<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 12, 1998
REGISTRATION NO. 333-
===============================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------------------
FORM S-1
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
----------------------------------
BOLLE INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<CAPTION>
<S> <C> <C>
DELAWARE 3851 13-393-4135
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of incorporation) Classification Code Number) Identification No.)
</TABLE>
555 THEODORE FREMD AVENUE, SUITE B-302, RYE, NEW YORK 10580, (914) 967-9475
(Address, including zip code, and telephone number, including area
code, of registrant's principal executive offices)
----------------------------------
MARTIN E. FRANKLIN
555 THEODORE FREMD AVENUE, SUITE B-302
RYE, NEW YORK 10580
(914) 967-9475
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
----------------------------------
WITH A COPY TO:
WILLIAM J. GRANT, JR., ESQ.
WILLKIE FARR & GALLAGHER
787 SEVENTH AVENUE
NEW YORK, NEW YORK 10019
(212) 728-8000
----------------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As
soon as practicable after the effective date of this Registration Statement.
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, check the following box. [X]
If this Form is filed to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act, please check the
following box and list the Securities Act registration number of the earlier
effective registration statement for the same offering. [ ] __________
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the
Securities Act registration number of the earlier effective registration
statement for the same offering. [ ] __________
If this Form is a post-effective amendment filed pursuant to Rule
462(d) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ] _____
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
===================================================================================================================================
PROPOSED PROPOSED
MAXIMUM MAXIMUM
OFFERING AGGREGATE AMOUNT OF
TITLE OF EACH CLASS OF SECURITIES AMOUNT TO BE PRICE PER OFFERING REGISTRATION
TO BE REGISTERED REGISTERED(1) SHARE(1) PRICE(1) FEE
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, $.01 par value per share up to 1,850,000 $5.1875 $9,596,875 $2,831.08
===================================================================================================================================
</TABLE>
(1) Based on the average of the high and low sale prices of the shares of
Common Stock reported on June 8, 1998 for purposes of determining the
registration fee pursuant to Rule 457(c) under the Securities Act of 1933,
as amended.
<PAGE>
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE
OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT THAT SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
===============================================================================
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO CHANGE, COMPLETION OR AMENDMENT
WITHOUT NOTICE. THIS PRELIMINARY OFFERING MEMORANDUM SHALL NOT CONSTITUTE AN
OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY
SALE OF THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE
WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES
LAWS OF ANY SUCH STATE. THESE SECURITIES MAY NOT BE SOLD NOR MAY OFFERS TO BUY
BE ACCEPTED BEFORE THIS PRELIMINARY OFFERING MEMORANDUM IS DELIVERED IN FINAL
FORM.
SUBJECT TO COMPLETION -- DATED JUNE 12, 1998
PROSPECTUS
UP TO 1,850,000 SHARES OF COMMON STOCK
BOLLE INC.
This Prospectus relates to the proposed sale of up to 1,850,000 shares
(the "Shares") of Common Stock, par value $0.01 per share ("Common Stock") of
Bolle Inc. a Delaware corporation ("Bolle" or the "Company") by certain
stockholders of the Company (the "Selling Stockholders"). The Shares may be
offered by the Selling Stockholders from time to time in transactions on the
Nasdaq Stock Market's National Market ("Nasdaq"), in negotiated transactions,
through the writing of options on the Shares or a combination of such methods
of sale, at fixed prices which may be changed, at market prices prevailing at
the time of sale, at prices related to such prevailing market prices or at
negotiated prices. The Selling Stockholders may effect such transactions by
selling the Shares in or through broker-dealers, and such broker-dealers may
receive compensation in the form of discounts, concessions or commissions from
the Selling Stockholders and/or the purchasers of the Shares for whom such
broker-dealers may act as agents or to whom they sell as principal, or both
(which compensation as to a particular broker-dealer might be in excess of
customary commissions). See "SELLING STOCKHOLDERS" and "PLAN OF DISTRIBUTION."
None of the proceeds from the sale of the Shares by the Selling
Stockholders will be received by the Company. The Company has agreed to bear
all expenses estimated at $200,000 in connection with the registration of the
Shares being offered by the Selling Stockholders. The Company has agreed to
indemnify certain Selling Stockholders, each underwriter, broker or dealer, if
any, and their respective directors, officers, employees or controlling persons
against certain liabilities, including liabilities under the Securities Act of
1933, as amended (the "Securities Act").
The shares of Common Stock are listed on Nasdaq under the symbol
"BEYE." On June 10, 1998, the closing price of the Common Stock, as reported by
Nasdaq, was $5.25 per share.
The Shares have not been registered for sale under the securities laws
of any state or jurisdiction as of the date of this Prospectus. Brokers or
dealers effecting transactions in the Shares should confirm the registration
thereof under the securities laws of the state in which such transactions
occur, or the existence of any exemption from registration.
SEE "RISK FACTORS" BEGINNING ON PAGE 7 FOR A DISCUSSION OF CERTAIN
FACTORS THAT SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY
STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
-------------------------------------------
The date of this Prospectus is , 1998
<PAGE>
PROSPECTUS SUMMARY
The following is a summary of certain information contained elsewhere
in this Prospectus. Reference is made to, and this Prospectus Summary is
qualified in its entirety by, the more detailed information, including the
Consolidated Financial Statements and notes thereto, contained herein or
incorporated by reference in this Prospectus. Unless the context otherwise
requires, the term the "Company" or "Bolle" refers to Bolle Inc., a Delaware
corporation, and its consolidated subsidiaries; the term "Bolle America" refers
to Bolle America, Inc., a Delaware corporation and a wholly owned subsidiary of
the Company; the term "Bolle France" refers to Bolle International S.A., a
French corporation and a wholly owned subsidiary of the Company, and its
consolidated subsidiaries and the term "Bolle Australia" refers to Bill Bass
Optical Pty. Ltd and its affiliate Parkhurst Oaks Pty. Ltd. "Lumen" refers to
Lumen Technologies, Inc. and its predecessor, BEC Group, Inc., the former
parent company of Bolle Inc. The symbol "$" refers to U.S. dollars.
THE COMPANY
The Company designs, manufactures and markets premium sunglasses and
sport shields, goggles and safety and tactical eyewear under the Bolle(R)
brand. Bolle(R) products enjoy worldwide recognition and a high quality image
in the sport and active lifestyle markets, particularly skiing, golf and
cycling, as well as a growing reputation in the larger, fashion driven
recreational sunglass market. The Company's safety and tactical business, which
accounts for approximately half of the Company's aggregate unit sales, serves
the specialty segment of the safety eyewear market, including laser protection
products and military applications.
The recent creation of Bolle Inc. through the combination of Bolle
America and Bolle France consolidates the Company's ownership of the worldwide
rights to the Bolle(R) trademark for the Company's products with its
international manufacturing and distribution capabilities into one
organization. For the first time, the Company is positioned to develop and
execute a unified marketing strategy targeted at promoting the Company's
competitive advantages. The Company believes that these advantages include its
strong brand name, integrated design, production and marketing capabilities,
superior technology, specialized product offerings, established international
distributors in over 40 countries and a one hundred year-long heritage of
producing quality products. The Company intends to integrate its international
distributors into a cohesive worldwide network and add new distributors through
acquisitions or distributorship agreements. See "BUSINESS--Business Strategy."
In recent years, the retail sunglass market has experienced the
emergence of a specific premium market, reflected by increased sales of
higher-priced and quality-oriented products. The Company competes in this
premium sunglass market. Based on available industry data, the Company believes
that sales of premium sunglasses grew from $825 million in 1989 to $1.6 billion
in 1996. The factors which contribute to the growth of this market include
advancements in product technology, growing demand for specialized sunglasses,
increased health concerns and greater fashion and image consciousness, all of
which encourage multiple purchases. The Company also competes in the special
purpose safety and tactical eyewear market. The factors which may contribute to
the potential growth of this market include increasing regulation of safety
eyewear, new special purpose applications, advancements in product technology,
and growing demand for more style-oriented products. The Company believes that
both its sunglass and safety and tactical eyewear products, with their
increased user-specific characteristics and proven reputation for style and
high performance, reflect consumer preferences in their respective markets.
The Company has recently announced the following corporate
developments, which constitute a significant start to its growth strategy:
Worldwide Marketing Initiative. The Company has launched a worldwide
marketing initiative to promote a consistent brand image through (i)
coordinated advertising campaigns in major international and local media and at
retail locations; (ii) focused sponsorship of athletes attracting international
interest; and (iii) for the first time, a single marketing and product brochure
for distributors worldwide. Through a sport-specific marketing approach, the
Company plans to emphasize the technological, style and performance
characteristics of Bolle(R) products. In March, 1998, Sunglass Hut
International, Inc. ("Sunglass Hut") identified Bolle as one of a select number
of
2
<PAGE>
preferred vendors. The Company intends to grow its business with Sunglass
Hut through prime store locations, cooperative marketing and chain wide
distribution of products.
Significant Endorsement Advertising. As part of its strategy of
building a unified global marketing program, the Company has entered into
agreements with several world-famous athletes to endorse Bolle(R) products.
Such athletes include Martina Hingis, the youngest number one ranked player in
the history of women's tennis; Jacques Villeneuve, the current formula one
racing world champion; Picabo Street, 1998 Olympic Super G gold medalist;
Jean-Luc Cretier, 1998 Olympic downhill gold medalist; and Steve Jones, winner
of the 1996 U.S. Open golf championship. In addition, Bolle has sponsorship
programs with over a thousand athletes worldwide who wear Bolle(R) products in
competition.
Focused Product Offerings. The market for premium sunglasses has shown
a trend towards consumer preference for sport-specific eyewear. In 1992, the
Company was the first to introduce a line of sunglasses specifically designed
for golfers. The Company is in the process of focusing its sunglasses and sport
glasses based on their use rather than their design, style or other defining
criteria. For instance, the Company recently introduced its Competivision(TM)
sunglasses, a model of sunglasses specifically suited to the needs of tennis
players with a high performance selective light filtration system designed to
enhance the clarity of yellow tennis balls. The Company has a tradition of
designing and manufacturing eyewear for sporting activities in consultation
with its sponsored athletes.
Supply Agreement for Metal Eyewear. Consistent with its traditional
focus on technological innovation, in October 1997, the Company entered into a
three-year exclusive supply agreement (the "Alyn Supply Agreement") with Alyn
Corporation ("Alyn"), a manufacturer of specialized metal frames, to create
premium sunglass frames using Boralyn(R), a special patented metal matrix
providing greater strength and stiffness to weight ratios than titanium, which
is currently considered the leading metal for advanced metal eyewear.
Development work on the Boralyn(R) line is in progress, with a launch planned
for 1999.
Acquisition of Distributors. As part of its strategy of consolidating
its distributors, the Company acquired in March 1998 Bolle (Canada) Inc.
("Bolle Canada"), the distributor of the Company's products in Canada.
Additionally, pursuant to a Share Sale Agreement, dated May 28, 1998 (the
"Share Sale Agreement") among the Company and each of Keith Archibald
Collicoat, Eric Henry Collicoat and Roger Howard Gibbons as trustees of the
Bill Bass Trust (the "Bill Bass Trust"), the Company has agreed to purchase 75%
of Bolle Australia, which constitutes the largest independent distributor of
the Company's products and the sole distributor of the Company's products in
Australia, where the Company believes it commands a leading market share. The
Bolle Australia acquisition, if consummated, would also give the Company
control over 100% of Bolle Sunglasses Ltd. ("Bolle Sunglasses") and Bolle Asia
Ltd. ("Bolle Asia"), the distributors of the Company's sunglass products in the
United Kingdom and Southeast Asia, respectively. Bolle Australia sold over
$10,000,000 of Bolle(R) products in 1997. The Company also is negotiating to
acquire 75% of Bolle (U.K.) Limited ("Bolle U.K."), the sole distributor of
Bolle(R) safety products in the United Kingdom (the "U.K.").
Private Placement. The Company completed on June 1, 1998 the sale of
$7,000,000 aggregate principal amount of its Zero Coupon Convertible
Subordinated Notes due 2002 (the "Convertible Notes") to OZ Master Fund, Ltd.
("Och Ziff Fund"), an affiliate of Och-Ziff Capital, pursuant to the terms of a
Convertible Note Purchase Agreement, dated May 29, 1998, between the Company
and Och Ziff Fund (the "Convertible Note Purchase Agreement") and an exemption
from registration under the Securities Act. See "RECENT DEVELOPMENTS" and
"DESCRIPTION OF CAPITAL STOCK--Convertible Notes." The Convertible Notes are
convertible at any time at the option of the holder(s) thereof and, under
certain circumstances, of the Company into a maximum of 1,333,333 Shares of
Common Stock. Under certain circumstances, including if the Company fails to
convert or redeem any Convertible Notes when due, the Company becomes obligated
to repay the principal amount of such Convertible Notes (up to a maximum of
$7,000,000) in cash and to issue up to a maximum of 360,000 Shares to the
holder(s) of such Convertible Notes. All the Shares issuable pursuant to the
terms of the Convertible Note Purchase Agreement will, if issued, be eligible
for resale pursuant to this Prospectus. See "SELLING STOCKHOLDERS" and "PLAN OF
DISTRIBUTION."
The Company became a publicly-held company on March 11, 1998,
following the spinoff by Lumen to its stockholders of all of its equity
interest in the Company (the "Spinoff"). In connection with the Spinoff,
pursuant to
3
<PAGE>
a Bill of Sale and Assignment Agreement (the "Contribution
Agreement") and an Indemnification Agreement (the "Indemnification Agreement")
entered into between the Company and Lumen on March 11, 1998, Lumen assigned to
the Company, and the Company assumed, all of Lumen's assets and liabilities
prior to the Spinoff other than those related to Lumen's ORC Business (as
defined in the Contribution Agreement). See "RECENT DEVELOPMENTS--Spinoff."
The Company is incorporated in Delaware. Its principal executive
offices are located at 555 Theodore Fremd Avenue, Suite B-302, Rye, New York
10580, and its telephone number is (914) 967-9475.
THE OFFERING
COMMON STOCK OFFERED HEREBY................ Up to 1,850,000 Shares(1)
COMMON STOCK OUTSTANDING................... 6,884,969 shares(2)
NASDAQ NATIONAL MARKET SYMBOL.............. BEYE
(1) Includes 248,388 Shares issued in connection with the execution of the
Share Sale Agreement subject to the closing thereof. The remainder of such
Shares is issuable by the Company pursuant to the Convertible Note
Purchase Agreement and following the consummmation of the pending Bolle
Australia acquisition and proposed Bolle U.K. acquisition. This number
includes up to a maximum of 360,000 Shares issuable by the Company under
certain circumstances, including if the Company fails to convert or redeem
any Convertible Notes when due. The aggregate number of Shares offered
hereunder may be increased if, as contemplated under the terms of its
arrangement with each selling stockholder, the Company issues additional
Shares to such Selling Stockholder to prevent dilution resulting from
stock splits, stock dividends or similar transactions. Any additional
Shares which may thus be issued by the Company shall be eligible for
resale pursuant to the Prospectus, as permitted by Rule 416 under the
Securities Act.
(2) Based on the number of shares of Common Stock outstanding as of June 8,
1998. Excludes (i) an aggregate of 2,500,000 shares of Common Stock
reserved for issuance under the Bolle 1998 Stock Incentive Plan (the
"Plan"), of which options ("Bolle Options") for approximately 860,330
shares have been granted, and (ii) an aggregate of 663,618 shares of
Common Stock reserved for issuance upon exercise of outstanding warrants
to purchase Common Stock at $9.95 per share ("Bolle Warrants"). See
"EXECUTIVE COMPENSATION--Bolle 1998 Stock Incentive Plan" and "DESCRIPTION
OF CAPITAL STOCK--Warrants."
RISK FACTORS
Investors should consider the material risk factors involved in
connection with an investment in the Common Stock and the impact of various
events which could adversely affect the Company's business. See "RISK FACTORS."
4
<PAGE>
SUMMARY HISTORICAL AND PRO FORMA FINANCIAL DATA
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
The following selected historical and pro forma financial data have
been derived from audited historical financial statements and should be read in
conjunction with the consolidated financial statements of the Company and its
significant subsidiaries included herein.
The Company was formed in 1997 to complete Lumen's acquisition of
Bolle France and therefore has only one year of historical activity or
financial statements. Bolle America was purchased by Lumen in November 1995 in
a pooling of interests transaction. In conjunction with the purchase of Bolle
France, Bolle America became a subsidiary of the Company. Accordingly, for
accounting purposes only, Bolle America is treated as the acquirer of Bolle
France and therefore the predecessor business for historical financial
statement purposes.
The following unaudited Bolle Inc. pro forma combined statement of
operations data give effect to the acquisitions of Bolle France and Bolle
Australia under the purchase method of accounting and reflect the Contribution
Agreement and the issuance of the Convertible Notes as of it had occurred at
the beginning of the period. The following pro forma combined balance sheet
data only give effect to the acquisition of Bolle Australia and the issuance of
the convertible debt, as the effect of the acquisition of Bolle France and the
Contribution Agreement are already included in the Company's actual balance
sheet as of March 31, 1998. The actual statement of operations data presented
include the results of Bolle France for the six months ended December 31, 1997
(post-acquisition period) and the quarter ended March 31, 1998.
<TABLE>
<CAPTION>
PRO PRO
FORMA FORMA
COMBINED HISTORICAL COMBINED HISTORICAL HISTORICAL HISTORICAL HISTORICAL HISTORICAL
----------- ------------ ----------- ----------- ---------- ---------- ----------- ----------
QUARTER ENDED MARCH 31, YEAR ENDED DECEMBER 31,
------------------------ ---------------------------------------------------------------------
1998 1998 1997 1997(1) 1996(2) 1995(3) 1994(4) 1993
----------- ------------ ----------- ----------- ---------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales....................... $14,256 $10,728 $56,080 $32,160 $24,425 $24,829 $23,094 $18,377
Cost of sales................... 6,835 5,288 26,436 15,354 12,130 12,181 10,814 9,126
----------- ------------ ----------- ----------- ---------- ---------- ----------- ----------
Gross profit.................... 7,421 5,440 29,644 16,806 12,295 12,648 12,280 9,251
Selling, general and
administrative expenses
(including advertising and
sponsoring expenses)......... 6,825 5,430 26,378 16,342 11,374 10,275 8,871 7,384
Merger and acquisition
integration related expenses. 3,750 3,050
Interest expense (income).... 371 484 1,498 963 (256) (302) 316 336
Other expense (income).......... (562) (515) (1,644) (693) (450) 48 (104) (295)
----------- ------------ ----------- ----------- ---------- ---------- ----------- ----------
Income (loss) before income taxes
and minority interests....... 787 41 3,412 (3,556) 1,627 (423) 3,197 1,826
Provision for income taxes...... 286 16 4,147 1,099 635 364 1,260 700
----------- ------------ ----------- ----------- ---------- ---------- ----------- ----------
Net income (loss) before
minority interests........... 501 25 (735) (4,655) 992 (787) 1,937 1,126
----------- ------------ ----------- ----------- ---------- ---------- ----------- ----------
Minority interests.............. 96 319
Preferred dividends............. 139 29 511
=========== ============ =========== =========== ========== ========== =========== ==========
Net income (loss) attributable
to common stock.............. $266 $ (4) $(1,565) $(4,655) $992 $(787) $1,937 $1,126
=========== ============ =========== =========== ========== ========== =========== ==========
Basic and diluted EPS (5)....... $0.04 $(0.00) $(0.23) $(2,586.11) $9,920 $(0.22) $0.65 $0.38
Weighted average basic and
diluted shares outstanding... 6,884 1,476 6,884 1.8 0.1 3,510.6 2,997.0 2,963.0
French Franc per US Dollar
exchange rate (6)............ 6.0951 6.0951 5.6835 5.9843
Australian Dollar per U.S.
Dollar exchange rate (7)..... 0.6918 0.7673
</TABLE>
5
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<TABLE>
<CAPTION>
PRO
FORMA
COMBINED HISTORICAL HISTORICAL HISTORICAL HISTORICAL HISTORICAL HISTORICAL
----------- ------------ ---------- ---------- ----------- ---------- -----------
QUARTER ENDED MARCH 31, YEAR ENDED DECEMBER 31,
------------------------ ---------------------------------------------------------
1998 1998 1997(1) 1996(2) 1995(3) 1994(4) 1993
----------- ------------ ---------- ---------- ----------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital (deficiency).... $ 11,856 $ 9,137 $(20,936) $8,535 $11,395 $12,781 $1,060
Total assets.................... 116,880 106,829 94,697 15,624 16,309 17,549 9,629
Long term debt.................. 10,542 12,042 57 49
Convertible debt................ 7,000
Mandatorily redeemable
preferred stock.............. 20,709 20,709 11,055
Stockholders' equity............ 38,548 36,348 18,843 9,743 12,770 13,433 1,584
French Franc per US Dollar
exchange rate (6)............ 6.1890 6.1890 5.9912
US Dollar exchange per
Australian Dollar exchange
rate (7)..................... 0.6503
</TABLE>
- -----------
(1) On July 10, 1997, the Company acquired Bolle France and related assets in
a transaction accounted for as a purchase. Accordingly, the results of
operations for Bolle France are included in historical results of
operations from that date.
(2) In 1996, the Company paid a dividend to Lumen (its then current
stockholder) of $4,019.
(3) In November 1995, Lumen acquired Bolle America in a transaction accounted
for as a pooling of interests. Accordingly, Bolle America is included in
all periods presented.
(4) In 1994, Bolle America paid a $50 dividend to its then current
shareholders.
(5) Despite the loss before tax of $3,556 the Company recorded a tax charge of
$1,099 primarily due to the creation of a valuation allowance against the
entire net tax benefit arising from domestic operations, resulting in a
net loss of $4,655. If the 1997 statutory tax rate of 37% had been applied
to pro forma combined income before income taxes, pro forma EPS would have
been $0.19.
(6) Represents the exchange rates used to translate the results of operations
and balance sheet amounts of Bolle France. The exchange rate shown for the
actual results of operations for the year ended December 31, 1997
represents the average exchange rate for the six months ended December 31,
1997 used to translate the results of operations of Bolle France included
in the Company's actual result.
(7) Represents the exchange rates used to translate the results of operations
and balance sheet amounts of Bolle Australia.
6
<PAGE>
RISK FACTORS
An investment in the Common Stock offered hereby involves a high
degree of risk. Prospective investors should carefully consider the following
risk factors in addition to the other information set forth in this Prospectus
in connection with an investment in the Common Stock offered hereby.
This Prospectus contains statements which constitute "forward-looking
statements" within the meaning of Section 27A of the Securities Act and Section
21E of the Exchange Act which can be identified by the use of forward-looking
terminology such as "believes," "expects," "may," "will," "should," "could" or
"anticipates" or the negative thereof or other variations thereon or comparable
terminology, or by discussions of strategy that involve risks and
uncertainties. Forward-looking statements, such as the Company's plans to
expand its product line, brands and marketing activities and other statements
contained herein regarding matters that are not historical facts, are only
predictions. No assurance can be given that the future results will be
achieved; actual events or results may differ materially as a result of risks
facing the Company. Such risks include, but are not limited to, the Company's
ability to successfully market its products to current and new customers,
identify, finance and complete suitable acquisitions and design and manufacture
new products, all in a timely manner, at reasonable costs and on satisfactory
terms and conditions that could cause actual results to differ materially from
the future results indicated, expressed or implied, in such forward-looking
statements.
POSSIBLE INABILITY TO SUSTAIN AND MANAGE GROWTH. There are significant
risks associated with the Company's growth. The Company expanded its operations
significantly with the acquisition of Bolle France in July 1997. The Company
intends to grow through brand extension and possible strategic acquisitions,
including acquisitions of distributors of its products around the world. There
can be no assurance that the Company's efforts in managing its internal growth
or pursuing those acquisitions will be successful.
To manage growth effectively, the Company will be required to continue
to implement changes in various aspects of its business at a rapid pace,
continuously develop new designs and features, expand its information systems
and operations, and train and manage an increasing number of management-level
and other employees. If management is unable to anticipate or manage these
changes effectively, the Company's operating results could be materially
adversely affected.
To pursue external growth, the Company will need to identify
acquisition candidates the operations of which can be integrated effectively
and profitably into the Company on acceptable terms. There can be no assurance
that the Company will succeed in finding such candidates or obtaining such
terms or, where required, receive consent from its lenders. Future acquisitions
by the Company could result in the incurrence of debt, the potentially dilutive
issuance of equity securities and the incurrence of contingent liabilities and
amortization expenses related to goodwill and other intangible assets, which
could materially adversely affect the Company's business, operating results and
financial condition.
The success of the Bolle France and Bolle Canada acquisitions and the
pending Bolle Australia acquisition or any other future acquisition by the
Company depends on its ability to integrate effectively the acquired
businesses. There is no assurance that the Bolle Australia acquisition will
close or that the Company will enter into a definitive agreement to purchase
Bolle U.K. The process of integrating acquired businesses may involve numerous
risks, including difficulties in the assimilation of operations and products,
the diversion of management's attention from other business concerns, risks of
entering markets in which the Company has limited or no direct prior experience
and the potential loss of key employees of the acquired businesses.
Additionally, there can be no assurance that any future acquisitions will not
have a material adverse effect on the Company's operating results particularly
during the period immediately following such acquisitions. Prior to the
acquisition by Lumen, Bolle France has not been in compliance with certain
government-related requirements. The Company is currently in the process of
reorganizing Bolle France to improve administration and compliance.
Approximately $1,000,000 has been accrued on Bolle France's Financial
Statements to cover costs and expenses which the Company expects to incur in
connection with this reorganization. This financial exposure arises in
connection with the Company's transition from a private company to a
publicly-held company. The costs and expenses incurred in bringing Bolle
7
<PAGE>
France or other future acquisitions into compliance with applicable regulatory
requirements may have a material adverse effect on the Company's business,
financial condition and results of operations. Except as disclosed herein, the
Company has no present understandings, commitments or agreements with respect
to any material acquisition.
DEPENDENCE UPON NEW PRODUCT INTRODUCTIONS. The Company's historical
success, including that of Bolle France, is attributable, in substantial part,
to its timely introduction of products which are perceived to be an improvement
in performance or fashion over products available in the market. The Company's
future success will depend, in substantial part, upon its continued ability to
develop and introduce such innovative products, and there can be no assurance
as to the Company's ability to do so. In recent years the Company has
introduced a number of new product offerings within existing product
collections and a number of new collections. The success of any product line is
dependent upon various factors, including product demand, production capacity
and the availability of raw materials and critical manufacturing equipment. In
addition, competitors may follow the Company's introduction of successful
products with similar product offerings. The uncertainty associated with all
the above factors, and any change in such factors from the Company's
expectations, could result in cost increases and/or delays or cancellation of
such new products or product lines and may also cause actual results to differ
materially from those projected.
Innovative designs are often not successful, and successful product
designs can be displaced by other product designs introduced by competitors
which shift market preferences in their favor. There is no assurance that the
Company will be able to create innovative products and designs which are also
popular with customers. In addition, although the Company seeks to protect its
products through patents and other proprietary rights, there can be no
assurance that such protection will prevent competitors from offering similar
products. As a result of these and other factors, there can be no assurance
that the Company will successfully maintain or increase its market share.
ASSUMPTION OF LIABILITIES AND INDEMNIFICATION OF LUMEN BY THE COMPANY.
Under the terms of the Contribution Agreement and the Indemnification Agreement
entered into between Lumen and the Company in connection with the Spinoff, the
Company assumed all of Lumen's liabilities prior to the Spinoff other than
those related to Lumen's ORC Business (as defined in the Contribution
Agreement) and has agreed to indemnify Lumen against all of Lumen's liabilities
prior to the Spinoff other than substantially all liabilities related to the
ORC Business. Potential liabilities which the Company has assumed and/or
against which the Company will indemnify Lumen pursuant to the Contribution
Agreement include, without limitation, (a) potential liabilities arising in
connection with the sale of businesses previously owned by Lumen or its
predecessor, Benson Eyecare Corporation ("Benson"), including: the merger of
Essilor Acquisition Corporation ("Essilor") with and into Benson; the sale of
the Foster Grant Group, L.P. ("Foster Grant") by Lumen; the sale of the Orolite
division to Monsanto Company ("Monsanto Company"), and (b) potential
liabilities of Lumen under applicable environmental laws, including any such
liabilities related to the ORC Business to the extent such liabilities arose
before the Spinoff. For a detailed description of the potential liabilities of
Lumen assumed by the Company and the Company's indemnification obligations to
Lumen under the Contribution Agreement and the Indemnification Agreement, see
"RECENT DEVELOPMENTS-Spinoff." Pursuant to the Contribution Agreement and the
Indemnification Agreement, the Company may bear the burden of obligations and
losses not directly related to the business of the Company if the Company is
called upon to discharge and pay these obligations and liabilities.
In connection with the Spinoff, the Company also agreed to assume all
obligations and liabilities of Lumen incurred by Lumen in connection with the
purchase of Bolle France. In addition to Lumen's indemnification obligations to
the sellers of Bolle France under the Amended and Restated Share Purchase
Agreement (the "Share Purchase Agreement") dated July 9, 1997 among Lumen, the
Company and each of Maurice Bolle, Robert Bolle, Franck Bolle, Patricia Bolle
Passaquay, Brigitte Bolle and Christelle Roche (collectively, the "Sellers,"
and each, a "Seller") which became the sole responsibility of the Company, the
remainder of Lumen's liabilities and obligations to the Sellers were assumed by
the Company through the issuance of shares of its Series B Preferred Stock (the
"Series B Preferred Stock"), Bolle Options and the exchange of outstanding
warrants to purchase common stock of Lumen for Bolle Warrants. See "CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS--Certain Transactions." Should the
Company be required to discharge its
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liabilities pursuant to the foregoing arrangements, including the Contribution
Agreement and the Indemnification Agreement, or to redeem under certain
circumstances the shares of its Series A Preferred Stock (the "Series A
Preferred Stock") or Series B Preferred Stock prior to maturity, such payments
could have a material adverse effect upon the Company.
INVESTMENTS IN AFFILIATES AND OTHER ASSETS. The Company holds,
directly or indirectly, investments aggregating approximately $5,500,000 in
debt and equity securities of various unconsolidated entities which are not
controlled by the Company, including investments in Eyecare Products, plc
("Eyecare Products") and Accessories Associates International, Inc. ("AAi").
The Company received these assets from Lumen as part of the Spinoff. The
Company's management is not involved in the day-to-day operations of these
entities. There can be no assurance that fluctuations in the value of these
assets will not have a material adverse impact on the Company.
See "RECENT DEVELOPMENTS--Spinoff."
LIMITED OPERATING HISTORY. The Company was formed on February 3, 1997.
Although the financial statements and pro forma financial statements of the
Company include the results of its subsidiaries Bolle America, Bolle France and
Bolle Australia, which were operated as separate companies for many years, the
Company itself, as a consolidated entity, has a limited operating history upon
which potential investors may base an evaluation of its performance. Limited
actual historical financial information upon which to base an evaluation of the
Company's performance and an investment in the Common Stock is available.
MARKET CYCLES AND RECENT DECLINES IN SALES GROWTH IN THE SUNGLASS
MARKET. Suppliers of premium sunglasses have experienced declining sales and
excess inventory since the last quarter of 1996. The results of the Company and
its competitors were affected by this market trend and the operating
difficulties (including excess inventory) experienced throughout the year 1997
by the largest sunglass specialty retail chain. There can be no assurance that
the Company will be able to maintain or increase its sales, and should it fail
to do so, the Company's financial condition and results of operations could be
adversely affected.
SUSCEPTIBILITY TO CHANGING CONSUMER PREFERENCES. The eyewear industry
is subject to rapidly changing consumer preferences. The Company's sunglasses,
particularly its recreational sunglasses, are susceptible to fashion trends.
Unanticipated shifts in consumer preferences may adversely affect the Company's
sales, resulting in excess inventory and underutilized manufacturing capacity.
While the Company has a limited ability to modify slow-moving models to better
satisfy consumer preferences and otherwise utilize excess inventory and
manufacturing capacity, the Company cannot ensure that any such actions will be
sufficient to redress a market misjudgment. Accordingly, an unanticipated
change in consumer preferences could adversely affect the Company's results of
operations and financial condition.
HIGHLY COMPETITIVE MARKETS. Both the sunglass and personal safety
eyewear markets are highly competitive. Certain companies that engage in these
markets have significantly greater financial, distribution and marketing
resources than the Company, and certain of the Company's competitors have
significantly greater brand awareness than the Company in certain important
markets. See "BUSINESS--Competition."
Within various niches of the sports segment of the premium eyewear
market, the Company competes with mostly smaller sunglass and goggle companies
and a limited number of larger competitors. In order to retain its market
share, the Company must continue to be competitive in the areas of quality,
technology, method of distribution, style, brand image, intellectual property
protection and customer service. The purchasing decisions of athletes, sports
enthusiasts and recreational wearers with respect to high performance eyewear
often reflect highly subjective preferences which can be influenced by many
factors, including advertising, media, product endorsements, product
improvements and changing styles. The Company could therefore face competition
from existing or new competitors that introduce and promote eyewear which is
perceived by consumers to offer performance advantages over, or greater
aesthetic appeal than, the Company's products. These competitors include
established branded consumer products companies that have greater financial and
other resources than the Company. No assurance exists that new developments by
the Company's competitors will not render some or all of
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the Company's potential products obsolete or non-competitive, which would have
a material adverse effect on the Company's business, financial condition and
results of operations.
The Company also competes in the broader, recreational segment of the
premium sunglass market. This segment is fragmented and highly competitive and
is generally more fashion-oriented. A number of established companies compete
in this wider market, several of which have greater financial and other
resources than the Company. This size advantage may enable these competitors to
negotiate exclusive supply contracts with certain retailers. In certain
geographic markets, such as the U.S., certain of the Company's competitors have
achieved greater brand awareness among consumers than has the Company.
The personal safety eyewear market is also highly fragmented.
Competitors range from small manufacturers offering single product lines to a
limited number of large competitors offering multiple product lines, some of
which have greater financial or other resources than the Company. There can be
no assurance that the Company will be able to compete successfully against
current and future competitors or that the competitive pressures faced by the
Company will not adversely affect its financial performance. See
"BUSINESS--Competition." The Company has recently entered the safety eyewear
business in the U.S. There can be no assurance that this endeavor will be
successful.
RISKS ASSOCIATED WITH ADVERTISING STRATEGY. Although the Company will
seek to increase its visibility in the premium sunglass and sport eyewear world
markets through significantly increased and focused advertising campaigns, the
Company's advertising strategy may be unsuccessful at channeling consumer
preferences toward the Company's products, and the Company could be adversely
affected by such a failure while having incurred substantially increased
advertising and marketing costs.
DEPENDENCE UPON ENDORSEMENT CONTRACTS. As part of its marketing
strategy, the Company has retained a number of world-class athletes, including
tennis champion Martina Hingis, formula one champion Jacques Villeneuve, 1998
Olympic skiing gold medalists Picabo Street and Jean-Luc Cretier and U.S. Open
golf champion Steve Jones for the purpose of promoting the Company's products.
The Company intends to establish additional contacts with, and obtain
endorsements from, prominent athletes and public personalities. These
endorsement contracts generally have two-to three-year terms and include terms
and conditions specifically negotiated with each athlete. There can be no
assurance that the Company will be able to attract and retain athletes or
personalities to wear or endorse its products. If the Company were to lose the
benefit of its existing endorsements arrangements or were unable to arrange
additional endorsements of its products by athletes and/or public personalities
on terms it deems reasonable, it could be required to modify its marketing
plans and could be forced to rely more heavily on other forms of advertising
and promotion, which might not prove to be as effective as endorsements.
FOREIGN CURRENCY EXPOSURE; RISKS RELATING TO INTERNATIONAL SALES. As a
substantial amount of the Company's sales are currently invoiced in French
Francs and operating expenses are incurred in France, the Company's operating
results are affected by currency fluctuation, particularly between the U.S.
dollar and the French Franc. Since 1996, the French Franc has depreciated by
over 20% against the U.S. dollar which has had a material adverse impact on the
translation of Bolle France's operating results. As the Company's international
operations grow, future movements of the exchange rate of the U.S. Dollar
against the French Franc and other currencies may have an adverse impact on the
reported results of the Company.
Sales outside the United States accounted for approximately 40% of the
Company's net sales for the years ended December 31, 1997. While the Company
expects international sales to continue to account for a significant portion of
its sales, there can be no assurance that the Company will be able to maintain
or increase its international sales. The Company's international business may
be adversely affected by changing economic conditions in foreign countries and
fluctuations in currency exchange rates. The Company's international sales are
also subject to risks associated with tariff regulations, "local content" laws
requiring that certain products contain a specified minimum percentage of
domestically-produced components, political and social instability, labor
stoppages and trade restrictions. In addition, there can be no assurance that
the Company's brands and products will be popular in the various countries in
which the Company's products are or will be offered, or that the
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Company will be successful in preventing competitors from producing and selling
eyewear products using the same or substantially similar design and
manufacturing process as the Company.
VARIABLE INTEREST RATE EXPOSURE. As a substantial amount of the
Company's indebtedness denominated in Dollars is currently incurred at a
variable interest rate under the Credit Agreement, the Company's operating
results could be adversely affected if interest rates were to rise
significantly above current levels. See "RECENT DEVELOPMENTS--Credit
Agreement." Interest expense on the Convertible Notes recognized in the
Company's statement of operations will fluctuate with the market value of the
Common Stock.
RELIANCE ON SUPPLIERS, SUBCONTRACTORS AND DISTRIBUTORS. The Company
relies on a variety of subcontractors in France for the supply of several
components of its products and part of its manufacturing process. Although to
date the Company has not experienced any significant difficulty in obtaining
these components, there can be no assurance that shortages will not arise in
the future. The effect of the loss of any such sources or a disruption in their
business will depend primarily upon the availability of, and access to,
suitable alternative sources. The failure by the Company to meet the minimum
purchase requirements set forth in the Alyn Supply Agreement would result in
the loss of the Company's exclusive supply of Boralyn(R) metal frames. The loss
of the Company's sources for lens blanks or metal frames (for instance, as a
result of the termination of the Alyn Supply Agreement), or any disruption in
such sources' business or failure by them to meet the Company's product needs
on a timely basis could cause, at a minimum, temporary shortages in needed
materials and could have a material adverse effect on the Company's results of
operations. There can be no assurance that precautions taken by the Company
will be adequate or that, if it should become necessary, an alternative source
of supply could be identified in a timely manner. See "BUSINESS--Design and
Production" and "--Suppliers."
The Company relies for a significant part of its business on third
parties to ensure the worldwide marketing and distribution of its products.
Although to date the Company has not experienced any significant difficulty in
the distribution of its products, there can be no assurance that such
independent distributors will meet the Company's sales expectations or that the
Company will be able to continue to maintain or expand its existing
distribution network. See "BUSINESS--Sales and Distribution."
RELIANCE ON MANAGEMENT SERVICES AGREEMENT. In connection with the
Spinoff, the Company entered into a Management Services Agreement with Lumen
(the "Management Services Agreement"), pursuant to which certain executives of
Lumen provide key management services to the Company in return for the payment
by the Company of a $60,000 monthly fee. The Management Services Agreement has
an initial term of three years, and will thereafter be automatically renewed
for successive one-year periods until terminated by either party upon ninety
days' written notice. There is no assurance that Lumen will not terminate the
Management Services Agreement before or after its initial term. The loss of the
services provided under the Management Services Agreement by certain executives
of Lumen to the Company could have a material adverse effect on the Company's
operations. The Company plans to renegotiate the Management Services Agreement
to reduce its reliance on Lumen and to reduce its monthly fee paid for Lumen's
services to $50,000. The Company plans to use the savings generated by such
renegotiation to retain an executive who shall act as the Company's own
full-time Chief Financial Officer. There can be no assurance that the Company
will be able to renegotiate the Management Services Agreement or to identify
and hire a new Chief Financial Officer.
Pursuant to the Management Services Agreement, Lumen also makes
available to the Company the services of Martin E. Franklin, as Chairman of the
Board of Directors of the Company, and Mr. Ian G. H. Ashken, as Executive Vice
President of Finance and Administration, Chief Financial Officer and Assistant
Secretary. The loss of the services that are provided by Mr. Franklin or Mr.
Ashken to the Company could have a material adverse effect on the Company.
There is no assurance that Lumen or the Company will be able to retain the
services of Mr. Franklin or Mr. Ashken in the future.
DEPENDENCE ON KEY PERSONNEL. The Company's success depends, in
substantial part, on the efforts and abilities of Martin E. Franklin, the
Company's Chairman of the Board, Gary Kiedaisch, the Company's Chief Executive
Officer, and Ian G. H. Ashken, the Company's Executive Vice President of
Finance and Administration,
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Chief Financial Officer and Assistant Secretary. The Company does not maintain
key management life insurance policies on its key personnel. The loss of the
service of any of the foregoing key personnel could have a material adverse
effect on the Company's business, financial condition and results of
operations. Mr. Kiedaisch has entered into an employment agreement with the
Company which continues until August 2000 unless earlier terminated by either
party with or without cause. There is no assurance that, if Mr. Kiedaisch's
employment with the Company were terminated, the Company would be able to
retain the services of a person qualified to fill his position. Messrs.
Franklin and Ashken also hold senior executive positions at Lumen and will
therefore devote such time and efforts to the business of the Company as may be
reasonably requested by the Company under the Management Services Agreement.
However, a substantial portion of their time will be spent in connection with
their positions at Lumen and other entities at which they are employees or
directors. The Company believes that its future success will depend in large
part on its ability to attract and retain directly or through the Management
Services Agreement the services of highly skilled and qualified personnel.
Although the Company to date has been successful in attracting and retaining
qualified personnel, there can be no assurance that the Company will not
experience a shortage of qualified personnel in the future. See "MANAGEMENT."
CONFLICTS OF INTEREST; BENEFITS TO CERTAIN INSIDERS. The executive
officers of Bolle, who (except Mr. Kiedaisch) are also executive officers of
Lumen, and Messrs. Franklin, Ashken and Moore and Ms. Bailey, who are members
of the Board of Directors of Bolle and are also directors of Lumen, may have
potential conflicts of interest with respect to material transactions involving
Lumen and the Company. These potential conflicts of interest may adversely
affect the future value of the Company's shares. See "MANAGEMENT" and "CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS--Management Services Agreement" and
"--Relationships with Directors."
INFORMATION SYSTEMS; YEAR 2000 COMPLIANCE. The Company is in the
process of upgrading its information systems to adequately support the
implementation of its worldwide marketing strategy. The upgraded systems are
expected to include a number of integrated applications, including order entry,
billing and labeling which function properly with respect to dates in the year
2000 and thereafter and the single currency which is scheduled to be introduced
in the European Union beginning in 1999. This upgrading process will
significantly affect many aspects of the Company's business, including its
manufacturing, sales and marketing functions. The successful implementation and
integration of the new applications will be important to facilitate future
growth. The Company could experience unanticipated delays in the upgrading of
its information systems and such upgrading could cause significant disruption
in operations. If the Company is not successful in upgrading its information
systems, fails to train its personnel in their use in a timely manner or if the
Company experiences difficulties in the upgrading process, the Company could
experience problems with the delivery of its products or its ability to access
timely and accurate financial and operating information could be adversely
affected. In addition, delays in implementing the new systems could require
additional expenditures by the Company to modify or replace portions of its
existing information systems so that they will function properly with respect
to dates in the year 2000 and thereafter and the new European currency. There
can be no assurance that the Company will be able to correct any problems with
respect to such dates or the new currency in a timely manner. The Company could
also be adversely affected by year 2000 non-compliance of the computer systems
of the entities with which the Company interacts, including suppliers,
customers and financial service organizations. Any failure by the Company to
respond properly to these problems or any other difficulties which the Company
may face with its information systems could have a material adverse effect on
the Company's business and financial results.
ACCOUNTING TREATMENT OF INTANGIBLE ASSETS. The Company's total
goodwill and intangible assets as of December 31, 1997 was approximately
$64,000,000. These assets are currently being amortized at a rate of
approximately $1,600,000 a year. This amortization expense will decrease the
Company's income over the life of the assets being amortized. The carrying
value of long lived assets will be reviewed regularly and there is no guarantee
that the Company will not suffer a significant charge in the future from the
impairment of long lived assets. The Company may acquire businesses using
purchase accounting which may create more intangible assets and goodwill
amortization. While the Company believes its accounting treatment for goodwill
and intangible assets has been and will continue to be appropriate, there can
be no assurance that additional goodwill and intangible amortization or
write-offs will not have a material adverse effect on the Company's financial
position or results of operations.
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UNCERTAIN PROTECTION OF PROPRIETARY RIGHTS. The Company relies in part
on patent, trade secret, unfair competition, trade dress, trademark and
copyright law to protect its rights to certain aspects of its products,
including product designs, proprietary manufacturing processes and
technologies, product research and concepts and recognized trademarks, all of
which the Company believes are important to the success of its products and its
competitive position. There can be no assurance that any pending trademark or
patent application will result in the issuance of a registered trademark or
patent, or that any trademark or patent granted will be effective in thwarting
competition or be held valid if subsequently challenged. In addition, there can
be no assurance that the actions taken by the Company to protect its
proprietary rights will be adequate to prevent imitation of its products, that
the Company's proprietary information will not become known to competitors,
that the Company can meaningfully protect its rights to unpatented proprietary
information or that others will not independently develop substantially
equivalent or better products that do not infringe on the Company's
intellectual property rights. No assurance can be given that others will not
assert rights in, and ownership of, the patents and other proprietary rights of
the Company. In addition, the laws of certain foreign countries do not protect
proprietary rights to the same extent as the laws of the United States. See
"BUSINESS--Intellectual Property."
The Company's strategy is to assert vigorously its intellectual
property rights, and, if required, to devote reasonable efforts and resources
to the processing of trademark applications, the enforcement of patents issued
and trademark registrations granted to the Company, to the protection of trade
secrets, trade dress or other intellectual property rights owned by the Company
and to the determination of the scope of validity of the proprietary rights of
others that might be asserted against the Company. A substantial increase in
the level of potentially infringing activities by others could require the
Company to increase significantly above past levels the resources devoted to
such efforts. In addition, an adverse determination in any future litigation
could subject the Company to the loss of its rights to a particular patent,
trademark, copyright or trade secret, could require the Company to grant
licenses to third parties, could prevent the Company from manufacturing,
selling or using certain aspects of its products or could subject the Company
to substantial liability, any of which could have a material adverse effect on
the Company's results of operations.
PRODUCT LIABILITY. The Company may be subject to product liability
claims which generally would seek damages for personal injuries allegedly
sustained as a result of defects in the Company's products. A successful
product liability claim brought against the Company could have a material
adverse effect upon the Company's business, operating results and financial
condition. This risk, which is faced by any manufacturer of eyewear products,
may be greater for the Company as a result of its focus on eyewear products
used in activities associated with greater physical risks, such as activities
requiring the use of safety eyewear, sports and other activities involving
special or extreme situations. Although the Company has not been subject to a
significant product liability claim to date, the growth of the Company's
business in the United States (where litigation is more prevalent) or elsewhere
could result in greater exposure to such risk.
SPECIFIC RISKS ASSOCIATED WITH THE COMPANY'S SAFETY AND TACTICAL
EYEWEAR BUSINESS. The Company's safety and tactical eyewear business, which
represented more than 50% of the Company's total unit sales in 1997, is subject
to specific risks in addition to all the risks described herein. The primary
users of the Company's safety eyewear products are industrial workers. As a
result, decreases in general employment levels of industrial workers may have
an adverse effect on the Company's sales. The Company's sales may also be
adversely affected by changes in safety regulations covering industrial workers
and in the level of enforcement of such regulations. Changes in regulations
could reduce the need for and the utility of certain products manufactured by
the Company. A substantial portion of the sales of tactical eyewear products by
the Company is made pursuant to procurement contracts with the defense forces
of various countries. Such contracts typically include specific termination and
modification provisions and are subject to laws and regulations pursuant to
which the governmental party is granted significantly greater rights than under
regular commercial supply contracts.
QUARTERLY FLUCTUATIONS OF RESULTS; SEASONALITY OF BUSINESS. The
Company's business is affected by economic factors and seasonal consumer buying
patterns. The Company's quarterly results of operations have fluctuated and may
continue to fluctuate as a result of a number of factors, including the timing
of the introduction of new products, the mix of product sales and weather
patterns. Historically, the Company's sales, in the aggregate, generally have
been higher in the period from March to September than during the rest of the
year.
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UNPREDICTABILITY OF DISCRETIONARY CONSUMER SPENDING. The success of
the Company's business depends to a significant extent upon a number of factors
relating to discretionary consumer spending, including general economic
conditions affecting disposable consumer income, such as employment, business
conditions, interest rates and taxation. Any significant decline in such
general economic conditions or uncertainties regarding future economic
prospects that adversely affect discretionary consumer spending generally, or
purchasers of discretionary optical products specifically, could have a
material adverse effect on the Company's results of operations.
RECENT TRADING MARKET; VOLATILITY OF STOCK PRICE. Prior to the Spinoff
which occurred on March 11, 1998, there was no trading market for the Common
Stock and the Company has only a limited trading history. The stock of new and
relatively small issuers in immature or developing markets is frequently
subject to sharp increases and decreases in market value, and trading prices of
the Common Stock could vary significantly over relatively short periods of
time. The market price of the Common Stock may be subject to significant
fluctuations in response to variations in quarterly operating results and other
factors. Fluctuations in the market price of the Common Stock will directly
affect the interest expense related to the Convertible Notes recorded in the
Company's statement of operations. In addition, the securities markets have
experienced significant price and volume fluctuations from time to time in
recent years that have often been unrelated or disproportionate to the
operating performance of particular companies. These broad fluctuations may
adversely affect the market price of the Common Stock. There can be no
assurance that an active trading market will be sustained after the sale of any
of the Shares offered hereby.
SHARES ELIGIBLE FOR FUTURE SALE; FUTURES SALES BY SIGNIFICANT
STOCKHOLDERS. Sales of a substantial number of shares of Common Stock in the
public market or the prospect of such sales could adversely affect prevailing
market prices for the Common Stock. In addition to the 1,850,000 Shares which
may be sold hereunder by the Selling Stockholders, of the 6,636,261 shares of
Common Stock distributed pursuant to the Spinoff, approximately 5,843,261
shares are freely tradable without restriction or the requirement of future
registration under the Securities Act. All of the remaining 793,000 shares are
restricted securities ("Restricted Shares") as that term is defined by Rule 144
promulgated under the Securities Act and are eligible for resale pursuant to
Rule 144 under the Securities Act subject to manner of sale, volume, notice and
information requirements and applicable contractual restrictions.
Following the expiration in July 2000 of certain contractual
restrictions on resale, all the shares of Bolle Common Stock held by the
Sellers, or approximately 4% of the Bolle Common Stock outstanding will be
eligible for sale by the Sellers pursuant to the provisions of Rule 144 under
the Securities Act. Upon the redemption in full of all the shares outstanding
of the Bolle Series B Preferred Stock, all the shares of Bolle Common Stock
received by Mr. Franklin pursuant to the Spinoff, or approximately 10% of the
total number of shares of Bolle Common Stock outstanding, will be eligible for
sale by Mr. Franklin in accordance with applicable law. No assurance can be
given that the Sellers or Mr. Franklin will not decide, based upon prevailing
market conditions, to dispose of all or a portion of their investment in the
Company after the expiration of applicable restrictions. The future sale of a
substantial number of shares of Common Stock may have an adverse impact on the
market price of the Common Stock. See "--Recent Trading Market; Volatility of
Stock Price."
The 860,330 Bolle Options which were outstanding on June 8, 1998 were
granted in connection with the Spinoff at in-the-money exercise prices. The
Company intends to register up to 2,500,000 shares of Common Stock for issuance
upon exercise of Bolle Options granted to its employees under the Plan,
including the Bolle Options currently outstanding. In addition, under the
Warrant Agreement dated March 11, 1998 among the Company and each of the
Sellers (the "Warrant Agreement"), 663,618 shares of Common Stock issuable upon
exercise of the Bolle Warrants are subject to demand registration rights
vesting on the date a Warrant is first exercised, which may be as early as July
1999. The Company has agreed to register such shares for resale under the
Securities Act. During the term of such options and warrants and any additional
stock, warrants and/or options which the Company may issue to raise capital in
the future, the holders thereof are given the opportunity to profit from a rise
in the market price of the Common Stock. The exercise of such options and
warrants may have an adverse effect on
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the market value of the Common Stock. The existence of such options and
warrants may adversely affect the terms on which the Company can obtain
additional equity financing. To the extent the exercise prices of such options
and warrants are less than the net tangible book value of the Common Stock at
the time such options are exercised, the Company's stockholders will experience
an immediate dilution in the net tangible book value of their investment.
RESTRICTED DIVIDEND POLICY. The Company does not currently intend to
declare or pay any dividends on the Common Stock. The payment of cash dividends
in the future will depend on the Company's earnings, financial condition,
capital needs and other factors deemed relevant by the Company's Board of
Directors including corporate law restrictions on the availability of capital
for the payment of dividends, the rights of holders of any series of preferred
stock in issue and the limitations, if any, on the payment of dividends under
any then-existing credit facility or other indebtedness. Under the terms of the
Credit Agreement dated March 11, 1998 among the Company and the lenders party
thereto, as amended (the "Credit Agreement") and the Convertible Notes, the
Company's ability to pay cash dividends on the Common Stock is restricted and
the Company expects that any other bank revolving credit facility or other
indebtedness, if any, that the Company may incur in the future will contain
similar restrictions. Pursuant to the Indemnification Agreement, the Company is
further restricted from paying dividends on shares of Common Stock unless
certain minimum net worth requirements are met until, at the latest, the end of
the year 2003, except that the Company may declare dividends payable solely in
shares of capital stock which do not carry mandatory redemption or other
repayment rights. Furthermore, for so long as shares of the Series B Preferred
Stock are outstanding, the Company may not, without the consent of the holders
of at least 90% of such shares, declare or pay a dividend or otherwise make a
distribution on any security issued by the Company which is junior to the
Series B Preferred Stock with respect to dividends or upon liquidation,
including the Series A Preferred Stock. See "USE OF PROCEEDS" and "DESCRIPTION
OF CAPITAL STOCK--Preferred Stock."
POTENTIAL ANTITAKEOVER EFFECT OF THE INDEMNIFICATION AGREEMENT AND
CERTAIN CHARTER PROVISIONS. Pursuant to the Indemnification Agreement, the
Company and its subsidiaries may not enter into certain business combinations,
including a consolidation or merger or transfer of all or substantially all of
its assets, unless the resulting entity is either the Company or a U.S.
corporation which expressly assumes all of the Company's obligations and
restrictions under the Indemnification Agreement. Furthermore, the resulting
entity must have a consolidated tangible net worth equal to or greater than
that of the Company prior to the combination. These limitations could remain
applicable until, at the latest, the end of the year 2003. In addition, the
Series B Preferred Stock is redeemable in full upon a change of control
resulting in the Company's payment in full of all amounts due with respect to
the Credit Agreement. These restrictions could have the effect of deterring a
potential acquirer.
The Company has in excess of 20,000,000 and 125,000 shares of
authorized and unissued Common Stock and preferred stock, respectively, which
could be issued to a third party selected by management or used as the basis
for a stockholders' rights plan. This stock could have the effect of deterring
a potential acquiror. The ability of the Board of Directors of the Company to
establish the terms and provisions of different series of preferred stock could
discourage unsolicited takeover bids from third parties. See "DESCRIPTION OF
CAPITAL STOCK--Preferred Stock."
USE OF PROCEEDS
The Company will not receive any proceeds from the sale of the shares
by the Selling Stockholders. All proceeds will be received by the Selling
Stockholders.
PRICE RANGE OF COMMON STOCK
The Common Stock has been quoted on Nasdaq under the symbol "BEYE"
since March 12, 1998. The following table reflects the high and low sales
prices per share of the Common Stock as reported by Nasdaq.
15
<PAGE>
<TABLE>
<CAPTION>
1998 HIGH LOW
- ---- ---- ---
<S> <C> <C>
First quarter (from March 12, 1998)......................................... $8.25 $6.44
Second quarter (through June 9, 1998)....................................... $7.00 $5.00
</TABLE>
On June 10, 1998, the last reported sales price of the Common Stock
reported on Nasdaq was $5.25 per share. As of June 10, 1998, there were
approximately 580 holders of record of Common Stock.
16
<PAGE>
DIVIDEND POLICY
The Company has not declared or paid any cash dividends on the Common
Stock, although Bolle America, the Company's predecessor for accounting
purposes, declared and paid dividends in 1994 and 1996. See "Prospectus
Summary--Summary Historical Consolidated Financial and Operating Data,"
"Selected Financial Data" and the respective notes thereto. The Company intends
to retain future earnings, if any, to finance the development and expansion of
its businesses and, therefore, does not anticipate declaring or paying any
dividends on the Common Stock in the foreseeable future. The payment of cash
dividends in the future will depend on the Company's earnings, financial
condition, capital needs and other factors deemed relevant by the Board,
including corporate law restrictions on the availability of capital for the
payment of dividends, the rights of holders of any series of preferred stock
that may hereafter be issued and the limitations, if any, on the payment of
dividends under any then-existing credit facility or other indebtedness. The
Credit Agreement and the Convertible Notes restrict the Company's ability to
pay cash dividends on shares of Common Stock. In addition, the Company expects
that any other bank revolving credit facility or indebtedness, if any, that the
Company may incur would contain similar restrictions. Pursuant to the
Indemnification Agreement, the Company is further restricted from paying
dividends on shares of Common Stock, unless certain minimum net worth
requirements are met, until at the latest the end of the year 2003, except that
the Company may declare dividends payable in stock which does not carry
mandatory redemption or other repayment rights. Furthermore, for so long as
shares of the Series B Preferred Stock are outstanding, the Company may not,
without the consent of the holders of at least 90% of such shares declare or
pay a dividend or otherwise make a distribution on any security issued by the
Company which is junior to the Series B Preferred Stock with respect to
dividends or upon liquidation, including the Series A Preferred Stock.
17
<PAGE>
SELECTED FINANCIAL DATA
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)
The following selected historical and pro forma financial data have
been derived from audited historical financial statements and should be read in
conjunction with the consolidated financial statements of the Company and its
significant subsidiaries included herein.
The Company was formed in 1997 to complete Lumen's acquisition of
Bolle France and therefore has only one year of historical activity or
financial statements. Bolle America was purchased by Lumen in November 1995 in
a pooling of interests transaction. In conjunction with the purchase of Bolle
France, Bolle America became a subsidiary of the Company. Accordingly, for
accounting purposes only, Bolle America is treated as the acquiror of Bolle
France and therefore the predecessor business for historical financial
statement purposes.
The following unaudited Bolle Inc. pro forma combined statement of
operations data give effect to the acquisitions of Bolle France and Bolle
Australia under the purchase method of accounting and reflect the Contribution
Agreement and the issuance of the Convertible Notes as of it had occurred at
the beginning of the period. The following pro forma combined balance sheet
data only give effect to the acquisition of Bolle Australia and the issuance of
the convertible debt, as the effect of the acquisition of Bolle France and the
Contribution Agreement are already included in the Company's actual balance
sheet as of March 31, 1998. The actual statement of operations data presented
include the results of Bolle France for the six months ended December 31, 1997
(post-acquisition period) and the quarter ended March 31, 1998.
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
COMBINED HISTORICAL COMBINED HISTORICAL HISTORICAL HISTORICAL HISTORICAL HISTORICAL
------------ ------------ ------------ ----------- ----------- ----------- ---------- --------------
QUARTER ENDED MARCH 31, YEAR ENDED DECEMBER 31,
------------------------- ---------------------------------------------------------------------------
1998 1998 1997 1997(1) 1996(2) 1995(3) 1994(4) 1993
------------ ------------ ------------ ----------- ----------- ----------- ---------- --------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales.................... $14,256 $10,728 $56,080 $32,160 $24,425 $24,829 $23,094 $18,377
Cost of sales................ 6,835 5,288 26,436 15,354 12,130 12,181 10,814 9,126
------------ ------------ ------------ ----------- ----------- ----------- ---------- --------------
Gross profit................. 7,421 5,440 29,644 16,806 12,295 12,648 12,280 9,251
Selling, general and
administrative expenses
(including advertising
and sponsoring expenses).. 6,825 5,430 26,378 16,342 11,374 10,275 8,871 7,384
Merger and acquisition
integration related
expenses.................. 3,750 3,050
Interest expense (income). 371 484 1,498 963 (256) (302) 316 336
Other expense (income)....... (562) (515) (1,644) (693) (450) 48 (104) (295)
------------ ------------ ------------ ----------- ----------- ----------- ---------- --------------
Income (loss) before income
taxes and minority
interests................. 787 41 3,412 (3,556) 1,627 (423) 3,197 1,826
Provision for income taxes... 286 16 4,147 1,099 635 364 1,260 700
------------ ------------ ------------ ----------- ----------- ----------- ---------- --------------
Net income (loss) before
minority interests........ 501 25 (735) (4,655) 992 (787) 1,937 1,126
Minority interests........... 96 319
Preferred dividends.......... 139 29 511
------------ ------------ ------------ ----------- ----------- ----------- ---------- --------------
Net income (loss)
attributable to common
stock..................... $266 $ (4) $(1,565) $(4,655) $992 $(787) $1,937 $1,126
============ ============ ============ =========== =========== =========== ========== ==============
Basic and diluted EPS (5).... $0.04 $(0.00) $(0.23) $(2,586.11) $9,920 $(0.22) $0.65 $0.38
Weighted average basic and
diluted shares outstanding 6,884 1,476 6,884 1.8 0.1 3,510.6 2,997.0 2,963.0
French Franc per US Dollar
exchange rate (6)......... 6.0951 6.0951 5.6835 5.9843
Australian Dollar exchange
per U.S. Dollar exchange
rate (7).................. 0.6918 0.7673
BALANCE SHEET DATA:
Working capital (deficiency). $ 11,856 $ 9,137 $(20,936) $8,535 $11,395 $12,781 $1,060
Total assets................. 116,880 106,829 94,697 15,624 16,309 17,549 9,629
Long term debt............... 10,542 12,042 57 49
Convertible debt............. 7,000
Mandatorily redeemable
preferred stock........... 20,709 20,709 11,055
Stockholders' equity......... 38,548 36,348 18,843 9,743 12,770 13,433 1,584
French Franc per US Dollar
exchange rate (6)......... 6.1890 6.1890 5.9912
US Dollar exchange per
Australian Dollar
exchange rate (7)......... 0.6503
</TABLE>
- -----------
18
<PAGE>
(1) On July 10, 1997, the Company acquired Bolle France and related assets
in a transaction accounted for as a purchase. Accordingly, the results
of operations for Bolle France are included in historical results of
operations from that date.
(2) In 1996, the Company paid a dividend to Lumen (its then current
stockholder) of $4,019.
(3) In November 1995, Lumen acquired Bolle America in a transaction
accounted for as a pooling of interests. Accordingly, Bolle America is
included in all periods presented.
(4) In 1994, Bolle America paid a $50 dividend to its then current
shareholders.
(5) Despite the loss before tax of $3,556 the Company recorded a tax
charge of $1,099 primarily due to the creation of a valuation
allowance against the entire net tax benefit arising from domestic
operations, resulting in a net loss of $4,655. If the 1997 statutory
tax rate of 37% had been applied to pro forma combined income before
income taxes, pro forma EPS would have been $0.19.
(6) Represents the exchange rates used to translate the results of
operations and balance sheet amounts of Bolle France. The exchange
rate shown for the actual results of operations for the year ended
December 31, 1997 represents the average exchange rate for the six
months ended December 31, 1997 used to translate the results of
operations of Bolle France included in the Company's actual result.
(7) Represents the exchange rates used to translate the results of
operations and balance sheet amounts of Bolle Australia.
19
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
General
Until March 11, 1998, Bolle Inc. was a subsidiary of Lumen. Bolle Inc.
was organized on February 3, 1997 in connection with the July 1997 acquisition
by Lumen of Holding B.F., the French holding company that owned Bolle(R)'s
design and manufacturing operations and certain distribution interests,
including the worldwide rights to the Bolle(R) brand. Bolle Inc. is a holding
company, the principal subsidiaries of which are Bolle America and Bolle
France. Lumen acquired Bolle America in November 1995 and contributed Bolle
America to Bolle Inc. in July 1997. Prior to being acquired by Lumen, Bolle
America was a public company. Bolle Inc. became a publicly-held company on
March 11, 1998, as a result of the Spinoff by Lumen to its stockholders of all
of its equity interest in the Company.
Due to the acquisition of Bolle France on July 10, 1997, only six
months of results of operations of Bolle France are included in the results of
operations for the year ended December 31, 1997.
The Company has begun to develop and implement a global brand
management and marketing program, resulting in increased advertising expenses.
There can be no assurance that such increased expenses will result in increased
sales. The Company expects that these and other expenditures required to
implement its strategic plan will limit its earnings potential, particularly in
1998, and that the effects of its efforts may not be realized until 1999, if at
all.
The Company is in the process of upgrading its information systems to
support the implementation of its strategy and anticipated growth. The new
systems are expected to function properly with respect to dates in the year
2000 and thereafter and the new single currency which is scheduled to be
introduced by the European Union at the beginning of 1999. While the Company's
systems have been adequate to date, the Company began implementing the new
systems in 1997 and plans to complete implementation during 1999. See "RISK
FACTORS--Information Systems; Year 2000 Compliance."
It is not anticipated that operating on a standalone basis following
the Spinoff will have a significant impact on the results of operations,
financial position or cash flows of the Company other than that which is
disclosed herein. The Company was operated as a separate segment of Lumen's
business and will continue to receive management and administrative services
from Lumen on similar terms to those reflected in the historical financial
statements under the Management Services Agreement.
Pro forma results of operations
On a pro forma basis, including the results of Bolle France and Bolle
Australia as if the acquisitions of Bolle France and Bolle Australia had
occurred on January 1, 1997, the Company's sales were $56.1 million for the
year ended December 31, 1997 and $14.3 million for the quarter ended March 31,
1998. The Company, on a pro forma basis, experienced a decline in sales and
profitability from 1996 to 1997. The decline in sales and earnings reflected
the following: (i) a declining rate of sales growth in the U.S. premium
sunglass industry; (ii) the realization by the largest sunglass specialty
retail chain in the U.S. that it had significant excess inventory and its
resultant reduction of purchases from suppliers, including the Company; (iii)
the impact of the supply/demand imbalance in the premium sunglass industry
caused in part by this retailer's. While the Company's sales to this retailer
were not significant inventory surplus, although the Company's sales to this
retailer were not significant. The existence of excess inventory in the market
produced downward price pressure and greater competition in all the Company's
distribution channels; (iv) the loss of the Company's largest OEM customer due
to a decision by the customer to stop outsourcing production of their sunglass
lines; (v) an approximate 16% negative swing in the average exchange rate
between the U.S. dollar (the Company's functional currency) and the French
Franc; and (vi) a lack of new sunglass designs due to the distractions
experienced by members of the Bolle family (including Bolle
20
<PAGE>
France's chief product designer) while negotiating the sale of the family
business. Additionally, the average exchange rate between the U.S. Dollar and
the Australian Dollar has also been declining significantly over the last year.
In March 1998, the Company was named as one of a limited number of
preferred vendors by Sunglass Hut. Notwithstanding this positive development,
the Company continues to take measures to assure it does not become unduly
reliant on any one customer. While the Company believes that the market is
clearing the excess inventory that adversely impacted the premium sunglass
sector in 1997, there can be no assurance that inventory issues will not
resurface. To that end, the Company is placing increased emphasis on the
introduction of new products and on conveying an image which will support its
sales in a period of future market decline. The benefits are being offset
somewhat by French Franc exchange rates which continue to negatively affect the
Company's results of operations.
Quarter ended March 31, 1998 compared to quarter ended March 31, 1997
Net sales of $10.7 million for the quarter ended March 31, 1998
increased from $5.1 million for the comparable period in 1997 as a result of
the acquisition of Bolle France on July 10, 1997, offset by a decrease in sales
in the United States. Continued soft conditions in the U.S. market for premium
sunglasses contributed to the decrease in sales in North America.
Gross profit of $5.4 million or 50.7% for the quarter ended March 31,
1998 increased from $2.3 million or 45.1% for the quarter ended March 31, 1997.
The increase in gross margin percentage reflects the higher gross margins of
the Company's integrated manufacturing and distribution operations following
the acquisition of Bolle France.
Selling, general and administrative expenses for the quarters ended
March 31, 1998 and 1997 were $5.4 million and $3.0 million, or 51% and 60% of
net sales, respectively. The reduction in selling, general and administrative
expense as a percentage of net sales reflects the change in the Company's mix
of business following the acquisition of Bolle France.
Interest expense of $0.5 million for the quarter ended March 31, 1998
reflects the cost of debt incurred to fund the Bolle France acquisition for two
months and reduced debt levels due to the Spinoff after March 11, 1998.
Interest expense for the quarter ended March 31, 1997 was immaterial.
Other income consists primarily of foreign exchange transaction gains
of $0.45 million for the quarter ended March 31, 1998. Other income for the
comparable period in 1997 includes allocated equity income and management fee
income from Eyecare Products of $0.25 million.
Income taxes represent 39% of pretax profit for the quarter ending
March 31, 1998 compared to a benefit of 32% against the pretax loss for the
quarter ending March 31, 1997. The increase in the effective tax rate reflects
the acquisition of Bolle France.
Year ended December 31, 1997 compared to year ended December 31, 1996
Net sales of $32.2 million for the year ended December 31, 1997
increased from $24.4 million for the comparable period in 1996, as a result of
the acquisition of Bolle France on July 10, 1997, offset by a $5.7 million
decrease in sales in the United States. Soft conditions in the U.S. market for
premium sunglasses contributed to the decrease in sales in North America. The
largest sunglass specialty retail chain, which had been growing rapidly up
until the fourth quarter of 1996, began closing outlets and returning excess
inventory at the end of 1996 and throughout 1997, negatively affecting the
entire premium sunglass industry. This customer represented 14% of the
Company's sales for the year ended December 31, 1996 and less than 4% of the
Company's sales for the year ended December 31, 1997. While overall retail
sales of premium sunglasses continued to grow (though at a slower pace than in
prior years), many premium sunglass manufacturers, including the Company, had
overproduced in
21
<PAGE>
anticipation of significantly higher sales and took significant returns which
eroded profit margins. The Company expects market conditions to improve during
1998.
Gross margin increased from 50.3% for the year ended December 31, 1996
to 52.3% for the year ended December 31, 1997, reflecting the higher gross
margins of the Company's integrated manufacturing and distribution operations
following the Acquisition.
Advertising and sponsoring expenses increased $0.5 million on a sales
increase of $7.7 million due to the acquisition of Bolle France. As a
percentage of sales, advertising and sponsoring expenses fell from 13.4% in
1996 to 11.6% in 1997, although advertising and sponsoring expenses in the U.S.
increased to 17%.
For the year ended December 31, 1997 selling, general and
administrative expenses of $12.6 million increased from $8.1 million for the
year ended December 31, 1996, reflecting the acquisition of Bolle France. As a
percentage of sales, selling, general and administrative expenses increased
from 33.1% to 39.1% in 1997. This increase resulted from the Company's change
in mix of business following the acquisition of Bolle France.
Interest expense of $1.0 million for the year ended December 31, 1997
reflects the interest expense on the debt incurred to fund the acquisition of
Bolle France. In the comparable period in 1996 the Company's cash on hand
generated interest income of $0.3 million.
As a result of the above factors, pre-tax income decreased to a loss
before taxes of $3.6 million in 1997 from income before taxes of $1.6
million in 1996. Excluding the impact of $3.8 million of merger and acquisition
integration expenses, income before taxes for 1997 would have been $0.2 million.
Other income consists of allocated equity income and management fee
income from Lumen's investment in Eyecare Products of $0.6 million for the year
ended December 31, 1997 and $0.4 million for the year ended December 31, 1996.
This income was allocated to the Company by Lumen. For each of the years ended
December 31, 1997 and December 31, 1996 other income also included $0.1 million
of foreign exchange transaction gains.
The Company recorded a net tax provision of $1.1 million despite the
loss before taxes of $3.6 million for the year ended December 31, 1997. A
provision was recorded as a result of the Company establishing a valuation
allowance against the entire domestic net deferred tax asset for 1997. The
acquisition of Bolle France in 1997 had a significant impact on the tax rate
due to higher overall French taxes. In 1996, the effective tax rate was 39% of
net income before taxes.
Year ended December 31, 1996 compared to year ended December 31, 1995
Net sales were flat for the year ended December 31, 1996 compared to
the prior year. Although the premium sunglass market continued to grow, Bolle
America (the only business included in the Company at that time) was impacted
by industry problems described above that reduced sales in the fourth quarter.
At the end of 1996 and into 1997, the Company's "grass roots" distribution to
many smaller, loyal retail outlets worked in its favor by lessening the effect
of sales declines experienced in certain of the Company's larger customers. For
the years ended December 31, 1996 and 1995, the Company's sales were
substantially all in the United States.
During 1996 and 1995, the Company purchased substantially all of its
products from Bolle France, which did not change its pricing significantly
during those years. Accordingly, the gross margin of 50% in 1996 did not change
materially from the 1995 gross margin of 51%.
For the year ended December 31, 1996, advertising and sponsoring
expenses were $3.3 million versus $2.7 million for the prior year. As a
percentage of sales, advertising and sponsoring expenses increased from 10.7%
in 1995 to 13.4% in 1996. This increase was due to the Company's strategy of
building the Bolle brand in the United States where it competes with other
brands which are heavily marketed and advertised.
22
<PAGE>
Selling, general and administrative costs increased from $7.6 million
in 1995 to $8.1 million in 1996 primarily due to corporate allocation of its
stockholder's general and administrative expenses in 1996. In 1995, because the
Company was acquired by its stockholder in November, no allocations were
effected. In November 1995, the Company was acquired by its stockholder in a
transaction accounted for as a pooling of interests. Accordingly, the merger
related costs of $3.1 million are included in the results of the Company for
1995.
In both 1996 and 1995, the Company's cash on hand resulted in interest
income of $0.3 million.
Other income in 1996 includes $0.4 million of allocated equity income
from Lumen's investment in Eyecare Products. This income was allocated to the
Company by Lumen. During 1995, because the acquisition of the Company by Lumen
did not occur until November, the comparable equity income was not allocated.
The 1995 amount consists of foreign exchange losses.
The effective tax rate of 39% in 1996 represents an operating basis
provision while the 1995 benefit reflects the significant effect of the merger
related expenses.
LIQUIDITY AND CAPITAL RESOURCES
Quarter ended March 31, 1998
Net cash provided by operations of $2.0 million represents the nominal
net income, as well as decreases in accounts receivable and inventory and
increases in accounts payable. Depreciation and amortization for the quarter
ended March 31, 1998 was $0.7 million compared to $0.1 million for the same
period in 1997, reflecting the acquisition of Bolle France, Capital
expenditures of $0.08 million represent an increase of approximately $0.05
million from the comparable period in 1997. These operating and investing
activities were financed through proceeds from indebtedness to related parties
through March 10, 1998. On March 11, 1998 the Company executed a Credit
Agreement with a banking syndicate. Proceeds from the Credit Agreement were
used to repay a portion of indebtedness to Lumen. The remaining indebtedness to
Lumen was capitalized in connection with the execution of the Contribution
Agreement on March 12, 1998. There are currently no intercompany credit
arrangements between Lumen and the Company. Management believes that
availability under the Credit Agreement, along with cash provided from
operations, will be sufficient to fund the Company's cash, operating, investing
and debt servicing requirements for the next twelve months. It is not expected
that repatriation of French Franc cash flows, if any, will have a significant
impact on liquidity.
Year ended December 31, 1997
Net cash provided by operating activities during the year ended
December 31, 1997 of $1.1 million represents the net loss offset by the
positive effect on non-cash expenditures and the reduction of inventory and
accounts receivable. Depreciation and amortization for the year ended December
31, 1997 was $1.5 million compared to $0.4 million for 1996, reflecting the
acquisition of Bolle France. Cash paid for acquisitions in 1997 represents the
purchase of Bolle France net of cash received from the acquisition. Capital
expenditures of $0.7 million representing a $0.3 million increase over 1996 was
due to the acquisition. These operating and investing activities were financed
through proceeds from indebtedness to related parties, primarily through
borrowings from Lumen which were funded by Lumen through its revolving credit
facility. During 1997 the Company borrowed US dollars from Lumen at a rate of
8% and French Francs at a rate of 5.5%. On March 11, 1998 the Company executed
the Credit Agreement which has substantially the same terms as the Lumen
facility. Proceeds from the Credit Agreement were used to repay a portion of
indebtedness to related parties. There are currently no intercompany credit
arrangements between Lumen and the Company. Management believes that
availability under the Credit Agreement, along with cash provided from
operations will be sufficient to fund the Company's cash, operating, investing
and debt servicing requirements through the end of 1998. It is not expected
that repatriation of French Franc cash flows, if any, will have a significant
impact on liquidity.
In conjunction with the acquisition of Bolle France and the Spinoff,
the Company is subject to interest on approximately $17 million of senior
indebtedness owed to NationsBank at an average current rate of approximately
23
<PAGE>
6.5%. Although this represents significantly less than the indebtedness owed by
Bolle America to Lumen outstanding prior to the Spinoff, it is nevertheless
higher than indebtedness had been prior to the Bolle France acquisition. In
addition, the acquisition of Bolle France has resulted in additional annual
depreciation and amortization of approximately $1.6 million, significantly
increasing selling, general and administrative expenses as a percentage of
sales.
In connection with the issuance of the Convertible Notes, non cash
interest expense will be recognized in the statement of operations and the
effective rate will fluctuate with the market value of the Common Stock.
In connection with the Contribution Agreement executed on March 12,
1998, between Lumen and the Company, approximately $17 million of indebtedness
to related parties incurred to finance the acquisition of Bolle France was
capitalized. This reduction in the Company's debt improves working capital
levels.
SEASONALITY
The Company's sunglass business is seasonal in nature with the second
quarter having the highest sales due to the increased demand for sunglasses
during that period. The Company's goggle business is seasonal in nature with
the first quarter having the highest sales due to the increased demand for
goggles during the ski season. This seasonality is partially offset by safety
eyewear sales worldwide.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Approximately $6.5 million of the Company's revenues for the quarter
ended March 31, 1998 and $80 million of its total assets, including intangible
assets of $59 million as of March 31, 1998 were denominated in French Francs.
Approximately $12 million of indebtedness at March 31, 1998 was denominated in
French Francs bearing interest at variable rates based upon the French Franc
LIBOR rate. 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.
NEW ACCOUNTING STANDARD
SFAS No. 131, "Disclosures about Segments of an Enterprise and Related
Information," establishes standards for reporting of operating segment
information in annual financial statements and requires that those enterprises
report selected information about operating segments in interim financial
statements issued to shareholders. The statement is effective for all periods
beginning after December 15, 1997. The Company presently reports as one
operating segment and two geographical segments, and expects to continue to do
so. The Company plans to adopt SFAS No. 131 in its financial statements for the
year ended December 31, 1998.
24
<PAGE>
RECENT DEVELOPMENTS
On March 11, 1998, the Company became a publicly-held company as a
result of the Spinoff by Lumen to its stockholders of all of its equity
interest in the Company. In connection with the Spinoff, Lumen and Bolle
entered into various transactions, including transactions that result in
ongoing relationships between them as described below. As a development to its
business strategy, the Company has agreed to acquire its Australian distributor
and is negotiating to purchase its U.K. distributor. To help finance this
strategy, the Company secured a credit facility for an aggregate of U.S.
$28,000,000 and recently completed the sale of $7,000,000 aggregate principal
amount of its Convertible Notes.
SPINOFF
Transfer of the Non-ORC Business to the Company. Effective March 11,
1998, the Company received from Lumen all of Lumen's assets other than assets
related to Lumen's ORC Business (as defined in the Contribution Agreement) and
certain other specified assets retained by Lumen, and the Company assumed all
of Lumen's liabilities prior to the Spinoff other than those related to the ORC
Business. Pursuant to the terms of the Contribution Agreement, the Company
assumed and has agreed to pay, when and as due, and discharge all debts,
liabilities, obligations and taxes in respect of these assets and liabilities.
Assigned assets and assumed liabilities include, without limitation, all
interests, rights, duties and obligations of Lumen relating to AAi (which
purchased Foster Grant) and to Superior Vision Services, Inc.; certain assets,
rights, and obligations relating to Sterling Vision, Inc.; the Management
Agreement between Lumen and Eyecare Products, as well as all of Lumen's right,
title and interest in and to shares of stock of Eyecare Products; and all
rights and interests in and to rental payments received by Lumen (as assignee)
pursuant to an Industrial Lease by and between Bartley Optical Sales, Inc. and
ORC dated as of December 8, 1995 and a Lease Agreement, dated as of May 3,
1996, between Monsanto Company and ORC.
Investments in Affiliates and Other Assets. As a result of the
Spinoff, the Company holds a 23% equity interest in Eyecare Products. Eyecare
Products, which is quoted on the London Stock Exchange, is one of the largest
optical frame manufacturers in France with approximately $90,000,000 in sales
in 1997. Eyecare Products has one operating subsidiary, L'amy Group. Eyecare
Products reported net assets of approximately $28.5 million at December 31,
1997 with profit before tax of approximately $1.7 million. The Company has
entered into an option agreement to sell its investment in Eyecare Products at
the end of 1998. However, there is no certainty that this option will be
exercised and accordingly, the Company has been advised that Eyecare Products
is also actively exploring other possible strategic initiatives. The Company
and Eyecare Products have explored manufacturing product for each other as
Eyecare Products specializes in metal frames and the Company specializes in
nylon frames. However, to date there is no significant business between the two
companies.
As a result of the Spinoff, the Company also owns convertible
redeemable preferred stock of Foster Grant Holdings, Inc. (the "FGH Preferred
Stock") with a book value of $1,000,000. The FGH Preferred Stock is convertible
into shares of common stock of AAi. AAi, which purchased the Foster Grant
business from Lumen in 1996, is a privately held company and is the largest
distributor of value-priced sunglasses, reading glasses and jewelry accessories
in the United States. Pursuant to the Contribution Agreement, Bolle has agreed
that, to the extent Bolle exchanges all, but not less than all, of its FGH
Preferred Stock for shares of common stock of AAi, Bolle will deliver to Lumen
35.71% of all the AAi shares received by Bolle (the "AAi shares"), together
with any rights attaching thereto. If AAi undertakes a successful initial
public offering before December 1999, the Company can elect to receive the
equivalent of $7,000,000 in equity in AAi in exchange for its FGH Preferred
Stock (if not already exchanged), of which the Company will keep $4,500,000 and
Lumen will receive $2,500,000 pursuant to the terms of the Contribution
Agreement. However, the Contribution Agreement provides that in the event that
Bolle does not obtain the AAi Shares, Bolle agrees to pay to Lumen the first
$2,500,000 received by Bolle from proceeds (the "Proceeds") relating to (i) the
sale by Bolle of its shares of FGH Preferred Stock or (ii) the redemption by
Foster Grant Holdings, Inc. of the FGH Preferred Stock. In the event that Lumen
does not receive either the AAi Shares or $2,500,000 from Bolle, as described
above, on or before the date that is five years after the effective date of
BEC's merger with ILC Technology, Inc. ("ILC") (March 12, 1998), Bolle shall
promptly pay to Lumen, an amount equal to $2,500,000 less any amount previously
paid to Lumen by Bolle from the proceeds.
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In exchange for receiving assets under the Contribution Agreement, the
Company has assumed liability for and has agreed to indemnify Lumen against,
the following potential liabilities, which do not involve any material present
claims or known liabilities, in connection with Lumen's indemnification
obligations under the following: a guaranty of the minimum display purchase
requirements of Foster Grant from HMG World-Wide Corporation and its subsidiary
Intermark Corp., a Foster Grant supplier; certain agreements and obligations
under a (since then repaid) $3,500,000 mortgage with Wells Fargo Bank (Texas)
and Lumen as successor to Foster Grant; any remaining Lumen or Benson
obligations relating and pursuant to (i) the Agreement and Plan of Merger dated
July 26, 1995, among Benson, BEC Acquisition Corp. and Bolle America, (ii) the
Asset Purchase Agreement dated May 3, 1996, among Benson, Lumen, and Monsanto
Company, and (iii) the merger of Essilor into Benson, effective May 3, 1996;
certain immaterial pending litigation; and the Stock Purchase Agreement between
Lumen and Lantis Eyewear Corporation, dated November 14, 1996, as amended
relating to the Eyecare Products shares transferred to the Company pursuant to
the Contribution Agreement. See "RISK FACTORS--Assumption of Liabilities and
Indemnification of Lumen by the Company."
In May 1998 the Company sold the Foster Grant building which it
received in connection with the Spinoff and was leased by Foster Grant, for
approximately $5,800,000, representing net cash proceeds of approximately
$2,000,000 after mortgage repayment and expenses.
In addition, the Indemnification Agreement, which is in effect until
June 30, 2000, except for liabilities under environmental laws, for which the
term is seven years, and tax liabilities, for which the term is the applicable
statute of limitations, provides that the Company will indemnify Lumen against
any and all liabilities incurred or suffered by Lumen related to the following:
(i) Lumen and its subsidiaries, excluding the ORC Business, prior to or in
connection with the Spinoff; (ii) the Company and its subsidiaries subsequent
to the Spinoff; (iii) any environmental laws in connection with the business
operations of Lumen or its subsidiaries or their predecessors (including the
ORC Business) prior to the date of the Spinoff and the current, past or future
business operations of the Company and its subsidiaries or any of their
predecessors; (iv) any claims by Monsanto Company for indemnification in
connection with the Asset Purchase Agreement among Benson, Lumen and Monsanto
Company dated February 11, 1996; and (v) the enforcement by Lumen of its rights
under the Indemnification Agreement, and that Lumen will indemnify the Company
against all losses that are suffered by Bolle related to: (i) Lumen's business
after the Spinoff; (ii) the ORC Business before the Spinoff (other than
environmental liabilities); or (iii) enforcing the Company's rights under the
Indemnification Agreement. In addition, the Indemnification Agreement sets
forth each party's rights and obligations with respect to payments and refunds
relating to certain taxes and related matters such as the filing of tax returns
and the conduct of audits or other proceedings involving claims made by taxing
authorities. In general, Bolle has agreed to indemnify Lumen for taxes relating
to the business of Lumen (excluding the ORC Business) and for taxes
attributable to the Spinoff and certain other transactions, and Lumen has
agreed to indemnify Bolle for taxes relating to the ORC Business. In addition,
the Indemnification Agreement sets forth each party's rights and obligations
with respect to payments and refunds relating to certain taxes and related
matters such as the filing of tax returns and the conduct of audits or other
proceedings involving claims made by taxing authorities. In general, the
Company has agreed to indemnify Lumen for taxes relating to the business of
Lumen (excluding the ORC Business) and for taxes attributable to the Spinoff
and certain other transactions, and Lumen has agreed to indemnify the Company
for taxes relating to the ORC Business. See "RISK FACTORS--Assumption of
Liabilities and Indemnification of Lumen by the Company."
Management Services Agreement. Bolle and Lumen have entered into a
Management Services Agreement pursuant to which Lumen has agreed to provide
certain management services to Bolle in return for the payment by Bolle of a
$60,000 monthly fee. See "RISK FACTORS--Management Services Agreement" and
"CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS--Management Services
Agreement."
Assumption by the Company of Lumen's Liabilities Relating to the
Acquisition of Bolle France. The Company assumed all obligations and
liabilities of Lumen to each of the Sellers which Lumen incurred in connection
with the purchase of Bolle France. In addition, each Seller conveyed to the
Company all shares of Lumen preferred stock held by such Seller and the Company
issued in exchange to each Seller, an amount of shares of Series B Preferred
Stock equal to the number of shares of Lumen preferred stock conveyed by such
Seller
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to the Company. No shares of Common Stock were issued to the holders of
outstanding shares of Lumen preferred stock or Series A Preferred Stock
pursuant to the Spinoff. Lumen furthermore canceled all Lumen warrants
outstanding as of the Spinoff record date, and the Company issued in exchange
to each holder of canceled Lumen warrants, Bolle Warrants to purchase 663,618
shares of Common Stock, with an exercise price per Warrant equal to $9.95. No
shares of Common Stock were issued to holders of outstanding Lumen warrants or
Bolle Warrants pursuant to the Spinoff. See "DESCRIPTION OF CAPITAL
STOCK--Preferred Stock" and "--Warrants."
Bolle Options. Lumen options outstanding with respect to employees who
were employed by the Company after the Spinoff were canceled in exchange for
Bolle Options having similar terms and conditions and an equivalent economic
value to the canceled Lumen options. In addition, management employees of Lumen
who are providing services to the Company under the Management Services
Agreement were granted Bolle Options under the Plan in connection with the
Spinoff. As a result of the Spinoff, Bolle Options to purchase a total of
860,330 shares of Common Stock were issued by the Company.
CONVERTIBLE NOTES
On May 29, 1998 the Company completed the sale of $7,000,000 aggregate
principal amount of its Convertible Notes to Och Ziff Fund, under an exemption
from registration under the Securities Act. Pursuant to the terms of the
Convertible Subordinated Note Purchase Agreement, the Convertible Notes are
convertible at any time at the option of the holder(s) thereof into a maximum
of 1,333,333 shares of Common Stock at a conversion price of $5.25 per share
(the "Conversion Price"). The Company may cause the conversion of the
Convertible Notes at the Conversion Price at any time following the sixtieth
day after the date of the Prospectus, if the closing price of the Common Stock
is in excess of $7.0875 for 20 consecutive trading days and the Shares
underlying the Convertible Notes have been registered for resale under the
Securities Act. Under certain circumstances, including if the Company fails to
convert or redeem any Convertible Notes when due, the Company becomes obligated
to repay the principal amount (up to a maximum of $7,000,000) in cash and to
issue up to a maximum of 360,000 Shares to the holder(s) of such Convertible
Notes. All the Shares issuable pursuant to the terms of the Convertible Notes
Purchase Agreement will, if issued, be eligible for resale upon issuance
pursuant to this Prospectus. See "SELLING STOCKHOLDERS" and "PLAN OF
DISTRIBUTION." Unless otherwise provided by the terms of any indebtedness of
the Company, the Convertible Notes are subordinate to the rights of the Lenders
(as defined below) under the Credit Agreement and other ordinary creditors of
the Company for all purposes other than the issuance of the Shares. See
"DESCRIPTION OF CAPITAL STOCK--Convertible Notes."
CREDIT AGREEMENT
On March 11, 1998, the Company entered into the Credit Agreement,
pursuant to which the lenders party thereto (the "Lenders") and NationsBank,
N.A., as agent ("NationsBank" or the "Agent") have agreed to make available to
the Company (i) a term loan facility denominated in French Francs of
FF61,290,000 ($10,000,000 at the time of drawdown) for a term of five years,
(ii) a revolving credit facility denominated in U.S. Dollars or French Francs,
at the Company's option, of up to $18,000,000 for a term of three years and
(iii) a letter of credit facility of up to $5,000,000 for a term of three
years, provided that no letter of credit need be issued if the aggregate sum of
all draw downs under the letter of credit facility and the revolving credit
facility exceeds $18,000,000. The Company may use borrowings under the Credit
Agreement for working capital, to finance capital expenditures permitted under
the Credit Agreement, to finance the acquisition of Bill Bass Optical and Bolle
U.K., to refinance certain existing indebtedness, and for other miscellaneous
corporate purposes. The Company, NationsBank and the Lenders entered into
Amendment No. 1 to the Credit Agreement on May 29, 1998 for the purpose of
amending the Credit Agreement to permit the issuance of the Convertible Notes
and the optional redemption, repayment or conversion thereof, as contemplated
by the Convertible Note Purchase Agreement.
Interest accrues on borrowings outstanding under the term loan
facility and on French Franc borrowings outstanding under the revolving credit
facility at a fixed rate, which is based on the London Interbank Offered Rate
("LIBOR") for French Francs, currently approximately 6%. Interest accrues on
dollar borrowings outstanding under the revolving credit facility at either, at
the Company's option, (i) a variable rate based on the greater of (x)
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NationsBank's prime rate or (y) the weighted average of the rates on overnight
Federal funds transactions with members of the Federal Reserve System or (ii) a
fixed rate, based on LIBOR for U.S. Dollars.
The Company, each domestic subsidiary of the Company and, in the case
of (i) and (ii) below, ORC Management Corporation (collectively, the
"Guarantors") executed, among other documents, (i) a Second Amended and
Restated Guaranty Agreement dated as of March 11, 1998 for the benefit of the
Lenders, guaranteeing the payment of the obligations of the Company to the
Lenders under the Credit Agreement (the "Obligations"); (ii) a Second Amended
and Restated Security Agreement dated as of March 11, 1998, granting to the
Lenders a security interest in, among other things, their inventory,
receivables, equipment, contracts and all general intangibles as security for
payment of the Obligations and (iii) a Second Amended and Restated Intellectual
Property Security Agreement dated as of March 11, 1998, granting to the
Lenders, among other things, a security interest in material intellectual
property, as security for payment of the Obligations. In addition, pursuant to
the terms of a Stock Pledge Agreement dated as of March 11, 1998, entered into
by the Company and certain of its subsidiaries, the Company pledged to the
Agent 100% of the capital stock of the Company's domestic subsidiaries owned by
the Company; 65% of the voting stock and 100% of the non-voting common stock
owned by the Company of any direct foreign subsidiaries of the Company acquired
or created after March 11, 1998 and 100% of the capital stock owned on March
11, 1998 by the Company of any foreign subsidiary of the Company, to the extent
that such pledge would not result in adverse material tax consequences for the
Company.
Pursuant to and subject to the terms of the Credit Agreement, the
Company may borrow under the revolving credit facility until March 11, 2001, at
which time the revolving credit facility terminates and all amounts outstanding
thereunder become due and payable. The term loan facility is subject to
repayment in accordance with the schedule set forth in the Credit Agreement,
with the final payment of all amounts outstanding, together with accrued
interest thereon, being due and payable on March 11, 2003. The Credit Agreement
also requires the Company to make certain mandatory prepayments and allows the
Company to make optional prepayments.
Pursuant to the Credit Agreement, the Company is subject to certain
covenants, including, without limitation, restrictions on: (i) the incurrence
of additional indebtedness; (ii) the creation of liens on the Company's
property or assets; (iii) future acquisitions and mergers, except for the
acquisition of Bolle U.K., Bolle Australia and Bolle U.K.; (iv) the payment of
dividends, redemptions or distributions and (v) a change of control. The
Company is also required to maintain, among other things, certain minimum
consolidated fixed charge ratios, certain consolidated leverage ratios and
consolidated net worth in accordance with the provisions of the Credit
Agreement.
As of March 31, 1998, the Company had debt outstanding under the
Credit Agreement of approximately $17,000,000, with additional borrowing
availability of approximately $11,000,000 and was in compliance with all
financial covenants. The Company has agreed to use the aggregate proceeds of
the sale of the Convertible Notes to repay a portion of its outstanding
indebtedness under the Credit Agreement.
ACQUISITIONS
Bolle Canada Acquisition. Consistent with its strategy of
consolidating certain of its distributors through acquisitions or other
arrangements, the Company acquired its Canadian distributor, Bolle Canada in
March 1998. Pursuant to the terms of a Memorandum of Understanding dated
February 6, 1998 by and between the Company and the other shareholder of Bolle
Canada, the Company purchased from such shareholder for approximately $60,000,
49% of the outstanding capital shares of Bolle Canada, giving the Company 100%
ownership of Bolle Canada. The Company also agreed to provide the seller with
certain benefits to which he had been entitled as a director and officer of
Bolle Canada for a period of one year from the date of closing of the Bolle
Canada acquisition, and released the seller from all actual, pending or
potential obligations and liabilities in respect of the Company and Bolle
Canada, except for any such obligations and liabilities arising under the terms
of the Memorandum of Understanding. The acquisition of Bolle Canada by the
Company does not constitute a significant acquisition for purposes of financial
disclosure.
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Bill Bass Optical Acquisition. Under the terms of the Share Sale
Agreement, the Company has agreed to purchase 75% of Bolle Australia (after
reimbursement of certain outstanding indebtedness and excluding certain real
estate assets and other interests in unrelated businesses), 100% of Bolle Asia
and the 49% of Bolle Sunglasses not already owned by the Company. The purchase
price is approximately (i) $3,900,000 in cash and (ii) shares of Common Stock
with an agreed value of approximately $2,300,000 subject to adjustment, of
which (a) 248,388 shares (or approximately 60%) were issued at the execution of
the Share Sale Agreement subject to the closing thereof and may be resold by
the Bill Bass Trust pursuant to this Prospectus, and (b) the remainder or
191,312 Shares may be issued no later than twelve months after the closing. The
transaction is anticipated to close in the second quarter of 1998. The Company
has agreed to indemnify the Bill Bass Trust against certain liabilities which
it may incur in connection with the transactions contemplated by the Share Sale
Agreement. The Bill Bass Trust has granted the Company a call option to
purchase the remaining 25% interest which it has not conveyed to the Company
pursuant to the Share Sale Agreement. The Bill Bass Trust has the right to put
such shares for purchase by the Company if none of Messrs. Franklin, Ashken or
Kiedaisch are members of the Board of Directors of the Company and in any event
after five years from the date of the Share Sale Agreement. The Company has
agreed for so long as the foregoing options shall be outstanding, to maintain
the net tangible assets of Bolle Australia above $2,300,000 and not to sell any
shares of Bolle Asia. The acquisition of Bolle Australia does not constitute a
significant acquisition for purposes of financial disclosure.
Bolle U.K. Acquisition. The Company is negotiating to bring its
shareholdings in Bolle U.K. to 75%. The Company contemplates that it will pay
approximately $1,600,000 in cash at closing and to issue $150,000 in shares of
Common Stock each year for three years following the closing of the
acquisition, which shares will be eligible for resale upon issuance pursuant to
this Prospectus. Bolle U.K. is the exclusive distributor of Bolle safety
products in the U.K. and has a leading share of this market. While this
business, like Bolle Canada, is relatively small in size, its proposed
acquisition reflects the Company's consolidation strategy. The acquisition of
Bolle U.K. does not constitute a significant acquisition for purposes of
financial disclosure.
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BUSINESS
INTRODUCTION
The Company designs, manufactures and markets premium sunglasses and
sport shields, goggles and safety and tactical eyewear under the Bolle(R)
brand. Bolle(R) products enjoy worldwide recognition and a high quality image
in the sport and active lifestyle markets, particularly skiing, golf and
cycling as well as a growing reputation in the larger, fashion driven
recreational sunglass market. The Company's safety and tactical business, which
accounts for approximately half of the Company's aggregate unit sales, serves
the specialty segment of the safety eyewear market, including laser protection
products and military applications.
The recent creation of Bolle Inc. through the combination of Bolle
America and Bolle France consolidates the Company's ownership of the worldwide
rights to the Bolle(R) trademark for the Company's products with its
international manufacturing and distribution capabilities into one
organization. For the first time, the Company is positioned to develop and
execute a unified marketing strategy targeted at promoting the Company's
competitive advantages. The Company believes that these advantages include its
strong brand name, integrated design, production and marketing capabilities,
superior technology, specialized product offerings, established international
distributors in over 40 countries and a one-hundred year long heritage of
producing quality products. The Company intends to integrate its international
distributors into a cohesive worldwide network and add new distributors through
acquisitions or distributorship agreements. See "--Business Strategy."
In recent years, the retail sunglass market has experienced the
emergence of a specific premium market, reflected by increased sales of
higher-priced and quality-oriented products. The Company competes in the
premium sunglass market. Based on available industry data, the Company believes
that sales of premium sunglasses grew from $825 million in 1989 to $1.6 billion
in 1996. The factors which contribute to the growth of this market include
advancements in product technology, growing demand for specialized sunglasses,
increased health concerns and greater fashion and image consciousness, all of
which encourage multiple purchases. The Company also competes in the special
purpose safety and tactical eyewear market. Safety and tactical eyewear
products may be designed for general or special purpose. The factors which may
contribute to the potential growth of this market include increasing regulation
of safety eyewear, new special purpose applications, advancements in product
technology and growing demand for more style-oriented products. The Company
believes that both its sunglass and safety and tactical eyewear products, with
their increased user-specific characteristics and proven long-standing
reputation for style and high performance, are suited to today's consumer
preferences in their respective markets.
The Company has recently announced the following corporate
developments, which constitute a significant start to its growth strategy:
Worldwide Marketing Initiative. The Company has launched a worldwide
marketing initiative to promote a consistent brand image through (i)
coordinated advertising campaigns in major international and local media and at
retail locations; (ii) focused sponsorship of athletes attracting international
interest; and (iii) for the first time, a single marketing and product brochure
for distributors worldwide. Through a sport-specific approach the Company plans
to emphasize the technological, style and performance characteristics of
Bolle(R) products. In March, 1998, Sunglass Hut identified Bolle as one of a
select number of preferred vendors. The Company intends to grow its business
with Sunglass Hut through prime store locations, cooperative marketing and
chain wide distribution of products.
Significant Endorsement Advertising. As part of its strategy of
building a unified global marketing program, the Company has entered into
agreements with several world-famous athletes to endorse Bolle products. Such
athletes include Martina Hingis, the youngest number one-ranked player in the
history of women's tennis; Jacques Villeneuve, the current formula one racing
world champion; Picabo Street and Jean-Luc Cretier, 1998 Olympic Super G and
downhill gold medalists, respectively, and Steve Jones, winner of the 1996 golf
U.S. Open. In addition, Bolle has sponsorship programs with over a thousand
athletes worldwide who wear Bolle(R) products in competition.
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Focused Product Offerings. The market for premium sunglasses has shown
a trend towards consumer preference for sport-specific eyewear. In 1992, the
Company was the first to introduce a line of sunglasses specifically designed
for golfers. The Company is in the process of focusing its sunglasses and sport
glasses based on their use rather than their design, style or other defining
criteria. For instance, the Company recently introduced its Competivision(TM)
sunglasses, a new model of sunglasses specifically suited to the needs of
tennis players with a high performance selective light filtration system
designed to enhance the clarity of yellow tennis balls. The Company has a
tradition of designing and manufacturing sport-specific eyewear in consultation
with its sponsored athletes. The Company believes that its experience in
designing sport specific eyewear products makes it particularly well positioned
to respond to current trends in consumer preferences.
Alyn Supply Agreement. Consistent with its traditional focus on
technological innovation, in October 1997, the Company entered into the
three-year exclusive Alyn Supply Agreement with Alyn, a manufacturer of
specialized metal frames, to create premium sunglass frames using Boralyn(R), a
special patented metal matrix providing greater strength and stiffness to
weight ratios than titanium, which is currently considered the leading metal
for advanced metal eyewear. Development work on the Boralyn(R) line is in
progress, with a launch planned for 1999.
Acquisition of Distributors. As part of its strategy of consolidating
its distributors, the Company acquired in March 1998 its Canadian distributor,
Bolle Canada, and in May 1998 entered into the Share Sale Agreement to purchase
75% of Bolle Australia, which is the largest independent distributor of the
Company's products and the sole distributor of the Company's products in
Australia, where the Company believes it commands a leading market share. The
Company has agreed to purchase 75% of Bolle Australia, 100% of Bolle Asia (the
distributor of the Company's sunglasses in Southeast Asia), and the 49% of the
shares of Bolle Sunglasses (the distributor of the Company's sunglasses in the
U.K.) not already owned by the Company for an aggregate price of approximately
U.S.$6,250,000, consisting of U.S.$3,900,000 in cash and U.S.$2,300,000 in
Common Stock, or 439,700 Shares which will be eligible for resale hereunder.
For a period of five years following the closing of the transaction and subject
to certain options to purchase or sell the same, the Bill Bass Trust would
retain a 25% ownership interest in Bolle Australia providing it with a 25%
share in the profits generated by Bill Bass Australia and a pro rata share of
any distributions therefrom. See "RECENT DEVELOPMENTS."
INDUSTRY OVERVIEW
The Premium Sunglass Market
The sunglass market consists of two main segments, premium and
value-priced. The premium market is defined by products with retail price
points of $30 and over and the value-priced segment is defined by products with
retail price points below $30. The Company competes in the premium, and not the
value-priced, sunglass market. The Company's premium sunglass business accounts
for approximately half of the Company's aggregate unit sales and 70% of the
Company's total sales. The Company's main competitors are Bausch & Lomb
Incorporated ("Bausch & Lomb"), the marketer of the Ray Ban, Killer Loop,
Arnette and Revo brands, Luxottica Spa ("Luxottica"), and Oakley, Inc.
("Oakley"), which together control approximately 60% of the premium market
segment and several other companies with smaller market shares. The Company
focuses on the $60 to $90 price point range, which the Company believes
differentiates it from its major competitors in the sport segment whose average
price is in excess of $100. Approximately 19 million pairs of premium
sunglasses were sold in 1996 for a total value of $1.7 billion. Based on
available industry data, the Company believes that sales of premium sunglasses
grew from $825 million in 1989 to $1.7 billion in 1996.
The key factors contributing to the continuing growth in the premium
sunglass market include the following:
Advancements in Product Technology. New products and technologies are
continually being introduced in the industry to improve the quality and
durability of frames and lenses. Advances include (i) lightweight, virtually
unbreakable, polycarbonate lenses for better comfort and safety; (ii)
interchangeable lenses offering
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multiple styles and functions for a particular frame; (iii) scratch resistant
coatings for longer lasting lenses; and (iv) anti-reflective coatings to reduce
glare and eyestrain, improve visual clarity and cosmetic appeal. These
innovations are increasing the overall range of products in the market as well
as, in many cases, profit margins.
Growing Demand for Specialized Sunglasses Leading to Multiple
Purchases. In addition to consumer concern for quality eye protection and the
growing importance of sunglasses as a fashion accessory, demand for specialized
sunglasses to be used as equipment in different sports and activities has
grown. This additional customer demand has resulted in more product offerings,
greater frequency of purchases by consumers and increased brand awareness.
Increased Health Concerns. Consumer awareness of the harmful effects
of ultraviolet rays on the eyes and the overall importance of health concerns
have increased. This has resulted in greater willingness by consumers to pay
more for premium sunglasses believed to provide greater eye protection. In
addition, as the proportion of the population who require corrective eyewear
increases, the demand for prescription sunglasses is expected to rise.
Non-prescription sunwear sales are likely to be driven by the growing number of
people opting to have their vision surgically corrected.
Increased Fashion and Image Content. Sunglasses are increasingly being
used as fashion accessories for dress, casual and recreational activities. A
number of leading designers, such as Giorgio Armani, Calvin Klein, Guess,
Nautica and Polo Ralph Lauren, among others, are leveraging the appeal of their
brand names by offering lines of sunglasses. As the emphasis shifts to include
function and fashion, the offerings of shapes and colors have been expanded,
creating more sunglass choices and resulting in more frequent purchases by
customers.
The Safety and Tactical Eyewear Market
Safety and tactical eyewear products may be designed for general or
special purpose. General purpose safety and tactical eyewear products provide
undifferentiated protection against hazards such as flying objects, glare and
liquid. Special purpose safety and tactical eyewear products are designed to
fit the needs of a particular category of customers in addition to providing
the same protection features as general purpose safety and tactical eyewear
products. The Company competes in the special purpose segment of the safety and
tactical eyewear market. The Company's main competitors are Bacou USA, Inc.,
the marketer of Titmus(R) and Uvex(R) products, WGM Safety Corp. (a subsidiary
of French manufacturer Christian Dalloz S.A.) which distributes its products
under the Willson Safety Products trade name, and Crews, Inc., which
distributes its products under the Crews Safety Products trade name. The
Company's safety and tactical business accounts for approximately half of the
Company's aggregate unit sales and 30% of the Company's total sales. The
Company focuses on the $3 to $25 price point range.
The key factors which may contribute to the potential growth of the
safety and tactical eyewear market include the following:
Increased Regulation of Safety Eyewear. Demand for safety eyewear
products is driven by government regulations promulgated by agencies such as
the Occupational Safety and Health Administration, the Mine Safety and Health
Administration and the National Institute of Occupational Safety and Health
mandating the use of personal protective eyewear for certain job
classifications and work-site environments. Other factors creating requirements
for personal safety eyewear products at the workplace include the rising cost
of insurance, costs and liabilities relating to worker injury and increased
safety awareness.
New Special Purpose Applications. Demand for laser eye protection
equipment has risen as a result of the generalized use of lasers in
manufacturing processes, military operations and for medical treatment. Other
special purpose applications which have developed in recent years include
protective eyewear for firefighters, sky divers and paratroopers.
Advancements in Product Technology. Technological trends in the
industry include a move toward lighter-weight and thinner polycarbonate lenses,
special applications lenses, such as infrared lenses, and increased
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use of coatings, such as scratch resistant and anti-fog coatings. Consumer
preferences include lighter and more sophisticated products as more demand for
protective eyewear products arises from service industries, schools and
hospitals. In 1989, the American National Standards Institute changed the
standard pertaining to eye and face protection products. Under the new
standard, the evaluation of safety and tactical eyewear products shifted from
design to performance based criteria. As a result, producers moved to
incorporate more technology in their manufacturing processes to improve product
performance.
Demand for Style-Oriented Products. Style and comfort have led to
better user acceptance and even desirability. Product users prefer fashionable
and comfortable safety and tactical eyewear products. Therefore, the Company
believes that industrial purchasers are inclined to select functional products
which combine the characteristics of fashion and comfort whenever available
because product users are more likely to wear such products regularly, thereby
increasing regulatory compliance and reducing the risk of injury. As a result,
more spectacles and wrap around styles are being developed, as opposed to
heavier and bulkier goggles and face shields. Rising demand for a broader
variety of lens options, styles and colors is also expected.
Private Placement. On June 1, 1998 the Company completed the sale of
$7,000,000 aggregate principal amount of its Convertible Notes to Och Ziff Fund
pursuant to an exemption from registration under the Securities Act. See
"RECENT DEVELOPMENTS" and "DESCRIPTION OF CAPITAL STOCK--Convertible Notes."
The Convertible Notes are convertible at any time at the option of the
holder(s) thereof and, under certain circumstances, of the Company into a
maximum of 1,333,333 Shares of Common Stock. Under certain circumstances,
including if the Company fails to convert or redeem any Convertible Notes when
due, the Company becomes obligated to repay the principal amount of such
Convertible Notes (up to a maximum of $7,000,000) in cash and to issue up to
360,000 shares to the holder(s) of such Convertible Notes. All the Shares
issuable pursuant to the terms of the Convertible Note Purchase Agreement will,
if issued, be eligible for resale hereunder. See "SELLING STOCKHOLDERS" and
"PLAN OF DISTRIBUTION."
BUSINESS STRATEGY
Building on its technological heritage and its other competitive
advantages, the Company intends to leverage its established international
distributors in over 40 countries through a worldwide marketing initiative to
expand the Bolle(R) brand aggressively.
Competitive Advantages
The Company believes that it has the following competitive advantages:
Strong Brand Name. Bolle(R) products enjoy a strong reputation for
high performance and style. This reputation is based on the superior technical
characteristics of the Bolle(R) frames and lenses. Because famous brand names
are known to trigger instant appeal among consumers, the Company continuously
seeks to strengthen consumer perception of the Bolle(R) brand name as
representing high quality, technologically advanced and fashionable eyewear
products. The Company believes that the Bolle(R) brand ranks among the five
best known brands in the premium sport sunglass market and is especially strong
among consumers having an active lifestyle, such as skiers, cyclists, surfers
and other sports enthusiasts. As a result, the Company has the ability to lead
the market for certain of its products. For example, Bolle(R) ski goggles
collections such as Chrono(TM) and Future(TM) have been recognized as setting
standards for quality products in their market by numerous ski champions. The
Company will continue to pursue its constant search for superior lens
technology as well as improved frame quality and design with the objective of
achieving increased brand recognition and greater differentiation from its
competitors.
Integrated Design, Production and Marketing. As a result of its July
1997 acquisition of Bolle France, the Company owns the production and design
capabilities of Bolle France and the worldwide rights to the Bolle(R) brand for
its products. The Company believes that this organization enables the Company
to develop and execute a unified worldwide marketing and distribution strategy
focused on expanding the Bolle(R) brand with a consistent brand image and
design innovation. The Company's design team, which is supervised by Mr.
Maurice Bolle, oversees the entire design process from mold creation to the
final lens development stage. The Company enjoys
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flexible manufacturing in Oyonnax, France through the use of local
subcontractors, while retaining control over manufacturing and all its
proprietary processes.
Superior Technology. Bolle(R) eyewear products incorporate several
unique technological features, thus enabling the Company to better
differentiate itself from its competitors. The best known of these features is
Bolle(R) hydrated "memory" nylon, a virtually unbreakable material obtained
through a proprietary process owned by the Company. The Company uses this
special process to saturate the nylon material so that it retains moisture.
Bolle nylon frames return to their original shape after mistreatment, which
significantly improves product life. In addition, unlike most of its
competitors, the Company manufactures its own polycarbonate lenses. The
Company's primary lens material is polycarbonate, a lighter and more impact
resistant material than glass which provides 100% protection from damaging
ultraviolet light. Bolle(R) proprietary lenses provide each eye with a separate
optical center of focus, which permits the use of wraparound designs with wide
coverage without sacrificing overall optical clarity or introducing distortion.
The Company also offers an interchangeable lens system (marketed under the
Breakaway(TM) brand), which enables consumers to customize the look and
function of certain Bolle(R) products by offering different lenses that fit in
the same frame. Consistent with its traditional focus on technological
innovation, the Company continues to search for new technologies. The Company
has entered into a six-year exclusive Supply Agreement with Alyn to create
premium sunglass frames using Boralyn(R), a special patented metal matrix
providing greater strength and stiffness to weight ratios than titanium, which
is currently considered the leading metal for advanced metal eyewear. As a
result of its superior technological characteristics, Bolle(R) eyewear is known
for its durability, resiliency and light weight, all characteristics that are
important to customers engaged in sports and leisure activities. It is the
Company's objective to continue to develop, manufacture and sell products with
these superior quality and durability characteristics.
Specialized Product Offerings. The market for premium sunglasses has
shown a trend toward consumer preference for sport-specific eyewear. The
Company is in the process of focusing its sunglasses and sport glasses based on
their use rather than their design, style or other defining criteria. The
Company has a tradition of designing and manufacturing sport-specific eyewear
products in cooperation with its sponsored athletes. For example, the Company
has worked with French Olympic ski champions Jean-Claude Killy and, more
recently, Luc Alphand to design and continuously improve its ski goggles. The
Company also has worked closely with U.S. cycling champion Greg LeMond, a three
time winner of the Tour de France, to design its current line of cycling
glasses, including the signature Greg LeMond Attack(TM) line. In 1992, the
Company was the first to introduce sunglasses with features specifically
designed for golf, such as distortion free vision and wraparound design to
prevent wind and glare interference. Other examples of lines of sport glasses
include Aquashield(R) for water sports and Varsity for squash and racquetball.
The Company recently introduced its Competivision(TM) sunglasses, a model of
sunglasses specifically suited to the needs of tennis players with a high
performance selective light filtration system designed to enhance the clarity
of yellow tennis balls. These sunglasses are used by Martina Hingis in
competition.
Growth Strategy Targeted at Expanding Aggressively the Bolle(R) Brand
Worldwide Marketing Initiative. The Company intends to enhance and
unify its marketing efforts with the objective of achieving increased
recognition of the Bolle(R) brand name around the world. The Company's
worldwide marketing initiative includes a single marketing and product brochure
for distributors worldwide, coordinated advertising campaigns in major
international and local media and at retail locations, more focused sponsoring
of athletes attracting international interest and the unification of the
Company's sport celebrities endorsement program. The Company's marketing
initiative will seek to emphasize through a unified sport-specific approach the
technological, style and performance characteristics of Bolle(R) products. The
Company's marketing strategy also includes training retail salespersons to
fully understand the specificities of Bolle(R) products and in-store education
highlighting the Bolle(R) style and technical features. In March, 1998,
Sunglass Hut identified Bolle as one of a select number of preferred vendors.
The Company intends to grow its business with Sunglass Hut through prime store
locations, cooperative marketing, and chainwide distribution of products. The
Company expects to coordinate with its international distributors future
introductions of new Bolle(R) products, such as new motorsports and fishing
lines, so as to maximize the benefits which the Company may derive from its
worldwide
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rights to the Bolle(R) brand and enhance global sales. The Company also expects
to maximize the impact of its worldwide marketing initiative by also building a
cohesive distribution network.
Create and Leverage a Cohesive Distribution Network. The Company will
seek to ascertain greater control over the distribution of its products by
creating and expanding an integrated network of Bolle(R) distributors around
the world through acquisitions and distributorship agreements. The Company has
agreed to purchase 75% of Bill Bass Optical, its largest independent
distributor, and certain of its affiliates, including Bolle Sunglasses and
Bolle Asia, the distributor of the Company's sunglasses in the U.K. and
Southeast Asia, respectively. The Company expects the integration and expansion
of its distribution channels to result in new accounts and a larger customer
base. In addition, the Company expects the improved efficiencies that could
result from this strategy to lead to additional distribution capacity, which,
when combined with actual increased production, could also contribute to
increased sales.
Increased Use of Flexible Manufacturing. The Company enjoys flexible
manufacturing in Oyonnax, France through the use of local subcontractors, while
retaining control over manufacturing and all proprietary processes. The use of
a number of small local subcontractors enables the Company to maintain a
variable cost structure and minimal inventory levels, as well as to respond
quickly to shifting trends in the industry. The Company will seek to improve
the efficiency of this flexible manufacturing process by reducing lead time
from design to distribution. The Company expects improved efficiency to result
in increased manufacturing capacity and faster product launches.
Develop Product Line Extensions. The Company has plans to develop
product line extensions bearing the Bolle(R) brand. Once the reputation of the
Bolle(R) brand as a worldwide leader is established in a particular sport and
active lifestyle market, brand extensions have been successful, as shown by the
Company's experience with Bolle Australia, which has developed and carries a
successful line of Bolle(R) accessories, representing approximately 25% of
Australian sales.
Safety and Tactical Business Strategy
The first range of Bolle safety spectacles and goggles were
manufactured in Oyannax, France in 1950 and the first tactical eyewear products
sold by Bolle were motorcycle goggles for the French Ministry of Defence in
1982. Since this time Bolle has established a reputation for high quality,
stylish safety eyewear. Style is a key element in the marketing of safety
products because it induces personnel to wear the safety eyewear.
Bolle's safety business has grown at a compound growth rate of
approximately 10% since 1980. The Company's strategy is to build on the success
it has experienced in its strongest safety markets (Australia, France and the
UK) to introduce the safety collection in other markets, particularly in the
rest of Europe and North America. The product has a proven track record of
customer acceptance which management believes can be developed in these new
markets. The Company is continually introducing new models into the market and
has introduced a prescription line in the UK.
Tactical products have been sold to military establishments in over 10
countries. A separate tactical and military sales force was established by the
Company in 1998 and initial responses at trade shows has been encouraging. The
nature of the business is that orders tend to be relatively large, but are
infrequent.
PRODUCTS
General
The Company designs, manufactures and markets premium sunglasses and
sport shields ranging in retail price from $30 to $165 and ski goggles at most
price points. The Company currently offers approximately 180 models of
sunglasses, sport shields and goggles in 15 collections for a total of
approximately 400 separate product offerings. Each year, the Company attempts
to introduce a number of new models and collections and retire slower
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moving product offerings. Recently introduced Bolle(R) products include the
Breakaway(TM) and Snakes(TM) collections. The Company believes that the
continued introduction of new and innovative products will be important to its
success and that it must continue to respond to changing consumer preferences
in the areas of style, function and technological innovation.
Active Lifestyle Focus
Bolle(R) sunglasses are particularly suited to most athletic
endeavors, from recreational activities to hard-core competition, such as
skiing, snowboarding, triathlon, surfing, golf and other outdoor pursuits and
generally to the needs of customers having an active lifestyle. Bolle(R) sport
shields and goggles are offered for a broad range of sports activities,
including road and high-speed sports, squash, racquetball and other high impact
sports, golf, surfing and windsurfing, rock and ice sports as well as sky
diving. Bolle(R) ski goggles are designed to provide performance and protection
to persons facing the elements encountered in skiing, snowboarding and other
winter sports. Sales in the ski goggle market are dependent to a significant
extent on weather conditions and the quality and duration of the ski season.
Bolle(R) safety and tactical eyewear includes safety glasses and goggles, face
shields, laser eye protection devices and other specialized safety and tactical
eyewear products.
Technological Characteristics
Bolle(R) Frames. Bolle(R) nylon frames are lightweight and virtually
unbreakable. The Company uses an hydrated "memory" nylon, a virtually
unbreakable material obtained through a proprietary process owned by the
Company. The Company uses this special process to saturate the nylon material
so that it retains moisture. Bolle nylon frames return to their original shape
after a mistreatment, which significantly improves product life. Pigments are
incorporated during the manufacturing process and are therefore unalterable.
Grylamid frames are used for their transparent properties and light weight
while metal frames employ state-of-the-art alloys which provide durability and
resiliency while offering modern styling. Frames are offered in a variety of
monochromatic versions from black to fluorescent pink to white as well as in
exotic versions from patterns in the "Graffiti(TM)" line to various sparkling
colors in the "Crystal(TM)" line and most recently "Cyber(TM)" colors. Bolle
also sells metal frames primarily through its optical distribution network.
Bolle(R) Polycarbonate Lenses. The Company's primary lens material is
polycarbonate, a lighter and more impact resistant material than glass, which
provides high protection from damaging sun light. The Company was among the
first to incorporate lightweight polycarbonate lenses for use in recreational
eyewear, including sunglasses and sport glasses. The Company has since
developed its own polycarbonate lens, the Bolle(R) 100 which is capable of
stopping 100% of ultraviolet rays, 100% of infrared rays and 56% of blue light.
This lens can achieve this high performance without any surface coating. Its
filtering power is due exclusively to absorbers included in the material and
its applications are sun protection, computer work, welding and lasers.
Approximately 85% of the Company's total current production features
polycarbonate lenses. The Company believes the use of polycarbonate lenses has
played an important role in its ability to manufacture high performance
technologically-advanced eyewear products. Although polycarbonate is three
times lighter than glass and maintains perfect optical quality, it is twenty
times more impact resistant than glass and can be pierced without creasing,
cracking or splitting. Optically correct polycarbonate lenses are quartz coated
for scratch resistance. Polycarbonate lenses are available in a variety of
colors including smoke, vermilion, amber, emerald and clear, each adapted to
particular weather conditions.
Acrylic, Acetate and Glass Lenses. Other lens materials in the
Company's product lines include acrylic, acetate and glass. Acrylic is a
durable yet inexpensive material used in the Company's medium-priced
collections that allows the Company to offer products at an economical price
point. Acrylic lenses are lighter than glass, pass tests adopted by the U.S.
Food and Drug Administration for impact resistance and offer scratch resistance
through quartz coating. Cr 39(R) plastic lenses are available in clear, yellow,
vermilion, smoke and all-weather designs. Spectra lens coatings that are
available include blue, green, orange, rose, gold and silver. The Polarized
lens collection features glass lenses, offering light smoke, dark smoke and
light brown polarization. Polarized lenses reduce surface glare. Multilayer
coatings include blue, violet, green, red, gun and infrared.
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Optional Features
The Company offers an interchangeable lens system (marketed under the
Breakaway(TM) brand), which enables consumers to customize the style and
functions of certain Bolle(R) products by adapting different lenses to the same
frame. Also offered with many Bolle(R) products is a patented Sport Optical
System(TM), which the Company has designed to satisfy the needs of an
increasing number of its customers requiring sport glasses with corrective
lenses. Along with anti-scratch coating and polarization, most Bolle(R) sport
and protective eyewear products offer anti-fog coating, which the Company was
the first to develop for its ski goggles in 1973.
Safety and Tactical Products
The Company carries a line of approximately 50 safety and tactical
styles and produces customer specific designs for special purpose applications.
The products feature the Company's proprietary "memory" nylon frames and
carboglass lenses, which are high impact and scratch resistant material based
on polycarbonate; but sprayed with quartz crystal coating. The Bolle(R) safety
spectacle range provides style, function and comfort using advanced technology
and materials. As well as manufacturing safety glasses for standard industrial
requirements, the Company specializes in specific application eyewear such as
laser glasses, chemical splash protection and military approved products. A
number of the designs are based on the sunglass collection; similarly a number
of the technological features used on Bolle sunglasses are developed from the
Company's in-house research and development efforts undertaken in connection
with its safety and tactical eyewear products.
ADVERTISING AND MARKETING
As a result of its recent acquisition of Bolle France, the Company
owns the production and design capabilities of Bolle France and the worldwide
rights to the Bolle(R) brand for its products. This organization enables the
Company to create and execute a unified worldwide marketing and distribution
strategy. This strategy is focused on leveraging the Bolle(R) superior
technology and established distributors in over 40 countries to aggressively
expand the Bolle(R) brand with consistency of brand image and design
innovation. The Company's worldwide marketing initiative includes a single
marketing and product brochure for distributors worldwide, coordinated
advertising campaigns in major international and local media and at retail
locations, increased sponsoring of significant sport competitions and athletes
attracting international interest and the unification of the Company's sport
celebrities endorsement program. The Company's marketing strategy also includes
training retail salespersons to understand fully the specifics of Bolle(R)
products and in-store education highlighting the Bolle(R) style and technical
features. The Company expects that the impact of its worldwide marketing
initiative will be maximized by its parallel efforts to build a cohesive
distribution network. The Company expects to coordinate future introductions of
new Bolle(R) products, such as a new motorsports line, with its international
distributors so as to maximize the benefits which the Company may derive from
its worldwide rights to the Bolle(R) brand and enhance global sales. The
Company's marketing initiative will seek to emphasize through a sport-specific
approach, the technological frame and lens characteristics and proven
reputation for style and performance of Bolle(R) products.
The Company intends to unify and expand its sponsoring program through
the use of endorsement arrangements with sports celebrities and professional
athletes. Endorsement contracts typically have a two-to three-year term,
providing the Company with flexibility to renew such contracts. The Company has
sponsored athletes in a number of venues including the Tour de France, the
Olympic Games and the Pro Golf Tour. French Olympic gold medal ski champions
Luc Alphand and Jean-Luc Cretier use and endorse the Company's Chrono(R) line
of ski goggles. Martina Hingis, the youngest number one-ranked player in the
history of women's tennis, wears exclusively Bolle(R) sunglasses, sport glasses
and ski goggles at all public events and for recreation, and has agreed to
appear in advertisements and promotions for Bolle(R) products worldwide.
Jacques Villeneuve, the current formula one racing world champion and Picabo
Street, winner of the gold medal in the Super G competition in the 1998 Winter
Olympic Games also wear exclusively Bolle(R) sunglasses, sport glasses and ski
goggles at all public events for recreation, and have agreed to appear in
advertisements and promotions for Bolle(R) products worldwide. The Company also
sponsors a variety of teams and organizations including sports federations, the
Professional
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Golfers Association and the U.S. ski team. These sponsorships are a
cost-effective means of publicizing the Bolle(R) brand name while demonstrating
the Company's ability to deliver quality products that satisfy the performance
needs of a broad array of sports.
The Company intends to capitalize on the opportunity to consolidate
globally the brand management and marketing of the Bolle(R) brand for its
products. This will enable the coordination of new product releases worldwide
and promote a consistent brand image and an international, focused athlete
sponsorship program.
DESIGN AND PRODUCTION
Design. The Company employs a four person design team in Oyonnax and
maintains relationships with outside design agencies under the supervision of
Mr. Maurice Bolle. Mr. Maurice Bolle designed the famous cat eye sunglass in
the 1950's. The Bolle design team oversees the entire design process, from
carving the actual frame out of acetate to mold creation, forming, polishing
and the final lens development stage. Approximately 20 new molds are designed
each year. The Company currently houses a library of approximately 700 molds.
The molds for each Bolle(R) design have been inventoried in a warehouse at the
Company's facilities in Oyonnax, France and the Company believes it maintains
the capability to produce over 97% of the products represented by its mold
inventory.
Production. Although the Company has outsourced the completion of a
substantial number of steps in the process it uses to manufacture its products,
the Company still closely oversees the activities of its subcontractors. This
enables the Company to retain control over the entire assembly process that
leads to any finished Bolle(R) product, including the production of eyeglass
frames through injection molding and of foam cushioning and straps for the
Company's sport products as well as the creation of design applications added
to eyeglass frames. The majority of the subcontractors of the Company are
located in the immediate vicinity of the Company's facilities in Oyonnax,
France and the manufacturing of Bolle(R) products is their primary activity.
The Company has not entered into binding agreements with its subcontractors and
has not outsourced the production of items involving proprietary processes.
However, the Company believes that its history of good relations with such
subcontractors and the close proximity of these subcontractors to its
operations provides a conducive environment for continued good business
relations. The Company believes its arrangements with subcontractors enable it
to maintain a variable cost structure and minimal inventory levels, as well as
to respond quickly to shifting trends in the industry.
Products manufactured entirely by the Company include those made
pursuant to orders that are not large enough to warrant subcontractor
production, or which require the utilization of certain molds which do not fit
the machine specifications of subcontractors or which correspond to new or
specific design requirements, such as hard eyewear cases or certain eyeglass
frames which feature a wire-reinforced temple. The Company also participates in
original equipment manufacturing for other manufacturers of premium-priced
eyewear at its manufacturing facility. Although such arrangements do not
represent a significant portion of its business, the Company believes the
manufacturing of these products is evidence of its continued reputation as a
quality producer of high performance eyewear.
SUPPLIERS
Raw Materials
The Company generally obtains the raw materials required for use in
eyewear production, such as polycarbonate and nylon, from distributors of such
materials and occasionally directly from suppliers. The Company is not
dependent on any one source for supply of such materials and has not in the
past, had and does not expect in the future to have, difficulty in obtaining
these materials. These materials are generally available from a number of U.S.
and international suppliers.
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Metal Frames
Pursuant to the Alyn Supply Agreement, Alyn, the exclusive
manufacturer of Boralyn(R), a special proprietary metal matrix providing
greater strength and stiffness to weight ratios than titanium, has agreed to
provide the Company exclusively with sunglass frames using Boralyn(R), which is
currently considered the leading metal for advanced metal eyewear. Alyn has
retained the right to provide certain prescription eyeglass frames to other
customers. In order to retain exclusivity, the Company must maintain certain
specified minimum purchase amounts, starting at 100,000 units for the first
year and increasing by 50,000 units per year through the fourth year and by
25,000 units per year for the two remaining years. The Alyn Supply Agreement is
for a term of three years beginning with the first shipment of frames from Alyn
to the Company and will extend for an additional three years if the Company
meets its contractual requirements and agrees to certain specified purchase
levels.
COMPETITION
The Company faces intense competition in the premium sunglasses and
ski goggle business. The premium sunglasses industry is dominated by three
large competitors, Bausch & Lomb, Luxottica and Oakley, with a combined share
of the U.S. premium sunglass market estimated at approximately 60%. The rest of
the market is fragmented, with numerous small competitors. The Company competes
with a number of manufacturers, importers and distributors whose brand names
may enjoy greater brand recognition than that of Bolle(R). The principal
methods of competition are style, product performance, price and brand
recognition. Most competitors of the Company offer a portfolio of brands, as
opposed to focusing exclusively on one brand, as do the Company and Oakley. In
addition, the Company faces intense competition in the safety and tactical
eyewear market, including competition from Bacou, Uvex, Dalloz, Karsurg and a
number of Far East manufacturers who have introduced styles similar to those of
the Company. Competition in safety and tactical eyewear is based on quality,
price, reputation and technological features.
Companies active in Bolle's industry must respond simultaneously to
changes in fashion and technology, yet maintain inexpensive and rapid
production in order to remain competitive. Moreover, changing economic
conditions and regulatory policies complicate such companies' ability to
address all factors effectively. Consequently, these companies attempt to
reduce the impact of these variables through reliance on name brands and
images. Consumers' purchasing decisions are often the result of highly
subjective preferences which can be influenced by many factors, including,
among others, advertising, media, promotions and product endorsements. The
Bolle(R) name has been recognized for decades and the Company believes that it
is well positioned to retain such strong recognition in the future. The Company
believes that its competitive advantages include its strong brand name; product
quality; product performance; leading edge styling; integrated design,
production and marketing; superior technology and technological innovation;
specialized product offerings; price; and international distribution networks.
The Company also believes that the competitive advantage constituted by the
Company's right to market Bolle(R) products in the United States through
multiple retail distribution channels, including general and specialty sporting
goods stores and optometrists, ophthalmologists and opticians, is important to
its competitive position.
The Company believes its continued success will depend upon its
ability to remain competitive in its product areas. With several of its
competitors having greater financial, research and development, manufacturing
and marketing experience and resources than the Company, the Company faces
substantial long-term competition. The failure to compete successfully in the
future could result in a material deterioration of customer loyalty and the
Company's image and could have a material adverse effect on the Company's
business.
CUSTOMERS
The distributors owned by the Company are not dependent upon a single
customer or a few customers. None of the Company's customers accounted for more
than 10% of the Company's consolidated revenues in 1997. Bolle America's top 25
customers represent approximately half of its total net sales. In addition to
its relationships with large chains, Bolle America has an established
distribution network to thousands of smaller customers.
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QUALITY CONTROL AND PRODUCT IMPROVEMENT
Bolle(R) products are subject to stringent quality control
requirements. At every step of the production process, each piece of a product
is inspected by hand before moving to the next level of production. The Company
estimates that each unit of eyewear undergoes a minimum of four quality control
inspections before it leaves the facility. Technicians test random samples from
the manufacturing facility and from subcontractors to check for durability and
other production specifications. Product improvements are continually developed
in the Company's testing laboratory. For instance, the Company tests the fit of
its sport and safety goggles by using a machine which agitates particles in the
air and measures the amount of particles which pass through the edges of the
product. The Company's testing laboratory meets all British, German and U.S.
national standards for testing. High velocity and radiation testing are
conducted regularly. Laser coating units and spectrophotometers add to the
Company's ability to produce superior products.
SALES AND DISTRIBUTION
The Company sells its products through a worldwide network of both
affiliated and independent wholesale distributors in over 40 countries, which
in turn distribute Bolle(R) products to retail outlets. Information regarding
the sales, operating profit or loss and identifiable assets attributable to the
Company's U.S. and foreign operations for the year ended December 31, 1997 is
set forth in Note 16 to the Company's Consolidated Financial Statements
included in this Prospectus. During 1997, 42% of total sales were to North
American distributors, 36% of sales were in Europe, 14% of sales were in
Australia and Asia and 8% of sales were made to customers in the rest of the
world. Prior to the acquisition of Bolle France by the Company in July 1997,
the Company had no foreign operations and the information regarding the sales,
operating profit or loss and identifiable assets of the Company for the years
ended December 31, 1996 and 1995, which is provided in Note 16 to the Company's
Consolidated Financial Statements, is only attributable to Bolle America's U.S.
operations.
In the United States, the Company sells its products through a
nationwide network of approximately 200 independent sales representatives and
distributors to over 10,000 accounts, which include general and specialty
sporting good stores, opticians, ophthalmologists and optometrists, golf pro
shops, retail sunglass stores and mail order catalog companies.
The Company's retail products distribution operations are designed to
meet the individual inventory and service requirements of its customers.
Products are shipped in a variety of volumes, ranging from full truck loads, to
small orders to pre-stocked displays. Most orders are shipped by ground service
via common carriers to either a customer's distribution center or directly to
the customer's retail location. The Company believes that its operations are
capable of meeting a customer's individual service needs.
The Company plans to consolidate certain of its distributors through
acquisitions or other arrangements over the next three years. As part of this
strategy, the Company has agreed to purchase 75% of Bolle Australia, the
largest independent distributor of the Company's products and the principal
distributor of the Company's products in Australia, whose sales of Bolle(R)
products in Australia exceeded $10 million in 1997. The Company believes that
this will provide the potential for increases in the efficiency and utilization
of its distribution channels. In addition, the Company is negotiating to bring
its shareholding in Bolle U.K. to 75%.
SEASONALITY
The Company's sunglass business is seasonal in nature with the second
quarter having the highest sales due to the increased demand for sunglasses
during that period. The Company's goggle business is seasonal in nature with
the first quarter having the highest sales due to the increased demand for
goggles during the ski season. This seasonality is partially offset by safety
eyewear sales worldwide.
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REGULATION
The Company has been specifically certified by appropriate industry
and governmental authorities to manufacture sunglasses, sport products and
industrial protection products as well as laser protection products and eyewear
produced for specific military orders.
INTELLECTUAL PROPERTY
The Company, directly or indirectly, owns the exclusive right to a
number of registered trademarks in the United States and other countries,
including Bolle(R); Bolle PC(R); ACRYLEX(R); ALIEN(R); CONTOUR(R);
CHRONOSHIELD(R); MICRO EDGE(R); GEOMETRIC(R); TIGER SNAKE(R); SUNSPENDER(R);
Bolle EYEZONE(R); EYEZONE DESIGN(R); NORTHERN LIGHTS(R); PUT 'EM ON YOUR
FACE(R); EAGLE VISION(R); TACTICAL(R); AVANT EDGE(R); bf(R); MAURICE BOLLE(R);
CARBO GLAS(R); AQUASHIELD(R); and the Snakes design. In addition, Bolle America
has applications pending to register a number of additional trademarks,
including BREAKAWAY(TM), SEE BETTER, PLAY BETTER(TM); Bolle MADNESS(TM); Bolle
ATTACK(TM); Bolle ESCAPE(TM); Bolle CARBONEX(TM); VAPOR TRAIL(TM); and TOUR
ELITE(TM).
The Company has a number of design and utility patents registered in
the United States and other countries. The Company's United States patents have
expiration dates ranging from 2001 to 2015; certain of these patents are
subject to the payment of maintenance fees to maintain their registration.
These patents are intended to protect the unique design and functional
characteristics of certain Bolle(R) products from duplication by competitors.
There can be no assurance that any individual patent will provide substantial
protection or be of commercial value. The loss of any one patent would not have
a material adverse effect on the business of the Company.
EMPLOYEES
As of June 8, 1998, the Company had approximately 160 employees,
approximately half of which were assigned to the Company's design, production
and distribution operations in France with the remainder assigned to its
distribution operations in the United States and other parts of the world. None
of the Company's employees working in the United States is subject to a
collective bargaining agreement. Employees of the Company working in France are
subject to the provisions of the French Labor Code and a collective bargaining
agreement. The Company considers its relations with its employees in the United
States and France to be satisfactory.
41
<PAGE>
FACILITIES
As of June 10, 1998, the locations of the Company's principal
facilities are as follows:
<TABLE>
<CAPTION>
APPROXIMATE
LOCATION PRINCIPAL USE/USER(S) SQUARE FOOTAGE
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Oyonnax, France............. Manufacturing plant, design center, warehouse 90,000
and office space
Denver, Colorado............ Warehouse and office space 30,000
</TABLE>
The Company's main manufacturing facility in France is approximately
90,000 square feet, located just outside Oyonnax, France. This facility houses
the majority of the manufacturing activities of the Company as well as the
quality control aspects, management, accounting and design. The Company
recently relocated its warehouse and office space in the U.S. in Denver,
Colorado. The new facilities have an approximate square footage of 30,000.
The Company owns all of its manufacturing facilities in France and
will lease its Wheat Ridge facilities, which are located in the Denver
metropolitan area, under a lease which expires in 2005, with an option to
extend for an additional three year term.
ENVIRONMENTAL REGULATION
Manufacturing operations managed by corporations in which the Company
has an interest are subject to regulation by various federal, state and local
agencies concerned with environmental control. The Company believes that its
facilities are in substantial compliance with all existing federal, state and
local U.S. and non U.S. environmental regulations.
LEGAL PROCEEDINGS
While the Company is engaged in routine litigation incidental to its
business, 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 the
subject. In connection with the Spinoff, the Company has agreed to indemnify
Lumen against liabilities which may arise from certain pending litigation. See
"RECENT DEVELOPMENTS--Spinoff." The Company does not believe that any of such
pending litigation constitutes material legal proceedings for the Company.
42
<PAGE>
MANAGEMENT
The following table sets forth the names, ages and positions of the
executive officers and members of the Company's Board of Directors. Their
respective backgrounds are described following the table.
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
Martin E. Franklin(1)(2)............... 33 Chairman of the Board of Directors
Gary A. Kiedaisch(1)................... 51 President, Chief Executive Officer and Director
Ian G. H. Ashken(1)(2)................. 37 Executive Vice President of Finance and Administration,
Chief Financial Officer, Assistant Secretary and Director
Nora A. Bailey(3)(4)................... 57 Director
Franck Bolle(1)........................ 41 Director
Patricia Bolle Passaquay(1)............ 41 Director
David L. Moore(2)(3)(4)................ 40 Director
David S. Moross(3)(4).................. 40 Director
</TABLE>
- ---------------------
(1) Member of Executive Committee
(2) Member of Nominating Committee
(3) Member of Audit Committee
(4) Member of Compensation/Stock Option Committee
Directors of the Company are elected at each annual meeting of
stockholders. The next annual meeting of stockholders is scheduled for July
1998. All of the officers identified above serve at the discretion of the Board
of Directors of the Company. Other than Franck Bolle and Patricia Bolle
Passaquay, who are cousins, there are no family relationships between any
persons identified above.
The Company has established (i) an Audit Committee which reviews the
services provided by the Company's independent auditors, consults with the
independent auditors on audits and proposed audits of the Company and reviews
the need for internal auditing procedures and the adequacy of internal
controls; (ii) a Compensation Committee which determines executive compensation
and stock option awards; (iii) an Executive Committee which exercises, to the
maximum extent permitted by law, all powers of the Board of Directors between
board meetings, except those functions assigned to specific committees; and
(iv) a Nominating Committee which selects nominees for election as members of
the Board of Directors of the Company. The Board of Directors may establish
additional committees from time to time.
The following are brief biographies of persons identified above.
Martin E. Franklin was elected Chairman of the Board of Directors of
the Company in February 1997 and acted as Chief Executive Officer until July
1997. Mr. Franklin has served as Chairman of the Board of Lumen since its
formation and served as its Chief Executive Officer until March 1998. Mr.
Franklin was Chairman of the Board and Chief Executive Officer of Benson from
October 1992 to May 1996 and President from November 1993 to May 1996. Mr.
Franklin has been Chairman and Chief Executive Officer of Marlin Holdings,
Inc., the general partner of Marlin Capital, L.P., since October 1996. Mr.
Franklin is non-executive Chairman and a director of Eyecare Products and also
serves on the board of Specialty Catalog Corp. Mr. Franklin received his B.A.
in Political Science from the University of Pennsylvania.
Gary A. Kiedaisch was appointed President, Chief Executive Officer and
a member of the Board of Directors of the Company in July 1997. From 1989 until
his appointment as the Chief Executive Officer of the Company, Mr. Kiedaisch
had been President and Chief Executive Officer of the Mt. Mansfield Company
d/b/a Stowe Mountain Resort, a wholly owned subsidiary of multi-national
insurance and financial services
43
<PAGE>
conglomerate American International Group. Prior to his tenure in Stowe, he
held executive positions with several high visibility companies in the winter
sports industry including AMF Head Ski Worldwide, Raichle Monitor USA, Blizzard
North America and Hart Ski Manufacturing Company, where he had responsibility
for worldwide marketing, coordinating and consolidating distributor networks
and unifying worldwide brand identification.
Ian G.H. Ashken, A.C.A. was elected Executive Vice President, Chief
Financial Officer, Assistant Secretary and a member of the Board of Directors
of the Company in February 1997. Mr. Ashken was elected Executive Vice
President, Chief Financial Officer, Assistant Secretary and a Director of Lumen
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. Since October 1996, Mr. Ashken has been Vice Chairman of Marlin
Holdings, Inc., the general partner of Marlin Capital, L.P. Mr. Ashken is a
director of Eyecare Products. Mr. Ashken received his B.A. (Hons) in Economics
and Accounting from the University of Newcastle in England.
Nora A. Bailey, Esq. became a member of the Company's Board of
Directors in March 1998. 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 is also a director of
Lumen. Ms. Bailey received her J.D. from the University of Michigan Law School.
Franck Bolle has been a member of the Board of Directors of the
Company since July 1997. Mr. Bolle was appointed President and Director of
International Operations of Bolle France in July 1997. Mr. Bolle has been a
member of the executive management of Bolle France since 1984 and as such has
shared responsibility with Ms. Passaquay for the day-to-day operations of Bolle
France. Prior to joining Bolle France, Mr. Bolle served as Sales Manager of a
home improvement supplies manufacturer. Mr. Bolle holds a degree in business
administration with a concentration in marketing from Ecole Libre des Sciences
Commerciales Appliquees of Paris, France.
Patricia Bolle Passaquay has been a member of the Board of Directors
of the Company and Director of Export Sales since July 1997. Ms. Passaquay has
been a member of the executive management of Bolle France since 1981 and as
such has shared responsibility with Mr. Franck Bolle for the day-to-day
operations of Bolle France. Ms. Passaquay holds a degree in business
administration with a concentration in marketing from Ecole Libre des Sciences
Commerciales Appliquees of Paris, France.
David L. 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 received his B.A. in Economics from Amherst College and his M.B.A.
from Harvard University.
David S. Moross became a member of the Company's Board of Directors in
March 1998. Mr. Moross is presently active with the Whitehall Financial Group,
a holding company that invests throughout the world, and is a member of its
Board of Directors. Mr. Moross recently was appointed Managing Director of the
newly created IMG/Chase Sports Capital Fund, a private equity venture formed by
International Management Group ("IMG") and Chase Capital Partners to invest in
the sports industry. Mr. Moross has also served as a consultant to IMG for the
past eight years. He also served as President and Chief Executive Officer of
Kalvin-Miller International, Inc., a national insurance broker. Mr. Moross
received his B.A. in economics from the University of Texas at Austin.
44
<PAGE>
EXECUTIVE COMPENSATION
From the Company's inception in February 1997 until December 31, 1997,
the executive officers of the Company, other than Gary A. Kiedaisch, its Chief
Executive Officer, were officers of Lumen, and the compensation of such
executive officers was paid by Lumen. Although such compensation was in part
for services rendered to the Company, the full amounts thereof are provided
below because, prior to the Spinoff, the Company was a subsidiary of Lumen and
no apportionment between Lumen and the Company was made on an ongoing basis.
SUMMARY OF COMPENSATION
The following Summary Compensation Table sets forth information
concerning compensation earned by the Company's Chief Executive Officer and its
other executive officers in the fiscal year ended December 31, 1997.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
------------
ANNUAL COMPENSATION(1) AWARDS
---------------------- ------------
NUMBER OF
SECURITIES
UNDERLYING ALL OTHER
SALARY BONUS OPTION/ COMPENSATION
NAME AND PRINCIPAL POSITION YEAR ($)(5) ($) SARS(3) ($)
------ -------- ------- ------------ --------------
<S> <C> <C> <C> <C> <C>
Gary A. Kiedaisch
Chief Executive Officer.......... 1997 103,846(6) 37,500 166,667 0
Martin E. Franklin(2)
Executive Chairman............... 1997 257,500 300,000 183,333 34,541(4)
Ian G. H. Ashken(2)
Executive Vice President of
Finance and Administration,
Chief Financial Officer and
Assistant Secretary............ 1997 206,000 168,750 33,333 27,546(4)
</TABLE>
- ------------
(1) The compensation of the Company's executive officers was paid entirely by
Lumen in 1997.
(2) This information reflects the aggregate compensation paid by Lumen for the
services of Messrs. Franklin and Ashken as officers of both Lumen and the
Company. The part of this compensation relating to services provided to
the Company cannot be determined separately.
(3) All awards reflected in this column represent Bolle options held by the
Company's executive officers which were received in 1998, pursuant to the
Spinoff, equivalent to Lumen options granted in 1997.
(4) Includes (i) $5 million and $3 million "split dollar" life insurance
policies maintained by Lumen for Messrs. Franklin and Ashken,
respectively, for which Messrs. Franklin and Ashken reported $28,877 and
$21,882, respectively, as income in 1997 and (ii) employer matching
contributions under Lumen's 401(k) savings plan of $5,664 for each of
Messrs. Franklin and Ashken in 1997.
(5) The allocation of the portion of Messrs. Franklin and Ashken's salaries
and bonus paid for services rendered to the Company is included in the
$719,000 selling, general and administrative allocation from Lumen
reflected in the Company's 1997 financial statements included herein.
(6) From July 1997.
45
<PAGE>
OPTION GRANTS IN 1997
The following table sets forth information regarding Bolle Options
currently held by the Company's executive officers which were granted by the
Company in 1998, pursuant to the Spinoff, based on the number of Lumen options
granted in 1997. In accordance with the rules of the Commission, the table sets
forth the hypothetical gains or "option spreads" that would exist for the
options at the end of their terms. These gains are based on assumed rates of
annual compound stock price appreciation of Lumen common stock of 5% and 10%
from the date the options were granted to the end of the option terms.
OPTION GRANTS IN FISCAL 1997
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
------------------------------ POTENTIAL REALIZABLE
VALUE AT
ASSUMED ANNUAL RATES OF
NAME NUMBER OF STOCK PRICE APPRECIATION
- ---- SECURITIES PERCENT OF TOTAL FOR
UNDERLYING OPTIONS GRANTED TO EXERCISE OPTION TERM (4)(5)
OPTIONS EMPLOYEES IN PRICE EXPIRATION --------------------------
GRANTED FISCAL 1997(1) PER SHARE DATE 5% 10%
------- -------------- --------- ---- -- ---
<S> <C> <C> <C> <C> <C> <C>
Gary A. Kiedaisch......... 166,667 19% $0.76 July 7, 2004(2) $877,810 $2,045,671
Martin E. Franklin........ 183,333 21% 0.57 March 25, $951,597 $2,217,626
2007(3)
Ian G.H. Ashken........... 33,333 4% 0.57 March 25, $173,018 $403,205
2007(3)
</TABLE>
- ---------------
(1) Based on the total number of Bolle Options issued pursuant to the
Spinoff equivalent to Lumen options granted in 1997.
(2) 41,666 of Mr. Kiedaisch's total options will vest on each of July 7,
1998, 1999, 2000, and 2001.
(3) These options will 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 $8 per share for a twenty (20) consecutive trading day period
or (b) March 25, 2005.
(4) The assumed annual compound rates of stock price appreciation are
mandated by the rules of the Commission and do not represent the
Company's estimate or projection of future stock prices.
(5) Since the Company's executive officers were granted only Lumen options
in 1997, and since there was no public market for the Company's Common
Stock on December 31, 1997, the information provided in this column is
based on the 500,000, 550,000 and 100,000 Lumen options granted to
Messrs. Kiedaisch, Franklin and Ashken, respectively, in 1997, with an
exercise price of $4.3125, $4.25 and $4.25 per share, respectively.
LUMEN OPTIONS EXERCISED IN LAST FISCAL YEAR; FISCAL YEAR ENDED OPTION VALUES
The following table summarizes certain information regarding certain
year end option values of Bolle Options currently held by the Company's
executive officers which were granted by the Company in 1998 pursuant to the
Spinoff based on the number of Lumen options granted in 1997.
46
<PAGE>
<TABLE>
<CAPTION>
NUMBER OF
UNEXERCISED VALUE OF UNEXERCISED
OPTIONS IN-THE-MONEY OPTIONS AT F-Y END
AT FY-END (1) ($)(1)
------------------------------------------------------------------
EXERCISABLE/ EXERCISABLE/
NAME UNEXERCISABLE UNEXERCISABLE
- ---- ------------------------------------------------------------------
<S> <C> <C>
Gary A. Kiedaisch.......................... 0/166,667 0/843,750(2)
Martin E. Franklin......................... 45,833/320,833 1,131,656/1,352,844(3)
Ian G. H. Ashken........................... 31,250/93,750 124,453/356,484(4)
</TABLE>
- ----------------
(1) Since the Company's executive officers held only Lumen options as of
December 31, 1997, and since there was no public market for the Company's
Common Stock on that date, the information provided in this column is
based on information regarding such Lumen options and on the December 31,
1997 closing price of Lumen common stock of $5.937 per share.
(2) Based on a total of 0 exercisable and 500,000 unexercisable Lumen options
held by Mr. Kiedaisch on December 31, 1997 with an exercise price of $4.25
per share.
(3) Based on a total of 137,500 exercisable and 962,500 unexercisable Lumen
options held by Mr. Franklin on December 31, 1997 with an average exercise
price of $4.98 and $4.56 per share for exercisable and unexercisable
options, respectively.
(4) Based on a total of 93,750 exercisable and 281,250 unexercisable Lumen
options held by Mr. Ashken on December 31, 1997 with an average exercise
price of $4.61 and $4.67 per share for exercisable and unexercisable
options, respectively.
DIRECTORS' COMPENSATION
Members of the Company's Board of Directors other than those who are
officers or employees of the Company and the Chairman of the Board, will
receive for 1998 an annual fee of $15,000 for their services as directors and
as members of any committees of the Company's Board of Directors on which they
serve. Thereafter, members of the Company's Board of Directors other than those
who are officers or employees of the Company and the Chairman of the Board,
will receive an annual retainer fee in an amount to be determined. Directors
who are not officers or employees of the Company ("Non-Employee Directors")
also receive automatic stock option grants under the Plan. See "-Bolle 1998
Stock Incentive Plan" below. Mr. Kiedaisch is compensated pursuant to an
employment agreement with the Company. See "-Employment Agreement" below.
EMPLOYMENT AGREEMENT
Mr. Kiedaisch is employed full time pursuant to an employment
agreement with the Company for a term ending on August 4, 2000, unless earlier
terminated by either party. At that time, the agreement will automatically
extend for additional one year terms unless either party gives six months
written notice prior to the end of the initial term or 90 days written notice
prior to the end of any renewal term. Mr. Kiedaisch's employment agreement
provides for annual base compensation of $250,000 and entitles Mr. Kiedaisch to
a bonus for the year 1997 and each full year thereafter which varies based on
the Company's annual earnings reaching certain milestones. Mr. Kiedaisch also
received a grant of Lumen options which were exchanged upon the completion of
the Spinoff for 166,667 options to purchase shares of Common Stock. Pursuant to
a separate Memorandum of Understanding, Mr. Kiedaisch will be entitled to a
cash payment from the Company if the value of the nominal gains on the options
(the "Nominal Gain") at the close of business on July 6, 2001 falls below
certain levels as follows: if Mr. Kiedaisch is still employed on July 6, 2001
or his employment has been terminated prior to that date without cause, and the
Nominal Gain is less than $500,000, the Company shall pay to Mr. Kiedaisch the
difference
47
<PAGE>
between $500,000 and the Nominal Gain. If Mr. Kiedaisch's employment
has been terminated prior to July 6, 2001 other than without cause, and the
Nominal Gain is less than $338,000, the Company shall pay to Mr. Kiedaisch the
difference between $338,000 and the Nominal Gain. The employment agreement
restricts Mr. Kiedaisch from competing against the Company and its affiliates
in the United States or any other territory where the Company does business or
in which the Company's products are marketed for a period of one year following
the expiration of the employment agreement and further contains certain
anti-solicitation and confidentiality provisions. The Company may terminate the
employment agreement without compensation in the event Mr. Kiedaisch commits a
material breach not cured after receiving notice thereof, is grossly or
willfully negligent or commits fraud or a misappropriation. The Company may
terminate the employment agreement without cause upon paying Mr. Kiedaisch a
severance indemnity equal to one year's base compensation or all remaining base
compensation due thereunder for the remainder of the term, whichever is
greater, plus the pro rata portion of his bonus for the then current year. In
the event of any termination without cause, all options granted to Mr.
Kiedaisch which are not then vested will vest automatically.
BOLLE 1998 STOCK INCENTIVE PLAN
In January 1998, the Company's Board of Directors adopted the 1998
Stock Incentive Plan (the "Plan") under which 2,500,000 shares of Common Stock
are reserved for issuance pursuant to the grant of stock-based awards under the
Plan. Pursuant to the Plan, employees, officers, directors and consultants of
the Company and its subsidiaries and affiliates (other than employees subject
to a collective bargaining agreement) are eligible to be selected by the
Compensation Committee as participants to receive discretionary awards of
various forms of equity-based incentive compensation, including stock options,
stock appreciation rights, restricted stock awards, performance share unit
awards and phantom stock unit awards, and awards consisting of any combination
of such equity-based incentives as set forth below.
The Plan is administered by the full Board of Directors of the Company
or a committee thereof, including the Compensation Committee (the entity
administering the Plan, hereafter referred to as the "Committee"). The
Committee, in its sole discretion, will determine which eligible officers,
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 Committee who are Non-Employee Directors will
receive automatic non-discretionary annual grants of stock options pursuant to
the Plan.
Each Non-Employee Director has been granted an option to purchase
3,333 shares of Common Stock in connection with the Spinoff. On the date that a
person first becomes a Non-Employee Director, he or she will automatically be
granted an option to purchase 3,333 shares of Common Stock. Thereafter,
beginning in 1999, on the date of each annual meeting of stockholders of the
Company, each Non-Employee Director will automatically be granted an option to
purchase 1,000 shares of 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 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. All Director Options will be NQSO's
(as defined below).
Also in connection with the Spinoff, salaried employees, sponsored
athletes and other consultants of Bolle who previously had been awarded options
to purchase Lumen shares under Lumen's stock option plan were granted
substitute options under the Plan; their Lumen options were canceled. Such
substitute options were granted at in-the-money exercise prices determined to
provide the optionee with the same unrealized economic gain (if any) that he or
she enjoyed in his or her Lumen options at the time of the Spinoff and were
granted on proportionate vesting schedules based on the vesting schedules of
their Lumen options. In addition, management employees of Lumen who are
providing services to the Company as non-salaried officers and consultants of
the Company under the Management Services Agreement were granted options under
the Plan on the same basis as the options noted above. However, these options
are new options rather than substitute options (as the recipients retained
their original options in Lumen). Some of these in-the-money grants are
immediately taxable to the recipients, with the balance of the grants taxable
upon vesting or exercise. The actual gain (if any) to the recipients of the new
options will be realized immediately, upon vesting or upon exercise of the
options. These grants, which were designed to reward and incentivize the
recipients as non-salaried officers and consultants to the Company, are
otherwise
48
<PAGE>
equivalent to the salaried employee, sponsored athlete and consultant grants.
The actual gain (if any) to the recipients of the substitute options will be
realized only upon exercise of any such options. Total options granted were
860,330, at an average exercise price of $1.64 per share. All such options are
NQSOs (as defined below).
Stock options granted by the Committee under the Plan may be
"incentive stock options" ("ISOs"), within the meaning of Section 422 of the
Internal Revenue Code of 1986, as amended, or "non qualified stock options"
("NQSO's"). The exercise price of the options will be determined by the
Committee when the options are granted, subject to a minimum price of the fair
market value of the Common Stock on the date of grant in the case of ISOs and
the par value in the case of NQSOs. The option exercise price for all options
granted under the Plan may be paid in cash or in shares of Common Stock having
a fair market value on the date of exercise equal to the exercise price or, in
the discretion of the 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.
A stock appreciation right (a "SAR"), may be granted by the Committee
as a supplement to a related stock option or may be granted independently 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 independently of any
option will vest and lapse according to the terms and conditions set by the
Committee. A SAR will entitle its holder to be paid an amount equal to the
excess of the fair market value of the Common Stock subject to the SAR on the
date of exercise over the exercise price of the related stock options, in the
case of a SAR granted in connection with an option, or the fair market value of
Common Stock on the date of grant in the case of a SAR granted independently of
an option.
Shares of Common Stock covered by a restricted stock award may, in the
discretion of the Committee, be issued to the recipient at the time the award
is granted or may be deposited with an escrow agent until the end of the
restricted period set by the 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 Committee at the time the award
is granted.
A phantom stock unit award will provide for the future payment of cash
or the issuance of shares Common Stock to the recipient if continued employment
or other conditions established by the 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 Common Stock to the recipient upon the
attainment of certain corporate performance goals established by the Committee
over performance award periods. At the end of each performance award period,
the Committee decides the extent to which the corporate performance goals have
been attained and the amount of cash or Common Stock to be distributed to the
participant.
OTHER
The Company does not maintain a pension plan or other actuarial
retirement plan for its named executive officers. The Company does not maintain
any long term incentive plans. The Company's named executive officers are
eligible to participate in benefit plans maintained by Lumen which are
generally available to the Company's employees, including a 401(k) savings plan
and the health and life insurance programs.
DIRECTOR AND OFFICER INDEMNIFICATION AND LIMITATION OF LIABILITY
The Company's Certificate of Incorporation contains provisions
permitted under the Delaware General Corporation Law (the "DGCL") relating to
the liability of directors. The provisions eliminate a director's liability for
monetary damages for a breach of fiduciary duty as a director, except for
liability in certain circumstances involving wrongful acts, such as the breach
of a director's duty of loyalty or acts or omissions which involve intentional
misconduct or a knowing violation of law. Further, the Company's Certificate of
Incorporation and
49
<PAGE>
Bylaws contain provisions to indemnify the Company's directors and officers to
the fullest extent permitted by the DGCL including payment in advance of a
final disposition of a director's or officer's expenses and attorneys' fees
incurred in defending any action, suit or proceeding.
The Company has entered into indemnification agreements with each of
its directors and officers. These agreements provide for the indemnification by
the Company of such directors and officers for liability for acts and omissions
as directors and executive officers of the Company.
The Company believes that its Certificate of Incorporation and Bylaws
provisions and indemnification agreements are necessary to attract and retain
qualified persons as directors and officers.
The Company has, in effect, an executive liability insurance policy
which provides coverage for its directors and officers similar to the coverage
provided with respect to Lumen's directors and officers. Under this policy, the
insurer agrees to pay, subject to certain exclusions (including violations of
securities laws), for any claim made against a director or officer of the
Company for a wrongful act by such director or officer, but only if and to the
extent such director or officer becomes legally obligated to pay such claim or
the Company is required to indemnify the director or officer for such claim.
50
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
MANAGEMENT SERVICES AGREEMENT
In connection with the Spinoff, the Company entered into a Management
Services Agreement with Lumen, pursuant to which Lumen provides certain
management services to the Company, including services relating to overall
management and strategic planning and direction, banking negotiations, treasury
functions, investor relations, securities regulatory compliance, employee and
general business insurance programs and asset acquisitions and sales. Pursuant
to the Management Services Agreement, Lumen also makes available to the Company
the services of Mr. Martin E. Franklin and Mr. Ian G. H. Ashken. As
compensation for its services, Lumen is entitled to receive a monthly fee of
$60,000 and reimbursement for its identifiable reasonable out-of-pocket
expenses incurred in connection with the performance of services under the
Management Services Agreement. The Management Services Agreement has an initial
term of three years, and will thereafter be automatically renewed for
successive one-year periods until terminated by either party upon 90 days'
written notice. The Company plans to renegotiate the Management Services
Agreement to reduce its reliance on Lumen and to reduce the monthly fee payable
for Lumen's services to $50,000. See "RISK FACTORS--Reliance on Management
Services Agreement" and "RECENT DEVELOPMENTS--Spinoff".
CONTRIBUTION AGREEMENT AND INDEMNIFICATION AGREEMENT
In connection with the Spinoff, Lumen assigned to the Company all of
Lumen's assets other than those related to the ORC Business (as defined in the
Contribution Agreement) and certain other specified assets retained by Lumen,
and the Company assumed all of Lumen's liabilities prior to the Spinoff other
than those related to the ORC Business. In addition, the Company is required to
indemnify Lumen against all of Lumen's liabilities prior to the Spinoff other
than substantially all liabilities related to the ORC Business. See "RECENT
DEVELOPMENTS--Spinoff".
RELATIONSHIPS WITH DIRECTORS
Employment Agreements. Each of Mr. Franck Bolle and Ms. Patricia Bolle
Passaquay, both directors of the Company, is employed full-time by Societe
Bolle SNC ("Bolle SNC"), an indirectly wholly owned subsidiary of the Company,
as Director of International Operations and Director of Export Sales,
respectively, pursuant to employment agreements with Bolle SNC. Under each
agreement, the Company is committed to pay basic annual gross base remuneration
in the French Franc equivalent of approximately $280,000, to be increased by a
minimum of 3% annually after the first year. In addition, each of Mr. Franck
Bolle and Ms. Patricia Bolle Passaquay is entitled to bonuses for the years
1997, 1998 and 1999 of 25% to 50% of his or her annual salary if Bolle SNC
meets or exceeds its annual budgetary objectives. Each agreement shall continue
until terminated by either party upon three-months prior written notice,
provided, however, that if Bolle SNC terminates either agreement before July 9,
2000 for any reason other than gross or willful misconduct, the employee will
be entitled to compensation equal to the salary that he or she would have
received from the date of termination to July 9, 2000. Each agreement provides
that if the employee terminates his or her employment, he or she will be
restricted from competing against Bolle SNC for a period of up to three years
following such termination and will be entitled to an additional monthly
compensation equal to eight to ten percent of his or her last monthly salary
during such period. Mr. Kiedaisch, the Chief Executive Officer and a director
of the Company, is employed full time pursuant to an employment agreement with
the Company. See "EXECUTIVE COMPENSATION--Employment Agreement."
Counsel. Ms. Nora A. Bailey, a member of the Company's Board of
Directors since March 1998, 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 Lumen. 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 will be engaged from time to time in the future to
provide similar legal services to the Company. All fees paid to Ms. Bailey in
connection with such services have been agreed in arm's 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
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in consideration of her services as a director. Aggregate fees billed by Ms.
Bailey for services rendered to Lumen and the Company and paid by Lumen during
1997 were approximately $93,000.
Bolle Preferred Stock and Warrants. Each of Mr. Franck Bolle and Ms.
Patricia Bolle Passaquay holds 12,614 shares of Series A Preferred Stock and
1,975 shares of Series B Preferred Stock, and Bolle Warrants for the purchase
of up to 132,724 shares of Common Stock. Mr. Bolle and Ms. Bolle Passaquay may
not sell their Series B Preferred Stock without the prior written consent of at
least 90% of the then outstanding shares of the Series B Preferred Stock until
the Company has redeemed all the shares of the Series B Preferred Stock or the
Subordinated Debt (as defined below). For a description of the rights and
preferences of the Bolle Series A and Series B Preferred Stock and a
description of the Bolle Warrants, see "DESCRIPTION OF CAPITAL STOCK--Preferred
Stock" and "-Warrants."
CERTAIN TRANSACTIONS
Bolle France Acquisition. On July 10, 1997, Lumen acquired and
contributed to the Company all of the issued and outstanding share capital of
Bolle France, pursuant to the terms of the Share Purchase Agreement. Pursuant
to the terms of the Share Purchase Agreement, Bolle acquired from the Sellers
all of the issued and outstanding share capital of Bolle France, Bolle
Diffusion Sarl and the related land, in exchange for approximately $54,700,000
consisting of the following, not including transaction expenses of
approximately $3,600,000: (a) $31,000,000 in cash (the "Cash Consideration");
(b) warrants to the Sellers to purchase Lumen common stock which have since
been exchanged for Bolle Warrants to purchase an aggregate of 663,618 shares of
Common Stock with an exercise price of $9.95 per share; (c) ten thousand
(10,000) shares of Lumen Series A Preferred Stock having an aggregate
liquidation preference of approximately $9,300,000 issued pursuant to the terms
of the Certificate of Designations of Lumen Series A Preferred Stock; (d) one
hundred (100) shares of Common Stock valued at approximately $3,300,000, being
the minimum value of the Common Stock to be issued to the Sellers pursuant to
the Share Purchase Agreement; and (e) sixty-four thousand one hundred twenty
(64,120) shares of Series A Preferred Stock having an aggregate liquidation
preference of approximately $11,100,000 issued pursuant to the terms of the
Certificate of Designations of the Series A Preferred Stock of the Company. On
July 10, 1997, Lumen borrowed approximately $32,000,000, for the purpose of
paying the Cash Consideration and certain transaction expenses in connection
with the purchase of Bolle France, pursuant to the terms of the Credit
Agreement.
The Share Purchase Agreement provides that none of the Sellers may
dispose of their shares of Common Stock until July 9, 2000. If, on that date,
the closing market price of the total number of shares then held by the Sellers
is less than $3,301,500 (the "Minimum Value"), the Company shall pay on such
date in cash or freely tradable stock the difference between the actual value
of the shares and the Minimum Value. In addition, pursuant to letters dated
July 9, 1997 and December 4, 1997 from Martin Franklin to the Sellers,
including Mr. Franck Bolle and Ms. Patricia Bolle Passaquay, Mr. Franklin will
refrain from selling any shares of Common Stock which he received pursuant to
the Spinoff for so long as the Series B Preferred Stock shall not have been
redeemed in full by the Company. In connection with the Spinoff, each of Mr.
Franck Bolle, Ms. Patricia Bolle Passaquay, Ms. Christelle Roche and Ms.
Brigitte Bolle were issued approximately 55,000 shares of Common Stock and each
of Mr. Robert Bolle and Mr. Maurice Bolle were issued approximately 27,500
shares of Common Stock. All of the shares of Common Stock received by the
Sellers, including Mr. Franck Bolle and Ms. Patricia Bolle Passaquay, pursuant
to the Share Purchase Agreement and this dividend will bear the rights and
obligations described above.
Under the Share Purchase Agreement, each of the Sellers on the one
hand, and the Company and Lumen on the other hand, are liable to fully
reimburse and indemnify the other for any expense, damage, loss or liability
arising from any breach of the terms of the Share Purchase Agreement by the
indemnifying party, subject to certain minimum claim amounts which must be met
for the indemnification provisions to take effect. In connection with the
Spinoff, the Company agreed to assume all obligations and liabilities of Lumen
to each Seller, including Mr. Franck Bolle and Ms. Patricia Bolle Passaquay,
incurred by Lumen in connection with the purchase of Bolle France and Lumen
shall then be released from all such obligations and liabilities. As a result,
the Company became solely responsible for Lumen's indemnification obligations
for breach of its representations and warranties
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made to the Sellers, including Mr. Franck Bolle and Ms. Patricia Bolle
Passaquay, in the Share Purchase Agreement.
Intercompany Financings. During the year ended December 31, 1997,
Bolle America was party to a revolving intercompany credit arrangement with
Lumen whereby interest on outstanding balances was charged to Bolle America at
a rate of 8% per annum. Conversely, interest on cash sent to Lumen was earned
at a rate of 5% per annum. In addition, in July 1997, Lumen entered into a
$40,000,000 intercompany revolving credit agreement with the Company, for a
term of up to three years, pursuant to which the Company paid interest to Lumen
at a rate of 5.5% per annum. In connection with the Spinoff, the Company pushed
down its acquisition indebtedness to Bolle France and charges interest on
existing balances at 5% per annum. In connection with the Spinoff, Lumen
repurchased all the shares of Lumen preferred stock held by the Company in
exchange for the cancellation of an equivalent amount in intercompany debt owed
by the Company to Lumen. At the time of the Spinoff the Company entered into
the Credit Agreement and there are no further intercompany credit arrangements
between Lumen and the Company.
Consulting and Non-Compete Agreement. In connection with the Spinoff,
pursuant to the transfers made from Lumen to the Company under the Contribution
Agreement, the Company became party to the consulting and non-compete agreement
entered into with Steve N. Haber, the former Chairman of the Board, Chief
Executive Officer and President of Bolle America in November 1995. The
following description refers to the parties' respective duties giving effect to
the assignment of the consulting agreement to the Company. Pursuant to the
agreement, as of January 1, 1997, Mr. Haber was hired as a consultant to the
Company for annual compensation of $155,000 plus health and life insurance
benefits for a period ending on December 31, 2000, extendible for an additional
five years by mutual agreement of the parties. In addition to employment as a
consultant, Mr. Haber agreed, commencing on the effective date of the
consulting agreement and continuing through December 31, 2005, not to compete
against the Company in the eyewear or optical, opthalmic or optometric
businesses in any geographic area in which the Company does business. As
compensation for this noncompete agreement, Mr. Haber received an initial
payment of $800,000 and will receive a payment of $100,000 per year commencing
January 1, 1997 through December 31, 2005. Mr. Haber furthermore agreed not to
disclose any of the Company's confidential information.
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information with regard to the
beneficial ownership of the Common Stock as of March 31, 1998 and as adjusted
to reflect the sale of the shares of Common Stock offered hereby, by (i) each
person known by the Company to own beneficially more than 5% of the outstanding
shares of the Common Stock, (ii) each director and executive officer and (iii)
all directors and officers of the Company as a group.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF
NAME AND ADDRESS OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP(1) PERCENTAGE OF CLASS OWNED
- ------------------------------------------ ---------------------------------- ----------------------------------
SERIES A SERIES B SERIES A SERIES B
COMMON PREFERRED PREFERRED COMMON PREFERRED PREFERRED
STOCK STOCK STOCK STOCK STOCK STOCK
---------- ----------- ----------- -------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
Martin E. Franklin
555 Theodore Fremd Avenue
Suite B-302
Rye, New York 10580............. 712,003(2) 0 0 10.0% 0% 0%
Gary A. Kiedaisch................. 2,000 0 0 * 0 0
Ian G.H. Ashken................... 143,749 (3) 0 0 2.1 0 0
Nora A. Bailey.................... 10,833 0 0 * 0 0
Franck Bolle...................... 64,019 12,614 1,975 * 20 20
Patricia Bolle Passaquay.......... 64,019 12,614 1,975 * 20 20
David L. Moore.................... 5,116 0 0 * 0 0
David S. Moross................... 0 0 0 0 0 0
All Executive Officers and
Directors as a group (7 persons).. 1,043,405 25,228 3,950 14.3 40 40
Millbrook Partners, L.P.(4)
2102 Sawgrass Village Drive
Ponte Vedra Beach, Florida 32082 885,066 N/A N/A 13.3 N/A N/A
Marvin Schwartz(5)
605 Third Avenue
New York, New York 10158........ 463,157 N/A N/A 7.0 N/A N/A
Palisade Capital(6)
One Bridge Plaza
Suite 695
Fort Lee, New Jersey 07024...... 408,771 N/A N/A 6.2 N/A N/A
OZ Master Fund, Ltd.(7)
c/o OZ Management, L.L.C.
153 East 53rd Street
New York, New York 10022......... 1,343,333 N/A N/A 16.2 N/A N/A
</TABLE>
- ---------------
*Less than 1%.
(1) Shares not outstanding but deemed beneficially owned by virtue of the
right of an individual to acquire them within sixty (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) Excludes 5,127 shares of Common Stock held in trust for Mr. Franklin's
minor children as to which shares Mr. Franklin disclaims beneficial
ownership.
(3) Excludes 8,333 shares of Common Stock held in trust for Mr. Ashken's minor
children, as to which shares Mr. Ashken disclaims beneficial ownership.
(4) Based on a pre-Spinoff Schedule 13D filing, dated March 31, 1997,
reporting beneficial ownership of Lumen shares and after giving effect to
the distribution of 1 share of Bolle Common Stock for 3 shares of Lumen
Common Stock pursuant to the Spinoff. 859,066 of these shares, or 8.7% of
the Common Stock to be outstanding after the Offering, are beneficially
held by Millbrook Partners, L.P. ("Millbrook"), and the remaining 26,000
shares are beneficially held by Millbrook's general partner, Mark M.
Mathes.
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(5) In a Schedule 13D filing dated March 26, 1998, Marvin Schwartz, acting in
his personal capacity and not as a principal of Neuberger & Berman,
reported beneficial ownership of such shares.
(6) Based on a pre-Spinoff Schedule 13G, dated February 1, 1997, in which
Palisade Capital reported beneficial ownership of Lumen shares and after
giving effect to the distribution of 1 share of Bolle Common Stock for
3 shares of Lumen Common Stock pursuant to the Spinoff.
(7) Shares issuable at any time at the option of OZ Master Fund, Ltd. upon
conversion of $7,000,000 aggregate principal amount of the Convertible
Notes, subject to the provisions of the Convertible Note Purchase
Agreement.
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<PAGE>
DESCRIPTION OF CAPITAL STOCK
The authorized capital stock of the Company consists of 30,000,000
shares of Common Stock of which 6,884,969 shares were issued and outstanding as
of May 29, 1998, and 200,000 shares of preferred stock, $.01 par value per
share, of which 64,120 shares of Series A Preferred Stock and 10,000 shares of
Series B Preferred Stock were issued and outstanding as of May 29, 1998.
The following summary of certain terms of the Company's capital stock
describes material provisions of, but is not necessarily a summary and is
subject to, and qualified in its entirety by, the Company's Certificate of
Incorporation, the Certificate of Designations of the Series B Preferred Stock,
the Company's Bylaws, and applicable provisions of Delaware corporate law
(including but not limited to the DGCL).
COMMON STOCK
Holders of Common Stock are entitled to one vote for each share held
on all matters submitted to a vote of stockholders and do not have cumulative
voting rights. Accordingly, holders of a majority of the shares of Common Stock
entitled to vote in any election of directors may elect all of the directors
standing for election. Holders of Common Stock are entitled to receive ratably
such dividends, if any, as may be declared by the Board of Directors out of
funds legally available therefor, subject to any preferential dividend rights
of outstanding Preferred Stock. Upon the liquidation, dissolution or winding up
of the Company, the holders of Common Stock are entitled to receive ratably the
net assets of the Company available after the payment of all debts and other
liabilities and after provision has been made for the payment of the
liquidation preference on the Series A Preferred Stock, the liquidation
preference and any accrued dividends on the Series B Preferred Stock and the
payment obligations on any other outstanding shares of preferred stock of the
Company. Holders of the Common Stock have no preemptive, subscription,
redemption or conversion rights. All the outstanding shares of Common Stock
are, and the shares of Common Stock to be issued pursuant to the Spinoff when
issued and paid for will be, fully paid and non-assessable. The rights,
preferences and privileges of holders of Common Stock are subject to, and may
be adversely affected by, the rights of the holders of shares of any series of
Preferred Stock that the Company may designate and issue in the future.
PREFERRED STOCK
General
Under the terms of the Company's Certificate of Incorporation, the
Board is authorized, subject to any limitations prescribed by law, without
stockholder approval, to issue up to 200,000 shares of preferred stock in one
or more series. Each such series of preferred stock shall have such rights,
preferences, privileges and restrictions, including voting rights, dividend
rights, conversion rights, redemption privileges and liquidation privileges, as
shall be determined by the Board of Directors.
The purpose of authorizing the Board of Directors to issue preferred
stock and determine its rights and preferences is to eliminate delays
associated with a stockholder vote on specific issuances. The issuance of
preferred stock, while providing desirable flexibility in connection with
possible acquisitions and other corporate purposes, could have the effect of
making it more difficult for a third party to acquire, or of discouraging a
third party from acquiring, a majority of the outstanding voting stock of the
Company.
Series A Preferred Stock
Holders of the Series A Preferred Stock are not entitled to receive
dividends. Upon any voluntary or involuntary liquidation, dissolution or
winding up of the Company before any distribution of assets of the Company
shall be made to or set apart for the holders of Common Stock, the holders of
the Series A Preferred Stock will be entitled to receive from the Company's
assets legally available for distribution to stockholders, a payment in an
amount equal to the greater of (i) 1,000 French Francs per share or (ii) the
French Franc equivalent of U.S. $172.41 per share of Series A Preferred Stock.
After payment of the full amount of the liquidation distributions to
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<PAGE>
which they are entitled, the holders of the Series A Preferred Stock will have
no right or claim to any of the remaining assets of the Company. In the event
that upon any such voluntary or involuntary liquidation, dissolution or winding
up, the available assets of the Company are insufficient to pay the amount of
the liquidation distributions on all outstanding shares of Series A Preferred
Stock, then the holders of the Series A Preferred Stock shall share ratably in
any such distribution of assets in proportion to the full liquidating
distributions to which they would otherwise be respectively entitled. The
Series A Preferred Stock is not convertible or exchangeable for any other
securities of the Company.
Shares of the Series A Preferred Stock will be redeemed by the Company
upon 10 days' prior written notice on the third anniversary of their issuance,
subject to the provisions of the Company's senior indebtedness in effect at the
effective time of the Spinoff (which includes indebtedness under the Credit
Agreement)(the "Senior Indebtedness"). Prior to that, the Company may redeem
any shares of Series A Preferred Stock at any time upon 10 days' prior written
notice. In addition, in the event the Company's EBITDA exceeds U.S. $18,400,000
for the fiscal year 1998 or U.S. $24,700,000 for the fiscal year 1999, the
Company shall be obligated to redeem, upon 10 days' prior written notice, and
within 110 days after the close of the relevant fiscal year, any shares of
Series A Preferred Stock then outstanding, provided in each case that Bolle
remains in compliance with the financial covenants contained in the Senior
Indebtedness after giving effect to such redemption and U.S. $2,000,000 million
is available for borrowing by Bolle under such Senior Indebtedness. In the
event that the Series A Preferred Stock is not redeemed in full by its due
date, it will begin accruing interest from July 2000 on the same terms as the
Series B Preferred Stock, as described below.
Generally, the shares of Series A Preferred Stock have no voting
rights. If the Company fails to give notice of a redemption within three years
of the date of issuance of any shares of Preferred Stock, the holders of more
than 90% of such shares shall have the right to cause the Company to use
commercially reasonable efforts to either obtain cash in order to redeem in
full such shares or to effect without delay a commercially reasonable sale of
the Company's assets or the merger, consolidation or other reorganization of
the Company. So long as any shares of Series A Preferred Stock are outstanding,
the Company shall not, without the consent of holders of at least 90% of such
shares, (i) alter or change the rights, preferences or privileges of such
shares or (ii) issue any class or series of preferred stock ranking senior or
pari passu with the Series A Preferred Stock with respect to dividend,
redemption or liquidation rights. Shares of Series A Preferred Stock may only
be transferred to persons who are already holders of such shares and in
accordance with applicable law.
Series B Preferred Stock
Under the terms of the Series B Preferred Stock, holders of Series B
Preferred Stock will be entitled to accrue cumulative cash dividends, whether
or not declared by the Company's Board of Directors, payable semi-annually at a
rate of 5% of the liquidation preference, as described below, for 1997 and
increasing annually up to 10% of the liquidation preference beginning on
January 1, 2000 and continuing until the Series B preferred stock has been
redeemed. Upon any voluntary or involuntary liquidation, dissolution or winding
up of the Company, the holders of Series B Preferred Stock will be entitled to
receive from the Company's assets legally available for distribution to
stockholders, a payment in an amount equal to the 5,500 French Franc
liquidation preference per share ($9,294,000 in the aggregate at the exchange
rate used in the Company's Pro Forma Balance Sheet as of December 31, 1997),
plus any accrued dividends to the date of redemption. After payment of the full
amount of the liquidation distributions to which they are entitled, the holders
of Series B Preferred Stock will have no right or claim to any of the remaining
assets of the Company. In the event that upon any such voluntary or involuntary
liquidation, dissolution or winding up, the available assets of the Company are
insufficient to pay the amount of the liquidation distributions on all
outstanding shares of Series B Preferred Stock, then the holders of Series B
Preferred Stock shall share ratably in any such distribution of assets in
proportion to the full liquidating distributions to which they would otherwise
be respectively entitled. The Series B Preferred Stock is not convertible or
exchangeable for any other securities of the Company.
The Company may redeem the shares of Series B Preferred Stock, in
whole or in part, for cash or, beginning on January 1, 1998, by issuing to the
holders of the Series B Preferred Stock a subordinated debt instrument with
substantially the same powers, designations, preferences and relative,
participating, or other
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<PAGE>
rights, and qualifications, limitations and restrictions as the Series B
Preferred Stock, upon 10 days' prior written notice. In addition, the Company
must, upon 10 days' prior written notice, redeem, out of funds legally
available therefor, the Series B Preferred Stock (if not previously redeemed),
upon the earlier occurrence of (i) the earlier of (A) the third anniversary
date from the issuance of the Series B Preferred Stock, if redemption is then
permitted under the terms and conditions of the Company's Senior Indebtedness,
(B) such later date as redemption is first permitted under the terms of the
Company's Senior Indebtedness; (ii) the closing of any equity financing by the
Company (including the Offering), but only to the extent of the net cash
proceeds of such financing by the Company and no more than the redemption price
of the then outstanding shares of Series B Preferred Stock, and provided
further, that such redemption would not violate any of the terms and conditions
of the Company's Senior Indebtedness; or (iii) a change of control resulting in
the Company's payment in full of all amounts due with respect to its Senior
Indebtedness.
Generally, the shares of Series B Preferred Stock have no voting
rights. So long as any shares of Series B Preferred Stock are outstanding, the
Company shall not, without the consent of the holders of at least 90% of such
shares, (i) alter or change the rights, preferences or privileges of such
shares; (ii) declare or pay a dividend or otherwise make a distribution on any
security issued by the Company which is junior to the Series B Preferred Stock
with respect to dividends or upon liquidation, including the Series A Preferred
Stock; (iii) enter into any agreements that prohibit the Company from declaring
or paying dividends on the Series B Preferred Stock or redeeming the Series B
Preferred Stock or the subordinated debt instrument, as the case may be; or
(iv) issue any class or series of Preferred Stock ranking senior or pari passu
with the Series B Preferred Stock with respect to dividend, redemption or
liquidation rights. Shares of Series B Preferred Stock may only be transferred
in strict accordance with applicable law.
WARRANTS
Pursuant to the terms of the Warrant Agreement between the Company and
each of the Sellers, the Company has issued Bolle Warrants for the purchase of
663,618 shares of Common Stock. The Bolle Warrants will be exercisable between
July 9, 1999 and July 9, 2001 (the "Exercise Period") at an exercise price per
share equal to $9.95, subject to certain other adjustments (the "Exercise
Price"). The Bolle Warrants may only be transferred during the Exercise Period,
and may not be transferred in the absence of registration of the Bolle Warrants
under the Securities Act and state securities laws, or an exemption therefrom.
The Bolle Warrants may only be exercised for the purchase of a minimum
of 17,000 shares of Common Stock or for the remaining amount of shares that the
warrantholder is then able to purchase upon exercise thereof. Upon the
surrender of a Bolle Warrant and payment of the Exercise Price, the Company
shall issue, no later than 10 business days from the date of such surrender and
payment, certificates for the number of shares so purchased together with cash
for any fractional shares.
In addition, at any time during the Exercise Period, any number of
Bolle Warrants may be exchanged without payment of the Exercise Price into a
number of shares of Common Stock having a value equal to that of the number of
shares which would be issued by the Company upon receipt of the Exercise Price,
less the Exercise Price.
The Company must at all times keep reserved, so long as the Bolle
Warrants remain outstanding, sufficient shares of its Common Stock to cover the
exercise of the Bolle Warrants. Furthermore, the Company must notify the
holders of the Bolle Warrants no less than 20 days prior to the date on which
the Company (i) shall pay any dividend upon its Common Stock or make any
distribution to the holders of its Common Stock; (ii) offers pro rata
subscription rights to the holders of its Common Stock; (iii) offers any other
rights to the holders of its Common Stock; (iv) engages in any capital
reorganization, reclassification, consolidation, merger, or disposition of all
or substantially all of the Company's assets; or (v) engages in a voluntary or
involuntary dissolution, liquidation or winding up of the Company.
At any time during the Exercise Period, the holders of at least a
majority of the shares issued or issuable pursuant to the exercise of the Bolle
Warrants and any securities issued or issuable with respect to those shares
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("Registrable Securities") may cause the Company to register those shares under
the Securities Act within a commercially reasonable time. If such registration
is requested, the holders of the Bolle Warrants must pay all registration
expenses, whether or not the registration is ever deemed effective.
Furthermore, if at any time after July 9, 1999 the Company intends to file a
registration statement for the registration of an offering of equity securities
with the Commission, the holders of Registrable Securities must be given at
least 30 days' prior notice and may have their Registrable Securities included
in such registration statement. In such case, the Company shall pay all
registration expenses.
CONVERTIBLE NOTES
Pursuant to the terms of the Convertible Note Purchase Agreement, the
Company completed on June 1, 1998 the sale of $7,000,000 aggregate principal
amount of its Convertible Notes to Och Ziff Fund, under an exemption from
registration under the Securities Act. The Convertible Notes are convertible at
any time at the option of the holder(s) thereof into a maximum of 1,333,333
shares of Common Stock at a conversion price of $5.25 per share (the
"Conversion Price"). The Conversion Price must be adjusted in the event the
Company pays a dividend or distribution in shares of its capital stock or
subdivide, combine or reclassify its outstanding shares of Common Stock, so as
to provide the holder of any Convertible Notes upon conversion with an
equivalent number of shares of capital stock which such holder would have owned
if such holder had converted its Convertible Notes prior completion of any of
foregoing transactions. Upon any consolidation or merger of the Company with
and into any other corporation, a holder of Convertible Notes is entitled to
receive upon the conversion thereof the securities or property to which a
holder of the number of shares then deliverable upon such conversion would have
been entitled upon such consolidation or merger. The Company may cause the
conversion of the Convertible Notes at the Conversion Price at any time
following the sixtieth day after the date of this Prospectus, if the closing
price of the Common Stock is in excess of $7.0875 for 20 consecutive trading
days and the Shares underlying the Convertible Notes have been registered for
resale under the Securities Act. In addition, any holder of Convertible Notes
who engages in an arbitrage transaction with respect to shares of Common Stock
underlying its Convertible Notes shall be required to convert the principal
amount of Convertible Notes which when so converted shall be equal to the same
number of shares of Common Stock subject to such arbitrage transaction. All the
shares issuable upon conversion of the Convertible Notes will be eligible for
resale upon issuance pursuant to this Prospectus. See "SELLING STOCKHOLDERS"
and "PLAN OF DISTRIBUTION." The Company has agreed to repay the principal
amount of any Convertible Notes outstanding no later than May 29, 2002 or
within twenty days after the date the Common Stock shall cease to be listed on
Nasdaq, the Nasdaq Small Cap Market, the New York Stock Exchange or the
American Stock Exchange. If the Convertible Notes are not converted before
maturity, the Company is obligated to repay their aggregate principal amount
($7,000,000) in cash and to issue 360,000 shares of Common Stock to the
holder.
The Company has agreed that it shall not without the written consent
of 50% in principal amount of the Convertible Notes take any of the following
actions: (i) create, incur or assume any indebtedness (as this term is defined
in the Convertible Note Purchase Agreement) unless following the creation of
such indebtedness, the Company's consolidated leverage ratio (as this term is
defined in the Convertible Note Purchase Agreement) is less or equal to 3.50 to
1.00; (ii) (a) declare any dividends (other than payable in shares of capital
stock of the Company) on any shares of its capital stock, other than the Series
A Preferred Stock or the Series B Preferred Stock, or (b) except in connection
with the Series A Preferred Stock or Series B Preferred Stock, apply its
property or assets to the purchase, redemption or other retirement of, or set
apart any sum for the payment of dividends on, or make any distribution in
respect of, any class of capital stock of the Company; (iii) consummate a
merger or consolidation (except with a subsidiary) without first offering the
holder(s) of the Convertible Notes the option to have their Convertible Notes
(a) redeemed in full in connection with such merger or consolidation, or (b)
assumed by the successor to the Company; and (iv) register any shares of Common
Stock, except as described in this Prospectus, or issue securities in reliance
upon an exemption from registration under Regulation S of the Securities Act,
in each case for the earlier of (x) 75 days following the date that this
Registration Statement has been declared effective by the Commission or (y)
until January 11, 1999.
For so long as the Company shall be subject to the requirement of
obtaining shareholder approval prior to issuing shares in excess of 20% of the
aggregate number of then outstanding shares of Common Stock, it shall not be
obligated to issue any Shares upon request for conversion of Convertible Notes
if, following such issuance, the
59
<PAGE>
total number of shares of Common Stock issued upon such conversion would exceed
20% of the total number of shares of Common Stock then outstanding.
The Company is required to (i) repay the principal amount of any
Convertible Notes outstanding and all amounts payable under the Convertible
Note Purchase Agreement and (ii) issue 360,000 Additional Shares or, in case
less than $7,000,000 aggregate principal amount of Convertible Notes shall thus
be repaid, the number of shares of Common Stock obtained by multiplying 360,000
by a quotient, of which the numerator shall be the amount of Convertible Notes
being repaid and the denominator shall be the aggregate principal amount of
Convertible Notes issued under the Convertible Note Purchase Agreement
($7,000,000), whenever (1) the Company has failed, for a period of ten days, to
pay the principal amount of any Convertible Notes when due, at maturity, upon
redemption, acceleration or otherwise, or has failed to pay any installment of
interest or other payment due upon the failure by the Company to issue any
Shares; (2) the Company fails to issue Shares upon request for conversion of
Convertible Notes; (3) any voluntary or involuntary proceeding is commenced in
respect of the Company seeking liquidation, reorganization or other relief
under any bankruptcy, insolvency or other similar law, or the Company makes a
general assignment for the benefit of its creditors or fails to pay its debts
when they become due; and (4) the Company is in breach of any of its covenants
as described below or representations contained in the Note Purchase Agreement.
If any Convertible Notes are not converted before maturity, the
Company is obligated to repay their aggregate principal amount (up to a maximum
of $7,000,000) in cash and issue 360,000 Shares (or, in case of a partial
repayment, a number of Shares pro rated as described above) to the holder(s) of
such Convertible Notes. Unless otherwise provided by the terms of any
indebtedness of the Company, the Convertible Notes are subordinate to the
rights of the Lenders under the Credit Agreement and other ordinary creditors
of the Company for all purposes other than the issuance of Shares. Accordingly,
upon any acceleration of the Convertible Notes or any indebtedness, or any
payment or distribution of assets of the Company of any kind, to creditors upon
any dissolution, winding up or liquidation of the Company, no payment shall be
made to holder(s) of Convertible Notes until all amounts payable in respect of
the Company's outstanding indebtedness (including under the Credit Agreement)
have been paid in full. If, and for so long as, the Company shall be in default
under the terms of any its indebtedness, including the Credit Agreement but
excluding any intercompany indebtedness, it shall not make, and no holder(s) of
Convertible Notes shall accept, any payment on, or apply any assets to the
purchase or retirement of, the Convertible Notes, or make any other payment
pursuant to the Convertible Note Purchase Agreement (other than upon conversion
into Shares), and the holder(s) of the Convertible Note shall not enforce any
judgment or seek remedy against the Company, provided, however, that any such
payment may be made, if required, to the extent possible without causing an
event of default under the Company's indebtedness. The Lenders have agreed that
the Convertible Notes shall not be deemed "equity securities" for the purpose
of assessing compliance by the Company with the minimum equity ratios set forth
in the Credit Agreement until the Convertible Notes are actually converted.
The Convertible Notes may not be transferred without the prior written
consent of the Company which shall not be unreasonably withheld. The Company
has agreed to indemnify Och Ziff Fund, each underwriter, broker or dealer, if
any, and their respective directors, officers, employees or controlling persons
against certain liabilities, including liabilities under the Securities Act
arising from the sale of the Shares issued upon conversion of the Convertible
Notes.
DIRECTOR AND OFFICER INDEMNIFICATION
The Certificate of Incorporation contains certain provisions permitted
under the DGCL relating to the liability of directors. The provisions eliminate
a director's liability for monetary damages for a breach of fiduciary duty,
except in certain circumstances involving wrongful acts, such as the breach of
a director's duty of loyalty or acts or omissions which involve intentional
misconduct or a knowing violation of law. Further, the Certificate of
Incorporation and the Company's ByLaws contain provisions to indemnify the
Company's directors and officers to the fullest extent permitted by the DGCL,
including payment in advance of a final disposition of a director's or
officer's expenses and attorneys' fees incurred in defending any action, suit
or proceeding. The Company believes that these provisions will assist the
Company in attracting and retaining qualified individuals to serve as
directors. See "EXECUTIVE COMPENSATION--Director and Officer Indemnification
and Limitation of Liability."
60
<PAGE>
TRANSFER AGENT AND REGISTRAR
The Transfer Agent and Registrar for the Common Stock is National City
Bank.
61
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
In addition to the 1,850,000 Shares which may be sold hereunder by the
Selling Stockholders, of the 6,636,261 shares of Common Stock distributed
pursuant to the Spinoff, approximately 5,843,261 shares are freely tradable
without restriction or the requirement of future registration under the
Securities Act. All of the remaining 793,000 outstanding shares are Restricted
Shares under Rule 144 and are eligible for resale thereunder subject to manner
of sale, volume, notice and information requirements and applicable contractual
restrictions.
In general, under Rule 144 as currently in effect, a person (or
persons whose shares are aggregated) who has beneficially owned his or her
restricted securities (as that term is defined in Rule 144) for at least one
year from the date such securities were acquired from the Company or an
affiliate of the Company would be entitled to sell within any three-month
period a number of shares that does not exceed the greater of (i) one percent
of the then outstanding shares of the Common Stock (approximately 68,849 shares
of Common Stock at the time of this Prospectus) and (ii) the average weekly
trading volume of the Common Stock during the four calendar weeks preceding a
sale by such person. Sales under Rule 144 are also subject to certain
manner-of-sale provisions, notice requirements and the availability of current
public information about the Company. Under Rule 144, however, a person who has
held shares for a minimum of two years from the later of the date such
securities were acquired from the Company or an affiliate of the Company and
who is not, and for the three months prior to the sale of such shares has not
been, an affiliate of the Company, is free to sell such shares without regard
to the volume, manner-of-sale and certain other limitations contained in Rule
144.
Following the expiration in July 2000 of certain contractual
restrictions on resale, all the shares of Bolle Common Stock held by the
Sellers, or approximately 4% of the Bolle Common Stock outstanding will be
eligible for sale by the Sellers pursuant to the provisions of Rule 144 under
the Securities Act. Upon the redemption in full of all the shares outstanding
of the Bolle Series B Preferred Stock, all the shares of Bolle Common Stock
received by Mr. Franklin pursuant to the Spinoff, or approximately 10% of the
total number of shares of Bolle Common Stock outstanding, will be eligible for
sale by Mr. Franklin in accordance with applicable law. No assurance can be
given that the holders of such shares, including the Sellers or Mr. Franklin
will not decide, based upon prevailing market conditions, to dispose of all or
a portion of their investment in the Company after the expiration of applicable
restrictions. The future sale of a substantial number of shares of Common Stock
may have an adverse impact on the market price of the Common Stock. See "RISK
FACTORS--Shares Eligible for Future Sales; Future Sales by Significant
Stockholders" and "CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS--Certain
Transactions."
A total of 2,500,000 shares of Common Stock are reserved for issuance
upon the exercise of options that may be granted under the Plan, of which
options to purchase 860,330 shares have been granted and are outstanding. The
Company intends to file a registration statement on Form S-8 to register the
Common Stock reserved for issuance under the Plan. Shares of Common Stock
issued under the Plan after the effective date of such registration statement
and the shares of Common Stock outstanding on the date of such registration
statement as a result of option exercises, other than shares held by affiliate
of the Company, will be eligible for resale in the public market without
restriction. See "EXECUTIVE COMPENSATION--Bolle 1998 Stock Incentive Plan." The
Board of Directors may consider the granting of additional stock options to
various employees of the Company, the amount, terms and timing of which have
not yet been determined. Any such options will be granted at an exercise price
not less than the fair market value of the Common Stock on the date the options
are granted. In addition, under the Warrant Agreement, 663,618 shares of Common
Stock issuable upon exercise of the Bolle Warrants are subject to demand
registration rights vesting on the date a Warrant is first exercised, which may
be as early as July 1999.
62
<PAGE>
SELLING STOCKHOLDERS
The following table provides certain information with respect to the
shares of Common Stock which may be offered for sale hereunder by each Selling
Stockholder. Each Selling Stockholder may offer all the shares which such
Stockholder will be issued pursuant to the transactions described herein.
Because the Selling Stockholders may offer some or all of the Shares in an
offering which is not underwritten on a firm commitment basis, no estimate can
be given as to the amount of securities that will be held by the Selling
Stockholders after completion of the registration of the Shares offered hereby.
See "PLAN OF DISTRIBUTION." To the extent required, the specific securities to
be sold, the names of the Selling Stockholders effecting such sale, the names
of any agent, dealer or underwriter participating in such sale, and any
applicable commission or discount with respect to the sale will be set forth in
a supplement to this Prospectus. The nature of the positions, offices or other
material relationships which certain Stockholders have had with the Company or
any of its predecessors or affiliates within the past three years are set forth
below. The securities offered by means of this Prospectus may be offered from
time to time by the Selling Stockholders named below:
<TABLE>
<CAPTION>
Shares Owned by the Selling
Stockholder prior to resale Shares to be Offered for the
Selling Stockholder hereunder (1) Selling Stockholder's Account (2)
- ------------------------------------------------- --------------------------------- ---------------------------------
<S> <C> <C>
OZ Master Fund, Ltd. (3).................... Up to 1,333,333 Up to 1,333,333
Bill Bass Trust (4)......................... 248,388 439,700
Peter Bartholomew (5)....................... 75,000 75,000
</TABLE>
- ------------------
(1) Shares not outstanding but deemed beneficially owned by virtue of the
right of an individual to acquire them within sixty (60) days upon the
exercise of an option are treated as outstanding for purposes of
determining beneficial ownership.
(2) The number of shares offerd hereunder by each Selling Stockholder may be
increased by such number of shares as the Company may be required to issue
to such Selling Stockholder to prevent dilution resulting from stock
splits, stock dividends or similar transactions under the terms of its
arrangement with such Selling Stockholder.
(3) All the Shares offered by Och Ziff Fund hereunder are issuable upon
conversion of $7,000,000 aggregate principal amount of the Convertible
Notes. Included in this amount are up to a maximum of 360,000 shares which
are issuable by the Company under certain circumstances, including if the
Company fails to issue Shares upon a request for conversion of outstanding
Convertible Notes. In such instances, the Company is required to issue
such Shares in proportion to the principal amount of Convertible Notes
which if failed to convert or redeem, up to a maximum of 360,000. See
"DESCRIPTION OF CAPITAL STOCK--Convertible Notes."
(4) Of the Shares offered by the Bill Bass Trust hereunder, an aggregate of
248,388 Shares were issued by the Company on May 28, 1998 in connection
with the execution of the Share Sale Agreement but subject to the closing
thereof, and the remainder, or 191,312 Shares are issuable by the Company
under certain conditions contained in the Share Sale Agreement as
described elsewhere in this Prospectus.
(5) All the shares offered by Peter Bartholomew (the present owner of Bolle
U.K.) hereunder are issuable by the Company upon the closing of the
proposed purchase of Bolle U.K.
63
<PAGE>
PLAN OF DISTRIBUTION
The Shares offered hereby may, upon compliance with applicable "Blue
Sky" law, be sold from time to time to purchasers directly by the Selling
Stockholders or by pledgees, donees, transferees or other successors in
interest, or in negotiated transactions and through Nasdaq. The Shares may be
sold by one or more of the following: (a) a block trade in which the broker or
dealer so engaged will attempt to sell the Shares as agent but may position and
resell a portion of the block as principal to facilitate the transaction; (b)
purchases by a broker or dealer as principal and resale by such broker or
dealer for its account pursuant to this Prospectus; (c) ordinary brokerage
transactions in which the broker solicits purchasers; and (d) directly to one
or more purchasers. In addition, any securities covered by this Prospectus
which qualify for sale pursuant to Rule 144 may be sold under Rule 144 rather
than pursuant to this Prospectus.
Alternatively, the Selling Stockholders may from time to time offer
the securities offered hereby through underwriters, dealers or agents, who may
receive compensation in the form of underwriting discounts, concessions of
commissions from the Selling Stockholders and/or the purchasers of securities
for whom they may act as agents.
The Selling Stockholders and any underwriters, dealers or agents that
participate in the distribution of securities offered hereby may be deemed to
be underwriters, and any profit on the sale of such securities by them and any
discounts, commissions or concessions received by any such underwriters,
dealers or agents might be deemed to be underwriting discounts and commissions
under the Securities Act. At the time a particular underwritten offer of
securities is made, to the extent required, a supplement to this Prospectus
will be distributed which will set forth the aggregate amount of securities
being offered and the terms of the offering, including the name or names of any
underwriters, dealers or agents, and discounts, commissions and other items
constituting compensation from the Selling Stockholders and any discounts,
commissions or concessions allowed or reallowed or paid to dealers.
The securities offered hereby may be sold from time to time in one or
more transactions at market prices prevailing at the time of sale, at a fixed
offering price, which may be changed, at varying prices determined at the time
of sale or at negotiated prices.
The Selling Stockholders will pay the commissions and discounts of
underwriters, dealers or agents, if any, incurred in connection with the sale
of the Shares. Pursuant to the terms of the agreements entered into between the
Company and the Selling Stockholders, the Company has agreed to pay all
expenses incident to the registration of the Shares. These agreements provide
for reciprocal indemnification between the Company on the one hand, and the
Selling Stockholder on the other hand, against certain liabilities in
connection with the Registration Statement, of which this Prospectus is a part,
including liabilities under the Securities Act.
VALIDITY OF SHARES
Certain legal matters in connection with the securities offered hereby
are being passed upon for the Company by Willkie Farr & Gallagher, New York,
New York.
EXPERTS
The consolidated financial statements of Bolle Inc. as of December 31,
1997 and 1996 and for each of the three years in the period ended December 31,
1997 and the combined financial statements of Holding BF SA as of September 30,
1997 and for the three-month period then ended, as of June 30, 1997 and for the
six-month period then ended and as of December 31, 1996 and for the year then
ended, included in this Prospectus have been so included in reliance on the
reports of Price Waterhouse LLP (Bolle Inc.) and Befec-Price Waterhouse
(Holding BF SA), independent accountants, given on authority of said firms as
experts in auditing and accounting.
64
<PAGE>
AVAILABLE INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission"), Washington, D.C. 20549, a Registration Statement on Form S-1
under the Securities Act with respect to the shares of Common Stock. This
Prospectus, which is part of the Registration Statement, does not contain all
of the information set forth in the Registration Statement and the exhibits and
schedules thereto. For further information with respect to the Company and the
Common Stock, reference is made to the Registration Statement and the exhibits
and schedules filed therewith. Statements contained in this Prospectus as to
the contents of any contract or any other document to which reference is made
are necessarily summaries thereof, and in each instance reference is made to
the copy of such contract or other document filed as an exhibit to the
Registration Statement, each such statement being qualified in all respects by
such reference. Any interested party may inspect the Registration Statement,
without charge, and copied at prescribed rates, at the public reference
facilities maintained by the Commission at Room 1024, 450 Fifth Street, N.W.,
Washington, D.C. 20549, or at its regional offices located at Northwestern
Atrium Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661 and
Seven World Trade Center, Suite 1300, New York, New York 10048. In addition,
the Commission maintains a website that contains the Registration Statement.
This website can be accessed at www.sec.gov. Copies of such material can also
be obtained from the Company upon request by contacting the Company at its
principal executive office.
The Company is subject to the informational requirements of the
Exchange Act and, in accordance therewith, files reports, proxy statements and
other information with the Commission. The reports, proxy statements and other
information which filed by the Company with the Commission are available for
inspection and copying at the Commission's public reference facilities referred
to above. Copies of such material are obtainable by mail at prescribed rates by
writing the Public Reference Branch of the Commission at the address referred
to above. In addition, reports, proxy statements and other information
concerning the Company are available for inspection at the offices of Nasdaq
located at 1735 K Street, N.W., Washington, D.C. 20006.
65
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Bolle Inc.
Unaudited Pro Forma Combined Financial Data
Unaudited Pro Forma Balance Sheet as of March 31, 1998............................................ F-3
Unaudited Pro Forma Statement of Operations for the quarter ended
March 31, 1998.................................................................................. F-4
Unaudited Pro Forma Statement of Operations for the year ended
December 31, 1997............................................................................... F-5
Notes to Unaudited Pro Forma Combined Financial Statements........................................ F-6
Unaudited Interim Condensed Financial Statements
Unaudited Balance Sheet as of March 31, 1998...................................................... F-8
Unaudited Statements of Operations for the quarters ended March 31, 1998 and 1997................. F-9
Unaudited Statements of Cash Flows for the quarters ended March 31, 1998 and 1997................. F-10
Notes to Condensed Financial Statements........................................................... F-11
Annual Financial Statements
Independent Auditors' Report...................................................................... F-13
Consolidated Balance Sheets as of December 31, 1997, 1996 and 1995................................ F-14
Consolidated Statements of Operations for the years ended December 31, 1997,
1996 and 1995................................................................................... F-15
Consolidated Statements of Comprehensive Income for the years ended
December 31, 1997, 1996 and 1995................................................................ F-16
Consolidated Statements of Stockholders' Equity for the years ended December 31, 1997,
1996 and 1995................................................................................... F-17
Consolidated Statements of Cash Flows for the years ended December 31, 1997,
1996 and 1995................................................................................... F-18
Notes to Consolidated Financial Statements........................................................ F-20
Holding B.F. SA
Annual and Interim Financial Statements
Report of Independent Accountants................................................................. F-34
Combined Balance Sheets as of December 31, 1996, June 30, 1997 and September
30, 1997........................................................................................ F-35
Combined Statement of Operations for the year ended December 31, 1996, the six
months ended June 30, 1997 and the three months ended September 30, 1997........................ F-36
Combined Statement of Stockholders' Equity for the year ended December 31, 1996, the six
months ended June 30, 1997 and the three months ended September 30, 1997........................ F-37
Combined Statement of Cash Flows for the year ended December 31, 1996,
the six months ended June 30, 1997 and the three months ended September 30, 1997................ F-38
Notes to Combined Financial Statements............................................................ F-39
</TABLE>
F-1
<PAGE>
BOLLE INC.
PRO FORMA COMBINED FINANCIAL STATEMENTS
The following unaudited pro forma combined statements of operations
(i) give effect to the July 10, 1997 acquisition of Holding
BF SA and related assets ("Bolle France") under the
purchase method of accounting;
(ii) reflect the Bill of Sale and Assignment Agreement (the
"Contribution Agreement") and the Indemnification
Agreement between the Company and its prior parent
company Lumen Technologies, Inc. ("Lumen") described in
the audited and interim financial statements included
herein;
(iii) reflect the acquisition of 75% of both Bill Bass
Optical Pty. Ltd. and Parkhurst Oaks Pty. Ltd.
(collectively "Bolle Australia") under the purchase
method of accounting; and
(iv) give effect to the issuance of the Convertible Notes
and use of its proceeds.
The unaudited pro forma combined balance sheet as of March 31, 1998
only gives effect to the acquisition of Bolle Australia and the issuance of the
Convertible Notes as the acquisition of Bolle France and the Contribution
Agreement and Indemnification Agreement are already included in the historical
balance sheet as of March 31, 1998.
The accompanying pro forma combined statements of operations give
effect to the Contribution Agreement and the acquisitions of Bolle France and
Bolle Australia as though they had occurred as of the beginning of the periods
presented. The pro forma combined financial statements are derived from (i) the
audited and unaudited financial statements of the Company; (ii) the Bolle
France historical audited financial statements as of and for the six months
ended June 30, 1997; (iii) the Bolle Australia historical audited financial
statements as of and for the six months ended December 31, 1997 and the year
ended June 30, 1997; and (iv) the adjustments set forth in the notes to the pro
forma combined financial statements.
Pro forma adjustments are based upon preliminary estimates, available
information and certain assumptions that management deems appropriate.
Management does not expect material changes to purchase accounting and other
pro forma adjustments upon final allocation of the purchase price. The
unaudited pro forma combined financial information presented herein is not
necessarily indicative of the results of operations or financial position that
the Company would have obtained had such events occurred at the beginning of
the periods presented, as assumed, or of the future results of the Company.
F-2
<PAGE>
BOLLE INC.
PRO FORMA BALANCE SHEET
AS OF MARCH 31, 1998
(Amounts in thousands)
<TABLE>
<CAPTION>
CONVERTIBLE
(2) ACQUISITION SUBORDINATED
BOLLE BOLLE PRO FORMA NOTE PRO FORMA
INC AUSTRALIA ADJUSTMENTS ADJUSTMENTS COMBINED
------------- ----------- -------------- --------------- ----------------
<S> <C> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents................ $ 1,210 $ 711 $ (161) (a) $ 1,760
Trade receivables, net................... 10,975 4,229 (1,051) (b) 12,416
(1,737) (a)
Inventories.............................. 11,235 2,085 13,320
Other current assets..................... 6,528 468 (3) (a) 6,993
------------- ----------- -------------- --------------- ----------------
Total current assets................... 29,948 7,493 (2,952) 34,489
Investment in affiliates.................... 5,403 5,403
Property and equipment, net (1)............. 10,086 264 10,350
Trademark, net.............................. 37,542 37,542
Goodwill and other intangibles, net......... 22,399 1 4,758 (c) 27,158
Other assets................................ $ 1,451 87 400 (h) 1,938
------------- ----------- -------------- --------------- ----------------
Total assets........................... $106,829 $ 7,845 $ 1,806 $ 400 $116,880
============= =========== ============== =============== ================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Short term debt and current maturities $ 8,705 $ 1,301 $3,850 (d) $ (5,100) (h) $ 8,756
of long-term debt (1).................
Accounts payable......................... 4,825 2,556 (1,051) (b) 5,599
(731) (a)
Other accrued expenses................... 7,281 703 294 (a) 8,278
------------- ----------- -------------- --------------- ----------------
Total current liabilities.............. 20,811 4,560 2,362 (5,100) 22,633
Long-term debt (1)....................... 12,042 (1,500) (h) 10,542
Convertible subordinated notes $ 7,000 (i) 7,000
Deferred tax liability 14,000 14,000
Long-term liabilities.................... 2,919 98 3,017
------------- ----------- -------------- --------------- ----------------
Total liabilities........................ 49,772 4,658 2,362 400 57,192
------------- ----------- -------------- --------------- ----------------
Mandatorily redeemable preferred stock...... 20,709 20,709
Minority interests.......................... 431 (e) 431
Stockholders' equity........................ 36,348 3,187 (1,723) (f) 38,548
(1,464) (a)
2,200 (g)
------------- ----------- -------------- --------------- ----------------
Total liabilities, mandatorily redeemable
preferred stock, minority interests and
stockholders' equity..................... $106,829 $ 7,845 $ 1,806 $400 $116,880
============= =========== ============== =============== ================
</TABLE>
- -----
(1) In May 1998, the Company sold its real estate investment for $5.8 million.
The net book value of the property at March 31, 1998 was $5.7 million and
the related mortgage was $3.5 million. Using the net proceeds after
repayment of the mortgage and expenses, the Company repaid approximately
$2 million of its term loan.
(2) Represents the balance sheet of Bolle Australia as of December 31, 1997
translated at 0.6503 US Dollars per Australian Dollar, the exchange rate
at December 31, 1997.
F-3
<PAGE>
BOLLE INC.
PRO FORMA STATEMENT OF OPERATIONS
FOR THE QUARTER ENDED MARCH 31, 1998
(Amounts in thousands, except per share data)
<TABLE>
<CAPTION>
CONTRIBUTION
AGREEMENT
AND CONVERTIBLE
(1) ACQUISITION SUBORDINATED
BOLLE PRO FORMA NOTE PRO FORMA
BOLLE INC. AUSTRALIA ADJUSTMENTS ADJUSTMENTS COMBINED
-------------- -------------- -------------- --------------- -------------
<S> <C> <C> <C> <C> <C>
REVENUES:
Net sales......................... $10,728 $4,267 $ (739) (u) $14,256
COSTS AND EXPENSES:
Cost of sales..................... 5,288 2,286 (739) (u) 6,835
Selling, general and 5,430 1,390 30 (j) (25) (q) 6,825
administrative expenses.........
Interest expense.................. 484 39 (222) (k) (107) (r) 371
72 (l) 105 (s)
Other income...................... (515) (47) (562)
-------------- -------------- -------------- --------------- -------------
Total costs and expenses.......... 10,687 3,668 (859) (27) 13,469
-------------- -------------- -------------- --------------- -------------
Income (loss) before income taxes
and minority interests............ 41 599 120 27 787
Provision for income taxes........ 16 216 44 (m) 10 (m) 286
-------------- -------------- -------------- --------------- -------------
Net income (loss) before minority
interests......................... 25 383 76 17 501
Minority interests................ 96 96
Preferred stock dividends......... 29 110 (n) 139
============== ============== ============== =============== =============
Net income (loss) attributable to
common stock.................... $ (4) $287 $ (34) $ 17 $ 266
============== ============== ============== =============== =============
Basic and diluted weighted 248 (o)
average shares outstanding...... 1,476 5,160 (p) 6,884
Basic and diluted EPS (4)......... $(0.00) $ 0.04
</TABLE>
- -----
(1) Represents the results of operations of Bolle Australia for the three
months ended December 31, 1997, translated at the average exchange rate
for the period of 0.6918 US Dollars per Australian Dollar.
F-4
<PAGE>
BOLLE INC.
PRO FORMA STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
(Amounts in thousands, except per share data)
<TABLE>
<CAPTION>
CONTRIBUTION
AGREEMENT
AND CONVERTIBLE
(2) (3) ACQUISITION SUBORDINATED
(1) BOLLE BOLLE PRO FORMA NOTE PRO FORMA
BOLLE INC. FRANCE AUSTRALIA ADJUSTMENTS ADJUSTMENTS COMBINED
-------------- ------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
REVENUES:
Net sales................ $32,160 $18,656 $12,650 $(3,060) (t) $56,080
(4,326) (u)
COSTS AND EXPENSES:
Cost of sales............ 15,354 11,577 6,891 (3,060) (t) 26,436
(4,326) (u)
Selling, general and 16,342 5,258 4,127 (179) (v) 26,378
administrative expenses 811 (w) (100) (q)
119 (j)
Merger and acquisition
integration related
expenses............... 3,750 (3,750) (x)
Interest expense......... 963 175 171 (91) (k) (429) (r) 1,498
289 (l) 420 (s)
Other income............. (693) (359) (592) (1,644)
-------------- ------------- -------------- -------------- -------------- --------------
Total costs and expenses. 35,716 16,651 10,597 (10,187) (109) 52,668
-------------- ------------- -------------- -------------- -------------- --------------
Income (loss) before
income taxes and
minority interests....... (3,556) 2,005 2,053 2,801 109 3,412
Provision for income
taxes.................... 1,099 1,193 779 1,036 (m) 40 (m) 4,147
-------------- ------------- -------------- -------------- -------------- --------------
Net income (loss) before
minority interests....... (4,655) 812 1,274 1,765 69 (735)
Minority interests....... 319 319
Preferred stock
dividends.............. 511 (n) 511
============== ============= ============== ============== ============== ==============
Net income (loss)
attributable to common
stock.................. $(4,655) 812 $955 $1,254 $ 69 $ (1,565)
============== ============= ============== ============== ============== ==============
Basic and diluted
weighted average 248 (o)
shares outstanding..... 1.8 6,634 (p) 6,884
Basic and diluted $(2,586.11) $ (0.23)
EPS (4)...............
</TABLE>
(1) Represents the results of operations of Bolle Inc. for the year ended
December 31, 1997, including the results of operations of Bolle France for
the six months ended December 31, 1997.
(2) Represents the results of operations of Bolle France for the six months
ended June 30, 1997 (not included in (1)) translated using the average
rate of 5.6835 French Francs per US dollar for such period.
(3) Represents the results of operations of Bolle Australia for the year ended
September 30, 1997, translated at the average exchange rate for the period
of 0.7673 US Dollars per Australian Dollar.
(4) Despite the loss before tax of $3,556, the Company recorded a tax charge
of $1,099 primarily due to the creation of a valuation allowance against
the entire net tax benefit arising from domestic operations, resulting in
a net loss of $4,655. If the 1997 statutory tax rate of 37% had been
applied to pro forma combined income before income taxes, pro forma EPS
would have been $0.19.
F-5
<PAGE>
NOTES TO THE PRO FORMA COMBINED FINANCIAL STATEMENTS
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
PRO FORMA COMBINED BALANCE SHEET ADJUSTMENTS
(a) Adjustments to reflect agreed upon dividend to prior Bolle Australia
shareholders which occurred after December 31, 1997, in connection
with, but before the acquisition of Bolle Australia.
(b) Adjustment to reflect the elimination of receivables from Bolle
Australia to Bolle France.
(c) Adjustment to reflect the allocation to goodwill of the excess of the
purchase price of Bolle Australia over the book value to be amortized
over an estimated useful life of forty years.
(d) Adjustment to reflect the borrowings used to finance the cash portion
of the purchase price of Bolle Australia.
(e) Adjustment to reflect the 25% minority interest in Bolle Australia
which continues to be held by the prior majority shareholders of Bolle
Australia.
(f) Adjustment to reflect the elimination of Bolle Australia equity in pro
forma consolidation.
(g) Adjustment to reflect the issuance of stock for the stock portion of
the purchase price.
(h) Adjustment to reflect the use of net proceeds from the issuance of the
Convertible Subordinated Notes to repay a portion of the Company's
term loan and revolving credit facility.
(i) Adjustment to reflect the issuance of the Convertible Notes (net of a
total of $400 of transaction expenses), which are convertible into the
underlying securities in this Offering.
PRO FORMA COMBINED STATEMENTS OF OPERATIONS ADJUSTMENTS
(j) Adjustment to reflect the amortization of the goodwill recorded in
conjunction with the acquisition of Bolle Australia over an estimated
useful life of forty years. See adjustment (c).
(k) Adjustment to reflect the reduction of interest related to the reduced
indebtedness resulting from the Contribution Agreement. Such reduction
is calculated as: the $16,104 debt outstanding on the date of the
Spinoff, multiplied by the effective interest rate of 6.5%, less the
actual interest expensed by the Company and Bolle France during the
period.
(l) Adjustment to reflect interest on the cash portion of the Bolle
Australia purchase price of $3,700 plus direct acquisition expenses of
$150 at a rate of 7.5%.
(m) Adjustment to reflect the statutory rate of 37% applied to the pro
forma adjustments.
(n) Adjustment to reflect the preferred dividends as if the Series B
Preferred Stock issued in conjunction with the Contribution Agreement
had been outstanding since the beginning of the period.
(o) Adjustment to reflect the issuance of shares to satisfy a portion of
the purchase price of Bolle Australia.
(p) Adjustment to reflect the Spinoff of the Company to its shareholders
as if it had occurred as of the beginning of the period.
(q) Adjustment to reflect amortization of the direct transaction expenses
of the Convertible Notes issuance over the 4 year term. See note (i).
(r) Adjustment to reflect reduced interest expense as a result of
repayment of indebtedness by the use of proceeds from the Convertible
Notes.
(s) Adjustment to reflect effective interest on the Convertible Notes,
based on the current market price of the Company's shares, at an
interest rate of 6%. The effect of a $0.25 change in the market value
of Company Common Stock would be $350 per annum. This effective
interest rate will fluctuate during the term of the Convertible Notes
based on the Company's then current market price per share, as the
instrument will be marked to market at each balance sheet date.
(t) Adjustment to reflect elimination of sales from Bolle France to Bolle
America for the unconsolidated six months ended June 30, 1997,
translated at the same exchange rate used to translate the statement
of operations.
(u) Adjustment to reflect the elimination of sales from Bolle France to
Bolle Australia translated at the French Franc to US Dollar exchange
rates of 5.84 for the year ended December 31, 1997 and 6.10 for the
three
F-6
<PAGE>
months ended March 31, 1998.
(v) Adjustment to reflect the elimination of Bolle France acquisition
related expenses incurred and charged at Bolle France prior to the
acquisition. Such expenses do not have a recurring effect on the
results of the Company.
(w) Adjustment to reflect the amortization of goodwill and trademark value
($62,502) recorded over an estimated useful life of 40 years ($1,563
per annum) and the adjustment to the value of the buildings ($1,824)
over an estimated useful life of 30 years ($60 per annum).
(x) Adjustment to reflect the elimination of acquisition integration
related expenses described as follows:
(i) a reserve for the return of product from the Company's owned
and non-owned distributors in conjunction with the redefining
and streamlining of the Company's new product line, and
(ii) the legal, production and marketing expenses related to the
set up of a new logo for Bolle(R) worldwide and the creation
of the first worldwide catalog.
F-7
<PAGE>
BOLLE INC.
CONDENSED INTERIM FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS
(In thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
MARCH 31, 1998
ASSETS
Current assets:
<S> <C>
Cash and cash equivalents................................................. $ 1,210
Trade receivables from related parties.................................... 487
Trade receivables, less allowances of $754 and $857....................... 10,488
Inventories............................................................... 11,235
Prepaid and other current assets.......................................... 1,165
Deferred tax asset........................................................ 5,363
----------
Total current assets......................................................... 29,948
Note receivable and investment in affiliates................................. 5,403
Property and equipment, net.................................................. 10,086
Trademark, net............................................................... 37,542
Goodwill and other intangible assets, net.................................... 22,399
Other assets................................................................. 1,451
----------
Total assets............................................................. $ 106,829
==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short term debt and current portion of long term debt..................... $ 8,705
Accounts payable.......................................................... 4,825
Accrued compensation...................................................... 962
Other accrued expenses.................................................... 6,319
----------
Total current liabilities.................................................... 20,811
Long term debt, net of current portion....................................... 12,042
Deferred tax liability....................................................... 14,000
Other long-term liabilities.................................................. 2,919
----------
Total liabilities............................................................ 49,772
----------
Mandatorily redeemable preferred stock - redemption value $11,055; par value
$.01; 64 shares authorized, issued and outstanding........................ 11,055
Mandatorily redeemable cumulative preferred stock - redemption value
$9,625; par value $0.01; 10 shares authorized, issued and outstanding..... 9,654
Stockholders' equity:
Common stock - par value $.01; 25,000 shares authorized, 6,636 shares
issued and outstanding................................................. 66
Additional paid-in capital................................................ 43,285
Cumulative translation adjustment......................................... (2,344)
Accumulated deficit....................................................... (4,659)
----------
Total stockholders' equity.......................................... 36,348
----------
Total liabilities, mandatorily redeemable preferred stock
and stockholders' equity $ 106,829
==========
</TABLE>
See accompanying notes to condensed financial statements.
F-8
<PAGE>
BOLLE INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except share and per share data)
(Unaudited)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED
MARCH 31,
1998 1997
--------- --------
<S> <C> <C>
REVENUES:
Net sales............................................ $ 10,728 $ 5,058
COSTS AND EXPENSES
Cost of sales........................................ 5,288 2,778
Selling, general and administrative expenses......... 5,430 3,034
Interest expense..................................... 484 21
Other (income) expense............................... (515) (288)
--------- --------
Total costs and expenses............................. 10,687 5,545
--------- --------
Income (loss) before income taxes.................... 41 (487)
Provision for (benefit from) income taxes............ 16 (156)
--------- --------
Net income (loss).................................... 25 (331)
Preferred dividend................................... 29
--------- --------
Net loss attributable to common stock................ $ (4) $ (331)
--------- --------
Comprehensive loss................................... $ (1,123) $ (331)
========= ========
Weighted average shares outstanding:
Basic................................................ 1,476,351 100
Diluted.............................................. 1,566,124 100
Loss per share:
Basic................................................ $ (0.00) $ (3,310)
Diluted.............................................. $ (0.00) $ (3,310)
</TABLE>
See accompanying notes to condensed financial statements.
F-9
<PAGE>
BOLLE INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED MARCH 31,
------------------------------------
1998 1997
---- ----
<S> <C> <C>
Net cash provided (used) by operating activities........... $ 2,018 $ (554)
--------- ----------
Cash flows from investing activities:
Non compete agreement................................... (25) (25)
Capital expenditures.................................... (78) (29)
Proceeds from sale of assets............................ 7
--------- ----------
Net cash used by investing activities............. (103) (47)
--------- ----------
Cash flows from financing activities:
Proceeds from (payments on) revolving credit line....... (1,982) 355
Proceeds from long term obligations..................... 102
--------- ----------
Net cash provided (used) by financing activities.. (1,880) 355
--------- ----------
Effect of change in exchange rate on cash.................. (29)
Net increase (decrease) in cash............................ 6 (246)
Cash and cash equivalents at beginning of period........... 1,204 311
--------- ----------
Cash and cash equivalents at end of period................. $ 1,210 $ 65
========= ==========
</TABLE>
See accompanying notes to condensed financial statements.
F-10
<PAGE>
NOTES TO CONDENSED FINANCIAL STATEMENTS
NOTE 1 - SPINOFF AND BASIS OF PRESENTATION
At December 31, 1997 Bolle Inc. (the "Company") was a subsidiary of
Lumen Technologies, Inc. (formerly known as BEC Group, Inc.) ("Lumen"). On
March 11, 1998, Lumen distributed the stock of Bolle Inc. to Lumen's
stockholders (the "Spinoff") and the Company began trading on the NASDAQ
National Market under the symbol "BEYE" on March 12, 1998.
In connection with the Spinoff, pursuant to a Bill of Sale and
Assignment Agreement entered into between Lumen and the Company immediately
prior to the consummation of the Spinoff (the "Contribution Agreement"), (i)
Lumen assigned to the Company all of Lumen's assets other than assets related
to the ORC Business (as defined in the Contribution Agreement) and certain
other specified assets retained by Lumen; and (ii) the Company assumed all of
Lumen's liabilities prior to the Spinoff other than those related to the ORC
Business. Pursuant to this agreement, approximately $17 million of the
Company's indebtedness to related parties was contributed to the capital of the
Company and the remaining balance was refinanced via a bank credit facility.
In connection with the Spinoff, the Company assumed all obligations
and liabilities of Lumen to each of Maurice Bolle, Robert Bolle, Franck Bolle,
Patricia Bolle Passaquay, Brigitte Bolle and Christelle Roche (collectively,
the "Sellers," and each a "Seller") incurred by Lumen in connection with the
purchase of Bolle France, and Lumen was released from all such obligations or
liabilities. In addition, each Seller conveyed to the Company all shares of the
Series A Preferred Stock of Lumen (the "Lumen Preferred Stock") held by such
Seller and the Company issued in exchange to each Seller, shares of its Series
B Preferred Stock (the "Bolle Series B Preferred Stock") in proportion to the
number of shares of Lumen Preferred Stock conveyed by such Seller to the
Company. No shares of Bolle Common Stock were issued to the holders of
outstanding shares of Bolle Series B Preferred Stock pursuant to the Spinoff.
Lumen canceled all warrants (the "Lumen Warrants") and the Company issued in
exchange to each holder of canceled Lumen Warrants, warrants to purchase Bolle
Common Stock (the "Bolle Warrants") in proportion to the number of Lumen
Warrants held by such holder prior to the cancellation. No shares of Bolle
Common Stock were issued to holders of outstanding Bolle Warrants pursuant to
the Spinoff.
Due to the acquisition of Bolle France on July 10, 1997, the results
of operations of Bolle France are included only in the results of operations
for the quarter ended March 31, 1998.
The accompanying unaudited condensed financial statements have been
prepared in accordance with generally accepted accounting principles,
Regulation S-X and the instructions for Form 10-Q and Regulation S-X. These
statements contain all adjustments, consisting of only normal recurring
adjustments, other than those related to the Spinoff and Contribution
Agreement, which in the opinion of management are necessary to fairly present
the consolidated financial position of the Company as of March 31, 1998 and its
results of operations and cash flows for the three months ended March 31, 1998
and 1997. The results of operations for the interim periods presented are not
necessarily indicative of the results to be expected for the full fiscal year.
These condensed financial statements should be read in conjunction with the
financial statements and notes thereto included in the Company's Annual Report
on Form 10-K for the year ended December 31, 1997.
NOTE 2 - INDEBTEDNESS TO RELATED PARTIES
In connection with the Contribution Agreement between Lumen and the
Company, approximately $17 million of indebtedness to related parties incurred
to finance the acquisition of Bolle France was capitalized and the remaining
debt was refinanced with bank debt.
F-11
<PAGE>
NOTE 3 - MANDATORILY REDEEMABLE CUMULATIVE PREFERRED STOCK
In connection with the Spinoff described in Note 1, the Company issued
10,000 shares of Bolle Series B Preferred Stock (the "Series B Stock") with a
redemption value of $9.6 million. Shares of the Series B Stock will be redeemed
by the Company on the third anniversary of their issuance, subject to the
provisions of the Company's senior indebtedness. The Series B Stock bears
dividends at 6% through June 30, 1998; 7% through December 31, 1998; and
increases by 1% every six months thereafter through January 1, 2000 at which
time the dividend is 10% until redemption. Dividends accumulate and bear
interest at the applicable dividend rate. The Series B Stock does not
participate in any other dividends declared by the Company.
F-12
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors
and Stockholders of Bolle 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 Bolle 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 Notes 1 and 2, on March 11, 1998, the Company's
parent, Lumen Technologies, Inc. (formerly BEC Group, Inc.), distributed the
Company's stock to Lumen stockholders via a Spinoff. Contemporaneously with the
Spinoff, certain assets and liabilities were transferred from Lumen to the
Company and a portion of the Company's indebtedness to related parties was
contributed to the capital of the Company, resulting in a decrease in current
liabilities of approximately $28 million and an increase in stockholders'
equity of approximately $14 million.
PRICE WATERHOUSE LLP
Dallas, Texas
April 15, 1998
F-13
<PAGE>
BOLLE INC.
CONSOLIDATED BALANCE SHEETS
(AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------
1997 1996
------------- -------------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents.................................................... $ 1,204 $ 311
Trade receivables from related parties (Note 14)............................. 1,120
Trade receivables, less allowances of $857 and $445.......................... 11,332 4,895
Inventories.................................................................. 11,734 8,388
Prepaid and other current assets............................................. 1,617 822
-------- --------
Total current assets..................................................... 27,007 14,416
Property and equipment, net..................................................... 4,687 534
Trademark, net.................................................................. 39,029
Goodwill and other intangible assets, net....................................... 23,447 646
Other assets.................................................................... 527 28
-------- --------
Total assets............................................................. $ 94,697 $ 15,624
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable............................................................. $ 6,247 $ 3,488
Indebtedness to related parties (Note 10).................................... 35,782 1,420
Accrued compensation......................................................... 1,111 146
Other accrued expenses....................................................... 4,803 827
-------- --------
Total current liabilities................................................ 47,943 5,881
Deferred tax liability.......................................................... 14,000
Other long-term liabilities..................................................... 2,856
-------- --------
Total liabilities........................................................ 64,799 5,881
-------- --------
Mandatorily redeemable preferred stock--redemption value $11,055; par value
$.01; 64,120 shares authorized, issued
and outstanding.............................................................. 11,055
Stockholders' equity:
Investment by stockholder....................................................... 9,743
Common stock--par value $.01; 25,000 shares authorized, 2,000
shares issued and outstanding................................................
Additional paid-in capital...................................................... 23,960
Cumulative translation adjustment............................................... (462)
Accumulated deficit............................................................. (4,655)
-------- --------
Total stockholders' equity............................................... 18,843 9,743
-------- --------
Total liabilities, mandatorily redeemable preferred stock
and stockholders' equity............................................... $ 94,697 $ 15,624
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-14
<PAGE>
BOLLE INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
For the Year Ended December 31,
-----------------------------------------------
1997 1996 1995
--------------- ------------- --------------
<S> <C> <C> <C>
Net sales................................................... $32,160 $24,425 $24,829
Costs and expenses:
Costs of sales........................................... 15,354 12,130 12,181
Selling, general and administrative expenses............. 12,584 8,105 7,610
Advertising and sponsoring expenses...................... 3,758 3,269 2,665
Merger and acquisition integration related expenses...... 3,750 3,050
Interest (income) expense................................ 963 (256) (302)
Other (income) expense................................... (693) (450) 48
--------------- ------------- --------------
Total costs and expenses.......................... 35,716 22,798 25,252
--------------- ------------- --------------
Income (loss) before income taxes........................ (3,556) 1,627 (423)
Provision for income taxes............................... 1,099 635 364
--------------- ------------- --------------
Net income (loss)........................................ $(4,655) 992 (787)
=============== ============= ==============
Basic and diluted earnings (loss) per share.............. $(2,586.11) $9,920.00 $(0.22)
=============== ============= ==============
Weighted average shares outstanding...................... 1,800 100 3,510,624
=============== ============= ==============
</TABLE>
See accompanying notes to consolidated financial statements.
F-15
<PAGE>
BOLLE INC.
STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
For the Year Ended December 31,
----------------------------------------------
1997 1996 1995
---------------- ------------- ---------------
<S> <C> <C> <C>
Net income (loss)...................................... $(4,655) $992 $(787)
Foreign currency translation adjustments.......... (462)
Reclassification adjustment--(before taxes).......
---------------- ------------- ---------------
Comprehensive income (loss) before tax............ (5,117) 992 (787)
Other comprehensive income tax effect............. 142
---------------- ------------- ---------------
Comprehensive income (loss)............................ $(4,975) $992 $(787)
================ ============= ===============
</TABLE>
See accompanying notes to consolidated financial statements.
F-16
<PAGE>
BOLLE INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
(AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
Common Stock
----------------
Additional Cumulative
Par Paid-in Accumulated Translation Total
Shares Value Capital Deficit Adjustment Equity
------ ----- ---------- ----------- ----------- ------
<S> <C> <C> <C> <C> <C> <C>
Balance--December 31, 1994 $13,433
1995:
Net Loss.................. (787)
Compensation expense
accrued for stock options. 124
-------
Balance--December 31, 1995 12,770
1996:
Net income................ 992
Dividend to Lumen......... (4,019)
-------
Balance--December 31, 1996 $9,743
=======
1997:
Beginning balance--
January 1, 1997.......... $9,743 $9,743
Capitalization of Bolle Inc. --
February 3, 1997............. 1,900 -- 10,915 10,915
======= ====== ========== =========== =========== ======
Common stock issued in 100 -- 3,302 3,302
connection with Bolle France
acquisition..................
Net income (loss)............ $(4,655) (4,655)
Cumulative translation
adjustment.................. $(462) (462)
------- ------ ---------- ----------- ----------- -------
Balance--December 31, 1997 $2,000 -- $23,960 $(4,655) $(462) $18,843
======= ====== ========== =========== =========== =======
</TABLE>
See accompanying notes to consolidated financial statements.
F-17
<PAGE>
BOLLE 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:
Net income (loss)................................................... $ (4,655) $ 992 $ (787)
Adjustments to reconcile income (loss) to net cash provided
(used) by operating activities:
Merger and acquisition integration related
expenses, net of payments................................... 1,823 99
Depreciation and amortization................................... 1,477 386 254
Bad debt expense................................................ 489 73 183
Loss (gain) on sale of property and equipment................... 19 1
Changes in current assets and liabilities (net of effect of companies
acquired):
Accounts receivable................................................. 2,515 821 (203)
Receivables from related parties.................................... (1,120) (736) 736
Inventories......................................................... 2,821 (1,470) (2,063)
Other assets........................................................ (726) 291 (528)
Accounts payable.................................................... 2,584 1,135 (323)
Accrued expenses and other.......................................... (4,128) (191) (176)
-------------- ------------ ------------
Net cash provided (used) by operating activities.................. 1,099 1,302 (2,808)
-------------- ------------ ------------
Cash flows from investing activities:
Cash expended in acquisitions, net of cash received................. (33,290)
Capital expenditures................................................ (665) (319) (131)
Proceeds from sale of fixed assets.................................. 65 2
Non-compete agreement and intangible assets......................... (100) (2) (815)
-------------- ------------ ------------
Net cash used by investing activities............................. (33,990) (319) (946)
-------------- ------------ ------------
Cash flows from financing activities:
Proceeds (payments) from long-term obligations...................... (18) (21) (78)
Proceeds (payments) on indebtedness to related parties.............. 34,362 (1,000) (1,600)
Proceeds from issuance of common stock.............................. (21)
-------------- ------------ ------------
Net cash provided (used) by financing activities 34,344 (1,021) (1,699)
-------------- ------------ ------------
Effect on cash of changes in foreign exchange rates.................... (560)
Net increase (decrease) in cash........................................ 893 (38) (5,453)
Cash and cash equivalents at beginning of period....................... 311 349 5,802
-------------- ------------ ------------
Cash and cash equivalents at end of period............................. $ 1,204 $ 311 $ 349
-------------- ------------ ------------
Interest paid....................................................... $ 46 $ 5 $ 42
Income taxes paid................................................... 2,635 * *
</TABLE>
See accompanying notes to consolidated financial statements.
F-18
<PAGE>
o Income taxes were paid by the Company's parent for the years ended
December 31, 1995 and 1996 as it has been part of a U.S. tax group since 1995.
In 1997, only the Company's domestic income taxes were paid by the Parent on
behalf of the Company. Accordingly, the income taxes paid by the Company in
1997 represent foreign income taxes.
NONCASH TRANSACTIONS:
1997
o The acquisition of Bolle France discussed in Note 3 was funded
through a combination of cash, equity and debt. The fair values of the assets
and liabilities at the dates of acquisition are presented as follows:
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)
Deferred tax liability...................... (14,000)
Other long-term liabilities................. (1,896)
1996 AND 1995
o During the fourth quarter of 1996, Bolle America forgave the
repayment of a $4,019 advance made to Lumen during the year. The forgiveness
of the advance was characterized as a dividend in 1996.
o There were no non-cash transactions during the year ended
December 31, 1995.
See accompanying notes to consolidated financial statements.
F-19
<PAGE>
BOLLE INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA, UNLESS OTHERWISE NOTED)
NOTE 1--SPINOFF SUBSEQUENT TO YEAR END
At December 31, 1997 Bolle Inc. (the "Company") was a subsidiary of
Lumen Technologies, Inc. (formerly known as BEC Group, Inc.) ("Lumen"). On
March 11, 1998, Lumen distributed the stock of Bolle Inc. to Lumen's
shareholders (the "Spinoff") and the Company began trading on the NASDAQ
National Market under the symbol "BEYE" on March 12, 1998.
In connection with the Spinoff, pursuant to a Bill of Sale and
Assignment Agreement entered into between Lumen and the Company immediately
prior to the consummation of the Spinoff (the "Contribution Agreement"), (i)
Lumen assigned to the Company all of Lumen's assets other than assets related
to the ORC Business (as defined in the Contribution Agreement) and certain
other specified assets retained by Lumen; and (ii) the Company assumed all of
Lumen's liabilities prior to the Spinoff other than those related to the ORC
Business. Pursuant to this agreement, approximately $17 million of the
Company's indebtedness to related parties was contributed to the capital of the
Company and the remaining balance was refinanced via a bank credit facility.
In connection with the Spinoff, the Company assumed all obligations
and liabilities of Lumen to each of Maurice Bolle, Robert Bolle, Franck Bolle,
Patricia Bolle Passaquay, Brigitte Bolle and Christelle Roche (collectively,
the "Sellers," and each a "Seller") incurred by Lumen in connection with the
purchase of Bolle France, and Lumen was released from all such obligations or
liabilities. In addition, each Seller conveyed to the Company all shares of
Series A Preferred Stock of Lumen (the "Lumen Preferred Stock") held by such
Seller and the Company issued in exchange to each Seller, shares of its Series
B Preferred Stock (the "Bolle Series B Preferred Stock") in proportion to the
number of shares of Lumen Preferred Stock conveyed by such Seller to the
Company. No shares of Bolle Common Stock were issued to the holders of
outstanding shares of Bolle Series B Preferred Stock pursuant to the Spinoff.
Lumen canceled all warrants (the "Lumen Warrants") and the Company issued in
exchange to each holder of canceled Lumen Warrants, warrants to purchase Bolle
Common Stock (the "Bolle Warrants") in proportion to the number of Lumen
Warrants held by such holder prior to the cancellation. No shares of Bolle
Common Stock were issued to holders of outstanding Bolle Warrants pursuant to
the Spinoff.
NOTE 2--GENERAL INFORMATION, BUSINESS AND BASIS OF PRESENTATION
GENERAL INFORMATION
The Company was organized on February 3, 1997 to effect the July 1997
acquisition by Lumen of Holding B.F. (hereinafter referred to as "Bolle
France"), the French holding company that owned the Bolle design, manufacturing
and certain distribution interests, including the worldwide rights to the
Bolle(Registered Trademark) brand. The Company is a holding company, the
principal subsidiaries of which are Bolle America, Inc. ("Bolle America") and
Bolle France. Bolle America was acquired by Lumen in November 1995 in a
transaction accounted for as a pooling of interests.
The Company and Lumen entered into a management services agreement
(the "Management Agreement") contemporaneously with the Spinoff pursuant to
which certain executives of Lumen will provide key management services to the
Company for an initial term of three years. The agreement is thereafter
automatically renewed for successive one-year periods until terminated by
either party upon at least 90 days written notice prior to the expiration of
the initial, or any renewal, term then in effect.
BUSINESS
Bolle Inc. is a vertically integrated, designer, manufacturer and
marketer of Bolle(Registered Trademark) premium sunglasses, goggles, and
tactical and safety eyewear. Products are manufactured by Bolle France in
Oyonnax, France and through subcontractors and sold to distributors or direct
customers primarily located in the United States, Europe, Australia and Canada.
BASIS OF PRESENTATION
Bolle America was a wholly owned subsidiary of Lumen at the time the
Company was formed. The net
F-20
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA, UNLESS OTHERWISE NOTED)
assets of Bolle America were contributed to the Company by Lumen as of July 1,
1997. At that time, the net book value of Bolle America was $11,038 including
retained earnings of $359. Accordingly, the financial position and results of
operations of Bolle Inc. presented herein are those of the Company's
predecessor for accounting purposes, Bolle America, prior to the acquisition of
Bolle France. The results of operations of Bolle France are included beginning
on July 10, 1997, (the closing date of the Bolle France acquisition described
in Note 3 below).
For the periods subsequent to the acquisition of Bolle America by
Lumen, certain revenues and expenses reflected in the financial statements
include allocations of certain corporate expenses from Lumen. These allocations
include income from Lumen's investment in Eyecare Products Plc, as well as
expenses for general management, treasury, legal, tax, financial reporting,
auditing, insurance, investor and public relations and information management.
Allocations were primarily based on relative sales. These financial statements
also reflect the allocation of certain corporate assets including those
relating to taxes.
Management believes that the foregoing allocations were made on a
reasonable basis; however, the allocations of costs and expenses do not
necessarily indicate the costs that would have been or will be incurred by the
Company on a stand-alone basis. Also, the financial information included in the
financial statements may not necessarily reflect the financial position,
results of operations and cash flows of the Company in the future or what the
financial position and results of operations would have been if it had been a
separate, stand-alone company during the periods covered.
The accompanying financial statements do not give effect to the
Contribution Agreement, which was executed subsequent to year end. On a
proforma basis, had the Contribution Agreement been effective at December 31,
1997, the effect would have been to increase assets by $10,680 (unaudited),
decrease liabilities by $13,457 (unaudited), increase mandatorily redeemable
preferred stock by $9,579 (unaudited), and increase equity by $14,378
(unaudited).
For periods prior to 1997, equity is presented in the accompanying
consolidated balance sheets and statements of stockholders' equity on one line.
Presentation of traditional equity categories is not considered meaningful.
Effective January 1, 1997, equity is presented in the traditional manner.
NOTE 3--ACQUISITIONS
On July 10, 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 affiliates, for a total purchase
price of approximately $58,235, comprised of cash of $31,000, Lumen Series A
mandatorily redeemable preferred stock of $9,294, Company mandatorily
redeemable preferred stock of $11,055 and Company common stock of $3,302, as
well as direct acquisition costs of $3,585. Where such consideration was
denominated in French Francs, the July 10, 1997 exchange rate of 5.9197 was
used to translate to US Dollars. A summary of the allocation of purchase price
is as follows:
Current assets................... $17,290
Property and equipment........... 3,949
Goodwill......................... 22,642
Trademarks....................... 40,000
Other assets..................... 181
Current liabilities.............. (9,931)
Long term liabilities............ (15,896)
-----------
$58,235
===========
The land included in property and equipment was purchased from the
Sellers as part of a separate contract, therefore its specific purchase price
of $422 is included as its fair value in property and equipment. The
F-21
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA, UNLESS OTHERWISE NOTED)
building was revalued based on management estimates resulting in a step up of
$1,824 in value. This amount is also included in property and equipment. For
all other property and equipment purchased, book value was assumed to
approximate fair value.
Based upon an independent appraisal obtained by the Company, the
Bolle(Registered Trademark) was valued at $40,000. The remainder of the excess
of purchase price over book value of $22,642 was allocated to goodwill.
The trademark and goodwill are being amortized over 40 years (Note 5).
Management does not expect material changes to the purchase
accounting.
NOTE 4--MERGER AND ACQUISITION INTEGRATION RELATED EXPENSES
Acquisition integration related expenses of $3.75 million in 1997
represent the following expenses incurred in connection with the integration of
Bolle France and creation of Bolle Inc.: (i) a reserve for the return of
product from the Company's owned and non-owned distributors in conjunction with
the redefining and streamlining of Bolle Inc.'s new product line, and (ii) the
legal, production and marketing expenses related to the set up of a new logo
for Bolle(Registered Trademark) worldwide and the creation of the first
worldwide catalog.
Merger related expenses in 1995 represent $3.1 million of transaction
costs associated with the pooling of interests between Lumen and Bolle America
discussed in Note 1.
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. Investments in less than 50% owned
entities and certain greater than 50% owned entities are accounted for by the
equity method. Investments in less than 20% owned entities are accounted for by
the cost method (Note 9). All significant intercompany transactions, profits
and accounts are 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 at the time of shipment with estimates
provided for returns based on historical experience.
Concentration of Credit Risk and Major Customers
In the opinion of management, concentration of credit risk varies
significantly on a country-by-country basis. With the acquisition of Bolle
France, the Company now sells to customers throughout the world, with the
majority of sales to customers in the United States, Europe, Australia and
Canada.
Credit is generally extended based on an evaluation of the customer's
financial condition and its relationship with the Company, and collateral is
generally not required. Credit risk is affected by conditions or occurrences in
the local economies and relative strength of the local environment in each of
the countries where the Company's customers operate. The Company establishes an
allowance for doubtful accounts based on factors surrounding the credit risk of
specific customers, historical trends and other information.
F-22
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA, UNLESS OTHERWISE NOTED)
For the years ended December 31, 1996 and 1995, the Company had sales
to a specific customer located in the United States that represented 14% and
11% of net sales. For the year ended December 31, 1997, no single customer
contributed more than 10% of the Company's net sales.
Foreign Currency Translation
For subsidiaries which operate in a local currency environment, assets
and liabilities are translated into U.S. dollars at year end exchange rates in
effect at the balance sheet date. Income and expense items are translated at
average rates prevailing during the year. Translation adjustments for these
subsidiaries are accumulated in a separate component of equity.
Foreign Currency Transactions
Prior to July 1997, the Company had entered into a series of
agreements with Bolle France providing a series of fixed exchange rates on the
French franc/U.S. dollar exchange rate for inventory purchases from them. From
time to time, the Company may also enter into foreign currency forward
contracts to hedge against the effects of foreign currency fluctuations on
inventory purchases and the settlement of trade accounts payable. There were no
such contracts in effect subsequent to July 1, 1997. Foreign currency
transaction gains and losses are recorded in other income when the underlying
transactions are settled.
Inventories
Inventories, which consist primarily of raw materials and finished
goods held for resale, are stated at the lower of cost or market value. Costs
include materials, direct labor, and overhead. The Company determines inventory
value on an average cost basis.
Warranties
Certain sales are subject to warranty against defects in material and
workmanship. The Company provides for such potential future costs at the time
the sales are recorded based on historical experience.
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 or accelerated 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 7 years for office
equipment, fixtures and molds and up 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.
Trademark, Goodwill and Other Intangible Assets
Trademark represents the Bolle(R) brand. Goodwill represents the
excess cost over the fair value of net assets acquired in business combinations
accounted for under the purchase method. Other intangible assets consist
principally of a non-compete agreement.
Trademark, goodwill and other intangible assets are amortized on a
straight line basis over estimated useful lives which approximate 40 years for
the Bolle trademark, 40 years for goodwill and from 3-10 years for other
identifiable intangibles. At each balance sheet date, the Company evaluates the
realizability of trademark, goodwill and other intangible assets based upon
expectations of undiscounted cash flows of each subsidiary having a significant
trademark, goodwill or other intangible asset balance. Should this review
indicate that trademark,
F-23
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA, UNLESS OTHERWISE NOTED)
goodwill or other intangible assets will not be recoverable, the Company's
carrying value of the trademark, goodwill or other intangible assets will be
reduced by the estimated shortfall of discounted cash flows. Based upon its
most recent analysis, the Company believes that no impairment of the trademark,
goodwill or other intangible assets exists.
Impairment of Long-Lived Assets
At each balance sheet date, the Company evaluates the realizability of
long-lived assets based on expectations of undiscounted cash flows. Should this
review indicate that the cost of long-lived assets may be impaired, an
evaluation of recoverability would be performed. If an evaluation is required,
the estimated future undiscounted cash flows associated with the asset would be
compared to the carrying amount of the asset to determine whether a write-down
to market value is required.
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.
Earnings Per Share
Basic earnings per share is computed pursuant to SFAS No. 128
"Earnings Per Share," 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 antidilutive. 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. Bolle America was a public company from January 1, 1995 to
November 2, 1995 with 4,212,729 shares outstanding at the date of acquisition
by Lumen. Lumen cancelled all but 100 shares upon acquisition. Such shares
remained unchanged until the capitalization of Bolle Inc. in February 1997 when
1,900 additional shares were issued. As a wholly owned subsidiary, the Company
had no common stock equivalents. The historical actual shares issued are used
to calculate weighted average shares outstanding during 1995 and 1996. Since
the Company has no dilutive securities outstanding at December 31, 1997, basic
earnings per share is equivalent to diluted earnings per share.
In accordance with the Securities and Exchange Commission Staff
Accounting Bulletin No. 98, the weighted average number of outstanding common
shares is calculated based on the historical timing of the common stock
transactions.
Pension and post retirement indemnity
The Employees of Bolle America currently participate in a 401(k)
Savings plan administered by Lumen. No pension, post-retirement or other
benefit arrangements have been established by Bolle, Inc.
A provision of $150 is recorded for the termination indemnity of the
legal employees of Bolle France and its subsidiaries. These indemnities are due
to employees who leave Bolle France or its subsidiaries at retirement age (65)
and depend upon the length of the employee's service and salary level. The
obligation, which is not funded, is calculated using an actuarial method
(discount rate of 6.19%, salary increase of 2.5%) and considers staff turnover
and mortality statistics until retirement age. There are no other pensions,
post-retirement or post-employment obligations to Bolle France as such employee
benefits are provided by the French Social Security System.
F-24
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA, UNLESS OTHERWISE NOTED)
Reclassifications
Certain amounts in 1995 and 1996 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
reported period. Actual results could differ from these estimates.
Fair Value
At December 31, 1997, the carrying value of financial instruments such
as trade receivables, accounts payable and short term debt approximated their
fair values based on the short term maturities of these instruments.
New Accounting Pronouncements
SFAS No. 129, "Disclosure of Information about Capital Structure"
reiterates the disclosure requirements set forth in existing pronouncements as
they relate to an entity's capital structure and contains no changes in
disclosure requirements other than making them applicable to all entities.
Because the Company complies with the disclosure requirements of existing
pronouncements, there was no impact of the adoption of SFAS No. 129 in the
Company's financial statements.
SFAS No. 130, "Reporting Comprehensive Income", establishes guidelines
for all items that are to be recognized under accounting standards as
components of comprehensive income to be reported in the financial statements.
The statement is effective for all periods beginning after December 15, 1997
and reclassification of financial statements for earlier periods presented will
be required for comparative purposes. The Company has adopted SFAS No. 130 in
its financial statements for the year ended December 31, 1997.
SFAS No. 131, "Disclosures about Segments of an Enterprise and Related
Information", establishes standards for reporting of operating segment
information in annual financial statements and requires that those enterprises
report selected information about operating segments in interim financial
statements issued to shareholders. The statement is effective for all periods
beginning after December 15, 1997. The Company presently reports as one
operating segment and two geographical segments, and expects to continue to do
so. The Company plans to adopt SFAS No. 131 in its financial statements for the
year ended December 31, 1998.
NOTE 6--INVENTORIES
Inventories consist of the following at:
<TABLE>
<CAPTION>
December 31,
------------------------------
1997 1996
------------- ---------
<S> <C> <C>
Raw materials........................... $1,362 $
Work in progress........................ 2,595
Finished goods.......................... 9,595 8,635
Reserves................................ (1,818) (247)
---------- ----------
$11,734 $8,388
========== ==========
</TABLE>
F-25
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA, UNLESS OTHERWISE NOTED)
NOTE 7--PROPERTY AND EQUIPMENT
Property and equipment consists of the following at:
<TABLE>
<CAPTION>
December 31,
-------------------------------
1997 1996
-------------- --------------
<S> <C> <C>
Land.................................. $417 $
Buildings............................. 2,169 5
Machinery and equipment............... 2,197 369
Computer hardware and software........ 847 593
Furniture and fixtures................ 202 98
-------------- --------------
5,832 1,065
Less: accumulated depreciation........ (1,145) (531)
-------------- --------------
$4,687 $534
============== ==============
</TABLE>
Depreciation expense for the years ended December 31, 1997, 1996 and
1995 was $705, $216 and $172, respectively.
The minimum future rental expense for property and buildings under
operating lease is as follows:
<TABLE>
<CAPTION>
<S> <C>
1998...................................... $146
1999...................................... 73
2000...................................... 73
2001...................................... 73
2002...................................... 73
Thereafter................................ 20
-----------
$458
===========
</TABLE>
NOTE 8--TRADEMARK, GOODWILL AND OTHER INTANGIBLE ASSETS
Trademark, goodwill and other intangible assets and related
accumulated amortization consist of the following:
<TABLE>
<CAPTION>
December 31,
--------------------------------
1997 1996
------------ -----------
<S> <C> <C>
Goodwill............................................... $22,979 $
Non compete agreement.................................. 900 800
Other identifiable intangible assets................... 16 16
------------ -----------
23,895 816
Less Accumulated amortization.......................... (448) (170)
------------- ------------
$23,447 $646
============= ============
Trademark.............................................. $39,523 $
Less: Accumulated amortization......................... (494)
------------- ------------
$39,029 $
============= ============
</TABLE>
F-26
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA, UNLESS OTHERWISE NOTED)
The Company entered into a non-compete agreement with the former
president of Bolle America for the period November 2, 1995 through December 31,
2005. The Company paid $800 at November 2, 1995, $100 in 1997 and will pay $100
per year from January 1, 1998 to 2005.
Amortization expense for the years ended December 31, 1997, 1996 and
1995 was $772, $170 and $82, respectively.
NOTE 9--EQUITY IN AFFILIATED COMPANIES
The Company sells its products to three related party distributors,
Bolle Sunglasses UK, Bolle Japan and Bolle Canada. All investments are
accounted for under the equity method of accounting. The Company's equity in
the net assets of these entities is approximately $75. No equity income or loss
was recognized during 1997. Subsequent to year end the Company has acquired
100% of Bolle Canada and entered into a letter of intent to acquire 100% of
Bolle Sunglasses U.K.
NOTE 10--CREDIT FACILITIES
During the years ended December 31, 1997, 1996 and 1995, the Company
was party to a revolving intercompany credit arrangement with Lumen whereby
interest was earned at a rate of 5% on excess cash and interest was charged at
a rate of 8% on outstanding borrowings. Since the acquisition of Bolle France,
the revolving intercompany credit arrangement was adjusted to allow for French
Franc denominated borrowings by Bolle France at a French market rate of 5.5%.
This rate will be reset annually. The debt incurred to finance the cash portion
of the consideration has been pushed down to Bolle Inc. under this arrangement.
On March 11, 1998, in connection with the Spinoff described in Note 1,
the Company entered into a $28 million credit facility (the "New Agreement")
with a syndicate of lenders led by NationsBank N.A. The New Agreement provides
for a $10 million Term Loan denominated in French Francs, payments due
quarterly over five years, and a revolving line of credit of $18 million,
including a letter of credit subfacility of $5 million. The interest rate
applicable to the facilities will equal the Base Rate or the Eurodollar Rate or
the French Franc Libor Rate (each as defined in the New 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 form 0% to 1.0% 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 1.0% to 2.5%, depending upon the Company's
satisfaction of certain financial criteria. The terms of the New Agreement
require the Company to maintain certain financial ratios.
NOTE 11--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. The Company has reorganized the structure of
various entities comprising Bolle France so that Bolle France will file one
consolidated tax return for 1998 and subsequent thereto. Following the March
1998 Spinoff of the Company, the Company will file its consolidated tax return
separately from Lumen.
Income (loss) before provision for income taxes consists of the
following for the periods ended:
<TABLE>
<CAPTION>
December 31,
-----------------------------------------------
1997 1996 1995
------------ ---------- ----------
<S> <C> <C> <C>
U.S.............................. $ (4,713) $1,627 $(423)
Foreign.......................... 1,157
------------ ---------- ----------
$ (3,556) $1,627 $(423)
============ ========== ==========
</TABLE>
F-27
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA, UNLESS OTHERWISE NOTED)
The provision for income taxes, prepared as if Bolle were a stand
alone company, consists of the following for the periods ended:
<TABLE>
<CAPTION>
December 31,
-------------------------------------------
1997 1996 1995
---------- ---------- ----------
<S> <C> <C> <C>
UNITED STATES:
Current:
Federal...................... $ $542 $616
State and local.............. 81 103
Deferred........................ 445 12 (355)
---------- ---------- ----------
445 635 364
---------- ---------- ----------
FOREIGN:
Current...................... 1,803
Deferred........................ (1,149)
---------- ---------- ----------
654
---------- ---------- ----------
Total provision for income
taxes...................... $1,099 $635 $364
========== ========== ==========
</TABLE>
The Company's effective tax rates differ from the Federal statutory
rate as follows:
<TABLE>
<CAPTION>
December 31,
----------------------------------------------------
1997 1996 1995
--------------- ---------------- ----------------
<S> <C> <C> <C>
Expected tax (benefit) at statutory rate.... (34.0)% 34.0% (34.0)%
State income taxes (benefit)................ (3.0)% 3.5% 16.1%
Non-deductible and merger related 7.9% 104.0%
expenses..............................
Valuation allowance......................... 60.0%
Other, net.................................. 1.5%
--------------- ---------------- ----------------
30.9% 39.0% 86.1%
=============== ================ ================
</TABLE>
F-28
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA, UNLESS OTHERWISE NOTED)
Significant components of deferred income taxes are as follows for the
periods ended:
<TABLE>
<CAPTION>
December 31,
-----------------------------------------
1997 1996
----------------- -----------------
<S> <C> <C>
Current deferred tax assets:
Net operating loss carry forward.............. $828
Accounts receivable........................... 61 $168
Non qualified stock options................... 54 54
Inventories................................... 1,186 129
Accrued expenses.............................. 362 83
----------------- -----------------
Total gross current deferred tax assets..... 2,491 434
Non-current deferred tax assets:
Intangibles................................... 12
Accrued expenses.............................. 440
Fixed assets.................................. 23 6
----------------- -----------------
Total non-current deferred tax assets....... 463 18
----------------- -----------------
Gross deferred tax asset.................... 2,954 452
Valuation allowance...................... (2,132)
----------------- -----------------
Deferred tax asset....................... 822 452
----------------- -----------------
Current deferred tax liability:
Other liabilities............................. (155)
Non current deferred tax liability:
Intangibles................................... (14,000)
----------------- -----------------
Gross deferred tax liability................ (14,155)
----------------- -----------------
Net deferred tax asset (liability).......... $(13,333) $452
================= =================
</TABLE>
The Company recorded gross deferred tax assets of $2,954 and $452 for
the years ended December 31, 1997 and 1996, respectively. A valuation allowance
has been established for the entire net tax benefit associated with
substantially all carryforwards and temporary differences at December 31, 1997,
for the domestic operations, as their realization was not assured. The effect
on the income tax provision related to the valuation allowance was a charge of
$2,132 for 1997. Net operating loss carryforwards amount to approximately $2.2
million and $0 at December 31, 1997 and 1996, respectively. The net operating
loss carryforwards begin to expire in the year 2011.
NOTE 12--MANDATORILY REDEEMABLE PREFERRED STOCK
In connection with the acquisition of Bolle France described in Note
3, the Company issued 64,120 shares of Bolle Series A Preferred Stock with a
redemption value of $11,055. Shares of the Bolle Series A Preferred Stock will
be redeemed by the Company on the third anniversary of their issuance, subject
to the provisions of the New Agreement. Prior to that, the Company may redeem
any shares of Bolle Series A Preferred Stock at any time. Further, in the event
that the Company's EBITDA exceeds $18,400 for the fiscal year 1998 or $24,700
for the fiscal year 1999, the Company will be obligated to redeem any shares of
the Bolle Series A Preferred Stock then outstanding, provided that in each case
the Company remains in compliance with the financial covenants contained in any
senior indebtedness in effect as of June 4, 1997 as amended after giving effect
to such redemption and $2,000 is available for borrowing by the Company under
the New Agreement. The carrying value of the Bolle Series A Preferred Stock
approximates its fair value.
F-29
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA, UNLESS OTHERWISE NOTED)
NOTE 13--STOCK OPTION PLANS
Until the Spinoff, the Company participated in the Lumen stock
incentive plan. Such options were exercisable into common stock of Lumen.
Accordingly, Lumen disclosures for the Company employees included in the Lumen
stock incentive plan are shown below. All option information has been restated
to give effect to the May 3, 1996 and March 12, 1998 reverse stock splits.
Following the March 1998 Spinoff, the Company adopted its own separate stock
option and incentive plan similar to the Lumen plan.
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 to Company employees under those plans consistent with the
method provided by SFAS No. 123, the Company's net income (loss) and net income
(loss) per share would have been as follows:
<TABLE>
<CAPTION>
December 31,
--------------------------------------------
1997 1996 1995
<S> <C> <C> <C>
Net income (loss):
As reported........................................ $(4,655) $992 $(787)
Pro forma.......................................... $(4,884) $706 $(1,398)
Basic and diluted earnings (loss) per share:
As reported........................................ $(2,586.11) $9,920.00 $(0.22)
Pro forma.......................................... $(2,713.33) $7,060.00 $(0.40)
</TABLE>
The fair value of each option grant is estimated on the date of grant
using the Black-Scholes option pricing model with the following weighted
average assumptions used for all grants:
<TABLE>
<CAPTION>
1997 1996 1995
----------- ----------- ----------
<S> <C> <C> <C>
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
</TABLE>
The weighted average fair values of all Benson Eyecare Corporation
(Lumen's predecessor, "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 all Lumen options granted during 1997 and 1996 was $8.98 and
$9.96, respectively.
Lumen may grant nonqualified stock options, incentive stock options or
stock appreciation rights to officers, directors, consultants and key employees
of Lumen.
As a result of a merger and asset sale on May 3, 1996, all Benson
options were canceled. Option holders received consideration (including new
Lumen options) for their Benson options. Accordingly, all options were issued
under the Lumen Stock Compensation Plan, on or after May 3, 1996.
F-30
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA, UNLESS OTHERWISE NOTED)
A summary of the transactions for Benson options held by Company
employees is as follows:
<TABLE>
<CAPTION>
Option Price Range Per Number of Benson
Benson Share Shares Expiration Date
------------------------- ----------------------- ----------------------
<S> <C> <C> <C>
Outstanding at 12//31/94........... $12.26-$18.00 126
Granted............................ --
Exercised.......................... $18.00-$18.00 (2)
Cancelled..........................
-----------------------
Outstanding at 12/31/95............ $12.26-$18.00 124 1996-2000
Granted............................ --
Exercised.......................... -- --
Cancelled.......................... -- --
Cancelled in connection with
merger and asset sale.............. $12.26-$18.00 (124)
-----------------------
Outstanding at 12/3/196............ --
=======================
</TABLE>
A summary of the transactions for Lumen options held by Company
employees is as follows:
<TABLE>
<CAPTION>
Weighted Average
Exercise
Price Per Lumen Number of
Share Lumen Options
---------------- -------------
<S> <C> <C>
Outstanding at 12/31/95 --
Granted............................ 9.96 99
Exercised.......................... --
Cancelled.......................... 9.96 (15)
-------------
Outstanding at 12/31/96............ 9.96 84
Granted............................ 8.98 439
Exercised.......................... 10.34 (2)
Forfeited.......................... 10.12 (27)
-------------
Outstanding at 12/31/97............ 9.08 494
=============
</TABLE>
Options generally vest evenly over a three-or four-year period
beginning one year from the date of grant and expire seven years from the date
of grant. The 34 exercisable Lumen options held by Company employees at
December 31, 1997 had an option price range of $6.78-$10.25 and a weighted
average exercise price of $9.42 per Lumen share. The weighted average remaining
contractual life of the 494 Lumen options held by Company employees outstanding
at December 31, 1997 was approximately 6.2 years.
NOTE 14--RELATED PARTY TRANSACTIONS
On March 11, 1998, in conjunction with the Spinoff, (see Note 1) the
Company executed a Management Services Agreement with certain executives of
Lumen pursuant to which certain executives of Lumen will provide key management
services to the Company. The Management Services Agreement has an initial term
of three years. The agreement thereafter automatically renews for successive
one-year periods until terminated by either party upon at least ninety days
written notice. During the initial term of the Management Services Agreement,
the Company will pay Lumen $720 per year for such services.
F-31
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA, UNLESS OTHERWISE NOTED)
With the acquisition of Bolle France, the Company has transactions
with related parties (Lumen, Bolle Sunglasses UK, Bolle Japan and Bolle
Canada), for which transactions and balances have been disclosed under the
captions "Trade receivables from related parties" and "Indebtedness to related
parties." Such transactions are realized at conditions equivalent to those
prevailing for unrelated parties.
NOTE 15--COMMITMENTS AND CONTINGENCIES
The Company is subject to various litigation incidental to its
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 financial position, results of operations or cash flows of the
Company.
NOTE 16--GEOGRAPHIC INFORMATION
The Company operates in one principal industry segment: the design,
manufacture and marketing of premium sunglasses, goggles and safety and
tactical eyewear. Products are manufactured by Bolle France in Oyonnax, France
and through subcontractors and sold to distributors or direct customers
primarily located in the United States, Europe, Australia and Canada. The
Company had no international sales until the acquisition of Bolle France in the
third quarter of 1997.
Geographic information is as follows:
<TABLE>
<CAPTION>
December 31,
--------------------------------------------
1997 1996 1995
-------------- ------------- -------------
<S> <C> <C> <C>
Net sales to unaffiliated customers:
North America................................................ $19,769 $24,425 $24,829
Europe....................................................... 9,207
Other........................................................ 3,184
-------------- ------------- -------------
Total net sales.............................................. $32,160 $24,425 $24,829
============== ============= =============
(Transfers between geographic areas eliminated in consolidation):
North America................................................ $4,976
Europe....................................................... 2,941
-------------- ------------- -------------
Total transfers.............................................. $7,917 -- --
============== ============= =============
Income (loss) before income taxes............................
North America................................................ $285 $921 $2,373
Europe....................................................... 133
Other........................................................ 46
Interest, merger and acquisition integration related expenses and (4,020) 706 (2,796)
other income, net..........................................
-------------- ------------- -------------
Total income (loss) before income taxes...................... $(3,556) $1,627 $(423)
============== ============= =============
Identifiable assets:
North America................................................ $12,049 $15,624 $16,309
Europe....................................................... 82,648
Corporate assets.............................................
-------------- ------------- -------------
Total identifiable assets.................................... $94,697 $15,624 $16,309
============== ============= =============
</TABLE>
F-32
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA, UNLESS OTHERWISE NOTED)
Net sales to unaffiliated customers are classified based on the
location of the customers. Transfers between geographic areas are recorded at
amounts generally above cost and in accordance with the rules and regulations
of the respective governing tax authorities. Income (loss) before income taxes
consists of total net sales less operating expenses and does not include merger
and acquisition integration related expenses, interest and other income, net.
Identifiable assets of geographic areas are those assets used in the Company's
operations in each area.
F-33
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
November 26, 1997, except for Note 10, as to which the date is March 11, 1998
To the Board of Directors and
Shareholders of Holding BF SA
In our opinion, the accompanying combined balance sheets and the related
combined statements of operations and stockholders' equity and of cash flows
present fairly, in all material respects, the financial position of Holding BF
SA and its subsidiaries at December 31, 1996, June 30, 1997 and September 30,
1997 and the results of their operations and their cash flows for the year, six
months and three months then ended in conformity with accounting principles
generally accepted in the United States of America. 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 auditing standards
generally accepted in the United States of America 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.
Befec -Price Waterhouse
Lyon, France
/s/ Olivier Auscher
- -------------------------------
Olivier Auscher
F-34
<PAGE>
HOLDING BF S.A. AND SUBSIDIARIES
COMBINED BALANCE SHEET
DECEMBER 31, 1996, JUNE 30, 1997 AND SEPTEMBER 30, 1997
(AMOUNTS IN THOUSANDS OF FRENCH FRANCS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30, SEPTEMBER 30,
ASSETS 1996 1997 1997
------------------ ------------------ -----------------
<S> <C> <C> <C>
Current assets:
Cash and cash equivalents.............. FF 17,884 FF 7,610 FF 8,115
Trade receivables, less allowance for
doubtful accounts of FF 1,556, FF 2,414
and FF 3,094......................... 64,185 55,524 46,382
Inventories............................ 29,697 36,268 32,756
Other current assets................... 2,918 2,282 8,629
------------------- ------------------ -----------------
Total current assets.................. 114,684 101,684 95,882
Investments............................ 191 690 570
Property and equipment, net............ 11,038 12,498 26,180
Trademark, net......................... -- -- 235,308
Goodwill, net.......................... -- -- 50,753
Other assets........................... 545 375 403
------------------- ------------------ -----------------
Total assets.......................... FF 126,458 FF 115,247 FF 409,096
=================== ================== =================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short term debt........................ FF 11,886 FF 1,032 FF 991
Indebtedness to Bolle Inc.............. -- -- 212,138
Accounts payable....................... 25,312 32,422 22,053
Accrued liabilities.................... 24,085 20,560 25,580
------------------- ------------------ -----------------
Total current liabilities............. 61,283 54,014 260,762
Long term liabilities................... 949 1,084 5,415
Accrued reorganization liabilities...... 5,050 5,650 6,050
------------------- ------------------ -----------------
Total liabilities..................... 67,282 60,748 272,227
------------------- ------------------ -----------------
Minority interests...................... 11,820 395 --
Commitments and
contingencies........................
Stockholders' equity:
Common stock--par value FF 1,000....... 16,500 53,600 53,600
Capital surplus........................ -- -- 81,058
Cumulative translation adjustment...... (78) (78) 259
Retained earnings...................... 30,934 582 1,952
------------------- ------------------ -----------------
Total stockholders' equity 47,356 54,104 136,869
------------------- ------------------ -----------------
Total liabilities and stockholders' equity FF 126,458 FF 115,247 FF 409,096
=================== ================== --=================
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-35
<PAGE>
HOLDING BF S.A. AND SUBSIDIARIES
COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996, THE SIX MONTHS ENDED JUNE 30, 1997
AND THE THREE MONTHS ENDED SEPTEMBER 30, 1997
(AMOUNTS IN THOUSANDS OF FRENCH FRANCS)
<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS ENDED THREE MONTHS ENDED
DECEMBER 31, JUNE 30, SEPTEMBER 30,
1996 1997 1997
------------------------------------------------------------
<S> <C> <C> <C>
Net sales:
Sales to Bolle America.................... FF 66,251 FF 17,391 FF 17,461
Third party sales......................... 183,442 88,641 35,124
--------------- ------------- --------------------
Total net sales:.......................... 249,693 106,032 52,585
--------------- ------------- --------------------
Costs and expenses:
Costs of sales............................ 153,233 65,798 34,411
Selling, general and administrative expenses 57,716 29,885 12,238
Interest expense.......................... 2,417 993 2,349
Other expenses, net....................... 1,281 (2,043) (493)
--------------- ------------- --------------------
Total costs and expenses................ 214,647 94,633 48,505
--------------- ------------- --------------------
Income before income taxes
and minority interests................ 35,046 11,399 4,080
Provision for income taxes................ 9,133 6,783 2,523
--------------- ------------- --------------------
Net income before minority interests...... 25,913 4,616 1,557
Minority interests........................ (8,250) (265) 395
--------------- ------------- --------------------
Net income................................ FF 17,663 FF 4,351 FF 1,952
=============== ============= ================
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-36
<PAGE>
HOLDING BF S.A. AND SUBSIDIARIES
COMBINED STATEMENT OF STOCKHOLDERS' EQUITY
DECEMBER 31, 1996, JUNE 30, 1997 AND SEPTEMBER 30, 1997
(AMOUNTS IN THOUSANDS OF FRENCH FRANCS)
<TABLE>
<CAPTION>
COMMON STOCK
-------------------------
RETAINED TRANSLATION CAPITAL
SHARES PAR VALUE EARNINGS ADJUSTMENT SURPLUS TOTAL
-------- ------------ ----------- ------------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
1996
Balance--beginning of year........ 100 FF 16,500 FF 14,568 FF FF FF 31,068
Translation adjustments.......... (78) (78)
Dividend to stockholders......... (1,297) (1,297)
Net income....................... 17,663 17,663
-------- ------------ ----------- ------------- ---------- ---------
Balance--December 31, 1996........ 100 16,500 30,934 (78) 47,356
1997
Acquisition of minority interests 37,100 (23,100) 14,000
Dividend to stockholders......... (9,972) (9,972)
Investment in new subsidiary..... (1,631) (1,631)
Net income....................... 4,351 4,351
-------- ------------ ----------- ------------- ---------- ---------
Balance--June 30, 1997............ 100 FF 53,600 FF 582 (78) FF 54,104
=====================================================================================================================
Adjustments to reflect purchase by
Bolle Inc...................... (582) 337 81,058 80,813
Net income........................ 1,952 1,952
-------- ------------ ----------- ------------- ---------- ---------
Balance--September 30, 1997....... 100 FF 53,600 FF 1,952 FF 259 FF 81,058 FF136,869
======== ============ =========== ============= ========== =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-37
<PAGE>
HOLDING BF S.A. AND SUBSIDIARIES
COMBINED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1996, SIX MONTHS ENDED JUNE 30, 1997
AND THREE MONTHS ENDED SEPTEMBER 30, 1997
(AMOUNTS IN THOUSANDS OF FRENCH FRANCS)
<TABLE>
<CAPTION>
SIX MONTHS THREE MONTHS
YEAR ENDED ENDED ENDED
DECEMBER 31, JUNE 30, SEPTEMBER 30,
1996 1997 1997
------------ ---------- -------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income..................................... FF 17,663 FF 4,351 FF 1,952
Adjustments to reconcile net income to cash
provided by operating activities:
Minority interests............................. 8,250 265 (395)
Depreciation and amortization.................. 4,486 2,275 3,403
Bad debt expense............................... 1,241 858 680
Loss on sale of property and equipment......... 69 -- 262
Changes in current assets and liabilities:
Accounts receivable............................ (158) 7,798 8,462
Other current assets........................... (392) 170 (6,347)
Inventories.................................... (8,603) (6,571) 3,512
Other assets................................... (1,888) 641 (403)
Accounts payable............................... 387 5,543 (9,560)
Accrued expenses and other..................... 12,102 (1,359) 1,065
---------- ---------- ----------
Net cash provided by operating activities.. 33,157 13,971 2,631
---------- ---------- ----------
Cash flows from investing activities:
Capital expenditures.......................... (4,640) (3,734) (2,272)
Proceeds from sale of fixed assets............ 91 -- 105
Investment in unconsolidated subsidiaries..... (89) (474) 120
Net cash (used) by investing activities.... (4,638) (4,208) (2,047)
---------- ---------- ----------
Cash flows from financing activities:
Payments on short term debt................... (17,514) (10,065) (79)
Cash dividends to stockholders................ (11,120) (9,972) --
---------- ---------- ----------
Net cash (used) by financing activities.... (28,634) (20,037) (79)
---------- ---------- ----------
Net increase (decrease) in cash..................... (115) (10,274) 505
Cash and cash equivalents at beginning of period.... 17,999 17,884 7,610
---------- ---------- ----------
Cash and cash equivalents at end of period.......... FF 17,884 FF 7,610 FF 8,115
========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-38
<PAGE>
HOLDING BF S.A. AND SUBSIDIARIES
FOR THE YEAR ENDED DECEMBER 31, 1996, THE SIX MONTHS
ENDED JUNE 30, 1997, AND THE THREE MONTHS ENDED SEPTEMBER 30, 1997
NOTES TO COMBINED FINANCIAL STATEMENTS
(AMOUNTS IN THOUSANDS OF FRENCH FRANCS)
NOTE 1 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of presentation
The combined financial statements of Holding BF SA and subsidiaries
(the "Group") have been prepared in accordance with accounting principles
generally accepted in the United States of America. The combined financial
statements of the Group include the subsidiaries and equity investments owned
by Holding BF SA in addition to certain entities held by the owners of Holding
BF SA. Accordingly, the combined financial statements include the consolidated
accounts of Holding BF SA and its wholly owned and majority-owned subsidiaries
(SNC Bolle 76%, Bolle Protection Sarl 88%, Bolle Production Sarl 68.75%), and
the accounts of RM Plastiques Sarl and Bolle Diffusion Sarl at December 31,
1996.
On July 10, 1997, Bolle Inc., a wholly-owned subsidiary of BEC Group
Inc. acquired from the Bolle family, shareholders of Holding BF SA, all of the
shares of Holding BF SA and subsidiaries. Further, in connection with the
purchase agreement, Holding BF SA acquired the minority interests in SNC Bolle
and all of the outstanding stock of RM Plastiques Sarl, Bolle Protection Sarl
and Bolle Production Sarl prior to closing of the transaction as part of the
legal and tax reorganization of the Group. Accordingly the combined accounts of
the Company at June 30, 1997 include Holding BF SA and its wholly-owned
subsidiaries (SNC Bolle 100%, Bolle Protection Sarl 100%, Bolle Production
Sarl 100%, RM Plastiques Sarl 100%) and the accounts of Bolle Diffusion Sarl,
all on a pre-acquisition basis.
Bolle Inc. acquired Bolle Diffusion Sarl separately on July 10, 1997.
Bolle Diffusion Sarl was accounted for outside the consolidation of Holding BF
SA at September 30, 1997. Accordingly, the financial statements of Holding BF
SA at September 30, 1997 are presented on a combined basis and include the
accounts of Bolle Diffusion Sarl.
Further, the combined financial statements at September 30, 1997
reflect the application of push down accounting of Bolle Inc. debt used to fund
the acquisition of the Group and related purchase accounting adjustments.
Business
Holding BF SA and subsidiaries operates in one business segment and
manufactures and sells sunglasses and sport shields, safety and tactical
eyewear and ski goggles. These products are manufactured in the Group's plant
in Oyonnax, France and through subcontractors and are sold to distributors or
direct customers located around the world.
Principles of Consolidation
All significant intercompany transactions, profits and accounts have
been eliminated in consolidation. Investments in companies in which the Group
does not have control, but has the ability to exercise significant influence
are accounted for by the equity method. Bolle Sunglasses Ltd. and Bolle Canada
Inc. are held by majority-owned subsidiaries of Holding BF SA, and therefore
the Group's ownership of each of these entities is 38%, respectively at
December 31, 1996. Subsequent to the Company's acquisition of the minority
interests described above, Holding BF SA's ownership of Bolle Sunglasses Ltd.
and Bolle Canada Inc. increased to 51%, respectively and continue to be
accounted for under the equity method of accounting in the financial statements
of Holding BF SA at June 30, 1997 and September 30, 1997, as the Group did not
have effective control of these entities.
F-39
<PAGE>
Revenue Recognition
Revenue is recognized upon shipment or delivery of products with
estimates provided for returns based on management estimates.
Concentration of Credit Risk and Major Customers
In the opinion of management, concentration of credit risk varies
significantly on a country-by-country basis. The Group sells to customers in
twenty countries, with the majority of sales to customers in the United States,
Europe, Australia and Canada.
Credit is generally extended based on an evaluation of the customer's
financial condition and on-going relationship with the Group, and collateral is
generally not required. Credit risk is affected by conditions or occurrences in
the local economies and relative strength of the retail environment in each of
the countries where the Group's customers operate. The Group establishes an
allowance for doubtful accounts based on factors surrounding the credit risk of
specific customers, historical trends and other information.
The Group sells its products to three related party distributors,
Bolle Sunglasses UK Ltd. and Bolle Canada, Inc., which were both 51% owned by
SNC Bolle as of June 30, 1997, and Bolle America, Inc. which is a sister
company owned 100% by Bolle Inc. For the year ended December 31, 1996, and the
six months and three months ended June 30, 1997 and September 30, 1997,
respectively, Bolle America, Inc. represented 27%, 16% and 33% of the Group's
net sales, respectively. Specific cost of sales related to Bolle America or any
other single customer cannot be calculated. Sales to Bolle Sunglasses UK Ltd.
and Bolle Canada did not exceed 10%, respectively in any of the periods
presented.
Foreign Currency Translation
For non-French subsidiaries which operate in a local currency
environment, assets and liabilities are translated into French Francs at
period-end exchange rates. Income and expense items are translated at average
rates prevailing during the year. Translation adjustments for these
subsidiaries are accumulated in a separate component of stockholders' equity.
In the normal course of business, operations (mainly sales) of the
Group is not exposed to fluctuations in currency values. Accordingly, the Group
does not enter into any type of financial instrument with respect to balance
sheet exposure arising from foreign exchange risk.
Up until July 10, 1997, the Group, however, had entered into a series
of agreements with Bolle America, Inc. providing a series of fixed exchange
rates on the French franc/U.S. dollar exchange rate for sales to that customer.
Therefore, foreign currency transaction losses amounting to FF 114 for the year
ended December 31, 1996 and FF 0 for the six months June 30, 1997 are included
in other income.
Cash and Cash Equivalents
Cash and cash equivalents represent investments with maturities of
three months or less from the time of purchase, and are carried at cost which
approximates fair value because of the short maturity of those instruments.
Cash paid for interest and income taxes was FF 1,232 and FF 7,852 for the year
ended December 31, 1996; FF 290 and FF 3,966 for the six months ended June 30,
1997, and FF 73 and FF 9,840 for the three months ended September 30, 1997,
respectively.
Property and Equipment
Buildings are valued at cost and depreciated over 30 years on a
straight-line basis.
F-40
<PAGE>
Other property and equipment are recorded at fair value and
depreciated over their estimated useful life calculated, on a straight-line
method (see below):
Fittings and fixtures......................... 5 years
Machinery and equipment....................... 7-10 years
Motor vehicles................................ 5 years
Office furniture.............................. 3-5 years
Impairment of Long-Lived Assets
At each balance sheet date, the Group evaluates the realizability of
long-lived assets based on expectations of undiscounted cash flows. Should this
review indicate that the cost of long-lived assets may be impaired, an
evaluation of recoverability would be performed. If an evaluation is required,
the estimated future undiscounted cash flows associated with the asset would be
compared to the asset's carrying amount to determine whether a write-down to
market value is required.
Warranties
Certain sales are subject to warranty against material defects.
Potential future warranty costs are provided on the balance sheet.
Pensions and Post Retirement Indemnity
A provision is recorded for legal employees' lump sum termination
indemnities. These indemnities are due to all employees which leave the Group
at retirement age (65) and depend upon the length of employees' service and
salary level. The obligation, which is not funded, is calculated using an
actuarial method (weighted-average discount rate of 6.19%, salary increase of
2.5%) and takes into account staff turnover and mortality statistics until
retirement age. There are no other pensions, post-retirement or post employment
obligations to the Company as such employee benefits are provided by the French
social security system.
Research and Development
Research, development and engineering expenditures which amounted to
FF 3,045, FF 1,752, and FF 931 for the year ended December 31, 1996, the six
months ended June 30, 1997 and the three months ended September 30, 1997,
respectively, are expensed as incurred. Substantially all engineering and
development costs are related to developing new products or designing
significant improvements to existing products.
Income Taxes
Taxable income/loss of the various companies comprising the Group was
included in the tax returns of the appropriate taxable entity. Accordingly,
consolidated income tax returns were not prepared for the Group. 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.
Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires Group management to make estimates and
assumptions that effect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from these estimates.
F-41
<PAGE>
Fair value
At December 31, 1996, June 30, 1997 and September 30, 1997, the
carrying value of financial instruments such as trade receivables, accounts
payable and short term debt approximated their fair values based on the short
term maturities of these instruments.
Trademark and Goodwill
The fair value of the worldwide Bolle(R) trademark of the Group (FF
236,788) has been established by an independent appraisal and is reflected in
the Group's combined balance sheet as a result of the revaluation of assets
recorded in connection with the acquisition of the Group by Bolle Inc. Both the
trademark and goodwill are being amortized over 40 years.
NOTE 2 -- RELATED PARTY TRANSACTIONS
As disclosed in Note 1, the Group sells to related parties (Bolle UK,
Bolle Japan). Such transactions are realized at conditions equivalent to those
prevailing for unrelated parties.
As disclosed in Note 5, prior to July 10, 1997 the Group borrowed from
certain stockholders (Bolle family). Interest expense and balances are
disclosed in the statement of operations and on the balance sheet,
respectively.
Certain stockholders of the Group owned 100% of RM Plastique Sarl
prior to July 10, 1997, a company with which the Group subcontracts certain
assembly tasks. Services rendered by RM Plastique Sarl, amounting to FF 1,385,
FF 1,053 and FF 165 for the year ended December 31, 1996, the six months ended
June 30, 1997 and the three months ended September 30, 1997, are invoiced at
cost on an arm's length basis.
The minority stockholders in SNC Bolle referred to in Note 8 were also
the majority stockholders of the Group before July 10, 1997.
The Indebtedness to Bolle Inc., as of September 30, 1997 consists
primarily of debt incurred in conjunction with the purchase of the Group by
Bolle Inc. and short term working capital financing provided by Bolle Inc.
During the three months ended September 30, 1997, Bolle Inc. charged an average
annualized interest rate of 5.5% on the balance.
NOTE 3 -- INVENTORIES
Inventories consist of the following at:
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30, SEPTEMBER 30,
1996 1997 1997
--------------- ----------------- -----------------
<S> <C> <C> <C>
Raw materials...................................... FF 13,076 FF 12,047 FF 10,402
Work in progress................................... 10,580 23,341 20,153
Finished goods..................................... 10,741 5,580 6,901
Reserves........................................... (4,700) (4,700) (4,700)
---------- ---------- ----------
FF 29,697 FF 36,268 FF 32,756
========== ========== ==========
</TABLE>
F-42
<PAGE>
NOTE 4 -- PROPERTY AND EQUIPMENT
Property and equipment consists of the following at:
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30, SEPTEMBER 30,
1996 1997 1997
------------ -------- -------------
<S> <C> <C> <C>
Land............................................... FF -- FF -- FF 2,500
Buildings and fixtures............................. 11,193 11,625 13,205
Machinery and equipment............................ 56,257 58,142 8,356
Motor vehicles..................................... 2,579 2,637 406
Office furniture................................... 3,827 5,187 2,855
Less: accumulated depreciation..................... (62,818) (65,093) (1,142)
--------- ---------- ---------
FF 11,038 FF 12,498 FF 26,180
========= ========== =========
</TABLE>
Depreciation expense for the year ended December 31, 1996 amounted to
FF 4,486 and FF 2,275 and FF 1,519 for the six and three months ended June 30,
and September 30, 1997, respectively.
NOTE 5 -- SHORT TERM DEBT AND INDEBTEDNESS TO BOLLE INC.
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30, SEPTEMBER 30,
1996 1997 1997
------------- -------- -------------
<S> <C> <C> <C>
Short term debt....................................
Bank debt...................................... FF 559 FF 509 FF 431
Bank overdraft................................. 5,704 158
Other.......................................... 5,623 523 402
--------- --------- ---------
Total short term debt.............................. FF 11,886 FF 1,032 FF 991
========= ========= =========
</TABLE>
The Group benefits from bank overdraft facilities which extend through
October 31, 1997 totaling FF 8,200 at an interest of Pibor + 1.5. The rate of
interest for the year ended December 31, 1996 and the six and three months
ended June 30, and September 30, 1997 averaged 4.9%.
Short term related party debt represents dividends declared by the
Group payable to the Bolle family and interest accrued on such undistributed
dividends at a variable rate of interest, which averaged 6.4% during the year
ended December 31, 1996 and 6.0% for the six months ended June 30, 1997.
Indebtedness to Bolle Inc. represents debt incurred by Bolle Inc. to
acquire the Group and interest accrued on the balance at an average annualized
rate of 5.5% for the three months ended September 30, 1997.
F-43
<PAGE>
NOTE 6 -- ACCRUED LIABILITIES
Accrued liabilities consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30, SEPTEMBER 30,
1996 1997 1997
------------ -------- -------------
<S> <C> <C> <C>
Salaries, wages and other
employee benefits.............................. FF 5,632 FF 4,543 FF 4,591
Fringe benefits accruals........................... 2,667 2,328 1,743
Other taxes........................................ 632 993 1,623
Interest payable................................... 2,190 -- --
Income taxes....................................... 7,117 7,925 6,994
Deferred taxes..................................... 1,154 3,271 3,105
Warranty........................................... 3,400 1,500 1,421
Reorganization of the Group........................ -- -- 5,624
Other.............................................. 1,293 -- 479
--------- --------- ---------
FF 24,085 FF 20,560 FF 25,580
========= ========= =========
</TABLE>
NOTE 7 -- INCOME TAXES
The provision (benefit) from income taxes consists of the following:
<TABLE>
<CAPTION>
SIX MONTHS THREE MONTHS
YEAR ENDED ENDED ENDED
DECEMBER 31, JUNE 30, SEPTEMBER 30,
1996 1997 1997
------------ ---------- -------------
<S> <C> <C> <C>
Current............................................ FF 12,588 FF 4,741 FF 2,690
Deferred........................................... (3,455) 2,042 (167)
--------- --------- ---------
Total.............................................. FF 9,133 FF 6,783 FF 2,523
========= ========= =========
</TABLE>
The Company's effective tax rate differs from the statutory rate as
follows:
<TABLE>
<CAPTION>
SIX MONTHS THREE MONTHS
YEAR ENDED ENDED ENDED
DECEMBER 31, JUNE 30, SEPTEMBER 30,
1996 1997 1997
------------ ---------- -------------
<S> <C> <C> <C>
French statutory rate............................. 36.7% 41.7% 41.7%
Non-taxable income attributable to minority
stockholders (see Note 8)...................... (10.5)% -- --
Impact of new statutory rate...................... -- 19.6% --
Non-deductible expenses........................... -- -- 20.1%
Other............................................. (0.2)% (1.7)% --
-------- ------- -----
Effective income tax rate......................... 26.0% 59.6% 61.8%
======== ======= =======
</TABLE>
F-44
<PAGE>
Significant components of deferred income taxes are as follows:
<TABLE>
<CAPTION>
SIX MONTHS THREE MONTHS
YEAR ENDED ENDED ENDED
DECEMBER 31, JUNE 30, SEPTEMBER 30,
1996 1997 1997
------------ ---------- --------------
<S> <C> <C> <C>
Pension liability.................................. FF (467) FF (375) FF (375)
Accrued liabilities................................ 697 -- --
Inventory and other................................ 624 3,271 3,105
--------- --------- ---------
Net deferred tax liability........................ FF 854 FF 2,896 FF 2,730
========= ========= =========
</TABLE>
At December 31, 1996, June 30, 1997 and September 30, 1997, other
assets include FF 300, FF 375 and FF 375 of deferred tax assets.
Historically, the Company consisted of a number of different tax
entities with different ownership interests. Prior to its acquisition by Bolle
Inc., such entities' tax returns were prepared and filed on an unconsolidated
basis. The Company's structure is currently being revised in order to allow it
to prospectively file one consolidated tax return in France.
NOTE 8 -- MINORITY INTERESTS
<TABLE>
<CAPTION>
<S> <C>
Minority interests at December 31, 1995................................................ FF 13,393
Minority interest in net income of consolidated subsidiaries........................... 8,250
Dividends paid to minority shareholders................................................ (9,823)
-----------
Minority interests at December 31, 1996................................................ FF 11,820
-----------
Minority interest in net income of consolidated subsidiaries........................... 265
Acquisition of minority interests by the Group......................................... (11,690)
-----------
Minority interests at June 30, 1997.................................................... FF 395
-----------
Minority interest in losses of consolidated subsidiaries............................... (395)
-----------
Minority interests at September 30, 1997............................................... FF --
===========
</TABLE>
At December 31, 1996, minority shareholders had a 24% interest in SNC
Bolle, a Group consolidated subsidiary which form of incorporation provides for
an allocation of pre-tax income to minority shareholders in the period earnings
are generated. Minority interests in the statement of operations for the year
ended December 31, 1996 include FF 8,011 relating to SNC Bolle. This amount is
on a pre-tax basis as the related income tax is born directly by the minority
stockholders.
As described in Note 1, in connection with the acquisition of the
Group by Bolle Inc., Holding BF SA acquired the minority interests in SNC Bolle
and all of the outstanding stock of RM Plastiques Sarl, Bolle Protection Sarl
and Bolle Production Sarl prior to closing of the transaction. Accordingly, the
only remaining minority interests at June 30, 1997 and September 30, 1997
relate to Bolle Diffusion Sarl. For the three months ended September 30, 1997,
Bolle Diffusion Sarl incurred a net loss of FF 1,325, FF 930 of which was
included in the Group's results.
NOTE 9 -- COMMITMENTS AND CONTINGENCIES
The Group has various commitments to purchase materials and supplies
as part of the ordinary conduct of business. In the aggregate, such commitments
are not at prices in excess of current market. Management believes that the
settlement of such commitments will not materially affect the financial
position, results of operations or cashflows of the Group. The Group is also
subject to various litigation incidental to its business. The Group does not
believe that exposure on any matter will result in a significant impact on its
financial position, results of operations or cash flows.
F-45
<PAGE>
NOTE 10 -- SUBSEQUENT EVENTS (UNAUDITED)
Subsequent to September 30, 1997, certain adjustments and
reclassifications have been made to the original purchase price allocation
(including the recording of deferred taxes of FF 82,775 relating to the
trademark valuation) described in Note 3 and have been included in the
financial statements of Bolle Inc. for the year ended December 31, 1997.
In addition, in connection with the reorganization of the Group
described in Note 1, certain provisions and investments have been transferred
to Bolle Inc. subsequent to September 30, 1997. Further, the borrowings used to
fund the acquisition of the Group referred to in Note 1 is also reflected in
the consolidated financial statements of Bolle Inc. for the year ended December
31, 1997.
On March 11, 1998, Lumen Technologies, Inc. (formerly known as BEC
Group, Inc.) ("Lumen") distributed the stock of Bolle Inc. to Lumen
stockholders (the "Spinoff").
F-46
<PAGE>
No dealer, salesperson or any other person has been authorized to give any
information or to make any representations other than those contained in this
Prospectus in connection with the offer made by this Prospectus and, if given
or made, such information or representations must not be relied upon as having
been authorized by the Company or by any of the Underwriters. This Prospectus
does not constitute an offer to sell or the solicitation of any offer to buy
any security other than the shares of Common Stock offered by this Prospectus,
nor does it constitute an offer to sell or a solicitation of any offer to buy
the shares of Common Stock by anyone in any jurisdiction in which such an offer
or solicitation is not authorized, or in which the person making such offer or
solicitation is not qualified to do so, or to any person to whom it is unlawful
to make such offer or solicitation. Neither the delivery of this Prospectus nor
any sale made hereunder shall, under any circumstances, create any implication
that the information contained herein is correct as of any time subsequent to
the date hereof.
TABLE OF CONTENTS
Prospectus Summary......................................3
Risk Factors............................................8
Use of Proceeds........................................18
Price Range of Common Stock............................19
Dividend Policy........................................19
Capitalization.........................................20
Selected Financial Data................................21
Management's Discussion and Analysis of Financial
Condition and Results of Operations.................23
Recent Developments....................................27
Business...............................................31
Management.............................................44
Executive Compensation.................................46
Certain Relationships and Related Transactions.........50
Security Ownership of Certain Beneficial Owners
and Management......................................54
Description of Capital Stock...........................55
Shares Eligible for Future Sale........................59
Underwriting...........................................60
Validity of Shares.....................................61
Experts................................................61
Available Information..................................62
Index to Financial Statements.........................F-1
BOLLE INC.
Common Stock
----------
PROSPECTUS
----------
,1998
<PAGE>
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following is a list of the estimated expenses to be incurred by
the Company in connection with the distribution of the Common Stock being
registered hereby. Except for the Securities and Exchange Commission
Registration Fee and the Nasdaq National Market Listing Fee, all amounts are
estimates.
Securities and Exchange Commission Registration Fee......... $2,831.08
NASD Filing Fee............................................. --
Blue Sky Fees and Expenses.................................. --
Nasdaq National Market Listing Fee.......................... 10,000
Printing and Engraving Costs................................ --
Accounting Fees and Expenses................................ 100,000
Legal Fees and Expenses..................................... 200,000
Transfer Agent and Registrar Fees........................... 10,000
Miscellaneous............................................... 77,168.92
Total..................................................... 400,000
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Certificate of Incorporation and Bylaws of the Company provide
that the Company shall indemnify each person who is or was a director or
officer of the Company to the fullest extent permitted under Section 145 of the
DGCL. Section 145 of the DGCL empowers a Delaware corporation to indemnify any
person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative (other than an action by or in the
right of such corporation) by reason of the fact that such person is or was a
director, officer, employee or agent of such corporation, or is or was serving
at the request of such corporation as a director, officer, employee or agent of
another corporation or enterprise. The Company shall indemnify such person
against expenses (including attorney's fees), judgments, fines and amounts paid
in settlements actually and reasonably incurred by such person in connection
with such action, suit or proceeding if such person acted in good faith and in
a manner such person reasonably believed to be in or not opposed to the best
interests of the corporation, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was unlawful,
provided that, under the Company's Bylaws, any such indemnification has been
authorized by the Board of Directors or the stockholders, as the case may be,
upon a determination that indemnification of the director, officer, employee or
agent is proper in the circumstances because the applicable standard of conduct
has been met. In addition, pursuant to its Bylaws, the Company shall, in
advance of the final disposition of any civil, criminal, administrative or
investigative action, suit or proceeding, pay the expenses (including
attorney's fees) incurred by any officer, director, employee or agent in
defending such action, provided that the director, officer, employee or agent
undertakes to repay such amount if it shall ultimately be determined that he is
not entitled to be indemnified by the Company.
Under Section 145 of the DGCL, a Delaware corporation may also
indemnify its directors, officers, employees and agents in an action by or in
the right of such corporation to procure a judgment in its favor under the same
conditions, except that no indemnification is permitted without a judicial
approval if the director, officer, employee or agent is adjudged to be liable
to the corporation. The indemnification provided is not deemed to be exclusive
of any other rights to which a director, officer, employee or agent may be
entitled under the corporation's bylaws, agreements, vote or otherwise.
Article Ninth of the Company's Certificate of Incorporation provides
that the personal liability of the directors of the Company is eliminated to
the fullest extent permitted by Section 102(b)(7) of the DGCL, as the same may
be amended and supplemented. As a result, a director of the Company will not be
personally liable to the Company or its stockholders for monetary damages for
breach of fiduciary duty as a director, except for liability (i) for a breach
of the director's duty of loyalty to the Company or its stockholders, (ii) for
acts or omissions not in
II-1
<PAGE>
good faith or which involve intentional misconduct or a knowing violation of
law, (iii) under Section 174 of the DGCL, or (iv) for any transaction from
which the director derived an improper personal benefit.
While the Certificate of Incorporation provides directors with
protection from awards for monetary damages for breaches of their duty of care,
it does not eliminate such duty. Accordingly, the Certificate of Incorporation
will have no effect on the availability of equitable remedies such as an
injunction or rescission based on a director's breach of his or her duty of
care.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
In the three years preceding the filing of this Registration
Statement, the Company has issued the following securities that were not
registered under the Securities Act:
On February 27, 1997 and July 9, 1997, the Company issued 100 and
1,800 shares of Common Stock, par value $.01 per share, respectively, to Lumen
based upon an exemption from registration under Section 4(2) of the Securities
Act.
On July 9, 1997, the Company issued 10 shares of Common Stock, par
value $.01 per share, and 6,864 shares of Series A Preferred Stock, par value
$.01 per share, to each of Robert Bolle and Maurice Bolle as partial
consideration for the purchase of Bolle France based upon an exemption from
registration under Section 4(2) of the Securities Act. On July 9, 1997, the
Company issued 20 shares of Common Stock, par value $.01 per share, and 12,614
shares of Series A Preferred Stock, par value $.01 per share, to each of Franck
Bolle and Patricia Bolle Passaquay as partial consideration for the purchase of
Bolle France based upon an exemption from registration under Section 4(2) of
the Securities Act.
On July 9, 1997, the Company issued 20 shares of Common Stock, par
value $.01 per share, and 12,582 shares of Series A Preferred Stock, par value
$.01 per share, to each of Brigitte Bolle and Christelle Roche as partial
consideration for the purchase of Bolle France based upon an exemption from
registration under Section 4(2) of the Securities Act.
The total value of the Common Stock issued to Lumen was $34,618,100.
The total value of the 100 shares of Common Stock issued to the above
individuals at the time of issuance was $1,822,000, and the total value of the
Series A Preferred Stock at the time of issuance was $11,055,000.
On May 29, 1998, the Company issued $7,000,000 aggregate principal
amount of its 0% Convertible Subordinated Notes due 2002 to OZ Master Fund,
Ltd. based upon an exemption from registration under the Securities Act.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits:
3.1 Amended and Restated Certificate of Incorporation. Incorporated by
reference to Exhibit 1 to the Company's Registration Statement on
Form 8-A (Commission File No. 000-23899).
3.2 Certificate of Designations of the Series B Preferred Stock.
Incorporated by reference to Exhibit 2 to the Company's Registration
Statement on Form 8-A (Commission File No. 000-23899).
3.3 Amended and Restated Bylaws. Incorporated by reference to Exhibit 3
to the Company's Registration Statement on Form 8-A (Commission File
No. 000-23899).
3.4 Amendment to Bylaws dated March 11, 1998. Incorporated by reference
to Exhibit 3.4 to the Company's Annual Report on Form 10-K for the
year ended December 31, 1997 (Commission File No. 000-23899).
II-2
<PAGE>
4.1 Specimen of Stock Certificate. Incorporated by reference to Exhibit
4 to the Company's Registration Statement on Form 8-A (Commission
File No. 000-23899).
4.2 Amended and Restated Share Purchase Agreement dated July 9, 1997
among BEC Group, Inc. ("BEC") (renamed Lumen Technologies, Inc. on
March 11, 1998) and Bolle Inc. (the "Company"), on the one hand, and
each of Robert Bolle, Maurice Bolle, Franck Bolle, Brigitte Bolle,
Patricia Bolle Passaquay and Christelle Roche (collectively, the
"Sellers"). Incorporated by reference to Exhibit 10.1 of BEC's
Current Report on Form 8-K, dated July 10, 1997 (Commission File No.
1-14360).
4.3 Letter Agreement dated July 9, 1997 by and among Martin E. Franklin
and each of the Sellers. Incorporated by reference to Exhibit 4.3 to
the Company's Registration Statement on Form S-1 (Registration No.
333-40279).
4.4 Letter Agreement dated December 15, 1997 by and among Martin E.
Franklin and each of the Sellers. Incorporated by reference to
Exhibit 6 to the Company's Registration Statement on Form 8-A
(Commission File No. 000-23899).
4.5 Letter from the Company to the Sellers regarding the Series A
Preferred Stock. Incorporated by reference to Exhibit 4.5 to the
Company's Annual Report on Form 10-K for the year ended December 31,
1997 (Commission File No. 000-23899).
4.6 Warrant Agreement among the Company and each of the Sellers.
Incorporated by reference to Exhibit 4.6 to the Company's Annual
Report on Form 10-K for the year ended December 31, 1997 (Commission
File No. 000-23899).
4.7 1998 Stock Incentive Plan. Incorporated by reference to Exhibit 4.7
to the Company's Annual Report on Form 10-K for the year ended
December 31, 1997 (Commission File No. 000-23899).
4.8 Convertible Subordinated Note Purchase Agreement dated May 29, 1998
between the Company and OZ Master Fund, Ltd.
4.9 Form of Convertible Subordinated Note.
4.10 Share Sale Agreement dated May 28, 1998 among the Company and Keith
Archibald Collicoat, Eric Henry Collicoat and Roger Howard Gibbons.
5.1 Opinion of Willkie Farr & Gallagher.
10.1 Employment Agreement and Memorandum of Understanding dated July 7,
1997 between the Company and Gary Kiedaisch. Incorporated by
reference to Exhibit 10.1 to the Company's Registration Statement on
Form S-1 (Registration No. 333-40279).
10.2 Employment Agreement dated July 9, 1997 between Societe Bolle SNC
and Franck Bolle (English translation). Incorporated by reference to
Exhibit 10.2 to the Company's Registration Statement on Form S-1
(Registration No. 333-40279).
10.3 Employment Agreement dated July 9, 1997 between Societe Bolle SNC
and Patricia Bolle Passaquay (English translation). Incorporated by
reference to Exhibit 10.3 to the Company's Registration Statement on
Form S-1 (Registration No. 333-40279).
10.4 Agreement dated September 20, 1995 between the Company and Steve N.
Haber. Incorporated by reference to Exhibit 10.4 to the Company's
Registration Statement on Form S-1 (Registration No. 333-40279).
10.5 Management Services Agreement between the Company and BEC.
Incorporated by reference to Exhibit 10.6 to BEC's Current Report on
Form 8-K, date of event March 11, 1998.
10.6 Bill of Sale and Assignment Agreement between BEC and the Company.
Incorporated by reference to Exhibit 10.4 to BEC's Current Report on
Form 8-K, date of event March 11, 1998.
II-3
<PAGE>
10.7 Indemnification Agreement by and among BEC, BILC Acquisition Corp.
and the Company. Incorporated by reference to Exhibit 10.5 to BEC's
Current Report on Form 8-K, date of event March 11, 1998.
10.8 Exclusive Customer Agreement dated as of October 23, 1997 by and
between the Company and Alyn Corporation. Incorporated by reference
to Exhibit 10.8 to the Company's Registration Statement on Form S-1
(Registration No. 333-40279).
10.9 Letter of Intent between the Company and Bill Bass Optical Pty Ltd.
dated January 6, 1998. Incorporated by reference to Exhibit 10.9 to
the Company's Registration Statement on Form S-1 (Registration No.
333-40279).
10.10 Agreement and Plan of Merger, dated as of July 26, 1995, among
Benson Eyecare Corporation, Benson Acquisition Corp., and Bolle
America, Inc. Incorporated by reference to Exhibit 10.1 to Benson
Eyecare Corporation's Current Report on Form 8-K, dated August 3,
1995 (Commission File No. 1-9435).
10.11 Agreement and Plan of Merger, dated as of February 11, 1996, between
Essilor International, S.A., Essilor of America, Inc., Essilor
Acquisition Corporation, Benson Eyecare Corporation, BEC and Omega
Opco, Inc. Incorporated by reference to Exhibit 10.1 to BEC's
Registration Statement on Form S-1 (Registration No. 333-3186).
10.12 Indemnification Agreement, dated as of February 11, 1996, by and
among Essilor International, S.A., Essilor of America, Inc., Essilor
Acquisition Corporation, Benson Eyecare Corporation, and BEC.
Incorporated by reference to Exhibit 10.3 to BEC's Registration
Statement on Form S-1 (Registration No. 333-3186).
10.13 Asset Purchase Agreement, dated as of February 11, 1996, by and
among Benson Eyecare Corporation, BEC and Optical Radiation
Corporation and Monsanto Company. Incorporated by reference to
Exhibit 10.2 to Benson Eyecare Corporation's Current Report on Form
8-K, dated February 12, 1996.
10.14 Stock Purchase Agreement, dated as of November 13, 1996, by and
among BEC, Foster Grant Group, L.P., Foster Grant Holdings, L.P. and
Accessories Associates, Inc. Schedules and other attachments to such
agreement are not filed herewith, but will be provided
supplementally to the Commission upon request. Incorporated by
reference to Exhibit 2.1 to BEC's Quarterly Report on Form 10-Q/A
for the period ended September 30, 1996.
10.15 Merger Agreement, dated as of June 30, 1994, among BEC (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 (Commission File No. 1-9435).
10.16 Amendment No. 1 to Merger Agreement, dated as of July 6, 1994, among
BEC (as assignee), Benson Acquisition Company, Inc. and Optical
Radiation Corporation. Incorporated by reference to Exhibit 99.2 to
Benson Eyecare Corporation's Current Report on Form 8-K, date of
event June 30, 1994 (Commission File No. 1-9435).
10.17 Amendment No. 2 to Merger Agreement, dated as of August 29, 1994, by
and among BEC, Optical Radiation Corporation and Benson Acquisition
Corporation. Incorporated by reference to Annex E to Benson Eyecare
Corporation's Registration Statement on Form S-4, dated September
12, 1994 (Commission File No. 1-9435).
10.18 Form of Indemnification Agreement between the Company and its
officers and directors. Incorporated by reference to Exhibit 10.22
to the Company's Registration Statement on Form S-1 (Registration
No. 333-40279).
10.19 Second Amended and Restated Credit Agreement, dated as of March 11,
1998, among the Company, NationsBank, National Association
("NationsBank") and the other lenders party thereto. Incorporated by
reference to Exhibit 10.23 to the Company's Annual Report on Form
10-K for the year ended December 31, 1997 (Commission File No.
000-23899).
II-4
<PAGE>
10.20 Amendment No. 1 to Second Amended and Restated Credit Agreement,
dated as of May 29, 1998 by and among the Company, NationsBank and
the other lenders party thereto.
21.1 List of the subsidiaries of the Company. Incorporated by reference
to Exhibit 21.1 to the Company's Registration Statement on Form S-1
(Registration No. 333-40279).
23.1 Consent of Price Waterhouse LLP
23.2 Consent of Befec-Price Waterhouse
The Company hereby agrees to furnish supplementally a copy of any
omitted schedules or exhibits to the above-described agreements to the
Commission upon request.
(b) Financial Statement Schedules:
All schedules have been omitted because they are not applicable or not
required or the required information is included in the financial statements or
notes thereto.
ITEM 17. UNDERTAKINGS.
The Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the registration
statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement;
provided, however, that paragraphs (1)(i) and (1)(ii) do not apply if
the information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed pursuant to Section 13 or
Section 15(d) of the Exchange Act that are incorporated by reference in the
registration statement;
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to
be a new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination
of the offering.
Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling persons
of the Registrant pursuant to the provisions, described under Item 14 above, or
otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission, such indemnification is against public
policy as expressed in the Securities Act and is, therefore, unenforceable. In
the event that a claim for indemnification against such liabilities (other than
the payment by the Registrant of expenses incurred or paid by a director,
officer or controlling person of the Registrant in the successful defense of
any action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the questions of whether such indemnification by it is against public policy as
expressed in the Securities Act and will be governed by the final adjudication
of such issue.
II-5
<PAGE>
(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part of
this registration statement in reliance upon Rule 430A and contained in a form
of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of this registration
statement as of the time it was declared effective.
(2) For purposes of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of prospectus
shall be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
II-6
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has
duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Rye, State of New York,
on June 12, 1998.
BOLLE INC.
By: /s/ Martin E. Franklin
----------------------
Martin E. Franklin
Title: Chairman of the Board
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each of the undersigned, being a
director or officer, or both of Bolle Inc., a Delaware corporation, hereby
constitutes and appoints Martin E. Franklin and Ian G.H. Ashken, and each of
them, his true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities, to sign any and all amendments (including
post-effective amendments) to this Registration Statement or any registration
statement for this offering that is to be effective upon the filing thereof
pursuant to Rule 462(b) under the Securities Act, and to file the same, with
all exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite, necessary or advisable to be done, as fully to
all intents and purposes as he might or could do in person, hereby ratifying
and confirming all that said attorneys-in-fact and agents, or any of them, or
their or his substitute or substitutes, may lawfully do or cause to be done by
virtue hereof.
Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed by the following persons in the capacities and on the
dates indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Martin E. Franklin Chairman of the Board, Director June 12, 1998
- -------------------------------------
Martin E. Franklin
/s/ Gary Kiedaisch Chief Executive Officer and Director June 12, 1998
- -------------------------------------
Gary Kiedaisch
/s/ Ian G.H. Ashken Executive Vice President of Finance and June 12, 1998
- ------------------------------------- Administration, Chief Financial
Ian G.H. Ashken Officer, Principal Accounting Officer,
Assistant Secretary and Director
/s/ Nora A. Bailey Director June 12, 1998
- -------------------------------------
Nora A. Bailey
/s/ Franck Bolle Director June 12, 1998
- -------------------------------------
Franck Bolle
/s/ Patricia Bolle Passaquay Director June 12, 1998
- -------------------------------------
Patricia Bolle Passaquay
/s/ David Moore Director June 12, 1998
- -------------------------------------
David Moore
/s/ David S. Moross Director June 12, 1998
- -------------------------------------
David S. Moross
</TABLE>
II-7
<PAGE>
Exhibit 4.8
================================================================================
BOLLE INC.
WITH
THE PURCHASERS LISTED
ON
EXHIBIT "A" HERETO
- --------------------------------------------------------------------------------
CONVERTIBLE SUBORDINATED NOTE PURCHASE AGREEMENT
- --------------------------------------------------------------------------------
DATED AS OF MAY 29, 1998
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BOLLE INC.
As of May 29, 1998
To the Purchasers listed
on Exhibit "A" to this Agreement
Dear Sirs:
BOLLE Inc., a Delaware corporation (the "Company"), agrees with each
Purchaser as follows:
I.A.1. AUTHORIZATION OF CONVERTIBLE NOTES.
The Company has authorized the issuance and sale of an aggregate of
$7,000,000 principal amount of its 0% Convertible Subordinated Notes due May
29, 2002 (the "Convertible Notes"). The Convertible Notes are convertible into
shares of the Company's common stock ("Common Stock"), par value $.01 per share
(such shares to be issued upon conversion of the Convertible Notes being
hereinafter referred to herein as the "Shares"), at the Conversion Price
defined in Article 24 of this Agreement. The Convertible Notes do not bear
interest. The Convertible Notes are to be sold pursuant to this Agreement to
the purchasers listed on Exhibit "A" to this Agreement (the "Purchasers"). The
Form of Convertible Note is attached hereto as Exhibit "B".
I.A.2. SALE AND PURCHASE OF CONVERTIBLE NOTES.
Subject to the terms and conditions hereof, the Company will sell to
each Purchaser, and each Purchaser will purchase from the Company, on the
Closing Date specified in Article 3, a Convertible Note or Convertible Notes in
the aggregate principal amount set forth opposite such Purchaser's name on
Exhibit "A" hereto, at a purchase price of 100% of such principal amount.
I.A.3. CLOSING.
The closing (the "Closing") of the purchase and sale of the
Convertible Notes will take place at the offices of Kane Kessler, P.C., 1350
Avenue of the Americas, New York, New York 10019, at 10:00 a.m., New York City
time, on May 29, 1998 or such other time and date as shall be mutually agreed
upon by the Purchasers and the Company. Such time and date is herein called the
"Closing Date."
On the Closing Date, the Company shall deliver to each Purchaser a
Convertible Note, dated the Closing Date, in the aggregate principal amount set
forth opposite such Purchaser's name on Exhibit "A" hereto, each such
Convertible Note to be registered in the name of the Purchaser or its nominee,
against delivery by the Purchaser to the Company of a certified or official
bank check(s) or wire transfer(s) in an aggregate amount equal to the aggregate
purchase
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price for such Convertible Notes, payable to the order of the Company
in immediately available funds.
I.A.4. REPRESENTATIONS AND WARRANTIES BY THE COMPANY.
The Company represents and warrants that:
I.A.4.1. Corporate Existence and Power. The Company is a corporation
duly incorporated, validly existing and in good standing under the laws of the
State of Delaware, and has all corporate powers required to carry on its
business as now conducted. The Company is duly qualified to do business as a
foreign corporation and is in good standing in each jurisdiction where the
character of the property owned or leased by it or the nature of its activities
makes such qualification necessary, except for those jurisdictions where the
failure to be so qualified would not, individually or in the aggregate, have a
Material Adverse Effect on the Company and its Subsidiaries taken as a whole.
For purposes of this Agreement, the term "Material Adverse Effect" means, with
respect to any person or entity, a material adverse effect on the condition
(financial or otherwise), business, properties, assets, liabilities (including
contingent liabilities), results of operations of the Company or its
Subsidiaries (as defined below). For purposes of this Agreement, the term
"Subsidiary" means, with respect to any entity, any corporation or other
organization of which securities or other ownership interests having ordinary
voting power to elect a majority of the board of directors or other persons
performing similar functions are directly or indirectly owned by such entity or
of which such entity is a partner or is, directly or indirectly, the beneficial
owner of 50% or more of any class of equity securities or equivalent profit
participation interests.
I.A.4.2. Corporate Authorization. The execution, delivery and
performance by the Company of this Agreement, and the consummation of the
transactions contemplated hereby (including, but not limited to, the sale,
issuance and delivery of the Convertible Notes, the subsequent issuance of the
Shares upon conversion of the Convertible Notes and the Additional Shares) have
been duly authorized by all required corporate action and no additional
corporate action is required for the approval of this Agreement. This Agreement
constitutes the legal, valid and binding agreement of the Company enforceable
against it in accordance with its terms, except as may be limited by
bankruptcy, reorganization, insolvency, moratorium and similar laws of general
application relating to or affecting the enforcement of rights of creditors and
except that enforceability of its obligations hereunder are subject to general
principles of equity (regardless of whether such enforceability is considered
in a proceeding in equity or at law).
I.A.4.3. Disclosure. The Company's filings and submissions with the
Commission (the "SEC Reports") comply in all material respects with all
applicable securities laws and no statement, report, or certificate filed with
the Commission contains any untrue statement of a material fact or omits to
state a material fact necessary in order to make the statements contained
therein not misleading. Since December 31, 1997, the Company has conducted its
business in the ordinary and usual course consistent with past practices and
there has not occurred any Material Adverse Effect.
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A.I.4.4. Capitalization. Except as disclosed below, the authorized
capital of the Company is as set out in its most recently filed Annual Report
on Form 10-K for the year ended December 31, 1997 (the "1997 Form 10-K"), which
discloses all outstanding options or warrants for the purchase of, or other
rights to purchase or subscribe for, or securities convertible into or
exchangeable for, Common Stock or other capital stock of the Company, or any
contracts or commitments to issue or sell Common Stock or other capital stock
of the Company or any such options, warrants, rights or other securities; and
from such date to the date hereof there has been no material change in the
amount or terms of any of the foregoing except for the grant of shares of
Common Stock pursuant to the Company's stock option plan. In connection with
the closing of the Bolle Australia Acquisition, the Company has issued 248,388
shares of Common Stock. In addition, in connection with the Bolle UK
Acquisition, the Company has agreed to issue shares of Common Stock having a
value of approximately $375,000. The outstanding Shares of Common Stock have
been duly authorized and validly issued and are fully paid and nonassessable
and all of such options, warrants and other rights have been duly authorized by
the Company. None of the outstanding Shares of Common Stock and options,
warrants and other rights to acquire Common Stock has been issued in violation
of the preemptive rights of any securityholder of the Company. The offers and
sales of the outstanding Shares of Common Stock and options, warrants and other
rights to acquire Common Stock were at all relevant times either registered
under the Securities Act and applicable state securities laws or exempt from
such requirements.
I.A.4.5. Concerning the Shares and the Common Stock. The Shares and
the Additional Shares have been duly authorized and, when the Shares are issued
upon conversion of the Convertible Note, or the Additional Shares are issued in
accordance with the terms of this Agreement, as the case may be, such shares
will be duly and validly issued, fully paid and non-assessable and will not
subject the holder thereof to personal liability by reason of being such
holder. The holders of outstanding shares of capital stock of the Company are
not entitled to preemptive or other rights to subscribe for the Shares or the
Convertible Note. The Shares have been duly reserved by the Company for
issuance upon conversion of the Convertible Note, and shall remain so reserved
as long as the Convertible Note may be converted. The Additional Shares have
been duly reserved by the Company for issuance pursuant to the terms of this
Agreement, and shall remain so reserved as long as such Additional Shares may
be required to be issued in connection with this Agreement. The Common Stock is
listed for trading on the NASDAQ National Market System and (1) the Company and
the Common Stock meet the criteria for continued listing and trading on NASDAQ;
(2) the Company has not been notified by the National Association of Securities
Dealers, Inc. (the "NASD") of any failure or potential failure to meet the
criteria for continued listing and trading on NASDAQ National Market and (3) no
suspension of trading in the Common Stock is in effect.
I.A.4.6. Non-contravention. The execution and delivery of this
Agreement, and the consummation by the Company of the issuance of the Shares
and the Additional Shares, do not and will not, with or without the giving of
notice or the lapse of time, or both, (i) result in any violation of any term
of the certificate of incorporation or by-laws of the Company, (ii) conflict
with or result in a breach by the Company of any of the
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terms or provisions of, or constitute a default under, or result in the
modification of, or result in the creation or imposition of any lien, security
interest, charge or encumbrance upon any of the properties or assets of the
Company pursuant to, any indenture, mortgage, deed of trust or other agreement
or instrument to which the Company is a party or by which the Company or any of
its properties or assets are bound or affected, (except as to any such
agreement for which the Company has obtained a written waiver in form, scope
and substance reasonably acceptable to the Purchaser), or (iii) violate or
contravene any applicable law, rule or regulation or any applicable decree,
judgment or order of any court, United States federal or state regulatory body,
administrative agency or other governmental body having jurisdiction over the
Company or any of its properties or assets, except as disclosed in Section 4.7
below, or (iv) have any Material Adverse Effect on any permit, certification,
registration, approval, consent, license or franchise necessary for the Company
to own or lease and operate its properties and to conduct any its business or
the ability of the Company to make use thereof.
I.A.4.7. Approvals. No authorization, approval or consent of, or
filing with, any court, governmental body, regulatory agency, self-regulatory
organization, or stock exchange or market or the stockholders of the Company is
required to be obtained or made by the Company in connection with the
execution, delivery and performance of this Agreement or the issuance of the
Shares or the Additional Shares as contemplated by this Agreement and the terms
of the Convertible Note, other than (1) listing of the Shares and the
Additional Shares on NASDAQ, (2) registration of the Shares and the Additional
Shares under the Securities Act as contemplated by Section 13, and (3) as may
be required under applicable state securities or "blue sky" laws.
I.A.4.8. SEC Reports. The Company has filed in a timely manner all
reports required to be filed under the Exchange Act and any other material
reports or documents required to be filed with the Commission and to the extent
that the Company used Rule 12b-25(b) under the Exchange Act with respect to a
report, that report has actually been filed within the time prescribed by such
Rule. All of such reports and documents complied, when filed, in all material
respects, with all applicable requirements of the Securities Act and the
Exchange Act.
I.A.4.9. Private Offering. Neither the Company nor any Person acting
on its behalf has taken or will take any action which might subject the
offering, issuance or sale of the Convertible Notes, the Shares and the
Additional Shares hereunder to the registration requirements of the Securities
Act; provided, that the representations hereunder made by each of the
Purchasers is true, correct and complete.
I.A.4.10. Registration Rights; Rights of Participation. Except as
described on Schedule 4.10 hereto, (A) the Company has not granted or agreed to
grant to any Person any rights (including "piggy-back" registration rights) to
have any securities of the Company registered with the Commission or any other
governmental authority which has not been satisfied and (B) no Person,
including, but not limited to, current or former shareholders of the Company,
underwriters, brokers or agents, has any right of first refusal, preemptive
right, right of
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participation, or any similar right to participate in the transactions
contemplated by this Agreement, which has not been waived.
I.A.4.11. No Brokers. The Company has not employed any financial
advisor, broker or finder and has not incurred (and will not incur) any
broker's, finder's, investment banking or similar fees, commissions or expenses
in connection with the transactions contemplated by this Agreement.
I.A.4.12. Absence of Litigation. Except as described in the SEC
Reports, there is no action, suit, proceeding, inquiry or investigation before
or by any court, public board or body pending or, to the knowledge of the
Company, threatened against or affecting the Company wherein an unfavorable
decision, ruling or finding would have a material adverse effect on the
business, properties, operations, condition (financial or other), results of
operations of the Company or the transactions contemplated by this Agreement,
or which would materially adversely effect the validity or enforceability of,
or the authority or ability of the Company to perform its obligations under
this Agreement.
I.A.4.13. No Default or Violation. The Company (i) is not in default
under or in violation of any indenture, loan or credit agreement or any other
agreement or instrument to which it is a party or by which it or any of its
properties is bound, (ii) in violation of any order of any court, arbitrator or
governmental body applicable to its property or assets, or (iii) in violation
of any statute, rule or regulation of any governmental authority to which it is
subject, except those that would result in a Material Adverse Effect.
I.A.5. SUBORDINATION.
I.A.5.1. Agreement to Be Bound. The Company covenants and agrees, and
each holder of Convertible Notes by his (its) acceptance thereof, likewise
covenants and agrees, that the Convertible Notes shall be issued subject to the
provisions contained in this Article 5; and each person holding any Convertible
Notes, whether upon original issue or upon transfer or assignment thereof,
accepts and agrees to be bound by such provisions. All Convertible Notes shall,
to the extent and in the manner hereinafter set forth, be subordinated and
subject in right of payment to the prior payment in full of all Senior
Indebtedness (as defined herein). Notwithstanding any other provisions of this
Article 5, conversions of the Convertible Notes and the issuance of Additional
Shares shall not be considered redemptions, acquisitions or retirements thereof
for purposes of this Article 5.
I.A.5.2. Priority of Senior Indebtedness. (a) No payment on account of
principal or interest on the Convertible Notes or any amount due or payable
pursuant to this Agreement shall be made, nor shall any assets be applied to
the purchase or other acquisition or retirement of the Convertible Notes or any
amount due or payable pursuant to this Agreement, nor shall the Purchaser
enforce any judgment or otherwise attach or seek remedy directly against any
property of the Company (whether before or after judgment), if, at the time of
such payment or application or immediately after giving effect thereto, there
shall exist a default (other than a default in the payment of any amount due)
in the payment of any amount due on any Senior Indebtedness or if there shall
have occurred an event of default with respect to any Senior Indebtedness, or
in the
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instrument under which the same has been issued, permitting the holders
thereof, after notice or lapse of time, or both, to accelerate the maturity
thereof, until the earliest to occur of (i) the date on which the Senior
Indebtedness to which such event of default related is discharged in accordance
with its terms, or (ii) the date such event of default is waived by the holders
of such Senior Indebtedness or otherwise cured; provided, that the Convertible
Notes shall not be considered "equity securities" for the purposes of
determining whether a default has occurred, or would occur, under Company
covenants pertaining to Senior Indebtedness which prohibit the redemption of
equity securities or require the maintenance of minimum equity ratios, until
such time as and to the extent that the Convertible Notes are actually
converted to Common Stock; and provided, further, that notwithstanding the
partial restriction of a redemption or other payment hereunder, payment shall
be made, if required by the terms hereof, to the extent possible without
causing an event of default under Senior Indebtedness, and the balance thereof
shall be paid as soon as such event of default is no longer continuing. Within
ten (10) Business Days after knowledge of any such default referred to in this
Section 5.2(a), the Company shall furnish a copy thereof to each holder of the
Convertible Notes, in the manner and at the address specified pursuant to
Article 17 hereof.
(b) Upon the occurrence and during the continuance of any Event of
Default under this Agreement or the Convertible Notes, or upon the occurrence
of an event requiring any amount to be due and payable pursuant to this
Agreement and notwithstanding any other provision contained herein or in the
Convertible Notes to the contrary, each Purchaser hereby agrees, for the
benefit of the holders of Senior Indebtedness, not to take or receive any
amount owing under the Convertible Notes or any amount due or payable pursuant
to this Agreement with respect thereto, or enforce any judgment or otherwise
attach or seek remedy directly against any property of the Company (whether
before or after judgment), until the earliest of, (i) if applicable, the date
on which the Senior Indebtedness to which such event of default related is
discharged in accordance with its terms or after the date that such event of
default is waived by the holders of such Senior Indebtedness or otherwise cured
or (ii) any voluntary or involuntary petition in bankruptcy filed by or against
the Company. Within ten (10) Business Days after knowledge of any Event of
Default under this Agreement or the Convertible Notes, the Company shall
furnish a copy thereof to the holders of Senior Indebtedness in the manner and
at the addresses specified in the documents and/or agreements evidencing the
applicable Senior Indebtedness.
I.A.5.3. Acceleration of Convertible Notes; Insolvency. Upon (i) any
acceleration of the principal amount due on the Convertible Notes or Senior
Indebtedness or (ii) any payment or distribution of assets of the Company of
any kind or character, whether in cash, property or securities, to creditors
upon any dissolution or winding up or total or partial liquidation or
reorganization of the Company, whether voluntary or involuntary or in
bankruptcy, insolvency, receivership or other proceedings, all amounts due or
to become due upon all Senior Indebtedness shall first be paid in full, or
payment thereof duly provided for, to the full satisfaction of the holders of
Senior Indebtedness before the holders of the Convertible Notes shall be
entitled to receive or retain any assets so paid or distributed in respect
thereof; and upon any such dissolution or winding up or liquidation or
reorganization, any payment or distribution of assets of the Company of any
kind or character, whether in cash, property or securities, to which the
holders of the Convertible Notes would be entitled, except for these
provisions, shall be paid by the Company or by any receiver, trustee in
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bankruptcy, liquidating trustee, agent or other person making such payment or
distribution, or by the holders of the Convertible Notes if received by them or
it, as the case may be, directly to the holders of Senior Indebtedness, to the
extent necessary to pay all such Senior Indebtedness in full, after giving
effect to any concurrent payment or distribution to or for the holders of
Senior Indebtedness before any payment or distribution is made to the holders
of the Convertible Notes.
I.A.5.4. Subrogation, Etc. Upon payment in full of all Senior
Indebtedness, the holders of Convertible Notes shall be subrogated to the
rights of the holders of Senior Indebtedness to receive payments or
distributions of assets of the Company pro rata in proportion to the respective
amounts then owing to the holders of Convertible Notes; and for purposes of
such subrogation, no payments or distributions to the holders of Senior
Indebtedness of any cash, property or securities to which the holders of
Convertible Notes would be entitled except for the provisions of this Section
5, and no payment pursuant to such provisions to the holders of Senior
Indebtedness, shall, as between the Company and its creditors (other than the
holders of Convertible Notes and the holders of the Senior Indebtedness), be
deemed to be a payment by the Company to or on account of Senior Indebtedness,
it being understood that the provisions of this Section 5 are and are intended
solely for the purpose of defining the relative rights of the holders of
Convertible Notes on the one hand and the holders of Senior Indebtedness on the
other hand. The holders of Senior Indebtedness may amend, modify and otherwise
deal with Senior Indebtedness without any notice to or approval of any holder
of Indebtedness ranking junior to Senior Indebtedness.
I.A.5.5. Enforcement. The foregoing subordination provisions shall be
for the benefit of the holders of Senior Indebtedness and may be enforced
directly by such holders against the holders of the Convertible Notes. Each
holder of Convertible Notes by his (or its) acceptance thereof shall be deemed
to acknowledge and agree that the subordination provisions of this Article 5
are, and are intended to be, an inducement and a consideration to each holder
of any Senior Indebtedness, whether such Senior Indebtedness was created or
acquired before or after the issuance of the Convertible Notes, to acquire and
continue to hold, or to continue to hold, such Senior Indebtedness and each
holder of Senior Indebtedness shall be deemed conclusively to have relied on
such subordination provisions in acquiring and continuing to hold, or in
continuing to hold, such Senior Indebtedness.
Upon any payment or distribution of assets of the Company, the holders
of the Convertible Notes shall be entitled to rely upon a certificate of the
receiver, trustee in bankruptcy, liquidation trustee, Company, agent or other
person making such payment or distribution, delivered to the holders of the
Convertible Notes, for the purpose of ascertaining the persons entitled to
participate in such distribution, the holders of the Senior Indebtedness and
other indebtedness of the Company, the amount thereof or payable thereon, the
amount or amounts paid or distributed thereon and all other facts pertaining
thereto or to the provisions of this Article 5.
I.A.5.6. Obligations Unimpaired. Nothing contained in this Article 5,
or elsewhere in this Agreement, or in the Convertible Notes, is intended to or
shall impair as between the Company, its creditors other than the holders of
Senior Indebtedness, and the holders of the
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Convertible Notes, the obligation of the Company, which shall be absolute and
unconditional, to pay the holders of the Convertible Notes the principal of and
interest on the Convertible Notes as and when the same shall become due and
payable in accordance with the terms thereof, or affect the relative rights of
the holders of the Convertible Notes and other creditors of the Company other
than the holders of Senior Indebtedness, nor shall anything herein or therein
prevent the holder of any Convertible Notes from exercising all remedies
otherwise permitted by applicable law upon default under this Agreement,
subject to the rights, if any, under this Article 5 of the holders of Senior
Indebtedness in respect to cash, property or securities of the Company received
upon the exercise of any such remedy. Nothing contained in this Article 5,
shall prevent the Company from making payment of the principal of or interest,
if applicable, on the Convertible Notes at any time except under the conditions
described in Section 5.2 or 5.3 or during the pendency of any dissolution,
winding up, liquidation or reorganization of the Company.
I.A.5.7. Definition of Senior Indebtedness. The term "Senior
Indebtedness" shall mean the principal, interest and other amounts due under
the terms of the instruments creating or evidencing all Consolidated Funded
Indebtedness of the Company permitted by Section 9.1 hereof from time to time,
including that owing to banks or other financial institutions (including, but
not limited to, under the terms of the Second Amended and Restated Credit
Agreement among the Company, the lenders executing a signature thereto and
NationsBank, National Association, as Agent, dated as of March 11, 1998, as may
be amended from time to time (the "Credit Facility")), an agency or agencies of
the federal government or other institutions engaged in the business of lending
money, unless expressly stated not to be superior in right of payment to the
Convertible Notes; provided that "Senior Indebtedness" shall in any case
include all amounts owing under or pursuant to the Credit Facility to the
extent of the current available credit facilities in the maximum principal
amount at anytime outstanding of $28,000,000.00 which shall include a Term Loan
Facility (as defined in the Credit Facility) and a Revolving Credit Facility
(as defined in the Credit Facility), including a letter of credit subfacility
of up to $5,000,000 together with all interest and other amounts due or payable
thereunder, notwithstanding the Company's compliance or non-compliance with
Section 9.1; and provided, further, that "Senior Indebtedness" shall in any
case not include any amounts owing to Lumen Technologies, Inc. or to a
Subsidiary or an Affiliate of the Company or Lumen Technologies, Inc. (other
than holders of the Convertible Notes), notwithstanding the Company's
compliance or non-compliance with Section 9.1 hereof.
I.A.6. REPRESENTATIONS OF THE PURCHASERS.
I.A.6.1. Binding Agreement. Each Purchaser has full power, authority
and legal capacity to (i) execute, deliver and perform this Agreement and (ii)
consummate the transactions contemplated hereby. This Agreement has been duly
authorized, approved, executed and delivered by each Purchaser. This Agreement
constitutes the legal, valid and binding obligation of each Purchaser
enforceable against it in accordance with its terms.
I.A.6.2. Acquisition of Shares for Own Account; Restrictions on
Transfer. Each Purchaser is acquiring the Convertible Notes, and to the extent
acquired, the Shares and the Additional Shares, for investment and not with a
view to the sale or distribution thereof, and is acquiring such Convertible
Notes for its own account and not on behalf of others and has not
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granted any other person any right or option or any participation or beneficial
interest in any of the Convertible Notes and the Shares and the Additional
Shares. Each Purchaser acknowledges its understanding that the Convertible
Notes, the Shares and the Additional Shares constitute restricted securities
within the meaning of Rule 144 of the Commission under the Securities Act of
1933, as amended (the "Securities Act"), and that none of such Convertible
Notes, the Shares and the Additional Shares may be sold except pursuant to an
effective registration statement under the Securities Act or in a transaction
exempt from registration under the Securities Act, and acknowledges that it
understands the meaning and effect of such restriction. Each Purchaser has
sufficient knowledge and experience in financial and business matters so that
it is capable of evaluating the risks and merits of the acquisition of the
Convertible Notes. Each Purchaser is aware of and has investigated the
Company's business, management and financial condition, has had a satisfactory
opportunity to ask questions of, and receive answers from, agents and employees
of the Company concerning the business of the Company and the terms and
conditions of this transaction and has had access to such other information
about the Company as each Purchaser deemed necessary or desirable to reach an
informed and knowledgeable decision to purchase the Convertible Notes, the
Shares and the Additional Shares.
I.A.6.3. Accreditation. Each Purchaser is an "accredited investor"
within the meaning of Rule 501 of the rules and regulations of the Commission
promulgated under the Securities Act, and has the financial ability to bear the
economic risk of its acquisition of the Convertible Notes, the Shares and the
Additional Shares. The principal place of business of each of the Purchasers is
New York. Each Purchaser hereby agrees to provide the Company and its counsel
with such information as is reasonably necessary to enable the Company to file
a Form D with the Commission with respect to the transactions contemplated
hereby. In furtherance of the foregoing, each Purchaser acknowledges that a
purchase of the Convertible Notes is only available to a Purchaser who is an
"accredited investor."
I.A.6.4. No Brokers. The Purchaser has not employed any financial
advisor, broker or finder and has not incurred (and will not incur) any
broker's, finder's, investment banking or similar fees, commissions or expenses
in connection with the transactions contemplated by this Agreement.
I.A.6.5. Compliance with Securities Laws. Each of the Purchasers shall
comply in all material respects with all applicable requirements of federal and
state securities laws.
I.A.7. CONDITIONS TO OBLIGATIONS.
I.A.7.1. The Purchasers' obligation to purchase the Convertible Notes
hereunder is subject to satisfaction of the following conditions at the
Closing:
(a) Accuracy of Representations and Warranties. The representations
and warranties of the Company herein or in any certificate or document
delivered pursuant hereto shall be true and correct on and as of the Closing
Date with the same effect as though made on and as of the Closing Date.
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(b) Performance; No Default. The Company shall have performed and
complied, in each case in all material respects, with all material agreements
and conditions contained in this Agreement required to be performed or complied
with by it prior to or at the Closing and at the time of the Closing, no Event
of Default shall have occurred and be continuing.
(c) Compliance with Securities Laws. The offering and sale of the
Convertible Notes at or prior to the Closing under this Agreement shall have
complied in all material respects with all applicable requirements of federal
and state securities laws.
(d) Consents. The Company shall receive the consent of the lenders
under the Credit Facility.
(e) Legal Opinion. Each Purchaser shall have received from counsel for
the Company an opinion with respect to the matters set forth in Exhibit D,
which opinion shall be addressed to the Purchasers, dated the date of the
Closing, and in form and substance reasonably satisfactory to the Purchasers.
(f) Officer's Certificate. The Purchasers shall have received a
certificate of an officer of the Company, dated the date of the Closing,
stating that the conditions specified in this Section 7.1 have been fully
satisfied.
(g) Expenses. At the Closing, the Company shall have paid, or
reimbursed the Purchasers for, the Purchasers' fees and expenses to the extent
provided in Section 25 hereof.
(h) Convertible Notes. The Company shall have delivered to each
Purchaser a Convertible Note in the aggregate principal amount set forth
opposite such Purchaser's name on Exhibit A hereto.
(i) Secretary's Certificate. Each of the Purchasers shall have
received a certificate of the Secretary of the Company (in form and substance
satisfactory to the Purchasers) certifying (i) that attached thereto are true
and complete copies of the certificate of incorporation and by-laws of the
Company, (ii) that attached thereto are true and complete copies of the
resolutions of the Board of Directors of the Company authorizing the execution,
delivery and performance of this Agreement and any other documents, instruments
and certificates required to be executed by it in connection herewith and
approving the consummation of the transactions in the manner contemplated
hereby including, but not limited to, the authorization and issuance of the
Convertible Notes and the Common Stock issuable on conversion thereof and the
reservation thereof, (iii) the names and true signatures of the officers of the
Company signing this Agreement and all other documents to be delivered in
connection with this Agreement, and (iv) such other matters as the Purchasers
may reasonably request.
(j) Other Documents. The Purchasers shall have received such other
documents as the Purchaser may reasonably require.
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Any condition specified in this Section 7.1 may be waived if consented
to by each Purchaser.
I.A.7.2. The Company's obligation to issue the Convertible Notes
hereunder is subject to satisfaction of the following conditions at the
Closing:
(a) Accuracy of Representations and Warranties. The representations
and warranties of each of the Purchasers herein or in any certificate or
document delivered pursuant hereto shall be true and correct on and as of the
Closing Date with the same effect as though made on and as of the Closing Date.
(b) Performance; No Default. Each Purchaser shall have performed and
complied, in each case in all material respects, with all material agreements
and conditions contained in this Agreement required to be performed or complied
with by it prior to or at the Closing and at the time of the Closing, no Event
of Default shall have occurred and be continuing.
(c) Consents. The Company shall have received the consent of the
lenders under the Credit Facility.
(d) Loan Proceeds. At the Closing, the Purchasers shall have delivered
to the Company a certified or official bank check(s) or wire transfer(s) in an
aggregate amount of $7,000,000 payable to the order of the Company in
immediately available funds.
(e) Other Documents. The Company shall have received such other
documents as the Company may reasonably require.
Any condition specified in this Section 7.2 may be waived if consented
to by the Company.
I.A.8.2 AFFIRMATIVE COVENANTS.
I.A.8.1. Office for Payment, Exchange and Registration. So long as any
of the Convertible Notes are outstanding, the Company will maintain an office
or agency in the United States where the Convertible Notes may be presented for
payment, conversion, exchange or registration of transfer as provided in this
Agreement. Such office or agency initially shall be the office of the Company
set forth in Article 17 hereof, which place may thereafter from time to time be
changed by notice to the holders of all Convertible Notes then outstanding.
I.A.8.2. Notices. The Company will give notice to all holders of
Convertible Notes within 10 Business Days after it learns of the existence of
any Event of Default or any event which, with the giving of notice or the lapse
of time or both, would become an Event of Default, describing the same and the
period of existence thereof, and what action the Company has taken, is taking
or proposes to take with respect thereto.
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I.A.8.3. Corporate Existence, Etc. The Company will at all times
preserve and keep in full force and effect its corporate existence, and rights
and franchises deemed material to its business, and those of each of its
material Subsidiaries.
I.A.8.4. Payment of Taxes. The Company will, and will cause each of
its Subsidiaries to, pay all taxes, assessments and other governmental charges
imposed upon it or any of its properties or assets or in respect of any of its
franchises, business, income or profits before any penalty or interest accrues
thereon, provided that no such tax, assessment, charge or claim need be paid if
being contested in good faith by appropriate proceedings promptly initiated and
diligently conducted and if such reserve or other appropriate provision, if
any, as shall be required by generally accepted accounting principles shall
have been made therefor.
I.A.8.5. Maintenance of Properties; Insurance. The Company will
maintain or cause to be maintained in reasonably good repair, working order and
condition, normal wear and tear excepted, all material properties used in the
business of the Company and its Subsidiaries. The Company will maintain or
cause to be maintained, with financially sound and reputable insurers,
insurance with respect to its properties and business and the properties and
business of its Subsidiaries against loss or damage of the kinds customarily
insured against by corporations of established reputation engaged in the same
or similar business and similarly situated, of such types and in such amounts
as are customarily carried under similar circumstances by such other
corporations.
I.A.8.6. Compliance with Laws. The Company will, and will cause each
Subsidiary to, comply in all material respects with all applicable laws,
ordinances, rules, regulations, and requirements of governmental authorities
except where (i) noncompliance could not reasonably be expected to have a
material adverse effect on the business, operations or condition (financial or
otherwise) of the Company and its Subsidiaries, taken as a whole, or (ii) the
necessity of compliance therewith is contested in good faith by appropriate
proceedings.
I.A.8.7. Listing and Reservation of Shares. The Company shall (i) with
reasonable promptness following the Closing Date prepare and file with the
NASDAQ National Market (as well as any other national securities exchange or
market on which the Common Stock is then listed) an additional shares listing
application or a letter acceptable to the NASDAQ Market System covering and
listing all Shares and the Additional Shares, (ii) take all reasonable steps
necessary to cause the Shares and the Additional Shares to be approved for
listing in the NASDAQ Market System (as well as on any other national
securities exchange or market on which the Common Stock is then listed) as soon
as possible thereafter, and (iii) provide to the Purchasers evidence of such
listing, and the Company shall take all steps reasonably necessary to maintain
the listing of its Common Stock on such market or exchange.
I.A.8.8. Conversion Procedures. Exhibit C attached hereto sets forth
the procedures with respect to the conversion of the Convertible Notes,
including the form of conversion notice to be provided upon conversion and
instructions as to the procedures for conversion.
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I.A.8.9. No Violation of Applicable Law. Notwithstanding any provision
of this Agreement to the contrary, if the redemption of Convertible Notes or
Shares otherwise required under this Agreement would be prohibited by law or
contractual restrictions, such redemption shall be effected as soon as it is
permitted under such law or such contractual restriction; provided, that
interest payable by the Company with respect to any such redemption shall
continue to accrue in accordance with Section 12, to the extent applicable.
I.A.8.10. Press Releases. The press release or other public
announcement concerning this Agreement or the transactions contemplated hereby
will be mutually satisfactory to the Company and the Purchaser, except that the
Company may issue such press release or make public statements as they
reasonably believe to be required by law.
I.A.9. NEGATIVE COVENANTS.
The Company covenants and agrees that it shall not without the written
consent of 50% in principal amount of the Convertible Notes, take any of the
following actions:
I.A.9.1. The Company shall not create, incur or assume any
Consolidated Funded Indebtedness, unless following the creation, incurrence or
assumption of such Consolidated Funded Indebtedness, the Company's Consolidated
Leverage Ratio (as defined in Section 24 hereof) is less than or equal to 3.50
to 1.00.
I.A.9.2. The Company shall not: (a) declare any dividends (other than
dividends payable in capital stock of the Company) on any shares of its capital
stock (other than the Company's Series A Preferred Stock and Series B Preferred
Stock); (b) except in connection with the Company's Series A Preferred Stock
and Series B Preferred Stock, apply its property or assets to the purchase,
redemption or other retirement of, or set apart any sum for the payment of any
dividends on, or for the purchase, redemption or other retirement of, or make
any other distribution by reduction of capital or otherwise in respect of, any
shares of any class of capital stock of the Company.
I.A.9.3. The Company shall not consummate a Merger (as defined in
Section 24 hereof) with and into any other Person or permit any other Person to
effect a Merger into it; provided, that the Company may effect any such Merger
if in connection therewith the holders of the Convertible Notes are given the
option, exercisable within twenty days after written notice of such proposed
Merger, to have their Convertible Notes redeemed in full in connection with and
upon consummation of such Merger or (B) to have their Convertible Notes assumed
by the successor entity in connection with and upon consummation of such
Merger.
I.A.9.4. The Company shall not, and shall use its best efforts to
ensure that any Affiliate of the Company shall not, sell, offer for sale or
solicit offers to buy any security (as defined in Section 2 of the Securities
Act) that is integrated with the offer or sale of the Convertible Notes or the
Shares in a manner that would require registration under the Securities Act of
the sale of the Convertible Notes.
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I.A.9.5. The Company shall not (i) register any shares of Common
Stock, except as described in Schedule 4.10, or (ii) issue securities in
reliance upon an exemption from registration under Regulation S of the
Securities Act, in each case for the earlier of (x) 75 days following the date
that the Registration Statement has been declared effective by the Commission
or (y) 225 days from the Closing Date.
I.A.10. DEFAULTS.
I.A.10.1. If any of the following events (herein called a "default" or
"defaults") shall occur and be continuing:
(a) The Company fails (i) to pay the principal amount of the
Convertible Notes when due, whether at maturity, upon redemption, upon
acceleration or otherwise, as applicable, or (ii) to pay any
installment of interest hereon or Conversion Penalty, if any, when due
and, in the case of this clause (ii) of this paragraph only, such
failure continues for a period of ten (10) days after the due date
therefor;
(b) The Company fails to issue shares of Common Stock to a
Purchaser upon exercise by such Purchaser of the conversion rights of
the Purchaser in accordance with the terms of this Agreement and after
the Deadline Day;
(c) The Company fails to comply with the provisions of Section 9
of this Agreement in any material respect;
(d) Any material representation or warranty of the Company made
herein or in any agreement, statement or certificate given in writing
pursuant hereto shall be false or misleading in any material respect
when made; provided that any purported failure of the Company to
comply with the 20% Rule shall not be deemed to breach any such
representation, warranty, statement or certificate of the Company, so
long as Section 11.12 hereof is complied with by the Company;
(e) The Company or any Subsidiary shall commence a voluntary case
or other proceeding seeking liquidation, reorganization or other
relief with respect to itself or its debts under any bankruptcy,
insolvency or other similar law now or hereafter in effect or seeking
the appointment of a trustee, receiver, liquidator, custodian or other
similar official of it or any substantial part of its property, or
shall consent to any such relief or to the appointment of or taking
possession by any such official in an involuntary case or other
proceeding commenced against it, or shall make a general assignment
for the benefit of creditors, or shall fail generally to pay its debts
as they become due or shall admit in writing its inability generally
to pay its debts as the become due;
(f) An involuntary case or other proceeding shall be commenced
against the Company or any Subsidiary seeking liquidation,
reorganization or other relief with respect to it or its debts under
any bankruptcy, insolvency or other similar law
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now or hereafter in effect or seeking the appointment of a trustee,
receiver, liquidator, custodian or other similar official of it or any
substantial part of its property, and such involuntary case or other
proceeding shall remain undismissed and unstayed for a period of sixty
(60) consecutive days;
then, or at any time thereafter, and as long as such default is continuing for
fourteen (14) days after written notice of such default has been delivered to
the Company by the majority in interest of the Purchasers, (except for the
events described in Section 10(e) and (f) for which no notice shall be given
and no grace period shall be provided) or unless such default shall have been
waived in writing by the majority in interest of the Purchasers (which waiver
shall not be deemed to be a waiver of any subsequent default) the majority in
interest of the Purchasers may declare an event of default (an "Event of
Default") and the Company shall pay (subject to the provisions of Article 5
hereof) to the Purchasers (A) an amount equal to the sum of (1) the principal
amount of the Convertible Notes then outstanding and (2) all other amounts
payable hereunder, together with (B) the Additional Shares (as defined in
Section 24 hereof) applicable to such principal amount (except with respect to
any principal amount to which the Redemption Price is applicable), all of which
shall immediately become due and payable, without demand, presentment or
notice, all of which hereby are expressly waived, together with all costs,
including, without limitation, reasonable legal fees and expenses of
collection, and the Purchasers shall be entited to exercise all other rights
and remedies available at law or in equity, subject, however, to the provisions
of Article 5 hereof.
I.A.11. CONVERSION.
I.A.11.1. Conversion. On or after the date hereof, and prior to the
maturity of the Convertible Notes or, if sooner, the Redemption Date (as
hereinafter defined), the holder of a Convertible Note shall have the right, at
the option of such holder (whether or not payment upon the Convertible Notes is
prohibited by the subordination provisions of Article 5) to convert, subject to
the terms and provisions of this Article 11, all or, subject to the provision
contained in this Section 11.1, any portion of the Convertible Notes held by
such holder into the number of fully paid and nonassessable Shares as shall be
equal to the aggregate principal amount of Convertible Notes then being
converted divided by the Conversion Price then in effect, by delivery of the
Convertible Notes to the Company at the office of the Company provided for in
Section 8.2 herein; provided, however, that no holder of a Convertible Note
shall be permitted to exercise its rights with respect to partial conversions
as herein described unless each such holder of a Convertible Note elects to
convert a minimum of at least $100,000 principal amount of its Convertible Note
or any additional amounts in multiples thereof; provided, further, that the
Company shall not be required to issue any fractional shares in connection with
any conversion pursuant to this Article 11. Each such conversion shall be made
as specified hereunder and in accordance with the procedures and form of
conversion notice ("Conversion Notice") set out in Exhibit C.
I.A.11.2. Delivery of Stock Certificates; Time Conversion Effective;
No Adjustment for Interest or Dividends. As promptly as practicable after the
receipt of a Conversion Notice from a holder of Convertible Notes (and in any
case within three Trading Days after the Conversion Date (as defined below)),
the Company shall deliver or cause to be delivered to or upon
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the written order of the holder of the Convertible Note so surrendered,
certificates representing the number of fully paid and nonassessable Shares
into which the Convertible Note is being converted. Subject to the following
provisions of this Section 11.2, such conversion shall be deemed to have been
made at the close of business on the date of the Company's receipt of a
properly completed and duly executed Conversion Notice (the "Conversion Date"),
so that the rights of the holder of such Convertible Note as a holder thereof,
shall cease at such time and the person or persons entitled to receive any of
the Shares upon conversion of the Convertible Notes shall be treated for all
purposes as having become the record holder or holders of such Shares at such
time; provided, however, that no such surrender on any date when the stock
transfer books of the Company shall be closed, shall be effective to constitute
the person or persons entitled to receive Shares upon such conversion as the
record holder or holders of such Shares on such date, but such surrender shall
be effective to constitute the person or persons entitled to receive such
Shares as the record holder or holders thereof for all purposes at the close of
business on the next succeeding day on which such stock transfer books are open
or the Company is required to convert Convertible Notes. If such certificate or
certificates are not delivered to or as directed by the applicable holder or
before the fourth (4th) Trading Day after the Conversion Date, the Company
shall pay to such holder, in cash, as liquidated damages and not as a penalty,
$1,500 for each Trading Day after such fourth Trading Day until the eleventh
(11th) Trading Day (which day is referred to herein as the "Deadline Day")
after the Conversion Date (being a maximum of 8 Trading Days). If the Company
fails to deliver to the holder such certificate or certificates pursuant to
this Section on or prior to the Deadline Day, the Company shall pay to such
holder the Conversion Penalty within Seven (7) Business Days of the Company's
receipt of documents, invoices or other reasonable evidence prepared by such
holder supporting the calculation of the Conversion Penalty.
If the day for the exercise of the conversion right shall not be a
Trading Day, then such conversion right will automatically be deemed to be
exercised on the next succeeding day which is a Trading Day.
I.A.11.3. [INTENTIONALLY OMITTED].
I.A.11.4. Adjustment of Conversion Price. The Conversion Price shall
be subject to adjustment as of the Closing Date as follows:
(a) In case the Company shall, after the date hereof, (i) pay a
stock dividend or make a distribution in shares of its capital stock
(whether shares of its Common Stock or of capital stock of any other
class), (ii) subdivide its outstanding shares of Common Stock, (iii)
combine its outstanding shares of Common Stock into a smaller number
of shares, or (iv) issue by reclassification of its shares of Common
Stock any shares of capital stock of the Company, the Conversion Price
in effect immediately prior to such action shall be adjusted so that
the holder of a Convertible Note thereafter surrendered for conversion
shall be entitled to receive an equivalent number of shares of capital
stock of the Company which he would have owned immediately following
such action had such Convertible Note been converted immediately prior
thereto. Any adjustment made pursuant to this subsection (a) shall
become effective immediately after the record date in the case of a
dividend or
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distribution and shall become effective immediately after the
effective date in the case of a subdivision, combination or
reclassification.
(b) In any case in which this Section 11.4 shall require that an
adjustment be made immediately following a record date or an effective
date, the Company may elect to defer (but only until five Business
Days following the mailing by the Company to the holders of
Convertible Notes of the certificate required by subsection (h) of
this Section 11.4) issuing to the holder of any Convertible Note
converted after such record date or effective date the shares of
Common Stock issuable upon such conversion over and above the shares
of Common Stock issuable upon such conversion on the basis of the
Conversion Price prior to adjustment, and paying to such holder any
amount of cash in lieu of a fractional share.
(c) No adjustment in the Conversion Price shall be required to be
made unless such adjustment would require an increase or decrease of
at least one percent (1%) in such price; provided, however, that any
adjustments which by reason of this subsection (g) are not required to
be made shall be carried forward and taken into account in any
subsequent adjustment. All calculations under this Section 11.4 shall
be made to the nearest cent.
(d) Whenever the Conversion Price is adjusted as provided in
Section 11.4(a) herein, the Company will promptly mail to the holders
of the Convertible Notes, a certificate of the Company's Treasurer or
Chief Financial Officer setting forth the Conversion Price as so
adjusted and a brief statement of facts accounting for such
adjustment.
(e) Irrespective of any adjustment or change in the Conversion
Price and the number of Shares actually purchasable under the
Convertible Notes, the Convertible Notes theretofore and thereafter
issued may continue to express the Conversion Price per Share and the
number of Shares purchasable thereunder as the Conversion Price per
Share and the number of Shares purchasable as expressed upon the
Convertible Notes when initially issued.
I.A.11.5. Company's Consolidation or Merger. If the Company shall at
any time consolidate or merge with and into another corporation, (a) the
Company shall give at least twenty (20) days prior written notice to the
holders of the Convertible Notes of such consolidation or merger and the terms
thereof, and (b) the holder of a Convertible Note shall thereafter be entitled
to receive, upon the conversion thereof, the securities or property to which a
holder of the number of Shares then deliverable upon the conversion thereof
would have been entitled upon such consolidation or merger, and the Company
shall take such steps in connection with such consolidation or merger as may be
necessary to assure such holder that the provisions of this Agreement shall
thereafter be applicable, as nearly as reasonably may be in relation to any
securities or property thereafter deliverable upon the conversion of the
Convertible Note including, but not limited to, obtaining a written
acknowledgement from the continuing corporation or other appropriate
corporation of its obligation to supply such securities or property upon such
conversion and to honor the obligations under this Agreement
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and the Convertible Notes. A sale of all or substantially all the assets of the
Company shall be deemed a consolidation or merger for the foregoing purposes as
well as Section 9.3 hereof.
I.A.11.6. Reserve of Sufficient Shares. The Company will reserve and
keep available a sufficient number of shares of its Common Stock to satisfy the
conversion requirements of all outstanding Convertible Notes and the Additional
Shares. The Company will take all such action as may be necessary to insure
that all Shares issued upon conversion of the Convertible Notes and the
Additional Shares will be duly and validly authorized and issued and fully paid
and nonassessable.
I.A.11.7. Taxes on Conversion. The issuance of certificates for Shares
upon the conversion of Convertible Notes shall be made without charge to the
holders of Convertible Notes converting such Convertible Notes for any issue or
stamp tax in respect of the issuance of such certificates, and such
certificates shall be issued in the respective names of, or in such names as
may be directed by, the holders of the Convertible Notes converted; provided,
however, that the Company shall not be required to pay any tax which may be
payable in respect of any transfer involved in the issuance and delivery of any
such certificate in a name other than that of the holder of the Convertible
Note converted, and the Company shall not be required to issue or deliver such
certificates unless or until the person or persons requesting the issuance
thereof shall have paid to the Company the amount of such tax or shall have
established to the satisfaction of the Company that such tax has been paid.
I.A.11.8. Cancellation of Converted Convertible Notes. All Convertible
Notes which have been converted in full shall be cancelled by the Company and
no Convertible Notes shall be issued in lieu thereof.
I.A.11.9. Notice to Holders of Convertible Notes. In case at any time:
(a) the Company shall take any action which would require an
adjustment in the Conversion Price pursuant to Section 11.4(a); or
(b) there shall be any capital reorganization or reclassification
of the Common Stock (other than a change in par value or from par
value to no par value or from no par value to par value of the Common
Stock), whether or not such reorganization or reclassification results
in an adjustment in the Conversion Price, or any consolidation or
merger to which the Company is a party and for which approval of any
stockholders of the Company is required, or any sale or transfer of
all or substantially all of the assets of the Company; or
(c) there shall be a voluntary or involuntary dissolution,
liquidation or winding-up of the Company;
then, in any one or more of said cases, the Company shall give written notice
to the holders of the Convertible Notes, not less than twenty (20) days before
any record date or other date set for definitive action, of the date on which
such adjustment, distribution, reorganization, reclassification, sale,
consolidation, merger, dissolution, liquidation or winding up shall take place,
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as the case may be. Such notice shall also set forth such facts as shall
indicate the effect of such action (to the extent such effect may be known at
the date of such notice) on the current Conversion Price and the kind and
amount of the Shares and other securities and property deliverable upon
conversion of the Convertible Notes. Such notice shall also specify the date as
of which the holders of the Common Stock of record shall be entitled to
exchange their Common Stock for securities or other property deliverable upon
such adjustment, distribution, reorganization, reclassification, sale,
consolidation, merger, dissolution, liquidation or winding up, as the case may
be (on which date, in the event of voluntary or involuntary dissolution,
liquidation or winding up of the Company, the right to convert the Convertible
Notes into Shares shall terminate).
Without limiting the obligation of the Company to provide notice to
the holders of Convertible Notes or Shares of corporate action hereunder, it is
agreed that failure of the Company to give such notice shall not invalidate
such corporate action of the Company.
I.A.11.10. Certain Transactions. Notwithstanding anything to the
contrary contained in this Agreement or in the Convertible Notes, in the event
that a Purchaser of Convertible Notes or any of such Purchaser's Associates or
Affiliates have initiated, engaged in, or completed any Arbitrage Transaction,
then the Purchaser shall promptly give notice to the Company ("Arbitrage
Notice") to convert that principal amount of Convertible Notes which when
converted into Shares of Common Stock shall equal the same number of Shares of
Common Stock that is subject to the Arbitrage Transaction. In the event that a
Purchaser does not provide the Company with the Arbitrage Notice within 90 days
of an Arbitrage Transaction such holder shall be deemed to automatically and
immediately have elected on the date of such Arbitration Transaction to convert
that principal amount of Convertible Notes which when converted into Shares of
Common Stock shall equal the same number of Shares of Common Stock that is
subject to such Arbitrage Transaction.
I.A.11.11. Optional Company Conversion.
(a) In the event that at any time following the sixtieth (60th) day
after the effectiveness of the Registration Statement, the Closing Price of the
Common Stock, as reported on NASDAQ, or if not listed on NASDAQ, on any
securities exchange on which Common Stock is then listed, for 20 consecutive
Trading Days (at any time after the effectiveness of the Registration
Statement) is in excess of $7.0875 per share, following notice pursuant to
Section 11.11(b) given at any time thereafter to all holders of Convertible
Notes, as provided below, the Company may at its option, require the holders of
the Convertible Notes to convert in whole or in part the Convertible Notes into
Shares of Common Stock, as herein described; provided, that in the event of a
conversion pursuant to the provisions of this Section 11.11, the holders of the
Convertible Notes shall be entitled to receive registered Shares of the Common
Stock. The holder of any Convertible Notes shall be required to convert such
Convertible Notes held by such holder into the number of fully paid and
nonassessable Shares as shall be equal to the aggregate principal amount of
Convertible Notes then being converted divided by the Conversion Price then in
effect, by delivery of the Convertible Notes to the Company at the office of
the Company provided for in Section 8.1 herein. The Company shall not be
required to issue any fractional shares in connection with
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any conversion pursuant to this Article 11. In the event that any Purchaser
shall be required to convert the Convertible Notes held by it in an amount less
than the entire aggregate principal amount outstanding of such Convertible
Notes held by such Purchaser, the Company shall, or shall direct its transfer
agent to, issue to such Purchaser certificates for the Shares of Common Stock
for which such Convertible Note is being converted in such denominations as are
required for delivery to such Purchaser, and the Company shall, or shall direct
its transfer agent to, thereupon deliver such certificates to or in accordance
with the instructions of such Purchaser, and the Company shall issue to such
Purchaser a new Convertible Note, duly executed by the Company, in form and
substance identical to the Convertible Note surrendered by such Purchaser, for
the balance of the aggregate principal amount of Convertible Notes that have
not been so converted.
(b) Company Conversion Procedures. At least 10 days prior to the date
fixed for any conversion of Convertible Notes pursuant to Section 11.11 above
(the "Company Conversion Date"), written notice shall be sent to each holder of
Convertible Notes, notifying such holder of the conversion to be effected,
specifying the Company Conversion Date, and calling upon such holder to
surrender to the Company, in the manner and at the place designated, his
Convertible Notes to be converted (the "Company Conversion Notice"). On or
after the Company Conversion Date, each holder of Convertible Notes to be
converted shall surrender to the Company the Convertible Notes, in the manner
and at the place designated in the Company Conversion Notice, and thereupon the
Shares of Common Stock shall be delivered to the person whose name appears on
such Convertible Notes as the owner thereof and each surrendered Convertible
Notes shall be cancelled.
I.A.11.12. Shares Issuance Limitation. If, on any date of requested
conversion, redemption or repayment, as the case may be, (A) the Common Stock
is then listed for trading on the NASDAQ National Market, NASDAQ Small Cap
Market, the American Stock Exchange, or the New York Stock Exchange, or if
rules similar to Rule 4460(i) of the NASDAQ Stock Market, Inc. (or any
successor or replacement provision thereof, the "20% Rule") are applicable to
the over-the-counter market or an exchange or market to which the Common Stock
is then trading and the Company's Common Stock is listed for trading on such
market or exchange, (B) the 20% Rule is applicable on that date, (C) the
Conversion Price then in effect is such that the aggregate number of shares of
Common Stock that would then be issuable upon conversion of all outstanding
Convertible Notes or through the issuance of Additional Shares, together with
any shares of Common Stock previously issued upon conversion of the Convertible
Notes or through the issuance of Additional Shares, would equal or exceed 20%
of the number of shares of Common Stock outstanding on the Closing Date (the
"Issuable Maximum"), and (D) the Company has not previously obtained
Shareholder Approval (as defined below), then the Company shall issue to any
holder so requesting conversion of Convertible Notes its pro rata portion of
the Issuable Maximum in the same ratio that the principal amount of Convertible
Notes held by any such holder bears to the aggregate outstanding principal
amount of all of the Convertible Notes then outstanding and, with respect to
any shares of Common Stock that otherwise would have been issuable to such
holder in respect of the conversion notice at issue hereunder in excess of such
holder's pro rata portion of the Issuable Maximum (the "Surplus Amount"), the
Company shall
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have the option to either (1) as promptly as possible, but in no event later
than 90 days after such requested Conversion Date, convene a meeting of the
holders of the Common Stock and use its reasonable efforts (which may include,
among other things, hiring a proxy solicitor) to obtain the Shareholder
Approval and the approval of the Company's Board of Directors or (2) in lieu of
issuing such Surplus Amount, redeem in cash that outstanding principal amount
of the Convertible Notes, which relates to such Surplus Amount, at a redemption
price equal 108% of the principal amount then being repaid or redeemed;
provided, that if the Company has elected to obtain Shareholder Approval under
clause (1) above, the holders of a majority of the outstanding principal amount
of Convertible Notes may request, in lieu of such meeting, that the Company
redeem each holder's Surplus Amount as set forth herein and provided, further
that if the Company fails for any reason to obtain such Shareholder Approval
within the time period set forth in (1) above, the Company shall be obligated
to redeem the principal amount of Convertible Notes not converted as a result
of the provisions of this Section in accordance with the provisions of clause
(2) above. "Shareholder Approval" means the approval by a majority of the total
votes cast on the proposal, in person or by proxy, at a meeting of the
shareholders of the Company held in accordance with the Company's Certificate
of Incorporation and by-laws, of the issuance by the Company of shares of
Common Stock exceeding the Issuable Maximum as a consequence of the conversion
of Convertible Notes into Common Stock at a price less than the greater of the
book or market value on the Closing Date as and to the extent required pursuant
to Rule 4460(i) of the NASDAQ Stock Market or Rule 713 of the American Stock
Exchange (or any successor or replacement provision thereof), as applicable.
Notwithstanding anything to the contrary contained herein, in the event that
the Company redeems any such holder's Surplus Amount of the Convertible Notes
pursuant to this Section 11.2, no Additional Shares will be issued by the
Company in respect of such amount being redeemed or repaid.
I.A.12. MANDATORY REDEMPTION OF CONVERTIBLE NOTES BY THE COMPANY.
The Company shall not directly or indirectly, call, prepay, redeem, or
repurchase, any Convertible Notes or any portion thereof except as set forth in
this Article 12 or in Article 11 or in Section 9.3.
I.A.12.1. Mandatory Redemption by the Company. (a) The Company shall
redeem, subject to the provisions contained in Article 5 hereof, the
Convertible Notes (if not previously converted) at the Redemption Price
therefor pursuant to the terms of this Section 12 on the one hundred ninetieth
(190th) day following the date of issuance of the Convertible Notes in the
event that the Registration Statement has not been declared effective by the
SEC within one hundred and eighty (180) days after the Closing Date in
accordance with the provisions of Article 13 hereof.
(b) The Company shall redeem, subject to the provisions contained in
Article 5 hereof, the Convertible Notes (if not previously converted) pursuant
to the terms of this Section 12 within twenty days after the date that the
Company's Common Stock shall
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cease to be listed on the NASDAQ National Market, the NASDAQ
Small Cap Market, the NYSE or the AMEX.
I.A.12.2. Notice of Redemption. The Company shall redeem any
Convertible Notes pursuant to Section 12.1 by giving notice of such redemption
(the "Redemption Notice"), by personal delivery, overnight courier, certified
mail or by facsimile, signed by an authorized officer, to the holders of
Convertible Notes, not less than three (3) days prior to the date upon which
the redemption is to be made (the "Redemption Date"). The Redemption Notice
shall specify (i) the aggregate principal amount of the Convertible Notes to be
redeemed, (ii) the date of such redemption, and (iii) the Redemption Price, if
applicable.
I.A.12.3. Partial Redemption. In the event of a partial redemption by
the Company pursuant to this Article 12, the aggregate principal amount of each
redemption of Convertible Notes pursuant to Section 12.1 hereof, shall be
allocated among the Convertible Notes at the time outstanding, in proportion,
as nearly as practicable, to the respective unpaid principal amounts of such
Convertible Notes. Any redemption required to be made hereunder which cannot be
made in full, or which can be made only in part, shall be made on such date to
the extent possible, and the balance thereof shall be made as soon as permitted
thereafter.
I.A.12.4. Surrender of Convertible Notes Upon Redemption. In the event
that any Convertible Notes shall be surrendered to the Company as provided in
this Article 12, interest shall cease to accrue upon such Convertible Notes so
surrendered.
I.A.13. RESTRICTIONS ON TRANSFER; REGISTRATION RIGHTS.
I.A.13.1. Transferability. The holders of the Convertible Notes are
only entitled to transfer the Convertible Notes, subject to strict compliance
with all applicable laws, with the prior written consent of the Company, which
consent shall not be unreasonably withheld.
I.A.13.2. Legend. The Company may endorse on all Convertible Notes and
on all certificates evidencing Shares (issued upon conversion of the
Convertible Notes) and the Additional Shares an appropriate legend restricting
their transfer, which in the case of the Convertible Notes shall be in the
terms set out in Exhibit "B" hereto and in the case of the Shares and the
Additional Shares shall read as follows "THE SHARES REPRESENTED BY THIS
CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT"). THE SHARES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT
BE SOLD, TRANSFERRED, PLEDGED, ASSIGNED OR OTHERWISE DISPOSED OF IN THE ABSENCE
OF AN EFFECTIVE REGISTRATION STATEMENT FOR THESE SHARES UNDER THE ACT OR AN
OPINION, IF REQUESTED, OF COUNSEL SATISFACTORY TO THE COMPANY THAT REGISTRATION
IS NOT REQUIRED UNDER THE ACT"; provided, that, no such legend shall be
endorsed on any Convertible Note, Shares or Additional Shares certificates
which, when issued, are no longer subject to the restrictions of this Article
13, and provided, further, that if an opinion of satisfactory counsel (in-house
counsel of a Purchaser shall be deemed satisfactory counsel) which opinion
shall be reasonably satisfactory to counsel for the
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Company concludes that the legend is no longer necessary, the Company will
deliver upon transfer or exchange Convertible Notes or otherwise in connection
with this Agreement, stock certificates without such legends.
I.A.13.3. Covenant to Register. The Company shall use its best efforts
to promptly file a registration statement ("Registration Statement") within
sixty (60) days of the Closing Date, with the Commission to register the
Registrable Securities (as defined in Section 24 hereof) for an offering to be
made on a continuous or delayed basis pursuant to Rule 415 under the Securities
Act, if available to the Company, covering all of the Registrable Securities.
Such registration statement shall be on Form S-1 or Form S-3 under the
Securities Act, if such Forms are then available for use by the Company, or
another appropriate form that is available to the Company permitting
registration of such Registrable Securities for resale by the holders of
Convertible Notes, Shares or Additional Shares ("Holders") in the manner or
manners reasonably designated by them (including, without limitation, one or
more underwritten offerings). The Registration Statement shall state, to the
extent permitted by Rule 416 under the Securities Act, that it also covers such
indeterminate number of shares of Common Stock as may be required to effect
conversion of the Convertible Note to prevent dilution resulting from stock
splits, stock dividends or similar events. Except for the parties described on
Schedule 4.10 hereto, the Company shall not permit any securities other than
the Registrable Securities issuable in connection with the transactions
contemplated by this Agreement to be included in the Registration Statement.
The Company shall use its best efforts to cause the Registration Statement to
be declared effective by the Commission as soon as practicable after the filing
of the Registration Statement relating to such Shares. The Holder shall
cooperate with the Company to provide all such necessary information as shall
be required by the Company to file the Registration Statement. The Company
shall maintain the prospectus relating to the Registrable Securities effective
for so long as the Holder desires to dispose of the Shares, not to exceed a
period of four years from the date hereof. In the event that the Registration
Statement is not declared effective by the Commission within one hundred and
eighty (180) days after the Closing Date, then the Convertible Notes shall be
redeemed by the Company in accordance with the terms and conditions set forth
in Article Twelve.
I.A.13.4. Terms and Conditions of Registration. Except as otherwise
provided herein, in connection with any Registration Statement filed pursuant
to Sections 13.3 herein, the following provisions shall apply:
(i) All expenses in connection with the preparation and filing of a
Registration Statement filed pursuant to Sections 13.3 shall be borne solely by
the Company, except for any transfer taxes payable with respect to the
disposition of such Registrable Securities.
(ii) The Company shall use its reasonable efforts to cause all of the
Registrable Securities covered by such Registration Statement to be listed on
NASDAQ or on such other securities exchange as such shares may then be listed,
on which similar shares are listed for trading, if the listing of such
registered shares is permitted by such exchange.
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(iii) Following the effective date of such Registration Statement, the
Company shall, upon the request of the Holders, forthwith supply such number of
prospectuses (including exhibits thereto and preliminary prospectuses and
amendments and supplements thereto) meeting the requirements of the Securities
Act and such other documents as are referred to in the prospectus as shall be
reasonably requested by the Holders to permit the Holders to make a public
distribution of their Shares.
(iv) The Company shall use its reasonable efforts to register the
Registrable Securities covered by any such registration statements filed
pursuant to Section 13.3 under such securities or Blue Sky laws in addition to
those in which the Company would otherwise sell shares, as the Holders shall
request, except that neither the Company nor the Holders shall for any such
purpose be required to execute a general consent to service of process or to
qualify to do business as a foreign corporation in any jurisdiction where it is
not so qualified. The fees and expenses incurred in connection with such
registration shall be borne by the Company.
(v) The Holders shall cooperate fully with the Company and provide the
Company with all information reasonably requested by the Company for inclusion
in the registration statement or as necessary to comply with the Securities
Act.
(vi) The Company shall notify the Holders, at any time after
effectiveness when a prospectus relating thereto is required to be delivered
under the Securities Act of the happening of any event as a result of which the
prospectus included in such registration statement, as then in effect, includes
an untrue statement of a material fact or omits to state any material fact
required to be stated therein or necessary to make the statements therein not
misleading in light of circumstances then existing (and upon receipt of such
notice and until a supplemented or amended prospectus as set forth below is
available, the Holders shall not offer or sell any securities covered by such
registration statement and shall return all copies of such prospectus to the
Company if requested to do so by it), and at the request of the Holders prepare
and furnish the Holders as promptly as practicable, a reasonable number of
copies of a supplement to or an amendment of such prospectus as may be
necessary so that, as thereafter delivered to the purchasers of such shares,
such prospectus shall not include an untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to
make the statements therein not misleading in light of the circumstances then
existing.
13.5.Indemnification.
(i) In the event of the registration of any Registrable Securities of
the Company under the Securities Act pursuant to the provisions of Sections
13.3, the Company agrees to indemnify and hold harmless the Holders, each
underwriter, broker or dealer, if any, and their respective directors, officers
and employees, of such Shares, and each other person, if any, who controls the
holders of the Convertible Notes, the Shares or the Additional Shares (or a
permitted assignee thereof), such underwriter, broker or dealer within the
meaning of the Securities Act, from and against any and all losses, claims,
damages or liabilities (or actions in respect thereof), joint or several, to
which the Holders (and as applicable) its directors, officers or employees, or
such underwriter, broker or dealer or controlling person may become subject
under
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the Securities Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon any
untrue statement or alleged untrue statement of any material fact contained in
any registration statement under which such Registrable Securities were
registered under the Securities Act, any preliminary prospectus or final
prospectus relating to such Registrable Securities, or any amendment or
supplement thereto, or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, or any violation by
the Company of any rule or regulation under the Securities Act applicable to
the Company or relating to any action or inaction required by the Company in
connection with any such registration and will reimburse the Holders, each such
underwriter, broker or dealer and controlling person, and their respective
directors, officers or employees, for any legal or other expenses reasonably
incurred by the Holders or such underwriter, broker or dealer or controlling
person in connection with investigating or defending any such loss, claim,
damage, liability or action; provided, however, that the Company will not be
liable in any such case to the extent that any such loss, claim, damage or
liability arises out of or is based upon an untrue statement or alleged untrue
statement or omission or alleged omission made in such registration statement,
such preliminary prospectus, such final prospectus or such amendment or
supplement thereto in reliance upon and in conformity with written information
furnished to the Company by the Holders and as applicable, such Holders'
directors, officers or employees, or such underwriter, broker, dealer or
controlling person for use in the preparation thereof. Such indemnity shall
remain in full effect irrespective of any investigation by any person
indemnified above.
(ii) In the event of the registration of any Registrable Securities of
the Holders under the Securities Act for sale pursuant to the provisions of
this Agreement, the Holders, jointly and severally, agree to indemnify and hold
harmless the Company, its directors, officers and employees, from and against
any losses, claims, damages or liabilities, joint or several, to which the
Company, its directors, officers or employees, may become subject under the
Securities Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon any
untrue statement or alleged untrue statement of any material fact contained in
any registration statement under which such Registrable Securities were
registered under the Securities Act, any preliminary prospectus or final
prospectus relating to such Registrable Securities, or any amendment or
supplement thereto, or arise out of or are based upon omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, which untrue statement
or alleged untrue statement or omission or alleged omission was made therein in
reliance upon and in conformity with written information furnished to the
Company by the Holders for use in the preparation thereof. Such indemnity shall
remain in full effect irrespective of any investigation by any person
indemnified above.
(iii) Promptly after receipt by a person entitled to indemnification
under this Section 13.5 (for purposes of this Section 13.5, an "Indemnified
Party") of notice of the commencement of any action or claim relating to any
registration statement filed under Sections 13.3 or as to which indemnity may
be sought hereunder, such Indemnified Party will, if a claim for
indemnification hereunder in respect thereof is to be made against any other
party hereto (for purposes of this Section 13.5, an "Indemnifying Party"), give
written notice to
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such Indemnifying Party of the commencement of such action or claim, but the
failure to so notify the Indemnifying Party will not relieve it from any
liability which it may have to any Indemnifying Party otherwise than pursuant
to the provisions of this Section 13.5 and shall also not relieve the
Indemnifying Party of its obligations under this Section 13.5, except to the
extent that the Indemnifying Party is damaged solely as a result of the failure
to give timely notice. In case any such action is brought against an
Indemnified Party, and it notifies an Indemnifying Party of the commencement
thereof, the Indemnifying Party will be entitled (at its own expense) to
participate in and, to the extent that it may wish, jointly with any other
Indemnifying Party similarly notified, to assume the defense with counsel
satisfactory to such Indemnified Party, of such action and/or to settle such
action and, after notice from the Indemnifying Party to such Indemnified Party
of its election so to assume the defense thereof, the Indemnifying Party will
not be liable to such Indemnified Party for any legal or other expenses
subsequently incurred by such Indemnified Party in connection with the defense
thereof, other than the reasonable cost of investigation; provided, however,
that no Indemnifying Party and no Indemnified Party shall enter into any
settlement agreement which would impose any liability on such other party or
parties without the prior written consent of such other party or parties.
(iv) Contribution. To the extent any indemnification by an
Indemnifying Party as set forth in this Section is applicable by its terms but
is prohibited or limited by law, the Indemnifying Party agrees to make the
maximum contribution with respect to any amounts for which it would otherwise
be liable under this Section to the fullest extent permitted by law. In
determining the amount of contribution to which the respective parties are
entitled, there shall be considered the relative fault of each party, the
parties' relative knowledge of and access to information concerning the matter
with respect to which the claim was asserted, the opportunity to correct and
prevent any statement or omission and any other equitable considerations
appropriate under the circumstances; provided, that (a) no contribution shall
be made under circumstances where the maker would not have been liable for
indemnification under the fault standards set forth in this Section 13.5, (b)
no person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any other
person who was not guilty of such fraudulent misrepresentation and (c)
contribution by any seller of securities under the Registration Statement shall
be limited in amount to the proceeds received by such seller from the sale of
such securities.
I.A.13.6. Reports Under Exchange Act. With a view to making available
to the Purchasers the benefits of Rule 144, the Company agrees to:
(a) furnish to each Purchaser so long as such Purchaser owns
Registrable Securities, promptly upon request, (i) a copy of the most recent
annual or quarterly report of the Company and such other reports and documents
so filed by the Company and (ii) such other information as may be necessary to
permit the Purchasers to sell such securities pursuant to Rule 144 without
registration; and
(b) if at any time the Company is not required to file such reports
with the SEC, use its best efforts to, upon the request of a Purchaser, make
publicly available other information so long as is necessary to permit
publication by brokers and dealers of quotations for
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the Common Stock and sales of the Registrable Securities in accordance with
Rule 15c2-11 under the Exchange Act.
I.A.13.7. Survival. The indemnity and contribution agreements
contained in this Article 13 shall remain operative and in full force and
effect regardless of (i) any termination of this Agreement or any underwriting
agreement, (ii) any investigation made by or on behalf of any Indemnified Party
or by or on behalf of the Company and (iii) the consummation of the sale or
successive resales of the Shares.
I.A.14. REPLACEMENT OF CONVERTIBLE NOTES.
Upon receipt of evidence satisfactory to the Company of the loss,
theft, destruction or mutilation of any Convertible Note and, in the case of
any such loss, theft, or destruction, upon delivery of a bond of indemnity
satisfactory to the Company (provided that, in the case of any Purchaser, the
written Affidavit of Loss and undertaking of such Purchaser to indemnify the
Company shall be satisfactory to the Company) or in the case of any such
mutilation, upon surrender and cancellation of such Convertible Note, the
Company will issue a new Convertible Note of like tenor as if the lost, stolen,
destroyed or mutilated Convertible Note were then surrendered for exchange in
lieu of such lost, stolen, destroyed or mutilated Convertible Note.
I.A.15. AMENDMENT AND WAIVER.
Except as set forth in Article 5, this Agreement and the Convertible
Notes may be amended (or any provision thereof waived) with the consent of the
Company and the Purchasers holding in excess of fifty percent (50%) in
aggregate principal amount of the Convertible Notes then outstanding. The
Company and each holder of a Convertible Note then or thereafter outstanding
shall be bound by any amendment or waiver effected in accordance with the
provisions of this Article, whether or not (y) any such holder consented to
such amendment or waiver or (z) such Convertible Note shall have been marked to
indicate such modification, but any Convertible Note issued thereafter shall
bear a notation as to any such modification. Promptly after obtaining the
written consent of the holders herein provided, the Company shall transmit a
copy of such modification to all of the holders of the Convertible Notes then
outstanding.
I.A.16. HOME OFFICE PAYMENT.
The Company will make payments of principal and any other cash
payments required pursuant to the terms of this Agreement by check payable to
the order of the holder of any such Convertible Notes duly mailed or delivered
to such holder at the address of such holder specified in Exhibit "A", or at
such other address as such holder may designate in writing, or , if requested
by any holder of the Convertible Notes, by wire transfer to its (or its
nominee's) account at any bank or trust company in the United States of
America, notwithstanding any contrary provisions herein or in any Convertible
Note with respect to the place of payment. All such payments shall be made in
immediately available funds. The Purchasers agree that, before any such
Convertible Note is assigned or transferred, the Purchasers will make or cause
to be made a notation thereon of principal payments previously made thereon and
of the date to which interest
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thereon has been paid and will notify the Company of the name and address of
the transferee of such Convertible Note if such name and address are known to
such Purchaser.
I.A.17. NOTICES.
All notices, requests, consents and other communications hereunder
shall be in writing and shall be deemed to have been made when delivered by
courier or mailed express mail or transmitted by telex, facsimile, or other
means of electronic transmission:
(a) if to a Purchaser or its nominee, at such Purchaser's address as
set forth in Exhibit "A" hereto, or at such other address as may have been
furnished to the Company by a Purchaser in writing; or
(b) if to any other holder of a Convertible Note, at such address as
the payee thereof shall have designated to the Company by a written notice
stating that such holder has acquired such Convertible Note and designating
such an address, or at such other address as may have been furnished to the
Company by such holder in writing; or
(c) if to the Company, at 555 Theodore Fremd Avenue, Suite B-302, Rye,
New York 10580 (fax number (914) 967-9400; Attention: President), or at
such other address as may have been furnished to the Purchasers or other
holders of Convertible Notes in writing by the Company, with a copy to
Robert L. Lawrence, Esq., Kane Kessler, P.C., 1350 Avenue of the Americas,
New York, New York 10019 (fax number (212) 245-3009).
I.A.18. ENTIRE AGREEMENT.
This Agreement and the Convertible Notes embody the entire agreement
and understanding between the Purchasers and the Company and supersede all
prior agreements and understandings relating to the subject matter hereof.
I.A.19. SUCCESSORS AND ASSIGNS.
All covenants and agreements in this Agreement contained by or on
behalf of any of the parties hereto shall bind and inure to the benefit of the
respective successors and assigns of the parties hereto whether so expressed or
not.
I.A.20. HEADINGS.
The headings of the articles and sections of this Agreement have been
inserted for convenience of reference only and shall in no way restrict or
otherwise modify any of the terms or provisions hereof.
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I.A.21. GOVERNING LAW, JURY TRIAL.
This Agreement shall be construed and enforced in accordance with and
governed by the laws of the State of New York, without giving effect to its
conflict of laws rules. Each party hereby irrevocably submits to the
non-exclusive jurisdiction of the state and federal courts sitting in the City
of New York, borough of Manhattan, for the adjudication of any dispute
hereunder or in connection herewith or with any transaction contemplated hereby
or discussed herein, and hereby irrevocably waives, and agrees not to assert in
any suit, action or proceeding, any claim that it is not personally subject to
the jurisdiction of any such court, or that such suit, action or proceeding is
improper. Each party hereby irrevocably waives personal service of process and
consents to process being served in any such suit, action or proceeding by
receiving a copy thereof sent to such party at the address in effect for
notices to it under this Agreement and agrees that such service shall
constitute good and sufficient service of process and notice thereof. Nothing
contained herein shall be deemed to limit in any way any right to serve process
in any manner permitted by law. EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES, TO
THE FULLEST EXTENT PERMITTED BY LAW, ALL RIGHT TO TRIAL BY JURY AS TO ANY ISSUE
RELATING HERETO IN ANY ACTION, PROCEEDING, OR COUNTERCLAIM ARISING OUT OF OR
RELATING TO THIS AGREEMENT.
I.A.22. COUNTERPARTS.
This Agreement may be signed in any number of counterparts with the
same effect as if the signatures thereto and hereto were upon the same
instrument. Facsimile signatures shall be deemed acceptable and binding.
I.A.23. SEVERABILITY.
Any provision hereof or of the Convertible Notes which is prohibited
or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof or thereof, and any such
prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.
I.A.24. DEFINITIONS.
The following terms, when used in this Agreement, shall have the
meanings described below. A copy of the definitions section to the Credit
Facility is attached hereto as Exhibit "E".
"Additional Shares" shall mean that number of registered shares of
Common stock that is derived at by multiplying (i) 360,000 by (ii) the
principal amount of the Convertible Note then being repaid or redeemed, as the
case may be, divided by the Original Principal Amount.
"Affiliate" shall mean any person that controls, is controlled by or
is under common control with the person in question. For purposes hereof,
"control" and the
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correlative definitions "controlled by" and "under common control with" shall
mean the power and ability to direct the management and affairs of the person
in question, whether through the ownership of voting securities, by contract or
otherwise.
"Agreement" has the meaning set forth in Article 1.
"Arbitrage Transaction" shall mean any puts, calls, future contracts,
short sales, hedging and other related arbitrage transactions with respect to
the Company's equity securities.
"Associate" shall include:
(a) any corporation or organization (other than the Company or any of
its majority-owned subsidiaries) of which the Purchaser is an executive officer
or partner, or of which the Purchaser is, directly or indirectly, the
beneficial owner of 10% or more of any class of equity securities;
(b) any trust or other estate in which the Purchaser has a substantial
beneficial interest or as to which the Purchaser serves serve as trustee or in
a similar fiduciary capacity;
(c) any relative or spouse of the Purchaser, or any relative of such
spouse, who has the same home as the Purchaser or who is a director or officer
of the Company or any of its subsidiaries; and
(d) any of the Purchaser's agents or representatives.
"beneficial owner" has the meaning set forth in Rule 13d-3 promulgated
by the Commission under the Exchange Act.
"Board" or "Board of Directors" means, with respect to any person
which is a corporation, a joint stock company or a business trust, the board of
directors or other group, however designated, which is charged with legal
responsibility for the management of such person, or any committee of such
board of directors or group, however designated, which is authorized to
exercise the power of such board or group in respect of the matter in question.
"Bolle Australia Acquisition" shall have the meaning ascribed to such
term in the Credit Facility.
"Bolle UK Acquisition" shall have the meaning ascribed to such term in
the Credit Facility.
"Business Day" means any day other than a Saturday, Sunday or other
day on which banks in the State of New York are legally authorized to close.
"Capital Lease" shall mean a lease of property which is capitalized on
the financial statements of the lessee in accordance with generally accepted
accounting principles, as well as, conditional sales or similar retention
agreements.
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"Closing" has the meaning set forth in Article 3.
"Closing Date" has the meaning set forth in Article 3.
"Closing Price" means (i) the last reported sale price as reported on
the NASDAQ National Market System or the successor principal National
securities exchange on which the Common Stock is listed or admitted to trading,
or (ii) if the Common Stock is not listed or admitted to trading on any
national securities exchange or on the NASDAQ National Market System, the
average of the highest reported bid and lowest reported asked price as
furnished by NASDAQ, the National Quotation Bureau, Inc., or comparable system
or organization, or (iii) in the absence of any of the foregoing, the fair
market value as determined in good faith by the Board of Directors of the
Company (which determination shall be conclusive).
"Commission" means the Securities and Exchange Commission and any
other similar or successor agency of the federal government administering the
Securities Act or the Exchange Act.
"Company" means Bolle Inc., a Delaware corporation, and its successors
and assigns.
"Consolidated EBITDA" shall have the meaning ascribed to such term in
the Credit Facility.
"Consolidated Funded Indebtedness" shall have the meaning ascribed to
such term in the Credit Facility.
"Consolidated Leverage Ratio" shall have the meaning ascribed to such
term in the Credit Facility.
"Conversion Date" has the meaning set forth in Section 11.2.
"Conversion Penalty" shall mean the amount of actual damages caused
directly by the Company's failure to deliver certificates representing Shares
on or prior to the Deadline Day.
"Conversion Price" means $5.25 per share, as the same may be adjusted
from time to time in accordance with the terms of this Agreement.
"Convertible Notes" has the meaning set forth in Article 1.
"Credit Facility" has the meaning set forth in Section 5.7.
"Deadline Day" has the meaning set forth in Section 11.2.
"EBITDA" shall have the meaning ascribed to such term in the Credit
Facility.
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"Event of Default" has the meaning set forth in Article 10.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"generally accepted accounting principles" or "GAAP" means, unless
otherwise stated, generally accepted accounting principles in effect from time
to time.
"Holders" has the meaning set forth in Section 13.3.
"Indebtedness" of any person means and includes, without duplication,
as of any date as of which the amount thereof is to be determined, (i) all
obligations of such person to repay money borrowed (including, without
limitation, all debentures payable and drafts accepted representing extensions
of credit, all obligations evidenced by bonds, debentures or other similar
instruments and all obligations upon which interest charges are customarily
paid), (ii) all Capital Leases and other leases of the Company and its
Subsidiaries in respect of which such person is liable as lessee or as the
guarantor of the lessee, (iii) the principal amount of all monetary obligations
which are secured by any lien or security interest existing on property owned
by such person whether or not the obligations secured thereby shall have been
assumed by such person, (iv) all guaranties of the Indebtedness of any other
person, (v) all amounts from time to time owing to trade creditors whether
arising in the ordinary course of such person's business, or otherwise, (vi)
obligations of the Company for the reimbursement of any obligor on any Letter
of Credit, banker's acceptance or similar credit transaction, and (vii) any
deferrals, renewals and extensions of any indebtedness described in clauses (i)
through (vi) above.
"Indebtedness for Money Borrowed" shall have the meaning ascribed to
such term in the Credit Facility.
"Maturity Date" shall mean May 29, 2002
"Merger" shall mean a merger or consolidation of the Company with or
into another corporation or a sale of all or substantially all of the assets of
the Company, but shall not be deemed to include such a transaction involving a
Subsidiary of the Company.
"NASDAQ" means the National Association of Securities Dealers
Automated Quotation System.
"Original Principal Amount" shall mean the aggregate principal amount
of the Convertible Notes issued by the Company on the Closing Date.
"Person" shall mean and include an individual, a partnership, a
corporation (including a business trust), a joint stock company, an
unincorporated association, a joint venture, a trust or other entity or a
governmental authority.
"Purchaser" has the meaning set forth in Article 1.
32
<PAGE>
"Redemption Price" means 108% of the principal amount of the
Convertible Notes then being redeemed or repaid.
"Registrable Securities" shall mean the Shares and the Additional
Shares.
"Registration Statement" has the meaning set forth in Article 13.
"SEC Reports" shall have the meaning set forth in Section 4.3.
"Securities Act" means the Securities Act of 1933, as amended.
"Senior Indebtedness" has the meaning set forth in Section 5.7.
"Share" or "Shares" has the meaning set forth in Article 1.
"Trading Day" means (a) a day on which the Common Stock is traded on
the NASDAQ National Market or other stock exchange or market on which the
Common Stock is then listed, or (b) if the Common Stock is not listed on the
NASDAQ National Market or any stock exchange or market, a day on which the
Common Stock is traded in the over-the-counter market, as reported by the OTC
Bulletin Board, or (c) if the Common Stock is not quoted on the OTC Bulletin
Board, a day on which the Common Stock is quoted in the over-the-counter
market as reported by the National Quotation Bureau Incorporated (or any
similar organization or agency succeeding its functions of reporting prices);
provided, that in the event that the Common Stock is not listed or quoted as
set forth in (a), (b) and (c) hereof, then Trading Day shall mean any day
except Saturday, Sunday and any day which shall be a legal holiday or a day on
which banking institutions in the State of New York are authorized or required
by law or other government action to close.
I.A.25. EXPENSES.
Each party to this Agreement shall bear all of its own expenses in
connection with the execution, delivery and performance of this Agreement and
the transactions contemplated hereby, including without limitation all fees and
expenses of its agents, representatives, counsel and accountants; provided,
however, that the Company shall be responsible the reasonable fees and expenses
of Gregory F.W. Todd, counsel to the Purchasers in an amount up to $20,000.
33
<PAGE>
If the foregoing correctly sets forth our understanding, please sign
below on the enclosed counterpart of this Agreement and return the same to the
undersigned.
Very truly yours,
BOLLE INC.
By: /s/ Ian G. H. Ashken
------------------------------------
Name: Ian G. H. Ashken
Title: Executive Vice President and
Chief Financial Officer
The foregoing Agreement is hereby
accepted and agreed to as of the
date first above written:
PURCHASER:
By: /s/ Daniel S. Och
------------------------------------
Name: Daniel S. Och
Title: Managing Member
OZ Management, L.L.C.
as Investment Manager of
OZ Master Fund, Ltd.
34
<PAGE>
EXHIBIT "A"
PURCHASERS
PRINCIPAL
AMOUNT TO BE PERCENTAGE
NAME AND ADDRESS OF PURCHASER PURCHASED OF OFFERING
- ----------------------------- --------- -----------
(a) Name: $7,000,000 100%
OZ Master Fund, Ltd.
(b) Address for communications:
c/o OZ Management, L.L.C.
153 East 53rd Street, 43rd Floor
New York, New York 10022
Attn: Joel Frank, CFO
Facsimile: 212-292-5950
(c) Address for payment of principal and
interest by wire transfer of immediately
available funds:
<PAGE>
EXHIBIT 4.9
[COPY]
THIS CONVERTIBLE SUBORDINATED NOTE AND THE SHARES OF COMMON STOCK ISSUABLE UPON
CONVERSION HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, AND ARE NOT TRANSFERABLE EXCEPT UPON THE CONDITIONS SPECIFIED IN THE
PURCHASE AGREEMENT REFERRED TO HEREIN.
BOLLE INC.
0% CONVERTIBLE SUBORDINATED NOTE DUE MAY 29, 2002
Dated: June 1, 1998
New York, New York
FOR VALUE RECEIVED, the undersigned, BOLLE INC. (the "Company"), a
Delaware corporation, hereby promises to pay to OZ Master Fund, Ltd. or
registered assigns, the principal sum of Seven Million ($7,000,000) Dollars, or
such lesser amount as may be outstanding hereunder on May 29, 2002, without
interest.
Payments of principal and other cash payments required pursuant to the
terms of the Purchase Agreement (as hereinafter defined), if applicable, shall
be made in lawful money of the United States of America at the principal office
of the Company in Rye, New York or at such other place as the Company shall have
designated for such purpose to the holder hereof in writing and may be paid by
check mailed, or wire transfer as provided in the Purchase Agreement referred to
below, to the registered address designated by the holder hereof for such
purpose.
This Convertible Note is one of a duly authorized issue of Convertible
Notes, aggregating $7,000,000 in principal amount, issued pursuant to a certain
Convertible Subordinated Note Purchase Agreement (hereinafter called the
"Purchase Agreement") dated as of May 29, 1998, between the Company and the
Purchasers named in said Purchase Agreement (capitalized terms not otherwise
defined herein shall have their respective meanings as set forth in the Purchase
Agreement).
This Convertible Note is subject to the provisions of and is entitled
to the benefits of the Purchase Agreement. In addition, the payment of the
principal and other cash payments, if applicable, on this Convertible Note is
subordinated in right of payment to the prior payment in full to all Senior
Indebtedness (as defined in the Purchase Agreement) of the Company to the extent
and in the manner set forth in the Purchase Agreement. Each holder of this
Convertible Note, by accepting the same, agrees to and shall be bound by the
provisions of the Purchase Agreement.
This Convertible Note is transferable only upon the conditions
specified in the Purchase Agreement. Notwithstanding the foregoing, however,
this Note is registered with the Company as to both principal and other cash
payments, if applicable, and
<PAGE>
transfer of this Convertible Note can be effected only by surrender of this
Convertible Note and either reissuance by the Company of this Convertible Note
or by issuance by the Company of a new Convertible Note. The Company shall
maintain a register for the transfer of this Convertible Note (the "Schedule"),
containing the name and address of any holder(s) of this Convertible Note. All
transfers of this Convertible Note and/or transferees of this Convertible Note
shall be registered in the Schedule. This Convertible Note may be assigned only
upon the surrender thereof at the address of the Company set forth in the
Purchase Agreement. Thereupon, the Company shall execute in the name of the
assignee either a reissued Convertible Note or a new Convertible Note, shall
register such transfer in the Schedule and shall deliver either a reissued
Convertible Note or a new Convertible Note to the holder. Upon surrender or
presentation of this Convertible Note to the Company for transfer, this
Convertible Note shall be duly endorsed and shall specify the name and address
of the transferee.
This Convertible Note is subject to certain mandatory and optional
conversion provisions pursuant to which this Convertible Note is convertible
into Shares of Common Stock of the Company (as set forth in Article 11 of the
Purchase Agreement) in the manner, and upon the terms and conditions provided in
the Purchase Agreement including, but not limited to, the procedures set forth
in Exhibit C and C-1 to the Purchase Agreement.
The Convertible Note shall be redeemed by the Company in the manner,
and upon the terms and conditions provided in the Purchase Agreement.
Notwithstanding anything to the contrary contained herein (subject to the
provisions of Article 5 of the Purchase Agreement) (a) or in the Purchase
Agreement, in the event that the Registration Statement is not declared
effective by the Commission within one hundred and eighty (180) days after the
Closing Date, then this Convertible Note shall be redeemed by the Company at the
Redemption Price in accordance with the terms and conditions set forth in
Article Twelve of the Purchase Agreement, and (b) a portion of the principal
amount of the Convertible Note may be redeemable by the Company at the
Redemption Price in accordance with the terms and conditions of Section 11.12 of
the Purchase Agreement.
In case an Event of Default, as defined in the Purchase Agreement,
shall occur and be continuing, the principal of this Convertible Note may be
declared due and payable in the manner and with the effect provided in the
Purchase Agreement.
No reference herein to the Purchase Agreement and no provision hereof
or thereof shall alter or impair the obligation of the Company, which is
absolute and unconditional, to pay the principal hereof and other cash payments
hereon at the respective times and places set forth herein and in the Purchase
Agreement.
2
<PAGE>
The terms and provisions of this Convertible Note may be amended or
waived in accordance with the procedures provided in Section 15 of the Purchase
Agreement.
This Convertible Note is delivered in and shall be construed and
enforced in accordance with and governed by the laws of the State of New York,
without giving effect to its conflict of laws rules.
Subject to the provisions of Article 19 of the Purchase Agreement, the
Company may treat the person in whose name this Convertible Note is registered
as the owner and holder of this Convertible Note for the purpose of receiving
payment of principal and interest on this Convertible Note and for all other
purposes whatsoever and the Company shall not be affected by any notice to the
contrary.
IN WITNESS WHEREOF, BOLLE INC. has caused this Convertible Note to be
dated, and to be executed on its behalf by its officer thereunto duly
authorized.
BOLLE INC.
By: /s/ Ian G. H. Ashken
---------------------------------
Name: Ian G. H. Ashken
Title: Chief Financial Officer
3
<PAGE>
REGISTER FOR TRANSFERS
Holder Name and Address
- ------ ----------------
c/o OZ Master Fund, Ltd. OZ Management, L.L.C.
153 East 53rd Street,
43rd Floor
New York, New York 10022
Attn: Joel Frank, CFO
Facsimile: 212-292-5950
4
<PAGE>
Exhibit 4.10
KEITH ARCHIBALD COLLICOAT
AND
ERIC HENRY COLLICOAT
AND
ROGER HOWARD GIBBONS
AND
BOLLE INC
---------------------
SHARE SALE
AGREEMENT
---------------------
<PAGE>
TABLE OF CONTENTS
PAGE
PART 1. DEFINITIONS AND INTERPRETATION................................2
1.1. Definitions....................................................2
1.2. Interpretation................................................10
1.3. Knowledge and Awareness.......................................11
1.4. Accounting Standards..........................................11
PART 2. CONDITIONS PRECEDENT TO AGREEMENT............................12
2.1. Conditions Precedent..........................................12
2.2. Best endeavours...............................................12
PART 3. AGREEMENT TO SELL............................................12
3.1. Sale of Shares................................................12
3.2. Associated rights.............................................12
PART 4. PURCHASE PRICE...............................................13
4.1. Amount........................................................13
4.2. Payment and issuing of the Bolle Stock........................13
4.3. Interest......................................................13
4.4. Method of Payment.............................................13
PART 5. PERIOD BEFORE COMPLETION.....................................14
5.1. Business in the ordinary course...............................14
5.2. Access........................................................15
5.3. Bank Authorities..............................................15
5.4. Prompt disclosure of breach...................................15
5.5. Insurance.....................................................15
5.6. Registration Statement........................................16
PART 6. NO ASSIGNMENT................................................16
6.1. No Assignment.................................................16
PART 7. COMPLETION...................................................16
7.1. Date for Completion...........................................16
7.2. Delivery of documents.........................................16
7.3. Board meetings................................................18
7.4. Buyer's obligations at Completion.............................18
7.5. Interdependency...............................................19
7.6. Obligations following Completion..............................19
7.7. Certification by Buyer and Sellers............................19
7.8. Exercise of Rights of Registered Shareholder..................19
7.9. Indemnity.....................................................20
7.10. Further Completion............................................20
7.11. Acknowledgment................................................20
PART 8. WARRANTIES...................................................20
8.1. Giving of Warranties..........................................20
8.2. Acknowledgment................................................20
8.3. Reliance......................................................21
8.4. Limitation on Warranties......................................22
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<PAGE>
8.5. Qualification of Warranties...................................22
8.6. Buyer's Warranties............................................22
8.7. Buyer and Sellers' Warranty...................................23
PART 9. RELEASE OF GUARANTEES AND INDEMNIFICATION....................23
9.1. Release of Guarantees.........................................23
9.2. Indemnification...............................................23
PART 10. NON COMPETITION.............................................23
10.1. Undertakings..................................................23
10.2. Effect on value of the Shares.................................26
10.3. Legal advice..................................................26
10.4. Injunction....................................................26
10.5. Separate undertakings.........................................26
10.6. Survival......................................................26
10.7. Sellers' obligations several not joint........................27
PART 11. ANNOUNCEMENTS...............................................27
11.1. Legal requirements............................................27
11.2. Disclosure to officers and professional advisers..............27
11.3. Further publicity.............................................27
11.4. Public Announcement...........................................27
PART 12. TAXATION INDEMNITY..........................................27
12.1. Tax Indemnity.................................................27
12.2. Notification..................................................28
12.3. Objections and Appeals........................................28
12.4. Assistance and cooperation....................................29
12.5. Successful Objection, Reference or Appeal or refund...........29
12.6. Bolle Sunglasses Ltd indemnity................................30
PART 13. ENVIRONMENTAL INDEMNITY.....................................30
13.1. Buyer's Environmental Indemnity...............................30
13.2. Seller's clean-up rights......................................30
13.3. Exercise of Seller's clean-up rights..........................31
13.4. Costs of appeal...............................................31
13.5. Notification of Clean-Up Notice...............................31
13.6. Avoidance of breach of Environmental Law......................32
PART 14. ONGOING INVESTMENT..........................................32
14.1. Distribution of annual profits................................32
14.2. Call Option...................................................32
14.3. Exercise of Call Option.......................................32
14.4. Put Option....................................................32
14.5. Exercise of Put Option........................................33
14.6. Terms applicable to either option.............................33
14.7. Option Completion.............................................33
14.8. Documents to be delivered.....................................33
14.9. Payment of the Option Price...................................33
14.10. Maintaining Net Tangible Assets...............................33
14.11. Renewal of the Licence........................................34
14.12. Sale of Bolle Asia Ltd........................................34
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<PAGE>
PART 15. MISCELLANEOUS...............................................34
15.1. Costs and Expenses............................................34
15.2. Notices.......................................................34
15.3. Governing law and jurisdiction................................35
15.4. Waivers.......................................................35
15.5. Variation.....................................................36
15.6. Cumulative rights.............................................36
15.7. Non-merger and survival of Warranties.........................36
15.8. Further assurances............................................36
15.9. Entire agreement..............................................36
15.10. Attorneys.....................................................36
15.11. Counterparts..................................................36
15.12. Severance.....................................................37
SCHEDULE 1 - (WARRANTIES).............................................39
1. THE TRUST........................................................39
2. CORPORATE........................................................39
2.1 Issued Share Capital and Assets..................................39
2.2 Accounts.........................................................40
2.3 Books and Records................................................40
2.4 Returns etc......................................................41
2.5 Dividends........................................................41
2.6 Memorandum and Articles of Association...........................41
3. CONTRACTS & RELATED MATTERS......................................41
3.1 Contracts........................................................41
3.2 Powers of Attorney...............................................43
3.3 Offers, Tenders etc..............................................43
3.4 Illegal or Void Contracts........................................43
3.5 Defaults under Contracts/Liable to Termination...................43
4. ASSETS AND RENTAL ASSETS.........................................44
4.1 Stocks...........................................................44
4.2 Fixed Assets.....................................................44
4.3 Use of Assets Generally..........................................44
4.4 All Assets Disclosed.............................................45
4.5 All Assets Necessary.............................................45
4.6 Rental Contracts.................................................45
5. SECURITIES.......................................................45
5.1 Mortgages etc....................................................45
5.2 Third Party Interests............................................46
5.3 No Guarantees....................................................46
5.4 No Third Party Securities........................................46
6. TRADING AND OPERATIONAL MATTERS..................................46
6.1 claims in relation to Services Provided..........................46
6.2 Product and Service Claims.......................................46
6.3 Official Investigations..........................................46
6.4 Criminal Offenses etc............................................46
6.5 Authorisations...................................................47
7. TAXATION.........................................................47
7.1 Full Disclosure..................................................47
7.2 No Tax Proceedings...............................................47
7.3 Agreements for Extension of Time.................................48
7.4 All Tax Paid.....................................................48
7.5 Adequate provision in Accounts for Tax...........................48
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<PAGE>
7.6 Tax Since Accounts Date..........................................48
7.7 Franking.........................................................48
7.8 Undertakings or Agreements.......................................49
7.9 Stamp Duty.......................................................49
7.10 Relief from Stamp Duty...........................................49
8. INSOLVENCY EVENTS................................................49
8.1 Liquidation/Winding Up...........................................49
8.2 Execution........................................................49
8.3 Insolvency.......................................................49
8.4 Schemes of Arrangement...........................................50
8.5 Section 459E Notices.............................................50
8.6 Receivers/Managers/etc...........................................50
8.7 Striking Off.....................................................50
9. LITIGATION.......................................................50
9.1 Ongoing Proceedings etc..........................................50
9.2 Proceedings Pending or Threatened................................50
9.3 Unsatisfied Judgements...........................................50
10. ACCOUNTS.........................................................51
10.1 Prepared in accordance with the Accounting Standards.............51
10.2 Consistent Basis.................................................51
10.3 True and Accurate................................................51
10.4 No Material Omission.............................................51
10.5 No Liabilities not required to be referred to....................51
10.6 Receivables......................................................51
10.7 Outstanding Notes................................................51
10.8 Insurance Claims.................................................51
11. INSURANCE........................................................52
12. INTELLECTUAL PROPERTY RIGHTS.....................................52
12.1 Intellectual Property............................................52
12.2 Infringement.....................................................52
12.3 Ownership of intellectual property...............................52
13. PERSONNEL........................................................52
13.1 Disclosure of Offices etc........................................52
13.2 Employees Generally..............................................53
13.3 Compliance With Laws.............................................53
13.4 Material Employment Terms........................................53
13.5 Consultants etc..................................................54
13.6 Superannuation and Similar Schemes...............................54
13.7 Union Agreements.................................................54
13.8 Awards...........................................................54
14. PROPERTIES.......................................................54
14.1 Occupation.......................................................54
14.2 No Breach........................................................55
14.3 Notices..........................................................55
14.4 Environmental Liability..........................................55
-iv-
<PAGE>
SCHEDULE 2 - INTELLECTUAL PROPERTY & BUSINESS NAMES
SCHEDULE 3 - OFFICERS AND EMPLOYEES
SCHEDULE 4 - RENTAL CONTRACTS
SCHEDULE 5 - FORM OF RESIGNATION
SCHEDULE 6 - SHARES
SCHEDULE 7 - CONTRACT REQUIRING 12 MONTHS NOTICE OF TERMINATION
SCHEDULE 8 - CONTRACTS WITH DIRECTORS ETC
SCHEDULE 9 - INSURED ASSETS
SCHEDULE 10 - RELEVANT SCHEMES
SCHEDULE 11 - IDENTIFIED STOCK
ANNEXURE 1. AUDITED ACCOUNTS OF BILL BASS OPTICAL PTY LTD. AND THE BILL BASS
COMPANIES FOR THE PERIOD ENDING ON THE ACCOUNTS DATE.
ANNEXURE 2. UNAUDITED ACCOUNTS OF BILL BASS OPTICAL PTY. LTD. AND THE BILL
BASS COMPANIES ENDING ON THE ACCOUNTS DATE.
ANNEXURE 3. EMPLOYMENT AGREEMENTS.
-v-
<PAGE>
THIS AGREEMENT is made on 1998.
PARTIES
KEITH ARCHIBALD COLLICOAT ("KA COLLICOAT")
of 193 Carmody Street, St Lucia, in the State of Queensland Australia in his
capacity as trustee of the Bill Bass Trust.
ERIC HENRY COLLICOAT ("EH COLLICOAT")
of 407 Mount Macedon Road, Mount Macedon, in the State of Victoria Australia in
his capacity as trustee of the Bill Bass Trust.
ROGER HOWARD GIBBONS ("RH GIBBONS")
of Unit 702, 15 Queens Road, Melbourne, in the State of Victoria Australia in
his capacity as trustee of the Bill Bass Trust.
and
BOLLE INC
of 555 Theodore Fremd Avenue, Rye, in the State of New York United States of
America ("BUYER")
RECITALS:
A. Bill Bass conducts business as the sole distributor and seller of the
products of Establissements Bolle, a "Societe en nom Collectif",
("Bolle") throughout Australia, New Zealand, Fiji, Vanuatu, Papua New
Guinea and Indonesia for five years from 12 January, 1996 pursuant to
the Licence.
B. Bill Bass owns all of the issued shares in Parkhurst Oaks Pty Ltd,
Bolle Australia Pty Ltd, Bolle (N.Z.) Limited (a company incorporated
in New Zealand) and Bolle Asia Ltd, which conducts the Business in
Hong Kong, the People's Republic of China, Taiwan, Singapore,
Malaysia, the Philippines, Thailand, Vietnam, Cambodia and Macau
pursuant to the Licence, and 49 per cent. of the issued shares in
Bolle Sunglasses Ltd (a company incorporated in the United Kingdom)
which conducts the Business in the United Kingdom and Ireland pursuant
to the Licence.
C. KA Collicoat, EH Collicoat and RH Gibbons jointly hold all the issued
share capital of Bill Bass on trust for the Bill Bass Trust.
D. KA Collicoat, EH Collicoat and RH Gibbons have been directed by the
beneficiaries of the Bill Bass Trust to sell 75 per cent. of Bill Bass
Trust's shares in Bill Bass.
<PAGE>
E. Bolle Inc has acquired the rights of Bolle under the Licence and
wishes to buy the Shares and has agreed to put and call options over
the Remaining Shares.
F. The parties have agreed upon the terms upon which the sale of the
Shares and the granting of the Options will occur.
THE PARTIES AGREE as follows:
PART 1.
DEFINITIONS AND INTERPRETATION
1.1. DEFINITIONS
In this agreement:
"ACCOUNTS" means the audited accounts of Bill Bass and the Bill Bass Companies
for the period ending on the Accounts Date as set out in annexure 1.
"ACCOUNTING STANDARDS" means the accounting standards and practices determined
under CLAUSE 1.4.
"ACCOUNTS DATE" means 31 December, 1997.
"ADJUSTED FINANCIAL STATEMENTS" means the audited accounts of Bill Bass and
Parkhurst Oaks Pty Ltd adjusted to remove such income or accounting charges
including any management fees or charges or the like, costs, expenses,
liabilities or other matters beneficially or adversely affecting the
profitability of either company as were not ordinarily included in the
financial statements of those companies or incurred in the ordinary course of
ordinary business of those companies prior to Completion Date except as may be
agreed from time to time in writing by EH Collicoat, RH Gibbons and the Buyer.
"ADJUSTED ACCOUNTS" means the unaudited adjusted balance sheet of Bill Bass and
the Bill Bass Companies ending on the Accounts Date as set out in annexure 2.
"ADJUSTED PRICE" means the trading price of the Buyer's common stock on the
Stock Exchange adjusted to remove the effect of:
(a) any stock dividends;
(b) distributions or issues, including rights issues and options in or
exerciseable into, shares of the Buyer's capital stock whether in
common stock or other classes of stock;
(c) the subdivision of the capital or stock of the Buyer;
-2-
<PAGE>
(d) any combination of the stock of the Buyer into a smaller number of
shares;
(e) the issue of common stock by reclassification of other capital stock
of the Buyer;
since Completion Date.
"AUTHORISATION" includes any authorisation, approval, consent, licence,
payment, franchise, permission, filing, registration, resolution, direction,
declaration and exemption.
"BANK" means St George Partnership Banking Limited and St George Partnership
Finance Limited.
"BILL BASS" means Bill Bass Optical Pty Ltd (ACN 005 741 300)
"BILL BASS COMPANIES" means Parkhurst Oaks Pty Ltd (ACN 056 622 087), Bolle
Australia Pty Ltd (ACN 079 626 592), Bolle (N.Z.) Limited (AK/840758) (a
company incorporated in New Zealand), Bolle Asia Ltd (389404) (a company
incorporated in Hong Kong) and Bolle Sunglasses Ltd (a company incorporated in
the United Kingdom).
"BILL BASS GROUP" means Bill Bass and each of the Bill Bass Companies as set
out in Schedule 6.
"BILL BASS SHARES" means the issued shares of Bill Bass.
"BOLLE STOCK" means the Initial Bolle Stock and the Further Bolle Stock.
"BUSINESS" means the business conducted by Bill Bass and the Bill Bass
Companies including business conducted pursuant to the Licence as at Completion
Date.
"BUSINESS DAY" means a day on which banks are open for business in Melbourne,
excluding a Saturday or a Sunday or a public holiday.
"BUSINESS NAMES" means all the business names used in the conduct of the
Business as listed in Part A of Schedule 2.
"CALCULATION PERIOD" means the 20 consecutive trading days of the Buyer's
common stock on the Stock Exchange over which it has the highest average
closing price during the 12 months after Completion Date.
"CALL OPTION" means the call option referred to in CLAUSE 14.2 AND 14.3.
"CLEAN-UP NOTICE" means any notice, direction, order or other claim served by
any Government Agency in connection with any Environmental Law which requires
the taking of Prescribed
-3-
<PAGE>
Remedial Action in respect of the presence of any Contaminant located in, on or
under, or emission or discharge of any Contaminant from any of the Properties.
"COMMISSIONER" means the Commissioner of Taxation.
"COMPLETION" means completion of the sale and purchase of the Shares under PART
7 except CLAUSE 7.10.
"COMPLETION DATE" means the earlier of date 3 elapsed Business Days after the
registration of the Initial Bolle Stock under the U.S. Securities Act 1933 or
30 June, 1998 unless the Sellers elect in writing to extend the time for
Completion after 30 June, 1998.
"CONFIDENTIAL INFORMATION" means all know how, trade secrets, ideas, concepts,
technical and operational information and other information which, by its
nature or by circumstances of its disclosure, is or could reasonably be
expected to be regarded as confidential to the Sellers in respect of the
Business or to any third party with whose consent or approval the Sellers use
that confidential information, but excludes information that has come into the
public domain for any reason whatever other than by reason of any breach of any
obligation of confidentiality by the Sellers.
"CONTAMINANT" means a solid, liquid, gas, odour, heat, sound, vibration,
radiation or substance which makes or may make the Properties or the
surrounding environment:
(a) unsafe or unfit for human habitation or occupation by persons or
animals;
(b) degraded in its capacity to support plant life;
(c) otherwise environmentally degraded;
(d) not comply with any Environmental Law.
"CONTRACTS" means all agreements to which Bill Bass is a party or by which it
may be bound.
"CONTROLLER" has the same meaning given to that term in the Corporations Law.
"DIVIDEND" means not less than 20 per cent. of the annual profit of Bill Bass
and Parkhurst Oaks Pty Ltd as calculated on the basis of the Adjusted Financial
Statements.
"DOLLARS" "A$" and "$" means the lawful currency of the Commonwealth of
Australia.
"DUTY" means any stamp, transaction or registration duty or similar charge
imposed by any governmental agency and includes,
-4-
<PAGE>
but is not limited to, any interest, fine, penalty, charge or other amount
imposed in respect of the above, but excludes any Tax.
"EMPLOYEES" means the employees of the Business listed in Schedule 3.
"EMPLOYMENT AGREEMENTS" means the agreements comprised in annexure 3.
"ENVIRONMENTAL LAW" means any law, whether statute or common law, concerning
environmental matters, and includes but is not limited to law concerning land
use, development, pollution, waste disposal, toxic and hazardous substances,
conservation of natural or cultural resources and resource allocation including
any law relating to exploration for or development of any natural resource.
"ENVIRONMENTAL LIABILITY" means any obligation, expense, penalty or fine under
any Environmental Law which would or could be imposed upon the Bill Bass Group,
the Buyer or any occupier of the Properties as a result of activities carried
on during the ownership or occupation of the Properties by the Bill Bass Group
up to Completion Date.
"EXCHANGE RATE" means the average of the buy and sell rate of exchange of
United States dollars into Australian dollars as published by the Bank on the
Further Completion Date.
"EXERCISE DATE" means the date upon which the notice under CLAUSE 14.2 or 14.4
is given, whichever occurs first.
"FURTHER BOLLE STOCK" means such, if any, further registered shares of the
Buyer's common stock as needs to be issued to the Sellers in addition to the
Initial Bolle Stock to give the Bolle Stock a value of A$3.5 million as at
Further Completion Date calculated by reference to the Trading Price and the
Exchange Rate.
"FURTHER COMPLETION" means the completion of the issuing of the Further Bolle
Stock in CLAUSE 7.10.
"FURTHER COMPLETION DATE" means the date that falls 12 months after Completion
Date.
"FUTURE MAINTAINABLE OPERATING PROFITS" means the future maintainable operating
profits of Bill Bass and Parkhurst Oaks Pty Ltd, being profits before interest,
tax and amortisation of goodwill, as calculated based on the Adjusted Financial
Statements on the basis that the Licence continues for the period for which the
said future maintainable operating profits are calculated.
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"GOVERNMENTAL AGENCY" includes any government, whether federal, state,
territorial or local, and any minister, department, office, commission,
delegate, instrumentality, agency, board, authority or organ thereof, whether
statutory or otherwise.
"INITIAL BOLLE STOCK" means 248,387 registered shares of the Buyer's common
stock the subject of the Registration Statement.
"INDEMNITY" means the indemnity described in CLAUSE 9.2.
"INTELLECTUAL PROPERTY RIGHTS" means patents, registered trade marks, and
registered designs (and circuit layouts).
"INTELLECTUAL PROPERTY" means the Intellectual Property Rights of Bill Bass or
the Bill Bass Companies listed in Schedule 2.
"ISSUE PRICE" means the issue price of $US 5.25 per share of the Buyer's common
stock in the private placement of $US 7 million by the Buyer in May, 1998.
"LICENCE" means the exclusive licence hold by Bill Bass to distribute the
products of Bolle for five years from 12 January, 1996 throughout Australia,
New Zealand, Fiji, Vanuatu, Papua New Guinea, Indonesia, Hong Kong, the
People's Republic of China, Taiwan, Singapore, Malaysia, the Philippines,
Thailand, Vietnam, Cambodia, Macau, United Kingdom and Ireland together with an
option for a further five years subject to the agreement of both licensor and
licencee which the Buyer hereby accepts and acknowledges.
"MELBOURNE PROPERTY" means the property situated at 37 Thistlethwaite Street,
South Melbourne, Victoria being the land comprised in Certificate of Title
Volume 9859 Folio 649.
"MONTHLY FINANCIAL STATEMENTS" means monthly management accounts of Bill Bass
produced in accordance with past practice.
"MORTGAGE DEBENTURE" means the instrument dated 30 June, 1994 being a mortgage
debentures created and issued by Bill Bass and Parkhurst Oaks Pty Ltd in favour
of the Bank and lodged at the Australian Securities Commission and registered
as charge number 449272 and 449270 respectively.
"OFFICERS" means the directors and secretaries of Bill Bass.
"OPTION" means the Call Option granted under CLAUSE 14.2 and the Put Option
granted under CLAUSE 14.4 or either of them.
"OPTION COMPLETION" means completion of the exercise of the Option in
accordance with CLAUSE 14.
"OPTION PRICE" means:
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(a) for the purposes of the exercise of the Put Option under CLAUSE
14.5(c), 25 per cent. of four times Future Maintainable Operating
Profits; or
(b) otherwise means the greater of:
(i) A$3,125 million; or
(ii) such sum as the Buyer and the Sellers mutually agree in
writing within 30 days of the Buyer giving notice of its exercise of
the Option in the manner provided for the giving of notices under this
agreement; or
(iii) or, in the event that agreement is not so reached, at a
price that is determined by a mutually agreed firm of chartered
accountants appointed within 10 days of a failure to agree under
clause (ii) as being the fair market value of the shares purchased
such determination to be made within 30 days of appointment; or
(iv) 25 per cent. of four times Future Maintainable Operating
Profits.
"OPTION SECURITIES" means all of the Remaining Shares together with the benefit
of all rights (including dividend rights) attached to or accruing to the
Remaining Shares as at the Exercise Date.
"PENALTY INTEREST RATE" means the rate fixed from time to time under section 2
of the Penalty Interest Rates Act 1983.
"PERSONAL GUARANTEES" means the guarantees given by EH Collicoat and RH Gibbons
in support of the Mortgage Debenture.
"POWER" means any right, power, authority, discretion or remedy conferred on
the parties by this agreement or any applicable law.
"PRESCRIBED REMEDIAL ACTION" means the taking of any one or more of the
following steps required in a Clean-Up Notice:
(a) ascertaining the nature and extent of any Contaminant on, in, under or
emitted or discharged from any of the Properties;
(b) preparing a remedial action plan for any of the Properties and, if
required, a long term management plan;
(c) removing the cause of the presence of any Contaminant from any of the
Properties;
(d) preventing or reducing the emission or discharge of any Contaminant
from any of the Properties;
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(e) reducing the concentrations of any Contaminant on, in, or under any of
the Properties;
(f) eliminating or reducing any danger arising from the presence of any
Contaminant on, in or under the Properties;
(g) restoring any of the Properties;
including the taking of any such steps in respect of groundwater under any of
the Properties.
"PROPERTIES" means the properties leased under the Property Leases and any
properties occupied under licence by the Bill Bass Group and for the purposes
of Clean-Up Notice, Contaminant, Environmental Liability and Prescribed
Remedial Action only also includes all properties which have at any time been
owned or occupied by any member of the Bill Bass Group.
"PROPERTY LEASES" means the leases of real property listed in CLAUSE 2 OF
SCHEDULE 4.
"PURCHASE PRICE" has the meaning given that term in CLAUSE 4.1
"PUT OPTION" means the put option referred to in CLAUSES 14.4 and 14.5.
"REGISTRATION STATEMENT" means the application to be filed with the SEC by the
Buyer for registration of the Initial Bolle Stock under the U.S. Securities Act
1933.
"RELEVANT DATE" means 1 January, 1993.
"RELEVANT SCHEMES" means all superannuation schemes, retirement benefit schemes
or other pension schemes or arrangements and all employment benefit plans,
programs or arrangements such as medical, dental or life insurance to which
Bill Bass is a party or which Bill Bass makes available or procures for its
officers or the Employees or any former officers or employees as listed in
Schedule 3.
"RENTAL ASSETS" means those assets in the possession or control of and/or owned
or used by Bill Bass which are the subject of the Rental Contracts.
"RENTAL CONTRACTS" means the lease, rental, hire purchase, credit sale or other
similar agreements in writing as listed in Schedule 4.
"SEC" means the Securities and Exchange Commission of the United States of
America or its successors.
"SECURITY INTEREST" means an interest or power:
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(a) reserved in or over an interest in any asset including, but not limited
to, any retention of title; or
(b) created or otherwise arising in or over any interest in any asset under
a bill of sale, mortgage, charge, lien, pledge, trust or power,
by way of security for the payment of a debt or any other monetary obligation
or the performance of any other obligation and includes, but is not limited to,
any agreement to grant or create any of the above.
"SELLERS" means KA Collicoat, EH Collicoat and RH Gibbons or such of them as
are registered holders of the Shares or the Remaining Shares.
"SHARES" means 15,000 ordinary shares of $1.00 each in the capital of Bill
Bass.
"IDENTIFIED STOCK" means the stock listed in schedule 11.
"STOCK EXCHANGE" means NASDAQ or such other SEC approved stock exchange upon
which the Buyer's registered common stock is publicly traded from time to time,
or if there is more than one such stock exchange, the stock exchange upon which
the Buyer's registered common stock is traded in greater volume.
"STOCKS" means all the stock in trade of the Business.
"SYDNEY PROPERTY" means the property situated at 21-27 Mitchell Road, Brookvale
and 27 Sydenham Road Brookvale, New South Wales being the whole of the land
comprised in Certificate of Title Volume 7396 Folio 36 and Register Folio
1/733384.
"TAX" means all forms of taxation, duties, levies, imposts, fees, deductions,
charges and withholdings whatsoever whether of Australia or elsewhere including
income tax, corporation tax, fringe benefits tax, capital gains tax, pay as you
earn tax, customs and other import or export duties, excise duties, sales tax,
stamp duty or other similar contributions together with interest thereon and
penalties, if any, and charges, fees or other amounts made on or in respect
thereof.
"TAX ACT" means the Income Tax Assessment Act 1936 or in the Income Tax
Assessment Act 1997 as amended from time to time and any related or
subordinated legislation including any reenactment or replacement thereof.
"TAX LIABILITY" means any loss incurred or any other amount paid or payable by
or in respect of Bill Bass Group as a result of a notice of assessment or a
notice of amended assessment for Tax by the Commissioner for the Tax Period
except to the extent such loss incurred or amounts paid or payable relate to
the Buyer's 51 per cent shareholding of Bolle Sunglasses Ltd.
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"TAX PERIOD" means the period up to Completion Date.
"THIRD PARTY INTEREST" includes any Security Interest, option, voting
arrangement, easement, covenant, notation, restriction, interest under any
agreement or trust or other right, equity, entitlement or other third party
interest of any nature.
"TRADING PRICE" means the greater of:
(a) the average closing price of the Buyer's common stock on the Stock
Exchange during the Calculation Period; and
(b) the Issue Price.
"TRUST" means the Bill Bass Trust.
"TRUST DEED" means the Deed of Trust of the Bill Bass Trust dated 30 November,
1980 as amended by supplemental deeds dated 10 July, 1985, 30 May, 1989 and 1
July, 1989.
"$US" means the lawful currency of the United States of America.
"WARRANTIES" means the warranties and representations set out in Schedule 1.
"WARRANTY AMOUNT" means, in respect of any breach of the Warranties by the
Sellers, any single loss, claim, cost, demand, liability or expense suffered by
the Buyer (directly or indirectly).
1.2. INTERPRETATION
In this agreement, unless the context otherwise requires:
(a) headings are for convenience only and do not affect the
interpretation of this agreement;
(b) words importing the singular include the plural and vice versa;
(c) words importing a gender include any gender;
(d) other parts of speech and grammatical forms of a word or phrase
defined in this agreement have a corresponding meaning;
(e) an expression importing a natural person includes any company,
partnership, joint venture, association, corporation or other body
corporate and any governmental agency;
(f) a reference to a party to a document includes that party's successors
and permitted assigns;
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(g) no rules of construction applies to the disadvantage of a party
because that party was responsible for the preparation of this
agreement or any part of it;
(h) a covenant or agreement on the part of two or more persons binds them
jointly and severally; and
(i) the expressions "include" and "including" mean "including without
limitation".
1.3. KNOWLEDGE AND AWARENESS
For the purposes of this agreement, where a Warranty is given on the basis of
the Sellers' knowledge and awareness this means that in order to establish that
the Warranty is true and not misleading the Sellers have made reasonable
inquiries.
1.4. ACCOUNTING STANDARDS
(a) Subject to any provisions of this agreement to the contrary, in
respect of any accounting practice relevant to this agreement, the
following accounting standards apply:
(1) the accounting standards required under the Corporations
Law;
(2) if no accounting standard applies under the Corporations
Law, the standards acceptable to the Australian
Accounting Research Foundation, including:
(A) the Australian Accounting Concepts;
(B) the Australian Accounting Standards;
(C) the Approved Accounting Standards; and
(3) if no accounting standard applies under CLAUSES 1.4(a)(1)
OR 1.4(a)(2), the accounting practice agreed between the
parties and, failing agreement, the accounting practice
determined under CLAUSE 1.4(b).
(b) If the parties do not agree under clause 1.4(3), the matter must be
referred within 10 Business Days to the President of the Institute of
Chartered Accountants in Australia or his nominee for the
determination of the appropriate accounting practice. Any party may
make this referral.
(c) A determination under CLAUSE 1.4(b) is final and binding on the
parties.
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(d) The parties must bear their respective costs of any referral and
determination under CLAUSE 1.4(b).
(e) In making a determination under CLAUSE 1.4(b), the President of the
Institute of Chartered Accountants or his nominee acts as an expert,
not as an arbitrator.
PART 2.
CONDITIONS PRECEDENT TO AGREEMENT
2.1. CONDITIONS PRECEDENT
This agreement (other than CLAUSES 2.2 AND 5.2, PART 9 AND CLAUSE 15.1) is of
no force or effect unless and until:
(a) the Buyer is informed in writing by or on behalf of the Federal
Treasurer that there are no objections in terms of the Australian
Government's Foreign Investment Policy to the Buyer acquiring the
Shares or the period during which the Federal Treasurer is empowered
by Section 25 of the Foreign Acquisitions and Takeovers Act 1975 (Cth)
to make an order prohibiting the proposed acquisition by the Buyer has
expired without such an order (other than an interim order) having
been made, whichever is the earlier; and
(b) Bill Bass has obtained an agreement to lease the Melbourne Property
for a term of 3 years with an option for a further term of 3 years
together with an option to purchase the Melbourne Property at market
value on certain terms exerciseable during the last 7 days of the term
of the lease or any extension thereof.
2.2. BEST ENDEAVOURS
Each of the parties must use their best endeavours to procure the fulfillment
of each of the conditions in CLAUSE 2.1 and must keep the other parties
informed of any circumstances which may result in the relevant condition not
being satisfied in accordance with its terms.
PART 3.
AGREEMENT TO SELL
3.1. SALE OF SHARES
Subject to the terms of this agreement, the Sellers have agreed to sell and the
Buyer has agreed to buy the Shares for the Purchase Price free of Security
Interests and other third party rights on Completion.
3.2. ASSOCIATED RIGHTS
The Sellers must sell the Shares together with all rights attached to them as
at the date of this agreement and all those
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rights which accrue between the date of this agreement and Completion.
PART 4.
PURCHASE PRICE
4.1. AMOUNT
The price ("PURCHASE PRICE") payable by the Buyer to the Sellers for the Shares
is the sum of A$9.375 million comprising a cash payment to the Trust of A$5.875
million and the issuing to the Trust of the Bolle Stock.
4.2. PAYMENT AND ISSUING OF THE BOLLE STOCK
On and subject to the terms and conditions of this agreement the Buyer must:
(a) on the Completion Date pay the part of the Purchase Price by the
payment of A$5.875 million and the issuing of the Initial Bolle Stock
in three equal proportions to each of KA Collicoat, EH Collicoat and
RH Gibbons or to such person or persons or other entities and in such
proportions as KA Collicoat, EH Collicoat and RH Gibbons may direct in
respect of their respective allocated proportions of the Initial Bolle
Stock;
(b) on the Further Completion Date satisfy the balance of the Purchase
Price by the issuing of the Further Bolle Stock, if any, in three
equal proportions to each of KA Collicoat, EH Collicoat and RH Gibbons
or to such person or persons or other entities and in such proportions
as KA Collicoat, EH Collicoat and RH Gibbons may direct in respect of
their respective allocated proportions of the Further Bolle Stock.
4.3. INTEREST
If any party fails to pay any sum payable by it under this agreement at the
time and otherwise in the manner provided in this agreement it must pay
interest on such sum from the due date of payment until such sum is paid in
full at the rate which is the aggregate of 2 per cent per annum and the Penalty
Interest Rate.
4.4. METHOD OF PAYMENT
All payments to be made under this agreement must be made by bank cheque or in
such other immediately available funds as may be agreed in writing between the
Sellers and the Buyer.
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PART 5.
PERIOD BEFORE COMPLETION
5.1. BUSINESS IN THE ORDINARY COURSE
Before Completion the Sellers must ensure that Bill Bass and the Bill Bass
Companies:
(a) carry on the Business in the ordinary and normal course;
(b) use all reasonable endeavours to preserve the value of the goodwill,
assets, financial and trading position of the Business;
(c) subject to CLAUSE 5.1(a), do not enter into any material commitment
with respect to the Business without the prior written consent of the
Buyer which consent will not be unreasonably withheld;
(d) subject to CLAUSE 8.2, do not acquire, dispose of, or create a
Security Interest over any of their assets other than acquisitions or
disposals of stock in trade in the ordinary course of ordinary
business except as contemplated by this agreement;
(e) do not distribute or return any capital or pay any dividend to its
members except as expressly contemplated by this agreement;
(f) do not pay any management fee, or similar amount, unless the Buyer
first consents in writing which consent will not be unreasonably
withheld;
(g) do not issue any shares, options or securities which are convertible
into shares in any of the entities comprising the Bill Bass Group;
(h) do not do or omit to do anything as a result of which any of the
Warranties would not be true if given at any time before Completion;
(i) except as required by law or in the ordinary course of ordinary
business, do not engage any new employee, change the terms (including
remuneration) of any of the Employees, or pay or provide any bonus to
any Employee unless the Buyer consents in writing which consent will
not be unreasonably withheld;
(j) do not alter their Memorandum or Articles of Association unless the
Buyer first consents in writing which consent will not be unreasonably
withheld.
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5.2. ACCESS
Before the Completion Date the Sellers must:
(a) ensure that the Buyer, and any person authorised by the Buyer, are,
upon the giving of reasonable notice by the Buyer and at the Buyer's
cost and expense, given all reasonable access during normal business
hours to the assets, books of account, records and documents of Bill
Bass and the Bill Bass Companies;
(b) answer any reasonable written inquiries or requisitions issued by the
Buyer;
(c) allow the Buyer, and any person authorised by the Buyer, to make
copies (at the Buyer's cost and expense) of all materials examined;
(d) introduce the Buyer, and any person authorised by the Buyer, to the
suppliers of the Business;
(e) allow the Buyer and its advisers to consult EH Collicoat and RH
Gibbons; and
(f) provide to the Buyer the Monthly Financial Statements between the date
of this agreement and Completion Date.
5.3. BANK AUTHORITIES
Not less than five Business Days prior to the Completion Date the Buyer must
advise the Sellers of the authorities to operate bank accounts that are to be
revoked and the names of the new signatories to those accounts.
5.4. PROMPT DISCLOSURE OF BREACH
The Sellers must immediately disclose to the Buyer any matter, event or
circumstance (including any omission to act) which may arise or become known to
the Sellers or any one of them after the date of execution of this agreement
and up to Completion which:
(a) constitutes a breach of or has a material adverse effect on any
Warranty; or
(b) has or is likely to have a material adverse effect on the financial
position or prospects of Bill Bass or the Bill Bass Companies.
5.5. INSURANCE
The Sellers and the Buyer agree that:
(a) the Sellers will ensure that insurance presently held by Bill Bass and
the Bill Bass Companies is maintained by
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those companies up to and including the Completion Date; and
(b) the Buyer will be responsible for all such insurance after the
Completion Date.
The Sellers confirm that the current insurance will remain valid and effective
after Completion.
5.6. REGISTRATION STATEMENT
The Buyer shall:
(a) file the Registration Statement with the SEC as soon as practicable
after the signing of this agreement and in no event later than the end
of May, 1998;
(b) provide a copy of the Registration Statement to the Sellers within 7
days of its filing;
(c) notify the Sellers forthwith in writing of any amendment to the
Registration Statement; and
(d) notify the Sellers forthwith in writing of the registration by the SEC
of the Initial Bolle Stock.
PART 6.
NO ASSIGNMENT
6.1. NO ASSIGNMENT
No party to this agreement shall assign or purport to assign its rights or
obligations under this agreement without the prior written approval of all
other parties.
PART 7.
COMPLETION
7.1. DATE FOR COMPLETION
Completion must take place on the Completion Date at 12 noon at 37
Thistlethwaite Street, South Melbourne or as otherwise agreed in writing by the
parties.
7.2. DELIVERY OF DOCUMENTS
At Completion, the Sellers must deliver to the Buyer:
(a) share certificates for the Shares;
(b) completed transfers of the Shares to the Buyer in registrable form,
executed by the Sellers;
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(c) the following documents in respect of Bill Bass and the Bill Bass
Companies:
(1) all available copies of the Memorandum and Articles of
Association;
(2) the common seal and any duplicate seals; and
(3) the Certificate of Registration;
(d) the Rental Contracts;
(e) the corporate registers of Bill Bass and the Bill Bass Companies;
(f) written resignations of
(1) EH Collicoat and RH Gibbons (as appropriate) as secretary
of Bill Bass and the Bill Bass Companies; and
(2) such other directors or secretaries of Bill Bass and the
Bill Bass Companies (if any) as requested by the Buyer
before Completion;
(in the form of resignation appearing in Schedule 5) to be
effective on the appointment of the directors, secretary and
auditors to be appointed at the Board meeting to be convened
under CLAUSE 7.3;
(g) possession of all ledgers, journals and books of account and other
business records of Bill Bass and the Bill Bass Companies; and
(h) Certificates of Registration of the Business Names;
(i) all other property of Bill Bass and the Bill Bass Companies in the
possession of the Sellers;
(j) a counterpart copy of each of the Employment Agreements signed by EH
Collicoat and RH Gibbons;
(k) all cheque books of the Bill Bass Group and a list of all bank
accounts maintained by the Bill Bass Group;
(l) all releases of the Bill Bass Group guarantees that have been obtained
in accordance with CLAUSE 9.1; and
(m) the forms of proxy required to give effect to CLAUSE 7.8.
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7.3. BOARD MEETINGS
At Completion the Sellers must ensure that a meeting of the directors of Bill
Bass and the Bill Bass Companies is convened and conducts the following
business:
(a) approval of the registration of the Buyer as the holder of the Shares
in the books of Bill Bass and the Bill Bass Companies, subject to the
payment of Duty on the transfer of the Shares;
(b) appointment of the nominees of the Buyer as:
(1) directors of Bill Bass and the Bill Bass Companies; and
(2) secretary of Bill Bass and the Bill Bass Companies;
(c) revocation of all existing mandates for the operation of bank accounts
of the Bill Bass Group and approval of new mandates in favour of the
officers of the Bill Bass Group nominated by the Buyer.
7.4. BUYER'S OBLIGATIONS AT COMPLETION
At Completion the Buyer must:
(a) pay to the Trust or to such person or persons and in such proportions
as KA Collicoat, EH Collicoat and RH Gibbons unanimously direct the
Purchase Price as set out in CLAUSE 4.2(a);
(b) deliver to the Sellers written consents to act from the persons
nominated by the Buyer as the directors and secretary of Bill Bass and
the Bill Bass Companies;
(c) deliver to the Trust or to such person or persons and in such
proportions as KA Collicoat, EH Collicoat and RH Gibbons direct share
certificates for the Initial Bolle Stock;
(d) deliver to EH Collicoat and RH Gibbons duly executed counterpart
copies of each of the Employment Agreements;
(e) deliver a duly executed Form 312 releasing Bill Bass from the Mortgage
Debenture and the irrevocable release in writing of Barclays Bank plc
of the guarantee given by the Bank in support of Bolle Sunglasses Ltd;
(f) deliver a duly executed release from or an Indemnity in respect of the
Personal Guarantees; and
(g) deliver a copy of the Registration Statement.
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7.5. INTERDEPENDENCY
The obligations of the parties in respect of Completion are interdependent. All
actions at Completion will be deemed to take place simultaneously and no
delivery or payment will be deemed to have been made until all deliveries and
payments due under this agreement at Completion have been made.
7.6. OBLIGATIONS FOLLOWING COMPLETION
Whenever reasonably requested by the Buyer for a period of 6 months after the
Completion Date KA Collicoat, EH Collicoat and RH Gibbons must give to the
directors for the time being of Bill Bass and the Bill Bass Companies all
reasonable information and explanation relating to the Business and the affairs
of Bill Bass and the Bill Bass Companies prior to the Completion Date as those
directors may reasonably require for the purpose of complying with any
statutory requirements.
7.7. CERTIFICATION BY BUYER AND SELLERS
(1)(a) At Completion, the Sellers will affix to each of the documents
referred to in CLAUSE 7.2(c)(1), 7.2(e), AND 7.2(h) a certificate
stating that, subject to paragraph (1)(c), the document to which the
relevant certificate is affixed is a true and original document or
copy of a document and in the case of the Memorandum and Articles of
Association of Bill Bass or the Bill Bass Companies, it contains
copies of all resolutions by Bill Bass or the Bill Bass Companies
amending their respective Memorandum and/or Articles of Association
since the Relevant Date and, to the best of the Sellers' knowledge,
since the relevant company's date of incorporation.
(b) Each of the certificates referred to in paragraph (1)(a) will be
deemed to be a Warranty under this agreement.
(c) Where any certificate referred to in paragraph (1)(a) relates to a
document that came into existence prior to the Relevant Date (save and
except for any amendments to such document after the Relevant Date),
such certificate will be to the knowledge of the Sellers only.
(2) At Completion, the Buyer will affix to each of the documents referred
to in CLAUSE 7.4(c), 7.4(d), AND 7.4(g) a certificate stating that the
document to which the relevant certificate is affixed is a true and
original document or copy of a document.
7.8. EXERCISE OF RIGHTS OF REGISTERED SHAREHOLDER
From Completion, until the Shares are registered in the name of the Buyer, each
Seller must, at the cost of the Buyer appoint the nominees of the Buyer as his
sole proxy to attend shareholders
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meetings and exercise the votes attached to the Shares and must not attend or
vote at those meetings except in his capacity as the holder of the Remaining
Shares.
7.9. INDEMNITY
The Buyer indemnifies the Sellers from any and all claims, suits, actions,
demands, damages, losses, liabilities, costs including reasonable legal costs,
charges, expenses, outgoings or payments arising out of or in connection with
the implementation of any action taken under the proxy referred to in CLAUSE
7.8.
7.10. FURTHER COMPLETION
Upon Further Completion the Buyer must on the Further Completion Date deliver
to the Trust or to such person or persons and in three equal proportions as KA
Collicoat, EH Collicoat and RH Gibbons direct share certificates for the
Further Bolle Stock, if any.
7.11. ACKNOWLEDGMENT
The Sellers acknowledge that upon Completion the transaction will be deemed to
be effective as of 1 January, 1998 and all profits and benefits of the Business
derived from that date will be to the account of the post-Completion
shareholders.
PART 8.
WARRANTIES
8.1. GIVING OF WARRANTIES
Subject to CLAUSE 8.5, the Sellers give the Warranties in favour of the Buyer
as at the date of this agreement and at the Completion Date.
8.2. ACKNOWLEDGMENT
The Buyer acknowledges that:
(a) (subject to the Warranties) all warranties and representations on the
part of the Sellers whether express or implied statutory or otherwise
(including without limitation under Part V of the Trade Practices Act
1974, the Fair Trading Act 1985 (Victoria) or under the Corporations
Law) are, to the extent permitted by law expressly excluded;
(b) they have been granted full and free access to the records of Bill
Bass and the Bill Bass Companies and have satisfactorily completed
their financial and commercial due diligence investigations in
relation to the Business and the assets of Bill Bass and the Bill Bass
Companies
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and have had the opportunity to conduct any further due diligence
before signing this agreement;
(c) the assets of Bill Bass at Completion do not include the Sydney
Property or the proceeds of any sale thereof or shares in William Bass
& Co. Pty Ltd which are to be or have been distributed to the
shareholders of Bill Bass prior to Completion Date;
(d) Bill Bass has paid to its shareholders a dividend of A$25,000 in each
of July, August and September, 1997;
(e) Bill Bass will declare a further dividend of A$700,000 before
Completion Date payable to and in favour of the Sellers provided that:
(i) the after-tax profit for the six months ended 31 December,
1997 is greater than A$690,000; and
(ii) Bill Bass and the Bill Bass Companies collectively have as at
the Accounts Date net tangible assets of not less than A$2.55
million and excluding the assets, transactions and payments
described in CLAUSES 8.2(c), (d), (e) AND (f);
such dividend to be paid:
(1) as to $246,891 before Completion;
(2) as to part of the balance, quarterly in the amount of the
lesser of book value or sale price of such of the Identified
Stock as was sold during the course of the immediately
preceding fiscal quarter during the period commencing on 1
April, 1998 and ending on 30 June, 1999;
(3) as to the remainder in the event that there is a balance of
the dividend of more than $A15,000 unpaid at 30 June, 1999 no
further payment will be made. If the balance is less than
$15,000 then the full remainder will be paid.
(f) payments relating to CLAUSES 8.2(c), (d), AND (e) are to be first
applied to clear the loan accounts of each of Sunnyco Pty Ltd, RH
Gibbons, Tickworth Pty Ltd, Second Pasdenom Pty Ltd and the Trust with
any balance to be paid to the Trust by way of fully franked dividend
to the extent of any franking credits.
8.3. RELIANCE
The Sellers acknowledge that the Buyer has entered into this agreement in
reliance on the Warranties and the Buyer
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acknowledges that the Sellers have entered into this agreement in reliance on
the warranties given in CLAUSE 8.6.
8.4. LIMITATION ON WARRANTIES
Notwithstanding anything contained in this agreement or the Warranties (whether
express or implied):
(a) the Buyer may not claim for any breach of a Warranty unless:
(i) the Warranty Amount exceeds $10,000; and
(ii) the Warranty Amount in respect of all breaches of
the Warranties is at least $50,000;
in which case the Buyer may only claim for such of the amount of the
breach of Warranties as exceeds $50,000;
(b) the Sellers will not be liable for any breach of the Warranties unless
on or before 31 March, 2000, the Buyer has given written notice to the
Sellers of any such breaches specifying (in reasonable detail) the
matter which gives rise to the breach, the nature of the breach and,
if known, the amount claimed in respect of it; and
(c) no claim will be made by the Buyer under any of the Warranties in
respect of a matter of which the Buyer or its professional advisers
are aware.
8.5. QUALIFICATION OF WARRANTIES
The Warranties appearing in CLAUSES 6.1 AND 6.3 of Schedule 1 are given only on
the Completion Date.
8.6. BUYER'S WARRANTIES
The Buyer represents and warrants that as at the date of this agreement and the
Completion Date:
(a) the Buyer is duly constituted according to the laws of its place of
incorporation and capable of entering into and performing this
agreement;
(b) the Buyer is not aware of any information that would materially affect
the Sellers' obligations or entitlements under this agreement;
(c) the Buyer's Form S-1 provided to the Sellers is accurate in all
material respects;
(d) the Buyer is not aware of any matter or fact other than as disclosed
in its Form S-1 which would adversely affect the
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value or price of the Bolle Stock or the Sellers' ability to sell the
Bolle Stock.
8.7. BUYER AND SELLERS' WARRANTY
The Buyer and Sellers each agree and warrant that Bill Bass will until Option
Completion be managed and operated and its business be conducted in the
ordinary course of ordinary business in a manner consistent with past practice
as reflected in the audited accounts of Bill Bass for the period prior to the
Accounts Date.
PART 9.
RELEASE OF GUARANTEES AND INDEMNIFICATION
9.1. RELEASE OF GUARANTEES
KA Collicoat, EH Collicoat and RH Gibbons must advise all suppliers of goods
and services and other third parties (other than the Bank) to which they or any
one or more of them have provided a guarantee or Security Interest in relation
to Bill Bass or the Bill Bass Companies, that their guarantee or Security
Interest is no longer of any force or effect after the Completion Date in
respect of goods or services ordered after the Completion Date.
9.2. INDEMNIFICATION
The Buyer indemnifies and agrees to keep indemnified KA Collicoat, EH Collicoat
and RH Gibbons in respect of any claim, suit, action, demand, damage, loss,
liability, cost including reasonable legal costs, charges, expenses, outgoings
or payments which KA Collicoat, EH Collicoat and RH Gibbons or any one or more
of them directly or indirectly pay, suffer, incur or are liable for in relation
to any disclosed guarantee or Security Interest given by them in connection
with the Business including but not limited to the Personal Guarantees and the
guarantee or Security Interest referred to in CLAUSE 9.1 in respect of goods or
services ordered after the Completion Date.
PART 10.
NON COMPETITION
10.1. UNDERTAKINGS
(a) For the purposes of CLAUSE 10.1(b) the expression "competitive with
the Business" includes (but is not limited to) competition in a small
part of the Business or mere competition in peripheral products or
lines of business.
(b) The Sellers must not do and must ensure that no party controlled by
them or in which they have an interest, except for 5 per cent. or less
share holdings in publicly
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listed companies, does any of the following without first obtaining the
written consent of the Buyer:
(1) directly or indirectly carry on (whether alone or in
partnership or joint venture with anyone else) or
otherwise be concerned with or interested in (except
of the Remaining Shares, whether as trustee,
principal, agent, shareholder, unit holder or in any
other capacity) any business similar to or
competitive with the Business in:
(A) United Kingdom;
(B) Hong Kong;
(C) New Zealand;
(D) the People's Republic of China;
(E) Taiwan;
(F) Singapore;
(G) Malaysia;
(H) the Philippines;
(I) Thailand;
(J) Vietnam;
(K) Cambodia;
(L) Macau;
(M) Australia;
(N) Victoria;
(O) New South Wales and the ACT;
(P) Queensland;
(Q) Western Australia;
(R) South Australia;
(S) Tasmania; and
(T) the Northern Territory;
for:
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(i) 3 years after Completion
Date;
(ii) 2 years after Completion
Date;
(iii) 1 year after Completion
Date;
(iv) 3 years after exercise of
the Option;
(v) 2 years after exercise of
the Option;
(vi) 1 year after exercise of
the Option.
(2) solicit or persuade any person or corporation which is a
customer or client of the Buyer or the Bill Bass Group or who was in
the 12 month period before the Completion Date a customer or client of
or in respect of the Business to cease doing business with the Buyer
or the Bill Bass Group or reduce the amount of business which the
customer or client would normally do in respect of the Business:
(A) 3 years after Completion Date;
(B) 2 years after Completion Date;
(C) 1 year after Completion Date;
(D) 3 years after exercise of the Option;
(E) 2 years after exercise of the Option;
(F) 1 year after exercise of the Option.
(3) accept from a customer or client referred to in CLAUSE
10.1(b)(2) any business of the kind ordinarily forming part of the
Business:
(A) 3 years after Completion Date;
(B) 2 years after Completion Date;
(C) 1 year after Completion Date;
(D) 3 years after exercise of the Option;
(E) 2 years after exercise of the Option;
(F) 1 year after exercise of the Option.
(4) at any time use or disclose to any third party any trade
secrets, product information or confidential
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information of the Business which is not generally known or available
in the market place or which but for a breach of this CLAUSE
10.1(b)(4) would not be generally known or available in the market
place; or
(5) at any time induce or attempt to induce any person who is at
the time of Completion or who later becomes an employee of the Buyer
or any Related Corporation of the Buyer in the Business to terminate
his or her employment with the Buyer or any Related Corporation of the
Buyer.
10.2. EFFECT ON VALUE OF THE SHARES
The Sellers agree that:
(a) any breach of CLAUSE 10.1 would diminish the value of the Shares; and
(b) the restrictive undertakings in CLAUSE 10.1 are reasonable and
necessary for the protection of the value of the Shares and must be
given full effect.
10.3. LEGAL ADVICE
The Sellers acknowledge that they have received legal advice in relation to
this agreement and in particular CLAUSE 10.1.
10.4. INJUNCTION
The Sellers acknowledge that monetary damages alone would not be adequate
compensation to the Buyer for a breach of CLAUSE 10.1 and that the Buyer is
entitled to seek an injunction from a court of competent jurisdiction in the
event of and in respect of:
(a) any failure to comply or threatened failure to comply by the Sellers
with CLAUSE 10.1;
(b) the Buyer having reason to believe that the Sellers will not comply
with CLAUSE 10.1.
10.5. SEPARATE UNDERTAKINGS
If notwithstanding the other provisions of this CLAUSE 10 any part of an
undertaking in CLAUSE 9.1 is unenforceable it may be severed without affecting
the remaining enforceability of that or other undertakings.
10.6. SURVIVAL
The Seller's obligations under this CLAUSE 10 survive the Completion of this
agreement.
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10.7. SELLERS' OBLIGATIONS SEVERAL NOT JOINT
The obligations of the Sellers pursuant to this CLAUSE 10 are several not joint
and a breach of them by one or more of the Sellers shall not constitute a
breach by the remaining Sellers.
PART 11.
ANNOUNCEMENTS
11.1. LEGAL REQUIREMENTS
The Buyer may disclose anything in respect of this agreement or the terms of
sale of the Shares as required:
(a) by any applicable law or
(b) by the requirements of any recognised stock exchange on which its
shares or the shares of any related body corporate are listed,
but to the extent possible, the Buyer must consult with the Sellers before
making the disclosure and use reasonable endeavours to agree on the form and
content of the disclosure.
11.2. DISCLOSURE TO OFFICERS AND PROFESSIONAL ADVISERS
The Buyer may disclose anything in respect of this agreement or the terms of
the sale of the Shares to the officers and professional advisers of the Buyer
but it must use its best endeavours to ensure all matters disclosed are kept
confidential.
11.3. FURTHER PUBLICITY
Subject to CLAUSES 11.1 AND 11.2 the Buyer may not disclose the provisions of
this agreement or the terms on which the Shares are sold unless the Sellers
first consent in writing.
11.4. PUBLIC ANNOUNCEMENT
Subject to CLAUSE 11.3 any and all public announcements of any kind made before
Completion Date concerning this agreement or the transactions contemplated by
it shall only be made with the prior written approval of the Buyer and the
Sellers.
PART 12.
TAXATION INDEMNITY
12.1. TAX INDEMNITY
The Sellers indemnify and agree to keep indemnified upon demand the Buyer at
all times from Completion Date against any Tax Liability for a period of 5
years from the date of this agreement.
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12.2. NOTIFICATION
The Buyer shall determine in good faith on reasonable grounds the amount of any
indemnity payment to be made under this CLAUSE 12 and its due date for payment
upon the issue of notice of assessment or a notice of amended assessment and
shall within 14 days of receipt of such a notice notify the Sellers of the
amount of the indemnity payment required and its due date for payment. The
amount of the indemnity payment will be the sum of:
(a) the amount of Tax payable which is sufficient to fully compensate the
Buyer for the Tax Liability;
(b) the amount of Tax payable, interest on an after-Tax basis and
penalties reasonably necessary to compensate the Buyer for any other
claims, actions, proceedings, judgments, damages, losses or
liabilities, excluding costs and expenses, incurred as a result of the
Tax Liability;
(c) the reference in CLAUSE 12.2(a) AND (b) to the after tax amount of the
payment means the payment in question net of any tax payable by the
Buyer.
12.3. OBJECTIONS AND APPEALS
If:
(a) the Commissioner for Taxation issues notice of assessment or a notice
of amended assessment in respect of a Tax Liability the Buyer will at
the written request of the Sellers cause or procure Bill Bass to lodge
an objection in respect of such assessment or amended assessment with
the Commissioner for Taxation in accordance with the Tax Act stating
such grounds of objection as the Sellers may reasonably require in
writing;
(b) the Sellers are disputing a notice of assessment or a notice of
amended assessment in respect of a Tax Liability then the Buyer shall
at the Sellers' request and with their assistance cause or procure
Bill Bass to use its best endeavours to secure a delay from the
Commissioner of Taxation in the determination of the objection pending
the resolution of the dispute between the Sellers and the Commissioner
of Taxation. Pending determination of that objection the Buyer will
not compromise or settle any ground of objection with the Commissioner
without the prior written consent of the Sellers;
(c) any objection by Bill Bass in respect of a Tax Liability under CLAUSE
12.3(a) is disallowed in whole or part, the Buyer shall cause or
procure Bill Bass to serve notice thereof upon the Sellers within 14
days of its receipt and shall at the written request of the Sellers
lodge a request for a reference to the Administrative Appeals
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Tribunal or lodge a request to treat the objection as an appeal and
forward it to the Federal Court of Australia or such other Court of
competent jurisdiction nominated by the Sellers ("the Court");
(d) any reference to the Administrative Appeals Tribunal in respect of a
Tax Liability is decided against Bill Bass, the Buyer shall at the
written request of the Sellers cause or procure Bill Bass to refer the
objection to the Court.
(e) an appeal to the Court in respect of a Tax Liability is decided
against Bill Bass, the Buyer shall at the written request of the
Sellers cause or procure Bill Bass to take such steps as the Sellers
may reasonably require to cause an appeal to be prosecuted to the
extent permissible under the Tax Act or such other legislation
applicable to such appeals;
(f) any reference or proceeding in respect of a Tax Liability are decided
in favour of Bill Bass and the Commissioner appeals against such
decision the Buyer shall serve notice thereof upon the Sellers within
28 days of receipt and shall at the written request of the Sellers
take such steps as the Sellers reasonably require before whatever
Court such appeal may be heard.
12.4. ASSISTANCE AND COOPERATION
The Buyer shall, for the purposes of CLAUSE 12.3 cooperate and provide all
reasonable assistance to the Sellers and shall cause or procure Bill Bass to do
likewise including, but not limited to, the provision to the Sellers of access
to all personnel and records of the Buyer and Bill Bass relevant to undertaking
or determining whether to undertake any of the matters in CLAUSE 12.3;
12.5. SUCCESSFUL OBJECTION, REFERENCE OR APPEAL OR REFUND
(a) If the Buyer is notified that any refund is due or allowed of a Tax
Liability or, as a result of any objection, appeal or other proceeding
it has been determined that the basis of a notice of assessment or a
notice of amended assessment in respect of a Tax Liability was not
justified, the Buyer shall notify the Sellers forthwith in writing;
(b) The Buyer shall pay the Sellers or shall cause or procure Bill Bass to
pay to the Sellers any amount recovered from the Commissioner by way
of refund, successful objection, reference or appeal and any interest
thereon (net of any Tax payable by the Buyer on such interest) that is
also recovered, in respect of a Tax Liability and forward the
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same to the Sellers upon demand less any amount due in respect of the
indemnify payments due under CLAUSE 12.
12.6. BOLLE SUNGLASSES LTD INDEMNITY
The Buyer indemnifies and agrees to keep indemnified upon demand the Sellers at
all times from Completion Date against any liability for or loss incurred or
any other amount paid or payable by or in respect of capital gains tax which
may arise upon the transfer of Bill Bass's shares in Bolle Sunglasses Ltd for a
period of 5 years from the date of this agreement.
PART 13.
ENVIRONMENTAL INDEMNITY
13.1. BUYER'S ENVIRONMENTAL INDEMNITY
The Sellers indemnify and agree to keep indemnified upon demand the Buyer at
all times from Completion Date against any Environmental Liability for a period
of 5 years from the date of this agreement.
13.2. SELLER'S CLEAN-UP RIGHTS
If a Clean-Up Notice is served on the Buyer or the Bill Bass Group then,
subject to CLAUSES 13.3 AND 13.4:
(a) the Sellers may at their discretion negotiate with the Governmental
Agency which has given the Clean-Up Notice with respect to the terms
and requirements of the Clean-Up Notice;
(b) the Sellers may at their discretion determine to exercise any right of
appeal against or review of the Clean-Up Notice provided that the
exercise of such right of appeal does not materially affect the
carrying on of the business of the Bill Bass Group;
(c) may, in the event that any right of appeal vests in the Buyer or any
member of the Bill Bass Group, commence and continue any such appeal
in the name of the Buyer or any member of the Bill Bass Group as the
case may be;
(d) may exclusively carry out the Prescribed Remedial Action necessary to
satisfy the Cleanup Notice or the requirements of the Governmental
Agency which issued it;
(e) the Sellers and their agents are irrevocably granted the right to
enter the Properties, including the bringing of vehicles and equipment
and their installation onto the Properties for the purpose of carrying
out or continuing to carry out the Prescribed Remedial Action
necessary to satisfy the Clean-Up Notice or the requirements of the
Governmental Agency which issued it;
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(f) the Buyer must provide all reasonable assistance to the Sellers and
shall cause or procure Bill Bass to do likewise including, for the
purpose of facilitating the carrying out or continuing to carry out
the Prescribed Remedial Action necessary to satisfy the Clean-Up
Notice or the requirements of the Governmental Agency which issued it;
(g) the Sellers shall indemnify the Buyer against and in respect of any
loss, damage, costs, expenses, liability or other harm which arises in
connection with the taking of any action by the Sellers or their
agents with respect to a Clean-Up Notice; and
(h) the Sellers shall after completion of the Prescribed Remedial Action
as far as practicable restore the affected Properties to substantially
the same condition as applied immediately prior to the Prescribed
Remedial Action being undertaken.
13.3. EXERCISE OF SELLER'S CLEAN-UP RIGHTS
Prior to the exercise any of the rights conferred by CLAUSE 13.2, the Sellers
must:
(a) notify the Buyer in writing of any action proposed to be taken or
right proposed to be exercised;
(b) in the event that any Prescribed Remedial Action is to be undertaken,
consult with the Buyer as to how such Prescribed Remedial Action may
be carried out in a manner which avoids or minimises any material
inconvenience, loss, damage, cost, expense liability or other harm to
the Buyer or disruption to the business of the Bill Bass Group.
13.4. COSTS OF APPEAL
If the Sellers exercise any of the rights of appeal or review conferred by
CLAUSE 13.2 in the name of the Buyer, the Sellers must indemnify the Buyer
against any order for costs made against it and all other costs reasonably
incurred by the Buyer in the course of such proceeding in the event that such
appeal or review is unsuccessful.
13.5. NOTIFICATION OF CLEAN-UP NOTICE
If a Clean-Up Notice is served upon the Bill Bass Group, the Buyer or the
Sellers:
(a) the party receiving such notice shall notify or shall cause or procure
the notification of the other party of such service by providing a
copy of the notice and any other document served with it or other
document served or
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forwarded by a Governmental Agency which foreshadows the possibility
of a Clean-Up Notice being served as soon as practicable but in any
event within 3 days of its receipt; and
(b) the Sellers shall exercise their election under CLAUSE 13.2 within 14
days of the receipt by them of the Clean-Up Notice by giving the Buyer
notice in writing prior to exercising any of the rights conferred by
that clause.
13.6. AVOIDANCE OF BREACH OF ENVIRONMENTAL LAW
The Buyer and Sellers acknowledge that any Clean-Up Notice must be satisfied as
quickly as practicable to avoid any breach of Environmental Law and will employ
reasonable endeavours to do so.
PART 14.
ONGOING INVESTMENT
14.1. DISTRIBUTION OF ANNUAL PROFITS
The Buyer and the Sellers agree that the Dividend will be declared and payable
by Bill Bass 5 days after presentation of signed audited accounts of Bill Bass
and Parkhurst Oaks Pty Ltd but in no event later than 105 days after 31
December each year until Option Completion. The Buyer and the Sellers further
agree that in the event that the Dividend or any part thereof cannot be paid
for any reason whatsoever but the Adjusted Financial Statements show that a
profit has been made which would otherwise entitle the Sellers to the Dividend,
Bill Bass will pay to EH Collicoat and RH Gibbons a bonus equivalent to the
after tax value of such of the Dividend as has not been so paid.
14.2. CALL OPTION
In consideration of A$1.00 paid by the Buyer to the Sellers (receipt of which
is hereby acknowledged) the Sellers grant the Buyer an irrevocable option to
require the Sellers to sell the Remaining Shares in accordance with this
Agreement.
14.3. EXERCISE OF CALL OPTION
The Buyer may exercise the Call Option by giving notice in writing.
14.4. PUT OPTION
In consideration of A$1.00 paid by the Sellers to the Buyer (receipt of which
is hereby acknowledged) the Buyer grants the Sellers an irrevocable option to
require the Buyer to purchase the Remaining Shares in accordance with this
Agreement.
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14.5. EXERCISE OF PUT OPTION
The Sellers may exercise the Put Option by the giving notice in writing given
by EH Collicoat and RH Gibbons if:
(a) None of Martin E Franklin, Gary Kiedasch, or Ian G H Ashken are
members of the Board of Directors of the Buyer and this option is
exercised by notice given to the Buyer within 6 months of the last of
them ceasing for whatever reason to be members of the Board of
Directors of the Buyer; or
(b) After the elapse of 5 years from the date of this agreement the
Adjusted Price is more than US$14 per share:
(c) 5 years has elapsed from the date of this agreement.
14.6. TERMS APPLICABLE TO EITHER OPTION
The Option Securities will be sold free of any Encumbrance and with all rights
attached to them at the date of Option Completion.
14.7. OPTION COMPLETION
Option Completion shall take place at 37 Thistlethwaite Street South Melbourne
on the first Business Day occurring 5 Business Days after the exercise of the
Option or such other date or place as may be agreed between the parties.
14.8. DOCUMENTS TO BE DELIVERED
The Sellers will deliver to the Buyer on or before Option Completion transfers
in registrable form in favour of the Buyer or other transferees as it may
direct, duly executed by the Sellers as transferor of the Option Securities.
14.9. PAYMENT OF THE OPTION PRICE
Upon Option Completion the Buyer will pay to the Trust or to such person or
persons and in such proportions as EH Collicoat and RH Gibbons may direct the
Option Price by wire transfer or by bank cheque as agreed between the parties.
14.10. MAINTAINING NET TANGIBLE ASSETS
Except as caused by cumulative operating losses, the Buyer will at all times
until Option Completion maintain the net tangible assets of Bill Bass and
Parkhurst Oaks Pty Ltd collectively such that they are greater than A$2.55
million as shown in the audited accounts and the Adjusted Financial Statements
of those companies or such other amount as may from time to time be agreed
between EH Collicoat, RH Gibbons and the management of the Buyer.
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14.11. RENEWAL OF THE LICENCE
The Buyer will at all times until Option Completion grant such extensions of
the Licence as are necessary to continue the Licence on the same terms as
presently apply until Option Completion.
14.12. SALE OF BOLLE ASIA LTD
The Buyer will not sell or agree to sell and will not cause or procure Bill
Bass to sell or agree to sell any shares in Bolle Asia Ltd until Option
Completion without the prior written approval of EH Collicoat and RH Gibbons.
PART 15.
MISCELLANEOUS
15.1. COSTS AND EXPENSES
Each party will be responsible for and must pay its own costs and expenses in
respect of the negotiation, preparation, execution and delivery of this
agreement or any document contemplated by this agreement incurred since 31
December, 1996 except that the Buyer must pay any Duty in respect of:
(a) this agreement; and
(b) any agreement or document entered into or signed under this agreement.
15.2. NOTICES
Any notice or other communication including, but not limited to, any request,
demand, consent or approval, to or by a party to this agreement:
(a) must be in legible writing addressed as shown:
(1) if to the Sellers: to each at the addresses given
at the commencement of this
agreement marked to their
respective attention.
(2) if to the Buyer or the Guarantor: The President, Bolle Inc
Address: 555 Theodore Fremd Avenue,
Suite B302,
Rye NY 10580
Facsimile: (914) 967 9405
Telephone: (914) 967 9400
or as specified to the sender by any party by notice;
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(b) is regarded as being given by the sender and received by the addressee:
(1) if by delivery in person, when delivered to the addressee;
(2) if by post, 3 Business Days unless the addressee is in a
different country to the sender in which case 7 Business Days
from and including the date of postage; or
(3) if by facsimile transmission, on production of a transmission
report by the machine from which the facsimile was sent which
indicates that the facsimile was sent in its entirety to the
facsimile number of the addressee;
but if the delivery or receipt is on a day which is not a Business Day
or is after 4:00 pm (addressee's time) it is regarded as received at
9:00 am on the following Business Day;
(c) a facsimile transmission is regarded as legible unless the addressee
by telephone or facsimile contacts the sender within 1 Business Day of
receipt or is deemed received by reason of CLAUSE 15.2(b)(3) and
informs the sender that it is not legible.
15.3. GOVERNING LAW AND JURISDICTION
(a) This agreement is governed by the laws of the State of Victoria.
(b) Each party irrevocably submits to the non-exclusive jurisdiction of
the courts of that State.
15.4. WAIVERS
(a) Waivers of any right arising from a breach of this agreement or of any
Power arising upon default under this agreement must be in writing and
executed by the party granting the waiver.
(b) A failure or delay in exercise, of:
(1) a right arising from a breach of this agreement; or
(2) a Power created or arising upon default under this agreement,
does not result in a waiver of that right or Power.
(c) A party is not entitled to rely on a delay in the exercise or
non-exercise of a right or Power arising from a breach
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of this agreement or on a default under this agreement as constituting
a waiver of that right or Power.
(d) A party may not rely on any conduct of another party as a defence to
exercise of a right or Power by that other party.
(e) This clause may not itself be waived except by writing executed by the
party granting the waiver.
15.5. VARIATION
A variation of any term of this agreement must be in writing and executed by
the parties.
15.6. CUMULATIVE RIGHTS
The rights, powers, authorities, discretions and remedies arising out of or
under this agreement are cumulative and do not exclude any other right, power,
authority, discretion or remedy of the parties.
15.7. NON-MERGER AND SURVIVAL OF WARRANTIES
(a) Neither the Warranties, nor any other provision of this agreement
merges on Completion.
(b) The Warranties survive Completion of this agreement.
15.8. FURTHER ASSURANCES
Each party must do all things, and execute all further documents, necessary to
give full effect to this agreement.
15.9. ENTIRE AGREEMENT
This agreement embodies the entire agreement between the parties with respect
to the subject matter of this agreement and supersedes any prior negotiation,
arrangement, understanding or agreement with respect to the subject matter or
any term of this agreement.
15.10. ATTORNEYS
Each of the attorneys executing this agreement states that the attorney has no
notice of the revocation of that attorney's power of attorney.
15.11. COUNTERPARTS
This agreement may be executed in two or more counterparts, each of which shall
be deemed an original, but all of which together will constitute one and the
same instrument.
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15.12. SEVERANCE
Any provision of this agreement which is prohibited or unenforceable in any
jurisdiction is ineffective as to that jurisdiction to the extent of that
prohibition or enforceability. That does not invalidate the remaining
provisions of this agreement or affect the validity or enforceability of that
provision in any other jurisdiction.
EXECUTED by the parties as an agreement:
SIGNED
by BOLLE INC
in the presence of:
BOLLE
/s/ Karen Ruituso /s/ Ian G. H. Ashken
- -------------------------------- ---------------------------
Witness BOLLE INC
Karen Ruituso
- --------------------------------
Name (please print)
SIGNED
by KEITH ARCHIBALD COLLICOAT
in the presence of:
/s/ B. J. Collicoat /s/ Keith Archibald Collicoat
- --------------------------------- -------------------------------
Witness KEITH ARCHIBALD COLLICOAT
B. J. Collicoat
- ---------------------------------
Name (please print)
SIGNED
by ERIC HENRY COLLICOAT
in the presence of:
/s/ Victoria Hautzigros /s/ Eric Henry Collicoat
- ---------------------------------- ----------------------------
Witness ERIC HENRY COLLICOAT
Victoria Hautzigros
- ----------------------------------
Name (please print)
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SIGNED
by ROGER HOWARD GIBBONS
in the presence of:
/s/ Victoria Hautzigros /s/ Roger Howard Gibbons
- ---------------------------------- -----------------------------
Witness ROGER HOWARD GIBBONS
Victoria Hautzigros
- ----------------------------------
Name (please print)
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SCHEDULE 1 - (WARRANTIES)
1. THE TRUST
(a) The Sellers are the legal owners of the Bill Bass Shares;
(b) The Sellers have full power and authority to transfer to the Buyer
good legal and equitable title to the Bill Bass Shares;
(c) The Sellers are empowered by the Trust Deed to enter into and perform
this agreement in their capacities as trustees of the Trust;
(d) All necessary resolutions, consents, approvals and other procedural
matters have been completed or obtained (including as required by the
Trust Deed) to enable the Sellers to enter into and perform this
agreement;
(e) The Trust has not been terminated nor has any event for the vesting of
the assets of the Trust occurred;
(f) The Sellers have taken all action necessary by them to authorize the
execution, delivery and performance of this agreement in accordance
with its terms.
2. CORPORATE
2.1 ISSUED SHARE CAPITAL AND ASSETS
(a) The authorised capital of Bill Bass and the Bill Bass Companies is
accurately set out in Schedule 6.
(b) Subject to clause 1 of this schedule, the whole of the issued share
capital of Bill Bass and the Bill Bass Companies is validly issued and
beneficially owned as disclosed in Schedule 6, free and clear of all
Third Party Interests.
(c) There are no options, agreements or understandings (whether
exercisable now or in the future and whether contingent or otherwise)
which entitle or may entitle any person to call for the issue,
purchase or transfer of any shares, debentures, notes, or other
securities in Bill Bass or the Bill Bass Companies or create or
require to be created any Third Party Interest over any of the Shares.
(d) To the best of the Sellers knowledge all legal requirements relating
to the formation of Bill Bass and the Bill Bass Companies have been
complied with in full.
(e) Since the Relevant Date and, to the best of the Sellers knowledge,
prior to the Relevant Date all legal requirements
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relating to the issue of Shares by Bill Bass and the Bill Bass
Companies have been complied with in full.
(f) All of the Shares are fully paid (both as to par value and any
premium) and neither Bill Bass nor any of the Bill Bass Companies has
exercised any lien over any of its issued shares.
(g) Bill Bass and the Bill Bass Companies collectively have as at the
Accounts Date net tangible assets of not less than A$2.55 million
excluding the assets, transactions and payments described in CLAUSES
8.2(c), (d), (e) AND (f).
2.2 ACCOUNTS
(a) The Accounts give a true and fair view of the financial position,
balance sheet and profit and loss account of the companies to which
they relate as at the Accounts Date and have been prepared in
accordance with the Accounting Standards:
(b) The Adjusted Accounts give a true and fair view of the financial
position, balance sheet and profit and loss account of the companies
to which they relate as at the Accounts Date adjusted to exclude the
assets, transactions and payments described in CLAUSES 8.2(c), (d),
(e) AND (f) and have otherwise been prepared in accordance with the
Accounting Standards.
2.3 BOOKS AND RECORDS
(a) The register of members, the statutory books of Bill Bass and the Bill
Bass Companies and (since the Relevant Date and, to the best of the
Sellers' knowledge prior to the Relevant Date) all other accounts,
books, registers, financial and other records of whatsoever kind of
Bill Bass and the Bill Bass Companies (whether required to be kept or
maintained by Bill Bass and the Bill Bass Companies or not):
(i) are up to date;
(ii) have been fully and properly maintained and contain due and
accurate records of all matters required by law to be entered
therein;
(iii) do not contain or reflect any material inaccuracies or
discrepancies;
(iv) will (save for records delivered to the Buyer on Completion)
be in the possession of Bill Bass and the Bill Bass Companies
upon Completion.
(b) With the exception of licenced software, the records, systems,
controls and information of Bill Bass and the Bill
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Bass Companies are not recorded, maintained, operated, or otherwise
wholly or partly dependent on any means (including all means of access
thereto and therefrom) which are not under the exclusive ownership and
direct or indirect control of Bill Bass or the Bill Bass Companies.
2.4 RETURNS ETC
After the Relevant Date, and to the Sellers' knowledge, prior to the Relevant
Date, all returns, particulars, resolutions, notices and other documents and
all announcements and disclosures required to be filed with, delivered or made
to the Australian Securities Commission, or other Governmental Agency in
respect of Bill Bass and the Bill Bass Companies have been properly filed,
delivered or made (as the case may require) within the applicable time
requirements, and were accurate and not misleading upon the lodgment, delivery
or making, thereof.
2.5 DIVIDENDS
After the Relevant Date and, to the Sellers' knowledge, prior to the Relevant
Date all dividends or other distributions of profits by Bill Bass and the Bill
Bass Companies since the date of incorporation of Bill Bass and the Bill Bass
Companies have been declared and paid or satisfied in accordance with all
applicable legal requirements.
2.6 MEMORANDUM AND ARTICLES OF ASSOCIATION
After the Relevant Date and, to the Sellers' knowledge, prior to the Relevant
Date, Bill Bass and the Bill Bass Companies have complied with their respective
Memorandum and Articles of Association in all respects.
3. CONTRACTS & RELATED MATTERS
3.1 CONTRACTS
Bill Bass and the Bill Bass Companies are not a party to any agreement,
arrangement or understanding:
(a) which is unusual or which is outside their ordinary and proper course
of business;
(b) which in the reasonable opinion of the Sellers involves or is likely
to involve obligations or liabilities which are onerous or which by
reason of their nature or magnitude ought reasonably to be made known
to an intending purchaser of the Shares;
(c) which is in the reasonable opinion of the Sellers unprofitable or
likely to be unprofitable;
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(d) which in the reasonable opinion of the Sellers materially and
adversely effects its business or the Assets or which in the
reasonable opinion of the Sellers unreasonably restricts Bill Bass or
the Bill Bass Companies' freedom of action in relation to their normal
business activities;
(e) for the purchase of materials, supplies or equipment which is
substantially in excess of the requirements of Bill Bass or the Bill
Bass Companies for their normal operating purposes;
(f) which is a joint venture, shareholders' agreement, partnership or
other similar agreement, arrangement, or understanding except for an
agreement between Bill Bass and McPhail Sports Limited (Number
121111)(a company incorporated in New Zealand). Bolle Asia Ltd and
Equus Tricots Limited and the Nerang River Plaza Shopping Centre joint
venture which is hereby acknowledged and accepted by the Buyer;
(g) which purports to control or otherwise affect the voting or
disposition of the shares of Bill Bass or the Bill Bass Companies;
(h) for the provision of services other than in the ordinary course of
business of Bill Bass or the Bill Bass Companies;
(i) except in the ordinary course of business pursuant to which any person
(including employees, agents, distributors or independent contractors
but excluding travel agents) is entitled to a commission,
remuneration, royalty or payment of any nature from Bill Bass or the
Bill Bass Companies calculated by reference to the whole or part of
the turnover, profits or sales of Bill Bass or the Bill Bass
Companies;
(j) which is not terminable on 12 month's notice or less, without penalty
or compensation other than those set out in schedule 7 which is an
accurate list of all such agreements, arrangements and understandings;
(k) which is a loan, facility, or other similar agreement, arrangement or
understanding; or
(l) with any director or officer of the Bill Bass Companies, their
shareholders or their shareholders' families or any party controlled
by them or in which they have an interest except as provided by this
agreement or as set out in Schedule 8;
(m) pursuant to which, as at the Completion Date, any third party is
entitled or, to the Sellers' knowledge, likely by reason of a change
of ownership of the Shares, except for the Mortgage Debenture:
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(1) to terminate the agreement;
(2) to require the adoption of terms which are less favourable to
the Bill Bass Group than the current terms.
3.2 POWERS OF ATTORNEY
Bill Bass and the Bill Bass Companies have given no power of attorney or other
authority to any person express, implied or ostensible which is still
outstanding or effective to enter into any contract or commitment to do
anything on their behalf other than the authority of employees to enter into
routine trading contracts in the normal course of their duties.
3.3 OFFERS, TENDERS ETC
No offer, tender, quotation or the like given or made by Bill Bass or the Bill
Bass Companies and still outstanding is capable of giving rise to a contract
merely by the unilateral act of a third party which in the reasonable opinion
of the Sellers is or will be unprofitable and outside their ordinary course of
business.
3.4 ILLEGAL OR VOID CONTRACTS
To the Sellers' knowledge, no material Contract is void, voidable, illegal or
unenforceable, in whole or in part.
3.5 DEFAULTS UNDER CONTRACTS/LIABLE TO TERMINATION
With respect to each Contract:
(a) there has been no material delay, material negligence or material
default on the part of Bill Bass or the Bill Bass Companies or any
other party to a Contract and no event has occurred which with the
giving of notice or passage of time, may constitute a material
default;
(b) Bill Bass and Bill Bass Companies are under no obligation which cannot
readily be fulfilled, performed or discharged by it on time and
without undue or unusual expenditure or effort;
(c) in the reasonable opinion of the Sellers, Bill Bass and the Bill Bass
Companies has the technical and other capabilities and the human and
material resources to enable it to fulfill, perform and discharge all
its outstanding obligations in the ordinary course of business; and
(d) The Sellers have not received any notice of termination of any
Contract and to the best of the Sellers' knowledge there
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are no grounds for rescission, avoidance, repudiation or termination.
4. ASSETS AND RENTAL ASSETS
4.1 STOCKS
With the exception of items sold by Bill Bass in the ordinary course of
business since the Accounts Date, Bill Bass or the Bill Bass Companies have
good and marketable title to all Stocks, free from any Third Party Interests
and without limitation free from any leases, hire or hire purchase agreements,
credit sale agreements, bills of sale or agreements for payment on deferred
terms and all Stocks are in the possession or control of Bill Bass or the Bill
Bass Companies and:
(a) the Stocks are in good condition and of normal merchantable quality
fit for the purpose for which they are intended to be used in the
Business; and
(b) the level of Stocks is not materially different from the levels in
existence as at the last monthly stocktake.
4.2 FIXED ASSETS
With the exception of the Rental Assets, Bill Bass or the Bill Bass Companies
have good and marketable title to all fixed and loose plant, machinery,
furniture, fixtures and fittings and equipment and all other tangible assets
owned by Bill Bass or the Bill Bass Companies or used in connection with the
Business and all fixed assets referred to in the Accounts and any additions
thereto made since the Accounts Date free from any Third Party Interests and
without limitation, free from any leases, hire or hire purchase agreements,
credit sale agreements, bills of sale or agreements for payment on deferred
terms and:
(a) all such assets are fully paid for and in the possession of Bill Bass
or the Bill Bass Companies; and
(b) all such assets are in the same condition as at the date of execution
of this agreement (fair wear and tear excepted).
4.3 USE OF ASSETS GENERALLY
In relation to all assets owned, used, or which are otherwise in the possession
or control of Bill Bass or the Bill Bass Companies:
(a) other than as disclosed in writing to the Buyer, the Sellers have not
received notice that the construction, positioning, use of any of the
assets, or the assets themselves contravene any relevant provisions of
any law or other requirement binding upon Bill Bass or the Bill Bass
Companies; and
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(b) after the Relevant Date and, to the Sellers' knowledge, prior to the
Relevant Date no notice has been served on Bill Bass or the Bill Bass
Companies or other circumstance arisen in respect of any such asset,
which in any way might impair, prevent, or otherwise interfere with
Bill Bass or the Bill Bass Companies' use of such asset.
4.4 ALL ASSETS DISCLOSED
Apart from the assets, transactions and payments described in CLAUSE 8.2(c),
(d), (e) AND (f), the assets disclosed in the Accounts together with such of
the Rental Assets as are not disclosed in the Accounts constitute all the
assets (other than as disclosed to the Buyer) owned or used by Bill Bass, or
the Bill Bass Companies with the exception of Stocks acquired or disposed of in
the ordinary course of business since the Accounts Date.
4.5 ALL ASSETS NECESSARY
Bill Bass and the Bill Bass Companies enjoy quiet possession of the Rental
Assets and have good and marketable title to all other assets necessary to
enable it to properly conduct the Business as such business has been conducted
prior to the date hereof.
4.6 RENTAL CONTRACTS
Annexures B, C, D, and E set out true and correct particulars of the material
terms of which the Sellers are aware of all the Rental Contracts, including,
where applicable, the amount of all rent or lease payments required to be paid
thereunder, the term thereof and the amount required to be paid (if applicable)
to enable Bill Bass or the Bill Bass Companies to obtain title to the Rental
Assets, free and clear of any Third Party Interests.
5. SECURITIES
5.1 MORTGAGES ETC
All of the assets of Bill Bass and the Bill Bass Companies are owned by Bill
Bass or the Bill Bass Companies free and clear of any Third Party Interests and
Bill Bass and the Bill Bass Companies have good and marketable title thereto.
5.2 THIRD PARTY INTERESTS
There is no Contract between Bill Bass or the Bill Bass Companies and any other
person pursuant to which Bill Bass or the Bill Bass Companies could become
obliged to confer a Third Party Interest with respect to any of Bill Bass or
the Bill Bass Companies' assets in favour of any person or pursuant to which a
Third Party Interest over any of Bill Bass or the Bill Bass Companies' assets
could be created.
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5.3 NO GUARANTEES
Bill Bass and each of the Bill Bass Companies have not entered into any
guarantee of any other person's obligations or liabilities or indemnified any
person against the acts or omissions of any third party.
5.4 NO THIRD PARTY SECURITIES
Other than as disclosed to the Buyer and to the knowledge of the Sellers, no
person has given any guarantee or security to any other person for any
liability of Bill Bass or the Bill Bass Companies to that other person.
6. TRADING AND OPERATIONAL MATTERS
6.1 CLAIMS IN RELATION TO SERVICES PROVIDED
To the best of the Sellers' knowledge and belief, no services supplied by Bill
Bass or the Bill Bass Companies have:
(a) been supplied in a negligent manner;
(b) failed to comply with the express or implied terms upon which services
were agreed to be provided by Bill Bass or the Bill Bass Companies or
the requirements of law; or
(c) been supplied in a manner which would entitle the recipient to make a
claim against Bill Bass or the Bill Bass Companies for which Bill Bass
or the Bill Bass Companies may become liable except as occurs in the
ordinary course of the Business.
6.2 PRODUCT AND SERVICE CLAIMS
The Sellers are not aware of any deficiencies or defects in any products or
services supplied or provided by Bill Bass or the Bill Bass Companies of which
they are aware may result in claims being made against Bill Bass or the Bill
Bass Companies for which Bill Bass or the Bill Bass Companies may become liable
in the course of its business, after the date hereof.
6.3 OFFICIAL INVESTIGATIONS
Bill Bass and the Bill Bass Companies are not the subject of any Official
investigation or inquiry and the Sellers are not aware of any facts which are
likely to give rise to any such investigation or inquiry.
6.4 CRIMINAL OFFENSES ETC
Neither Bill Bass nor the Bill Bass Companies, nor any of their Officers in
relation to Bill Bass or the Bill Bass Companies, has committed any criminal
offence or any tort or any breach of the
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requirements or conditions of any law or other requirement relating to Bill
Bass or the Bill Bass Companies or the conduct of the Business.
6.5 AUTHORISATIONS
After the Relevant Date and, to the Sellers' knowledge, prior to the Relevant
Date Bill Bass and the Bill Bass Companies possesses all necessary valid
Authorisations to enable it to conduct its business and operations as they are
presently being conducted and:
(a) Bill Bass and the Bill Bass Companies are not in default with respect
to, nor in violation of any Authorisation;
(b) Bill Bass and the Bill Bass Companies have not received any notice of
non-compliance with any Authorisation; and
(c) there is no circumstance or fact involving Bill Bass or the Bill Bass
Companies or their affairs (other than as a result of the sale and
purchase of the Shares under this agreement) which may result in the
revocation, suspension, cancellation or variation in any material
respect of any Authorisation.
7. TAXATION
7.1 FULL DISCLOSURE
After the Relevant Date and, to the Sellers' knowledge, prior to the Relevant
Date Bill Bass and the Bill Bass Companies have lodged with the appropriate
Governmental Agency all Tax returns, reports and other information required to
be lodged by it in relation to Tax and all such returns, reports and other
information were accurate, complete and not misleading upon lodgment thereof.
7.2 NO TAX PROCEEDINGS
Except as disclosed to the Buyer, Bill Bass and the Bill Bass Companies:
(a) are not a party to any action or proceeding for the assessment or
collection of Tax;
(b) are not the subject of any dispute or disagreement with any
Governmental Agency in relation to Tax; and
(c) there is no fact or matter which would give rise to a reasonable
suspicion by Bill Bass or the Bill Bass Companies or the Sellers that
there are grounds which might give rise to any such action,
proceeding, dispute or disagreement.
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7.3 AGREEMENTS FOR EXTENSION OF TIME
Bill Bass and the Bill Bass Companies have not entered into any agreement which
is now, or may hereafter become effective extending the period of assessment or
collection of any Tax.
7.4 ALL TAX PAID
(a) Bill Bass and the Bill Bass Companies have paid all Tax which has been
assessed or which is or has become lawfully assessable upon them which
is otherwise due and payable on the due date for payment thereof and
are under no liability to pay any penalty or interest in connection
therewith.
(b) Bill Bass and the Bill Bass Companies have deducted all Tax required
to be deducted from any payments made by Bill Bass and the Bill Bass
Companies including (but not limited to) interest, royalties,
remuneration payable to employees or contractors and where necessary
Bill Bass and the Bill Bass Companies have accounted for any such Tax
deducted or collected in accordance with all relevant requirements.
7.5 ADEQUATE PROVISION IN ACCOUNTS FOR TAX
As at the Accounts Date Bill Bass and the Bill Bass Companies did not have any
Liability in respect of unpaid or unassessed Tax and Bill Bass and the Bill
Bass Companies are not and shall not at any date in the future become subject
to any such Tax on or in respect of or by reference to the profits, gains or
income of Bill Bass or the Bill Bass Companies or in respect of or by reference
to any transaction entered into by Bill Bass or the Bill Bass Companies as at
or for any period up to and including the Accounts Date, in excess of any
provision for Tax included in the Accounts.
7.6 TAX SINCE ACCOUNTS DATE
Since the Accounts Date no additional Liability for Tax has accrued to Bill
Bass or the Bill Bass Companies otherwise than as a result of trading
activities in the ordinary course of the Business.
7.7 FRANKING
After the Relevant Date and, to the Sellers' knowledge, prior to the Relevant
Date Bill Bass and the Bill Bass Companies have complied with the provisions of
part IIIAA of the Income Tax Assessment Act 1936 (Cth) and have maintained
records of franking debits and franking credits which are sufficient for the
purposes of that Act.
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7.8 UNDERTAKINGS OR AGREEMENTS
Bill Bass and the Bill Bass Companies have complied in full with all
undertakings or agreements given to or entered into with any Governmental
Agency in relation to Tax.
7.9 STAMP DUTY
After the Relevant Date and, to the Sellers' knowledge, prior to the Relevant
Date all documents to which Bill Bass or the Bill Bass Companies are a party:
(a) and are obliged by any law or agreement;
(b) or in the enforcement of which Bill Bass or the Bill Bass Companies
may be interested;
have been duly and sufficiently stamped in accordance with applicable stamp
duty legislation. After the Relevant Date and, to the Sellers' knowledge, prior
to the Relevant Date all stamp duty payable upon any transfer of any issued
shares of Bill Bass or the Bill Bass Companies (other than as contemplated by
this agreement) has been duly paid.
7.10 RELIEF FROM STAMP DUTY
After the Relevant Date and, to the Sellers' knowledge, prior to the Relevant
Date, any relief obtained by Bill Bass and the Bill Bass Companies from stamp
duty has been properly obtained and no event has occurred as a result of which
any such duty from which Bill Bass or the Bill Bass Companies have obtained
relief has become payable.
8. INSOLVENCY EVENTS
8.1 LIQUIDATION/WINDING UP
Bill Bass and the Bill Bass Companies have not had a liquidator or provisional
liquidator appointed and Bill Bass and the Bill Bass Companies have not passed
any resolution that it be wound up and no summons for the winding up of Bill
Bass or the Bill Bass Companies has been presented.
8.2 EXECUTION
No execution, distress or similar process has been levied upon or against all
or any part of the business, assets or revenues of Bill Bass or the Bill Bass
Companies.
8.3 INSOLVENCY
Bill Bass and the Bill Bass Companies are not unable, deemed by law to be
unable or otherwise admitted their inability to pay their respective debts as
they fall due for payment and Bill Bass
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and the Bill Bass Companies have not suspended payments to their respective
creditors generally.
8.4 SCHEMES OF ARRANGEMENT
Bill Bass and Bill Bass Companies have not entered into any scheme of
arrangement, composition, assignment for the benefit of, or other arrangement
with its creditors or any class of creditors.
8.5 SECTION 459E NOTICES
The company has not received any demand under section 459E of the Corporations
Law that has not been satisfied in full.
8.6 RECEIVERS/MANAGERS/ETC
No Controller has been appointed over all or part of the business, assets or
revenues of Bill Bass or the Bill Bass Companies.
8.7 STRIKING OFF
Bill Bass and the Bill Bass Companies have not been struck off the register of
companies of any State or Territory or any other place or dissolved and there
is no action of which the Sellers are aware proposed by the Australian
Securities Commission or any other regulatory body to do so.
9. LITIGATION
9.1 ONGOING PROCEEDINGS ETC
Other than as disclosed in writing to the Buyer, neither Bill Bass nor the Bill
Bass Companies nor any person for whose acts or defaults Bill Bass or the Bill
Bass Companies may be liable is engaged in any prosecution, litigation or
arbitration proceeding as plaintiff or defendant.
9.2 PROCEEDINGS PENDING OR THREATENED
Other than as disclosed in writing to the Buyer, there are no proceedings of
the kind described in CLAUSE 9.1 of Schedule 1 pending or threatened in respect
of which verbal or written communication has been given or received either by
or against Bill Bass or the Bill Bass Companies nor are there, to the knowledge
of the Sellers, any circumstances which might give rise to any such
proceedings.
9.3 UNSATISFIED JUDGMENTS
There is no unfulfilled or unsatisfied judgment or court order outstanding
against Bill Bass or the Bill Bass Companies or any of their assets.
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10. ACCOUNTS
10.1 PREPARED IN ACCORDANCE WITH THE ACCOUNTING STANDARDS
The Accounts have been (except as disclosed in note 1 to the Accounts) prepared
in accordance with the Accounting Standards.
10.2 CONSISTENT BASIS
The Accounts have been prepared on a basis which in all material respects is
consistent with the previous year's practice (except as disclosed in note 1 to
the Accounts).
10.3 TRUE AND ACCURATE
The Accounts are complete and accurate in all material respects and set out a
true and fair view of the financial position, state of affairs, assets,
liabilities, and profit and loss of Bill Bass and the Bill Bass Companies for
the periods and dates to which, or as at which (as the case may require) they
respectively apply.
10.4 NO MATERIAL OMISSION
The Accounts do not omit to state a material fact required to be stated therein
or necessary to make them not misleading.
10.5 NO LIABILITIES NOT REQUIRED TO BE REFERRED TO
As at the Accounts Date Bill Bass and the Bill Bass Companies had no
liabilities not required by generally accepted accounting principles to be
referred to in the Accounts.
10.6 RECEIVABLES
To the knowledge of the Sellers, all debts owing to and amounts due to the Bill
Bass Group are collectable for their full amounts and are not subject to any
counterclaim or set-off except to the extent described or provided for in the
Accounts.
10.7 OUTSTANDING NOTES
To the knowledge of the Sellers, no cheque, promissory note or bill of exchange
drawn, accepted or endorsed by the Bill Bass Group is still outstanding, other
than cheques drawn to pay for obligations incurred by the Bill Bass Group in
the ordinary course of its ordinary business except to the extent described or
provided for in the Accounts.
10.8 INSURANCE CLAIMS
To the knowledge of the Sellers, there are no claims outstanding, pending,
threatened or capable of arising against the Bill Bass Group in respect of any
accident or injury which are not fully
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covered by insurance except to the extent described or provided for in the
Accounts.
11. INSURANCE
The assets of Bill Bass and the Bill Bass Companies set out in schedule 9 have
at all material times been insured against fire and other risks normally
insured against by persons carrying on the same class of business as the
Business and Bill Bass and the Bill Bass Companies have at all material times
been adequately covered by public risk and product liability insurance.
12. INTELLECTUAL PROPERTY RIGHTS
12.1 INTELLECTUAL PROPERTY
Parts A and B of Schedule 2 include an accurate and complete list of all
Intellectual Property, details of the states and territories in Australia or
such other places in which the Intellectual Property is registered and the
renewal dates for such registrations. All such registrations are valid and
current.
12.2 INFRINGEMENT
Except as previously notified in writing, the Bill Bass Group has unencumbered
and lawful right to use the Intellectual Property and the Sellers are not aware
of any infringement by any third party of the Intellectual Property and no
third party has alleged that the Bill Bass Group has infringed any intellectual
property rights of that third party.
12.3 OWNERSHIP OF INTELLECTUAL PROPERTY
All:
(a) intellectual property and all other rights resulting from intellectual
activities in the industrial, scientific, literary or artistic fields;
and
(b) any licences;
owned by the Bill Bass Group in relation to the conduct of the Business are
held by the Bill Bass Group. The Sellers will not after Completion own any
intellectual property relating to the Business.
13. PERSONNEL
13.1 DISCLOSURE OF OFFICES ETC
Schedule 3 sets out a complete and accurate description of the Officers of Bill
Bass and the Bill Bass Companies and the public officer of Bill Bass and the
Bill Bass Companies as at the date
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of this agreement and the Sellers shall notify the Buyer in writing of any
change or alteration thereto up to the Completion Date.
13.2 EMPLOYEES GENERALLY
Schedule 3 sets out true and accurate details as at the date of this agreement
of:
(a) the names and dates of birth and (except for casual employees) dates
of commencement of employment of all persons who are employees of Bill
Bass or the Bill Bass Companies;
(b) all remuneration payable, including any bonus and commission
entitlements and any other benefits provided or which Bill Bass or the
Bill Bass Companies are bound to provide (whether now or in the
future) to any such persons; and
(c) particulars of accrued long service leave, annual leave and sick leave
with respect to such employees.
13.3 COMPLIANCE WITH LAWS
To knowledge of the Sellers, Bill Bass and the Bill Bass Companies have
complied with all laws relating to their respective employees and their
conditions of work and employment and the Bill Bass Group is not involved in
any material industrial dispute with any employee or former employee and there
are no circumstances likely to give rise to any material industrial dispute.
13.4 MATERIAL EMPLOYMENT TERMS
Except as provided by this agreement and the Employment Agreements, Bill Bass
and the Bill Bass Companies do not have any:
(a) existing service or other agreements, arrangements or understandings
with any Officers or employees of Bill Bass or the Bill Bass Companies
which cannot be fairly terminated by not more than one calendar
months' notice without giving rise to a claim for damages or
compensation (other than in relation to the general manager of Bolle
Asia Ltd and as required by statute);
(b) share option or share incentive or similar schemes for any officers or
employees of Bill Bass or the Bill Bass Companies;
(c) moneys payable to any Officer or employee of Bill Bass or the Bill
Bass Companies other than in respect of remuneration or emoluments of
employment;
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(d) present or contingent liability to pay damages or compensation for
loss of office or employment to any ex-officer or ex-employee of Bill
Bass or the Bill Bass Companies and there are no payments due in
connection with the redundancy of any officer or employee and, to the
knowledge of the Sellers, no circumstances have arisen under which
Bill Bass or the Bill Bass Companies is likely to be required to make
any such payment (other than as disclosed to the Buyer); and
(e) obligation to reinstate or re-employ any ex-officer or ex-employee of
Bill Bass or the Bill Bass Companies other than Dianne Moncrieff who
is on parental leave.
13.5 CONSULTANTS ETC
No person has any agreement, arrangement or understanding with Bill Bass or the
Bill Bass Companies pursuant to which that person acts as a consultant or in a
similar capacity for Bill Bass or the Bill Bass Companies whether on a full
time or a part time or retainer basis or otherwise.
13.6 SUPERANNUATION AND SIMILAR SCHEMES
(a) Schedule 10 sets out complete and accurate details of all Relevant
Schemes.
(b) Bill Bass and the Bill Bass Companies do not have any unfunded or
contingent obligations with respect to any Relevant Scheme.
13.7 UNION AGREEMENTS
The Bill Bass Group is not a party to any agreement with a union or industrial
organization in respect of the Employees.
13.8 AWARDS
To the Sellers' knowledge and understanding, the industrial award applicable to
the Employees is the Wholesale Trade Industry Sector award.
14. PROPERTIES
14.1 OCCUPATION
The Bill Bass Group has no interest in land except its interest in the
Properties and has exclusive occupation and quiet enjoyment of the Properties
and holds all easements, rights, interests and privileges necessary or
appropriate for the conduct of the Business.
-54-
<PAGE>
14.2 NO BREACH
The Bill Bass Group is not in breach of or in default under any agreement or
covenant affecting the Properties.
14.3 NOTICES
The Bill Bass Group has not received notice from any third party in respect of
any of the Properties and, so far as it is aware, no proposal has been made:
(a) in respect of the compulsory acquisition or resumption of any part of
any of the Properties;
(b) requiring work to be done or expenditure to be made on or in respect
of any of the Properties;
(c) which may adversely affect any part of the Properties or their use of
them.
14.4 ENVIRONMENTAL LIABILITY
(a) There is no Environmental Liability affecting any of the Properties;
(b) To the Sellers' knowledge, there are no factors affecting any of the
Properties which are likely to give rise to an Environmental
Liability.
-55-
<PAGE>
Exhibit 5.1
[Letterhead of Willkie Farr & Gallagher]
June 12, 1998
Bolle Inc.
555 Theodore Fremd Avenue
Suite B-302
Rye, New York 10580
Ladies and Gentlemen:
We have acted as counsel to Bolle Inc. (the "Company"), a corporation
incorporated under the laws of the State of Delaware, in connection with the
filing by the Company of a Registration Statement on Form S-1 dated the date
hereof (the "Registration Statement") relating to the registration under the
Securities Act of 1933, as amended (the "Securities Act") of an aggregate of up
to 1,850,000 shares of common stock, par value $.01 per share, of the Company
(the "Shares"), for resale by the persons who, upon issuance and delivery of
the same to such persons by the Company, will become the holders thereof (the
"Selling Stockholders"), pursuant to Rule 415 under the Securities Act in
accordance with the Company's Registration Statement.
We have examined and are familiar with originals or copies, certified or
otherwise identified to our satisfaction, of such documents, corporate records
and other instruments relating to the incorporation of the Company and the
authorization and issuance of the Shares by the Company to the Selling
Stockholders. In particular, we have reviewed the certificate of incorporation
and by-laws of the Company, resolutions of the Board of Directors of the
Company, certifications by officers of the Company, and have made such
investigations of law, as we have deemed necessary and advisable. In such
examination, we have assumed the genuineness of all signatures, the
authenticity of all documents submitted to us as originals and the conformity
to authentic originals of all documents submitted to us as copies.
Based upon the foregoing, we are of the opinion that:
1. The Company is duly incorporated and validly existing under the laws
of the State of Delaware; and
2. The Shares have been duly authorized and, when any Shares have been
issued and delivered by the Company against receipt by the Company of
the consideration for which such Shares are to be issued as described
in the Registration
<PAGE>
Bolle Inc.
June 12, 1998
Page 2
Statement, such Shares will constitute legally issued, fully paid and
non-assessable shares of Common Stock under the laws of the State of
Delaware.
We are qualified to practice law in the State of New York and do not purport to
be experts on, or to express any opinion herein, concerning any law, other than
the laws of the State of New York, the General Corporation Law of the State of
Delaware and the federal laws of the United States of America.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement referred to above and to the reference to our firm under
the heading "Legal Matters" in the Prospectus included in the Registration
Statement.
Very truly yours,
/s/ Willkie Farr & Gallagher
<PAGE>
EXHIBIT 10.20
AMENDMENT NO. 1 TO
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
THIS AMENDMENT NO. 1 TO SECOND AMENDED AND RESTATED CREDIT AGREEMENT
(this "Amendment Agreement") is made and entered into as of this 29th day of
May, 1998 (the "Effective Date"), by and among BOLLE INC., a Delaware
corporation having its chief executive office in Rye, New York (the
"Borrower"), NATIONSBANK, NATIONAL ASSOCIATION, a national banking association
organized and existing under the laws of the United States of America
("NationsBank"), in its capacity as agent for the Lenders (as defined below)
(in such capacity, the "Agent"), and each of the Lenders executing and
delivering a signature page hereto.
W I T N E S S E T H:
WHEREAS, the Borrower, the Agent and the lenders from time to time
party thereto (the "Lenders") have entered into that certain Second Amended and
Restated Credit Agreement dated as of March 11, 1998 (as from time to time
amended, modified, supplemented or restated, the "Credit Agreement"), pursuant
to which the Lenders have made available to the Borrower a term loan facility
and a revolving credit facility, including a letter of credit facility; and
WHEREAS, the Borrower desires to enter into a Convertible Subordinated
Note Purchase Agreement dated as of May 29, 1998 (the "Note Purchase
Agreement") pursuant to which it will issue up to $7,000,000 of certain 0%
Convertible Subordinated Notes Due May 29, 2002 (the "Convertible Notes"); and
WHEREAS, the Borrower has requested that the Credit Agreement be
amended to allow the execution and delivery of the Note Purchase Agreement and
the issuance of the Convertible Notes in the manner set forth herein and the
Agent and the Lenders are willing to agree to such amendment upon the terms and
conditions set forth herein;
NOW, THEREFORE, in consideration of the mutual covenants and the
fulfillment of the conditions set forth herein, the parties hereto do hereby
agree as follows:
1. Definitions. Any capitalized terms used herein without definition
shall have the meaning set forth in the Credit Agreement.
2. Amendment. Subject to the terms and conditions set forth herein,
the Credit Agreement is hereby amended as follows:
(a) Section 1.2 is hereby amended by adding the following
definition of "Convertible Notes" in its proper alphabetical order in
Section 1.2:
"Convertible Notes" means the 0% Convertible
Subordinated Notes Due May 29, 2002 in the principal amount
of up to $7,000,000 issued in connection with and pursuant to
the terms of the Note Purchase Agreement.
<PAGE>
(b) Section 1.2 is hereby amended by adding the following definition
of "Note Purchase Agreement" in its proper alphabetical order in Section 1.2:
"Note Purchase Agreement" means that
certain Convertible Subordinated Note Purchase
Agreement dated as of May 29, 1998 by and among the
Borrower and certain note purchasers pursuant to
which the Borrower is issuing the Convertible Notes.
(c) Section 1.2 is hereby amended by adding to the end of the
definition of "Consolidated Leverage Ratio" the following:
; provided further, however, at all times until May
29, 2001 the Convertible Notes shall be excluded
from the determination of Consolidated Funded
Indebtedness for purposes of calculating the
Consolidated Leverage Ratio.
(d) Section 1.2 is hereby amended by adding to the end of the
definition of "Consolidated Net Worth" the following:
; provided, however, notwithstanding any application
of GAAP, in no event shall the Convertible Notes be
determined to be part of Consolidated Net Worth.
(e) Section 1.2 is hereby amended by amending and restating in its
entirety the definition of "Equity Offering" as set forth below:
"Equity Offering" means a public or private
offering of equity securities (including, without
limitation, any security or investment not
constituting Indebtedness exchangeable, exercisable
or convertible for or into, or otherwise entitling
the holder to receive, equity securities) of the
Borrower or any Subsidiary (other than securities
issued to the Borrower or another Subsidiary);
provided, however, the term "Equity Offering" shall
not include (i) the portion of any such offering
that does not result in any Net Proceeds to the
Borrower or any Subsidiary, (ii) any issuance of
equity securities in connection with the exercise of
stock options or warrants granted to, or purchase of
restricted stock by, eligible participants under the
Stock Option Plan, and (iii) the issuance of the
Convertible Notes unless and until, for purposes
only of Section 11.3, the Convertible Notes are
converted in accordance with their terms into shares
of Common Stock;
(f) Section 1.2 is hereby amended by amending and restating in its
entirety the definition of "Permitted Acquisition" as set forth below:
"Permitted Acquisition" means the Bolle Australia
Acquisition if consummated and effective on or prior
to June 30, 1998, and the
2
<PAGE>
Bolle UK Acquisition if consummated and effective on
or prior to August 31, 1998, each pursuant to the
Share Purchase Agreements and as to which all
applicable conditions specified in Section 7.1 and
Section 7.2 hereof shall have been satisfied.
(g) Section 10.10(c) is hereby amended to amend and restate the second
parenthetical occurring therein as set forth below:
(including, without limitation, shares of
the Preferred Stock or the Bolle Warrants but
excluding mandatory (as opposed to optional)
redemption of the Convertible Notes, such exclusion
not to in any way limit, diminish or restrict
application of Section 12.1(o) hereof)
(h) Section 10.18 is hereby amended to add at the end of its title ";
Note Purchase Agreement", to delete the word "or" preceding "(iii)" and insert
a comma in lieu thereof, and to add at the end of such Section ", or (iv) the
Note Purchase Agreement as of its original date."
(i) The following Section 12.1(o) is hereby inserted immediately
following Section 12.1(n) of the Credit Agreement:
(o) if, notwithstanding Section 10.10
hereof, (i) the Common Stock shall cease to be
listed on the Nasdaq National Market, the Nasdaq
Small Cap Market, the New York Stock Exchange or the
American Stock Exchange and the Convertible Notes
are outstanding and (ii) the Agent, on behalf of the
Lenders, shall have provided written Notice to the
Borrower that the same constitutes a Default or an
Event of Default under the Credit Agreement;
3. Consent. (a) The Agent and the Lenders hereby consent to, and waive
any Default or Event of Default arising or occurring under
(i) Sections 10.1 and 10.10 of the Credit Agreement as a
result of, the issuance by the Borrower of the Convertible Notes
pursuant to the terms of the Note Purchase Agreement substantially in
the forms thereof delivered to the Agent and the Lenders; and
(ii) Sections 7.1(a)(xxiv) and 12.1(m) of the Credit
Agreement as a result of the failure of the Borrower to have sold the
Texas Property on or before April 30, 1998 (the Texas Property having
been sold in accordance with the terms of the Texas Property Purchase
Agreement, and the Net Proceeds received therefrom applied by the
Borrower in accordance with the terms of Section
3
<PAGE>
2.6(e)(i)(A) of the Credit Agreement, prior to the date of this
Amendment Agreement).
(b) Subject to satisfaction of the condition set forth in
Sections 5(a)(ii) and (iii) hereof, the Agent and the Lenders further
consent to redemption, payment, prepayment or repurchase of the
Convertible Notes pursuant to, and in accordance with, the terms of
Sections 9.3, 11.12 and 12.1(a) of the Note Purchase Agreement as in
effect on the date of this Amendment Agreement and at maturity of the
Convertible Notes on May 29, 2002 and agree that the Purchasers (as
defined in the Note Purchase Agreement) shall be third-party
beneficiaries of, and may rely on, this Section 3(b).
4. Representations and Warranties. By its execution and delivery of
this Amendment Agreement, the Borrower represents and warrants to the Agent and
the Lenders as follows:
(a) The representations and warranties made by Borrower in
Article VIII of the Credit Agreement are true and correct on and as of
the date hereof, except to the extent that such representations and
warranties expressly relate to an earlier date;
(b) There has been no material adverse change in the
condition, financial or otherwise, of the Borrower and its
Subsidiaries, taken as a whole, since the date of the most recent
financial reports of the Borrower received by the Agent and the
Lenders under Section 9.1 of the Credit Agreement; and
(c) No event has occurred and is continuing which
constitutes, and no condition exists which upon the consummation of
the transaction contemplated hereby would constitute, a Default or an
Event of Default on the part of the Borrower under the Credit
Agreement.
5. Conditions. The effectiveness of this Amendment Agreement is
subject to the following:
(a) The Agent shall have received:
(i) nine (9) counterparts of this Amendment Agreement duly
executed by all signatories hereto;
(ii) a fully-executed copy of an escrow agreement of even
date herewith between the Agent and the Borrower (the "Escrow
Agreement") providing for the placement into an escrow account
maintained at NationsBank of the entire Net Proceeds from the issuance
of the Convertible Notes and termination of such escrow account either
in connection with redemption of the Convertible Notes pursuant to
Section 12.1(a) of the Note Purchase Agreement or for application of
such Net Proceeds as set forth in (b)(ii) and (iii) below;
4
<PAGE>
(iii) delivery by the Borrower of the entire Net Proceeds
from the issuance of the Convertible Notes to NationsBank to hold in
escrow pursuant to the terms of the Escrow Agreement; and
(iv) copies of all additional agreements, instruments and
documents which the Agent may reasonably request, such documents, when
appropriate, to be certified by appropriate governmental authorities.
(b) Each party hereto, by its execution of this Amendment Agreement,
agrees to each of the following and the events set forth in (ii) and (iii)
below shall have occurred:
(i) The execution and delivery of this Amendment Agreement
shall constitute the notice required under Section 2.6(b) of the
Credit Agreement, and no additional notice need be given by the
Borrower to the Agent;
(ii) Notwithstanding anything to the contrary herein or in
the Credit Agreement, a prepayment of the Term Loan with the Net
Proceeds resulting from the issuance of the Convertible Notes and held
in escrow by NationsBank pursuant to the Escrow Agreement shall be
made on the Business Day such funds are first available for such a
prepayment pursuant to the Escrow Agreement in accordance with the
first sentence of Section 2.6(b) of the Credit Agreement as if such
Section 2.6 was otherwise applicable and the last sentence of Section
2.6(b) of the Credit Agreement shall not be applicable; and
(iii) After the Borrower makes the prepayment required by the
first sentence of Section 2.6(b) of the Credit Agreement, the
remaining balance of the Net Proceeds from the issuance of the
Convertible Notes previously held in escrow by NationsBank pursuant to
the Escrow Agreement shall be used to make a prepayment of the
Revolving Credit Outstandings under the Revolving Credit Facility,
without any reduction in the Revolving Credit Commitment or Total
Revolving Credit Commitment; provided, however, that the minimum
amount and integral multiple limitations on prepayments contained in
the last sentence of Section 3.4(b) of the Credit Agreement shall not
apply to the prepayment required under this paragraph 5(b)(iii).
(c) All proceedings of the Borrower relating to the matters provided
for herein shall be reasonably satisfactory to the Lenders, the Agent and their
counsel.
6. Entire Agreement. This Amendment Agreement sets forth the entire
understanding and agreement of the parties hereto in relation to the subject
matter hereof and supersedes any prior negotiations and agreements among the
parties relative to such subject matter. No promise, condition, representation
or warranty, express or implied, not herein set forth shall bind any party
hereto, and not one of them has relied on any such promise, condition,
representation or warranty. Each of the parties hereto acknowledges that,
except as otherwise expressly stated in this Amendment Agreement, no
representations, warranties or commitments,
5
<PAGE>
express or implied, have been made by any party to the other. None of the terms
or conditions of this Amendment Agreement may be changed, modified, waived or
canceled orally or otherwise, except by writing, signed by all the parties
hereto, specifying such change, modification, waiver or cancellation of such
terms or conditions, or of any proceeding or succeeding breach thereof.
7. Limitation of Waiver and Consents. The waiver and consents
contained herein are limited as specified herein and shall remain in effect
only so long as the Borrower is in compliance with the terms of this Amendment
Agreement. The waiver and consents are granted only for the specific instance
specified herein and in no manner creates a course of dealing or otherwise
impairs the future ability of the Agent or the Lenders to declare a default
under or otherwise enforce the terms of the Credit Agreement.
8. Full Force and Effect of Agreement. Except as hereby specifically
amended, modified or supplemented, the Credit Agreement and all other Loan
Documents are hereby confirmed and ratified in all respects and shall remain in
full force and effect according to their respective terms. Each Guarantor
hereby acknowledges and agrees to the amendments of the Credit Agreement set
forth herein and hereby confirms and ratifies in all respects the Guaranty and
enforceability of the Guaranty against such Guarantor in accordance with its
terms.
9. Counterparts. This Amendment Agreement may be executed in any
number of counterparts, each of which shall be deemed an original as against
any party whose signature appears thereon, and all of which shall together
constitute one and the same instrument.
10. Governing Law. This Amendment Agreement shall in all respects be
governed by the laws and judicial decisions of the state of New York, without
giving effect to the conflict of laws provisions thereof.
11. Enforceability. Should any one or more of the provisions of this
Amendment Agreement be determined to be illegal or unenforceable as to one or
more of the parties hereto, all other provisions nevertheless shall remain
effective and binding on the parties hereto.
12. Credit Agreement. All references in any of the Loan Documents to
the "Credit Agreement" shall mean the Credit Agreement as amended hereby.
13. Successors and Assigns. This Amendment Agreement shall be binding
upon and inure to the benefit of each of the Borrower, the Lenders and the
Agent and their respective successors, assigns and legal representatives;
provided, however, that the Borrower, without the prior consent of the Agent
and each of the Lenders, may not assign any rights, powers, duties or
obligations hereunder.
14. Expenses. Borrower agrees to pay to the Agent all reasonable
out-of-pocket expenses incurred or arising in connection with the negotiation
and preparation of this Amendment Agreement.
[Signature pages follow]
6
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment
Agreement to be duly executed by their duly authorized officers, all as of the
day and year first above written.
BORROWER:
BOLLE INC.
By: /s/ Ian G. H. Ashken
--------------------------------
Name: Ian G. H. Ashken
------------------------------
Title: Executive Vice President
-----------------------------
LENDERS:
NATIONSBANK, NATIONAL ASSOCIATION
as Agent for the Lenders and as a
Lender
By: /s/ Susan Timmerman
--------------------------------
Name: Susan Timmerman
------------------------------
Title: Vice President
-----------------------------
Amendment No. 1 to
Second Amended and Restated Credit Agreement
SIGNATURE PAGE 1 OF 2
<PAGE>
BANK BOSTON, N.A.
By:_________________________
Name:_______________________
Title:______________________
CREDIT AGRICOLE INDOSUEZ
By:________________________
Name:______________________
Title:_____________________
By:________________________
Name:______________________
Title:_____________________
EUROPEAN AMERICAN BANK
By: /s/ Mark Saeger
------------------------
Name: Mark Saeger
----------------------
Title: Vice President
---------------------
IMPERIAL BANK
By: /s/ Ray Vadalma
-------------------------------
Name: Ray Vadalma
-----------------------------
Title: Senior Vice President
----------------------------
NATIONAL CITY BANK OF KENTUCKY
By: /s/ David Pullen
-------------------------------
Name: David Pullen
-----------------------------
Title: Vice Presiden
----------------------------
Amendment No. 1 to
Second Amended and Restated Credit Agreement
SIGNATURE PAGE 2 OF 2
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Prospectus constituting part of this
Registration Statement on Form S-1 of Bolle Inc. of our report dated April 15,
1998 which appears in such prospectus. We also consent to the reference to us
under the heading "Experts" in such Prospectus.
/s/ Price Waterhouse LLP
PRICE WATERHOUSE LLP
Dallas, Texas
June 11, 1998
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
June 3, 1998
To the Board of Directors and
Shareholders of Holdings BF SA
We hereby consent to the use in the Prospectus constituting part of this
Registration Statement on Form S-1 of Bolle Inc. of our report dated November
26, 1997 relating to the combined financial statements of Holdings BF SA, which
appears in such Prospectus. We also consent to the reference to us under the
heading "Experts" in such Prospectus.
Lyon, France
Befec - Price Waterhouse
/s/ Olivier Auscher
Olivier Auscher
