.
YEAR ENDED DECEMBER 31, 1997 COMPARED TO YEAR ENDED DECEMBER 31, 1996
Net sales of $48.1 million for the year ended December 31, 1997
increased 13% from $42.6 million for the year ended December 31, 1996. This
increase was due to strong internal growth and corresponding growth in the
Company's niche markets.
Gross margin decreased from 40% for the year ended December 31, 1996
to 36% for the year ended December 31, 1997 due to the sales mix being more
heavily weighted to the relatively lower gross margin product lines at ORC
Electronic Products and market pressure on average selling prices in the
specialty lighting products business.
For the year ended December 31, 1997, selling, general and
administrative expenses of $10.9 million or 23% of sales represented a $.09
million increase compared to prior year; however, as a percentage of sales,
such expenses decreased from 23.5% to 22.6%.
Special charges and spinoff expenses of $9.6 million in 1997
consisted of the Bolle Spinoff expenses and impaired value provisions against
long term assets, primarily :
(a) $6.2 million charge to reflect the impairment of the
Company's long term investment in Eyecare Products
("Eyecare"). This investment has historically been accounted
for under the equity method reflecting the Company's
percentage shareholding and the long term nature of this
investment. In connection with the Spinoff and the transfer
of the Eyecare shares to Bolle, the
13
<PAGE>
Company has reassessed Eyecare's operating performance and
market performance and accordingly has written down its
investment in Eyecare to market value at December 31, 1997.
(b) A $2.2 million charge to reflect the impairment of the
Sterling Vision, Inc. Converted Subordinated Note due 2015,
due to Sterling's recent operating performance and negative
operating cash flows.
Interest expense of $3.5 million for the year ended December 31, 1997
increased from $2.9 million in the prior year due primarily to higher average
debt during 1997.
The Company recorded a net tax benefit of $3.7 million or 42.7% of
income before taxes for 1997. Continuing operations recorded a net tax benefit
of $1.7 million, and discontinued operations recorded a net tax benefit of
$2.0 million. Prior year provision to return reconciliation and acquisitions
made in 1997 had a significant impact on the tax rate. In 1996, the effective
tax rate was 2.7% of income before taxes primarily due to the effects of
divestitures made in 1996.
YEAR ENDED DECEMBER 31, 1996 COMPARED TO YEAR ENDED DECEMBER 31, 1995
Net sales for the year ended December 31, 1996 were $42.6 million
compared to $41.2 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 ORC,
particularly ORC Electronic Products, which reflected the continued growth of
ORC's served markets.
Adjusted for the fee income from Superior Eye Care, Inc., the gross
profit margin remained relatively flat, increasing from 39% in 1995 to 40% in
1996.
Selling, general and administrative expenses decreased from $13.8
million or 33% of net sales in 1995 to $10.0 million or 24% of sales,
reflecting both a total dollar and percentage of sales decrease despite
increased sales. The Company's costs have decreased with the smaller size of
the Company as compared to Benson and the divestiture of Superior Eyecare,
Inc. in June 1995. ORC continued to combine sales growth with cost
efficiencies while maintaining strong operating margins.
Interest expense in 1996 was $2.9 million, down from $4.1 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 $0.5 million in 1995 to $0.3 million in 1996. In
1995 other income was also higher due to nonrecurring income earned from the
sale of assets.
The Company recorded a tax provision of $2.3 million or 2.7% of net
income before taxes for 1996. Continuing operations recorded a tax provision
of $1.9 million, and discontinued operations recorded a tax provision of $.4
million. Divestitures made during 1996 had a significant impact in
substantially reducing the rate for 1996. In 1995, the effective tax rate was
(2.9%) due to a valuation allowance established. The valuation allowance was
released in 1996.
LIQUIDITY AND CAPITAL RESOURCES
On March 12, 1998 in conjunction with the ILC Merger and the Spinoff,
the Company and its subsidiaries (not including Bolle) entered into a Second
Amended and Restated Credit Agreement (the "New Credit Agreement"). The New
Credit Agreement provides for a $40 million revolving credit facility, which
includes a letter of credit subfacility of $5 million and a $30 million term
facility. The interest rate applicable to the facilities will equal the Base
Rate or the Eurodollar Rate (each as defined in the New 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 0.25%, depending on the Company's
satisfaction of certain financial criteria. The Eurodollar Rate will generally
be equal to the interbank offered rate, as adjusted, to give effect to reserve
14
<PAGE>
requirements, plus a margin ranging from 0.875% to 1.75%, depending upon the
Company's satisfaction of certain financial criteria. A commitment and related
fees of $420 were paid upon the closing of the New Credit Agreement.
YEAR ENDED DECEMBER 31, 1997
Net cash provided by operating activities of continuing operations
during the year ended December 31, 1997 of $5.1 million represents the net
loss offset by the non-cash special charges and spinoff expenses and the
positive effect of decreased accounts receivable and increased accounts
payable. These sources of cash offset by an increase in other assets.
Depreciation and amortization for the year ended December 31, 1997 was $1.5
million compared to $1.1 million for the same period last year. Cash paid for
acquisitions in 1997 represents the purchases of the assets of Byers Equipment
and QSP Coating Technologies by ORC, the purchase of a controlling interest in
Wolfram Electric, Inc. and the purchase of a minority interest in Voltarc
Technologies, Inc. Capital expenditures of $1.4 million were higher than prior
year's of $0.6 million. These operating and investing activities were
primarily financed through credit facility borrowings.
The Company continues to expect cash flow from operations combined
with available borrowing capacity under the Company's revolving credit
facility to be sufficient to fund the Company's operating needs at least
through 1998.
YEAR ENDED DECEMBER 31, 1996
Net cash provided by continuing operations in 1996 was $1.8 million
with net income plus non-cash expenses being offset by increases in
inventories and other assets. Movements in accounts receivable and accounts
payable were not significant to overall cash flows.
During 1996, the disposition of the prescription eyewear business and
FGG provided total cash proceeds from operating, investing and financing
activities of approximately $285 million. 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.
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.
YEAR ENDED DECEMBER 31, 1995
In 1995, Benson's loss from continuing operations of $0.9 million
included substantially all non-cash special charges and depreciation and
amortization expense of $6.4 million. Changes in assets and liabilities
resulted in uses of cash except for the $2.4 million increase in accounts
payable resulting in cash used by continuing operating activities of $12.5
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 $0.8 million for the
installation and implementation of a new management information system at ORC
in addition 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 shares. 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.
15
<PAGE>
On March 6, 1995, all borrowings under the Second Amended and
Restated Loan and Security 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.
COMPUTER SYSTEMS AND YEAR 2000
The Company has conducted an internal review of its computer systems
to identify systems that could be affected by the "Year 2000: issue. The Year
2000 issue is the result off computer programs being written using two digits
rather than four to define the applicable year. Computer programs that have
time-sensitive software may recognize a date using "00" as the year 1900
rather than the year 2000, which could result in a major system failure or
miscalculations for systems utilizing such software. Based upon its internal
review, the Company presently believes that the Year 2000 issue will not pose
significant operational problems for the Company's computer systems. Most of
the Company's material programs are already Year 2000 compatible, while
potentially incompatible systems are currently being upgraded. All of the
Company's material programs are anticipated to be Year 2000 compatible prior
to end of 1998. The Company also intends to use reasonable efforts to assess
whether any Year 2000 noncompliance of the computer systems of entities with
which the Company's computer systems interact, including suppliers, customers
and financial service organizations, could have an adverse impact on the
Company.
FORWARD-LOOKING STATEMENTS
The Company is including the following cautionary statement in this
Form 10-K to make applicable and take advantage of the safe harbor provisions
of the Private Securities Litigation Reform Act of 1995 for any
forward-looking statements made by, or on behalf of, the Company.
Forward-looking statements include statements concerning plans, objectives,
goals, strategies, future events or performance, and underlying assumptions
and other statements which are other than statements of historical facts. From
time to time, the Company may publish or otherwise make available
forward-looking statements of this nature. All such subsequent forward-looking
statements, whether written or oral and whether made by or on behalf of the
Company, are also expressly qualified by these cautionary statements. Certain
statements contained herein are forward-looking statements and accordingly
involve risk and uncertainties which could cause actual results or outcomes to
differ materially from those expressed in the forward-looking statements. The
forward-looking statements contained herein are based on various assumptions,
many of which are based, in turn, upon further assumptions. The Company's
expectations, beliefs and projections are expressed in good faith and are
believed by the Company to have a reasonable basis, including without
limitation, management's examination of historical operating trends, data
contained in the Company's records and other data available from third
parties, but there can be no assurance that management's expectations, beliefs
or projections will result or be achieved or accomplished. In addition to the
other factors and matters discussed elsewhere herein, the following are among
the factors that, in the view of the Company, could cause actual results to
differ materially from those discussed in the forward-looking statements:
1. Changes in economic conditions, in particular those which affect the
Company's principal markets.
2. Changes in senior management of or control of the Company
3. Inability to obtain new customers or retain existing ones
4. Significant changes in competitive factors, including product pricing
conditions, affecting the Company.
5. Governmental/regulatory actions and initiatives, including those
affecting financings.
6. Significant changes from expectations in actual capital expenditures
and operating expenses.
16
<PAGE>
7. Occurrences affecting the Company's ability to obtain funds from
operations, debt or equity to finance needed capital expenditures and
other invesments.
8. Significant changes in rates of interst, inflation or taxes.
9. Significant changes in the Company's relationship with its employees
and the potential adverse effects if labor disputes or grievance were
to occur.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK.
Approximately $18 million off the Company's 1997 revenues and $70
million of its assets at December 31, 1997 were denominated in French Francs,
not including the French Franc denominated debt detailed below. The Company
may from time to time enter into forward or option contracts to hedge the
related foreign exchange risks. The Company does not enter into market risk
sensitive transactions for trading or speculative purposes.
On March 11, 1998, in conjunction with the Spinoff, the French Franc
denominated debt included in the table below was paid down. The table below
provides information about the Company's financial instruments, as of December
31, 1997, that were sensitive to changes in interest and foreign exchange
currency rates. The 1997 amounts approximate fair value. The table presents
principal cash flows by contractual maturity dates. The information is
presented in US dollar equivalents using the USD/FF exchange rate at December
31, 1997 of 5.9912. USD is the Company's reporting currency. The instruments'
actual cash flows are denominated in both US Dollars (USD) and French Francs
(FF), as indicated.
<TABLE>
<CAPTION>
USD Equivalent
(in thousands) Expected year of Maturity
There- Fair
------ ----
1998 1999 2000 2001 2002 after Total Value
---- ---- ---- ---- ---- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Variable rate short term debt
Denominated in FF 4,282
Denominated in USD 19,000
Variable rate long term debt
Denominated in FF 1,000 2,500 3,500 5,000 2,987 14,987
Denominated in USD 1,159 2,675 4,191 5,210 2,730 2,556 18,521
</TABLE>
The weighted average interest rate on variable rate short term and
long term debt for the year ended December 31, 1997 was 6.4%.
17
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of Lumen Technologies, Inc. (formerly
BEC Group, Inc.)
In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of operations, of comprehensive income (loss), of
stockholders' equity and of cash flows present fairly, in all material
respects, the financial position of Lumen Technologies, Inc. (formerly BEC
Group, Inc.) and its subsidiaries at December 31, 1997 and 1996, and the
results of their operations and their cash flows for each of the three years
in the period ended December 31, 1997, 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 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 provide a
reasonable basis for the opinion expressed above.
As discussed in Note 1, on March 11, 1998, the Company distributed the stock
of its subsidiary, Bolle Inc., to the Company's stockholders and on March 12,
1998 merged with ILC Technology, Inc.
PRICE WATERHOUSE LLP
Dallas, Texas
April 9 , 1998
18
<PAGE>
<TABLE>
<CAPTION>
LUMEN TECHNOLOGIES, INC. F/K/A BEC GROUP, INC.
CONSOLIDATED BALANCE SHEETS
(AMOUNTS IN THOUSANDS)
December 31,
--------------------------
1997 1996
-------- ---------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $762 $2,164
Trade receivables, less allowance for doubtful accounts of $586 and $503 10,214 7,280
Inventories 9,534 9,317
Investment in and net receivables from discontinued operations (Note 3) 51,567 11,167
Other current assets 6,094 3,651
--------- --------
Total current assets 78,171 33,579
Property and equipment, net 13,763 13,114
Goodwill, net 12,138 11,372
Intangible assets, net 1,225 1,296
Equity in and notes receivable from affiliated companies 8,773 11,435
Other assets 5,619 4,275
--------- --------
Total assets $119,689 $75,071
========= ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term debt and current maturities of long term debt $25,458 $17,645
Accounts payable 4,891 2,858
Accrued compensation 1,390 2,134
Other accrued expenses 12,095 8,557
--------- --------
Total current liabilities 43,834 31,194
Long-term debt 31,349 3,597
Convertible subordinated notes 23,742 21,922
Other long-term liabilities 8,307 10,754
--------- --------
Total liabilities 107,232 67,467
--------- --------
Commitments and contingencies
Mandatorily redeemable preferred stock--par value $1; 500 shares authorized;
10 issued and outstanding 9,294
---------
Stockholders' equity:
Common stock--par value $.01; 50,000 shares authorized; 8,815 issued; 8,813
and 8,857 outsanding 88 88
Additional paid-in capital 28,743 28,791
Treasury stock - 2 and 58 shares at cost (17) (557)
Accumulated deficit (25,651) (20,718)
--------- --------
Total stockholders' equity 3,163 7,604
--------- --------
Total liabilities and stockholders' equity $119,689 $75,071
========= ========
</TABLE>
See accompanying notes to consolidated financial statements.
19
<PAGE>
<TABLE>
<CAPTION>
LUMEN TECHNOLOGIES, INC. F/K/A BEC GROUP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
For the year ended December 31,
---------------------------------------------
1997 1996 1995
-------- -------- -------
<S> <C> <C> <C>
Continuing operations:
Net sales $48,128 $42,574 $41,244
Costs and expenses:
Costs of sales 30,603 25,676 23,725
Selling, general and administrative expense 10,905 10,020 13,820
Special charges and spinoff expenses 9,571 5,237
Interest expense 3,458 2,942 4,087
Other income, net (1,102) (1,378) (3,337)
--------- -------- -------
Total costs and expenses 53,435 37,260 43,532
Income (loss) from continuing operations before income taxes (5,307) 5,314 (2,288)
Provision (benefit) for incomes taxes from continuing operations (1,656) 1,870 (1,339)
--------- -------- -------
Income (loss) from continuing operations $(3,651) $3,444 $(949)
--------- -------- -------
Discontinued operations (Note 3):
Income (loss) from operations of the Prescription Eyewear Business, Foster $(1,282) $4,302 $(5,811)
Grant Group and Bolle (less applicable taxes of $(2,020), $384 and $1,139 in
1997, 1996 and 1995, respectively)
Net gain on the sales of the Prescription Eyewear Business, and Foster Grant
Group net of phase out losses of $2,902
75,010
--------- -------- -------
Income (loss) from discontinued operations $(1,282) $79,312 $(5,811)
--------- -------- -------
Net income (loss)` $(4,933) $82,756 $(6,760)
Basic earnings (loss) per share:
From continuing operations $(0.44) $0.40 $(0.12)
From discontinued operations (0.15) 9.29 (0.77)
--------- -------- -------
$(0.59) $9.69 $(0.89)
--------- -------- -------
Basic EPS weighted average shares outstanding 8,803 8,537 7,620
Diluted earnings (loss) per share:
From continuing operations $(0.44) $0.40 $(0.12)
From discontinued operations (0.15) 9.22 (0.77)
--------- -------- -------
$(0.59) $9.62 $(0.89)
--------- -------- -------
Diluted EPS weighted average shares outstanding 8,803 8,600 7,620
See accompanying notes to consolidated financial statements.
20
<PAGE>
LUMEN TECHNOLOGIES, INC. F/K/A BEC GROUP, INC.
STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(AMOUNTS IN THOUSANDS)
</TABLE>
<TABLE>
<CAPTION>
For the year ended December 31
--------------------------------------------------------
1997 1996 1995
-------------- -------------- ---------------
<S> <C> <C> <C>
Net income (loss) $ (4,933) $ 82,756 $ (6,760)
Foreign currency translation adjustments (462) 26
Reclassification adjustment - (before taxes) 77
--------- --------- ---------
Comprehensive income (loss) before tax (5,395) 82,833 (6,734)
Other comprehensive income tax effect 197 (2) (9)
--------- --------- ---------
Comprehensive income (loss) $ (5,198) $ 82,831 $ (6,743)
========= ========= =========
</TABLE>
See accompanying notes to consolidated financial statements
21
<PAGE>
<TABLE>
<CAPTION>
LUMEN TECHNOLOGIES, INC. F/K/A BEC GROUP, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
(AMOUNTS IN THOUSANDS)
ADDITIONAL RETAINED
ISSUED COMMON TREASURY COMMON PAID-IN EARNINGS TREASURY
SHARES SHARES STOCK CAPITAL (DEFICIT) STOCK
------------- -------- ------ ---------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
1995:
Balance - December 31, 1994 7,268 49 $72 $105,001 $7,385 $(1,365)
Shares issued for acquisitions 79 1 2,845
Shares issued through public offering,
net of expenses 589 6 22,030
Exercise of stock options 79 1 1,412
Other issuances of common stock 10 506
Net loss (6,760)
----------- ----------- ------------ -------------- -------------- -------------
Balance - December 31, 1995 8,025 49 80 131,794 625 (1,365)
1996:
Exercise of stock options 126 1 2,326
Other issuances of common stock 66 1,567
Cancel treasury stock (49) (49) (1,365) 1,365
Repurchases of treasury stock 58 (557)
Dividend to stockholders (125,972) (104,099)
Conversion of 8% Convertible Notes
due 2001 647 7 20,441
Net income 82,756
----------- ----------- ------------ -------------- -------------- -------------
Balance - December 31, 1996 8,815 58 88 28,791 (20,718) (557)
1997:
Exercise of stock options (84) (48) 789
Repurchase of treasury stock 28 (249)
Net loss (4,933)
----------- ----------- ------------ -------------- -------------- -------------
Balance - December 31, 1997 8,815 2 $88 $28,743 $(25,651) $(17)
=========== =========== ============ ============== ============== =============
</TABLE>
See accompanying notes to consolidated financial statements.
22
<PAGE>
LUMEN TECHNOLOGIES, INC. F/K/A BEC GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
----------------------------------------------
1997 1996 1995
---------- ---------- ----------
<S> <C> <C> <C>
Cash flows from operating activities:
Income (loss) from continuing operations $ (3,651) $ 3,444 $ (949)
Adjustments to reconcile income (loss) to net cash provided
(used) by operating activities:
Special charges and spinoff expenses, net of payments 9,571 4,120
Depreciation and amortization 1,477 1,105 1,234
Bad debt expense 163 26 280
Loss (gain) on sale of property and equipment 414 (316)
Other 15
Changes in current assets and liabilities (net of effect of companies
acquired):
Trade receivables (3,017) (89) (2,201)
Inventories (217) (1,371) 256
Other assets 723 (2,054) (3,529)
Accounts payable 2,033 356 2,383
Accrued expenses and other (1,972) 3 (4,663)
Cash provided (used) by discontinued operations 144 6,853 (9,122)
--------- --------- ---------
Net cash provided (used) by operating activities $ 5,254 $ 8,687 $ (12,492)
--------- --------- ---------
Cash flows from investing activities:
Cash expended in acquisitions, net of cash received (5,164) (3,865)
Capital expenditures (1,372) (618) (1,619)
Notes receivable from affiliates (815)
Proceeds from sale of fixed assets 155 3,648
Cash provided (used) by discontinued operations (33,848) 276,112 (36,887)
--------- --------- ---------
Net cash provided (used) by investing activities $ (41,199) $ 275,649 $ (38,723)
--------- --------- ---------
Cash flows from financing activities:
Net proceeds from (payments for) issuance of long-term debt 27,350 (15,364) 3,010
Proceeds (payments) from revolving credit lines and short term debt 7,813 (45,000) (8,938)
Proceeds from issuance of common stock 492 1,944 23,569
Cash dividend to stockholders (230,071)
Cash provided (used) by discontinued operations (1,112) 2,264 26,198
--------- --------- ---------
Net cash provided (used) by financing activities $ 34,543 $(286,227) $ 43,839
--------- --------- ---------
Net decrease in cash $ (1,402) $ (1,891) $ (7,376)
Cash and cash equivalents at beginning of year 2,164 4,055 11,431
--------- --------- ---------
Cash and cash equivalents at end of year $ 762 $ 2,164 $ 4,055
========= ========= =========
</TABLE>
(Continued)
23
<PAGE>
<TABLE>
<CAPTION>
LUMEN TECHNOLOGIES, INC. F/K/A BEC GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(AMOUNTS IN THOUSANDS)
(CONTINUED)
For the year ended December 31
--------------------------------------------
1997 1996 1995
-------- -------- ---------
Supplemental disclosures of cash flow information:
<S> <C> <C> <C>
Interest paid $2,167 $6,710 $9,100
Income taxes paid $484 $2,581 $910
</TABLE>
Noncash transactions:
1997
o Recorded $1,835 of interest on convertible subordinated
notes which is accrued until conversion, redemption or
maturity.
o The acquisition of Bolle France included in discontinued
operations was consummated during the year. The acquisition
was funded with cash, equity and debt. The fair values of
the assets and liabilities at the date of acquisition were
as follows:
Cash $1,294
Accounts receivable 9,441
Inventories 6,167
Other current assets 388
Property and equipment 3,949
Goodwill 22,642
Trademark 40,000
Other assets 181
Short-term debt (175)
Accounts payable and accrued liabilities (9,756)
Other long-term liabilities (15,896)
1996
o $20,448 of Benson convertible notes were converted into
equity during 1996 in conjunction with the Essilor Merger.
o $500 of notes receivable from Superior Vision Services, Inc.
("SVS") was forgiven during 1996.
o Recorded $1 million of non-interest bearing convertible
preferred stock as partial consideration on the sale of FGG.
(Continued)
24
<PAGE>
LUMEN TECHNOLOGIES, INC. F/K/A BEC GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(AMOUNTS IN THOUSANDS)
(CONTINUED)
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 were allocated as follows: Accounts receivable
$2,888, Property and equipment $622, Goodwill $13,841,
Intangible assets $1,350, Other assets $358, Accounts
payable and accrued liabilities $(1,840), and Other
long-term assets and liabilities $2,416.
See accompanying notes to consolidated financial statements.
25
<PAGE>
LUMEN TECHNOLOGIES, INC. F/K/A BEC GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA, UNLESS OTHERWISE NOTED)
NOTE 1 -- SPINOFF AND MERGER SUBSEQUENT TO YEAR END
On March 11, 1998, the Company distributed its subsidiary, Bolle Inc.
("Bolle"), to its stockholders via a spinoff (the "Spinoff"). In the Spinoff,
Company stockholders received one share of Bolle for every three shares of
Company common stock. In conjunction with the Spinoff, the Company and Bolle
entered into a Management Services Agreement and a Bill of Sale and Assignment
Agreement (the "Contribution Agreement"). The Management Services Agreement
provides management services to Bolle for an agreed fee. In accordance with
the Contribution Agreement, (i) the Company assigned to Bolle all of the
Company's assets other than the assets related to the ORC Technologies, Inc.
("ORC") Business (as defined in the Contribution Agreement ) and certain other
specific assets retained by the Company; and (ii) Bolle will assume all of the
Company's liabilities prior to the Spinoff other than those related to the ORC
Business and certain specific liabilities.
On March 12, 1998, the Company (through its wholly-owned subsidiary,
BILC Acquisition Corp.) completed its merger with ILC Technology, Inc. (the
"ILC Merger"). Under the terms of the agreement, ILC shareholders received
4.4084 shares of the company's Common Stock (or 2.2042 shares, after giving
effect to a one-for-two reverse split of the Company's Common Stock) for each
share of ILC Common Stock outstanding. In conjunction with the ILC Merger, the
Company changed its name to Lumen Technologies, Inc. The effect of the
one-for-two reverse split has been retroactively presented in these financial
statements.
The accompanying consolidated financial statements (i) reflect the
continuing operations of ORC; (ii) reflect Bolle net assets as "Investment in
and net receivables from discontinued operations" and Bolle's results of
operations as discontinued for all periods presented; (iii) do not reflect the
ILC Merger and (iv) do not reflect the disposition of certain assets and
liabilities pursuant to the Contribution Agreement.
On a proforma basis, had the above transactions occurred at December
31, 1997, the Company's total assets and stockholders' equity would have been
approximately $130 million (unaudited) and $35 million (unaudited),
respectively.
NOTE 2 -- BUSINESS
Business
During the periods presented, Lumen Technologies, Inc. ("Lumen" or
the "Company") had one core business, ORC which manufactures and markets
specialty lighting, electronic and electroformed products to a diverse
customer base. The evolution of the Company was accomplished through a series
of acquisitions and divestitures which were consummated during the period from
October 1992 through December 1997 (Notes 3 and 6). The name was changed from
BEC Group, Inc. in conjunction with the Spinoff (Note 1) and the ILC Merger
(Note 1) in March 1998.
26
<PAGE>
NOTE 3 -- DISCONTINUED OPERATIONS
Bolle Inc.
On March 11, 1998, the Company completed the Spinoff of Bolle to the
Company's stockholders (Note 1). Accordingly, the accompanying financial
statements reflect the results of operations of Bolle as discontinued
operations for all periods presented but do not reflect the transfer of the
other assets and liabilities to Bolle Inc. at the time of the Spinoff in
conjunction with the Contribution Agreement. After the Spinoff, the
"Investment in and net receivables from discontinued operations" caption will
be reduced to zero and will be accompanied by a corresponding entry to reduce
paid in capital.
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 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 was 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. All rights, liabilities and obligations of the Company
with respect to the Preferred Stock and/or agreement by and between the
Company, AAi Holdings and/or FGG was assigned to, and assumed by, Bolle in
connection with the Spinoff.
Prescription Eyewear Business
On May 3, 1996, Benson Eyecare Corporation (the predecessor of the
Company) ("Benson"), the Company, 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 "Essilor 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. In connection with the Spinoff, Bolle
will agree to indemnify the Company against any and all liabilities, damages,
costs or other expenses arising in connection with the Essilor transaction,
except to the extent arising as a result of the ORC Business.
Pursuant to the Essilor Merger, each outstanding share of Benson
common stock was exchanged for $6.60 in cash and one share of the Company's
Common Stock was received for every two shares of Benson Common Stock. Upon
consummation of the Essilor 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 Essilor Merger, the Company became a
registrant whose common shares are traded on the NYSE.
27
<PAGE>
For accounting purposes, the company was considered the continuing
entity. Accordingly, in substance, the Merger and Asset Sale were considered
to be a sale of Omega and Orcolite by the Company to Essilor and Monsanto
Company, respectively. Upon approval of the Essilor Merger, Benson's
historical consolidated financial statements, adjusted for the sale of the
Prescription Eyewear business, became the historical financial statements of
the Company. 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 the Company. The cash merger consideration is treated as a
dividend by the Company. 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 Essilor Merger and Asset
Sale differed from the legal and federal income tax treatment.
During the third quarter of 1996, the final Closing Balance Sheet for
the sale of Omega was agreed upon by the Company and Essilor. According to the
terms of the Essilor 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 amounts represent the
operating results of FGG, the Prescription Eyewear Business and Bolle Inc.
business through their respective measurement dates.
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
------------------------------------------
1997 1996 1995
--------- ---------- ---------
<S> <C> <C> <C>
Net sales $32,160 $125,987 $260,591
Income (loss) before income taxes (3,369) 4,686 (4,672)
Income tax expense (benefit) (2,020) 384 1,139
Minority interests (67)
-------- -------- ---------
Net income (loss) $(1,282) $4,302 $ (5,811)
======== ======== =========
</TABLE>
Pursuant to the Essilor Merger, all Benson stock options were
canceled. Continuing Company option holders received cash and new options in
exchange for their Benson options. Option holders from discontinued operations
received cash and the Company stock in exchange for their Benson options.
NOTE 4 -- SPECIAL CHARGES AND SPINOFF EXPENSES
The Company's special charges and spinoff expenses of $9.6 million
for the year ended December 31, 1997 include the following items:
(i) A $6.2 million charge to reflect the impairment of the
Company's long term investment in Eyecare Products plc
("Eyecare") (Note 10). This investment has historically been
accounted for under the equity method reflecting the
Company's percentage shareholding and the long term nature
of this investment. In connection with the Spinoff and the
transfer of the Eyecare shares to Bolle, the Company has
reassessed Eyecare's operating performance and market
performance and accordingly has written down its investment
in Eyecare to market value at December 31, 1997.
28
<PAGE>
(ii) A $2.2 million charge to reflect the impairment of the
Sterling Vision, Inc. Convertible Subordinated Note Due 2015
due to Sterling's recent operating performance and negative
operating cash flows.
(iii) Spinoff expenses of $1.2 million for expenses relating to
the distribution of Bolle Inc. See Note 1.
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 a non-interest bearing convertible note receivable from
Sterling Vision, Inc.; (ii) the write-off of $500 of deferred financing costs
in connection with a change in the Company's banking syndicate in September
1995. None of the above items relate to the operations of the ORC business.
NOTE 5 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The consolidated financial statements include the accounts of the
Company and its majority owned subsidiaries over which the Company asserts
control. Investments in 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 10). 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
The Company recognizes revenue upon shipment or delivery of products.
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.
Inventories
Inventories, which consist primarily of raw materials and finished
goods held for resale, are stated at the lower of cost or market value and
determined on a first-in-first-out 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.
29
<PAGE>
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
Basic earnings per share is computed by dividing net earnings or loss
available to common stockholders by the weighted average number of outstanding
shares of common stock. Diluted earnings per share includes weighted average
common stock equivalents outstanding during each year in the denominators,
unless the effect is anti-dilutive. Common stock equivalents consist of the
dilutive effect of common shares which may be issued upon exercise of stock
options, warrants or conversion of debt.
In accordance with Securities and Exchange Commission Staff
Accounting Bulletin No. 98, the weighted average number of outstanding common
shares and common stock options is calculated based on the historical timing
of the common stock transactions. Also, the May 3, 1996 and March 12, 1998
reverse stock splits have been retroactively reflected in the Company's
financial statements.
30
<PAGE>
Reclassifications
Certain amounts in the 1996 and 1995 financial statements have been
reclassified to conform with the 1997 presentation.
Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect 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 6 -- BUSINESS COMBINATIONS AND DIVESTITURES
1997 BUSINESS COMBINATIONS
Bolle France
On July 9, 1997, the Company acquired, in a transaction accounted for
as a purchase, all of the shares of Bolle France which included Bolle France
and several consolidated and unconsolidated subsidiaries, for a total purchase
price of approximately $58,235, comprised of cash of $31,000, BEC Series A
mandatorily redeemable preferred stock of $9,294, Bolle mandatorily redeemable
preferred stock of $11,055 and Bolle common stock of $3,302, as well as direct
acquisition costs of $3,595. Where such consideration was denominated in
French Francs, the July 10, 1997 exchange rate of 5.9197 was used to translate
to US Dollars.
Voltarc Technologies
On October 1, 1997, the Company expanded its interests in
the specialty lighting business. Pursuant to the terms of a Stock Purchase and
Option Agreement (the "Voltarc Purchase Agreement") dated as of October 1,
1997 among the Company, ORC, Voltarc and certain stockholders of Voltarc (the
"Voltarc Stockholders"), the Company and ORC acquired (a) 30% of the common
stock of Voltarc, for $1,800,000, (b) 12,000 shares of preferred stock of
Voltarc, convertible at ORC's option into approximately 10% of the total
number of shares of Voltarc issued and outstanding for $1,200,000 and (c) a
call option to acquire the remaining shares of capital stock of Voltarc from
the remaining Voltarc Stockholders in March 1999 if certain earnings
benchmarks are met. Pursuant to the Voltarc Purchase Agreement, the Voltarc
stockholders also received the right to put the remaining shares of Voltarc
common stock to the Company or ORC upon the occurrence of certain events. In
addition, ORC made available to Voltarc a subordinated revolving credit
facility in the amount of $800,000. The Company accounts for its investment in
Voltarc under the equity method. Voltarc is a manufacturer and marketer of
specialty lighting products.
1997 AND 1996 DIVESTITURES
For a discussion of 1997 and 1996 divestitures see Note 3.
31
<PAGE>
1995 BUSINESS COMBINATION
Bolle America, Inc.
Effective November 2, 1995, the Company acquired all of the
outstanding common stock of Bolle America, Inc. ("Bolle America") in exchange
for 3,265 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. 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. Bolle America's results are
included in discontinued operations.
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. (Note
4).
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.
NOTE 7 -- INVENTORIES
Inventories consist of the following at December 31:
<TABLE>
<CAPTION>
1997 1996
--------- ---------
<S> <C> <C>
Raw materials $4,604 $4,534
Work in progress 2,859 2,655
Finished goods 2,739 2,504
Reserves (668) (376)
----------- ----------
$9,534 $9,317
=========== ==========
</TABLE>
NOTE 8 -- PROPERTY AND EQUIPMENT
Property and equipment consists of the following at December 31:
<TABLE>
<CAPTION>
1997 1996
--------- ---------
<S> <C> <C>
Land $1,632 $1,631
Buildings 10,458 10,401
Machinery and equipment 3,775 3,224
Furniture and fixtures 291 203
Leasehold improvements 57 42
Construction in progress 603
----------- ----------
16,816 15,501
Less accumulated depreciation (3,053) (2,387)
----------- ----------
Net property and equipment $13,763 $13,114
=========== ==========
</TABLE>
32
<PAGE>
Depreciation expense for the years ended December 31, 1997, 1996 and
1995 was $1,097, $748 and $742, respectively.
Land and buildings totaling $6.1 million net of accumulated
depreciation are subject to operating leases. The minimum future rental income
is as follows:
1998 $1,257
1999 762
2000 494
2001 494
Thereafter
----------
$3,007
==========
NOTE 9 -- GOODWILL AND INTANGIBLE ASSETS
Intangible assets and accumulated amortization consist of the
following at December 31:
1997 1996
-------- --------
Goodwill $13,011 $11,939
Trademarks 1,482 1,498
Other identifiable intangible assets __ (16)
---------- --------
14,493 13,421
Less accumulated amortization (1,130) (753)
---------- --------
$13,363 $12,668
========== ========
Amortization expense for goodwill and intangible assets for the years
ended December 31, 1997, 1996 and 1995, was $380, $357 and $492, respectively.
NOTE 10 -- EQUITY IN AND NOTES RECEIVABLE FROM AFFILIATED COMPANIES
Eyecare Products plc
The Company first invested in Eyecare Products plc in December 1993.
For the years ended December 31, 1997, 1996 and 1995, the Company recognized
equity earnings of $595, $275 and $525, respectively, on its investment in
Eyecare. The Company entered into an agreement, dated November 14, 1996, as
amended, with Lantis Eyewear Corporation ("Lantis"), whereby the Company sold
3,500 shares of Eyecare to Lantis and granted Lantis an option to acquire the
Company's remaining interest in Eyecare. Lantis did not exercise its December
1997 option as the operating performance of Eyecare was below Lantis'
expectations and its market price was below the option floor price. The
Company currently maintains a 23% interest in Eyecare. Due to the value
impairment and the Company's intention to dividend this investment to Bolle
according to the Contribution Agreement, this investment was written down to
market value at December 31, 1997 resulting in a special charge of $6.2
million.
33
<PAGE>
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. No management fee was charged in 1997. The Company recognized
management fee income of $100 and $300 during each of the years December 31,
1996 and 1995, respectively.
NOTE 11 -- CREDIT FACILITIES
Short-Term Debt
Short-term debt consists of the following at December 31:
<TABLE>
<CAPTION>
1997 1996
------- -------
<S> <C> <C>
Credit Agreement $23,282 $17,500
Current maturities of long-term debt 2,159 145
Other short term debt 17
------- -------
$25,458 $17,645
======= =======
</TABLE>
Credit Agreement
On April 3, 1996, the Company and certain of its subsidiaries entered
into a credit facility (the "Credit Agreement") with a syndicate of lenders
(the "Lenders"), led by NationsBank, N.A., ("NationsBank"). The Original
Credit Agreement, as amended effective December 12, 1996 and July 10, 1997,
provided for a $70 million revolving credit facility, which included a letter
of credit subfacility of $5 million, and two $15 million term facilities. The
interest rate applicable to the credit facilities will equal the Base Rate,
the Eurodollar Rate or the French Franc Libor 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 and the French Franc Libor Rate will generally be equal to the interbank
offered rate, as adjusted to give effect to 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 and a commitment fee of $596 was paid upon
Closing of the July 10, 1997 amendment.
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, 1997, the Company had aggregate borrowing capacity
under the Credit Agreement of $70 million. During 1997, the weighted average
interest rate on borrowings under the facility was 6.7%, the average
outstanding balance was $35.4 million, and the maximum balance outstanding was
$53.4 million.
On March 11, 1998, in conjunction with the ILC Merger and the
Spinoff, the Company and its subsidiaries (excluding Bolle) entered into a
Second Amended and Restated Credit Agreement (the "New Credit Agreement"). The
New Credit Agreement provides for a $40 million revolving credit facility,
which includes a letter of credit subfacility of $5 million, and a $30 million
term facility. The interest rate applicable to the facilities will equal the
Base Rate or the Eurodollar Rate (each, as defined in the New 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
34
<PAGE>
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 0.25%, depending
on the Company's satisfaction of certain financial criteria. The Eurodollar
Rate will generally be equal to the interbank offered rate, as adjusted, to
give effect to reserve requirements, plus a margin ranging from 0.875% to
1.75%, depending upon the Company's satisfaction of certain financial
criteria. Commitment and related fees of $420 were paid upon the closing of
the New Credit Agreement.
At December 31, 1997, the Company was in compliance with all debt
covenants.
Long-Term Debt
Long-term debt consists of the following at December 31:
1997 1996
------ ------
Credit Agreement $29,987
Mortgage 3,521 $3,742
------- ------
33,508 3,742
Less current maturities (2,159) (145)
------- ------
$31,349 $3,597
======= ======
Aggregate maturities of long-term debt are as follows:
1998 $2,159
1999 5,175
2000 7,691
2001 10,210
2002 5,717
Thereafter 2,556
----------
$33,508
==========
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 Benson share. In connection with the Essilor
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 8% Convertible
Notes due 2002 (the "New Notes"). The other half of their notes was converted
into Merger Consideration using a $7.90 conversion price. The New Notes accrue
interest semi-annually but do not pay interest until conversion, redeemption
or maturity. Accordingly, $2,723 of accrued interest is included in the
Convertible Subordinated Notes balance at December 31, 1997. Interest may be
paid in cash or in kind at the option of the Company. The conversion price for
the New Notes was $5.75. As of December 31, 1997, there were $21,019 New Notes
and $0 Benson Notes outstanding. The Company registered the New Notes with the
Securities and Exchange Commission effective January 28, 1997. Since December
31, 1997, $8,045 of New Notes have converted into BEC stock.
35
<PAGE>
Mortgage
The Company has a $3,521 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. The
building and related mortgage were transferred to Bolle Inc. under the
Contribution Agreement. A contract to sell the property at a value in excess
of the mortgage valuation has been entered into.
NOTE 12 -- INCOME TAXES
The Company accounts for income taxes under SFAS No. 109. "Accounting
for Income Taxes". SFAS No. 109 requires an asset and liability approach to
accounting for income taxes.
Income (loss) before provision for income taxes consists of the
following for the periods ended:
DECEMBER 31,
---------------------------------------------------
1997 1996 1995
--------------- ------------ ---------------
U.S. $(9,766) $85,010 $(6,960)
Foreign 1,157
--------------- ------------ ---------------
$(8,609) $85,010 $(6,960)
=============== ============ ===============
The provision (benefit) from income taxes consists of the following
for continuing and discontinued operations for the periods ended:
<TABLE>
<CAPTION>
1997 1996 1995
---------- ---------- ----------
<S> <C> <C> <C>
Continuing operations:
Current:
Federal $1,177 $2,365 $(138)
State and local 67 141 (27)
Deferred (2,900) (636) (1,174)
-------- -------- -------
$(1,656) $1,870 $(1,339)
======== ======== =======
</TABLE>
<TABLE>
<CAPTION>
Discontinued operations: 1997 1996 1995
U.S.: -------- ------ ------
<S> <C> <C> <C>
Current $(1,713) $623 $719
Deferred (961) (239) 420
Foreign:
Current 1,803
Deferred (1,149)
------- ------ ------
$(2,020) $384 $1,139
------- ------ ------
Total provision (benefit) from income taxes $(3,676) $2,254 ($200)
======= ====== ======
</TABLE>
36
<PAGE>
The Company's effective tax rates for continuing and discontinued
operations differ from the Federal statutory rate as follows:
<TABLE>
<CAPTION>
1997 1996 1995
------ ------ ------
<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%)
Provision to return adjustment (7.6%)
Effects of acquisitions and divestitures 4.7% (32.9%) 4.2%
Valuation allowance (1.6%) 16.9%
Goodwill amortization 3.0% 1.3% 10.9%
Other, net (5.8%) (1.1%) 2.1%
--------- --------- --------
(42.7%) 2.7% (2.9%)
========= ========= ========
</TABLE>
Significant components of deferred income taxes for continuing and
discontinued operations are as follows at December 31:
1997 1996
------- -------
Net operating loss carryforward $1,072
Capital loss carryforward 607 $2,263
Accounts receivable 283 173
Notes receivable 1,748 959
Office closing 848
Investments 3,927
Inventories 298 190
Assets of discontinued operations 2,329 452
Other, net 587 398
------- -------
Gross deferred tax asset 10,851 5,283
Valuation allowance (607) (2,263)
------- -------
Deferred tax asset 10,244 3,020
Fixed assets (666) (650)
Intangible assets (28) (128)
------- -------
Deferred tax liability (694) (778)
------- -------
Net deferred tax asset $9,550 $2,242
======= =======
Discontinued Operations
The Company recorded gross deferred tax assets of $2,329 and $452 for
discontinued operations for the years ended December 31, 1997 and 1996,
respectively. 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 $5.6 million and $0 at December 31, 1997 and 1996 respectively.
37
<PAGE>
Continuing Operations
The Company recorded gross deferred tax assets of $8,522 and related
valuation allowance of $607 for continuing operations for the year ended
December 31, 1997. The capital loss generated on the sale of Foster Grant
Group and the related valuation allowance were revalued during 1997. Net
operating loss carryforwards related to continuing operations amount to
approximately $2.9 million and $0 at December 31, 1997 and 1996, respectively.
The net operating loss carryforwards begin to expire in the year 2008.
The Company recorded gross deferred tax assets of $4,831 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 FGG. 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.
NOTE 13 - 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 and 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. During
1996, the Company purchased 58 shares of its common stock at an average price
of $9.60 per share. During 1997, the Company purchased 28 shares of its common
stock at $8.96 per share. During 1997, the Company used 84 treasury shares to
satisfy options exercised. The Company discontinued its share repurchase
program in July 1997, as it was prohibited by the July 1997 amendment to the
Credit Agreement, as amended (See Note11).
NOTE 14 - 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 set forth in the tables below. All option information has been
restated to give effect to the May 3, 1996 and March 12, 1998 reverse stock
splits.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C> <C>
Net income (loss) As reported $(4,933) $82,756 $(6,760)
Pro Forma $(6,183) $78,592 $(10,236)
Basic earnings (loss) per share As reported $(0.59) $9.69 $(0.89)
Pro Forma $(0.73) $9.21 $(1.34)
Diluted earnings (loss) per share As Reported $(0.59) $9.62 $(0.89)
Pro Forma $(0.73) $9.14 $(1.34)
</TABLE>
38
<PAGE>
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:
1997 1996 1995
---- ---- ----
Dividend yield 0% 0% 0%
Expected volatility 50% 64% 64%
Risk free rate of return 6.5% 5% 5%
Expected turnover 7% 7% 7%
Expected term 5 years 5 years 5 years
The weighted average fair values of Benson options granted during the
years ended December 31, 1996 and 1995 were $10.24 and $9.60, respectively.
The weighted average fair value of the Company options granted during 1997 was
$8.80 and 1996 was $9.26.
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 the nonqualified stock option plan are granted to
officers, directors and key employees at prices determined by the Company
Board based upon market value on the date of grant. There were no shares
available under the plan for future grants at December 31, 1997. The plan was
amended on March 11, 1998 to increase the number of authorized options and to
ensure current grants were in compliance with the plans.
As a result of the Essilor Merger and Asset Sale, all Benson options
were canceled. Option holders received consideration (including new Company
options) for their Benson options. Accordingly, all options were issued under
the Company Stock Compensation Plan on or after May 3, 1996.
A summary of Benson option transactions is as follows:
<TABLE>
<CAPTION>
OPTION PRICE RANGE NUMBER OF EXPIRATION
PER SHARE OPTIONS DATE
------------------ --------- ----------
<S> <C> <C> <C>
Outstanding at 1/1/95 $3.00 - 16.90 1,144 1995 -2001
Granted $12.26 - 19.74 284
Exercised $3.00 - 14.50 (159)
Cancelled $14.00 - 14.50 (62)
---------
Outstanding at 12/31/95 $3.00 - 19.74 1,207 1996 -2002
Granted $15.74 - 19.00 134
Exercised $5.00 - 14.50 (163)
Cancelled $3.00 - 19.50 (8)
Cancelled in connection with Merger and Asset Sale (1,170)
---------
Outstanding at 12/31/96 -0-
</TABLE>
39
<PAGE>
A summary of the Company option transactions is as follows:
WEIGHTED
AVERAGE EXERCISE PRICE NUMBER OF OPTIONS
---------------------- -----------------
Outstanding at 12/31/95 -0-
Granted $9.26 1,025
Exercised $5.42 (45)
Cancelled $9.88 (73)
Outstanding at 12/31/96 $9.40 907
Exercisable at 12/31/96 $7.80 195
Granted $8.80 883
Exercised $8.82 (83)
Forfeited $10.02 (57)
Outstanding at 12/31/97 $9.08 1,650
Exercisable at 12/31/97 $8.68 316
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 316 exercisable options at 12/31/97 had an option price range of
$1.66 -- $10.25. The weighted average remaining contractual life of the 1,650
options outstanding as of December 31, 1997 was 5.5 years.
A summary of the price ranges of exercisable and outstanding options
as of December 31, 1997 and 1996 is as follows:
<TABLE>
<CAPTION>
1997 1996
----------------------------------------------------- ----------------------------------------------------
Price Range Per Share Number of Weighted Average Weighted Average Number of Weighted Average Weighted Average
- --------------------- --------- ----------------- ----------------- --------- ----------------- ----------------
Options Remaining Exercise Price options Remaining Exercise Price
------- ---------- -------------- ------- ---------- --------------
Contractual Life Contractual Life
---------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Outstanding options:
$ 0.00 - $ 4.00 6 5.3 $2.32 6 6.3 $2.32
$ 4.01 - $ 6.00 28 5.3 $4.88 28 6.3 $4.88
$ 6.01 - $ 8.00 79 3.2 $7.72 88 4.1 $7.72
$ 8.01 - $10.00 996 6.2 $8.80 196 3.8 $8.92
$10.01 - $12.00 541 4.4 $10.10 589 5.1 $10.10
--- ---
1,650 5.5 $9.08 907 4.8 $9.40
Exercisable options:
$ 0.00 - $ 4.00 6 $2.32 6 $2.32
$ 4.01 - $ 6.00 28 $4.88 28 $4.88
$ 6.01 - $ 8.00 69 $7.72 63 $7.74
$ 8.01 - $10.00 76 $8.92 87 $8.86
$10.01 - $12.00 137 $10.10 11 $10.10
--- --
316 $8.68 195 $7.80
</TABLE>
40
<PAGE>
NOTE 15 - EARNINGS PER SHARE COMPUTATION
<TABLE>
<CAPTION>
1997 1996 1995
------------------------------------------------------------------------------------------------------
Weighted Weighted Weighted
Average Per Share Average Per Share Average Per Share
Loss Shares Amount Income Shares Amount Loss Shares Amount
---- ------ ------ ------ ------ ------ ---- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net income (loss) from
continuing operations $(3,651) $3,444 $(949)
Less: Preferred stock
Dividend 232
-------
BASIC EPS
Income (loss) from
continuing operations
available to common
stockholders $(3,883) 8,803 $(0.44) $3,444 8,537 $0.40 $(949) 7,620 $(0.12)
EFFECT OF DILUTIVE
SECURITIES
Stock options 63 __
DILUTED EPS
Income from continuing
operations available to
common stockholders
plus assumed conversions $(3,883) 8,803 $(0.44) $3,444 8,600 $0.40 $(949) 7,620 $(0.12)
</TABLE>
In 1997 and 1995, due to the net loss from continuing operations, although
there were stock options outstanding, they were not included in the
computation of diluted EPS as the effect would be antidilutive. At December
31, 1997 and 1996 the Company had convertible debt outstanding convertible
into 1,828 shares of common stock. At December 31, 1995 Benson had convertible
debt outstanding convertible into 2,261 shares of common stock. Such shares
were not included in the computation of diluted EPS because the conversion
price was greater than the average market price of the common shares. Warrants
outstanding at December 31, 1997 issued in conjunction with the acquisition of
Bolle France were not included in the calculation of diluted EPS because the
effect would be antidilutive. Such warrants were cancelled on March 11, 1998
in conjunction with Spinoff.
NOTE 16 -- RELATED PARTY TRANSACTIONS
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 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 1997 and
1996 were approximately $90 and $73, respectively.
41
<PAGE>
On December 12, 1996, in connection with the sale of FGG by the
Company, Marlin Capital, LP ("Marlin"), a Delaware limited partnership,
invested $2.5 million in convertible preferred stock of the buyer 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.
Mr. Franklin serves as non-executive chairman of Eyecare Products.
Mr. Ashken serves as a director of Eyecare Products.
NOTE 17 -- COMMITMENTS AND CONTINGENCIES
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's financial condition, results of operations or cash flows.
NOTE 18 -- QUARTERLY FINANCIAL DATA (UNAUDITED)
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31, 1997
Q1 Q2 Q3 Q4
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net sales $10,963 $12,200 $12,058 $12,907
Gross profit 4,457 4,520 4,459 4,089
Income (loss) from continuing operations 1,038 993 699 (6,381)
Basic and diluted earnings (loss) per share $0.12 $0.11 $0.07 $(0.74)
from continuing operations
FOR THE YEAR ENDED DECEMBER 31, 1996
Q1 Q2 Q3 Q4
- ----------------------------------------------------------------------------------------------------------------
Net sales $10,771 $11,206 $10,007 $10,590
Gross profit 4,281 4,328 4,025 4,264
Income from continuing operations 779 1,210 1,045 410
Basic and diluted earnings per share from continuing $0.09 $0.14 $0.12 $0.05
operations
FOR THE YEAR ENDED DECEMBER 31, 1995
Q1 Q2 Q3 Q4
- ----------------------------------------------------------------------------------------------------------------
Net sales $9,547 $10,511 $9,875 $11,311
Gross profit 4,324 4,745 3,728 4,722
Income (loss) from continuing operations 145 629 (1,083) (640)
Basic and diluted earnings (loss) per share from continuing $0.02 $0.09 $(0.14) $(0.09)
operations
</TABLE>
42
<PAGE>
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.
43
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The executive officers and directors as of the date hereof are as
follows:
<TABLE>
<CAPTION>
NAME AGE OFFICE
- ---- --- ------
<S> <C> <C>
Martin E. Franklin(1)(2) 33 Chairman of the Board of Directors and Director
Richard D. Capra(1) 65 Chief Executive Officer and Director
Ian G.H. Ashken(1) 37 Executive Vice President of Finance and
Administration, Chief Financial Officer,
Assistant Secretary and Director
Harrison H. Augur(2) 55 Director
Nora A. Bailey(3) 56 Director
Henry C. Baumgartner(3) 65 Director
George B. Clairmont(3)(4) 48 Director
David L. Moore(2)(4) 40 Director
William T. Sullivan(4) 53 Director
</TABLE>
- -------------------------------------------------------------------------------
(1) Member of Executive Committee
(2) Member of Nominating Committee
(3) Member of Audit Committee
(4) Member of Compensation/Stock Option Committee
Martin E. Franklin is currently Chairman of Lumen Technologies, Inc.,
a NYSE listed company, Chairman of Bolle Inc., a NASDAQ listed company, and
non-executive Chairman of Eyecare Products plc, a London Stock Exchange listed
company. Mr. Franklin was Chairman and Chief Executive Officer of BEC Group,
Inc. ("BEC") from May 1996 to March 1998. Mr. Franklin was Chairman and Chief
Executive Officer of Benson Eyecare Corporation ("Benson"), the predecessor
company to BEC from October 1992 through May 1996. Mr. Franklin has been the
Chairman of the Board 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
specialize 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 also serves
on the Boards of Specialty Catalog Corp. and certain private companies. Mr.
Franklin received a B.A. in political science from the University of
Pennsylvania.
Richard D. Capra was elected to the Company's Board of Directors on
March 12, 1998, on which date he also was named its Chief Executive Officer.
Mr. Capra served as a member of the ILC Board from 1995 through March 1998.
From July 1996 through March 1998, Mr. Capra served as President and Chief
Operating Officer of ILC. From January 1991 to July 1996, Mr. Capra served as
a management consultant and a director of several companies in the electrical
and lighting business. He was President and Chief Executive Officer of Philips
Lighting Inc., U.S., from 1983 to 1991.
Ian G.H. Ashken, A.C.A. was appointed 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. Since October 1996, Mr. Ashken has been
Vice Chairman of Marlin Holdings, Inc., the
44
<PAGE>
general partner of Marlin Capital, L.P. Mr. Ashken is a director of Eyecare
Products plc, a London Stock Exchange listed company, Bolle Inc., a NASDAQ
listed company, and certain private companies. Mr. Ashken received his B.A.
(Hons) in Economics and Accounting from the University of Newcastle in
England.
Harrison H. Augur was elected to the Company's Board of Directors on
March 12, 1998. Mr. Augur served as a member of the Board of Directors of ILC
since 1989. He has been General Partner of Capital Asset Management since June
1987. From April 1981 to August 1991, Mr. Augur served as Executive Vice
President and Director of Worms & Co., Inc.
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 also serves on
the Board of Bolle Inc. Ms. Bailey received her J.D. from The University of
Michigan Law School.
Henry C. Baumgartner was a co-founder of ILC; he served ILC in
various management positions and as a member of the ILC Board from 1967through
March 1998. Mr. Baumgartner was appointed Chairman of the ILC Board in July
1996 and Chief Executive Officer of ILC in April 1990. From April 1990 to July
1996, Mr. Baumgartner served as the President of ILC; prior to 1990, he served
as Chief Executive Officer and Chairman of the Board of ILC from November
1986.
George B. Clairmont was elected to the Company's Board of Directors
on March 12,1998. Mr. Clairmont served as a member of the Board of Directors
of ILC from July 1997 through March 1998. He has been President of Clairvest
Corporation, a New York-based registered investment adviser, since 1983. Mr.
Clairmont also serves as a director of Thomson-Leeds Corporation, a designer
and manufacturer of point of sales displays.
David L. Moore became a member of the BEC Board in May 1996. For more
than the last five years Mr. Moore has been President and Chief Executive
Officer of Century 21 Home Improvements, and for more than fifteen years has
been President and Chief Executive Officer of Garden State Brickface, Inc., a
leading New York metropolitan area residential and commercial remodeling firm.
Mr. Moore also serves on the Board of Bolle Inc. Mr. Moore received his B.A.
in Economics from Amherst College and his M.B.A. from Harvard University.
William T. Sullivan became a member of the BEC Board in May 1996. Mr.
Sullivan has been President and Chief Executive Officer of, and a member of
the Board of Directors of, Sight Resource Corporation, an optical retailer,
since January 1998. Mr. Sullivan was President and Chief Operating Officer of
BEC from April 1996 to April 1997. Upon Benson's acquisition of 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.
DIRECTORS.
Pursuant to the terms of the ILC Merger agreement, for a period of
two years following the date of the ILC Merger, the Board of Directors shall
be composed of five (5) members designated by the Company (or the successors
of such designees) and four (4) members designated by ILC (or the successors
of such designees). At the Company's Special Meeting of Stockholders held on
March 11, 1998 for the purpose of ratifying and approving the ILC Merger,
Messrs. Baumgartner, Capra, Augur and Clairmont, IL s designees, were
nominated and elected as directors of the Company. Each of Messrs. Franklin,
Ashken, Moore and Sullivan and Ms. Bailey remained a director of the Company
as the Company's designees. 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.
45
<PAGE>
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 to 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, 1997, all Section 16(a) filing
requirements applicable to its officers, directors and greater than ten
percent (10%) beneficial owners were complied with.
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 1997
exceeding $100,000 (the "Executive Group"). Except as disclosed below, no
executive officer of the Company had a total annual salary and bonus for 1997
exceeding $100,000.
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
ANNUAL COMPENSATION(1) AWARDS
OPTIONS/ ALL OTHER
NAME AND PRINCIPAL POSITION(2) YEAR SALARY BONUS SARS(3) COMPENSATION
- ------------------------------ ---- ------ ----- ------- ------------
<S> <C> <C> <C> <C> <C>
Martin E. Franklin 1997 $257,500 $300,000 550,000 $34,541(4)
Chairman, Chief Executive 1996 $277,455 $602,477 550,000 $ 5,700(4)
Officer 1995 $300,000 $50,000 -0- -0-
Ian G.H. Ashken 1997 $206,000 $168,750 100,000 27,546(4)
Chief Financial Officer, 1996 $212,981 $86,813 275,000 $132,275(4)(5)
Executive Vice President of 1995 $190,000 -0- -0- -0-
Finance and Administration,
and Assistant Secretary
William T. Sullivan(6) 1997 $71,464 -0- -0- $350,000
Chief Operating Officer 1996 $212,981 $84,775 372,250 $961,618(4)(5)
and President 1995 $195,000 -0- 40,000(7) $106,340(4)(5)
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Included in the table are amounts received as compensation from
Benson during the periods in question and prior to the BEC Spinoff on
May 3, 1996.
(2) Indicates positions held during fiscal year ended December 31, 1997
(3) All awards reflected in this column represent stock options granted
under the Company's 1996 Stock Incentive Plan (as amended). Option
numbers are not adjusted to reflect the effect of the one-for-two
split of the Company's common stock effective March 11, 1998.
(4) 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; amounts indicated as "All Other Compensation" for
Messrs. Franklin and Ashken for 1997
46
<PAGE>
reflect $28,877 and $21,882, respectively, reported as income in
connection with such life insurance. "All Other Compensation" also
includes employer matching contributions under the Company's 401(k)
savings plan, as follows: Mr. Franklin, $5,700 for 1996 and $5,664
for 1997; Mr. Ashken, $5,700 for 1996 and $5,664 for 1997; Mr.
Sullivan, $5,700 for 1996 and $____ for 1997. Bonus earned by Mr.
Franklin in 1996 included a one-time bonus of $400,000 in recognition
of Mr. Franklin's successful efforts in connection with the Essilor
Merger and BEC Spinoff.
(5) Includes cash payments received in connection with the cancellation
on May 3, 1996 of then outstanding Benson Options upon the
consummation of the Essilor Merger and BEC Spinoff.
(6) Mr. Sullivan resigned as an executive officer of the Company
effective March 29, 1997; he remains a Director of the Company. "All
Other Compensation" for Mr. Sullivan for 1997 reflects payments
received pursuant to a severance agreement relating to Mr. Sullivan's
resignation. See "Executive Compensation - Employment Agreements."
(7) Represents options granted under the former Benson option plan, all
of which were cancelled in connection with the Essilor Merger and BEC
Spinoff on May 3, 1996.
OPTIONS/SAR GRANTS TABLE
Except as stated below, no stock options or stock appreciation rights
(SARs) were granted in 1997 to the named executive officers. The figures
disclosed below have not been adjusted to take into account the effect of the
Bolle Spinoff, ILC Merger or a one-for-two reverse split of the Company's
common stock occurring in March 1998.
<TABLE>
<CAPTION>
NUMBER OF % OF TOTAL POTENTIAL REALIZED VALUE
SECURITIES OPTIONS EXERCISE AT ASSUMED RATES OF
UNDERLYING GRANTED TO OR STOCK APPRECIATION FOR
OPTIONS EMPLOYESS IN BASE PRICE EXPIRATION OPTION TERM(2)
NAME GRANTED(1) FISCAL YEAR ($/SH) DATE 5%
---- ---------- ------------ ---------- ---------- ---
10%
---
<S> <C> <C> <C> <C> <C> <C>
Martin E. Franklin 550,000 (3) 31% $4.25 03/25/2007(3) $1,322,290 $1,831,261
Ian G.H. Ashken 100,000 6% $4.25 05/03/2007(3) $240,416 $332,957
William T. Sullivan -0- -0- N/A N/A N/A N/A
- ---------------------------
</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 on the earlier of (a) the date on which the
Company's common stock has traded at an average closing bid price
equal to $7.50/share for a twenty (20) consecutive trading day period
or (b) March 25, 2005.
47
<PAGE>
OPTIONS/SAR EXERCISE AND FISCAL YEAR-END OPTION/SAR VALUE TABLE
The following table provides information on options/SARs exercised during
fiscal 1997 by the Executive Group and the value of each such officer's
unexercised options/SARs as of the end of such fiscal year. The figures
disclosed below have not been adjusted to take into account the effect of the
Bolle Spinoff, ILC Merger or a one- for-two reverse split of the Company's
common stock occurring in March 1998.
<TABLE>
<CAPTION>
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTIONS/SAR VALUES
SHARES ACQUIRED ON NUMBER OF UNEXERCISED IN- VALUE OF UNEXERCISED IN-THE-
EXERCISE THE-MONEY OPTIONS/SARS AT FY-END (#) MONEY OPTIONS/SARS AT FY-END($)
-------- ------------------------------------ -------------------------------
NAME (#) VALUE ($)
---- --- REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
-------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Martin E. Franklin(1) -0- N/A 137,500 962,500 $1,131,656 $1,352,844
Ian G.H. Ashken(2) -0- N/A 93,750 281,250 $124,453 $356,484
William T. Sullivan(3) -0- N/A 295,000 2,500 $359,015 $2,968
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Based on the closing price of BEC common stock on the New York Stock
Exchange on December 31, 1997 of $5.937 and average exercise prices
of $4.98 to $4.56 per share, respectively, for exercisable and
unexercisable options.
(2) Based on the closing price of BEC common stock on the New York Stock
Exchange on December 31, 1997 of $5.937 and average exercise prices
of $4.61 to $4.67 per share, for exercisable and unexercisable
options.
(3) Based on the closing price of BEC common stock on the New York Stock
Exchange on December 31, 1997 of $5.937 and exercise prices of $4.72
to $4.75 per share, for exercisable and unexercisable options.
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 1997. For services rendered in 1997, 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." See, also "Employment
Agreements." In addition, upon the retirement of Mr. Richard D. Hanselman and
Dr. Charles S. Sydnor from the Company's Board of Directors, effective March
12, 1998, the Company caused all then-outstanding options granted to such
Directors to vest fully.
48
<PAGE>
EMPLOYMENT AGREEMENTS
Martin E. Franklin. Mr. Franklin has entered into an employment
agreement with the Company (the "Franklin Employment Agreement"), pursuant to
which he served as Chief Executive Officer and Chairman of the Company for an
initial period of three years, and thereafter subject to annual renewal. By
agreement, Mr. Franklin presently serves as Chairman of the Board and Mr.
Capra has assumed duties as Chief Executive Officer, effective March 12, 1998.
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 1998 has been set at $300,000. 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 1998 has been set at
$250,000. The other terms of Mr. Ashken's employment agreement are the same as
the terms of the Franklin Employment Agreement.
Richard D. Capra. Mr. Capra has entered into an employment agreement
with the Company, effective March 12, 1998. Under the agreement, Mr. Capra
will serve as Chief Executive Officer and President of the Company for a
period of one (1) year. Mr. Capra will receive a base salary in the amount of
$250,000. In addition, Mr. Capra, in consideration of his agreement to
terminate his previously existing employment arrangements, will receive the
sum of $980,000, payable over a period of four (4) years. Mr. Capra is not
eligible for a bonus or any other additional compensation. The other terms of
Mr. Capra's employment agreement are materially the same as Mr. Franklin's and
Mr. Ashken's agreements.
Henry C. Baumgartner. Mr. Baumgartner has entered into an agreement
with the Company, effective March 12, 1998, pursuant to which he agreed to
terminate all previously existing employment arrangements with ILC in return
for payments totaling $1,100,000, payable over a term of five years.
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 received payment of $350,000. The Company additionally
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
Company's 1996 Stock Incentive Plan (the "Plan") and on April 2, 1996, Benson,
as the then sole shareholder of the Company, approved the Plan. Effective
March 12, 1998, the Company's stockholders approved an Amended Plan in
connection with the ILC Merger and Bolle Spinoff, to increase to the number of
shares reserved for issuance pursuant to awards granted under the Plan and to
effect certain technical changes to conform to current SEC regulations and
provisions of the Internal Revenue Code. Pursuant to the Plan, employees and
consultants of the Company and its subsidiaries and affiliates
49
<PAGE>
(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 ("SARs"),
restricted stock awards, performance share unit awards and phantom stock unit
awards, and awards consisting of combination of such incentives. Approximately
250 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.
Under the Plan, at the time of the Essilor Merger and BEC 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, 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 the
exercise price may be 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 its 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.
50
<PAGE>
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.
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 was no repricing of
outstanding options or SARs held by any of the Company's executive officers
during fiscal year 1997. 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.
During 1997 and through March 12, 1998 the Company's Compensation
Committee was composed of Mr. Hanselman, Mr. Moore and Dr. Sydnor (Chairman).
Effective March 12, 1998, the Compensation Committee comprises of Mr. Moore
(Chairman), Mr. Clairmont and Mr. Sullivan. For information concerning certain
transactions between members of the Compensation Committee and the Company,
see "Executive Compensation-Directors' Compensation."
51
<PAGE>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, to the knowledge of the Company and
as of March 26, 1998, (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. All
figures are adjusted to reflect the effect of the one one-for-two reverse
split of the Company's common stock that was effected on March 11, 1998 and
the ILC Merger, which was effective March 12, 1998.
<TABLE>
<CAPTION>
Amount and Nature of Percent of
Name and Address of Beneficial Owner Beneficial Ownership(1) Class
- ------------------------------------ ----------------------- -----
<S> <C> <C>
Martin E. Franklin.................................... 1,054,057(2) 5.1%
555 Theodore Fremd Avenue
Suite B-302
Rye, New York
Richard D. Capra...................................... 310,986(3) 1.5%
Ian G.H. Ashken....................................... 221,875(4) 1.1%
Harrison H. Augur..................................... 136,660(5) *
Nora A. Bailey........................................ 18,750(6) *
Henry C. Baumgartner.................................. 570,309(7) 2.8%
George B. Clairmont................................... 392,127 1.9%
David Moore........................................... 10,175(6) *
William T. Sullivan................................... 139,048(8) *
All Executive Officers and Directors.................. 2,853,962(9) 13.1%
as a group (7 persons)
52
<PAGE>
Westport Asset Management, Inc. 1,544,152(10) 7.6%
253 Riverside Avenue
Westport CT. 06880
Millbrook Partners, L.P............................... 1,327,600(11) 6.5%(7)
2102 Sawgrass Village Dr., Ponte Vedra Beach
Florida 32082
Marvin Schwartz....................................... 1,324,615(12) 6.5%(8)
c/o Neuberger & Berman, LLC,
605 Third Avenue, New York, NY 10158-3698
Royce & Associates, Inc............................... 1,1,324,615(13) 5.6%
1414 Avenue of the Americas
New York N.Y 10019
</TABLE>
* 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 402,250shares that Mr. Franklin has a right to acquire
within 60 days upon the exercise of options. Excludes 7,691 shares
held in trust for Mr. Franklin's minor children, as to which shares
Mr. Franklin disclaims beneficial ownership.
(3) Includes 308,588 shares that Mr. Capra has right to acquire within 60
days upon exercise of options.
(4) Includes 121,875 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.
(5) Includes 110,210 shares that Mr. Augur has right to acquire within 60
days upon exercise of options.
(6) Includes 2,500 shares that the Director has a right to acquire within
60 days upon the exercise of options.
(7) Includes 352,671 shares that Mr. Baumgartner has right to acquire
within 60 days upon exercise of options.
(8) Includes 97,500 shares that Mr. Sullivan has a right to acquire
within 60 days upon the exercise of options and 848 shares with
respect to which Mr. Sullivan shares voting and investment power with
his spouse.
(9) Includes 1,450,618 shares that members of the group have a right to
acquire within 60 days upon the exercise of options. Excludes 10,191
shares held in trust for directors' children, as to which they
disclaim beneficial ownership.
(10) Shareholdings indicated are adjusted to reflect the effect of the ILC
Merger and the Company's one-for-two reverse stock split, occurring
on March 12, 1998 and March 11, 1998, based on a Schedule 13G dated
53
<PAGE>
February 13, 1997. Westport Asset Management, Inc. ("Westport")
reported beneficial ownership of 700,500 shares of ILC common stock,
of which it reported 691,500 shares were held in discretionary
managed accounts and 8,900 shares were beneficially owned by officers
and stockholders of Westport.
(11) Shareholdings indicated are adjusted to reflect the effect of the ILC
Merger and the Company's one-for-two reverse stock split, occurring
on March 12 and March 11, 1998, respectively, based on a Schedule 13D
filed March 31, 1997. Millbrook Partners, L.P. ("Millbrook") and Mark
M. Mathes, its general partner, reported that, as of December 31,
1996 they held an aggregate 2,655,200 shares of the Company's common
stock, or 15.2% of the shares then outstanding. Millbrook and Mr.
Mathes reported that they share voting and dispositive power with
respect to 2,577,200 of such shares, or 14.7% of the shares then
outstanding, while Mr. Mathes holds sole voting and dispositive power
with respect to 78,000 of such shares.
(12) Based on a Schedule 13D dated March 26, 1998. Marvin Schwartz, acting
in his personal capacity and not as a principal of Neuberger &
Berman, LLC ("N&B"), reported that he is the beneficial owner of
1,324,615 shares of the Company's common stock, constituting 6.5% of
the total shares outstanding as of that date. Mr. Schwartz reported
that 500,307 of such shares are held in his personal account. Mr.
Schwartz reported that 824,308 of such shares are held in street name
in accounts for the benefit of M
(13) Schwartz's family; Mr. Schwartz reported that he holds discretionary
and shared dispositive power over such accounts. Mr. Schwartz
reported that N&B has no voting or dispositive power over any of such
shares. Shareholdings indicated are adjusted to reflect the effect of
the ILC Merger and the Company's one-for-two reverse stock split,
occurring on March 11 and March 12, 1998, respectively, based on a
Schedule 13G/A dated June 6, 1997. A group including Mr. Charles
Royce, Royce & Associates ("Royce") and Royce Management Company
("RMC") reported beneficial ownership of 519,920 shares of ILC common
stock, of which 461,620 shares were reported to be owned by Royce and
58,300 were reported to be owned by RMC. Mr. Royce disclaimed
beneficial ownership of any such shares.
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.
The Company's non-employee Directors receive automatically stock
option grants under the terms of the Company's 1996 Stock Incentive Plan (as
amended). 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, Ashken, Capra, Baumgartner and Sullivan have entered into
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
54
<PAGE>
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 A. Bailey, a member of the Company's Board of Directors
since May 1996, is an attorney specializing in federal tax law. Martin E.
Franklin, Ian G.H. Ashken, David L. Moore, William T. Sullivan and Nora A.
Bailey continued to serve as directors of the Company after the ILC Merger. 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 the Company by Ms. Bailey during 1997
were approximately $90,000.
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
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(A) 1. FINANCIAL STATEMENTS:
<TABLE>
<CAPTION>
CONSOLIDATED FINANCIAL STATEMENTS: PAGE:
<S> <C>
Reports of Independent Accountant.............................................. ___
Consolidated Balance Sheets at December 31, 1997 and 1996 ___
Consolidated Statements of Operations for the years
ended December 31, 1997, 1996 and 1995...................................... ___
Consolidated Statements of Stockholders' Equity for the years
ended December 31, 1997, 1996 and 1995...................................... ___
Consolidated Statements of Cash Flows for the years ended
December 31, 1997, 1996 and 1995............................................ ___
Notes to Consolidated Financial Statements..................................... ___
</TABLE>
2. FINANCIAL STATEMENT SCHEDULES:
All other schedules for which provision is made in the
applicable accounting regulations of the Securities and
Exchange Commission are not required under the related
instructions or are inapplicable, and therefore have been
omitted.
3. EXHIBITS:
The following exhibits are filed herewith:
EXHIBIT NO. DESCRIPTION
55
<PAGE>
2.1 Agreement and Plan of Merger, dated as of October 30, 1997,
by and among the Company, BILC Acquisition Corp. and ILC.
Incorporated by reference to Exhibit 2.1 of the Company's
registration statement on Form S-4, Registration No.
333-40519 (the "S-4 Registration Statement".)
2.2 Amendment No. 1 to the Merger Agreement dated January 6,
1998 by and among the Company Acquisition Corp. and ILC.
Incorporated by reference to Exhibit 2.2 of the S-4
Registration Statement.
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, as amended, Registration
Statement No. 333-3186 (the "S-1 Registration Statement.")
3.2 By-laws of the Company. Incorporated by reference to Exhibit
3.2 to the S-1 Registration Statement.
3.3 Certificate of Designations of the Series A Preferred Stock
of the Company. Incorporated by reference to Exhibit 3.1 to
the Current Report on the Company's Form 8-K, date of event
July 10, 1997.
* 3.4 Certificate of Amendment to the Restated Certificate of
Incorporation of the Company.
* 3.5 Amendment No. 1 to By-laws of the Company.
4.1 The Company's 1996. Stock Incentive Plan. Incorporated by
reference to Exhibit 4.1 to the S-1 Registration Statement.
4.2 Agreement for Conversion and Exchange of Note, by and among
Benson Eyecare Corporation; the Company ; and Convertible
Note holders. Incorporated by reference to Annex F to Benson
Eyecare Corporation's Proxy Statement dated April 5, 1996,
File No. 1-9435.
4.3 The Company 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 Reports on Form 10-Q for the
period ended June 30, 1996.
4.4 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, as amended, Registration
No. 333-18947 ("S-3 Registration Statement").
4.5 Indenture, dated as of May 3, 1996, including form of
Convertible Note. Incorporated by reference to Exhibit 4.5
to S-3 Registration Statement
* 4.6 The Company's Amended and Restated 1996 Stock Incentive Plan.
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, the Company and Omega Opco, Inc. Incorporated
by reference to Exhibit 10.1 to the S-1 Registration
Statement.
10.2 Form of Spinoff Agreement between Benson Eyecare Corporation
and the Company. Incorporated by reference to Exhibit 10.2
to the S-1 Registration Statement.
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 the Company . Incorporated by reference to
Exhibit 10.3 to the S-1 Registration Statement.
56
<PAGE>
10.4 Form of Indemnification Agreement. Incorporated by reference
to Exhibit 10.4 to the Company's Current 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, the Company 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 date of event
February 12, 1996.
10.6 Credit Agreement among the Company 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
agreements (incorporated by reference to Exhibit 106 to the
Company's 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 the Company 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.
Incorporated by reference to Exhibit 10.7 of the Company's
Annual Report on Form 10-K for the year ended December 31,
1996.
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. Incorporated by reference to the Company's Annual Report
on Form 10-K for the year ended December 31, 1996.
10.10 Stock Purchase Agreement, dated as of November 13, 1996, by
and among the Company, Foster Grant Group, L.P., Foster
Grant Holdings, L.P. and Accessories Associates, Inc.
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 (the "Benson S-1 Registration Statement").
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. Incorporated by reference to Exhibit
10.12 to the Company's Annual Report on Form 10-K for the
year ended December 31, 1996.
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 S-1 Registration Statement.
57
<PAGE>
10.14 Amendment No. 1, dated as of October 31, 1996, to Employment
Agreement dated July 1, 1993, between the Company and Mr.
Ian G.H. Ashken. Incorporated by reference to Exhibit 10.14
to the Company's Annual Report on Form 10-K for the year
ended December 31, 1996.
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, date of event June 30, 1994.
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.
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.
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.
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.
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. Incorporated by reference to Exhibit
10.20 to the Company's Annual Report on Form 10-K for the
year ended December 31, 1996.
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.
Incorporated by reference to Exhibit 10.21 to the Company's
Annual Report on Form 10-K for the year ended December 31,
1996.
10.22 Deed of Trust, Security Agreement and Financing Statement,
dated March 31, 1995, relating to mortgage of real property
located in Dallas, Texas, Incorporated by reference to
Exhibit 10.22 to the Company's Annual Report on Form 10-K
for the year ended December 31, 1996.
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.
10.24 Separation Agreement by and between the Company and Mr.
William T. Sullivan. Incorporated by reference to Exhibit
10.24 to the Company's Annual Report on Form 10-K for the
year ended December 31, 1996.
10.25 Amended and Restated Share purchase Agreement, dated July 9,
1997, by and among the Company, and Bolle Inc., on the one
hand, and Mr. Robert Bolle, Mr. Maurice Bolle, Mr. Franck
Bolle, Mrs. Patricia Bolle Passaquay, Ms. Brigitte Bolle and
Mrs. Christelle Roche (collectively, the
58
<PAGE>
"Sellers"). Incorporated by reference to Exhibit 10.1 to the
Company's Current Report on Form 8-K, date of event July 10,
1997.
10.26 Warrant Agreement, dated as of July 9, 1997, by and among
the Company and each of the Sellers. Incorporated by
reference to Exhibit 10.2 to the Company's Current Report on
the Form 8-K, date of event July 10, 1997.
10.27 Amendment and Restated Credit Agreement, dated as of July
10, 1997, among the Company as Borrower, and NationsBank
National Association, Bank of Boston Connecticut, Caisse
Nationale de Credit Agricole, European American Bank,
Imperial Bank, National City Bank of Kentucky, and the other
financial institutions from time to time parties thereto, as
Lenders, and NationsBank, National Association, as Agent.
Incorporated by reference to Exhibit 10.3 to the Company's
Current Report on Form 8-K, date of event July 10, 1997.
10.28 Voting Agreement dated as of October 30, 1997, between ILC
and Martin E. Franklin. Incorporated by reference to Exhibit
10.28 of the S-4 Registration Statement.
10.29 Voting Agreement dated as of October 30, 1997 between the
Company, Acquisition Corp. and Henry C. Baumgartner.
Incorporated by reference to Exhibit 10.29 of the S-4
Registration Statement.
10.30 Indemnification Agreement between the Company, Acquisition
Corp. and Bolle. Incorporated by reference to Exhibit 10.5
to the Company's Current Report on Form 8-K, date of event -
March 11, 1998.
10.31 Bill of Sale and Assignment Agreement between the Company
and Bolle. Incorporated by reference to Exhibit 10.4 to the
Company's Current Report on Form 8-K, date of event - March
11, 1998.
10.32 Management Services Agreement between Bolle and the Company.
Incorporated by reference to Exhibit 10.6 to the Company's
Current Report on Form 8-K, date of event - March 11, 1998.
10.33 Fairness Opinion of Raymond James & Associates, Inc.
(incorporated by reference from Annex D to the Joint Proxy
Statement/Prospectus in the S-4 Registration Statement).
10.34 Fairness Opinion of Donaldson, Lufkin & Jenrette Securities
Corporation (incorporated by reference from Annex E to the
Joint Proxy Statement/Prospectus).
10.35 Assignment Agreement and First Amendment to Amended and
Restated Credit Agreement, dated as of March 11, 1998 among
the Company, ORC Technologies, Inc., ORC Management
Corporation, Bolle America, Inc., Bolle Inc. and
NationsBank, National Association, et al. Incorporated by
reference to Exhibit 10.2 to the Company's Current Report on
Form 8-K, date of event - March 11, 1998.
10.36 Second Amended and Restated Credit Agreement among the
Company and NationsBank, National Association, et al., dated
as of March 12, 1998. Incorporated by reference to Exhibit
10.3 to the Company's Current Report on Form 8-K, date of
event - March 11, 1998. Filed together with such Exhibit
10.3 are copies of the following agreements:
(a) Second Amended and Restated Guaranty Agreement
dated as of March 12, 1998.
(b) Second Amended and Restated Intellectual Property
Security Agreement, dated as of March 12, 1998.
(c) Second Amended and Restated Stock Pledge Agreement,
dated as of March 12, 1998.
59
<PAGE>
(d) Second Amended and Restated Security Agreement,
dated as of March 12, 1998.
* 10.37 Agreement between Henry C. Baumgartner and the Company, dated
as of March 12, 1998..
* 10.38 Agreement between Richard D. Capra and the Company, dated as
of March 12, 1998.
* 21 Subsidiaries of the Registrant.
* 24.1 Consent of Price Waterhouse LLP.
* 27 Financial Data Schedule (for electronic filing only).
* FILED ELECTRONICALLY HEREWITH.
(B) REPORTS ON FORM 8-K IN THE FOURTH QUARTER OF 1997:
(i) The Company filed no Reports on Form 8-K in the
fourth quarter of 1996.
60
<PAGE>
LUMEN TECHNOLOGIES, 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 10th day of April, 1998.
Lumen Technologies, Inc.
By: /s/ Martin E. Franklin
-------------------------
Martin E. Franklin
Chairman of the Board
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>
<CAPTION>
<S> <C>
/s/ Martin E. Franklin /s/ Richard D. Capra
- ------------------------------------ --------------------------------
Martin E. Franklin Richard D. Capra
Director and Chairman of the Board Director and Chief Executive Officer
Dated: April 10, 1998 Dated: April 10, 1998
/s/ Ian G.H. Ashken /s/ David L. Moore
- ------------------------------------ --------------------------------
Ian G. H. Ashken David L. Moore
Director and Chief Financial Officer, Director
Executive Vice President of Finance and
Administration; Dated: April 10, 1998
Dated: April 10, 1998
/s/ Nora A. Bailey
- ------------------------------------ --------------------------------
Nora A. Bailey William T. Sullivan
Director Director
Dated: April 10, 1998 Dated: , 1998
/s/ Harrison H. Augur /s/ George B. Clairmont
- ------------------------------------ --------------------------------
Harrison H. Augur George C. Clairmont
Director Director
Dated: , 1998 Dated: April 10, 1998
- ------------------------------------
61
<PAGE>
Henry C. Baumgartner
Director
Dated: , 1998
-------------
</TABLE>
62
<PAGE>
EXHIBIT INDEX
2.1 Agreement and Plan of Merger, dated as of October 30, 1997,
by and among the Company, BILC Acquisition Corp. and ILC.
Incorporated by reference to Exhibit 2.1 of the Company's
registration statement on Form S-4, Registration No.
333-40519 (the "S-4 Registration Statement".)
2.2 Amendment No. 1 to the Merger Agreement dated January 6,
1998 by and among the Company Acquisition Corp. and ILC.
Incorporated by reference to Exhibit 2.2 of the S-4
Registration Statement.
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, as amended, Registration
Statement No. 333-3186 (the "S-1 Registration Statement.")
3.2 By-laws of the Company. Incorporated by reference to Exhibit
3.2 to the S-1 Registration Statement.
* 3.3 Certificate of Designations of the Series A Preferred Stock
of the Company. Incorporated by reference to Exhibit 3.1 to
the Current Report on the Company's Form 8-K, date of event
July 10, 1997.
* 3.4 Certificate of Amendment to the Restated Certificate of
Incorporation of the Company.
3.5 Amendment No. 1 to By-laws of the Company.
4.1 The Company's 1996. Stock Incentive Plan. Incorporated by
reference to Exhibit 4.1 to the S-1 Registration Statement.
4.2 Agreement for Conversion and Exchange of Note, by and among
Benson Eyecare Corporation; the Company ; and Convertible
Note holders. Incorporated by reference to Annex F to Benson
Eyecare Corporation's Proxy Statement dated April 5, 1996,
File No. 1-9435.
4.3 The Company 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 Reports on Form 10-Q for the
period ended June 30, 1996.
4.4 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, as amended, Registration
No. 333-18947 ("S-3 Registration Statement").
4.5 Indenture, dated as of May 3, 1996, including form of
Convertible Note. Incorporated by reference to Exhibit 4.5
to S-3 Registration Statement.
* 4.6 The Company's Amended and Restated 1996 Stock Incentive Plan.
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, the Company and Omega Opco, Inc. Incorporated
by reference to Exhibit 10.1 to the S-1 Registration
Statement.
63
<PAGE>
10.2 Form of Spinoff Agreement between Benson Eyecare Corporation
and the Company. Incorporated by reference to Exhibit 10.2
to the S-1 Registration Statement.
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 the Company. Incorporated by reference to
Exhibit 10.3 to the S-1 Registration Statement.
10.4 Form of Indemnification Agreement. Incorporated by reference
to Exhibit 10.4 to the Company's Current 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, the Company 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 date of event
February 12, 1996.
10.6 Credit Agreement among the Company 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
agreements (incorporated by reference to Exhibit 106 to the
Company's 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 the Company 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.
Incorporated by reference to Exhibit 10.7 of the Company's
Annual Report on Form 10-K for the year ended December 31,
1996.
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. Incorporated by reference to the Company's Annual Report
on Form 10-K for the year ended December 31, 1996.
10.10 Stock Purchase Agreement, dated as of November 13, 1996, by
and among the Company, Foster Grant Group, L.P., Foster
Grant Holdings, L.P. and Accessories Associates, Inc.
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 (the "Benson S-1 Registration Statement").
64
<PAGE>
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. Incorporated by reference to Exhibit
10.12 to the Company's Annual Report on Form 10-K for the
year ended December 31, 1996.
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 S-1 Registration Statement.
10.14 Amendment No. 1, dated as of October 31, 1996, to Employment
Agreement dated July 1, 1993, between the Company and Mr.
Ian G.H. Ashken. Incorporated by reference to Exhibit 10.14
to the Company's Annual Report on Form 10-K for the year
ended December 31, 1996.
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, date of event June 30, 1994.
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.
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.
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.
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.
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. Incorporated by reference to Exhibit
10.20 to the Company's Annual Report on Form 10-K for the
year ended December 31, 1996.
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.
Incorporated by reference to Exhibit 10.21 to the Company's
Annual Report on Form 10-K for the year ended December 31,
1996.
10.22 Deed of Trust, Security Agreement and Financing Statement,
dated March 31, 1995, relating to mortgage of real property
located in Dallas, Texas, Incorporated by reference to
Exhibit 10.22 to the Company's Annual Report on Form 10-K
for the year ended December 31, 1996.
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.
65
<PAGE>
10.24 Separation Agreement by and between the Company and Mr.
William T. Sullivan. Incorporated by reference to Exhibit
10.24 to the Company's Annual Report on Form 10-K for the
year ended December 31, 1996.
10.25 Amended and Restated Share purchase Agreement, dated July 9,
1997, by and among the Company, and Bolle Inc., on the one
hand, and Mr. Robert Bolle, Mr. Maurice Bolle, Mr. Franck
Bolle, Mrs. Patricia Bolle Passaquay, Ms. Brigitte Bolle and
Mrs. Christelle Roche (collectively, the "Sellers").
Incorporated by reference to Exhibit 10.1 to the Company's
Current Report on Form 8-K, date of event July 10, 1997.
10.26 Warrant Agreement, dated as of July 9, 1997, by and among
the Company and each of the Sellers. Incorporated by
reference to Exhibit 10.2 to the Company's Current Report on
the Form 8-K, date of event July 10, 1997.
10.27 Amendment and Restated Credit Agreement, dated as of July
10, 1997, among the Company as Borrower, and NationsBank
National Association, Bank of Boston Connecticut, Caisse
Nationale de Credit Agricole, European American Bank,
Imperial Bank, National City Bank of Kentucky, and the other
financial institutions from time to time parties thereto, as
Lenders, and NationsBank, National Association, as Agent.
Incorporated by reference to Exhibit 10.3 to the Company's
Current Report on Form 8-K, date of event July 10, 1997.
10.28 Voting Agreement dated as of October 30, 1997, between ILC
and Martin E. Franklin. Incorporated by reference to Exhibit
10.28 of the S-4 Registration Statement.
10.29 Voting Agreement dated as of October 30, 1997 between the
Company, Acquisition Corp. and Henry C. Baumgartner.
Incorporated by reference to Exhibit 10.29 of the S-4
Registration Statement.
10.30 Indemnification Agreement between the Company, Acquisition
Corp. and Bolle. Incorporated by reference to Exhibit 10.5
to the Company's Current Report on Form 8-K, date of event -
March 11, 1998.
10.31 Bill of Sale and Assignment Agreement between the Company
and Bolle. Incorporated by reference to Exhibit 10.4 to the
Company's Current Report on Form 8-K, date of event - March
11, 1998.
10.32 Management Services Agreement between Bolle and the Company.
Incorporated by reference to Exhibit 10.6 to the Company's
Current Report on Form 8-K, date of event - March 11, 1998..
10.33 Fairness Opinion of Raymond James & Associates, Inc.
(incorporated by reference from Annex D to the Joint Proxy
Statement/Prospectus in the S-4 Registration Statement).
10.34 Fairness Opinion of Donaldson, Lufkin & Jenrette Securities
Corporation (incorporated by reference from Annex E to the
Joint Proxy Statement/Prospectus).
10.35 Assignment Agreement and First Amendment to Amended and
Restated Credit Agreement, dated as of March 11, 1998 among
the Company, ORC Technologies, Inc., ORC Management
Corporation, Bolle America, Inc., Bolle Inc. and
NationsBank, National Association, et al. Incorporated by
reference to Exhibit 10.2 to the Company's Current Report on
Form 8-K, date of event - March 11, 1998.
10.36 Second Amended and Restated Credit Agreement among the
Company and NationsBank, National Association, et al., dated
as of March 12, 1998. Incorporated by reference to Exhibit
10.3 to the Company's Current Report on Form 8-K, date of
event - March 11, 1998. Filed together with such Exhibit
10.3 are copies of the following agreements:
66
<PAGE>
(a) Second Amended and Restated Guaranty Agreement
dated as of March 12, 1998.
(b) Second Amended and Restated Intellectual Property
Security Agreement, dated as of March 12, 1998.
(c) Second Amended and Restated Stock Pledge Agreement,
dated as of March 12, 1998.
(d) Second Amended and Restated Security Agreement,
dated as of March 12, 1998.
* 10.37 Agreement between Henry C. Baumgartner and the Company, dated
as of March 12, 1998.
* 10.38 Agreement between Richard D. Capra and the Company, dated as
of March 12, 1998.
* 21 Subsidiaries of the Registrant.
* 24.1 Consent of Price Waterhouse LLP.
* 27 Financial Data Schedule (for electronic filing only).
* FILED ELECTRONICALLY HEREWITH.
67
<PAGE>
CERTIFICATE OF AMENDMENT
OF THE
RESTATED CERTIFICATE OF INCORPORATION
OF
BEC GROUP, INC.
(Under Section 242 of the General Corporation Law)
It is hereby certified that:
FIRST: The name of the corporation is BEC Group, Inc.
(the "Corporation").
SECOND: The Restated Certificate of Incorporation of the
Corporation is hereby amended by striking out Article First thereof and by
substituting in lieu of said Article First the following new Article First:
"The name of the Corporation (hereinafter referred to as the
"Corporation") is:
LUMEN TECHNOLOGIES, INC."
THIRD: The Restated Certificate of Incorporation of the
Corporation is hereby further amended by striking out Article Fourth thereof
and by substituting in lieu of said Article Fourth the following new Article
Fourth:
"The total number of shares of stock which the
Corporation shall have authority to issue is
50,000,000 shares of common stock, having a par
value of $.01 per share and 500,000 shares of
preferred stock having a par value of $1.00 per
share. There is hereby expressly vested in the
Board of Directors the authority to fix in the
resolution or resolutions providing for the issue
of each series of such preferred stock, the voting
power and the designations, preferences and
relative, participating, operational or other
rights of each such series, and the qualifications,
limitations or restrictions thereof. Shares of
preferred stock may be issued from time to time in
one or more series as may from time to time be
determined by the Board of Directors, each such
series to be distinctly designated.
At the Effective Time (as hereinafter defined) this
Certificate of Amendment, each two shares of common
stock, par value $.01 per share, issued and
outstanding immediately prior to the Effective Time
(the "Old Common Stock") shall automatically be
reclassified and continued, without any action on
the part of the holder thereof, as one share of
common stock, par value $.01 per share (the "New
Common Stock") and, in lieu of any interest of a
fraction of a share of New
<PAGE>
Common Stock, each holder whose aggregate holdings
of Old Common Stock prior to the Effective Time
amounted to a number of shares not evenly divisible
by two, shall be entitled to receive for and in lieu
of such interest in such fraction of Old Common
Stock ("Share"), at the Effective Time, and upon the
surrender of the stock certificates formerly
representing shares of Old Common Stock, an amount
in cash equal to the closing price on The New York
Stock Exchange for a share of Old Common Stock on
the trading day prior to the Effective Time
multiplied by one."
FOURTH: The foregoing amendments of the Restated Certificates
of Incorporation of the Corporation herein certified have been duly adopted in
accordance with the provisions of Section 242 of the General Corporation Law of
the State of Delaware.
FIFTH: The effective time (the "Effective Time") of this
Certificate of Amendment of the Restated Certificate of Incorporation shall be
4:30 p.m. Delaware local time on March 11, 1998.
IN WITNESS WHEREOF, this document has been executed by Martin
E. Franklin, its Chairman of the Board and Chief Executive Officer, on the date
set forth below.
Date: March 11, 1998
/s/ Martin E. Franklin
----------------------------------
Martin E. Franklin
Chairman of the Board and
Chief Executive Officer of
BEC Group, Inc.
<PAGE>
AMENDMENT
TO
BYLAWS
OF
LUMEN TECHNOLOGIES, INC.
(FORMERLY KNOWN AS BEC GROUP, INC.)
Pursuant to Article VII of the Bylaws (the "Bylaws") of BEC
Group, Inc. (the "Company") and the resolution of the Board of Directors of
the Company, duly adopted at a meeting of the Board held on October 30, 1997
(the "Resolution"), but subject to Paragraph 5 hereof and the Resolution, the
By-laws are hereby amended as follows:
1. The title of the Bylaws shall be amended by striking out
the words "BEC Group, Inc." and replacing them with "Lumen Technologies, Inc."
2. Article III, Section 7 is hereby stricken in its entirety
and the following new Article III, Section 7 is substituted in lieu thereof:
"SECTION 7. Chairman of the Board. The Chairman of
the Board shall be an executive officer of the corporation and shall preside,
if present, at all meetings of the stockholders and at all meetings of the
Board of Directors and shall perform such other duties and have such other
powers as from time to time may be assigned by the Board of Directors or
prescribed by these Bylaws."
3. Article III, Section 8 is hereby stricken in its entirety
and the following new Article III, Section 8 is substituted in lieu thereof:
"SECTION 8. Vice Chairman of the Board. The Vice
Chairman of the Board shall, at the request of the Chairman of the Board or in
his absence or disability, perform the duties of the Chairman of the Board and
when so acting shall, have all the power of, and be subject to all
restrictions upon, the chairman of the Board and shall perform such other
duties and have such other powers as from time to time may be assigned to him
by the Chairman of the Board or prescribed by these Bylaws. In the event of a
vacancy in the office of the Chairman of the Board, the Vice Chairman of the
Board shall thereupon serve as the Chairman of the Board until the next annual
meeting of stockholders and until a successor is duly elected and qualified."
<PAGE>
4. Article III, Section 9 is hereby stricken in its entirety
and the following new Article III, Section 9 is substituted in lieu thereof:
"SECTION 9. Chief Executive Officer. The Chief
Executive Officer shall have general direction of the affairs of the
Corporation and general supervision over its several officers, subject,
however, to the control of the Board of Directors and the Chairman of the
Board, and in general shall perform such duties and, subject to the other
provisions of these Bylaws, have such powers incident to the office of Chief
Executive Officer and perform such other duties as from time to time may be
assigned to him by the Board of Directors or the Chairman of the Board."
5. The foregoing amendments shall be deemed to become
effective immediately upon the Effective Time (as defined in the Agreement and
Plan of Merger dated October 30, 1997, as amended (the "Merger Agreement")
among the Company, BEC Acquisition Corp., and ILC Technology, Inc.), of the
Merger (as defined in the Merger Agreement).
6. Except as amended herein, the Bylaws shall remain
unmodified and in full force and effect.
The undersigned, ________________, hereby certifies that the
above amendments were duly adopted by vote of a majority of the Board of
Directors, at a special meeting of the Board held on October 30, 1997, at
which a quorum was present.
Signed this 11th day of March, 1998
/s/ Desiree DeStefano
-----------------------------------
Name: Desiree DeStefano
Title: Vice President of Finance
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BEC GROUP, INC.
1996 STOCK INCENTIVE PLAN
(AMENDED AND RESTATED AS OF OCTOBER 30, 1997)
1. PURPOSE
The purpose of the Plan is to provide a means through which the
Company and its Subsidiaries and Affiliates may attract able persons to enter
and remain in the employ of the Company and its Subsidiaries and Affiliates
and to provide a means whereby employees, directors and consultants of the
Company and its Subsidiaries and Affiliates can acquire and maintain Common
Stock ownership, or be paid incentive compensation measured by reference to
the value of Common Stock, thereby strengthening their commitment to the
welfare of the Company and its Subsidiaries and Affiliates and promoting an
identity of interest between stockholders and these employees.
So that the appropriate incentive can be provided, the Plan provides
for granting Incentive Stock Options, Nonqualified Stock Options, Stock
Appreciation Rights, Restricted Stock Awards, Phantom Stock Unit Awards,
Performance Share Unit Awards and Stock Bonus Awards, or any combination of
the foregoing. The Plan also provides for the automatic formula grant of
Restricted Stock to Non-Employee Directors.
2. DEFINITIONS
The following definitions shall be applicable throughout the Plan.
(a) "Affiliate" means any affiliate of the Company within the meaning
of 17 CFR ss. 230.405.
(b) "Award" means, individually or collectively, any Incentive Stock
Option, Nonqualified Stock Option, Stock Appreciation Right, Restricted Stock
Award, Phantom Stock Unit Award, Performance Share Unit Award, Stock Bonus
Award or Director Stock Award.
(c) "Award Period" means a period of time within which performance is
measured for the purpose of determining whether an Award of Performance Share
Units has been earned.
(d) "Benson" means Benson Eyecare Corporation, a Delaware corporation
and former Parent of the Company.
(e) "Board" means the Board of Directors of the Company.
(f) "Cause" means the Company, a Subsidiary or Affiliate having cause
to terminate a Participant's employment or service
<PAGE>
under any existing employment, consulting or any other agreement between the
Participant and the Company or a Subsidiary or Affiliate or, in the absence of
such an employment, consulting or other agreement, upon (i) the determination
by the Committee that the Participant has ceased to perform his duties to the
Company, a Subsidiary or Affiliate (other than as a result of his incapacity
due to physical or mental illness or injury), which failure amounts to an
intentional and extended neglect of his duties to such party, (ii) the
Committee's determination that the Participant has engaged or is about to
engage in conduct materially injurious to the Company, a Subsidiary or
Affiliate or (iii) the Participant having been convicted of a felony.
(g) "Change in Control" shall, unless the Board otherwise directs by
resolution adopted prior thereto or, in the case of a particular award, the
applicable Award agreement states otherwise, be deemed to occur if (i) any
"person" (as that term is used in Sections 13 and 14(d)(2) of the Exchange
Act) is or becomes the beneficial owner (as that term is used in Section 13(d)
of the Exchange Act), directly or indirectly, of 50% or more of either the
outstanding shares of Common Stock or the combined voting power of the
Company's then outstanding voting securities entitled to vote generally, (ii)
during any period of two consecutive years beginning on the date of the
consummation of the Spinoff, individuals who constitute the Board at the
beginning of such period cease for any reason to constitute at least a
majority thereof, unless the election or the nomination for election by the
Company's shareholders of each new director was approved by a vote of at least
three-quarters of the directors then still in office who were directors, or
approved by directors, at the beginning of the Spinoff period or (iii) the
Company undergoes a liquidation or dissolution or a sale of all or
substantially all of the assets of the Company. Neither the Spinoff nor any
merger, consolidation or corporate reorganization in which the owners of the
combined voting power of the Company's then outstanding voting securities
entitled to vote generally prior to said combination, own 50% or more of the
resulting entity's outstanding voting securities shall, by itself, be
considered a Change in Control.
(h) "Code" means the Internal Revenue Code of 1986, as amended.
Reference in the Plan to any section of the Code shall be deemed to include
any amendments or successor provisions to such section and any regulations
under such section.
(i) "Committee" means the full Board, the Compensation Committee of
the Board or such other committee of at least two people as the Board may
appoint to administer the Plan.
(j) "Common Stock" means the common stock par value $0.01 per share,
of the Company.
(k) "Company" means BEC Group, Inc.
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(l) "Date of Grant" means the date on which the granting of an Award
is authorized or such other date as may be specified in such authorization.
(m) "Director Stock Option" means the Award of a Nonqualified Stock
Option to Non-Employee Directors pursuant to Section 12.
(n) "Director Stock Option Agreement" means the agreement entered
into with respect to a Director Stock Option pursuant to Section 12.
(o) "Disability" means disability as defined in the long-term
disability plan of the Company, a Subsidiary or Affiliate, as may be
applicable to the Participant in question, or, in the absence of such a plan,
the complete and permanent inability by reason of illness or accident to
perform the duties of the occupation at which a Participant was employed or
served when such disability commenced or, if the Participant was retired when
such disability commenced, the inability to engage in any substantial gainful
activity, in either case as determined by the Committee based upon medical
evidence acceptable to it.
(p) "Disinterested Person" means a person who is (i) a "nonemployee
director" within the meaning of Rule 16b-3 under the Exchange Act, or any
successor rule or regulation and (ii) an "outside director" within the meaning
of Section 162(m) of the Code; provided, however, that clause (ii) shall apply
only with respect to grants of Awards with respect to which the Company's tax
deduction could be limited by Section 162(m) of the Code if such clause did
not apply.
(q) "Eligible Person" means any (i) person regularly employed by the
Company, a Subsidiary or Affiliate who satisfies all of the requirements of
Section 6; provided, however, that no such employee covered by a collective
bargaining agreement shall be an Eligible Person unless and to the extent that
such eligibility is set forth in such collective bargaining agreement or in an
agreement or instrument relating thereto; (ii) director of the Company, a
Subsidiary or Affiliate; or (iii) consultant to the Company, a Subsidiary or
Affiliate.
(r) "Exchange Act" means the Securities Exchange Act of 1934.
(s) "Fair Market Value" on a given date means (i) if the Stock is
listed on a national securities exchange, the mean between the highest and
lowest sale prices reported as having occurred on the primary exchange with
which the Stock is listed and traded on the date prior to such date, or, if
there is no such sale on that date, then on the last preceding date on which
such a sale was reported; (ii) if the Stock is not listed on any national
securities exchange but is quoted in the National Market System of the
National Association of Securities Dealers
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Automated Quotation System on a last sale basis, the average between the high
bid price and low ask price reported on the date prior to such date, or, if
there is no such sale on that date, then on the last preceding date on which a
sale was reported; (iii) if the Stock is not listed on a national securities
exchange nor quoted in the National Market System of the National Association
of Securities Dealers Automated Quotation System on a last sale basis, the
amount determined by the Committee to be the fair market value based upon a
good faith attempt to value the Stock accurately and computed in accordance
with applicable regulations of the Internal Revenue Service; or (iv)
notwithstanding clauses (i) - (iii) above, with respect to Awards granted as
of the consummation of the Spinoff, the price at which the Stock first begins
trading in a public trading market in connection with the Spinoff.
(t) "Holder" means a Participant who has been granted an Award.
(u) "Incentive Stock Option" means an Option granted by the Committee
to a Participant under the Plan which is designated by the Committee as an
Incentive Stock Option pursuant to Section 422 of the Code.
(v) "Merger" means the merger of ILC Technologies, Inc. with and into
BILC Acquisition Corp., a wholly owned subsidiary of the Company, as
contemplated in the Agreement and Plan of Merger, dated as of October 30, 1997
as amended by Amendment No. 1 to the Merger Agreement dated January 6, 1998,
by and among ILC Technologies, Inc., BILC Acquisition Corp. and the Company.
(w) "Non-Employee Director" means a director of the Company who is
not also an employee of the Company.
(x) "Nonqualified Stock Option" means an Option granted by the
Committee to a Participant under the Plan which is not designated by the
Committee as an Incentive Stock Option.
(y) "Normal Termination" means termination of employment or service
with the Company and all Subsidiaries and Affiliates:
(i) Upon retirement pursuant to the retirement plan of
the Company, a Subsidiary or Affiliate, as may be
applicable at the time to the Participant in
question;
(ii) On account of Disability;
(iii) With the written approval of the Committee; or
(iv) By the Company, a Subsidiary or Affiliate without
Cause.
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(z) "Option" means an Award granted under Section 7 of the Plan.
(aa) "Option Period" means the period described in Section 7(c).
(ab) "Option Price" means the exercise price set for an Option
described in Section 7(a).
(ac) "Participant" means an Eligible Person who has been selected by
the Committee to participate in the Plan and to receive an Award pursuant to
Section 6 and a Non-Employee Director who has received an automatic grant of
Restricted Stock pursuant to Section 12.
(ad) "Performance Goals" means the performance objectives of the
Company, a Subsidiary or Affiliate during an Award Period or Restricted Period
established for the purpose of determining whether, and to what extent, Awards
will be earned for an Award Period or Restricted Period.
(ae) "Performance Share Unit" means a hypothetical investment
equivalent equal to one share of Stock granted in connection with an Award
made under Section 9 of the Plan.
(af) "Phantom Stock Unit" means a hypothetical investment equivalent
equal to one share of Stock granted in connection with an Award made under
Section 10 of the Plan.
(ag) "Plan" means the Company's 1996 Stock Incentive Plan (Amended
and Restated as of October 30, 1997).
(ah) "Restricted Period" means, with respect to any share of
Restricted Stock or any Phantom Stock Unit, the period of time determined by
the Committee during which such Award is subject to the restrictions set forth
in Section 10.
(ai) "Restricted Stock" means shares of Stock issued or transferred
to a Participant subject to forfeiture and the other restrictions set forth in
Section 10.
(aj) "Restricted Stock Award" means an Award of Restricted Stock
granted under Section 10 of the Plan.
(ak) "Securities Act" means the Securities Act of 1933, as amended.
(al) "Stock" means the Common Stock or such other authorized shares
of stock of the Company as the Committee may from time to time authorize for
use under the Plan.
(am) "Stock Appreciation Right" or "SAR" means an Award granted under
Section 8 of the Plan.
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(an) "Stock Bonus" means an Award granted under Section 11 of the
Plan.
(ao) "Stock Option Agreement" means the agreement between the Company
and a Participant who has been granted an Option pursuant to Section 7 which
defines the rights and obligations of the parties as required in Section 7(d).
(ap) "Subsidiary" means any subsidiary of the Company as defined in
Section 424(f) of the Code.
(aq) "Vested Unit" shall have the meaning ascribed thereto in Section
10(e).
3. EFFECTIVE DATE, DURATION AND SHAREHOLDER APPROVAL
The Plan is effective as of April 2, 1996, the date of adoption of
the Plan by the Board. The effectiveness of the Plan and the validity of any
and all Awards granted pursuant to the Plan is contingent upon approval of the
Plan by the stockholders of the Company in a manner which complies with Rule
16b-3 promulgated pursuant to the Exchange Act and Section 422(b)(1) of the
Code. Unless and until the stockholders approve the Plan in compliance
therewith, no Award granted under the Plan shall be effective. See Section 18
for the applicability of the shareholder approval requirements of Section
162(m) of the Code.
The expiration date of the Plan, after which no Awards may be granted
hereunder, shall be April 2, 2006; provided, however, that the administration
of the Plan shall continue in effect until all matters relating to the payment
of Awards previously granted have been settled.
4. ADMINISTRATION
The Committee shall administer the Plan. Unless the full Board is
acting as the Committee, each member of the Committee shall, at the time he
takes any action with respect to an Award under the Plan, be a Disinterested
Person. The majority of the members of the Committee shall constitute a
quorum. The acts of a majority of the members present at any meeting at which
a quorum is present or acts approved in writing by a majority of the Committee
shall be deemed the acts of the Committee.
Subject to the provisions of the Plan, the Committee shall have
exclusive power to:
(a) Select the Eligible Persons to participate in the Plan;
(b) Determine the nature and extent of the Awards, other than
Director Stock Options, to be made to each Participant;
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(c) Determine the time or times when Awards, other than Director
Stock Options, will be made;
(d) Determine the duration of each Award Period and Restricted
Period, except with respect to a Director Stock Option;
(e) Determine the conditions to which the payment of Awards, other
than Director Stock Options, may be subject;
(f) Establish the Performance Goals for each Award Period;
(g) Prescribe the form of Stock Option Agreement or other form or
forms evidencing Awards; and
(h) Cause records to be established in which there shall be entered,
from time to time as Awards are made to Participants, the date of each Award,
the number of Incentive Stock Options, Nonqualified Stock Options, SARs,
Phantom Stock Units, Performance Share Units, shares of Restricted Stock and
Stock Bonuses awarded to each Participant, the expiration date, the Award
Period and the duration of any applicable Restricted Period.
The Committee shall have the authority, subject to the provisions of
the Plan, to establish, adopt, or revise such rules and regulations and to
make all such determinations relating to the Plan as it may deem necessary or
advisable for the administration of the Plan. The Committee's interpretation
of the Plan or any documents evidencing Awards granted pursuant thereto and
all decisions and determinations by the Committee with respect to the Plan
shall be final, binding, and conclusive on all parties unless otherwise
determined by the Board.
5. GRANT OF AWARDS; SHARES SUBJECT TO THE PLAN
The Committee may, from time to time, grant Awards of Options, Stock
Appreciation Rights, Restricted Stock, Phantom Stock Units, Performance Share
Units and/or Stock Bonuses to one or more Eligible Persons; provided, however,
that:
(a) Subject to Section 14, the aggregate number of shares of Stock
available for issuance with respect to all Awards is 4,250,000 shares;
(b) Such shares shall be deemed to have been used in payment of
Awards whether they are actually delivered or the Fair Market Value equivalent
of such shares is paid in cash. In the event any Option, SAR not attached to
an Option, Restricted Stock, Phantom Stock Unit or Performance Share Unit
shall be surrendered, terminate, expire, or be forfeited, the number of shares
of Stock no longer subject thereto shall thereupon be
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<PAGE>
released and shall thereafter be available for new Awards under the Plan;
(c) Stock delivered by the Company in settlement of Awards under the
Plan may be authorized and unissued Stock or Stock held in the treasury of the
Company or may be purchased on the open market or by private purchase; and
(d) No person may be granted Options or SARs under the Plan with
respect to more than 1,000,000 shares of Stock.
6. ELIGIBILITY
Participation shall be limited to Eligible Persons who have received
written notification from the Committee, or from a person designated by the
Committee, that they have been selected to participate in the Plan and
Non-Employee Directors who receive Director Stock Options.
7. DISCRETIONARY GRANT OF STOCK OPTIONS
The Committee is authorized to grant one or more Incentive Stock
Options or Nonqualified Stock Options to any Eligible Person; provided,
however, that no Incentive Stock Options shall be granted to any Eligible
Person who is not an employee of the Company or a Subsidiary. Each Option so
granted shall be subject to the following conditions, or to such other
conditions as may be reflected in the applicable Stock Option Agreement.
(A) OPTION PRICE. The exercise price ("Option Price") per share of
Stock for each Option shall be set by the Committee at the time of grant but
shall not be less than (i) in the case of an Incentive Stock Option, and
subject to Section 7(e), the Fair Market Value of a share of Stock at the Date
of Grant, and (ii) in the case of a Non-Qualified Stock Option, the par value
of a share of Stock; provided, however, that all Options intended to qualify
as "performance-based compensation" under Section 162(m) of the Code shall
have an Option Price per share of Stock no less than the Fair Market Value of
a share of Stock on the Date of Grant.
(B) MANNER OF EXERCISE AND FORM OF PAYMENT. Options which have become
exercisable may be exercised by delivery of written notice of exercise to the
Committee accompanied by payment of the Option Price. The Option Price shall
be payable in cash and/or shares of Stock valued at the Fair Market Value at
the time the Option is exercised (provided, however, that such shares have
either been held for six months or previously acquired on the open market) or,
in the discretion of the Committee, either (i) in other property having a fair
market value on the date of exercise equal to the Option Price, or (ii) by
delivering to the Committee a copy of irrevocable instructions to a
stockbroker to
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deliver promptly to the Company an amount of sale or loan proceeds sufficient
to pay the Option Price.
(C) OPTION PERIOD AND EXPIRATION. Options shall vest and become
exercisable in such manner and on such date or dates determined by the
Committee and shall expire after such period, not to exceed ten years, as may
be determined by the Committee (the "Option Period"); provided, however, that
notwithstanding any vesting dates set by the Committee, the Committee may in
its sole discretion accelerate the exercisability of any Option, which
acceleration shall not affect the terms and conditions of any such Option
other than with respect to exercisability. If an Option is exercisable in
installments, such installments or portions thereof which become exercisable
shall remain exercisable until the Option expires. Unless otherwise stated in
the applicable Option Agreement, the Option shall expire earlier than the end
of the Option Period in the following circumstances:
(i) If prior to the end of the Option Period, the
Holder shall undergo a Normal Termination, the
Option shall expire on the earlier of the last day
of the Option Period or the date that is three
months after the date of such Normal Termination.
In such event, the Option shall remain exercisable
by the Holder until its expiration, only to the
extent the Option was exercisable at the time of
such Normal Termination.
(ii) If the Holder dies prior to the end of the Option
Period and while still in the employ or service of
the Company, a Subsidiary or Affiliate, or within
three months of Normal Termination, the Option
shall expire on the earlier of the last day of the
Option Period or the date that is twelve months
after the date of death of the Holder. In such
event, the Option shall remain exercisable by the
person or persons to whom the Holder's rights under
the Option pass by will or the applicable laws of
descent and distribution until its expiration, only
to the extent the Option was exercisable by the
Holder at the time of death.
(iii) If the Holder ceases employment or service with the
Company and all Subsidiaries and Affiliates for
reasons other than Normal Termination or death, the
Option shall expire immediately upon such cessation
of employment or service.
(D) STOCK OPTION AGREEMENT - OTHER TERMS AND CONDITIONS. Each Option
granted under the Plan shall be evidenced by a Stock Option Agreement, which
shall contain such provisions as may be
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determined by the Committee and, except as may be specifically stated otherwise
in such Stock Option Agreement, which shall be subject to the following terms
and conditions:
(i) Each Option or portion thereof that is exercisable shall be
exercisable for the full amount or for any part thereof.
(ii) Each share of Stock purchased through the exercise of an
Option shall be paid for in full at the time of the
exercise. Each Option shall cease to be exercisable, as to
any share of Stock, when the Holder purchases the share or
exercises a related SAR or when the Option expires.
(iii) Subject to Section 13(k), Options shall not be transferable
by the Holder except by will or the laws of descent and
distribution and shall be exercisable during the Holder's
lifetime only by him.
(iv) Each Option shall vest and become exercisable by the Holder
in accordance with the vesting schedule established by the
Committee and set forth in the Stock Option Agreement.
(v) Each Stock Option Agreement may contain a provision that,
upon demand by the Committee for such a representation, the
Holder shall deliver to the Committee at the time of any
exercise of an Option a written representation that the
shares to be acquired upon such exercise are to be acquired
for investment and not for resale or with a view to the
distribution thereof. Upon such demand, delivery of such
representation prior to the delivery of any shares issued
upon exercise of an Option shall be a condition precedent to
the right of the Holder or such other person to purchase any
shares. In the event certificates for Stock are delivered
under the Plan with respect to which such investment
representation has been obtained, the Committee may cause a
legend or legends to be placed on such certificates to make
appropriate reference to such representation and to restrict
transfer in the absence of compliance with applicable
federal or state securities laws.
(vi) Each Incentive Stock Option Agreement shall contain a
provision requiring the Holder to notify the Company in
writing immediately after the Holder makes a disqualifying
disposition of
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any Stock acquired pursuant to the exercise of such
Incentive Stock Option. A disqualifying disposition is any
disposition (including any sale) of such Stock before the
later of (a) two years after the Date of Grant of the
Incentive Stock Option or (b) one year after the date the
Holder acquired the Stock by exercising the Incentive Stock
Option.
(e) INCENTIVE STOCK OPTION GRANTS TO 10% STOCKHOLDERS.
Notwithstanding anything to the contrary in this Section 7, if an Incentive
Stock Option is granted to a Holder who owns stock representing more than ten
percent of the voting power of all classes of stock of the Company or of a
Subsidiary, the Option Period shall not exceed five years from the Date of
Grant of such Option and the Option Price shall be at least 110 percent of the
Fair Market Value (on the Date of Grant) of the Stock subject to the Option.
(f) $100,000 PER YEAR LIMITATION FOR INCENTIVE STOCK OPTIONS. To the
extent the aggregate Fair Market Value (determined as of the Date of Grant) of
Stock for which Incentive Stock Options are exercisable for the first time by
any Participant during any calendar year (under all plans of the Company and
its Subsidiaries) exceeds $100,000, such excess Incentive Stock Options shall
be treated as Nonqualified Stock Options.
(g) VOLUNTARY SURRENDER. The Committee may permit the voluntary
surrender of all or any portion of any Nonqualified Stock Option and its
corresponding SAR, if any, granted under the Plan to be conditioned upon the
granting to the Holder of a new Option for the same or a different number of
shares as the Option surrendered or require such voluntary surrender as a
condition precedent to a grant of a new Option to such Participant. Such new
Option shall be exercisable at an Option Price, during an Option Period, and
in accordance with any other terms or conditions specified by the Committee at
the time the new Option is granted, all determined in accordance with the
provisions of the Plan without regard to the Option Price, Option Period, or
any other terms and conditions of the Nonqualified Stock Option surrendered.
8. STOCK APPRECIATION RIGHTS
Any Option granted under the Plan may include SARs, either at the
Date of Grant or, except in the case of an Incentive Stock Option, by
subsequent amendment. The Committee also may award SARs to Eligible Persons
independent of any Option. An SAR shall be subject to such terms and
conditions not inconsistent with the Plan as the Committee shall impose,
including, but not limited to, the following:
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(a) VESTING. SARs granted in connection with an Option shall become
exercisable, be transferable and shall expire according to the same vesting
schedule, transferability rules and expiration provisions as the corresponding
Option. An SAR granted independent of an Option shall become exercisable, be
transferable and shall expire in accordance with a vesting schedule,
transferability rules and expiration provisions as established by the
Committee and reflected in an Award agreement.
(b) AUTOMATIC EXERCISE. If on the last day of the Option Period (or
in the case of an SAR independent of an Option, the period established by the
Committee after which the SAR shall expire), the Fair Market Value of the
Stock exceeds the Option Price (or in the case of an SAR granted independent
of an Option, the Fair Market Value of the Stock on the Date of Grant), the
Holder has not exercised the SAR or the corresponding Option, and neither the
SAR nor the corresponding Option has expired, such SAR shall be deemed to have
been exercised by the Holder on such last day and the Company shall make the
appropriate payment therefor.
(c) PAYMENT. Upon the exercise of an SAR, the Company shall pay to
the Holder an amount equal to the number of shares subject to the SAR
multiplied by the excess, if any, of the Fair Market Value of one share of
Stock on the exercise date over the Option Price, in the case of an SAR
granted in connection with an Option, or the Fair Market Value of one share of
Stock on the Date of Grant, in the case of an SAR granted independent of an
Option. With respect to SARs exercised before the Company has been subject to
the reporting requirements of Section 13(a) of the Exchange Act for one year,
the Company shall issue or transfer to the Participant shares of Stock with a
Fair Market Value at such time equal to 100 percent of any such excess. With
respect to SARs exercised after the Company has been subject to such reporting
requirements for at least one year, the Company shall pay such excess in cash,
in shares of Stock valued at Fair Market Value, or any combination thereof, as
determined by the Committee. Fractional shares shall be settled in cash.
(d) METHOD OF EXERCISE. A Participant may exercise an SAR at such
time or times as may be determined by the Committee at the time of grant by
filing an irrevocable written notice with the Committee or its designee,
specifying the number of SARs to be exercised, and the date on which such SARs
were awarded.
(e) EXPIRATION. Except as otherwise provided in the case of SARs
granted in connection with Options, an SAR shall expire on a date designated
by the Committee which is not later than ten years after the Date of Grant of
the SAR.
9. PERFORMANCE SHARES
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(a) AWARD GRANTS. The Committee is authorized to establish
Performance Share programs to be effective over designated Award Periods
determined by the Committee. At the beginning of each Award Period, the
Committee will establish in writing Performance Goals based upon financial
objectives for the Company for such Award Period and a schedule relating the
accomplishment of the Performance Goals to the Awards to be earned by
Participants. Performance Goals may include absolute or relative growth in
earnings per share or rate of return on stockholders' equity or other
measurement of corporate performance and may be determined on an individual
basis or by categories of Participants. The Committee shall determine the
number of Performance Share Units to be awarded, if any, to each Participant
who is selected to receive such an Award. The Committee may add new
Participants to a Performance Share program after its commencement by making
pro rata grants.
(b) DETERMINATION OF AWARD. At the completion of a Performance Share
Award Period, or at other times as specified by the Committee, the Committee
shall calculate the number of shares of Stock earned with respect to each
Participant's Performance Share Unit Award by multiplying the number of
Performance Share Units granted to the Participant by a performance factor
representing the degree of attainment of the Performance Goals.
(c) PARTIAL AWARDS. A Participant for less than a full Award Period,
whether by reason of commencement or termination of employment or otherwise,
shall receive such portion of an Award, if any, for that Award Period as the
Committee shall determine.
(d) PAYMENT OF PERFORMANCE SHARE UNIT AWARDS. Performance Share Unit
Awards shall be payable in that number of shares of Stock determined in
accordance with Section 9(b); provided, however, that, at its discretion, the
Committee may make payment to any Participant in the form of cash upon the
specific request of such Participant. The amount of any payment made in cash
shall be based upon the Fair Market Value of the Stock on the day prior to
payment. Payments of Performance Share Unit Awards shall be made as soon as
practicable after the completion of an Award Period.
(e) ADJUSTMENT OF PERFORMANCE GOALS. The Committee may, during the
Award Period, make such adjustments to Performance Goals as it may deem
appropriate, to compensate for, or reflect, (i) extraordinary or non-recurring
events experienced during an Award Period by the Company or by any other
corporation whose performance is relevant to the determination of whether
Performance Goals have been attained; (ii) any significant changes that may
have occurred during such Award Period in applicable accounting rules or
principles or changes in the Company's method of accounting or in that of any
other corporation whose performance is relevant to the determination of
whether an Award has been earned or (iii) any significant changes
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that may have occurred during such Award Period in tax laws or other laws or
regulations that alter or affect the computation of the measures of
Performance Goals used for the calculation of Awards; provided, however, that
with respect to such Awards intended to qualify as "performance-based
compensation" under Section 162(m) of the Code, such adjustment shall be made
only to the extent that the Committee determines that such adjustments may be
made without a loss of deductibility for such Award under Section 162(m) of
the Code.
10. DISCRETIONARY RESTRICTED STOCK AWARDS AND PHANTOM STOCK UNITS
(a) AWARD OF RESTRICTED STOCK AND PHANTOM STOCK UNITS.
(i) The Committee shall have the authority (1) to grant
Restricted Stock and Phantom Stock Unit Awards to
Eligible Persons, (2) to issue or transfer
Restricted Stock to Participants, and (3) to
establish terms, conditions and restrictions
applicable to such Restricted Stock and Phantom
Stock Units, including the Restricted Period, which
may differ with respect to each grantee, the time
or times at which Restricted Stock or Phantom Stock
Units shall be granted or become vested and the
number of shares or units to be covered by each
grant.
(ii) The Holder of a Restricted Stock Award shall
execute and deliver to the Company an Award
agreement with respect to the Restricted Stock
setting forth the restrictions applicable to such
Restricted Stock. If the Committee determines that
the Restricted Stock shall be held in escrow rather
than delivered to the Holder pending the release of
the applicable restrictions, the Holder
additionally shall execute and deliver to the
Company (i) an escrow agreement satisfactory to the
Committee, and (ii) the appropriate blank stock
powers with respect to the Restricted Stock covered
by such agreements. If a Participant shall fail to
execute a Restricted Stock agreement and, if
applicable, an escrow agreement and stock powers,
the Award shall be null and void. Subject to the
restrictions set forth in Section 10(b), the Holder
shall generally have the rights and privileges of a
stockholder as to such Restricted Stock, including
the right to vote such Restricted Stock. At the
discretion of the Committee, cash dividends and
stock dividends with respect to the Restricted
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Stock may be either currently paid to the Holder or
withheld by the Company for the Holder's account,
and interest may be paid on the amount of cash
dividends withheld at a rate and subject to such
terms as determined by the Committee. Cash
dividends or stock dividends so withheld by the
Committee shall not be subject to forfeiture.
(iii) Upon the Award of Restricted Stock, the Committee
shall cause a stock certificate registered in the
name of the Holder to be issued and, if it so
determines, deposited together with the stock
powers with an escrow agent designated by the
Committee. If an escrow arrangement is used, the
Committee shall cause the escrow agent to issue to
the Holder a receipt evidencing any stock
certificate held by it registered in the name of
the Holder.
(iv) The terms and conditions of a grant of Phantom
Stock Units shall be reflected in a written Award
agreement. No shares of Stock shall be issued at
the time a Phantom Stock Unit Award is made, and
the Company will not be required to set aside a
fund for the payment of any such Award. Holders of
Phantom Stock Units shall receive an amount equal
to the cash dividends paid by the Company upon one
share of Stock for each Phantom Stock Unit then
credited to such Holder's account ("Dividend
Equivalents"). The Committee shall, in its sole
discretion, determine whether to credit to the
account of, or to currently pay to, each Holder of
an Award of Phantom Stock Units such Dividend
Equivalents. Dividend Equivalents credited to a
Holder's account shall be subject to forfeiture on
the same basis as the related Phantom Stock Units,
and may bear interest at a rate and subject to such
terms as are determined by the Committee.
(B) RESTRICTIONS.
(i) Restricted Stock awarded to a Participant shall be
subject to the following restrictions until the
expiration of the Restricted Period, and to such
other terms and conditions as may be set forth in
the applicable Award agreement: (1) if an escrow
arrangement is used, the Holder shall not be
entitled to delivery of the stock certificate; (2)
the shares shall be subject to the restrictions on
transferability set forth
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<PAGE>
in the Award agreement; (3) the shares shall be
subject to forfeiture to the extent provided in
subparagraph (d) and the Award Agreement and, to
the extent such shares are forfeited, the stock
certificates shall be returned to the Company, and
all rights of the Holder to such shares and as a
shareholder shall terminate without further
obligation on the part of the Company.
(ii) Phantom Stock Units awarded to any Participant
shall be subject to (1) forfeiture until the
expiration of the Restricted Period, to the extent
provided in subparagraph (d) and the Award
agreement, and to the extent such Awards are
forfeited, all rights of the Holder to such Awards
shall terminate without further obligation on the
part of the Company and (2) such other terms and
conditions as may be set forth in the applicable
Award agreement.
(iii) The Committee shall have the authority to remove
any or all of the restrictions on the Restricted
Stock and Phantom Stock Units whenever it may
determine that, by reason of changes in applicable
laws or other changes in circumstances arising
after the date of the Restricted Stock Award or
Phantom Stock Award, such action is appropriate.
(c) RESTRICTED PERIOD. The Restricted Period of Restricted Stock and
Phantom Stock Units shall commence on the Date of Grant and shall expire from
time to time as to that part of the Restricted Stock and Phantom Stock Units
indicated in a schedule established by the Committee.
(d) FORFEITURE PROVISIONS. Except to the extent determined by the
Committee and reflected in the underlying Award agreement, in the event a
Holder terminates employment with the Company and all Subsidiaries and
Affiliates during a Restricted Period, that portion of the Award with respect
to which restrictions have not expired ("Non-Vested Portion") shall be treated
as follows.
(i) Upon the voluntary resignation of a Participant or
discharge by the Company, a Subsidiary or Affiliate
for Cause, the Non-Vested Portion of the Award
shall be completely forfeited.
(ii) Upon Normal Termination, the Non-Vested Portion of
the Award shall be prorated for service during the
Restricted Period and shall be received as soon as
practicable following termination.
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(iii) Upon death, the Non-Vested Portion of the Award
shall be prorated for service during the Restricted
Period and paid to the Participant's beneficiary as
soon as practicable following death.
(e) DELIVERY OF RESTRICTED STOCK AND SETTLEMENT OF PHANTOM STOCK
UNITS. Upon the expiration of the Restricted Period with respect to any shares
of Stock covered by a Restricted Stock Award, the restrictions set forth in
Section 10(b) and the Award agreement shall be of no further force or effect
with respect to shares of Restricted Stock which have not then been forfeited.
If an escrow arrangement is used, upon such expiration, the Company shall
deliver to the Holder, or his beneficiary, without charge, the stock
certificate evidencing the shares of Restricted Stock which have not then been
forfeited and with respect to which the Restricted Period has expired (to the
nearest full share) and any cash dividends or stock dividends credited to the
Holder's account with respect to such Restricted Stock and the interest
thereon, if any.
Upon the expiration of the Restricted Period with respect to any
Phantom Stock Units covered by a Phantom Stock Unit Award, the Company shall
deliver to the Holder, or his beneficiary, without charge, one share of Stock
for each Phantom Stock Unit which has not then been forfeited and with respect
to which the Restricted Period has expired ("Vested Unit") and cash equal to
any Dividend Equivalents credited with respect to each such Vested Unit and
the interest thereon, if any; provided, however, that, if so noted in the
applicable Award agreement, the Committee may, in its sole discretion, elect
to pay cash or part cash and part Stock in lieu of delivering only Stock for
Vested Units. If cash payment is made in lieu of delivering Stock, the amount
of such payment shall be equal to the Fair Market Value of the Stock as of the
date on which the Restricted Period lapsed with respect to such Vested Unit.
(f) STOCK RESTRICTIONS. Each certificate representing Restricted
Stock awarded under the Plan shall bear the following legend until the lapse
of all restrictions with respect to such Stock:
"Transfer of this certificate and the shares represented hereby is
restricted pursuant to the terms of a Restricted Stock Agreement, dated as of
, between BEC Group, Inc. and . A copy of such Agreement is
on file at the offices of the Company at 555 Theodore Avenue, Rye, New York
10580." ---------
Stop transfer orders shall be entered with the Company's transfer agent and
registrar against the transfer of legended securities.
11. STOCK BONUS AWARDS
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The Committee may issue unrestricted Stock under the Plan to Eligible
Persons, alone or in tandem with other Awards, in such amounts and subject to
such terms and conditions as the Committee shall from time to time in its sole
discretion determine. Stock Bonus Awards under the Plan shall be granted as,
or in payment of, a bonus, or to provide incentives or recognize special
achievements or contributions.
12. AUTOMATIC GRANTS OF STOCK OPTIONS TO NON-EMPLOYEE DIRECTORS
Upon the consummation of the Merger each Non-Employee Director shall
be automatically granted a Nonqualified Stock Option to purchase 10,000 shares
of Stock. Thereafter, on the date any person first becomes a Non-Employee
Director, such person shall be automatically granted without further action by
the Board or the Committee a Nonqualified Stock Option to purchase 10,000
shares of Stock. Thereafter, beginning in 1999, for the remainder of the term
of the Plan and provided he remains a Non- Employee Director of the Company,
on the date of each of the Company's Annual Meeting of Stockholders, each
Non-Employee Director shall be automatically granted without further action by
the Board or the Committee a Nonqualified Stock Option to purchase 2,500
shares of Stock. All such Options granted to Non-Employee Directors shall
hereinafter be referred to as Director Stock Options.
(a) OPTION PRICE; TERM. All Director Stock Options shall have an
Option Price per share equal to the Fair Market Value of a share of Stock on
the Date of Grant. All Director Stock Options shall vest and become
exercisable over a period of four years at the rate of 25% of each grant
annually on each of the four consecutive anniversaries of the Date of Grant
directly following the Date of Grant provided the Non-Employee Director's
services as a director continues through each such anniversary. The term of
each Director Stock Option ("Term"), after which each such Option shall
expire, shall be ten years from the date of Grant.
(b) EXPIRATION. If prior to the expiration of the Term of a Director
Stock Option the Non-Employee Director shall cease to be a member of the Board
for any reason other than his death, the Director Stock Option shall expire on
the earlier of the expiration of the Term or the date that is three months
after the date of such cessation. If prior to the expiration of the Term of a
Director Stock Option a Non-Employee Director shall cease to be a member of
the Board by reason of his death, the Director Stock Option shall expire on
the earlier of the expiration of the Term or the date that is one year after
the date of such cessation. In the event a Non-Employee Director ceases to be
a member of the Board for any reason, any unexpired Director Stock Option
shall thereafter be exercisable until its expiration only
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<PAGE>
to the extent that such Option was exercisable at the time of such cessation.
(c) DIRECTOR STOCK OPTION AGREEMENT. Each Director Stock Option shall
be evidenced by a Director Stock Option Agreement, which shall contain such
provisions as may be determined by the Committee.
(d) NONTRANSFERABILITY. Subject to Section 13(k), Director Stock
Options shall not be transferable except by will or the laws of descent and
distribution and shall be exercisable during the Non-Employee Director's
lifetime only by him.
13. GENERAL
(a) ADDITIONAL PROVISIONS OF AN AWARD. Awards under the Plan also may
be subject to such other provisions (whether or not applicable to the benefit
awarded to any other Participant) as the Committee determines appropriate
including, without limitation, provisions to assist the Participant in
financing the purchase of Stock upon the exercise of Options, provisions for
the forfeiture of or restrictions on resale or other disposition of shares of
Stock acquired under any Award, provisions giving the Company the right to
repurchase shares of Stock acquired under any Award in the event the
Participant elects to dispose of such shares, and provisions to comply with
Federal and state securities laws and Federal and state tax withholding
requirements. Any such provisions shall be reflected in the applicable Award
agreement.
(b) PRIVILEGES OF STOCK OWNERSHIP. Except as otherwise specifically
provided in the Plan, no person shall be entitled to the privileges of stock
ownership in respect of shares of Stock which are subject to Awards hereunder
until such shares have been issued to that person.
(c) GOVERNMENT AND OTHER REGULATIONS. The obligation of the Company
to make payment of Awards in Stock or otherwise shall be subject to all
applicable laws, rules, and regulations, and to such approvals by governmental
agencies as may be required. Notwithstanding any terms or conditions of any
Award to the contrary, the Company shall be under no obligation to offer to
sell or to sell and shall be prohibited from offering to sell or selling any
shares of Stock pursuant to an Award unless such shares have been properly
registered for sale pursuant to the Securities Act with the Securities and
Exchange Commission or unless the Company has received an opinion of counsel,
satisfactory to the Company, that such shares may be offered or sold without
such registration pursuant to an available exemption therefrom and the terms
and conditions of such exemption have been fully complied with. The Company
shall be under no
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<PAGE>
obligation to register for sale under the Securities Act any of the shares of
Stock to be offered or sold under the Plan. If the shares of Stock offered for
sale or sold under the Plan are offered or sold pursuant to an exemption from
registration under the Securities Act, the Company may restrict the transfer
of such shares and may legend the Stock certificates representing such shares
in such manner as it deems advisable to ensure the availability of any such
exemption.
(d) TAX WITHHOLDING. Notwithstanding any other provision of the Plan,
the Company, a Subsidiary or an Affiliate, as appropriate, shall have the
right to deduct from all Awards cash and/or Stock, valued at Fair Market Value
on the date of payment, in an amount necessary to satisfy all Federal, state
or local taxes as required by law to be withheld with respect to such Awards
and, in the case of Awards paid in Stock, the Holder or other person receiving
such Stock may be required to pay to the Company or a Subsidiary, as
appropriate, prior to delivery of such Stock, the amount of any such taxes
which the Company or Subsidiary is required to withhold, if any, with respect
to such Stock. Subject in particular cases to the disapproval of the
Committee, the Company may accept shares of Stock of equivalent Fair Market
Value in payment of such withholding tax obligations if the Holder of the
Award elects to make payment in such manner.
(e) CLAIM TO AWARDS AND EMPLOYMENT RIGHTS. No employee or other
person shall have any claim or right to be granted an Award under the Plan or,
having been selected for the grant of an Award, to be selected for a grant of
any other Award. Neither the Plan nor any action taken hereunder shall be
construed as giving any Participant any right to be retained in the employ or
service of the Company, a Subsidiary or an Affiliate.
(F) DESIGNATION AND CHANGE OF BENEFICIARY. Each Participant shall
file with the Committee a written designation of one or more persons as the
beneficiary who shall be entitled to receive the amounts payable with respect
to an Award of Performance Share Units, Phantom Stock Units or Restricted
Stock, if any, due under the Plan upon his death. A Participant may, from time
to time, revoke or change his beneficiary designation without the consent of
any prior beneficiary by filing a new designation with the Committee. The last
such designation received by the Committee shall be controlling; provided,
however, that no designation, or change or revocation thereof, shall be
effective unless received by the Committee prior to the Participant's death,
and in no event shall it be effective as of a date prior to such receipt. If
no beneficiary designation is filed by the Participant, the beneficiary shall
be deemed to be his or her spouse or, if the Participant is unmarried at the
time of death, his or her estate.
(g) PAYMENTS TO PERSONS OTHER THAN PARTICIPANTS. If the Committee
shall find that any person to whom any amount is
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<PAGE>
payable under the Plan is unable to care for his affairs because of illness or
accident, or is a minor, or has died, then any payment due to such person or
his estate (unless a prior claim therefor has been made by a duly appointed
legal representative) may, if the Committee so directs the Company, be paid to
his spouse, child, relative, an institution maintaining or having custody of
such person, or any other person deemed by the Committee to be a proper
recipient on behalf of such person otherwise entitled to payment. Any such
payment shall be a complete discharge of the liability of the Committee and
the Company therefor.
(h) NO LIABILITY OF COMMITTEE MEMBERS. No member of the Committee
shall be personally liable by reason of any contract or other instrument
executed by such member or on his behalf in his capacity as a member of the
Committee nor for any mistake of judgment made in good faith, and the Company
shall indemnify and hold harmless each member of the Committee and each other
employee, officer or director of the Company to whom any duty or power
relating to the administration or interpretation of the Plan may be allocated
or delegated, against any cost or expense (including counsel fees) or
liability (including any sum paid in settlement of a claim) arising out of any
act or omission to act in connection with the Plan unless arising out of such
person's own fraud or willful bad faith; provided, however, that approval of
the Board shall be required for the payment of any amount in settlement of a
claim against any such person. The foregoing right of indemnification shall
not be exclusive of any other rights of indemnification to which such persons
may be entitled under the Company's Articles of Incorporation or By-Laws, as a
matter of law, or otherwise, or any power that the Company may have to
indemnify them or hold them harmless.
(i) GOVERNING LAW. The Plan shall be governed by and construed in
accordance with the internal laws of the State of New York without regard to
the principles of conflicts of law thereof.
(j) FUNDING. Except as provided under Section 10, no provision of the
Plan shall require the Company, for the purpose of satisfying any obligations
under the Plan, to purchase assets or place any assets in a trust or other
entity to which contributions are made or otherwise to segregate any assets,
nor shall the Company maintain separate bank accounts, books, records or other
evidence of the existence of a segregated or separately maintained or
administered fund for such purposes. Holders shall have no rights under the
Plan other than as unsecured general creditors of the Company, except that
insofar as they may have become entitled to payment of additional compensation
by performance of services, they shall have the same rights as other employees
under general law.
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(k) NONTRANSFERABILITY. A person's rights and interest under the
Plan, including amounts payable, may not be sold, assigned, donated, or
transferred or otherwise disposed of, mortgaged, pledged or encumbered except,
in the event of a Holder's death, to a designated beneficiary to the extent
permitted by the Plan, or in the absence of such designation, by will or the
laws of descent and distribution; provided, however, the Committee may, in its
sole discretion, allow for transfer of Awards other than Incentive Stock
Options to other persons or entities, subject to such conditions or
limitations as it may establish.
(l) RELIANCE ON REPORTS. Each member of the Committee and each member
of the Board shall be fully justified in relying, acting or failing to act,
and shall not be liable for having so relied, acted or failed to act in good
faith, upon any report made by the independent public accountant of the
Company and its Subsidiaries and Affiliates and upon any other information
furnished in connection with the Plan by any person or persons other than
himself.
(m) RELATIONSHIP TO OTHER BENEFITS. No payment under the Plan shall
be taken into account in determining any benefits under any pension,
retirement, profit sharing, group insurance or other benefit plan of the
Company or any Subsidiary except as otherwise specifically provided in such
other plan.
(n) EXPENSES. The expenses of administering the Plan shall be borne
by the Company and its Subsidiaries and Affiliates.
(o) PRONOUNS. Masculine pronouns and other words of masculine gender
shall refer to both men and women.
(p) TITLES AND HEADINGS. The titles and headings of the sections in
the Plan are for convenience of reference only, and in the event of any
conflict, the text of the Plan, rather than such titles or headings shall
control.
(q) TERMINATION OF EMPLOYMENT. For all purposes herein, a person who
transfers from employment or service with the Company to employment or service
with a Subsidiary or Affiliate or vice versa shall not be deemed to have
terminated employment or service with the Company, a Subsidiary or Affiliate.
14. CHANGES IN CAPITAL STRUCTURE
Awards granted under the Plan and any agreements evidencing such
Awards, the maximum number of shares of Stock subject to all Awards and the
maximum number of shares of Stock with respect to which any one person may be
granted Options or SARs during any year shall be subject to adjustment or
substitution, as determined by the Committee in its sole discretion, as to the
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<PAGE>
number, price or kind of a share of Stock or other consideration subject to
such Awards or as otherwise determined by the Committee to be equitable (i) in
the event of changes in the outstanding Stock or in the capital structure of
the Company by reason of stock dividends, stock splits, reverse stock splits,
recapitalizations, reorganizations, mergers, consolidations, combinations,
exchanges, or other relevant changes in capitalization occurring after the
Date of Grant of any such Award or (ii) in the event of any change in
applicable laws or any change in circumstances which results in or would
result in any substantial dilution or enlargement of the rights granted to, or
available for, Participants in the Plan, or which otherwise warrants equitable
adjustment because it interferes with the intended operation of the Plan. In
addition, in the event of any such adjustments or substitution, the aggregate
number of shares of Stock available under the Plan shall be appropriately
adjusted by the Committee, whose determination shall be conclusive. Any
adjustment in Incentive Stock Options under this Section 14 shall be made only
to the extent not constituting a "modification" within the meaning of Section
424(h)(3) of the Code, and any adjustments under this Section 14 shall be made
in a manner which does not adversely affect the exemption provided pursuant to
Rule 16b-3 under the Exchange Act. Further, with respect to Awards intended to
qualify as "performance-based compensation" under Section 162(m) of the Code,
such adjustments or substitutions shall be made only to the extent that the
Committee determines that such adjustments or substitutions may be made
without a loss of deductibility for Awards under Section 162(m) of the Code.
The Company shall give each Participant notice of an adjustment hereunder and,
upon notice, such adjustment shall be conclusive and binding for all purposes.
Notwithstanding the above, in the event of any of the following:
A. The Company is merged or consolidated with another
corporation or entity and, in connection therewith,
consideration is received by shareholders of the Company in
a form other than stock or other equity interests of the
surviving entity;
B. All or substantially all of the assets of the Company are
acquired by another person;
C. The reorganization or liquidation of the Company; or
D. The Company shall enter into a written agreement to undergo
an event described in clauses A, B or C above,
then the Committee may, in its discretion and upon at least 10 days advance
notice to the affected persons, cancel any outstanding Awards and pay to the
Holders thereof, in cash or stock, or any combination thereof, the value of
such Awards based upon the price per share of Stock received or to be received
by
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other shareholders of the Company in the event. The terms of this Section
14 may be varied by the Committee in any particular Award agreement.
15. EFFECT OF CHANGE IN CONTROL
Except to the extent reflected in a particular Award agreement:
(a) In the event of a Change in Control, notwithstanding any vesting
schedule with respect to an Award of Options (including Director Stock
Options), SARs, Phantom Stock Units or Restricted Stock, such Option or SAR
shall become immediately exercisable with respect to 100 percent of the shares
subject to such Option or SAR, and the Restricted Period shall expire
immediately with respect to 100 percent of such Phantom Stock Units or shares
of Restricted Stock.
(b) In the event of a Change in Control, all incomplete Award Periods
in effect on the date the Change in Control occurs shall end on the date of
such change, and the Committee shall (i) determine the extent to which
Performance Goals with respect to each such Award Period have been met based
upon such audited or unaudited financial information then available as it
deems relevant, (ii) cause to be paid to each Participant partial or full
Awards with respect to Performance Goals for each such Award Period based upon
the Committee's determination of the degree of attainment of Performance
Goals, and (iii) cause all previously deferred Awards to be settled in full as
soon as possible.
(c) In addition, in the event of a Change in Control, the Committee
may in its discretion and upon at least 10 days' advance notice to the
affected persons, cancel any outstanding Awards and pay to the Holders
thereof, in cash or stock, or any combination thereof, the value of such
Awards based upon the price per share of Stock received or to be received by
other shareholders of the Company in the event.
(d) The obligations of the Company under the Plan shall be binding
upon any successor corporation or organization resulting from the merger,
consolidation or other reorganization of the Company, or upon any successor
corporation or organization succeeding to substantially all of the assets and
business of the Company. The Company agrees that it will make appropriate
provisions for the preservation of Participant's rights under the Plan in any
agreement or plan which it may enter into or adopt to effect any such merger,
consolidation, reorganization or transfer of assets.
16. NONEXCLUSIVITY OF THE PLAN
Neither the adoption of this Plan by the Board nor the submission of
this Plan to the stockholders of the Company for
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<PAGE>
approval shall be construed as creating any limitations on the power of the
Board to adopt such other incentive arrangements as it may deem desirable,
including, without limitation, the granting of stock options otherwise than
under this Plan, and such arrangements may be either applicable generally or
only in specific cases.
17. AMENDMENTS AND TERMINATION
The Board may at any time terminate the Plan. Subject to Section 14,
with the express written consent of an individual Participant, the Board or
the Committee may cancel or reduce or otherwise alter outstanding Awards if,
in its judgment, the tax, accounting, or other effects of the Plan or
potential payouts thereunder would not be in the best interest of the Company.
The Board or the Committee may, at any time, or from time to time, amend or
suspend and, if suspended, reinstate, the Plan in whole or in part; provided,
however, that without further stockholder approval neither the Board nor the
Committee shall make any amendment to the Plan which would materially alter
the Plan or which would specifically:
(a) Materially increase the maximum number of shares of Stock which
may be issued pursuant to Awards, except as provided in Section 14;
(b) Change the minimum Option Price;
(c) Extend the maximum Option Period; or
(d) Extend the termination date of the Plan.
* * *
As adopted by the Board of Directors of
BEC Group, Inc. as of April 2, 1996 and
as amended and restated as of October 30. 1997.
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<PAGE>
AGREEMENT
THIS AGREEMENT, as of March 6, 1998 and effective as provided below, by
and between LUMEN TECHNOLOGIES, INC., a Delaware corporation (the "Company"),
and HENRY C. BAUMGARTNER, a resident of California ("Baumgartner").
W I T N E S S E T H:
WHEREAS, Baumgartner currently is the Chairman of the Board and Chief
Executive Officer of ILC Technology, Inc., a California corporation (referred
to hereinafter "ILC") and Baumgartner and ILC are parties to various agreements
relating to Baumgartner's employment by ILC (the "Employment Contract");
WHEREAS, ILC and the Company previously have entered into an agreement
regarding the merger of a subsidiary of the Company into ILC whereby the
shareholders of ILC acquire common stock of the Company in exchange for their
ILC common stock ("Combination");
WHEREAS, the Company and ILC desire to terminate the Employment Contract,
pursuant to the terms and conditions set forth herein in the event that the
Combination is closed;
WHEREAS, Baumgartner is willing to accept such termination, pursuant to
the terms and conditions set forth herein, in the event that the Combination is
closed;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
set forth in this Agreement, and for other good and valuable consideration,
receipt of which is acknowledged hereby, the Company and Baumgartner agree as
follows:
1. COMMENCEMENT. This Agreement shall be expressly conditioned upon the
closing of the Combination between the Company and ILC. If the Combination does
not close, this Agreement shall terminate with no further obligations between
the parties. If the Combination does close, this Agreement shall become fully
effective on such closing date and such closing date shall be the "Effective
Date" of this Agreement.
2. TERMINATION AND COMPENSATION. Effective on the Effective Date,
Baumgartner's term as an officer or director of ILC, and his employment by ILC,
shall end without further notice. In consideration for such termination and
Baumgartner's acceptance thereof, the Company shall pay Baumgartner or his
estate, and Baumgartner shall accept from the Company, as consideration and in
full satisfaction for termination of the Employment Contract and Baumgartner's
full observance and performance of all of the provisions hereof, the total
amount of $1,100,000 payable as follows:
a. $300,000 on the date of the execution hereof;
b. $300,000 on the first anniversary date hereof; and
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c. $166,666 on each of the third, fourth and fifth anniversary dates
hereof.
Baumgartner acknowledges and agrees that he shall not be eligible for any other
payments whatsoever, whether as an employee or otherwise, and that he will not
participate in any of the Company's bonus or benefit programs in effect from
time to time.
3. TERMINATION OF EMPLOYMENT CONTRACT. The parties acknowledge that
Baumgartner and ILC are parties to the existing Employment Contract. Upon the
date hereof, and in consideration of the payments set forth in Section 3,
above, and the mutual covenants and agreements contained herein, the
Employment Contract shall terminate and neither ILC nor the Company shall have
any obligations thereunder other than in respect of salary accrued through and
unpaid as of such date.
4. CONFIDENTIALITY. For purposes of this Section 4, all references to the
Company shall be deemed to include the Company's subsidiary corporations and
affiliates, including (without limitation) ILC. Baumgartner acknowledges that
he has had and in the future will have knowledge of, and access to, proprietary
and confidential information of the Company and its affiliates, including
(without limitation) ILC, including (without limitation), inventions, trade
secrets, technical information, know-how, plans, specifications, methods of
operations, financial and marketing information and the identity of customers
and suppliers (collectively, the "Confidential Information"), after August 1,
1996, and that such information, even though it may be contributed, developed
or acquired by Baumgartner, constitutes valuable, special and unique assets of
the Company developed at great expense which are the exclusive property of the
Company. Accordingly, Baumgartner shall not, at any time, during the five (5)
year period commencing upon the Effective Date, use, reveal, report, publish,
transfer or otherwise disclose to any person, corporation or other entity, any
of the Confidential Information without the prior written consent of the
Company, except to responsible officers and employees of the Company, and other
responsible persons who are in a contractual or fiduciary relationship with the
Company, and who have a need for such information for purposes in the best
interests of the Company, as appropriate, and except for such information which
is or becomes of general public knowledge in the industry from authorized
sources other than Baumgartner or is required to be disclosed pursuant to order
of any court or regulatory agency of competent jurisdiction. Baumgartner
acknowledges that the Company would not enter into this Agreement without the
assurance that all such confidential and proprietary information will be used
for the exclusive benefit of the Company.
5. REMEDIES. The restrictions set forth in section 4 are considered by the
parties to be fair and reasonable. Baumgartner acknowledges that the Company
would be irreparably harmed and that monetary damages would not provide an
adequate remedy in the event of a breach of the provisions of Section 4.
Accordingly, Baumgartner agrees that, in
2
<PAGE>
addition to any other remedies available to the Company, the Company shall be
entitled to seek injunctive and other equitable relief to secure the
enforcement of these provisions. If any provisions of Section 4 are adjudicated
to be invalid or unenforceable, the invalid or unenforceable provisions shall
be deemed amended (with respect only to the jurisdiction in which such
adjudication is made) in such manner as to render them enforceable and to
effectuate as nearly as possible the original intentions and agreement of the
parties.
6. MISCELLANEOUS.
A. SURVIVAL. The provisions of Sections 4 and 5 shall survive the
termination of this Agreement.
B. ENTIRE AGREEMENT. This Agreement sets forth the entire
understanding of the parties and merges and supersedes any prior or
contemporaneous agreements between the parties pertaining to the subject
matter hereof.
C. MODIFICATION. This Agreement may not be modified or terminated
orally, and no modification, termination or attempted waiver of any of the
provisions hereof shall be binding unless in writing and signed by the party
against whom the same is sought to be enforced.
D. WAIVER. Failure of a party to enforce one or more of the
provisions of this Agreement or to require at any time performance of any of
the obligations hereof shall not be construed to be a waiver of such provisions
by such party nor to in any way affect the validity of this Agreement or such
party's right thereafter to enforce any provision of this Agreement, nor to
preclude such party from taking any other action at any time which it would
legally be entitled to take.
E. SUCCESSORS AND ASSIGNS. Neither party shall have the right to
assign this Agreement, or any rights or obligations hereunder, without the
consent of the other party; provided, however, that upon the sale of all or
substantially all of the assets, business and goodwill of the Company to
another company, or upon the merger or consolidation of the Company with
another company, this Agreement shall inure to the benefit of, and be binding
upon, both Baumgartner and the company purchasing such assets, business and
goodwill, or surviving such merger or consolidation, as the case may be, in the
same manner and to the same extent as though such other company were the
Company. Subject to the foregoing, this Agreement shall inure to the benefit
of, and be binding upon, the parties hereto and their legal representatives,
heirs, successors and assigns.
3
<PAGE>
F. COMMUNICATIONS. All notices, requests, demands and other
communications under this Agreement shall be in writing and shall be deemed to
have been given at the time personally delivered or when mailed in any United
States post office enclosed in a registered or certified postage prepaid
envelope and addressed to the addresses set forth below, or to such other
address as any party may specify by notice to the other party; provided,
however, that any notice of change of address shall be effective only upon
receipt.
To the Company: Lumen Technologies, Inc.
555 Theodore Fremd Avenue
Suite B-302
Rye, NY 10580
To Baumgartner: Henry C. Baumgartner
737 Westridge Avenue
Portola Valley, CA 94025
G. SEVERABILITY. If any provision of this Agreement is held to be
invalid or unenforceable by a court of competent jurisdiction, such invalidity
or unenforceability shall not affect the validity and enforceability of the
other provisions of this Agreement and the provisions held to be invalid or
unenforceable shall be enforced as nearly as possible according to its original
terms and intent to eliminate such invalidity or unenforceability.
H. JURISDICTION VENUE. This Agreement shall be subject to the
exclusive jurisdiction of the courts of California. Any breach of any
provisions of this Agreement shall be deemed to be a breach occurring in the
State of California and the parties irrevocably and expressly agree to submit
to the jurisdiction of the courts of the State of California, or the Federal
Courts having concurrent geographic jurisdiction, for the purpose of resolving
any disputes among them relating to this Agreement or the transactions
contemplated by this Agreement. In the event of any dispute arising hereunder,
the prevailing party shall be entitled to recover from the other all costs and
expenses, including reasonable attorney's fees, incurred by such prevailing
party in connection therewith.
I. GOVERNING LAW. This Agreement is made and executed and shall be
governed by the laws of the State of California, without regard to the
conflicts of law principles thereof.
4
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto have duly executed this
Agreement as of the date set forth above.
LUMEN TECHNOLOGIES, INC.
By: /s/
-----------------------------
Its: Chief Financial Officer
-----------------------------
EMPLOYEE
/s/ Henry Baumgartner
---------------------------------
Henry C. Baumgartner
5
<PAGE>
AGREEMENT
THIS AGREEMENT, as of , 1998 and effective as provided below, by
and between LUMEN TECHNOLOGIES, INC., a Delaware corporation (the "Company"),
and RICHARD D. CAPRA, a resident of Texas ("Capra").
W I T N E S S E T H :
---------------------
WHEREAS, Capra currently is the Chief Operating Officer and President of
ILC Technology, Inc., a California corporation (referred to hereinafter "ILC")
and Capra and ILC are parties to various agreements relating to Capra's
employment by ILC (the "Employment Contract");
WHEREAS, ILC and the Company previously have entered into an agreement
regarding the merger of a subsidiary of the Company into ILC whereby the
shareholders of ILC acquire common stock of the Company in exchange for their
ILC common stock ("Combination");
WHEREAS, the Company and ILC desire to terminate the Employment Contract
and hire Capra as an employee, pursuant to the terms and conditions set forth
herein in the event that the Combination is closed;
WHEREAS, Capra is willing to accept employment, on the terms and
conditions set forth below.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
set forth in this Agreement, the Company and Capra agree as follows:
1. COMMENCEMENT. This Agreement shall be expressly conditioned upon the
closing of the Combination between the Company and ILC. If the Combination does
not close, this Agreement shall terminate with no further obligations between
the parties. If the Combination does close, this Agreement shall become fully
effective on such closing date and such closing date shall be the "Effective
Date" of this Agreement.
2. EMPLOYMENT. Upon the Effective Date, the Company shall employ Capra
as its Chief Executive Officer. Capra agrees to accept such employment on the
terms and conditions set forth in this Agreement. Capra shall remain an
employee of the Company until February 28, 1999 (the "Employment Term"), unless
otherwise terminated as provided below.
a. DUTIES. During his term as an employee, Capra shall serve as the
Company's Chief Executive Officer and shall perform all duties commensurate
with his position and as may be reasonably assigned to him by the Company's
Board of Directors consistent with such position. Capra shall devote
substantially all of his professional time and energies to the
1
<PAGE>
business and affairs of the Company and shall use his best efforts, skills and
abilities to promote the interests of the Company as necessary to diligently
and competently perform the duties of his position.
b. EMPLOYMENT COMPENSATION AND BENEFITS. During the Employment
Term, the Company shall pay to Capra, and Capra shall accept from the Company,
as compensation for the performance of services as an employee under this
Agreement and Capra's observance and performance of all of the provisions
hereof, a salary at the annual rate of $250,000 per year (the "Base
Compensation"). Capra acknowledges and agrees that he shall not be eligible
for any other bonus or bonuses, whether as an employee, and that he will not
participate in any of the Company's bonus programs in effect from time to time
unless otherwise approved by the board of directors. Capra's salary shall be
payable in accordance with the normal payroll practices of the Company and
shall be subject to withholding for applicable taxes and other amounts. During
the Employment Term, Capra shall be entitled to participate in or benefit from,
in accordance with the eligibility and other provisions thereof, such medical,
insurance, pension, retirement, life insurance, 401-K and other fringe benefit
plans or policies as the Company may make available to, or have in effect for,
personnel with commensurate duties from time to time. The Company retains the
right to terminate or alter its plans or policies from time to time. Capra
shall also be entitled to vacations, sick leave and other similar benefits in
accordance with policies of the Company from time to time in effect for
executive personnel.
3. REIMBURSEMENTS. During the Employment Term, upon submission of proper
invoices, receipts or other supporting documentation satisfactory to the
Company and in specific accordance with such guidelines as may be established
from time to time by the Company's Board of Directors, Capra shall be
reimbursed by the Company for all reasonable business expenses actually and
necessarily incurred by Capra on behalf of the Company in connection with the
performance of services under this Agreement.
4. TERMINATION OF EMPLOYMENT CONTRACT; COMPENSATION. The parties
acknowledge that Capra and ILC are parties to the existing Employment Contract.
Upon the Effective Date and in consideration of the mutual covenants and
agreements contained herein, the Employment Contract shall terminate and
neither ILC nor the Company shall have any obligations thereunder, other than
in respect of salary accrued through and unpaid as of such Date. In
consideration for such termination and Capra's acceptance thereof, the Company
shall pay Capra or his estate, and Capra shall accept from the Company, as
consideration and in full satisfaction for termination of the Employment
Contract and Capra's full observance and performance of all of the provisions
hereof, the amount of $980,000, payable as follows:
A. $500,000 on the Effective Date of;
B. $80,000 on or before January 4, 1999; and
C. $100,000 on each of the second, third, fourth and fifth
anniversary dates of the Effective Date.
2
<PAGE>
Baumgartner acknowledges and agrees that he shall not be eligible for any
other payments whatsoever, whether as an employee or otherwise, and that he
will not participate in any of the Company's bonus or benefit programs in
effect from time to time.
5. REPRESENTATION OF EMPLOYEE. Capra represents and warrants that he
is not party to, or bound by, any agreement or commitment, or subject to any
restriction, including but not limited to agreements related to previous
employment containing confidentiality or non-compete covenants, which in the
future may have a possibility of adversely affecting the business of the
Company or the performance by Capra of his material duties under this
Agreement.
6. CONFIDENTIALITY. For purposes of this Section 6, all references to
the Company shall be deemed to include the Company's subsidiary corporations
and affiliates, including (without limitation) ILC.
A. CONFIDENTIAL INFORMATION. Capra acknowledges that he has and
will continue to have knowledge of, and access to, proprietary and
confidential information of the Company and its affiliates, including (without
limitation) ILC, including (without limitation) inventions, trade secrets,
technical information, know-how, plans, specifications, methods of operations,
financial and marketing information and the identity of customers and
suppliers (collectively, the "Confidential Information"), and that such
information, even though it may be contributed, developed or acquired by Capra
after August 1, 1996, constitutes valuable, special and unique assets of the
Company developed at great expense which are the exclusive property of the
Company. Accordingly, Capra shall not, at any time during the five (5) year
period commencing on the effective date use, reveal, report, publish, transfer
or otherwise disclose to any person, corporation or other entity, any of the
Confidential Information without the prior written consent of the Company,
except to responsible officers and employees of the Company, as appropriate,
and other responsible persons who are in a contractual or fiduciary
relationship with the Company, and who have a need for such information for
purposes in the best interests of the Company, and except for such information
which is or becomes of general public knowledge in the industry from authorized
sources other than Capra or is required to be disclosed pursuant to order of
any court or regulatory agency of competent jurisdiction. Capra acknowledges
that the Company would not enter into this Agreement without the assurance that
all such confidential and proprietary information will be used for the
exclusive benefit of the Company.
B. RETURN OF CONFIDENTIAL INFORMATION. Upon the termination of
Capra's employment with the Company, Capra shall promptly deliver to the
Company all drawings, manuals, letters, notes, notebooks, reports and copies
thereof and all other materials relating to the Company's business.
7. NONCOMPETITION. For purposes of this Section 7, all references to the
Company shall be deemed to include the Company, its subsidiary corporations
and affiliates, including without limitation ILC. During the full term set
forth below, Capra will not utilize his special knowledge of the business of
the Company and his relationships with customers and suppliers of the Company
to compete with the Company. During the five (5) year period commencing on the
effective date, Capra shall not engage, directly or indirectly or have an
3
<PAGE>
interest, directly or indirectly, anywhere in the United States of America or
any other geographic area where the Company does business or in which its
products are marketed, alone or in association with others, as principal,
officer, agent, employee, capital, lending of money or property, rendering
of services or otherwise, in any business directly competitive with that
engaged in by the Company (it being understood hereby, that the ownership by
Capra of 2% or less of the stock of any company listed on a national securities
exchange shall not be deemed a violation of this Section 7). During the same
period, Capra shall not, and shall not encourage or authorize any of his
employees, agents or others under his control to, directly or indirectly, on
behalf of himself or any other person, (i) call upon, accept business from
(except to the extent such business is unrelated to the business of the
Company), or solicit the business of (except to the extent such business is
unrelated to the business of the Company) any person who is, or who had been
at any time during the preceding two years, a customer of the Company or any
successor to the business of the Company, if in competition with the Company,
or otherwise divert or attempt to divert any business from the Company or any
such successor, or (ii) directly or indirectly recruit or otherwise solicit
or induce any person who is an employee of, or otherwise engaged by, the
Company or any successor to the business of the Company to terminate his or her
employment or other relationship with the Company or such successor. Capra
shall not at any time, directly or indirectly, use or purport to authorize any
person to use any name, mark, logo, trade dress or other identifying words
or images which are the same as or substantially similar to those used at any
time by the Company in connection with any product or service, whether or not
such use would be in a business competitive with that of the Company. Capra
acknowledges and agrees that the non-compete provisions of this Section 7
have been agreed in consideration of the covenants and agreements of the
Company contained herein.
8. REMEDIES. The restrictions set forth in sections 6 and 7 are
considered by the parties to be fair and reasonable. Capra acknowledges that
the Company would be irreparably harmed and that monetary damages would not
provide an adequate remedy in the event of a breach of the provisions of
Section 6 or 7. Accordingly, Capra agrees that, in addition to any other
remedies available to the Company, the Company shall be entitled to seek
injunctive and other equitable relief to secure the enforcement of these
provisions. If any provisions of Section 6, 7 or 8 other than those described
in the preceding sentence are adjudicated to be invalid or unenforceable, the
invalid or unenforceable provisions shall be deemed amended (with respect only
to the jurisdiction in which such adjudication is made) in such manner as to
render them enforceable and to effectuate as nearly as possible the original
intentions and agreement of the parties.
9. TERMINATION. This Agreement may be terminated prior to the expiration
of the Employment Term, upon the occurrence of any of the events set forth in,
and subject to the terms of, this Section 9.
A. CAUSE. This Agreement may be terminated at the Company's option,
immediately upon notice to Capra, upon: (i) breach by Capra of any material
provision of this Agreement not cured within ten (10) days after notice of such
breach is given by the Company to Capra; (ii) gross negligence or willful
misconduct by Capra in connection with the performance of his duties under this
Agreement, (iii) fraud, criminal conduct or embezzlement
4
<PAGE>
by Capra involving the Company; or (iv) Capra's misappropriation for personal
use of material assets or business opportunities of the Company.
b. WITHOUT CAUSE. This Agreement may be terminated on thirty (30)
days notice (the thirtieth day following such notice being herein sometimes
called the "Termination Date") by the Company without Cause, subject to the
following provisions. If this agreement is terminated without Cause by the
Company, Capra shall receive all of the compensation outlined in sections 2
and 4 to the end of the full term of this Agreement; provided that the terms
and provisions of Sections 6 and 7 shall continue to apply to Capra while he
is receiving such compensation.
10. MISCELLANEOUS.
A. SURVIVAL. The provisions of Sections 6, 7, and 8 shall survive
the termination of this Agreement.
B. ENTIRE AGREEMENT. This Agreement sets forth the entire
understanding of the parties and merges and supersedes any prior or
contemporaneous agreements between the parties pertaining to the subject matter
hereof.
C. MODIFICATION. This Agreement may not be modified or terminated
orally, and no modification, termination or attempted waiver of any of the
provisions hereof shall be binding unless in writing and signed by the party
against whom the same is sought to be enforced; provided, however, that
Capra's compensation may be increased at any time by the Company without in any
way affecting any of the other terms and conditions of this Agreement, which
in all other respects shall remain in full force and effect.
D. WAIVER. Failure of a party to enforce one or more of the
provisions of this Agreement or to require at any time performance of any of
the obligations hereof shall not be construed to be a waiver of such provisions
by such party nor to in any way affect the validity of this Agreement or such
party's right thereafter to enforce any provision of this Agreement, nor to
preclude such party from taking any other action at any time which it would
legally be entitled to take.
E. SUCCESSORS AND ASSIGNS. Neither party shall have the right to
assign this Agreement, or any rights or obligations hereunder, other than in the
case of Capra, by will or the laws of descent, without the consent of the other
party; provided, however, that upon the sale of all or substantially all of the
assets, business and goodwill of the Company to another company, or upon the
merger or consolidation of the Company with another company, this Agreement
shall inure to the benefit of, and be binding upon, both Capra and the company
purchasing such assets, business and goodwill, or surviving such merger or
consolidation, as the case may be, in the same manner and to the same extent
as though such other company were the Company. Subject to the foregoing, this
Agreement shall inure to the benefit of, and be binding upon, the parties
hereto and their legal representatives, heirs, successors and assigns.
5
<PAGE>
F. COMMUNICATIONS. All notices, requests, demands and other
communications under this Agreement shall be in writing and shall be deemed to
have been given at the time personally delivered or when mailed in any United
States post office enclosed in a registered or certified postage prepaid
envelope and addressed to the addresses set forth below, or to such other
address as any party may specify by notice to the other party; provided,
however, that any notice of change of address shall be effective only upon
receipt.
To the Company: Lumen Technologies, Inc.
555 Theodore Fremd Avenue
Suite B-302
Rye, NY 10580
To Capra: Richard D. Capra
5764 Diamond Point Circle
El Paso, Texas 79912
G. SEVERABILITY. If any provision of this Agreement is held to be
invalid or unenforceable by a court of competent jurisdiction, such invalidity
or unenforceability shall not affect the validity and enforceability of the
other provisions of this Agreement and the provisions held to be invalid or
unenforceable shall be enforced as nearly as possible according to its original
terms and intent to eliminate such invalidity or unenforceability.
H. JURISDICTION VENUE. This Agreement shall be subject to the
exclusive jurisdiction of the courts of California. Any breach of any provisions
of this Agreement shall be deemed to be a breach occurring in the State of
California and the parties irrevocably and expressly agree to submit to the
jurisdiction of the courts of the State of California, or the Federal Courts
having concurrent geographic jurisdiction, for the purpose of resolving any
disputes among them relating to this Agreement or the transactions contemplated
by this Agreement. In the event of any dispute arising hereunder, the prevailing
party shall be entitled to recover from the other all costs and expenses,
including reasonable attorney's fees, incurred by such prevailing party in
connection therewith.
I. GOVERNING LAW. This Agreement is made and executed and shall
be governed by the laws of the State of California, without regard to the
conflicts of law principles thereof.
J. INDEMNIFICATION. The Company shall maintain or cause to be
maintained, consistent with past practice, directors' and officers' insurance
or similar coverage providing for indemnity of Capra to the fullest extent of
the law for acts or omissions occurring or alleged to occur in the performance
of services for the Company or its subsidiaries, as the case may be.
6
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto have duly executed this
Agreement as of the date set forth above.
LUMEN TECHNOLOGIES, INC.
By: ----------------------------------
Its: CFO
----------------------------------
/s/ Richard D. Capra
---------------------------------------
Richard D. Capra
7
<PAGE>
SUBSIDIARIES OF LUMEN TECHNOLOGIES, INC.
JURISDICTION OF
SUBSIDIARY INCORPORATION
- ---------- ---------------
The following are direct
subsidiaries of
Lumen Technologies, Inc.:
ORC Technologies, Inc. Delaware
ILC Technology, Inc. California
The following are indirect
subsidiaries of
Lumen Technologies, Inc.:
Optical Radiation Foreign Sales Corporation U.S. Virgin Islands
Q-ARC Ltd. U.K.
ILC Technology Light Source Barbados
Foreign Sales Corporation
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus
constituting part of the Registration Statement on Form S-3 (No. 333-18947)
and in the Registration Statement on Form S-8 (No. 333-4562) of Lumen
Technologies, Inc. (formerly BEC Group, Inc.) of our report dated April 9,
1998, relating to the consolidated financial statements of Lumen Technologies,
Inc. appearing on page 18 of Lumen Technologies, Inc. Annual Report on
Form 10K for the year ended December 31, 1997.
PRICE WATERHOUSE LLP
Dallas, Texas
April 13, 1998
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<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
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