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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 4, 1998
REGISTRATION NO. 333-40279
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
AMENDMENT NO. 3
BOLLE INC.
(Exact name of registrant as specified in its charter)
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DELAWARE 3851 13-373-4135
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of incorporation) Classification Code Number) Identification No.)
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555 THEODORE FREMD AVENUE, SUITE B-302, RYE, NEW YORK 10580, (914) 967-9400
(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) 967-9400
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
WITH COPY TO:
WILLIAM J. GRANT, ESQ.
WILLKIE FARR & GALLAGHER
ONE CITICORP CENTER
153 EAST 53RD STREET
NEW YORK, NEW YORK
(212) 821-8000
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. [ ]
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
- -----------------------------------------------------------------------------
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PROPOSED PROPOSED
MAXIMUM MAXIMUM
TITLE OF EACH CLASS OF OFFERING AGGREGATE AMOUNT OF
SECURITIES AMOUNT TO BE PRICE PER OFFERING REGISTRATION
TO BE REGISTERED REGISTERED SHARE(1) PRICE(2) FEE(3)
- -------------------------------- --------------------- ----------- ------------- --------------
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Common Stock, $.01 par value ... Up to 8,000,000 shares $24,460,000 $7,412.12
- -------------------------------- --------------------- ----------- ------------- --------------
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(1) Not applicable.
(2) Based on the book value of the securities to be registered as of
September 30, 1997 for purposes of determining the Registration Fee
pursuant to Rule 457(f)(2) under the Securities Act of 1933, as
amended.
(3) $6,963.64 has been previously paid; the balance, or $448.48, is being
paid concurrently with the filing of this Registration Statement.
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.
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INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS 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.
SUBJECT TO COMPLETION FEBRUARY 4, 1998
BOLLE INC.
UP TO 8,000,000 SHARES OF COMMON STOCK
This Prospectus is being furnished to stockholders (the "BEC
Stockholders") of BEC Group, Inc. ("BEC"), a Delaware corporation, in
connection with the Spinoff (as defined below) pursuant to which BEC
Stockholders will receive all of BEC's interest (96%) in Bolle Inc., a
Delaware corporation (the "Company" or "Bolle"), or up to 8,000,000 shares of
Bolle Common Stock (as defined below) in a pro rata distribution (the
"Spinoff"). The Spinoff is expected to become effective on the record date
thereof, which is scheduled to be on February , 1998 (the "Record Date"),
immediately following the special meeting of the BEC Stockholders (the "BEC
Special Meeting") to be held to approve the proposed merger (the "Merger") of
ILC Technologies, Inc., a California corporation ("ILC") with and into BILC
Acquisition Corp., a Delaware corporation and wholly owned subsidiary of BEC
("Acquisition Corp."), but prior to the closing of the Merger, which is
expected to be February , 1998 (the "Effective Time"). The Spinoff does not
require approval by the BEC Stockholders and is not conditioned upon the
closing of the Merger. The Spinoff and the Merger are referred to herein as
the "Transactions."
As a result of the Spinoff, holders of the common stock, par value $.01
per share of BEC (the "BEC Common Stock") will receive, commencing the
business day after the Effective Time, one share of Bolle Common Stock for
every three shares of BEC Common Stock held on the Record Date and, as a
result, Bolle will become an independent publicly-held company. Cash will be
paid in lieu of fractional shares. Only BEC stockholders of record on the
Record Date (which is scheduled to be the day prior to the closing of the
Merger) will receive Bolle Common Stock pursuant to the Spinoff. The receipt
of the Bolle Common Stock (as defined below) by the BEC Stockholders will be
a taxable transaction for federal income tax purposes. See "THE
SPINOFF--Certain Federal Income Tax Consequences." The market value of the
Bolle Common Stock to be distributed to the BEC Stockholders pursuant to the
Spinoff cannot be determined prior to the Spinoff. As of February 2, 1998,
the most recent date for which such information was available prior to the
printing of this Prospectus, there were 17,617,950 shares of BEC Common Stock
outstanding and the per share closing price of such shares was $5.94.
The Merger will be effected pursuant to an Agreement and Plan of Merger
(the "Merger Agreement"). As consideration for the Merger, BEC will issue to
shareholders of ILC, after certain adjustments, 2.18 shares of BEC Common
Stock for each outstanding share of ILC's common stock (assuming conversion
of the principal amount of all of BEC's 8% convertible subordinated notes
(the "BEC Convertible Notes") and consummation of a one for two reverse stock
split of the BEC Common Stock). BEC has the right to terminate the Merger
Agreement if a majority of the BEC Stockholders fail to approve the Merger
Agreement and the related issuance of BEC Common Stock at the special meeting
of BEC Stockholders to be held after the Effective Time.
The Company is a wholly owned subsidiary of BEC. BEC is a holding company
for two businesses, ORC Technologies, Inc. ("ORC") which manufactures and
markets specialty lighting technology products, and the Company, which
manufactures and markets Bolle(Registered Trademark) premium sunglasses,
sport shields, goggles and safety and tactical eyewear. The Company was
organized on February 3, 1997 to effect the July 1997 acquisition by BEC of
Holding B.F., the French holding company that owned the Bolle(Registered
Trademark) design, manufacturing and certain distribution interests,
including the worldwide rights to the Bolle(Registered Trademark) brand for
the Company's products. The Company is also a holding company, the principal
subsidiaries of which are Bolle America, Inc., a Delaware corporation ("Bolle
America") and Bolle International S.A., a French corporation ("Bolle
France"). The purpose of the Spinoff is to permit the BEC Stockholders to
retain their interest in the Company while at the same time enabling BEC to
focus on its specialty lighting technology business. The Company expects
that, pursuant to a Bill of Sale and Assignment Agreement to be entered into
between BEC and the Company at the Effective Time (the "Contribution
Agreement"), (i) BEC will assign to the Company all of BEC's assets other
than assets related to the ORC Business (as defined in the Contribution
Agreement) and certain other specified assets retained by BEC; and (ii) the
Company will assume all of BEC's liabilities prior to the Spinoff other than
those related to the ORC Business. The assets assigned to, and the
liabilities assumed by, the Company pursuant to the Contribution Agreement
are referred to herein as the "Non-ORC Business." See "THE SPINOFF--Transfer
of the Non-ORC Business to the Company" and "RISK FACTORS--Risks Associated
with the Spinoff."
The board of directors of BEC (the "BEC Board") has determined the record
date of the Spinoff (the "Record Date") to be February , 1998.
No additional consideration will be paid by the BEC Stockholders for the
shares of common stock par value $.01 per share of the Company (the "Bolle
Common Stock") to be received by them in the Spinoff and neither BEC nor
Bolle will receive any proceeds from the Spinoff. There is currently no
public trading market for the shares of Bolle Common Stock. Application has
been made to list the Bolle Common Stock on the Nasdaq National Market
("Nasdaq") under the symbol " ". See "THE SPINOFF."
The Spinoff is not conditioned upon the closing of the Merger. The Merger
is conditioned upon the consummation of the Spinoff and, among other things,
approval by the BEC Stockholders of the Merger Agreement and the transactions
contemplated thereby, as well as of the related issuance of BEC Common Stock,
which approval will be sought pursuant to the proxy materials which have been
distributed previously (the "Proxy Materials"). The Spinoff is expected to
become effective on the Record Date immediately after the Special Meeting,
but prior to the closing of the Merger.
SEE "RISK FACTORS" COMMENCING ON PAGE 10 FOR MATTERS THAT SHOULD BE
CONSIDERED WITH RESPECT TO THE SHARES OF BOLLE COMMON STOCK.
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.
February , 1998.
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ADDITIONAL INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission"), Washington, D.C. 20549, a Registration Statement on Form S-1,
Commission File No. 333-40279, under the Securities Act with respect to the
shares of the Bolle 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 Bolle 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.
Following the Spinoff, the Company will be subject to the informational
requirements of the Exchange Act and, in accordance therewith, will file
reports, proxy statements and other information with the Commission. The
reports, proxy statements and other information which will be filed by the
Company with the Commission will be available for inspection and copying at
the Commission's public reference facilities referred to above. Copies of
such material will be 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 will be available for inspection at the offices of the Nasdaq located
at 1735 K Street, N.W., Washington, D.C. 20006.
The Company intends to furnish its stockholders with annual reports
containing financial statements audited by an independent public accounting
firm and quarterly reports for the first three quarters of each fiscal year
containing unaudited interim financial information.
TABLE OF CONTENTS
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PAGE
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Summary ............................................................................. 3
Risk Factors ........................................................................ 10
The Company ......................................................................... 18
The Spinoff ......................................................................... 19
Selected Financial Data ............................................................. 24
Management's Discussion and Analysis of Financial Condition and Results of Operations 25
Business ............................................................................ 27
Management .......................................................................... 39
Executive Compensation .............................................................. 41
Certain Relationships and Related Transactions ...................................... 44
Security Ownership of Certain Beneficial Owners and Management ...................... 46
Description of Capital Stock ........................................................ 47
Validity of Shares .................................................................. 51
Experts ............................................................................. 51
Index to Financial Statements ....................................................... F-1
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2
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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. 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 wholly owned subsidiary of the Company; and the term "Bolle France"
refers to Bolle International S.A., a French corporation and wholly owned
subsidiary of the Company, and its consolidated subsidiaries. Unless
otherwise noted, the business description of the Company, the financial
statements and other financial information relating to the Company and data
and information as to the shares of Bolle Common Stock give effect to the
Spinoff.
THE COMPANY
The Company designs, manufactures and markets premium sunglasses and sport
shields, goggles and safety and tactical eyewear under the Bolle(Registered
Trademark) brand. Bolle(Registered Trademark) 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 was completed to combine the Company's
ownership of the worldwide rights to the Bolle(Registered Trademark)
trademark for the Company's products with its international manufacturing and
distribution capabilities under one organization, which the Company believes
will allow it to expand its business and enhance its profitability. This
organization enables the Company to develop and execute a consistent and
unified marketing strategy targeted at promoting the Company's competitive
advantages. The Company believes that its competitive advantages include its
strong brand name, integrated design, production and marketing capabilities,
superior technology, specialized product offerings and established
international distributors in over 40 countries around the world. The Company
will seek to integrate these 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. 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 Company competes in the premium sunglass market.
The factors which contribute to the growth of this market include
advancements in product technology, growing demand for specialized sunglasses
leading to multiple purchases, increased health concerns and greater fashion
and image content. Safety and tactical eyewear products may be designed for
general or special purpose. The Company 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 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:
Acquisition of Largest Independent Distributor. Consistent with the
Company's strategy of consolidating many of its distributors through
acquisitions or other arrangements, the Company has executed a letter of
intent to purchase Bill Bass Optical Pty Ltd. ("Bill Bass Optical"), the
largest independent distributor of the Company's products and the principal
distributor of the Company's products in Australia (the "Bill Bass Optical
Acquisition"), whose sales of Bolle(Registered Trademark) products in
Australia exceeded $10,000,000 in 1997.
3
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Supply Agreement for Metal Eyewear. Consistent with its traditional focus
on technological innovation, the Company has entered into a three-year
exclusive supply agreement dated as of October 23, 1997 (the "Alyn Supply
Agreement") with Alyn Corporation ("Alyn"), a manufacturer of specialized
metal frames, to create premium sunglass frames using Boralyn(Registered
Trademark), 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.
Martina Hingis Endorsement Contract. Martina Hingis, the youngest number
one-ranked player in the history of women's tennis, has agreed to wear
exclusively Bolle(Registered Trademark) sunglasses, sport glasses and ski
goggles at all public events and for recreation, and to appear in
advertisements and promotions for Bolle(Registered Trademark) products
worldwide. It is expected that Ms. Hingis will also appear in the Company's
first-ever worldwide brochure, a combination magazine/catalogue, in early
1998.
As a result of the Spinoff, the Company will become at the Effective Time
an independent, publicly-held company. The executive officers and members of
the BEC Board generally will be executive officers and directors of the
Company after the Spinoff. See "MANAGEMENT." Together with the other
stockholders of Bolle, BEC has taken certain actions on behalf of Bolle prior
to the Spinoff including: (i) approval of the terms of the Spinoff; (ii) the
election of directors and ratification of the directors' election of
officers; and (iii) approval of an Amended and Restated Certificate of
Incorporation (the "Certificate of Incorporation"), increasing the number of
authorized shares of Bolle Common Stock and Bolle preferred stock to permit
the issuance of the shares to be delivered in connection with the Spinoff.
See "DESCRIPTION OF CAPITAL STOCK."
The Company is incorporated in Delaware. Its principal executive offices
are located at 555 Theodore Fremd Avenue, Rye, New York 10580, and its
telephone number if (914) 967-9400.
An investment in shares of Bolle Common Stock is subject to various risks.
See "RISK FACTORS."
THE TRANSACTIONS
As one of the conditions of closing of the Merger, BEC will transfer at
the Effective Time the Non-ORC Business to the Company and distribute all of
its shares of Bolle Common Stock, pro rata, to the BEC Stockholders. In the
Spinoff, each BEC Stockholder will receive one share of Bolle Common Stock
for every three shares of BEC Common Stock held of record by such Stockholder
on the Record Date. See "RISK FACTORS--Risks Associated with the Spinoff" and
"DESCRIPTION OF CAPITAL STOCK." The purpose of the Spinoff is to permit the
BEC Stockholders to retain their interest in the Company while at the same
time enabling BEC to focus on its specialty lighting technology business.
Pursuant to the Merger Agreement, BEC has agreed to acquire ILC by merging
ILC with and into Acquisition Corp. As consideration for the Merger, BEC will
issue to shareholders of ILC, after certain adjustments, 2.18 shares of BEC
Common Stock for each outstanding share of ILC common stock (assuming
conversion of all of BEC's Convertible Notes and consummation of a one for
two reverse stock split of the BEC Common Stock). BEC has the right to
terminate the Merger Agreement if a majority of the BEC Stockholders fail to
approve the Merger Agreement and the related issuance of BEC Common Stock at
the BEC Special Meeting. A complete description of the terms of the Merger
and the Merger Agreement is contained in the Proxy Materials previously
distributed.
Assumption by the Company of BEC's Liabilities Relating to the Acquisition
of Bolle France. In connection with the Spinoff, it is expected that the
Company will assume at or prior to the Effective Time all obligations and
liabilities of BEC to each of Maurice Bolle, Robert Bolle, Franck Bolle,
Patricia Bolle Passaquay, Brigitte Bolle and Christelle Roche (collectively,
the "Sellers," and each a "Seller") which BEC incurred in connection with the
purchase of Bolle France and BEC will then be released from all such
obligations or liabilities. See "CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS--Certain Transactions." In addition, it is expected that, at or
prior to the Effective Time, each Seller will convey to the Company all
shares of Series A Preferred Stock of BEC (the "BEC Preferred Stock") held by
such Seller and the Company will issue in exchange to each Seller, an amount
of shares of its Series B
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Preferred Stock (the "Bolle Series B Preferred Stock") equal to the number of
shares of BEC Preferred Stock conveyed by such Seller to the Company. No
shares of Bolle Common Stock will be issued to the holders of outstanding
shares of BEC Preferred Stock or Bolle Series B Preferred Stock pursuant to
the Spinoff. BEC will cancel all warrants (the "BEC Warrants") to purchase a
total of 2,130,000 shares of BEC Common Stock outstanding as of the Record
Date and the Company will issue in exchange to each holder of canceled BEC
Warrants, warrants to purchase Bolle Common Stock (the "Bolle Warrants") in
proportion to the number of BEC Warrants held by such holder prior to the
cancellation, and representing in the aggregate 10% of the number of shares
of Bolle Common Stock to be distributed pursuant to the Spinoff, with an
exercise price per Warrant adjusted to reflect the ocurrence of the Spinoff.
No shares of Bolle Common Stock will be issued to holders of outstanding BEC
Warrants or Bolle Warrants pursuant to the Spinoff. See "THE
SPINOFF--Assumption by the Company of BEC's Liabilities Relating to the
Acquisition of Bolle France" and "DESCRIPTION OF CAPITAL STOCK--Preferred
Stock" and "--Warrants."
Treatment of BEC Options. Outstanding unexercised options and stock
appreciation rights (the "BEC Options") issued pursuant to the BEC 1996 Stock
Incentive Plan (the "BEC Option Plan") that are not exercisable on or prior
to the Effective Time will not become vested and exercisable solely by reason
of the consummation of the Spinoff. However, it is anticipated that, in
connection with the Spinoff, the committee administering the BEC Option Plan
will, pursuant to the provisions of the BEC Option Plan, make adjustments to
all BEC Options as follows: BEC Options outstanding with respect to employees
who will be employed by the Company after the Spinoff will be canceled in
exchange for options to purchase Bolle Common Stock on similar terms and
conditions and with an equivalent economic value to the canceled BEC Options.
BEC Options with respect to employees who will continue to be employed by BEC
after the Spinoff shall have the exercise price adjusted to reflect the
economic value of the Spinoff.
Treatment of BEC Convertible Notes. In May 1996, BEC issued $21,018,000
aggregate principal amount of 8% BEC Convertible Notes, due 2002. Assuming
the current conversion price of $5.75 per share of BEC Common Stock and the
conversion of all of, or 50% of, the BEC Convertible Notes, the BEC
Convertible Notes may convert into an aggregate of approximately 3,655,402
shares or 1,827,701 shares, respectively, of BEC Common Stock. Up to an
additional 500,000 shares of BEC Common Stock may be issued in payment of
accrued interest on the BEC Convertible Notes. A holder of BEC Convertible
Notes that converts such Notes into shares of BEC Common Stock prior to the
Record Date will receive one share of Bolle Common Stock for every three
shares of BEC Common Stock held following such conversion. Pursuant to the
terms of the indenture under which the BEC Convertible Notes were issued, the
Spinoff will result in an adjustment to the conversion price of the BEC
Convertible Notes, and the holders of the BEC Convertible Notes who do not
convert prior to the Record Date of the Spinoff will not receive shares of
Bolle Common Stock, but will retain their rights to convert into BEC Common
Stock at the adjusted conversion price. BEC has advised the Company that it
will use reasonable commercial efforts to effect the conversion of the BEC
Convertible Notes prior to the consummation of the Merger.
Spinoff Record Date. The BEC Board has determined the Record Date to be
February , 1998.
Other Agreements. At or prior to the Effective Time, the Company and BEC
will enter into a number of other ongoing arrangements, including a
Management Services Agreement (the "Management Services Agreement"), the
Contribution Agreement and an Indemnification Agreement (the "Indemnification
Agreement"). The Company will assume all of BEC's liabilities prior to the
Spinoff other than those related to the ORC Business (as defined in the
Contribution Agreement) and will be required to indemnify BEC against all of
BEC's liabilities prior to the Spinoff other than substantially all
liabilities related to the ORC Business. See "THE SPINOFF--Transfer of the
Non-ORC Business to the Company" and "RISK FACTORS--Risks Associated with the
Spinoff."
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Conditions. Consummation of the Spinoff does not require BEC Stockholder
approval and is not conditioned upon the closing of the Merger and is
expected to become effective on the Record Date immediately after the Special
Meeting, but prior to the closing of the Merger. The closing of the Merger is
conditioned upon the consummation of the Spinoff, approval of the Merger
Agreement and the transactions contemplated thereby as well as of the related
issuance of BEC Common Stock by BEC Stockholders, and other customary closing
conditions. See "THE SPINOFF--Conditions."
Certain Federal Income Tax Consequences. The receipt of the Bolle Common
Stock by the BEC Stockholders will be a taxable transaction for Federal
income tax purposes. See "THE SPINOFF--Certain Federal Income Tax
Consequences" in this Prospectus.
Interests of Certain Persons in the Spinoff. The executive officers of
BEC, who currently are and will remain after the Spinoff executive officers
of Bolle, and Messrs. Martin E. Franklin, Ian G.H. Ashken and David L. Moore,
who are members of the BEC Board and currently are and will remain after the
Spinoff directors of the Company, may be deemed to have interests in the
Spinoff in addition to their interests as BEC Stockholders generally which
may cause conflicts of interest. These interests relate to payments to be
received by BEC pursuant to the Management Services Agreement, the
apportionment of BEC's liabilities between BEC and Bolle pursuant to the
Contribution Agreement and the Indemnification Agreement, in addition to
liabilities assumed by Bolle through the issuance of the Bolle Series B
Preferred Stock and certain Bolle Options and Warrants under the Warrant
Agreement. In each case, the Bolle Board and the holders of Bolle Common
Stock were aware of these interests and considered them in unanimously
approving the Spinoff and the transactions contemplated thereby. Following
the Spinoff, as a result of their respective positions in BEC and the
Company, each of Messrs. Franklin, Ashken and Moore may, in the course of
their duties, have potential conflicts of interest with respect to material
transactions involving BEC and the Company. Each will have regard to his
obligation to act in the best interest of the Company and will endeavor to
ensure that such conflicts are resolved fairly. See "THE SPINOFF--Interests
of Certain Persons in the Spinoff."
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THE SPINOFF
DISTRIBUTING COMPANY .......... BEC
SECURITIES TO BE DISTRIBUTED .. All of BEC's interest in Bolle Common Stock
(96%), or up to 8,000,000 shares of Bolle
Common Stock, on the basis of one share of
Bolle Common Stock for every three shares of
BEC Common Stock outstanding on the Record
Date. See "THE SPINOFF" and "DESCRIPTION OF
CAPITAL STOCK." Based on, solely for the
purpose of the following estimate, (i) the
2,280 shares of Bolle Common Stock expected
to be held by BEC on or prior to the Record
Date, (ii) the 17,747,842 shares of BEC
Common Stock outstanding (including 129,892
shares issuable upon request) as of February
2, 1998, the most recent date for which such
information was available prior to the
printing of this Prospectus, and assuming
(i) exercise of a maximum of 1,000,000 BEC
Options to purchase shares of BEC Common
Stock which are or will be exercisable on or
prior to the Record Date, (ii) conversion of
all Convertible Notes and accrued interest
on or prior to the Record Date into a
maximum of 4,155,000 shares of BEC Common
Stock, (iii) consummation on or prior to the
Record Date of the Contribution Agreement
and all the other transactions expected to
occur in connection with the Spinoff on the
terms described in this Prospectus and,
after giving effect to a 3,347 for one stock
split in the form of a stock dividend on
Bolle Common Stock expected to be effective
at or prior to the Effective Time, a maximum
of 7,632,000 shares of Bolle Common Stock
would be distributed to the BEC Stockholders
in the Spinoff. The aggregate number of
shares of Bolle Common Stock that will
actually be distributed pursuant to the
Spinoff may vary.
SPINOFF RATIO ................. One share of Bolle Common Stock for every
three shares of BEC Common Stock outstanding
on the Record Date. See "THE
SPINOFF--Consummation of the Spinoff."
TIME OF SPINOFF ............... The Spinoff is expected to become effective
on the Record Date immediately after the
Special Meeting, but prior to the closing of
the Merger. When appropriate, share
certificates representing the Bolle Common
Stock will be mailed as soon as practicable
after the Effective Date. See "THE
SPINOFF--Manner of Effecting the Spinoff."
SPINOFF RECORD DATE ........... The BEC Board has determined the Record Date
to be February , 1998.
TRADING MARKET ................ Application has been made for the Bolle
Common Stock to be traded on Nasdaq under
the symbol " ." See "THE
SPINOFF--Listing of the Bolle Common Stock;
Restrictions on Resale."
CONDITIONS TO SPINOFF ......... The consummation of the Spinoff does not
require BEC Stockholder approval and is not
conditioned upon the closing of the Merger.
See "THE SPINOFF--Conditions."
TRANSFER AGENT ................ National City Bank (the "Transfer Agent").
7
<PAGE>
TAX CONSEQUENCES .............. The receipt of the Bolle Common Stock will
be a taxable transaction to the BEC
Stockholders for Federal income tax
purposes. See "THE SPINOFF--Certain Federal
Income Tax Consequences."
DIVIDENDS AFTER THE SPINOFF ... The Company does not currently intend to
declare or pay any dividends on the shares
of Bolle Common Stock. The Company's ability
to pay dividends is restricted pursuant to
the Indemnification Agreement with BEC and
the terms of the Series B Preferred Stock of
the Company. The Company and BEC are
currently renegotiating a credit agreement
that also restricts the Company's ability to
pay cash dividends on shares of Bolle Common
Stock. The Company has received commitments
from various lenders party to BEC's existing
credit agreement pursuant to which such
lenders have agreed to provide financing to
the Company subject to certain conditions
and the execution by the Company of a
definitive credit agreement with such
lenders containing covenants usual and
customary for financings of this type. The
Company believes that this credit agreement,
which it expects to enter into at or prior
to the Effective Time, will contain
restrictions on the payment of dividends
similar to those contained in BEC's existing
credit agreement, and that any other bank
revolving credit facility or other
indebtedness, if any, that the Company may
incur would contain similar restrictions.
See "DESCRIPTION OF CAPITAL STOCK--Dividend
Policy."
ANTITAKEOVER EFFECT OF THE
INDEMNIFICATION AGREEMENT
AND THE COMPANY'S CHARTER .... Certain provisions of the Company's
Certificate of Incorporation and the terms
of the Indemnification Agreement may have
the effect of delaying or making more
difficult an acquisition of control of the
Company in a transaction not approved by the
Company's Board of Directors. See "RISK
FACTORS--Potential Antitakeover Effect of
the Indemnification Agreement and Certain
Charter Provisions."
RELATIONSHIP WITH BEC
AFTER THE SPINOFF ............ In connection with the Spinoff, BEC has
entered into various agreements that will
result in ongoing relationships between BEC
and Bolle. See "RISK FACTORS--Risks
Associated with the Spinoff."
RISK FACTORS .................. Stockholders should carefully consider the
matters discussed below under the caption
"RISK FACTORS."
8
<PAGE>
SUMMARY HISTORICAL CONSOLIDATED FINANCIAL AND OPERATING DATA
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
The following selected historical and pro forma combined financial data
have been derived from audited and unaudited 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 BEC's acquisition of Bolle
France and therefore has no historical activity or financial statements.
Bolle America was purchased by BEC 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 acquisition of Bolle France under the
purchase method of accounting and reflect the Contribution Agreement and the
Indemnification Agreement. The following pro forma combined balance sheet
data only give effect to the Contribution Agreement and the Indemnification
Agreement as the effect of the acquisition is already included in the
Company's actual balance sheet as of September 30, 1997. The actual statement
of operations data presented include the results of Bolle France for the
three months ended September 30, 1997. The pro forma combined statement of
operations data presented include Bolle France as if the acquisition occurred
as of the beginning of the periods presented.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
-------------------------------------------------------------- ----------------------
PRO PRO
ACTUAL ACTUAL ACTUAL ACTUAL ACTUAL FORMA ACTUAL FORMA
1992 1993 1994(1) 1995(2) 1996(3) 1996 1997(4) 1997
--------- --------- --------- --------- --------- --------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
<C>
STATEMENT OF OPERATIONS DATA:
NET SALES ................................ $15,495 $18,377 $23,094 $24,829 $24,425 $60,297 $ 20,670 $36,266
COST OF SALES ............................ 8,595 9,126 10,814 12,181 12,130 29,140 9,750 18,267
--------- --------- --------- --------- --------- --------- ----------- ---------
GROSS PROFIT ............................. 6,900 9,251 12,280 12,648 12,295 31,157 10,920 17,999
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES (INCLUDING ADVERTISING AND
SPONSORING EXPENSES) .................... 6,808 7,384 8,871 10,275 11,374 23,813 10,593 16,310
MERGER RELATED EXPENSES .................. -- -- -- 3,050 -- -- -- --
INTEREST EXPENSE (INCOME)................. 488 336 316 (302) (256) 931 516 465
OTHER EXPENSE (INCOME) ................... (81) (295) (104) 48 (450) (200) (803) (1,162)
--------- --------- --------- --------- --------- --------- ----------- ---------
INCOME (LOSS) BEFORE INCOME TAXES ....... (315) 1,826 3,197 (423) 1,627 6,613 614 2,386
PROVISION FOR (BENEFIT FROM) INCOME
TAXES.................................... (120) 700 1,260 364 635 1,721 196 1,301
--------- --------- --------- --------- --------- --------- ----------- ---------
NET INCOME (LOSS) ........................ $ (195) $ 1,126 $ 1,937 $ (787) $ 992 4,892 $ 418 1,085
========= ========= ========= ========= ========= ========= =========== =========
PREFERRED STOCK DIVIDENDS ................ 511 383
--------- ---------
NET INCOME ATTRIBUTABLE TO COMMON STOCK .. $ 4,381 $ 702
========= =========
PRO FORMA SHARES OUTSTANDING.............. 7,408 7,408
PRO FORMA EARNINGS PER SHARE.............. $ 0.59 $ 0.09
FRENCH FRANC PER US DOLLAR EXCHANGE RATE
USED(5).................................. 5.1138 6.0832 5.9188
BALANCE SHEET DATA:
WORKING CAPITAL (DEFICIENCY).............. $ 31 $ 1,060 $12,781 $11,395 $ 8,535 $(16,528) $ 433
TOTAL ASSETS ............................. 8,164 9,629 17,549 16,309 15,624 82,513 99,370
LONG TERM DEBT ........................... 350 49 57 -- -- -- 3,428
MANDATORILY REDEEMABLE PREFERRED STOCK ... -- -- -- -- -- 11,055 20,349
STOCKHOLDERS' EQUITY ..................... 279 1,584 13,433 12,770 9,743 24,460 44,256
FRENCH FRANC PER US DOLLAR EXCHANGE RATE
USED(5).................................. 5.1900 5.9125 5.9125
</TABLE>
- ------------
(1) In 1994, Bolle America paid a $50 dividend to its then current
shareholders.
9
<PAGE>
(2) In November 1995, BEC acquired Bolle America in a transaction accounted
for as a pooling of interests. Accordingly, Bolle America is included
in all periods presented.
(3) In 1996, the Company paid a dividend to BEC (its then current
stockholder) of $4,019.
(4) 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.
(5) Represents the exchange rates used to translate the results of
operations and balance sheet amounts of Bolle France. The exchange rate
shown for the pro forma results of operations for the year ended
December 31, 1996 represents the average exchange rate used to
translate the results of operations of Bolle France added to the
Company's actual results in the pro forma statement of operations. The
exchange rate shown for the actual results of operations for the nine
months ended September 30, 1997 represents the average exchange rate
for the three months ended September 30, 1997 used to translate the
results of operations of Bolle France included in the Company's actual
results. The exchange rate shown for the pro forma results of
operations for the nine months ended September 30, 1997 represents the
average exchange rate for the nine months ended September 30, 1997 used
to translate the results of operations of Bolle France added to the
Company's actual results in the pro forma statement of operations.
10
<PAGE>
RISK FACTORS
In addition to the other information contained in this Prospectus,
stockholders should consider carefully the risk factors set forth below.
Information Regarding Forward-Looking Statements
The statements contained in this Prospectus which are not historical facts
are "forward-looking statements" which can be identified by the use of
forward-looking terminology such as "believes", "expects", "may", "will",
"should", or "anticipates" or the negative thereof or other variations
thereon or comparable terminology, or by discussions of strategy that involve
risks and uncertainties. The Company wishes to caution the reader that these
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.
RISKS ASSOCIATED WITH THE SPINOFF
Assumption of Liabilities and Indemnification of BEC by the Company
Under the terms of the Contribution Agreement and the Indemnification
Agreement, the Company will assume all of BEC's liabilities prior to the
Spinoff other than those related to the ORC Business and will agree to
indemnify BEC against all of BEC's liabilities prior to the Spinoff other
than substantially all liabilities related to the ORC Business. Potential
liabilities which the Company will assume and/or against which the Company
will indemnify BEC pursuant to the Contribution Agreement include, without
limitation, (a) potential liabilities arising in connection with the sale of
businesses previously owned by BEC 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 BEC; the sale of the Orolite division to
Monsanto Company ("Monsanto Company"), and (b) potential liabilities of BEC
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 BEC assumed by the
Company and the Company's indemnification obligations to BEC under the
Contribution Agreement and the Indemnification Agreement, see "THE
SPINOFF--Transfer of the Non-ORC Business to the Company." 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.
At or prior to the Effective Time, the Company will also agree to assume
all obligations and liabilities of BEC to the Sellers incurred by BEC in
connection with the purchase of Bolle France and BEC shall then be released
from all such obligations and liabilities. In addition to BEC's
indemnification obligations under the Amended and Restated Share Purchase
Agreement dated July 9, 1997 among BEC, the Company and each Seller (the
"Share Purchase Agreement") which will become the sole responsibility of the
Company, the remainder of BEC's liabilities and obligations to the Sellers
will be assumed by the Company through the issuance of the Bolle Series B
Preferred Stock, Bolle Options and the exchange of the BEC Warrants for Bolle
Warrants. See "CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS--Certain
Transactions." Should the Company be required to discharge its liabilities
pursuant to the foregoing arrangements, including the Contribution Agreement
and the Indemnification Agreement, or to redeem the shares of its Series A
Preferred Stock (the "Bolle Series A Preferred Stock") or Series B Preferred
Stock prior to maturity, such payments could have a material adverse effect
upon the Company.
11
<PAGE>
Reliance on Management Services Agreement
The Company expects to enter at the Effective Time into a Management
Services Agreement with BEC, pursuant to which BEC will provide key
management services to the Company. The Management Services Agreement will
have 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 BEC will not terminate
the Management Services Agreement before or after its initial term. The loss
of the services that will be provided under the Management Services Agreement
by BEC to the Company could have a material adverse effect on the Company's
operations.
Pursuant to the Management Services Agreement, BEC will also make
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 will be provided by Mr.
Franklin or Mr. Ashken to the Company could have a material adverse effect on
the Company. There is no assurance that BEC or the Company will be able to
retain the services of Mr. Franklin or Mr. Ashken in the future.
Restricted Dividend Policy
The Company does not currently intend to declare or pay any dividends on
the Bolle 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 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 Company
and BEC are currently renegotiating a credit agreement that restricts the
Company's ability to pay cash dividends on the Bolle Common Stock. The
Company has received commitments from various lenders party to BEC's existing
credit agreement pursuant to which such lenders have agreed to provide
financing to the Company subject to certain conditions and the execution by
the Company of a definitive credit agreement with such lenders containing
covenants usual and customary for financings of this type. The Company
believes that this credit agreement, which it expects to enter into on or
prior to the Effective Time, will contain restrictions on the payment of
dividends similar to those contained in BEC's existing credit agreement and
that any other bank revolving credit facility or other indebtedness, if any,
that the Company may incur would contain similar restrictions. Pursuant to
the Indemnification Agreement, the Company could be further restricted from
paying dividends on shares of Bolle 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 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
Bolle Series B Preferred Stock with respect to dividends or upon liquidation,
including the Bolle Series A Preferred Stock. See "DESCRIPTION OF CAPITAL
STOCK--Preferred Stock."
Interests of Certain Persons in the Spinoff
The executive officers of BEC, who currently are and will remain after the
Spinoff executive officers of Bolle, and Messrs. Franklin, Ashken and Moore,
who are members of the BEC Board and currently are and will remain after the
Spinoff directors of the Company, may be deemed to have interests in the
Spinoff in addition to their interests as BEC Stockholders generally which
may cause conflicts of interest. These interests relate to payments to be
received by BEC pursuant to the Management Services Agreement, the
apportionment of BEC's liabilities between BEC and Bolle pursuant to the
Contribution Agreement and the Indemnification Agreement, in addition to
liabilities assumed by Bolle through the issuance of the Bolle Series B
Preferred Stock and certain Bolle Options and Warrants under the Warrant
Agreement. Following the Spinoff, as a result of their respective positions
in BEC and the Company, each of Messrs. Franklin, Ashken and Moore may, in
the course of their duties, have potential conflicts of interest with respect
to material transactions including BEC and the Company.
12
<PAGE>
There is a risk that, as a result of these conflicts of interest, the
liabilities and obligations assumed by the Company pursuant to the Spinoff
could have a material impact on the future value of the Company's shares. See
"THE SPINOFF--Interests of Certain Persons in the Spinoff," "EXECUTIVE
COMPENSATION" and "CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS--Management
Services Agreement" and "--Relationships with Directors."
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 and Bolle France, 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 Bolle Common Stock is
available.
Absence of Trading History, Market Prices
Because all of the Bolle Common Stock is currently held by BEC and other
private stockholders, there is no public trading market for the Bolle Common
Stock. Although the Company has applied to list the Bolle Common Stock on
Nasdaq, there can be no assurance that an active trading market will develop
after the Spinoff. As there has been no trading market for the Bolle Common
Stock, there can be no assurance as to the prices at which trading in the
Bolle Common Stock will occur after the Spinoff. Moreover, 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 Bolle Common Stock could vary significantly over relatively short
periods of time. The Bolle Common Stock may also experience volatility
immediately following the Spinoff until trading values have become
established. See "THE SPINOFF--Listing of the Bolle Common Stock;
Restrictions on Resale."
Volatility of Stock Price
The market price of the Bolle Common Stock may be subject to significant
fluctuations in response to variations in quarterly operating results and
other factors. 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 Bolle Common Stock. See "Absence of Trading
History, Market Prices" above.
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. These restrictions
could have the effect of deterring a potential acquirer.
The Company will have in excess of 15,000,000 and 125,000 shares of
authorized and unissued Bolle Common Stock and preferred stock, respectively
after the issuance of shares in connection with the Spinoff which could be
issued to a third party selected by management or used as the basis for a
stockholders' rights plan, which 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."
Shares Eligible for Future Sales; Futures Sales by Significant Stockholders
After the Spinoff, pursuant to which up to 8,000,000 shares of Bolle
Common Stock may be distributed by BEC pursuant to this Prospectus, the
Company intends to register up to 2,500,000 shares
13
<PAGE>
of Common Stock for issuance upon exercise of Bolle Options granted to its
employees under the 1998 Stock Incentive Plan. In addition, under the Warrant
Agreement, up to 800,000 shares of Bolle 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 may issue additional stock, warrants and/or options to raise
capital in the future. During the terms of such options and warrants, 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 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.
Pursuant to the Certificate of Designations of the Series B Preferred
Stock, the Company has agreed to use commercially reasonable efforts to
complete an equity financing, including a public offering by the end of 1998.
Following the expiration in July 2000 of the restriction on resale contained
in the Share Purchase Agreement, all the shares of Bolle Common Stock held by
the Sellers, or 4% of the Bolle Common Stock expected to be outstanding after
the Spinoff, 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. Martin pursuant to the Spinoff,
or up to approximately 6% of the total number of shares of Bolle Common Stock
expected to be outstanding after the Spinoff, 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 Bolle Common Stock. See "Volatility of Stock Price."
SPECIFIC RISKS ASSOCIATED WITH THE COMPANY'S BUSINESS
Possible Inability to Sustain and Manage Growth
There are significant risks associated with the Company's growth. The
Company has expanded its operations significantly with the acquisition of
Bolle France in July 1997. The Company now intends to grow through brand
expansion and possibly 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, create
and develop continuously new or existing designs, 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. 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 acquisition or of the proposed Bill Bass
Optical Acquisition or any other future acquisition by the Company depends on
its ability to integrate effectively the acquired businesses. 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
14
<PAGE>
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. Except as disclosed herein, the Company has no present
understandings, commitments or agreements with respect to any material
acquisition.
Bill Bass Optical Acquisition
The Company has executed a non binding letter of intent to purchase the
business and operations of Bill Bass Optical, the principal distributor of
the Company's products in Australia, and certain of its affiliates. There is
no assurance that the Company will reach an agreement with the sellers
regarding the definitive terms of this acquisition, that the Company will
have sufficient financing available to pay the cash portion of the purchase
price of this acquisition (which the Company anticipates could be at least
$3,900,000), or that this acquisition will close, even if a definitive
agreement is reached prior to the closing of the Spinoff.
Accounting Treatment of Intangible Assets
On a pro forma basis, the Company's total goodwill and intangible assets
as of September 30, 1997 are estimated to be $48,979,000. On a pro forma
basis these assets are currently being amortized at a rate of approximately
$1,224,000 a year. This amortization expense will act to 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 result of operations.
Dependence Upon New Product Introductions
The Company's historical success, including that of Bolle France, is
attributable, in substantial part, to its introduction of products which are
perceived to represent an improvement in performance 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
which are perceived to represent an improvement in performance over products
available in the market, 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, 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.
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
15
<PAGE>
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 tennis
champion Martina Hingis for the purpose of promoting the Company's products
and intends to establish additional contacts with, and obtain endorsements
from, prominent athletes and public personalities. These endorsement
contracts generally have two to four year terms. The Company also expects to
furnish its products at a reduced cost or without charge to selected athletes
and personalities who would wear Bolle(Registered Trademark) products without
any formal arrangement. 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.
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 of 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(Registered Trademark) 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."
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, Chief
Financial Officer and Assistant Secretary. The loss of the service of either
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 BEC 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. The Company believes
that its future success will depend in large part on its ability to attract
and retain
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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.
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 vigorously assert 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 or elsewhere may result in greater exposure to such risk.
GENERAL RISKS ASSOCIATED WITH THE COMPANY'S BUSINESS
Susceptibility to Changing Consumer Preferences
The eyewear industry is subject to 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 and it may be faced with resulting
excess inventory and underutilized manufacturing capacity. While the Company
has a limited ability to modify slow-
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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 Market
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 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. In certain geographic markets, such as the
United States, certain of the Company's competitors have achieved greater
brand awareness among consumers than 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."
Market Cycles and Recent Declines in Sales Growth in the Sunglass Market
The world market for premium sunglasses experienced declining sales growth
and excess inventory in the last quarter of 1996 and the first nine months of
1997. The results of several competitors of the Company were affected by this
market trend and the operating difficulties (including excess inventory)
experienced throughout the year by a large sunglass specialty retail chain
the sales of which account for approximately 15% of total market sales. While
the Company expects sales to continue to grow for the remainder of 1997 and
the first six months of 1998, 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.
Risks Relating to International Sales
Sales outside the United States accounted for approximately 59% and 59% of
the Company's pro forma net sales for the year ended December 31, 1996 and
the nine months ended September 30, 1997, respectively. 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
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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 instability 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 Company will be
successful in preventing competitors from producing eyewear products for sale
using the same or substantially similar design and manufacturing process as
the Company.
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 1996, 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.
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.
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THE COMPANY
Bolle Inc. is a subsidiary of BEC. BEC is a holding company for two
businesses, ORC, which manufactures and markets specialty lighting technology
products, and the Company, which manufactures and markets Bolle(Registered
Trademark) premium sunglasses and sport shields, goggles and safety and
tactical eyewear. BEC was formed in May 1996 as a spinoff from Benson.
Following the spinoff, BEC sold Foster Grant, a distributor of value-priced
sunglasses and non-prescription reading glasses, in December 1996, leaving it
with two core businesses, Bolle America and ORC. Bolle America and ORC were
both public companies prior to their acquisition by Benson in November 1995
and October 1994, respectively. The Company was organized on February 3, 1997
in connection with the July 1997 acquisition by BEC of Holding B.F., the
French holding company that owned the Bolle(Registered Trademark) design and
manufacturing operation and certain distribution interests, including the
worldwide rights to the Bolle(Registered Trademark) brand. Bolle Inc. is a
holding company, the principal subsidiaries of which are Bolle America and
Bolle France. The purpose of the Spinoff is to permit the BEC Stockholders to
retain their interest in the Company while at the same time enabling BEC to
focus on its specialty lighting technology business.
The principal executive offices of the Company are located at 555 Theodore
Fremd Avenue, Suite B-302, Rye, New York, 10580. The telephone number is
(914) 967-9400.
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THE SPINOFF
REASONS FOR THE SPINOFF
The BEC Board of Directors believes that the Spinoff is fair to and in the
best interests of BEC and its stockholders for a number of reasons,
including, without limitation, that the Spinoff: (i) will maximize value in
the premium sunglass, sport shields, goggles and safety and tactical eyewear
segment of BEC's operations; (ii) should enable the Company to achieve a
valuation which, when seen in combination with its residual assets, is above
its current value as a wholly owned subsidiary of BEC; (iii) allows BEC
Stockholders to continue to participate in BEC's existing premium sunglass,
sport shields, goggles and safety and tactical eyewear business through the
direct ownership of the Bolle Common Stock; and (iv) will enable BEC to focus
on its specialty lighting technology business. A complete description of the
Merger and the reasons therefore is contained in the Proxy Statement that
accompanies this Prospectus.
TRANSFER OF THE NON-ORC BUSINESS TO THE COMPANY
The Company expects that, pursuant to the Contribution Agreement, BEC will
assign to the Company all of BEC's assets other than assets related to the
ORC Business (as defined in the Contribution Agreement) and certain other
specified assets retained by BEC, and the Company will assume all of BEC's
liabilities prior to the Spinoff other than those related to the ORC
Business. Pursuant to the terms of the Contribution Agreement, the Company
will assume and pay when and as due and discharge all debts, liabilities,
obligations and taxes in respect of these assets and liabilities. In return
for the net assets contributed to Bolle pursuant to the Contribution
Agreement, the Company expects to issue, at or prior to the Effective Time,
380 shares of Bolle Common Stock to BEC, as a result of which BEC will own
96% of the total number of shares of Bolle Common Stock outstanding. In
addition to the Contribution Agreement, BEC and the Company will enter into
an Indemnification Agreement (described below) and Management Services
Agreement. The terms of the Management Services Agreement are described under
"CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS--Management Services
Agreement." See also "RISK FACTORS--Risks Associated with the Spinoff."
Pursuant to the terms of the Contribution Agreement, BEC will retain the
ORC Business which consists of (i) all of the outstanding capital stock of
ORC and certain subsidiaries of ORC (the "ORC Group"), including BEC's
investment in Voltarc Technologies, Inc., and all the business, assets and
liabilities of or directly related to such entities, and (ii) all assets and
liabilities included in BEC's pro forma balance sheet to be attached as an
exhibit to the Contribution Agreement. Except as noted below, all other
assets of BEC will be assigned to, and all of BEC's liabilities prior to the
Spinoff, other than related to the ORC Business, will be assumed by the
Company. Assigned assets and assumed liabilities include without limitation
all interests, rights, duties and obligations of BEC relating to Accessories
Associates, Inc. (which purchased Foster Grant) and to Superior Vision
Services, Inc.; certain assets, rights, and obligations relating to Sterling
Vision, Inc.; the Management Agreement between BEC and Eyecare Products, plc.
("Eyecare Products"), as well as all of BEC'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 BEC (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.
Under the terms of the Contribution Agreement and the Indemnification
Agreement, BEC will retain rights in, but the Company will assume liability
for and will indemnify BEC against, the following potential liabilities,
which do not involve any material present claims or known liabilities, in
connection with BEC'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 $3.6 million mortgage
with Wells Fargo Bank (Texas) and BEC as successor to Foster Grant; any
remaining BEC 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, BEC, 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 BEC and Lantis Eyewear
Corporation, dated November 14, 1996, as amended relating to shares
transferred to the Company pursuant to the Contribution Agreement. See "RISK
FACTORS--Risks Associated with the Spinoff."
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In addition, pursuant to the terms of the Contribution Agreement, Bolle
agreed that to the extent Bolle exchanges all, but not less than all, of its
shares of Foster Grant Holdings, Inc. Series A Preferred Stock (the "FGH
Preferred Stock") for shares of common stock ("AAi Common Stock") of
Accessories Associates, Inc. ("AAi"), Bolle shall deliver to BEC 35.71% (such
portion of the shares of AAi Common Stock is hereinafter referred to as the
"AAi Shares") of all of such exchanged shares of AAi Common Stock received by
Bolle, together with any rights attaching thereto. However, the Contribution
Agreement provides that in the event that Bolle does not obtain the AAi
Shares, Bolle agrees to pay to BEC the first $2.5 million received by Bolle
from proceeds (the "Proceeds") relating to (i) the sale by Bolle of the FGH
Preferred Stock or (ii) the redemption by Foster Grant Holdings, Inc. of the
FGH Preferred Stock. In the event that BEC does not receive either the AAi
Shares or $2.5 million from Bolle, as described above, on or before the date
that is five years after the effective date of BEC's merger with ILC, Bolle
shall promptly pay to BEC, an amount equal to $2.5 million less any amount
previously paid to BEC by Bolle from the Proceeds.
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 BEC against
any and all liabilities incurred or suffered by BEC related to the following:
(i) BEC 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 BEC 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, BEC and
Monsanto Company dated February 11, 1996, (v) the enforcement by BEC of its
rights under the Indemnification Agreement and (vi) any untrue statement or
omission of a material fact in this Prospectus, and that BEC will indemnify
the Company against all losses that are suffered by Bolle related to: (i)
BEC'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 will set 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 will agree to
indemnify BEC for taxes relating to the business of BEC (excluding the ORC
Business) and for taxes attributable to the Spinoff and certain other
transactions, and BEC will agree to indemnify Bolle for taxes relating to the
ORC Business. In addition, the Indemnification Agreement will set 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 will agree to indemnify BEC for taxes
relating to the business of BEC (excluding the ORC Business) and for taxes
attributable to the Spinoff and certain other transactions, and BEC will
agree to indemnify the Company for taxes relating to the ORC Business. See
"RISK FACTORS--Risks Associated with the Spinoff."
CONSUMMATION OF THE SPINOFF
The Spinoff is expected to become effective on the Record Date immediately
after the Special Meeting, but prior to the closing of the Merger. The
Spinoff does not require BEC Stockholder approval and is not conditioned upon
the closing of the Merger. The Spinoff will be made to the holders of BEC
Common Stock on the Record Date. The BEC Board has determined the Record Date
to be February , 1998.
In the Spinoff, BEC will distribute pro rata to its stockholders all of
BEC's equity interest in the Company, or up to 8,000,000 shares of Bolle
Common Stock. As a result of the Spinoff, each holder of BEC Common Stock
will receive, commencing the business day after the Effective Time, a
distribution of one share of Bolle Common Stock for every three shares of BEC
Common Stock owned of record by such holder on the Record Date, and, as a
result, Bolle will become an independent publicly-held company. Cash will be
paid in lieu of fractional shares. Based on, solely for the purpose of the
following
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estimate, (i) the 2,280 shares of Bolle Common Stock expected to be held by
BEC on or prior to the Record Date, (ii) the 17,747,842 shares of BEC Common
Stock outstanding as of February 2, 1998, the most recent date for which such
information is available prior to the privating of this Propectus, and
assuming (i) exercise of a maximum of 1,000,000 BEC Options to purchase
shares of BEC Common Stock which are or will be exercisable on or prior to
the Record Date, (ii) conversion of all Convertible Notes and accrued
interest on or prior to the Record Date into a maximum of 4,155,000 shares of
BEC Common Stock, (iii) consummation on or prior to the Record Date of the
Contribution Agreement and all the other transactions expected to occur in
connection with the Spinoff on the terms described in this Prospectus and,
after giving effect to a 3,347 for one stock split in the form of a stock
dividend on Bolle Common Stock expected to be effective at or prior to the
Effective Time, a maximum of 7,632,000 shares of Bolle Common Stock would be
distributed to the BEC Stockholders in the Spinoff. The stock dividend
described above will be consummated immediately prior to the Effective Time
to provide BEC with a sufficient number of shares of Bolle Common Stock to
effect the distribution of the number of such shares which shall correspond
to the number of shares of BEC Common Stock outstanding as of the Record Date
on the basis of (1) share of Bolle Common Stock for (3) shares of BEC Common
Stock outstanding as of the Record Date. The Sellers will receive shares of
Bolle Common Stock pursuant to this dividend but their shares will not be
distributed to the public pursuant to the Spinoff and this Prospectus.
Because the computation of the dividend ratio depends on the number of shares
of BEC Common Stock that will be outstanding on the Record Date, the exact
dividend ratio will not be available to the Company until the close of
business on the Record Date. The aggregate number of shares of Bolle Common
Stock that will actually be distributed pursuant to the Spinoff may therefore
vary.
MANNER OF EFFECTING THE SPINOFF
It is expected that upon formal declaration thereof by the BEC Board, the
Spinoff will be made as of the Record Date to stockholders of record of the
BEC Common Stock. The Record Date will be February , 1998. The Merger is
expected to take place promptly thereafter following the satisfaction of
certain conditions set forth in the Merger Agreement. When applicable, the
Transfer Agent will deliver certificates for the Bolle Common Stock as soon
as practicable to holders of record of the BEC Common Stock as of the close
of business on the Record Date on the basis of one (1) share of Bolle Common
Stock for every three (3) shares of BEC Common Stock held on the Record Date.
The Bolle Common Stock issued in the Spinoff will be fully paid and
nonassessable and the holders thereof will not be entitled to preemptive
rights. See "DESCRIPTION OF CAPITAL STOCK." Following the Spinoff, the
Company will operate as an independent public company.
No holder of BEC Common Stock will be required to pay any cash or other
consideration for the Bolle Common Stock received in the Spinoff and neither
BEC nor Bolle will receive any proceeds from the Spinoff. The purpose of the
Spinoff is to permit the BEC Stockholders to retain their interest in the
Company while at the same time enabling BEC to focus on its specialty
lighting technology business.
TREATMENT OF BEC CONVERTIBLE NOTES.
In May 1996, BEC issued $21,018,000 aggregate principal amount of 8% BEC
Convertible Notes, due 2002. Assuming the current conversion price of $5.75
per share of BEC Common Stock and the conversion of all of, or 50% of, the
BEC Convertible Notes, the BEC Convertible Notes may convert into an
aggregate of approximately 3,655,402 shares or 1,827,701 shares,
respectively, of BEC Common Stock. Up to an additional 500,000 shares of BEC
Common Stock may be issued in payment of accrued interest on the BEC
Convertible Notes. A holder of BEC Convertible Notes that converts such Notes
into shares of BEC Common Stock prior to the Record Date will receive one
share of Bolle Common Stock for every three shares of BEC Common Stock held
following such conversion. Pursuant to the terms of the indenture under which
the BEC Convertible Notes were issued, the Spinoff will result in an
adjustment to the conversion price of the BEC Convertible Notes, and the
holders of the BEC Convertible Notes who do not convert prior to the Record
Date of the Spinoff will not receive shares of Bolle Common Stock, but will
retain their rights to convert into BEC Common Stock at the adjusted
conversion price. BEC has advised the Company that it will use reasonable
commercial efforts to effect the conversion of the BEC Convertible Notes
prior to the consummation of the Merger
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ASSUMPTION BY THE COMPANY OF BEC'S LIABILITIES RELATING TO THE ACQUISITION OF
BOLLE FRANCE
In connection with the Spinoff, the Company will assume at or prior to the
Effective Time all obligations and liabilities of BEC to the Sellers incurred
by BEC in connection with the purchase of Bolle France and BEC shall then be
released from all such obligations and liabilities. In addition to BEC's
indemnification obligations for breach of its representations and warranties
made to the Sellers in the Share Purchase Agreement, which will become the
sole responsibility of the Company, the remainder of BEC's liabilities and
obligations to the Sellers will be assumed by the Company through the
issuance of the Bolle Series B Preferred Stock, Bolle Options and the
conversion of the BEC Warrants into Bolle Warrants, all on substantially the
same terms as those applicable to BEC. See "CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS--Certain Transactions."
At or prior to the Effective Time, each Seller will contribute all of its
shares of BEC Series A Preferred Stock to the Company in return for the
issuance and delivery by the Company of an equal number of shares of Bolle
Series B Preferred Stock to such Seller. No shares of Bolle Common Stock will
be issued to the holders of outstanding shares of BEC Preferred Stock or
Bolle Series B Preferred Stock pursuant to the Spinoff. The Company expects
to contribute all the shares of BEC Series A Preferred Stock to BEC in return
for the cancellation of certain indebtedness of the Company to BEC. In
addition, the Sellers will agree to the termination of their existing warrant
agreement with BEC and the cancellation of their BEC Warrants to purchase
2,130,000 shares of BEC Common Stock issued pursuant thereto, in return for
the execution and delivery by the Company of the Warrant Agreement and,
pursuant to the Warrant Agreement, the issuance and delivery by the Company
to the Sellers of new warrants to purchase shares of Bolle Common Stock in
proportion to the number of BEC Warrants held by each Seller prior to the
cancellation, and representing in the aggregate 10% of the number of shares
of Bolle Common Stock to be issued pursuant to the Spinoff, with an exercise
price per Warrant adjusted to reflect the occurence of the Spinoff. No shares
of Bolle Common Stock will be issued to the holders of outstanding BEC
Warrants or Bolle Warrants pursuant to the Spinoff. See "DESCRIPTION OF
CAPITAL STOCK--Preferred Stock" and "--Warrants."
BOLLE PREFERRED STOCK
In connection with the acquisition of Bolle France, the Company issued in
July 1997 an aggregate of 64,120 shares of Bolle Series A Preferred Stock.
The Bolle Series A Preferred Stock is not convertible into Bolle Common Stock
pursuant to the Spinoff. In connection with the Spinoff, it is expected that
the holders of all outstanding shares of Bolle Series A Preferred Stock will
approve the making of the Bolle Series A Preferred Stock subordinate to the
Bolle Series B Preferred Stock in respect of liquidation preference and
redemption and other modifications which may be required in connection with
the Spinoff. See "DESCRIPTION OF CAPITAL STOCK--Preferred Stock."
TREATMENT OF STOCK OPTIONS
BEC Options that are not exercisable on or prior to the Effective Time
will not become vested and exercisable solely by reason of the consummation
of the Spinoff. However, it is anticipated that in connection with the
Spinoff, the committee administering the BEC Option Plan will, pursuant to
the provisions of the BEC Option Plan, make adjustments to all BEC Options as
follows: BEC Options outstanding with respect to employees who will be
employed by the Company after the Spinoff will be canceled in exchange for
options to purchase Bolle Common Stock with similar terms and conditions and
with an equivalent economic value to the canceled BEC Options. BEC Options
with respect to employees who will continue to be employed by BEC after the
Spinoff shall have the exercise price adjusted to reflect the economic value
of the Spinoff. A detailed description of the treatment of outstanding BEC
Options in connection with the Merger is provided in the Proxy Materials
distributed previously.
LISTING OF THE BOLLE COMMON STOCK; RESTRICTIONS ON RESALE
Application has been made to have the Bolle Common Stock listed for
trading on Nasdaq, under the symbol " ." The Bolle Common Stock received
pursuant to the Spinoff will be freely transferable
24
<PAGE>
under the Securities Act, except for shares of such Bolle Common Stock
received by any person who may be deemed to be an "affiliate" of the Company
within the meaning of Rule 144 under the Securities Act. Persons who may be
deemed to be affiliates of the Company, after the Spinoff generally include
individuals or entities that control, are controlled by, or are under common
control with the Company, and will include the directors and executive
officers of the Company who will own approximately up to 9% of the total
number of shares expected to be outstanding after the Spinoff, as well as any
principal stockholder of the Company. Persons who are affiliates of the
Company will be permitted to sell their Bolle Common Stock received pursuant
to the Spinoff only pursuant to an effective registration statement under the
Securities Act or pursuant to an exemption therefrom, such as the exemptions
afforded by Section 4(l) of the Securities Act and Rule 144 thereunder. This
Prospectus will not cover resales of the Bolle Common Stock by affiliates of
the Company. See "RISK FACTORS--Shares Eligible for Future Sale" and
"DESCRIPTION OF CAPITAL STOCK."
INTERESTS OF CERTAIN PERSONS IN THE SPINOFF
The executive officers of BEC, who currently are and will remain after the
Spinoff executive officers of Bolle, and Messrs. Franklin, Ashken and Moore,
who are members of the BEC Board and currently are and will remain after the
Spinoff directors of the Company, may be deemed to have interests in the
Spinoff in addition to their interests as BEC Stockholders generally which
may cause conflicts of interest. These interests relate to payments to be
received by BEC pursuant to the Management Services Agreement, the
apportionment of BEC's liabilities between BEC and Bolle pursuant to the
Contribution Agreement and the Indemnification Agreement, in addition to
liabilities assumed by Bolle through the issuance of the Bolle Series B
Preferred Stock and certain Bolle Options and Warrants under the Warrant
Agreement. In each case, the Bolle Board and the holders of Bolle Common
Stock were aware of these interests and considered them in unanimously
approving the Spinoff and the transactions contemplated thereby. Following
the Spinoff, as a result of their respective positions in BEC and the
Company, each of Messrs. Franklin, Ashken and Moore may, in the course of
their duties, have potential conflicts of interest with respect to material
transactions involving BEC and the Company. Each will have regard to his
obligation to act in the best interest of the Company and will endeavor to
ensure that such conflicts are resolved fairly. See "MANAGEMENT," "EXECUTIVE
COMPENSATION" and "CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS--Management
Services Agreement" and "--Relationships with Directors."
EXPENSES
Expenses associated with the Spinoff, which are expected to be
approximately $850,000 in the aggregate, will be paid either directly or
indirectly by the Company.
CONDITIONS
The consummation of the Spinoff does not require the approval of the BEC
Stockholders and is not contingent upon the closing of the Merger or other
conditions.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The receipt of the Bolle Common Stock will be a taxable transaction for
Federal income tax purposes. Gain recognized on the distribution will be
treated either as capital gain or as dividend income. The distribution should
be considered governed by Internal Revenue Code (the "Code") Section 301.
This section requires that the portion of the distribution (valued on the
basis of the Bolle Common Stock's fair market value on the distribution and
any cash distributed in lieu of fractional shares) equal to the pro rata of
BEC's current year and accumulated earnings and profits which for federal
income tax purposes is allocable to the BEC Common Stock with respect to
which the distribution is made be treated as a dividend for federal income
tax purposes. Any portion of the distribution in excess of earnings and
profits allocable to the BEC Common Stock with respect to which the Bolle
Common Stock is distributed is treated as a return of capital by applying it
against, and reducing the adjusted tax basis in, the BEC Common Stock with
respect to which the Bolle Common Stock was distributed. Any amount of the
25
<PAGE>
distribution which is not a dividend, to the extent it exceeds the adjusted
basis of the BEC stock to which it relates, is treated as gain from the sale
or exchange of property. Based on current facts, it is not anticipated that
BEC will have any current or accumulated earnings and profits at the time of
the distribution, and it also is not anticipated that the value of the
distribution will exceed any stockholder's tax basis in the BEC Common Stock
with respect to which each Bolle share (and any cash for fractional shares)
is distributed. If such anticipated circumstances exist at the time of the
distribution, no BEC Stockholder will have any gain by reason of the
distribution. The effect of treating a portion or all of the distribution as
a return of capital will be to reduce the BEC stockholders' tax basis in the
BEC Common Stock held after the distribution.
Any portion of the distribution which is treated as an exchange will be
taxable as long-term capital gain if the BEC Common Stock has been held for
more than one year on the date of the distribution; otherwise any gain will
be short-term capital gain. The federal income tax rate on long-term capital
gain will depend upon the length of time a stockholder has owned the BEC
Common Stock with respect to which the distribution is made. Gain taxable as
dividend income may be eligible for a dividends received deduction for
corporate stockholders. In addition, Section 1059 of the Code, which requires
corporate stockholders to reduce basis of shares in the case of certain
extraordinary dividends, may be applicable to corporate stockholders that
receive distributions which are taxable as dividend income. Finally, any
portion of the distribution which is treated as a dividend will be subject to
withholding tax for foreign stockholders.
Each holder's initial adjusted basis for the Bolle Common Stock received
in the Spinoff will be the fair market value of such stock at the time of the
distribution and the holding period for such stock will commence upon the day
of the distribution.
EACH BEC STOCKHOLDER IS ADVISED TO CONSULT HIS HER OR ITS OWN ADVISER AS
TO THE SPECIFIC TAX CONSEQUENCES TO SUCH STOCKHOLDER OF THE PROPOSED SPINOFF,
INCLUDING THE APPLICATION AND EFFECT OF STATE, LOCAL AND FOREIGN INCOME AND
OTHER TAX LAWS.
26
<PAGE>
SELECTED FINANCIAL DATA
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)
The following selected historical and pro forma combined financial data
have been derived from audited and unaudited 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 BEC's acquisition of Bolle
France and therefore has no historical activity or financial statements.
Bolle America was purchased by BEC 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 acquisition of Bolle France under the
purchase method of accounting and reflect the Contribution Agreement and the
Indemnification Agreement. The following pro forma combined balance sheet
data only give effect to the Contribution Agreement and the Indemnification
Agreement as the effect of the acquisition is already included in the
Company's actual balance sheet as of September 30, 1997. The actual statement
of operations data presented include the results of Bolle France for the
three months ended September 30, 1997. The pro forma combined statement of
operations data presented include Bolle France as if the acquisition occurred
as of the beginning of the periods presented.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
-------------------------------------------------------------- ----------------------
PRO PRO
ACTUAL ACTUAL ACTUAL ACTUAL ACTUAL FORMA ACTUAL FORMA
1992 1993 1994(1) 1995(2) 1996(3) 1996 1997(4) 1997
--------- --------- --------- --------- --------- --------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
<C>
STATEMENT OF OPERATIONS DATA:
NET SALES ................................ $15,495 $18,377 $23,094 $24,829 $24,425 $60,297 $ 20,670 $36,266
COST OF SALES ............................ 8,595 9,126 10,814 12,181 12,130 29,140 9,750 18,267
--------- --------- --------- --------- --------- --------- ----------- ---------
GROSS PROFIT ............................. 6,900 9,251 12,280 12,648 12,295 31,157 10,920 17,999
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES (INCLUDING ADVERTISING AND
SPONSORING EXPENSES) .................... 6,808 7,384 8,871 10,275 11,374 23,813 10,593 16,310
MERGER RELATED EXPENSES .................. -- -- -- 3,050 -- -- -- --
INTEREST EXPENSE (INCOME)................. 488 336 316 (302) (256) 931 516 465
OTHER EXPENSE (INCOME) ................... (81) (295) (104) 48 (450) (200) (803) (1,162)
--------- --------- --------- --------- --------- --------- ----------- ---------
INCOME (LOSS) BEFORE INCOME TAXES ....... (315) 1,826 3,197 (423) 1,627 6,613 614 2,386
PROVISION FOR (BENEFIT FROM) INCOME
TAXES.................................... (120) 700 1,260 364 635 1,721 196 1,301
--------- --------- --------- --------- --------- --------- ----------- ---------
NET INCOME (LOSS) ........................ $ (195) $ 1,126 $ 1,937 $ (787) $ 992 4,892 $ 418 1,085
========= ========= ========= ========= ========= ========= =========== =========
PREFERRED STOCK DIVIDENDS ................ 511 383
--------- ---------
NET INCOME ATTRIBUTABLE TO COMMON STOCK . $ 4,381 $ 702
========= =========
PRO FORMA SHARES OUTSTANDING.............. 7,408 7,408
PRO FORMA EARNINGS PER SHARE.............. $ 0.59 $ 0.09
FRENCH FRANC PER US DOLLAR EXCHANGE RATE
USED (5)................................. 5.1138 6.0832 5.9188
BALANCE SHEET DATA:
WORKING CAPITAL (DEFICIENCY).............. $ 31 $ 1,060 $12,781 $11,395 $ 8,535 $(16,528) $ 433
TOTAL ASSETS ............................. 8,164 9,629 17,549 16,309 15,624 82,513 99,370
LONG TERM DEBT ........................... 350 49 57 -- -- -- 3,428
MANDATORILY REDEEMABLE PREFERRED STOCK ... -- -- -- -- -- 11,055 20,349
STOCKHOLDERS' EQUITY ..................... 279 1,584 13,433 12,770 9,743 24,460 44,256
FRENCH FRANC PER US DOLLAR EXCHANGE RATE
USED (5)................................. 5.1900 5.9125 5.9125
</TABLE>
- ------------
(1) In 1994, Bolle America paid a $50 dividend to its then current
shareholders.
(2) In November 1995, BEC acquired Bolle America in a transaction accounted
for as a pooling of interests. Accordingly, Bolle America, Inc. is
included in all periods presented.
(3) In 1996, the Company paid a dividend to BEC (its then current
stockholder) of $4,019.
(4) 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.
(5) Represents the exchange rates used to translate the results of
operations and balance sheet amounts of Bolle France. The exchange rate
shown for the pro forma results of operations for the year ended
December 31, 1996 represents the average exchange rate used to
translate the results of operations of Bolle France added to the
Company's actual results in the pro forma statement of operations. The
exchange rate shown for the actual results of operations for the nine
months ended September 30, 1997 represents the average exchange rate
for the three months ended September 30, 1997 used to translate the
results of operations of Bolle France included in the Company's actual
results. The exchange rate shown for the pro forma results of
operations for the nine months ended September 30, 1997 represents the
average exchange rate for the nine months ended September 30, 1997 used
to translate the results of operations of Bolle France added to the
Company's actual results in the pro forma statement of operations.
27
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
GENERAL
Due to the acquisition of Bolle France on July 10, 1997, only three months
of results of operations of Bolle France are included in the results of
operations for the nine months ended September 30, 1997. Therefore, trends
due to the acquisition will be extrapolated accordingly when Bolle France is
included for the entire period presented.
In conjunction with the acquisition of Bolle France and following the
planned Spinoff, it is anticipated the Company will be subject to interest on
approximately $17 million of senior indebtedness at an average current rate
of approximately 5%. Although this represents significantly less than the
intercompany indebtedness currently outstanding, it is nevertheless higher
than indebtedness has been prior to the Bolle France acquisition. In
addition, the acquisition of Bolle France has resulted in additional
depreciation and amortization of approximately $2.1 million, significantly
increasing selling, general and administrative expenses as a percentage of
sales.
The Company has begun to develop and implement a global brand management
and marketing program, resulting in increased advertising expenses. There is
no guarantee that such increased expenses will result in increased sales.
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 has been operated as a separate segment of
BEC's business and will continue to receive management and administrative
services from BEC on similar terms to those reflected in the historical
financial statements under the Management Services Agreement.
Pro forma results of operations
For the nine months ended September 30, 1997, on a pro forma combined
basis, US sales represented 41% of total net sales while French sales
represented 59%. On a pro forma basis the year ended December 31, 1996 was
similar in geographic distribution with US sales representing 40% and French
sales representing 60% of pro forma combined net sales.
In US Dollars, for the nine months ended September 30, 1997, net sales of
Bolle France were $18,656 or 38% of $48,827, the net sales for the year ended
December 31, 1996. On the other hand, in thousands of French Francs, for the
nine months ended September 30, 1997, net sales of Bolle France were FF
158,617 or 64% of FF 249,693, the net sales for the year ended December 31,
1996. The relative difference between 38% and 64% is due to the substantial
increase in the French Franc to US Dollar exchange rate from 1996 to 1997.
The decrease in sales not due to the change in exchange rates is due to
the same factors discussed in the comparisons of actual results below. Bolle
America represented 16.4% and 26.5% of total Bolle France sales for the nine
months ended September 30, 1997 and the year ended December 31, 1996,
respectively. The reduction in Bolle America's sales significantly impacted
Bolle America's purchases from Bolle France.
As indicated by the pro forma combined gross margins of 50% and 52% for
the nine months ended September 30, 1997 and the year ended December 31,
1996, respectively, the gross margin which can be expected going forward is
slightly higher than that which has been experienced in actual historical
margins as a result of applying the manufacturing costs directly to the owned
distributors' sales prices. The gross margin for Bolle France in the third
quarter of 1997 was lower than in other quarters due to the annual plant
shutdown during the third quarter.
In accordance with the decrease in sales from 1996 to 1997, due to
exchange rate changes and reduced sales at Bolle America, net income also
decreased substantially in 1997. Pro forma combined interest
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<PAGE>
expense represents an estimate of the interest expense expected after the
Spinoff. Selling general and administrative expenses included $2.6 million of
depreciation and amortization on a pro forma combined basis for the year
ended December 31, 1996.
Prior to July 10, 1997, Bolle France consisted of a number of
unconsolidated privately held entities which filed separate tax returns.
Bolle America filed tax returns as part of BEC's consolidated United States
return. Since July 1997, the Company has revised the structure of Bolle
France to make it one consolidated tax group for French tax purposes.
Following the Spinoff, the Company will file a consolidated United States tax
return for its domestic businesses (including Bolle America) and the foreign
operations will file tax returns in the appropriate countries as required by
local law. The Company does not anticipate a significant change to the pro
forma combined tax provisions in future periods arising from the post-Spinoff
tax structure of Bolle Inc.
Nine months ended September 30, 1997 compared to nine months ended September
30, 1996
Net sales of $20.7 million for the nine months ended September 30, 1997
increased from $19.8 million for the comparable period in 1996 despite a $4.9
million decrease in sales in the United States, resulting from the
acquisition of Bolle France on July 10, 1997. For the nine months ended
September 30, 1997, US sales represented 72% of net sales with French sales
representing the remaining 28%. Soft conditions in the market for premium
sunglasses contributed to the decrease in sales in the United States. A major
retail distributor of premium sunglasses, 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 into 1997, negatively affecting the entire
premium sunglass industry. This customer represented 17% of Bolle America
sales for the nine months ended September 30, 1996 and less than 5% of Bolle
America sales for the nine months ended September 30, 1997. While overall
retail sales continued to grow, many premium sunglass manufacturers had
overproduced in anticipation of significantly higher sales and took
significant returns which eroded profit margins. The Company does not expect
this trend to continue in 1998.
Gross margin increased from 51.5% for the nine months ended September 30,
1996 to 52.8% for the nine months ended September 30, 1997, reflecting the
trend of increasing gross margins as the Company is now a combined
manufacturer and distributor following the Acquisition instead of solely a
distributor.
Advertising and sponsoring expenses did not increase significantly except
for the addition of Bolle France for the nine months ended September 30, 1997
compared to the nine months ended September 30, 1996.
For the nine months ended September 30, 1997, selling, general and
administrative expenses of $7.7 million increased from $6.3 million in the
comparable period in 1996 reflecting the addition of Bolle France costs.
Interest expense of $0.5 million for the nine months ended September 30,
1997 primarily reflects the interest expense on Bolle France acquisition
debt. In the comparable period in 1996, however, Bolle America's cash on hand
generated interest income of $0.2 million.
Other income consists of allocated equity income and management fee income
from BEC's investment in Eyecare Products of $0.6 million for the nine months
ended September 30, 1997 and $0.9 million for the nine months ended September
30, 1996. This income was allocated to the Company by BEC. For the nine
months ended September 30, 1997 other income also included $0.2 million of
foreign exchange transaction gains compared to none in the prior period.
The provision for income taxes of approximately $0.2 million or 32% of
income before income taxes for the nine months ended September 30, 1997
represents the anticipated effective tax rate of the Company in its present
structure. The tax provision of $1.0 million for the nine months ended
September 30, 1996 represented the Company's 39% effective tax rate for 1996
in its then present structure. The acquisition of Bolle France has had a
significant effect on the overall effective tax rate and provision
calculations due to the higher statutory tax rate in France and the
significant non-deductible amortization and depreciation expenses resulting
from purchase accounting.
29
<PAGE>
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. This increase was
due to the Company's strategy of building the brand in the United States
where it competes with other brands which are heavily marketed and
advertised.
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
BEC's investment in Eyecare Products. This income was allocated to the
Company by BEC. During 1995, because the acquisition of the Company by BEC
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.
Year ended December 31, 1995 compared to year ended December 31, 1994
The increase in net sales of 7.5% from 1994 to 1995 reflects the Company's
participation in premium sunglass market growth as it strengthened its brand
image and competitive advantages, selling more units at market-justified
higher price points. For the years ended December 31, 1995 and 1994, the
Company's sales were substantially all in the United States.
The decrease in gross margin from 53% to 51% reflects price increases from
the Company's main supplier, Bolle France, not passed on to the customers.
This increase was partially offset by a volume-related decrease.
Advertising and sponsoring expenses increased from $1.9 million in 1994 to
$2.7 million in 1995 due to continued implementation of more aggressive
marketing and advertising campaigns.
The 8.9% increase in selling, general and administrative expense from $7.0
million to $7.6 million reflects the increase in net sales and additional
administrative expenses associated with the Company's public offering
completed in December 1994.
Prior to the Company's public offering in December 1994, the Company's
average debt balances resulted in interest expense of $0.3 million for the
year ended December 31, 1994. Substantially all of the Company's debt was
repaid following the public offering resulting in interest income of $0.3
million for the year ended December 31, 1995.
Other income in both 1994 and 1995 represented foreign exchange gains and
losses resulting from currency movements between the United States Dollar and
the French Franc.
30
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
Net cash used by operating activities during the nine months ended
September 30, 1997 of $1.8 million represents the net income with the
negative effect of decreased accounts payable and increased other assets.
These cash uses were offset by decreased accounts receivable and non-cash
expenses. Depreciation and amortization for the nine months ended September
30, 1997 was $0.9 million compared to $0.3 million for the same period last
year, reflecting the acquisition of Bolle France. Cash paid for acquisitions
in 1997 represents the purchase of Bolle France net of cash received with the
acquisition. Capital expenditures of $0.4 million were also increased due to
the acquisition. These operating and investing activities were financed
through proceeds from indebtedness to stockholder which is the Company's
current source of capital outside of operating cash flows. Under the
intercompany credit arrangement, the Company borrows US Dollars from BEC at a
rate of 8% and French Francs at a rate of 5.5%. In conjunction with the
Spinoff, it is anticipated that the Company will enter into a separate credit
facility with substantially the same terms as the BEC facility and that there
will be no intercompany credit arrangements between BEC and the Company. The
Company will lend cash to its subsidiaries in substantially the same manner
as BEC lends to the Company and its subsidiaries. Management believes that
the new credit facility, along with cash provided from operations, will be
sufficient to fund the Company's cash operating and investing requirements
for the foreseeable future. It is not expected that repatriation of French
Franc cash flows, if any, will have a significant impact on liquidity.
Net cash provided by operating activities during the year ended December
31, 1996 consisted of net income and increases in accounts payable offset by
increases in receivables from related parties and inventory. The Company's
cash was payed to its stockholder from which it received interest income.
Net cash used by operating activities in 1995 consisted of the net loss
resulting from the merger-related expenses and increases in net working
capital. Cash on hand as a result of the December 1994 offering was used to
finance investing activities.
Net cash provided by operating activities in 1994 of $0.3 million
consisted of net income offset by increases in working capital to support the
growing business. The cash provided by operations along with proceeds from
long term debt was sufficient to fund the Company's investing activities. A
substantial portion of the public offering proceeds was used to repay
indebtedness.
In connection with the Contribution Agreement to be entered into between
BEC and the Company, approximately $18 million of indebtedness to related
parties incurred to finance the acquisition of Bolle France will be
capitalized. This reduction in the Company's debt will improve working
capital levels. The Company expects cash flows from operations combined with
available borrowing capacity to be sufficient to fund the Company's future
operating and investing needs through at least 1998.
NEW ACCOUNTING STANDARD
In February 1997, the Financial Accounting Standards Board issued
Statement No. 128, "Earnings Per Share" ("SFAS 128"), which revises the
calculation and presentation provisions of Accounting Principles Board
Opinion 15 and related interpretations. SFAS 128 is effective for the
Company's fiscal year ending December 31, 1997, and retroactive application
is required. The Company does not expect the implementation of SFAS 128 to
have a material effect on earnings per share amounts previously reported.
31
<PAGE>
BUSINESS
INTRODUCTION
The Company designs, manufactures and markets premium sunglasses and sport
shields, goggles and safety and tactical eyewear under the Bolle(Registered
Trademark) brand. Bolle(Registered Trademark) 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. was completed to combine the Company's
ownership of the worldwide rights to the Bolle(Registered Trademark)
trademark for the Company's products with its international manufacturing and
distribution capabilities under one organization, which the Company believes
will allow it to expand its business and enhance its profitability. This
organization enables the Company to develop and execute a consistent and
unified marketing strategy targeted at promoting the Company's competitive
advantages. The Company believes that its competitive advantages include its
strong brand name, integrated design, production and marketing capabilities,
superior technology, specialized product offerings and established
international distributors in over 40 countries around the world. The Company
will seek to integrate these 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 the premium sunglass
market. The factors which contribute to the growth of this market include
advancements in product technology, growing demand for specialized sunglasses
leading to multiple purchases, increased health concerns and greater fashion
and image content. Safety and tactical eyewear products may be designed for
general or special purpose. The Company competes in the special purpose
safety and tactical eyewear market. The factors which contribute to the
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:
Acquisition of Largest Independent Distributor. Consistent with the
Company's strategy of consolidating certain of its distributors through
acquisitions or other arrangements, the Company has executed a non-binding
letter of intent to purchase Bill Bass Optical, the largest independent
distributor of the Company's products and the principal distributor of the
Company's products in Australia, which had sales of Bolle(Registered
Trademark) products in Australia in excess of $10 million in 1997. The
Company has offered to purchase 75% of the outstanding shares of Bill Bass
Optical and an affiliate thereof, 100% of the outstanding shares of Bolle
Asia (the distributor of the Company's sunglasses in Southeast Asia), and the
49% of the shares of Bolle Sunglass Ltd. (the distributor of the Company's
sunglasses in the U.K.) that the Company does not already hold for an
aggregate price of approximately $6,250,000, consisting of $3,900,000 in cash
and $2,350,000 in Bolle Common Stock. It is contemplated that the transaction
will be completed following the closing of the Spinoff, and, thereupon, that
the sellers would collectively retain a 25% ownership interest in Bill Bass
Optical providing them with a 25% share in the profits generated by Bill Bass
Optical and a pro rata share of any distributions therefrom.
Alyn Supply Agreement. Consistent with its traditional focus on
technological innovation, the Company has entered into a three-year exclusive
Supply Agreement with Alyn, a manufacturer of specialized metal frames, to
create premium sunglass frames using Boralyn(Registered Trademark), a special
patented metal
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matrix providing greater strength and stiffness to weight ratios than
titanium, which is currently considered the leading metal for advanced metal
eyewear.
Martina Hingis Endorsement Contract. Martina Hingis, the youngest number
one-ranked player in the history of women's tennis, has agreed to wear
exclusively Bolle(Registered Trademark) sunglasses, sport glasses and ski
goggles at all public events and for recreation, and to appear in
advertisements and promotions for Bolle(Registered Trademark) products
worldwide. Ms. Hingis will also appear in the Company's first-ever worldwide
brochure, a combination magazine/catalogue, in early 1998.
INDUSTRY OVERVIEW
The Premium Sunglass Market
The premium sunglass market consists of two main segments, premium and
value-priced. The premium market is defined by products with retail price
points over $30 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, 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 pair 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 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 and 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.
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 has been
expanded, creating more sunglass choices and resulting in more frequent
purchases by customers.
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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(Registered Trademark) and Uvex(Registered
Trademark) 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 environment. 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 generalization of the use of laser 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 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 (ANSI) 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.
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(Registered Trademark) brand aggressively. The Company
believes that it is uniquely positioned, through its competitive advantages,
to implement successfully this growth strategy and achieve its brand
expansion objective.
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Competitive Advantages
The Company believes that it has the following competitive advantages
which contribute to differentiate it from its competitors:
Strong Brand Name. Bolle(Registered Trademark) products enjoy a strong
reputation for high performance and style. This reputation is based on the
superior technical characteristics of the Bolle(Registered Trademark) 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(Registered Trademark) brand name as that of high
quality, technologically advanced and fashionable eyewear products. The
Company believes that the Bolle(Registered Trademark) 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(Registered Trademark) ski goggles collections such as Chrono and Future
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(Registered
Trademark) brand for its products. This organization enables the Company to
develop and execute a consistent and unified worldwide marketing and
distribution strategy focused on expanding the Bolle(Registered Trademark)
brand with consistency of 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 flexible manufacturing in Oyonnax, France through the use of
local subcontractors, while retaining control over manufacturing and all its
proprietary processes.
Superior Technology. Bolle(Registered Trademark) eyewear products
incorporate several unique technological features, thus enabling the Company
to better differentiate itself from its competitors. 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(Registered Trademark) 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. Other materials used in the
manufacturing of Bolle(Registered Trademark) products include 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. Frames
made out of such material return to their original shape after a
mistreatment, which significantly improves product life. The Company also
offers an interchangeable lens system (marketed under the
Breakaway(Trademark) brand), which enables consumers to customize the look
and function of certain Bolle(Registered Trademark) products by offering
different lenses in the same frame. Consistent with its traditional focus on
technological innovation, the Company has entered into a six-year exclusive
Supply Agreement with Alyn, a manufacturer of specialized metal frames to
create premium sunglass frames using Boralyn(Registered Trademark), 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(Registered Trademark) 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 Company is currently in the process of
focusing its lines and collections of sunglasses and sport glasses based on
their use rather than their design, style or other defining criteria. The
Company intends to market its products based on the type of sport for which
they are designed, in an attempt to respond to a growing consumer preference
for sport-specific eyewear. The Company has a long-standing tradition of
designing and manufacturing in cooperation with its sponsored athletes high
performance eyewear products featuring sport-specific characteristics. For
example, the Company has worked with French Olympic Ski Champions Jean-Claude
Killy and, more recently, Luc
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Alphand to design and continuously improve its ski goggles. The Company also
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(Trademark) 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 for water sports and Varsity for squash and racquetball. 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.
Established International Distributors. The Company has established
international distributors in over 40 countries around the world. The largest
independent distributor of Bolle(Registered Trademark) sunglasses and safety
eyewear products is Bill Bass Optical, which has exclusive rights to
distribute Bolle(Registered Trademark) products in Australia. Bill Bass
Optical became the distributor of Bolle(Registered Trademark) products in
Australia in 1982 and was able to develop sales of Bolle(Registered
Trademark) products in Australia to over $10,000,000 in 1997. The remainder
of the Company's distribution capabilities in addition to affiliated
distributors consists of distributorship arrangements with well established
providers of eyewear products which are familiar with their local market. As
a result of this structure, the Company's distribution business has become to
a large extent multi cultural, yet with a single brand name and well
differentiated products. The Company expects that this will enhance the
implementation of its international marketing and distribution strategy.
Growth Strategy Targeted at Expanding Aggressively the Bolle(Registered
Trademark) Brand
Worldwide Marketing Initiative. The Company intends to enhance and unify
its marketing efforts with the objective of achieving increased recognition
of the Bolle(Registered Trademark) brand name around the world. The Company's
worldwide marketing initiative includes a unified 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
characteristics and long standing proven reputation for style and performance
of Bolle(Registered Trademark) products. The Company's marketing strategy
also includes training retail salespersons to fully understand the
specificities of Bolle(Registered Trademark) products and in-store education
highlighting the Bolle(Registered Trademark) style and technical features.
The Company expects to coordinate with its international distributors future
introductions of new Bolle(Registered Trademark) products, such as a new
motorsports line, so as to maximize the benefits which the Company may derive
from its worldwide rights to the Bolle(Registered Trademark) brand and
enhance global sales. The Company also expects that the impact of its
worldwide marketing initiative will be maximized by its parallel efforts to
build 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(Registered Trademark)
distributors around the world through acquisitions and distributorship
agreements. The Company has entered into a non binding letter of intent to
purchase 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 excess 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.
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Develop Product Line Extensions. The Company has plans to develop product
line extensions bearing the Bolle(Registered Trademark) brand. Once the
reputation of the Bolle(Registered Trademark) 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
Bill Bass Optical in Australia, which has developed and carries a successful
line of Bolle(Registered Trademark) golf and ski clothing.
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 moving
product offerings. Recently introduced Bolle(Registered Trademark) products
include the Breakaway(Trademark) and Snakes(Trademark) 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(Registered Trademark) sunglasses are particularly suitable 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(Registered Trademark) 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(Registered Trademark) 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(Registered
Trademark) safety and tactical eyewear includes safety glasses and goggles,
face shields, laser eye protection devices and other specialized safety and
tactical eyewear products.
Superior Technological Characteristics and Proven High Performances
Bolle(Registered Trademark) 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 so-called
Bolle(Registered Trademark) 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
application is used in 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 and pass tests adopted by the U.S. Food and
Drugs Administration for impact resistance and offer scratch resistance
through quartz coating. Cr 39(Registered Trademark) plastic lenses are
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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. Light smoke,
dark smoke and light brown polarization is available. Multilayer coatings
include blue, violet, green, red, gun and infrared.
Bolle(Registered Trademark) Frames. The Bolle(Registered Trademark) 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. Frames
made out of such material 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 fluo pink to white as well as in
exotic versions from patterns in the "Graffiti" line to various sparkling
colors in the "Crystal" line and most recently "Cyber" colors.
Optional Features
The Company offers an interchangeable lens system (marketed under the
Breakaway(Trademark) brand), which enables consumers to customize the style
and functions of certain Bolle(Registered Trademark) products by adapting
different lenses to the same frame. Also offered with many Bolle(Registered
Trademark) products is a patented Sport Optical System(Trademark), 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(Registered Trademark) sport
and protective eyewear products offer anti-fog coating, which the Company was
the first to develop for its ski goggles in 1973.
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(Registered Trademark) brand for its products. This
organization enables the Company to create and execute a consistent and
unified worldwide marketing and distribution strategy. This strategy is
focused on leveraging the Bolle(Registered Trademark) superior technology and
established distributors in over 40 countries to aggressively expand the
Bolle(Registered Trademark) brand with consistency of brand image and design
innovation. The Company's worldwide marketing initiative includes a unified
catalog 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(Registered
Trademark) products and in-store education highlighting the Bolle(Registered
Trademark) 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(Registered Trademark) 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(Registered Trademark) brand and enhance global sales. The
Company's marketing initiative will seek to emphasize through a unified
sport-specific approach the technological frame and lens characteristics and
long-standing proven reputation for style and performance of Bolle(Registered
Trademark) 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
champion Luc Alphand, uses and endorses the Company's Chrono line of ski
goggles. Martina Hingis, the youngest number one-ranked player in the history
of women's tennis, has agreed to wear exclusively Bolle(Registered Trademark)
sunglasses, sport glasses and ski goggles at all public events and for
recreation, and to appear in advertisements and promotions for
Bolle(Registered Trademark) products
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worldwide. The Company also sponsors a variety of teams and organizations
including sport federations and the Professional Golfers Association. These
sponsorships are a cost effective means of publicizing the Bolle(Registered
Trademark) 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(Registered
Trademark) 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(Registered Trademark) 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(Registered Trademark)
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(Registered Trademark) 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.
Metal Frames
Pursuant to its Supply Agreement with the Company, Alyn has agreed to
exclusively provide the Company with sunglass frames using Boralyn(Registered
Trademark), a special proprietary metal matrix providing greater
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strength and stiffness to weight ratios than titanium, 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 name may enjoy recognition which exceeds that of the Bolle(Registered
Trademark) brand name. 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.
Companies active in the Company's industry must respond simultaneously to
changes in fashion and technology, yet maintain inexpensive and rapid
production in order to remain competitive. Moreover, general economic
conditions and regulatory polices complicate the different companies' ability
to address all factors effectively. Consequently, these companies alleviate
the complexity 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(Registered
Trademark) 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(Registered
Trademark) products in the United States through multiple retail distribution
channels, including general and specialty sporting goods stores and
optometrist, ophthalmologists and opticians, is important to its competitive
position.
The Company believes that 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 few customers. None of the Company's customers account for more
than 10% of the Company's consolidated revenues. 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.
QUALITY CONTROL AND PRODUCT IMPROVEMENT
Bolle(Registered Trademark) 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
40
<PAGE>
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. international
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(Registered Trademark) 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
period ended September 30, 1997 is set forth in Note 15 to the Company's
Consolidated Financial Statements attached to this Prospectus. 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, 1995 and 1994, which is provided in note 6 to the Company's
Consolidated Financial Statements, is only attributable to Bolle America's
U.S. operations. During 1996, 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 distributors in the rest of the world.
Among affiliated distributors, Bolle America is the largest and
distributes Bolle(Registered Trademark) products in the United States, Mexico
and Costa Rica. The Company is in the process of consolidating the
distribution operations of Bolle America with the manufacturing and
distribution operations of Bolle France. The remainder of the Company's
distribution capabilities consist of distributorship arrangements with well
established providers of eyewear products, among which Bill Bass Optical in
Australia is the largest. In the United States, the Company sells its
products through a nationwide network of approximately 50 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
order 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.
Howard Leight Industries ("Howard Leight"), a major distributor of
industrial safety products, has committed to purchase from the Company
certain safety eyewear products for exclusive marketing and sale through
industrial supply networks in North and South America. Under its agreement
with the Company, if Howard Leight fails to maintain specified minimum
periodic purchase levels, the Company has the right to hire additional
distributors for the products and the territories covered by the Agreement.
These minimum periodic purchase levels begin at $6,500,000 for 1998 and
increase annually through 2003, at which time future minimum levels must be
agreed between the Company and Howard Leight. The Agreement has an initial
term of seven years, beginning October 15, 1997, and is automatically renewed
thereafter for successive one-year terms unless either party gives three
months' notice of termination. In January 1998, Bacou USA, one of the main
competitors of the Company, has announced that it has reached an agreement
for the purchase of Howard Leight. Although the Company believes it would be
entitled to continue its agreement with Howard Leight notwithstanding the
completion of this acquisition, it does not expect its relationship with
Howard Leight to develop significantly in the near future.
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 executed letters of intent to purchase Bill Bass
Optical, the largest independent distributor of the Company's products and
the principal distributor of the Company's products in Australasia, whose
sales of Bolle(Registered Trademark) 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.
41
<PAGE>
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.
REGULATION
The Company has been specifically certified to manufacture sunglasses,
sport products and industrial protection products as well as laser protection
products and eyewear produced for specific military orders. The Company
believes it is certified to sell its eyewear products in every country of the
world.
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(Registered Trademark); Bolle PC(Registered Trademark);
ACRYLEX(Registered Trademark); ALIEN(Registered Trademark);
CONTOUR(Registered Trademark); CHRONOSHIELD(Registered Trademark); MICRO
EDGE(Registered Trademark); GEOMETRIC(Registered Trademark); TIGER
SNAKE(Registered Trademark); SUNSPENDER(Registered Trademark); Bolle
EYEZONE(Registered Trademark); EYEZONE DESIGN(Registered Trademark); NORTHERN
LIGHTS(Registered Trademark); PUT 'EM ON YOUR FACE(Registered Trademark);
EAGLE VISION(Registered Trademark); TACTICAL(Registered Trademark); AVANT
EDGE(Registered Trademark); bf(Registered Trademark); MAURICE
BOLLE(Registered Trademark); CARBO GLAS(Registered Trademark);
AQUASHIELD(Registered Trademark); and the Snakes design. In addition, Bolle
America has applications pending to register a number of additional
trademarks, including BREAKAWAY(Trademark), SEE BETTER, PLAY
BETTER(Trademark); Bolle MADNESS(Trademark); Bolle ATTACK(Trademark); Bolle
ESCAPE(Trademark); Bolle CARBONEX(Trademark); VAPOR TRAIL(Trademark); and
TOUR ELITE(Trademark).
The Company has a number of design and utility patents registered in the
United States and other countries and owns the Bolle(Registered Trademark)
trademark for the Company's products. 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(Registered Trademark) 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 January 30, the Company had approximately 160 employees, about half
of which were assigned to the Company's design, production and distribution
operations in France and the remainder 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.
FACILITIES
As of January 30, 1998, the locations of the Company's principal
facilities are as follows:
<TABLE>
<CAPTION>
LOCATION PRINCIPAL USE/USER(S)
- -------------------- -----------------------------------------------------
<S> <C>
Oyonnax, France MANUFACTURING PLANT, DESIGN CENTER, WAREHOUSE AND
office space
Denver, Colorado Warehouse and office space for Bolle America
</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 owns all of its manufacturing facilities in France and leases
its Denver facilities.
42
<PAGE>
In addition, the Company owns and leases to an unaffiliated lessee an
approximately 150,000 square foot building located in Farmer's Branch, Texas.
The property is subject to a mortgage held by Wells Fargo Bank (Texas) in the
principal amount of approximately $3.6 million which Bolle will agree to
assume pursuant to the Contribution Agreement. See "THE SPINOFF--Transfer of
the Non-ORC Business to the Company."
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
these 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, it is expected that the Company will
agree to indemnify BEC against liabilities which may arise from certain
pending litigation. See "The SPINOFF--Transfer of the Non-ORC Business to the
Company." The Company does not believe that any of such pending litigation
constitutes material legal proceedings for the Company.
43
<PAGE>
MANAGEMENT
The following table sets forth the names, ages and positions of the
executive officers and members of, and nominee for election to, 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 ......... 33 Chairman of the Board of Directors
Gary A. Kiedaisch .......... 51 President, Chief Executive Officer and Director
Ian G. H. Ashken ........... 37 Executive Vice President of Finance and
Administration, Chief Financial Officer, Assistant
Secretary and Director
Franck Bolle ............... 41 Director
Patricia Bolle Passaquay .. 40 Director
David Moore ................ 40 Director
</TABLE>
Directors of the Company are elected annually at the annual meeting of
stockholders. The next annual meeting of stockholders is scheduled for May
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. In connection with the listing of the Bolle Common
Stock on Nasdaq, the Company intends to nominate three additional individuals
as independent directors. David Moore has agreed to be named as one of these
three independent Directors prior to the Effective Time.
The Company expects to form (i) an Audit Committee which will review the
services provided by the Company's independent auditors, consult with the
independent auditors on audits and proposed audits of the Company and review
the need for internal auditing procedures and the adequacy of internal
controls; (ii) a Compensation Committee which will determine executive
compensation and stock option awards; and (iii) an Executive Committee which
will exercise, to the maximum extent permitted by law, all powers of the
Board of Directors between board meetings, except those functions assigned to
specific committees. 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 the Company in
February 1997. Mr. Franklin was elected Chairman of the Board and Chief
Executive Officer of BEC in December 1995. Mr. Franklin was Chairman of the
Board and Chief Executive officer of BEC's predecessor, Benson from October
1992 to May 1996 and President from November 1993 to May 1996. Mr. Franklin
has been the Chairman and Chief Executive Officer of Pembridge Holdings, Inc.
since 1990. From 1988 to 1990, Mr. Franklin was Managing Director of
Pembridge Associates, Inc. Both Pembridge Associates, Inc. and Pembridge
Holdings, Inc. specialized in merchant banking and related services. Mr.
Franklin has been Chairman and Chief Executive Officer of Marlin Holdings,
Inc., the general partner of Marlin Capital, L.P., since October 1996. Mr.
Franklin is non-executive Chairman and a director of Eyecare Products plc and
also serves on the boards of Specialty Catalog Corp. and certain private
companies. Mr. Franklin received his B.A. in Political Science from the
University of Pennsylvania.
Gary A. Kiedaisch was appointed Chief Executive Officer 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 dba Stowe Mountain Resort, a wholly owned
subsidiary of multi-national insurance and financial services 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.
44
<PAGE>
Ian G.H. Ashken, A.C.A. was elected Executive Vice President, Chief
Financial Officer, Assistant Secretary and a Director of the Company in
February 1997. Mr. Ashken was elected Executive Vice President, Chief
Financial Officer, Assistant Secretary and a Director of BEC in December
1995. Mr. Ashken was Chief Financial Officer of Benson and a director of
Benson from October 1992 to May 1996. Mr. Ashken also served as Benson's
Executive Vice President from October 1994 to May 1996; Secretary from
October 1992 to December 1993; and, Assistant Secretary from December 1993 to
May 1996. Mr. Ashken has been the Executive Vice President and a director of
Pembridge Holdings, Inc. since 1990. Since October 1996, Mr. Ashken has been
Vice Chairman of Marlin Holdings, Inc., the general partner of Marlin
Capital, L.P. Mr. Ashken is a director of Eyecare Products plc. Mr. Ashken
received his B.A. (Hons) in Economics and Accounting from the University of
Newcastle in England.
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 became a member of the Bolle Board in January 1998. Mr.
Moore has been President and Chief Executive Officer of Century 21 Home
Improvements, and for more than fifteen years has been President and Chief
Executive Officer of Garden State Brickface, Inc., a leading New York
metropolitan area residential and commercial remodeling firm. Mr. Moore
received his B.A. in Economics from Amherst College and his M.B.A. from
Harvard University.
45
<PAGE>
EXECUTIVE COMPENSATION
Prior to the Spinoff, the executive officers of the Company, other than
Gary A. Kiedaisch, its Chief Executive Officer, were officers of BEC. As a
result, pursuant to interpretations of the rules of the Securities and
Exchange Commission, information with respect to the compensation paid by the
Company to each of the four most highly compensated executive officers other
than Mr. Kiedaisch is not presented in this Prospectus. Such information is
available in the periodic reports of BEC and will be provided by the Company
in connection with the fiscal year ending December 31, 1998.
SUMMARY OF COMPENSATION
The following Summary Compensation Table sets forth information concerning
compensation earned by Mr. Kiedaisch in the fiscal year ended December 31,
1997.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG TERM COMPENSATION ALL OTHER
----------------------------------- ------------------------------------- COMPENSATION
AWARDS PAYOUTS ($)
-------------------------- --------- ------------
NUMBER OF
SECURITIES
OTHER RESTRICTED UNDERLYING
ANNUAL STOCK OPTION/ LTIP
NAME AND PRINCIPAL SALARY BONUS COMPENSATION AWARD(S) SARS PAYOUTS
POSITION YEAR ($) ($) ($) ($) (#) ($)
- -------------------------- ------ --------- -------- -------------- ------------ ------------ ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Gary A. Kiedaisch (1)
Chief Executive Officer . 1997 103,846 37,500 0 0 500,000 0 0
</TABLE>
- ------------
(1) Mr. Kiedaisch's compensation was paid entirely by BEC in 1997.
OPTION GRANTS IN FISCAL 1997
The following table sets forth information regarding option grants to Mr.
Kiedaisch during fiscal 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 seven-year terms. These gains are
based on assumed rates of annual compound stock price appreciation of 5% and
10% from the date the options were granted to the end of the option terms.
OPTION GRANTS IN FISCAL 1997
INDIVIDUAL GRANTS
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT
ASSUMED ANNUAL RATES OF
STOCK
NUMBER OF PERCENT OF PRICE APPRECIATION FOR
SECURITIES TOTAL OPTIONS OPTION
UNDERLYING GRANTED TO TERM (4)
OPTIONS EMPLOYEES IN EXERCISE PRICE EXPIRATION ------------------------
NAME GRANTED (2) FISCAL 1997 PER SHARE DATE 5% 10%
- --------------------- ------------ --------------- -------------- ------------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Gary A. Kiedaisch
(1).................. 500,000 13%(3) $4.25 July 7, 2004 $865,088 $2,016,024
</TABLE>
- ------------
(1) All options granted to Mr. Kiedaisch in 1997 were BEC Options granted
pursuant to the BEC Option Plan and, in connection with the Spinoff,
will be exchanged for options to purchase Bolle Common Stock.
(2) The options shown in the table were granted at fair market value.
(3) Based on the total number of BEC Options granted in fiscal 1997. The
BEC Options granted to Mr. Kiedaisch in 1997 represent 19% of the Bolle
options for which BEC Options held by the Company's employees will be
exchanged pursuant to the Spinoff, as described under "THE
SPINOFF--Treatment of Stock Options."
(4) The assumed annual compound rates of stock price appreciation are
mandated by the rules of the Commission and do not represent the
Company's estimate or projection of future stock prices.
46
<PAGE>
BEC OPTIONS EXERCISED IN LAST FISCAL YEAR; FISCAL YEAR ENDED OPTION VALUES
The following table summarizes certain information regarding options
exercised during 1997 by Mr. Kiedaisch and certain year end option values. In
connection with the Spinoff, each holder of BEC Options who will be employed
by the Company following the Spinoff will receive Bolle Options as described
under "THE SPINOFF--Treatment of Stock Options."
<TABLE>
<CAPTION>
NUMBER OF VALUE OF UNEXERCISED
UNEXERCISED IN-THE-MONEY OPTIONS AT F-Y
OPTIONS END
AT FY-END (1) ($)(2)
--------------- ------------------------------
SHARES VALUE
ACQUIRED OF REALIZED EXERCISABLE/ EXERCISABLE/
NAME EXERCISE (#) ($) UNEXERCISABLE UNEXERCISABLE
- ------------------ ------------- ---------- --------------- ------------------------------
<S> <C> <C> <C> <C>
GARY A. KIEDAISCH 0 0 0/500,000 0/843,750
</TABLE>
- ------------
(1) Represents the total number of BEC shares subject to stock options held
by Mr. Kiedaisch. These options were granted on July 7, 1997. 125,000
of these options will become exercisable on each of July 7, 1998, 1999,
2000, and 2001. All of these options expire on July 7, 2004.
(2) Assumes that the fair market value of the options as of the end of the
fiscal year was $5.9375 per share, based upon the closing price of BEC
Common Stock on the New York Stock Exchange on December 31, 1997, and
the exercise price of $4.25 per share.
DIRECTORS' COMPENSATION
Members of the Company's Board of Directors other than those who are
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 employees of the Company and the Chairman of the Board, will receive an
annual retainer fee in an amount to be determined. Non-employee directors
also receive automatic stock option grants under the Company's 1997 Stock
Incentive Plan. See "Bolle 1997 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 options to purchase 500,000 shares of BEC Common
Stock, which are exchangeable upon the completion of the Spinoff for options
to purchase shares of Bolle 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
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
47
<PAGE>
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 2,000,000 shares of Bolle Common
Stock are reserved for issuance pursuant to the grant of stock based awards
under the Plan. Pursuant to the Plan, employees, 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
combination of such incentives of stock options 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 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 Bolle 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 Bolle 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 Bolle 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 Bolle 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).
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 Bolle 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 Bolle
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 SAR may be granted by the Committee as a supplement to a related stock
option or may be granted independent of any option. SARs granted in
connection with an option will become exercisable and lapse according to the
same vesting schedule and lapse rules that are established for the
corresponding option. SARs granted independent of any option will vest and
lapse according to the terms and conditions set by the Committee. A SAR will
entitle its holder to be paid an amount equal to the excess of the fair
market value of the Bolle 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 Bolle
Common Stock on the date of grant in the case of a SAR granted independent of
an option.
48
<PAGE>
Shares of Bolle 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 Bolle 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 Bolle 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 Bolle 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 BEC 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 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 will enter into indemnification agreements with each of its
directors and officers. These indemnification agreements will also 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.
Following the Spinoff, the Company will have in effect an executive
liability insurance policy which will provide coverage for its directors and
officers similar to the coverage provided with respect to BEC's directors and
officers. Under this policy, the insurer will agree 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 buy 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.
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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
MANAGEMENT SERVICES AGREEMENT
The Company expects to enter into, at or prior to the Effective Time, a
Management Services Agreement with BEC, pursuant to which BEC will provide
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, BEC
will also make available to the Company the services of Mr. Martin E.
Franklin and Mr. Ian G. H. Ashken. As compensation for its services, BEC will
be 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, which will be entered into at the time of the
Spinoff, will have 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.
CONTRIBUTION AGREEMENT AND INDEMIFICATION AGREEMENT
It is expected that, at or prior to the Effective Time, BEC will assign to
the Company all of BEC's assets other than those related to the ORC Business
(as defined in the Contribution Agreement) and certain other specified assets
retained by BEC, and the Company will assume all of BEC's liabilities prior
to the Spinoff other than those related to the ORC Business. In addition, the
Company will be required to indemnify BEC against all of BEC's liabilities
prior to the Spinoff other than substantially all liabilities related to the
ORC Business. The Company expects to issue 380 shares of Bolle Common Stock
to BEC in exchange for the net assets contributed by BEC pursuant to the
Spinoff. See "THE SPINOFF--Transfer of the Non-ORC Business to the Company."
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 International Director and Director of Exports, respectively,
pursuant to employment agreements that are unlimited in duration. Under each
agreement, the Company is committed to pay basic annual gross base
remuneration in the French Francs 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. 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 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."
Bolle Preferred Stock and Warrants. Each of Mr. Franck Bolle and Ms.
Patricia Bolle Passaquay holds 12,614 shares of Bolle Series A Preferred
Stock. In connection with the Spinoff, it is anticipated that Mr. Bolle and
Ms. Bolle Passaquay will receive 1,975 shares of Bolle Series B Preferred
Stock, and Bolle Warrants for the purchase of up to 145,000 shares of Bolle
Common Stock. Mr. Bolle and Ms. Bolle Passaquay may not sell their Bolle
Series B Preferred Stock without the prior written consent of at least 90% of
the then outstanding shares of the Bolle Series B Preferred Stock until the
Company has redeemed all the shares of the Bolle 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, BEC 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
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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 an
aggregate of up to 2,130,000 shares of BEC Common Stock at an exercise price
of $3.10 per share, subject to certain adjustments; (c) Ten Thousand (10,000)
shares of BEC 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 BEC Series A Preferred Stock; (d) One Hundred
(100) shares of Bolle Common Stock valued at approximately $3,300,000, being
the minimum value of the Bolle 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 Bolle 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, BEC 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 (as defined below).
The Share Purchase Agreement provides that none of the Sellers may dispose
of their shares of Bolle 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 Bolle Common Stock which he
will receive pursuant to the Spinoff for so long as the Bolle Series B
Preferred Stock shall not have been redeemed in full by the Company. In
connection with the Spinoff and effective on or prior to the Effective Time,
each Seller, including Mr. Franck Bolle and Ms. Patricia Bolle Passaquay,
will be issued pursuant to a stock split in the form of a stock dividend up
to 67,000 shares of Bolle Common Stock (assuming consummation of all the
transactions expected to occur in connection with the Spinoff on the terms
described in this Prospectus). All of the shares of Bolle Common Stock
received by the Sellers, including Mr. Franck Bolle and Ms. Patricia Bolle
Passaquay, pursuant to the Stock 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 BEC 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 will agree at or prior to the Effective Time to assume all
obligations and liabilities of BEC to each Seller, including Mr. Franck Bolle
and Ms. Patricia Bolle Passaquay, incurred by BEC in connection with the
purchase of Bolle France and BEC shall then be released from all such
obligations and liabilities. As a result, the Company will become solely
responsible for BEC's indemnification obligations for breach of its
representations and warranties made to the Sellers, including Mr. Franck
Bolle and Ms. Patricia Bolle Passaquay, in the Share Purchase Agreement.
Intercompany Financings. During the years ended December 31, 1995, 1996
and the nine months ended September 30, 1996 and 1997, Bolle America was
party to a revolving intercompany credit arrangement with BEC whereby
interest on outstanding balances was charged to Bolle America at a rate of 8%
per annum. Conversely, interest on cash sent to BEC was earned at a rate of
5% per annum. In addition, in July 1997, BEC 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 will pay interest to BEC at a rate
of 5.5% per annum. In conjunction with the Spinoff, it is anticipated that
the Company will enter into a separate credit facility with substantially the
same terms as the existing BEC credit facility and that there will be no
intercompany credit arrangements between BEC and the Company. Following the
Spinoff, the Company expects to enter into credit arrangements with its
subsidiaries similar to the arrangements it had with BEC prior to the
Spinoff. In addition, the Company has pushed down its acquisition
indebtedness to Bolle France and charges interest on existing balances at 5%
per annum. This intragroup loan will
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remain outstanding after the Spinoff. It is expected that, at or prior to the
Effective Time, BEC will repurchase all the shares of BEC Preferred Stock
held by the Company in exchange for the cancellation of an equivalent amount
in intercompany debt owed by the Company to BEC.
Consulting and Non-Compete Agreement. As of the Effective Time, pursuant
to the transfers made from BEC to the Company under the Contribution
Agreement, the Company will become 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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<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Prior to the Spinoff, 96% of the outstanding shares of Bolle Common Stock
will be held of record by BEC. However, following the Spinoff, BEC will own
no Bolle Common Stock, and these shares will be held, pro rata, by the
holders of record of BEC Common Stock on the Record Date. Based on, solely
for the purpose of the following estimate, (i) the 2,280 shares of Bolle
Common Stock expected to be held by BEC on or prior to the Record Date, (ii)
the 17,747,842 shares of BEC Common Stock outstanding or reserved for
issuance upon request as of February 2, 1998, the most recent date for which
such information was available prior to the printing of this Prospectus, and
assuming (i) exercise of a maximum of 1,000,000 BEC Options to purchase
shares of BEC Common Stock which are or will be exercisable on or prior to
the Record Date, (ii) conversion of all Convertible Notes and accrued
interest on or prior to the Record Date into a maximum of 4,155,000 shares of
BEC Common Stock, (iii) consummation on or prior to the Record Date of the
Contribution Agreement and all the other transactions expected to occur in
connection with the Spinoff on the terms described in this Prospectus and,
after giving effect to (i) a 3,347.37 for one stock split in the form of a
stock dividend on Bolle Common Stock, and (ii) a dividend of one share of
Bolle Common Stock for three shares of BEC Common Stock outstanding on the
Record Date expected to be effective at or prior to the Effective Time, a
maximum of 7,632,000 shares of Bolle Common Stock would be distributed to the
BEC Stockholders in the Spinoff and a maximum of 334,736 shares of Bolle
Common Stock would be issued to the Sellers, resulting in a total of
7,966,736 shares of Bolle Common Stock outstanding. The following table sets
forth, on a pro forma basis, the "beneficial ownership" (as that term is
defined in the rules of the Commission) of Bolle Common Stock immediately
after the Spinoff based on the foregoing assumptions of (i) each Director and
Nominee for election as a Director of the Company; (ii) all officers and
directors of the Company as a group; and (iii) each person who owned of
record, or is known by the Company to beneficially own, individually or with
his associates, more than 5% of the outstanding shares of Bolle Common Stock.
Except as otherwise indicated, the BEC stockholders (Bolle stockholders
following the Spinoff) listed in the table have or will have sole voting and
investment powers with respect to the Bolle Common Stock owned or to be owned
by them. The Convertible Notes are held primarily by a small number of
institutional investors, none of whom upon conversion of their holdings of
Convertible Notes, both individually and as a group, would become a
beneficial owner of more than five percent of the BEC Common Stock or of the
Bolle Common Stock after the Spinoff.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF
NAME AND ADDRESS OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP(1) PERCENT OF CLASS
- ------------------------------------ ------------------------------------- ----------------------------------
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................. 477,688(2) 0 0 6% 0% 0%
555 Theodore Fremd Avenue
Suite B-302
Rye, New York
Gary A. Kiedaisch.................. 0 0 0 0 0 0
Ian G.H. Ashken.................... 97,916(3) 0 0 1 0 0
Franck Bolle....................... 66,947 12,614 1,975 * 20 20
Patricia Bolle Passaquay........... 66,947 12,614 1,975 * 20 20
David Moore........................ 5,949 0 0 * 0 0
All Executive Officers and
Directors as a group
(5 persons)....................... 715,447 25,228 3,950 9 40 40
Millbrook Partners, L.P. 885,066(4) N/A N/A 11 N/A N/A
NationsBank Corporate Center
Charlotte, NC 28202
Marvin Schwartz 527,033 N/A N/A 7 N/A N/A
605 Third Avenue
New York, NY 10158
Palisade Capital 471,071 N/A N/A 6 N/A N/A
One Bridge Plaza
Suite 695
Fort Lee, NJ 07024
</TABLE>
<PAGE>
- ------------
* Less than 1%.
(1) Shares not outstanding but deemed beneficially owned by virtue of the
right of an individual to acquire them prior to the Record Date 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 Bolle Common Stock held in trust for Mr.
Franklin's minor children.
(3) Excludes 833 shares of Bolle Common Stock held in trust for Mr.
Ashken's minor children, as to which shares Mr. Ashken disclaims
beneficial ownership.
(4) 859,066 of these shares, or 10.8% of the Bolle Common Stock outstanding
after the Spinoff, 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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DESCRIPTION OF CAPITAL STOCK
The authorized capital stock of the Company consists of 30,000,000 shares
of Common Stock, $.01 par value per share, and 200,000 shares of preferred
stock, $.01 par value per share, including 64,120 shares of Bolle Series A
Preferred Stock and 10,000 shares of Bolle Series B Preferred Stock.
Based on, solely for the purpose of this estimate, (i) the 2,280 shares of
Bolle Common Stock expected to be held by BEC on or prior to the Record Date,
(ii) the 17,747,842 shares of BEC Common Stock outstanding (including 129,892
shares issuable upon request) as of February 2, 1998, the most recent date
for which such information was available prior to the printing of this
Prospectus, and assuming (i) exercise of a maximum of 1,000,000 BEC Options
to purchase shares of BEC Common Stock which are or will be exercisable on or
prior to the Record Date, (ii) conversion of all Convertible Notes and
accrued interest on or prior to the Record Date into a maximum of 4,155,000
shares of BEC Common Stock, (iii) consummation on or prior to the Record Date
of the Contribution Agreement and all the other transactions expected to
occur in connection with the Spinoff on the terms described in this
Prospectus and, after giving effect to (i) a 3,347 for one stock split in the
form of a stock dividend on Bolle Common Stock (ii) a dividend on BEC Common
Stock of one share of Bolle Common Stock for every three shares of BEC Common
Stock outstanding on the Record Date, both expected to be effective at or
prior to the Effective Time, a maximum of 7,632,000 shares of Bolle Common
Stock would be distributed to the BEC Stockholders in the Spinoff. The
aggregate number of shares of Bolle Common Stock that will actually be
distributed pursuant to the Spinoff may vary. All of the shares of Bolle
Common Stock to be distributed to BEC stockholders in the Spinoff will be
fully paid and nonassessable. On February 2, 1998, there were approximately
585 holders of record of BEC Common Stock. Pursuant to the terms of the
Spinoff and in addition to the shares of Bolle Common Stock which will be
held in the aggregate by the Sellers (which shall represent a 4% interest in
the outstanding Bolle Common Stock), there will be the same number of record
holders and one-third as many shares of Bolle Common Stock outstanding
following the Spinoff as there are record holders and shares of BEC Common
Stock outstanding immediately prior to the Spinoff.
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 Company's Bylaws, and applicable provisions of Delaware
corporate law (including but not limited to the DGCL.)
BOLLE COMMON STOCK
Holders of Bolle 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 Bolle
Common Stock entitled to vote in any election of directors may elect all of
the directors standing for election. Holders of Bolle 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 Bolle Common Stock
have no preemptive, subscription, redemption or conversion rights. All the
outstanding shares of Bolle Common Stock are, and the shares of Bolle 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 Bolle 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 of
Directors is authorized, subject to any limitations prescribed by law,
without stockholder approval, to issue up to 200,000 shares
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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 Bolle 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 Bolle 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 US $172.41 per share of Bolle
Series A Preferred Stock. After payment of the full amount of the liquidation
distributions to which they are entitled, the holders of the Bolle 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 Bolle Series A Preferred Stock, then the holders of the
Bolle 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 Bolle Series A Preferred Stock
is not convertible or exchangeable for any other securities of the Company.
Shares of the Bolle 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 (the "Senior Indebtedness"). Prior to that, the
Company may redeem any shares of Bolle Series A Preferred Stock at any time
upon 10 days prior written notice. In addition, in the event the Company's
EBITDA exceeds US $18,400,000 for the fiscal year 1998 or US $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 Bolle Series A Preferred Stock then outstanding,
provided in each case that BEC remains in compliance with the financial
covenants contained in the Senior Indebtedness after giving effect to such
redemption and US $2,000,000 million is available for borrowing by BEC under
such senior indebtedness.
Generally, the shares of Bolle Series A Preferred Stock have no voting
rights. In the event the Company fails to give notice of a redemption within
3 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 Bolle 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 Bolle Series A Preferred Stock
with respect to dividend, redemption or liquidation rights. Shares of Bolle
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 Bolle Series B Preferred Stock, holders of Bolle
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
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<PAGE>
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 Bolle 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 5,500 French Francs ($930 at
the July 10, 1997 exchange rate of 5.9197 used to convert into U.S. dollars
all amounts denominated in French Francs paid by BEC in connection with the
acquisition of Bolle France) per share of Bolle Series B Preferred Stock (the
"Liquidation Preference") plus any accumulated and unpaid dividends thereon.
After payment of the full amount of the liquidation distributions to which
they are entitled, the holders of Bolle 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 Bolle
Series B Preferred Stock, then the holders of Bolle 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 Bolle Series B Preferred Stock will not be convertible or
exchangeable for any other securities of the Company.
The Company may redeem the shares of Bolle 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 Shares a subordinated debt instrument
(the "Subordinated Debt") with substantially the same powers, designations,
preferences and relative, participating, or other rights, and qualifications,
limitations and restrictions as the Bolle 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 Bolle
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 Bolle 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, 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 Bolle 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. The Company shall furthermore use its best efforts
to close an equity financing, including a public offering during 1998.
Generally, the shares of Bolle Series B Preferred Stock have no voting
rights. So long as any shares of Bolle Series B Preferred Stock are
outstanding, the Company shall not, without the consent of holders 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 Bolle 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 Bolle Series B Preferred Stock or redeeming the Bolle Series B
Preferred Stock or Subordinated Debt, as the case may be; or (iv) issue any
class or series of Preferred Stock ranking senior or pari passu with the
Bolle Series B Preferred Stock with respect to dividend, redemption or
liquidation rights. Shares of Bolle Series B Preferred Stock may only be
transferred in strict accordance with applicable law.
The consummation of the Spinoff and the related transactions will not
require the consent of the holders of the outstanding shares of Bolle Series
B Preferred Stock.
WARRANTS
Pursuant to the terms of the Warrant Agreement between the Company and
each of the Sellers, the Company expects to issue Bolle Warrants for the
purchase of up to 800,000 shares of Bolle 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 adjusted to reflect the occurrence of
the Spinoff, subject to certain
56
<PAGE>
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 of
1933 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 Bolle 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 Bolle 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
("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 Securities and Exchange 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.
DIVIDEND POLICY
The Company has not paid any cash dividends on the Bolle Common Stock,
although Bolle America, the Company's predecessor for accounting purposes,
declared and paid dividends in 1994 and 1996. See "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 paying any dividends on the Bolle 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 Company 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 Company and BEC are
currently renegotiating a credit agreement that restricts the Company's
ability to pay cash dividends on shares of Bolle Common Stock. The Company
has received commitments from various lenders party to BEC's existing credit
agreement pursuant to which such lenders have agreed to provide financing to
the Company subject to certain conditions and the execution by the Company of
a definitive credit agreement with such lenders containing covenants usual
and customary for financings of this type. The Company believes that this new
credit agreement, which is expected to be entered into at or prior to the
Effective Time, will contain restrictions on the payment of dividends and
that any other bank revolving credit facility or other 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 Bolle Common Stock, unless certain minimum net
57
<PAGE>
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 Bolle Series B Preferred Stock
with respect to dividends or upon liquidation, including the Series A
Preferred Stock.
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 By-Laws contain provisions to
indemnify the Company's directors and officers to the fullest extent
permitted by the DGCL, including payment inadvance 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."
LISTING
Application has been made to list the Bolle Common Stock on Nasdaq under
the proposed symbol " ."
TRANSFER AGENT AND REGISTRAR
The Transfer Agent and Registrar for the Bolle Common Stock is National
City Bank.
VALIDITY OF SHARES
Certain legal matters with respect to the validity of the Bolle Common
Stock to be distributed in the Spinoff will be passed upon for the Company by
Willkie Farr & Gallagher, New York, New York.
EXPERTS
The consolidated financial statements as of December 31, 1995 and 1996 and
the years then ended included in this Prospectus have been so included in
reliance on the report of Price Waterhouse LLP, independent accountants,
given on the authority of said firm as experts in auditing and accounting.
The statements of operations, stockholders equity and cash flows of Bolle
America, Inc. for the year ended December 31, 1994 have been included herein
in reliance upon the report of KPMG Peat Marwick LLP, independent certified
public accountants, appearing elsewhere herein, and upon the authority of
said firm as experts in accounting and auditing.
58
<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 September 30, 1997.............................. F-3
Unaudited Pro Forma Statement of Operations for the nine months ended
September 30, 1997..................................................................... F-4
Unaudited Pro Forma Statement of Operations for the year ended December 31, 1996........ F-5
Notes to Unaudited Pro Forma Financial Statements....................................... F-6
Annual and Interim Financial Statements
Report of Independent Accountants....................................................... F-8
Independent Auditors' Report............................................................ F-9
Consolidated Balance Sheets as of December 31, 1995 and 1996 and September 30, 1997
(unaudited)............................................................................ F-10
Consolidated Statements of Operations for the years ended December 31, 1994,
1995 and 1996 and the nine months ended September 30, 1996 (unaudited) and 1997
(unaudited)............................................................................ F-11
Consolidated Statements of Stockholders' Equity for the years ended December 31,
1994, 1995 and 1996 and the nine months ended September 30, 1997 (unaudited)........... F-12
Consolidated Statements of Cash Flows for the years ended December 31, 1994,
1995 and 1996 and the nine months ended September 30, 1996 (unaudited) and 1997
(unaudited)............................................................................ F-13
Notes to Consolidated Financial Statements.............................................. F-15
Holding B.F. SA
Annual and Interim Financial Statements
Report of Independent Accountants....................................................... F-26
Combined Balance Sheets as of December 31, 1996, June 30, 1997 and September 30, 1997... F-27
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-28
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-29
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-30
Notes to Combined Financial Statements.................................................. F-31
</TABLE>
F-1
<PAGE>
BOLLE INC.
PRO FORMA COMBINED FINANCIAL STATEMENTS
The following unaudited pro forma combined statements of operations give
effect to the July 10, 1997 acquisition of Holding BF SA and related assets
(the "Acquisition" of "Bolle France") under the purchase method of accounting
and reflect the Bill of Sale and Assignment Agreement (the "Contribution
Agreement") and the Indemnification Agreement between the Company and its
stockholder BEC Group, Inc. ("BEC") described below. The unaudited pro forma
combined balance sheet only gives effect to the Contribution Agreement and
Indemnification Agreement as the effect of Acquisition is included in the
Company's historical balance sheet as of September 30, 1997.
In connection with the spinoff of Bolle Inc. to the stockholders of BEC
(the "Spinoff"), which will occur prior to the closing of the proposed merger
of ILC Technologies, Inc. and BILC Acquisition Corp., (the "Merger") a
wholly-owned subsidiary of BEC, the Company expects that BEC will transfer
certain assets and liabilities to the Company pursuant to the Contribution
Agreement. The spinoff does not require stockholder approval and is not
conditioned upon the closing of the proposed Merger.
Prior to and in connection with the Merger, BEC will use its reasonable
commercial efforts to convert the 8% Convertible Notes due 2002. Accordingly,
on the face of the pro forma statement of operations, 100% conversion has
been assumed to calculate pro forma earnings per share. In note (k) the
calculation of pro forma weighted average shares outstanding is also shown
assuming 50% and 0% conversion.
In accordance with the Contribution Agreement (i) BEC will assign to the
Company all of BEC's assets other than the assets related to the ORC Business
(as defined in the Contribution Agreement) and certain other specified assets
retained by BEC; and (ii) the Company will assume all of BEC's liabilities
prior to the Spinoff other than those related to the ORC Business. In
addition, approximately $18 million of the Company's indebtedness to related
parties will be contributed to the capital of the Company.
The accompanying pro forma combined statements of operations give effect
to the Contribution Agreement and the Acquisition of Bolle France as though
they occurred at the beginning of the periods presented. The pro forma
combined financial statements at September 30, 1997 and December 31, 1996 are
based on the audited historical financial statements of Bolle Inc. ("Bolle
Inc." or the "Company") at December 31, 1996, the unaudited interim financial
statements of Bolle Inc. at September 30, 1997, the Bolle France historical
financial statements at December 31, 1996, June 30, 1997 and September 30,
1997, and the adjustments set forth below.
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 purchase price and completion
of the Contribution Agreement. The unaudited pro forma combined financial
information presented herein is not necessarily indicative of the results of
operations or financial position that BEC would have obtained had such events
occurred at the beginning of the period, as assumed, or of the future results
of the Company.
F-2
<PAGE>
BOLLE INC.
PRO FORMA BALANCE SHEET
AS OF SEPTEMBER 30, 1997
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
BOLLE PRO FORMA PRO FORMA
INC. ADJUSTMENTS COMBINED
--------- -------------- -----------
<S> <C> <C> <C>
ASSETS
Current assets:
Cash & cash equivalents ................... $ 1,525 $ 1,525
Trade receivables, net .................... 10,387 10,387
Trade receivables from related parties .... 1,432 1,432
Inventories, net .......................... 13,317 13,317
Prepaid and other current assets .......... 1,869 1,869
--------- -------------- -----------
Total current assets ..................... 28,530 28,530
Investment in affiliates ................... 10,185 (a1) 10,185
Property and equipment, net ................ 4,835 5,672 (a2) 10,507
Trademark, net ............................. 39,750 39,750
Goodwill and other intangibles, net ....... 9,229 9,229
Other assets ............................... 169 1,000 (a3) 1,169
--------- -------------- -----------
Total assets ............................. $82,513 $ 16,857 $99,370
========= ============== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short term debt ........................... $ 278 $ 145 (a2)$ 423
Accounts payable .......................... 5,093 5,093
Indebtedness to related parties ........... 34,379 $ (17,454) (b) 16,925
Accrued compensation ...................... 1,192 1,192
Accrued commissions and royalties.......... 360 360
Other accrued expenses .................... 3,756 348 (a4) 4,104
--------- -------------- -----------
Total current liabilities ................ 45,058 (16,961) 28,097
Long term debt ............................. 3,428 (a2) 3,428
Long term liabilities ...................... 1,940 1,300 (a4) 3,240
--------- -------------- -----------
Total liabilities ......................... 46,998 (12,233) 34,765
--------- -------------- -----------
Mandatorily redeemable preferred stock ..... 11,055 9,294 (c) 20,349
Stockholders' equity ....................... 24,460 19,796 (d) 44,256
--------- -------------- -----------
Total liabilities and stockholders' equity $82,513 $ 16,857 $99,370
========= ============== ===========
</TABLE>
F-3
<PAGE>
BOLLE INC.
PRO FORMA STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
(1) (2)
BOLLE BOLLE PRO FORMA PRO FORMA
INC. FRANCE ADJUSTMENTS COMBINED
--------- --------- -------------- -----------
<S> <C> <C> <C> <C>
REVENUES:
Net sales ............................ $20,670 $18,656 $(3,060)(e) $36,266
COSTS AND EXPENSES:
Cost of sales ........................ 9,750 11,577 (3,060)(e) 18,267
Selling general and administrative
expenses............................. 10,593 5,258 (179)(f) 16,310
638 (g)
Interest expense (income)............. 516 175 (226)(h) 465
Other income ......................... (803) (359) (1,162)
--------- --------- -------------- -----------
Total costs and expenses ............. 20,056 16,651 (2,827) 33,880
--------- --------- -------------- -----------
Income (loss) from continuing
operations before income taxes ..... 614 2,005 (233) 2,386
Provision for (benefit from) income
taxes ............................... 196 1,193 (88)(i) 1,301
--------- --------- -------------- -----------
Income (loss) from continuing
operations .......................... $ 418 $ 812 $ (145) 1,085
========= ========= ==============
Preferred stock dividends ............ 383 (j)
-----------
Net income from continuing operations
attributable to common stock ........ $ 702
===========
Pro forma shares outstanding.......... 7,408 (k)
Pro forma earnings per share.......... $ 0.09
</TABLE>
- ------------
(1) Represents the results of operations of Bolle Inc. for the nine months
ended September 30, 1997 including the results of operations of Bolle
France for the three months ended September 30, 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 the six months ended
June 30, 1997.
F-4
<PAGE>
BOLLE INC.
PRO FORMA COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
(1)
BOLLE BOLLE PRO FORMA PRO FORMA
INC. FRANCE ADJUSTMENTS COMBINED
--------- --------- --------------- -----------
<S> <C> <C> <C> <C>
REVENUES:
Net sales...................................... $24,425 $48,827 $(12,955)(e) $60,297
COSTS AND EXPENSES:
Costs of sales................................. 12,130 29,965 (12,955)(e) 29,140
Selling general and administrative expenses ... 11,374 11,286 (123)(f) 23,813
1,276 (g)
Interest expense (income)...................... (256) 473 714 (h) 931
Other (income) expense......................... (450) 250 (200)
--------- --------- --------------- -----------
Total costs and expenses....................... 22,798 41,974 (11,088) 53,684
--------- --------- --------------- -----------
Income (loss) from continuing operations
before income taxes........................... 1,627 6,853 (1,867) 6,613
Provision for (benefit from) income taxes ..... 635 1,786 (700)(i) 1,721
--------- --------- --------------- -----------
Income (loss) from continuing operations ..... $ 992 $ 5,067 $ (1,167) 4,892
========= ========= ===============
Preferred stock dividends ..................... 511 (j)
-----------
Net income from continuing operations
attributable to common stock ................. $ 4,381
===========
Pro forma shares outstanding................... 7,408 (k)
Pro forma earnings per share................... $ 0.59
</TABLE>
- ------------
(1) Represents the statement of operations of Bolle France translated using
the average rate of 5.1138 French Francs per US Dollar for the year
ended December 31, 1996.
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) The following pro forma adjustments give effect to the Bill of Sale
and Assignment Agreement between BEC Group and the Company. In
accordance with the agreement, the following assets and liabilities
are being assigned to Bolle Inc. prior to the Spin-off. The pro forma
adjustments represent BEC Group's book value of the following items as
of September 30, 1997:
1. Equity in and notes receivable from affiliated companies consisting
of BEC Group's 23% interest in Eyecare Products plc ($9,534) which is
accounted for by the equity method and its investment in Superior
Vision Services, Inc. and related note receivable ($651) which are
accounted for by the cost method.
2. The Foster Grant building and related indebtedness.
3. The Preferred Stock in Accessories Associates, Inc.
4. Retained liabilities relating to BEC's sale of the Foster Grant
Group ($654) and the Prescription Eyewear Business ($994) in 1996.
Such liabilities represent estimates of amounts to be paid in
conjunction with the indemnification provisions of these sales
agreements.
(b) Adjustment to reflect the reduction of indebtedness to BEC offset by
new indebtedness pursuant to a credit facility.
(c) Adjustment to reflect the issuance of Bolle Inc. Preferred Stock in
exchange for the cancellation of the BEC Preferred Stock issued as
part of the consideration for the purchase of Bolle France.
(d) Adjustment to reflect net effect of above adjustments on the equity of
the Company.
PRO FORMA COMBINED INCOME STATEMENT ADJUSTMENTS
(e) Adjustment to reflect elimination of sales from Bolle France to Bolle
America translated at the same exchange rate used to translate the
statement of operations.
(f) Adjustment to reflect the elimination of Acquisition related expenses
at Bolle France.
(g) Adjustment to reflect the amortization of the goodwill and trademark
value ($48,642) recorded over an estimated useful life of 40 years
($1,216 per annum) and the adjustment to the value of the buildings
($1,824) over an estimated useful life of 30 years ($60 per annum).
Including these adjustments, the total depreciation and amortization
for the year ended December 31, 1996 increased from $1,263
historically to $2,503 on a pro forma combined basis.
(h) Adjustment necessary to reflect combined interest expense on the
$16,925 of debt expected to be outstanding following the Spinoff. See
Note (b). Interest is assumed at 5.5% per annum based on BEC's current
average French Franc borrowing rate. The effect on annual pre-tax
income from a 1/8% variance in the interest rate would be $21.
(i) Adjustment to reflect the statutory tax rate of 37.9% in 1997 and
37.5% in 1996 applied to the pro forma adjustments.
F-6
<PAGE>
(j) Adjustment to reflect dividend of 5.5% on the Series B Preferred
Stock.
(k) Pro forma shares outstanding is calculated as follows:
<TABLE>
<CAPTION>
100% 50% 0%
-------- -------- --------
<S> <C> <C> <C>
Shares outstanding at BEC Group, Inc. at September 30, 1997 . 17,631 17,631 17,631
Shares to be issued to minority shareholders of Bolle Inc. . 939 939 939
Conversion of principal amount of convertible debt of 100%,
50% and 0% ................................................. 3,655 1,828 0
-------- -------- --------
Subtotal-before issuance of one Company share for every
three BEC shares ........................................... 22,225 20,398 18,570
-------- -------- --------
Pro forma Company shares outstanding at September 30, 1997 . 7,408 6,799 6,190
======== ======== ========
Pro forma combined earnings per share:
For the nine months ended September 30, 1997................ $ 0.09 $ 0.10 $ 0.11
For the year ended December 31, 1996........................ $ 0.59 $ 0.64 $ 0.71
</TABLE>
F-7
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
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 stockholders' equity and of
cash flows present fairly, in all material respects, the financial position
of Bolle Inc. and its subsidiaries at December 31, 1995 and 1996, and the
results of their operations and their cash flows for the years then ended 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. The financial statements of
Bolle America, Inc. for the year ended December 31, 1994 were audited by
other independent accountants whose report dated January 20, 1995 expressed
an unqualified opinion on those statements.
PRICE WATERHOUSE LLP
Dallas, Texas
March 10, 1997
F-8
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
Bolle America, Inc.:
We have audited the accompanying statements of operations, stockholders'
equity, and cash flows of Bolle America, Inc. for the year ended December 31,
1994. 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 audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the results of operations and cash flows of Bolle
America, Inc. for the year ended December 31, 1994, in conformity with
generally accepted accounting principles.
KPMG Peat Marwick LLP
Denver, Colorado
January 20, 1995
F-9
<PAGE>
BOLLE INC.
CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31, 1995 AND 1996 AND SEPTEMBER 30, 1997 (UNAUDITED)
(AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
-------------------- ---------------
1995 1996 1997
--------- --------- ---------------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents .............................. $ 349 $ 311 $ 1,525
Trade receivables, less allowances of $400, $445 and
$698 .................................................. 5,690 4,895 10,387
Trade receivables from related parties ................. 1,432
Receivable from BEC, net ............................... 864
Inventories, net ....................................... 6,918 8,388 13,317
Prepaid and other current assets ....................... 1,113 822 1,869
--------- --------- ---------------
Total current assets ................................. 14,934 14,416 28,530
Property and equipment, net ............................. 509 534 4,835
Trademark ............................................... 39,750
Goodwill and other intangible assets, net ............... 815 646 9,229
Other assets ............................................ 51 28 169
--------- --------- ---------------
Total assets ......................................... $16,309 $15,624 $82,513
========= ========= ===============
LIABILITIES AND EQUITY
Current liabilities:
Short-term debt ........................................ $ 22 $ $ 278
Accounts payable ....................................... 2,353 3,488 5,093
Indebtedness to related parties ........................ 1,420 34,379
Accrued compensation ................................... 278 146 1,192
Accrued commissions and royalties ...................... 536 424 360
Other accrued expenses ................................. 350 403 3,756
--------- --------- ---------------
Total current liabilities ............................ 3,539 5,881 45,058
Other long-term liabilities ............................. 1,940
--------- --------- ---------------
Total liabilities .................................... 3,539 5,881 46,998
--------- --------- ---------------
Commitments and contingencies
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 .............................. 12,770 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 ...................... 82
Retained earnings ...................................... 418
--------- --------- ---------------
Total stockholders' equity ........................... 12,770 9,743 24,460
--------- --------- ---------------
Total liabilities and stockholders' equity .......... $16,309 $15,624 $82,513
========= ========= ===============
</TABLE>
See Note 1 for basis of presentation.
See accompanying notes to consolidated financial statements.
F-10
<PAGE>
BOLLE INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996 AND THE
NINE MONTHS ENDED SEPTEMBER 30, 1996 (UNAUDITED) AND 1997 (UNAUDITED)
(AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
(UNAUDITED)
FOR THE NINE MONTHS
FOR THE YEAR ENDED DECEMBER 31, ENDED SEPTEMBER 30,
--------------------------------------------------------
1994 1995 1996 1996 1997
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Net sales ........................ $23,094 $24,829 $24,425 $19,816 $20,670
Costs and expenses:
Costs of sales .................. 10,814 12,181 12,130 9,617 9,750
Selling, general and
administrative expenses ........ 6,987 7,610 8,105 6,338 7,686
Advertising and sponsoring
expenses ....................... 1,884 2,665 3,269 2,507 2,907
Merger related expenses ......... 3,050
Interest (income)/expense ...... 316 (302) (256) (217) 516
Other (income)/expense, net .... (104) 48 (450) (909) (803)
---------- ---------- ---------- ---------- ----------
Total costs and expenses ..... 19,897 25,252 22,798 17,336 20,056
---------- ---------- ---------- ---------- ----------
Income (loss) before income
taxes............................ 3,197 (423) 1,627 2,480 614
Provision for income taxes ..... 1,260 364 635 967 196
---------- ---------- ---------- ---------- ----------
Net income (loss) ................ $ 1,937 $ (787) $ 992 $ 1,513 $ 418
========== ========== ========== ========== ==========
</TABLE>
See Note 1 for basis of presentation.
See accompanying notes to consolidated financial statements.
F-11
<PAGE>
BOLLE INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996 AND THE
NINE MONTHS ENDED SEPTEMBER 30, 1997 (UNAUDITED)
(AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
COMMON STOCK
-----------------
ADDITIONAL RETAINED CUMULATIVE
PAR PAID-IN EARNINGS TRANSACTION TOTAL
SHARES VALUE CAPITAL (DEFICIT) ADJUSTMENT EQUITY
-------- ------- ------------ ---------- ------------- ---------
<S> <C> <C> <C> <C> <C> <C>
BALANCE--DECEMBER 31, 1993 ..... $ 1,585
1994:
NET PROCEEDS FROM INITIAL PUBLIC
OFFERING ....................... 9,961
DIVIDEND TO STOCKHOLDERS ...... (50)
NET INCOME ..................... 1,937
---------
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 BEC ................ (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
NET INCOME--6 MONTHS ENDED JUNE
30, 1997 ....................... $ 82 82
- -----------------------------------------------------------------------------------------------------
COMMON STOCK ISSUED IN
CONNECTION WITH BOLLE FRANCE
ACQUISITION .................... 100 -- 3,302 3,302
NET INCOME--3 MONTHS ENDED
SEPTEMBER 30, 1997 ............. 336 336
CUMULATIVE TRANSLATION
ADJUSTMENT ..................... $82 82
-------- ------- ------------ ---------- ------------- ---------
BALANCE--SEPTEMBER 30, 1997
(UNAUDITED)..................... 2,000 -- $23,960 $418 $82 $24,460
======== ======= ============ ========== ============= =========
</TABLE>
See Note 1 for basis of presentation.
See accompanying notes to consolidated financial statements.
F-12
<PAGE>
BOLLE INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996 AND THE
NINE MONTHS ENDED SEPTEMBER 30, 1996 (UNAUDITED) AND 1997 (UNAUDITED)
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
(UNAUDITED)
FOR THE NINE MONTHS
FOR THE YEAR ENDED DECEMBER 31, ENDED SEPTEMBER 30,
-----------------------------------------------------
1994 1995 1996 1996 1997
--------- ---------- --------- --------- ----------
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) .................................. $ 1,937 $ (787) $ 992 $ 1,513 $ 418
Adjustments to reconcile income (loss) to net cash
provided (used) by operating activities:
Special charges and merger related expenses, net
of payments ........................................ 99
Depreciation and amortization ..................... 199 254 386 275 853
Bad debt expense .................................. 40 183 73 173 215
Loss (gain) on sale of property and equipment .... 3 1 45
Changes in current assets and liabilities (net of
effect of companies acquired):
Accounts receivable ............................... (1,143) (203) 821 1,326 1,663
Receivables from related parties .................. 736 (736) 556
Inventories ....................................... (714) (2,063) (1,470) 35 (424)
Other assets ...................................... (224) (528) 291 (163) (1,106)
Accounts payable .................................. (415) (323) 1,135 (559) (3,803)
Accrued expenses and other ........................ 572 (176) (191) (87) (254)
--------- ---------- --------- --------- ----------
Net cash provided (used) by operating
activities ...................................... 255 (2,808) 1,302 2,513 (1,837)
Cash flows from investing activities:
Cash expended in acquisitions, net of cash
received ......................................... (33,375)
Capital expenditures .............................. (344) (131) (319) (233) (432)
Proceeds from sale of fixed assets ................ 14 2 35
Non-compete agreement and intangible assets ...... (815) (2) (75)
--------- ---------- --------- --------- ----------
Net cash used by investing activities ............ (330) (946) (319) (233) (33,847)
Cash flows from financing activities:
Proceeds (payments) from long-term obligations .... 323 (78) (21) (21)
Payment on short-term obligations ................. (565) (13)
Payment on revolving credit line .................. (3,843)
Proceeds (payments) on indebtedness to related
parties .......................................... (1,600) (1,000) (1,845) 36,915
Proceeds from issuance of common stock ............ 9,961 (21)
Cash dividends to stockholders .................... (50)
--------- ---------- --------- --------- ----------
Net cash provided (used) by financing
activities ...................................... 5,826 (1,699) (1,021) (1,866) 36,902
Effect on cash of changes in foreign exchange rates (4)
--------- ---------- --------- --------- ----------
Net increase (decrease) in cash ..................... $ 5,751 $(5,453) $ (38) $ 414 $ 1,214
========= ========== ========= ========= ==========
Cash and cash equivalents at beginning of period ... 51 5,802 349 349 311
Cash and cash equivalents at end of period ......... $ 5,802 $ 349 $ 311 $ 763 $ 1,525
Supplemental disclosures of cash flow information:
Interest paid .................................... $ 318 $ 42 $ 5 $ 5 $ 12
Income taxes paid ................................ $ 1,232 * * * $ 1,618
</TABLE>
- ------------
* Income taxes were paid by BEC on behalf of the Company for the years
ended December 31, 1995 and 1996 and the nine months ended September
30, 1996 (unaudited) as it has been part of the BEC U.S. tax group
since 1995. In 1994, the Company was a stand alone tax filer. In
1997, only domestic income taxes were paid by BEC on behalf of the
Company. Accordingly, the income taxes paid by the Company in 1997
represent foreign income taxes.
F-13
<PAGE>
Noncash transactions:
There were no non-cash transactions during the years ended December 31,
1994 and 1995 or during the nine month period ended September 30, 1996.
1996
o During the fourth quarter of 1996, Bolle America forgave the repayment
of a $4,019 advance made to BEC during the year. The forgiveness of the
advance was characterized as a dividend in 1996.
1997
o The acquisition of Bolle France discussed in Note 2 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:
<TABLE>
<CAPTION>
<S> <C>
Cash ..................................... $ 1,294
Accounts receivable ...................... 9,441
Inventories .............................. 6,167
Other current assets...................... 388
Property and equipment ................... 3,949
Goodwill ................................. 8,642
Trademark ................................ 40,000
Other assets ............................. 181
Short-term debt .......................... (175)
Accounts payable and accrued liabilities (9,756)
Other long-term liabilities .............. (1,896)
---------
Net assets acquired .................... $58,235
=========
</TABLE>
F-14
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except per share data, unless otherwise noted)
NOTE 1 -- GENERAL INFORMATION, BUSINESS AND BASIS OF PRESENTATION
General Information
Bolle Inc. (the "Company") is a subsidiary of BEC Group, Inc. ("BEC"), a
Delaware corporation. The Company was organized on February 3, 1997 to effect
the July 1997 acquisition by BEC 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 BEC in November
1995 in a transaction accounted for as a pooling of interests.
The Company and BEC expects to enter into a management services agreement
(the "Management Agreement") pursuant to which BEC will provide key
management services to the Company for an initial term of three years, and
thereafter is automatically renewed for successive one-year periods until
terminated by either party upon no later than 90 days prior to the expiration
of the initial term, or any renewal term then in effect.
Business
Bolle Inc. manufactures, markets, imports and distributes sunglasses,
safety goggles, sport shields and ski goggles. 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 BEC at the time the Company
was formed. The net assets of Bolle America were contributed to the Company
by BEC 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, Bolle America prior to the acquisition of Bolle
France. The results of operations of Bolle France are included beginning on
July 9, 1997, (the closing date of the Bolle France acquisition described in
Note 2 below).
For the periods subsequent to the acquisition of Bolle America by BEC,
certain revenues and expenses reflected in the financial statements include
allocations of certain corporate expenses from BEC. These allocations include
income from BEC's investment in Eyecare Products Plc, as well as expenses for
general management, treasury, legal, tax, financial reporting and auditing,
insurance, investor and public relations and information management which
were allocated 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.
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.
Interim Financial Information
The financial statements for the nine months ended September 30, 1996 and
1997 are unaudited but include all adjustments (consisting of normal
recurring adjustments) that the Company considers
F-15
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
(Amounts in thousands, except per share data, unless otherwise noted)
necessary for a fair presentation. Operating results for the nine months
ended September 30, 1997 are not necessarily indicative of the results that
may be expected for the year ending December 31, 1997. Financial disclosures
herein relating to matters subsequent to March 10, 1997 are unaudited.
NOTE 2 -- ACQUISITIONS
On July 9, 1997, the Company acquired, in a transaction accounted for as a
purchase, all of the shares of Bolle France which included Bolle France and
several consolidated and unconsolidated subsidiaries, for a total purchase
price of approximately $58,235, comprised of cash of $31,000, BEC Series A
preferred stock of $9,294, Company 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
preliminary allocation of purchase price is as follows:
<TABLE>
<CAPTION>
<S> <C>
Current assets ......... $17,290
Property and equipment 3,949
Goodwill ............... 8,642
Trademarks ............. 40,000
Other assets ........... 181
Current liabilities ... (9,931)
Long term liabilities . (1,896)
---------
$58,235
=========
</TABLE>
The Company determined that net book value approximated fair value for
current assets, other assets, current liabilities and other liabilities,
except for the costs and liabilities related to the legal, tax and
operational reorganization totaling $1,750 recorded as part of purchase
accounting.
The land included in property and equipment was purchased as part of a
separate contract, therefore its specific purchase price of $422 is included
as its fair value in property and equipment. The 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) trademark was valued at $40,000. The remainder of
the excess of purchase price over book value of $8,642 was allocated to
goodwill. The trademark and goodwill are being amortized over 40 years (Note
4).
Management does not expect material changes to the purchase accounting
upon final allocation of the purchase price which will occur by July 10,
1998.
NOTE 3 -- MERGER RELATED EXPENSES
Merger related expenses represent $3.1 million of transaction costs
associated with the pooling of interests between BEC and Bolle America
discussed in Note 1.
NOTE 4 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The consolidated financial statements include the accounts of the Company
and its majority-owned subsidiaries unless control indicates otherwise.
Investments in less than 50% owned affiliates and certain greater than 50%
owned affiliates are accounted for by the equity method. Investments in less
than 20% owned affiliates are accounted for by the cost method (Note 8). All
significant intercompany transactions, profits and accounts have been
eliminated in consolidation.
F-16
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
(Amounts in thousands, except per share data, unless otherwise noted)
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 or delivery of
products 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 in over thirty 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 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.
For the years ended December 31, 1995 and 1996 and the nine months ended
September 30, 1996 (unaudited), the Company had sales to a specific customer
located in the United States that represented 14%, 11% and 15% of their net
sales. For the year ended December 31, 1994 and the nine months ended
September 30, 1997 (unaudited), 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. 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 material, 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.
F-17
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
(Amounts in thousands, except per share data, unless otherwise noted)
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 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, 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 material 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.
Pro forma earnings per share
Due to the subsequent events described in Note 16 and their effect on the
capitalization of the company, pro forma earnings per share have not been
presented herein as they are not considered meaningful.
New Accounting Pronouncements
Statement of Financial Accounting Standards ("SFAS") No. 128, "Earnings
per Share" establishes specific guidelines for publicly held companies for
the computation, presentation, and disclosure requirements of earnings per
share. The statement is effective for all periods ending after December 15,
1997 and restatement will be required for all prior-period EPS data
presented. The application of SFAS 128 to the Company's computation of
earnings per share does not affect the pro forma earnings per share amounts
reported for the year ended December 31, 1996 or the nine months ended
September 30, 1997. The Company plans to adopt SFAS No. 128 in its financial
statements for the year ended December 31, 1997.
F-18
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
(Amounts in thousands, except per share data, unless otherwise noted)
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 will be 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 ending after December 15, 1997 and
reclassification of financial statements for earlier periods presented will
be required for comparative purposes. The Company plans to adopt 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 ending after December 15, 1997. Although the Company presently
reports as one operating segment and expects to continue to do so, the
materiality considerations set forth in SFAS No. 131 will be monitored to
assure compliance with this statement for the year ended December 31, 1997.
Pensions and post retirement indemnity
The employees of Bolle America currently participate in a 401(k) Savings
plan administered by BEC. No pension, post-retirement or other benefit
arrangements have been established by Bolle, Inc.
A provision 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.
Reclassifications
Certain amounts in the 1994, 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
reporting period. Actual results could differ from these estimates.
Fair Value
At 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.
F-19
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
(Amounts in thousands, except per share data, unless otherwise noted)
NOTE 5 -- INVENTORIES
Inventories consist of the following at:
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
------------------ ---------------
1995 1996 1997
-------- -------- ---------------
(UNAUDITED)
<S> <C> <C> <C>
Raw materials ... $ $ $ 1,759
Work in
progress........ 3,409
Finished goods .. 7,077 8,635 10,484
Less: reserve ... (159) (247) (2,335)
-------- -------- ---------------
$6,918 $8,388 $13,317
======== ======== ===============
</TABLE>
NOTE 6 -- PROPERTY AND EQUIPMENT
Property and equipment consists of the following at:
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
---------------- ---------------
1995 1996 1997
------- ------- ---------------
(UNAUDITED)
<S> <C> <C> <C>
Land ........................... $ $ $ 423
Buildings ...................... 2,233
Machinery and equipment ........ 397 369 1,814
Computer hardware and software 413 593 582
Furniture and fixtures ......... 95 98 534
Leasehold improvements.......... 5 5
------- ------- ---------------
910 1,065 5,586
Less: accumulated depreciation (401) (531) (751)
------- ------- ---------------
$ 509 $ 534 $4,835
======= ======= ===============
</TABLE>
Depreciation expense for the years ended December 31, 1994, 1995 and 1996
and the nine months ended September 30, 1996 (unaudited) and 1997 (unaudited)
was $166, $172, $216, $147 and $406, respectively.
The minimum future rental expense for property and buildings under lease
is as follows:
<TABLE>
<CAPTION>
<S> <C>
1998 ........... 67
Thereafter ..... --
</TABLE>
NOTE 7 -- TRADEMARK, GOODWILL AND OTHER INTANGIBLE ASSETS
Trademark, goodwill and other intangible assets and related accumulated
amortization consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
--------------- ---------------
1995 1996 1997
------ ------- ---------------
(UNAUDITED)
<S> <C> <C> <C>
Trademark ............................ $ $ $40,000
Goodwill ............................. 8,655
Non-compete agreement ................ 800 800 800
Other identifiable intangible assets 15 16 139
------ ------- ---------------
815 816 49,594
Less accumulated amortization ....... (170) (615)
------ ------- ---------------
$815 $ 646 $48,979
====== ======= ===============
</TABLE>
F-20
<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 and will pay $100 per
year from January 1, 1997 to 2005.
Amortization expense for the years ended December 31, 1994, 1995 and 1996
and the nine month periods ended September 30, 1996 (unaudited) and 1997
(unaudited) was $33, $82, $170, $128 and $447, respectively.
NOTE 8 -- EQUITY IN AFFILIATED COMPANIES
The Company sells its products to three related party distributors, Bolle
Sunglasses UK, Bolle Japan and Bolle Canada, which are owned 51%, 30%, and
51%, respectively. All investments are accounted for under the equity method
of accounting. Bolle Sunglasses UK and Bolle Canada are accounted for under
the equity method because the businesses are managed and operated by the
minority owners. The Company's equity in the net assets of these entities of
approximately $75 is considered immaterial.
NOTE 9 -- INTERCOMPANY CREDIT ARRANGEMENT
During the years ended December 31, 1995, 1996 and the nine months ended
September 30, 1996 (unaudited) and 1997 (unaudited), Bolle America was party
to a revolving intercompany credit arrangement with BEC 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 arrangement includes assignment to the
Company upon change of control. The debt incurred to finance the cash portion
of the consideration has been pushed down to Bolle Inc. under this
arrangement.
NOTE 10 -- 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
Spinoff of the Company, Bolle Inc. will file its consolidated tax return
separate from BEC.
Income before provision for income taxes consists of the following for the
periods ended:
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
--------------------------- -----------------
1994 1995 1996 1996 1997
-------- -------- -------- -------- -------
<S> <C> <C> <C> <C> <C>
U.S....... $3,197 $(423) $1,627 $2,480 $(57)
Foreign... 671
-------- -------- -------- -------- -------
$3,197 $(423) $1,627 $2,480 $614
======== ======== ======== ======== =======
</TABLE>
F-21
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
(Amounts in thousands, except per share data, unless otherwise noted)
The provision for income taxes consists of the following for the periods
ended:
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
------------------------ ---------------
1994 1995 1996 1996 1997
-------- ------- ------ ------ -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
UNITED STATES
Current:
Federal ................. $1,095 $ 616 $542 $817 (212)
State and local ......... 182 103 81 136 (34)
Deferred ................. (17) (355) 12 14 245
-------- ------- ------ ------ -------
1,260 364 635 967 (1)
FOREIGN
Deferred.................. 197
-------- ------- ------ ------ -------
Total provision for
income
taxes .................. $1,260 $ 364 $635 $967 $ 196
======== ======= ====== ====== =======
</TABLE>
The Company's effective tax rates differ from the Federal statutory rate
as follows:
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
-------------------------- -----------------
1994 1995 1996 1996 1997
------- --------- ------- ------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Expected tax (benefit) at statutory
rate .............................. 34.0% (34.0)% 34.0% 34.0% 34.0%
State income taxes (benefit) ....... 3.8% 16.1% 3.5% 3.5% (4.2)%
Non-deductible and merger related
expenses .......................... 104.0% 2.9%
Foreign rate differential........... 5.1%
Other, net ......................... 1.6% 1.5% 1.5% (5.8)%
------- --------- ------- ------- --------
39.4% 86.1% 39.0% 39.0% 32.0%
======= ========= ======= ======= ========
</TABLE>
Significant components of deferred income taxes are as follows for the
periods ended:
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
-------------- ---------------
1995 1996 1997
------ ------ ---------------
<S> <C> <C> <C>
Current deferred tax assets:
Accounts receivable.................... $150 $168 $ 66
Non qualified stock options............ 54 54 54
Inventories............................ 116 129 231
Accrued expenses....................... 114 83 65
------ ------ ---------------
Total current deferred tax assets .... 434 434 416
------ ------ ---------------
Non-current deferred tax assets:
Intangibles............................ 30 12 4
Pension liability...................... 63
Fixed assets........................... 6 9
------ ------ ---------------
Total non-current deferred tax
assets................................ 30 18 76
------ ------ ---------------
Gross deferred tax asset............. 464 452 492
------ ------ ---------------
Current deferred liabilities:
Other liabilities...................... (2,071)
------ ------ ---------------
Gross deferred tax liability.......... (2,071)
------ ------ ---------------
Net deferred tax asset (liability) .. $464 $452 $(1,579)
====== ====== ===============
</TABLE>
F-22
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
(Amounts in thousands, except per share data, unless otherwise noted)
No valuation allowance has been established against deferred tax assets
as realization is considered to be more likely than not. Current deferred tax
assets of $434, $434 and $416 are included in "Prepaid and other current
assets" at December 31, 1995 and 1996 and September 30, 1997 respectively.
Non-current deferred tax assets of $30, $18 and $76 are included in "Other
assets" at December 31, 1995 and 1996 and September 30, 1997, respectively.
Current deferred liabilities of $2,071 are included in "Other accrued
expenses" at September 30, 1997.
NOTE 11 -- MANDATORILY REDEEMABLE PREFERRED STOCK
In connection with the acquisition of Bolle France described in Note 2,
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 existing BEC senior debt. 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 BEC remains in compliance with the
financial covenants contained in any senior indebtedness in effect as of June
4, 1997 after giving effect to such redemption and $2,000 is available for
borrowing by BEC under such senior indebtedness.
NOTE 12 -- STOCK OPTION PLANS
Certain employees of the Company currently participate in the BEC stock
incentive plan. Such options are exercisable into common stock of BEC. The
Company plans to adopt separate stock option and incentive plans during the
fourth quarter of 1997.
NOTE 13 -- RELATED PARTY TRANSACTIONS
Prior to the planned spin off (see Note 16); the Company will enter into a
Management Services Agreement with BEC pursuant to which BEC will provide key
management services to the Company. The Management Services Agreement has an
initial term of three years, and thereafter is automatically renewed for
successive one-year periods until terminated by either party upon ninety days
written notice. During the initial term of the Management Services Agreement,
the Company will pay BEC $720 per year for such services.
With the acquisition of Bolle France, the Company has transactions with
related parties (BEC, Bolle Sunglasses UK, Bolle Japan and Bolle Canada), for
which transactions and balances have been disclosed under the captions
"Receivables from BEC, net," "Trade receivables from related parties" and
"Indebtedness to related parties." Such transactions are realized at
conditions equivalent to those prevailing for unrelated parties.
NOTE 14 -- 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 15 -- GEOGRAPHIC INFORMATION
The Company operates in one principal industry segment: the manufacture,
marketing and distribution of sunglasses, safety goggles, sport shields and
ski goggles. 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.
F-23
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
(Amounts in thousands, except per share data, unless otherwise noted)
Geographic information is as follows:
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
------------------------------ --------------------
1994 1995 1996 1996 1997
--------- --------- --------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net sales to unaffiliated customers:
United States ...................... $23,094 $24,829 $24,425 $19,816 $14,896
Europe ............................. 5,774
--------- --------- --------- --------- ---------
Total net sales ..................... $23,094 $24,829 $24,425 $19,816 $20,670
========= ========= ========= ========= =========
(Transfers between geographic areas
eliminated in consolidation):
United States ...................... $ $ $ $ $
Europe ............................. 2,870
--------- --------- --------- --------- ---------
Total transfers ..................... $ -- $ -- $ -- $ -- $ 2,870
========= ========= ========= ========= =========
Income (loss) before income taxes:
United States ...................... $ 3,409 $ 2,373 $ 921 $ 1,353 $ 2,222
Europe ............................. (1,895)
Interest, merger related expenses
and other income, net ............. (212) (2,796) 706 1,127 287
--------- --------- --------- --------- ---------
Total income (loss) before income
taxes .............................. $ 3,197 $ (423) $ 1,627 $ 2,480 $ 614
========= ========= ========= ========= =========
Identifiable assets:
United States ...................... $17,549 $16,309 $15,624 $13,795 $13,353
Europe ............................. 72,966
Corporate assets ................... (56)
--------- --------- --------- --------- ---------
Total identifiable assets ........... $17,549 $16,309 $15,624 $13,795 $86,263
========= ========= ========= ========= =========
</TABLE>
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 related expenses, interest and other income, net. Identifiable assets
of geographic areas are those assets used in the Company's operations in each
area.
NOTE 16 -- SUBSEQUENT EVENTS
On October 31, 1997, BEC announced its intent to spin off the Company to
BEC's shareholders (the "Spinoff"). Application will be made to list the spun
off Bolle Common Stock on the Nasdaq National Market.
In connection with the Spinoff, the Company expects that, pursuant to a
Bill of Sale and Assignment Agreement to be entered into between BEC and the
Company prior to the consummation of the Spinoff (the "Contribution
Agreement"), (i) BEC will assign to the Company all of BEC's assets other
than assets related to the ORC Business (as defined in the Contribution
Agreement) and certain other specified assets retained by BEC; and (ii) the
Company will assume all of BEC'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 will be
contributed to the capital of the Company and the remaining balance will be
refinanced via a bank credit facility.
F-24
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
(Amounts in thousands, except per share data, unless otherwise noted)
In connection with the Spinoff, it is expected that the Company will
agree at or prior to the Spinoff to assume all obligations and liabilities of
BEC 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 BEC in connection with the purchase of Bolle
France and BEC will then be released from all such obligations or
liabilities. In addition, it is expected that, at or prior to the Spinoff,
each Seller will convey to the Company all shares of Series A Preferred Stock
of BEC (the "BEC Preferred Stock") held by such Seller and the Company will
issue 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
BEC Preferred Stock conveyed by such Seller to the Company. No shares of
Bolle Common Stock will be issued to the holders of outstanding shares of
Bolle Series B Preferred Stock pursuant to the Spinoff. BEC will cancel all
warrants (the "BEC Warrants") to purchase 2,130,000 shares of BEC Common
Stock and the Company will issue in exchange to each holder of canceled BEC
Warrants, warrants to purchase Bolle Common Stock (the "Bolle Warrants") in
proportion to the number of BEC Warrants held by such holder prior to the
cancellation. No shares of Bolle Common Stock will be issued to holders of
outstanding Bolle Warrants pursuant to the Spinoff.
F-25
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
November 26, 1997
To the Board of Directors and
Shareholders of Holdings 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-26
<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 ..................... FF17,884 FF7,610 FF8,115
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 ................................. FF126,458 FF115,247 FF409,096
============= ============ ===============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short term debt................................ FF11,886 FF1,032 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 ... FF126,458 FF115,247 FF409,096
============= ============ ===============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-27
<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>
SIX MONTHS THREE MONTHS
YEAR ENDED ENDED ENDED
DECEMBER 31, JUNE 30, SEPTEMBER 30,
1996 1997 1997
-------------- ------------ ---------------
<S> <C> <C> <C>
Net sales:
Sales to Bolle America............................. FF66,251 FF17,391 FF17,461
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 ........................................ FF17,663 FF4,351 FF1,952
============== ============ ===============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-28
<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 FF16,500 FF14,568 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 FF53,600 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 FF53,600 FF1,952 FF 259 FF81,058 FF136,869
======== =========== =========== ============= ============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-29
<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 ...................................... FF17,663 FF4,351 FF1,952
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 ...... FF17,884 FF7,610 FF8,115
============== ============ ===============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-30
<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.
Revenue Recognition
Revenue is recognized upon shipment or delivery of products with estimates
provided for returns based on management estimates.
F-31
<PAGE>
HOLDING BF S.A. AND SUBSIDIARIES
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
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-32
<PAGE>
HOLDING BF S.A. AND SUBSIDIARIES
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
Other property and equipment are recorded at fair value and depreciated
over their estimated useful life calculated, on a straight-line method (see
below):
<TABLE>
<CAPTION>
<S> <C>
Fittings and fixtures ..... 5 years
Machinery and equipment .... 7-10 years
Motor vehicles.............. 5 years
Office furniture............ 3-5 years
</TABLE>
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-33
<PAGE>
HOLDING BF S.A. AND SUBSIDIARIES
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
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(Registered Trademark) 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-34
<PAGE>
HOLDING BF S.A. AND SUBSIDIARIES
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
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)
-------------- ----------- ---------------
FF11,038 FF12,498 FF26,180
============== =========== ===============
</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.
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>
F-35
<PAGE>
HOLDING BF S.A. AND SUBSIDIARIES
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
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>
Significant components of deferred income taxes are as follows:
<TABLE>
<CAPTION>
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.
F-36
<PAGE>
HOLDING BF S.A. AND SUBSIDIARIES
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 8 -- MINORITY INTERESTS
<TABLE>
<CAPTION>
<S> <C>
Minority interests at December 31, 1995 ......................... FF13,393
Minority interest in net income of consolidated subsidiaries ... 8,250
Dividends paid to minority shareholders ......................... (9,823)
-------------
Minority interests at December 31, 1996 ......................... FF11,820
=============
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-37
<PAGE>
PART II
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 Bolle 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.
<TABLE>
<CAPTION>
<S> <C>
Securities and Exchange Commission Registration Fee $ 7,412.12
Nasdaq National Market Listing Fee .................. 35,000.00
Printing and Engraving Costs ........................ 150,000
Accounting Fees and Expenses ........................ 225,000
Legal Fees and Expenses ............................. 300,000
Transfer Agent and Registrar Fees ................... 10,000
Miscellaneous ....................................... 100,000
------------
Total ............................................. $827,412.12
============
</TABLE>
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.
II-1
<PAGE>
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 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 BEC
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 BEC 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 shares at the time of issuance was $11,055,000.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
<TABLE>
<CAPTION>
<S> <C>
(a) Exhibits:
3.1 Form of Amended and Restated Certificate of Incorporation
3.2 Form of Certificate of Designations of the Series B Preferred Stock
3.3 Form of Amended and Restated Bylaws
4.1 Specimen of Stock Certificate
4.2 Amended and Restated Share Purchase Agreement dated July 9, 1997
among BEC Group, Inc. ("BEC") 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
II-2
<PAGE>
4.4 Form of Letter Agreement dated , 1998 by and among Martin E.
Franklin and each of the Sellers
4.5 Form of Warrant Agreement dated , 1998 among the Company and
each of the Sellers
4.6 Form of 1998 Stock Incentive Plan
*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
10.2 Employment Agreement dated July 9, 1997 between Societe Bolle SNC
and Franck Bolle (English translation)
10.3 Employment Agreement dated July 9, 1997 between Societe Bolle SNC
and Patricia Bolle Passaquay (English translation)
+10.4 Agreement dated September 20, 1995 between the Company and Steve N.
Haber
10.5 Form of Management Services Agreement between the Company and BEC
10.6 Form of Bill of Sale and Assignment Agreement dated as of October
1, 1997 between BEC and the Company
10.7 Form of Indemnification Agreement dated as of , 1997 by and among
BEC, BILC Acquisition Corp. and the Company
10.8 Exclusive Customer Agreement dated as of October 23, 1997 by and
between the Company and Alyn Corporation
10.9 Letter of Intent between the Company and Bill Bass Optical Pty Ltd.
dated January 6, 1998
10.10 Loan Agreement by and among BEC (as assignee) and First Interstate
Bank of Texas, N.A., relating to the real property located in
Dallas, Texas. Incorporated by reference to Exhibit 10.24 to Benson
Eyecare Corporation's Annual Report on Form 10-K for the year ended
December 31, 1995 (Commission File No. 1-9435).
10.11 First Amendment to Loan Agreement (see Exhibit 10.8 above) and
Other Loan Documents, dated May 3, 1996, by and among Foster Grant
Group, L.P., BEC and First Interstate Bank of Texas, N.A.
Incorporated by reference to Exhibit 10.20 to BEC's Annual Report
on Form 10-K for the year ended December 31, 1996 (Commission File
No. 1-14360).
10.12 Second Amendment to Loan Agreement (see Exhibit 10.8 above) and
Other Loan Documents, dated December 12, 1996, by and among Wells
Fargo Bank (Texas), N.A. (as successor to First Interstate Bank of
Texas, N.A.), ORC Management Corporation, Foster Grant Group, L.P.,
and BEC. Incorporated by reference to Exhibit 10.21 to BEC's Annual
Report on Form 10-K for the year ended December 31, 1996
(Commission File No. 1-14360).
10.13 Deed of Trust, Security Agreement and Financing Statement, dated
March 31, 1995, relating to mortgage of real property located in
Dallas, Texas. Incorporated by reference to Exhibit 10.22 of BEC's
Annual Report on Form 10-K for the year ended December 31, 1996
(Commission File No. 1-14360).
10.14 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).
10.15 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).
II-3
<PAGE>
10.16 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).
10.17 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.
10.18 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.
10.19 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, dated of event
June 30, 1994 (Commission File No. 1-9435).
10.20 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 Corporations' Current Report on Form 8-K,
date of event June 30, 1994 (Commission File No. 1-9435).
10.21 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).
10.22 Form of Indemnification Agreement between the Company and its
officers and directors
21.1 List of the subsidiaries of the Company
23.1 Consent of KPMG Peat Marwick LLP
23.2 Consent of Price Waterhouse LLP
23.3 Consent of Befec-Price Waterhouse
+27 Financial Data Schedule
+99.1 Consent of David Moore
</TABLE>
- ------------
* To be filed by amendment.
+ Previously Filed.
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.
II-4
<PAGE>
ITEM 17. UNDERTAKINGS.
The undersigned Registrant hereby undertakes that:
For the purpose of determining any liability under the Securities Act,
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 item shall be
deemed to be the initial bona fide public offering thereof.
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 question 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>
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 February 4, 1998.
BOLLE INC.
By: *
--------------------------------
Martin E. Franklin
Title: Chairman of the Board
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>
* Chairman of the Board, Director February 4, 1998
------------------------------
Martin E. Franklin
* President, Chief Executive Officer, Director February 4, 1998
------------------------------
Gary Kiedaisch
/s/ Ian G.H. Ashken Executive Vice President of Finance and February 4, 1998
------------------------------ Administration, Chief Financial Officer,
Ian G.H. Ashken Principal Accounting Officer, Assistant
Secretary and Director
* Director February 4, 1998
------------------------------
Franck Bolle
* Director February 4, 1998
------------------------------
Patricia Bolle Passaquay
*/s/ Ian G.H. Ashken
------------------------------
Ian G.H. Ashken as
Attorney-In-Fact
</TABLE>
II-6
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION PAGE NO.
- ----------- ------------------------------------------------------------------------------------------ ------------
<S> <C> <C>
3.1 Form of Amended and Restated Certificate of Incorporation
3.2 Form of Certificate of Designations of the Series B Preferred Stock
3.3 Form of Amended and Restated Bylaws
4.1 Specimen of Stock Certificate
4.2 Amended and Restated Share Purchase Agreement dated July 9, 1997 among BEC Group, Inc. ("BEC")
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
4.4 Form of Letter Agreement dated , 1998 by and among Martin E. Franklin and each of the Sellers
4.5 Form of Warrant Agreement dated , 1998 among the Company and each of the Sellers
4.6 Form of 1998 Stock Incentive Plan
*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
10.2 Employment Agreement dated July 9, 1997 between Societe Bolle SNC and Franck Bolle (English
translation)
10.3 Employment Agreement dated July 9, 1997 between Societe Bolle SNC and Patricia Bolle Passaquay
(English translation)
+10.4 Agreement dated September 20, 1995 between the Company and Steve N. Haber
10.5 Form of Management Services Agreement between the Company and BEC
10.6 Form of Bill of Sale and Assignment Agreement dated as of October 1, 1997 between BEC and the
Company
10.7 Form of Indemnification Agreement dated as of , 1997 by and among BEC, BILC Acquisition
Corp. and the Company
10.8 Exclusive Customer Agreement dated as of October 23, 1997 by and between the Company and Alyn
Corporation
10.9 Letter of Intent between the Company and Bill Bass Optical Pty Ltd. dated January 6, 1998
10.10 Loan Agreement by and among BEC (as assignee) and First Interstate Bank of Texas, N.A., relating
to the real property located in Dallas, Texas. Incorporated by reference to Exhibit 10.24 to
Benson Eyecare Corporation's Annual Report on Form 10-K for the year ended December 31, 1995
(Commission File No. 1-9435).
10.11 First Amendment to Loan Agreement (see Exhibit 10.8 above) and Other Loan Documents, dated May
3, 1996, by and among Foster Grant Group, L.P., BEC and First Interstate Bank of Texas, N.A.
Incorporated by reference to Exhibit 10.20 to BEC's Annual Report on Form 10-K for the year
ended December 31, 1996 (Commission File No. 1-14360).
<PAGE>
EXHIBIT DESCRIPTION PAGE NO.
- ----------- ------------------------------------------------------------------------------------------ ------------
10.12 Second Amendment to Loan Agreement (see Exhibit 10.8 above) and Other Loan Documents, dated
December 12, 1996, by and among Wells Fargo Bank (Texas), N.A. (as successor to First Interstate
Bank of Texas, N.A.), ORC Management Corporation, Foster Grant Group, L.P., and BEC. Incorporated
by reference to Exhibit 10.21 to BEC's Annual Report on Form 10-K for the year ended December
31, 1996 (Commission File No. 1-14360).
10.13 Deed of Trust, Security Agreement and Financing Statement, dated March 31, 1995, relating to
mortgage of real property located in Dallas, Texas. Incorporated by reference to Exhibit 10.22
of BEC's Annual Report on Form 10-K for the year ended December 31, 1996 (Commission File No.
1-14360).
10.14 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).
10.15 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).
10.16 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).
10.17 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.
10.18 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.
10.19 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, dated of event June 30, 1994 (Commission File
No. 1-9435).
10.20 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 Corporations' Current Report on Form 8-K, date of event June 30, 1994
(Commission File No. 1-9435).
10.21 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).
10.22 Form of Indemnification Agreement between the Company and its officers and directors
21.1 List of the subsidiaries of the Company
<PAGE>
EXHIBIT DESCRIPTION PAGE NO.
- ----------- ------------------------------------------------------------------------------------------ ------------
23.1 Consent of KPMG Peat Marwick LLP
23.2 Consent of Price Waterhouse LLP
23.3 Consent of Befec-Price Waterhouse
+27 Financial Data Schedule
+99.1 Consent of David Moore
</TABLE>
- ------------
* To be filed by amendment.
+ Previously Filed.
<PAGE>
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
BOLLE INC.
BOLLE INC., a corporation organized and existing under the
laws of the State of Delaware, hereby certifies as follows:
1. The name of the corporation is BOLLE INC., and the name
under which the corporation was originally incorporated is BOLLE, INC. The date
of the filing of its original Certificate of Incorporation with the Secretary
of State was February 3, 1997.
2. This Amended and Restated Certificate of Incorporation
restates and integrates and further amends the Certificate of Incorporation of
this corporation by increasing the total number of shares of stock which the
Corporation shall have authority to issue to 30,000,000 shares of common stock,
having a par value of $.01 per share and 200,000 shares of preferred stock
having a par value of $.01 per share.
3. The text of the Certificate of Incorporation as amended or
supplemented heretofore is further amended hereby to read as herein set forth
in full:
FIRST: The name of the Corporation (hereinafter
referred to as the "Corporation") is
BOLLE INC.
SECOND: The address, including street, number, city
and county, of the registered office of the Corporation in the State
of Delaware is 1013 Centre Road, Wilmington, Delaware 19805, County of
New Castle, and the name of the registered agent of the Corporation in
the State of Delaware is Corporation Service Company.
THIRD: The purpose of the Corporation is to engage
in any lawful act or activity for which corporations may be organized
under the General Corporation Law of the State of Delaware.
FOURTH: The total number of shares of stock which
the Corporation shall have authority to issue is 30,000,000 shares of
common stock, having a par value of $.01 per share and 200,000 shares
of preferred stock having a par value of $.01 per share. To the extent
not otherwise provided for by, and not inconsistent with, this
Certificate of Incorporation, there is hereby expressly vested in the
Board of Directors the authority to fix in the resolution or
resolutions providing for the issue of each series of such
<PAGE>
preferred stock, the voting power and the designations, preferences
and relative, participating, operational or other rights of each such
series, and the qualifications, limitations or restrictions thereof.
Shares of preferred stock may be issued from time to time in one or
more series as may from time to time be determined by the Board of
Directors, each such series to be distinctly designated.
a. Series A Preferred Stock. There shall be created
a series of preferred stock of the Corporation, which shall be
designated "Series A Preferred Stock" and shall consist of Sixty Four
Thousand One Hundred Twenty (64,120) shares, and have the powers,
designations, preferences and relative, participating, and other
rights of the shares of such series, and the qualifications,
limitations and restrictions thereof, as set forth below:
SECTION 1. Dividends. The holders of the Series A
Preferred Stock shall not be entitled to dividends.
SECTION 2. Rights on Liquidation. In the event of
any voluntary or involuntary liquidation, dissolution or
winding up of the Corporation (any such event being
hereinafter referred to as a "Liquidation"), before any
distribution of assets of the Corporation shall be made to or
set apart for the holders of Common Stock, the holders of
Series A Preferred Stock shall be entitled to receive payment
out of such assets of the Corporation in an amount equal to
the greater of (i) One Thousand French Francs (FF1,000) per
share of Series A Preferred Stock or (ii) the French Franc
equivalent of US $172.41 per share of Series A Preferred
Stock (such greater amount being referred to as the
"Liquidation Preference" for the Series A Preferred Stock).
If the assets of the Corporation available for distribution
to the holders of the Series A Preferred Stock shall not be
sufficient to make in full the payment herein required, such
assets shall be distributed pro-rata among the holders of
Series A Preferred Stock based on the aggregate Liquidation
Preference of the shares of Series A Preferred Stock held by
each such holder. If the assets of the Corporation available
for distribution to the holders of Series A Preferred Stock
shall exceed the distribution required to be made to the
holders of Series A Preferred Stock as herein described, such
excess assets shall be distributed pro-rata among the holders
of Common Stock and the holders of Series A Preferred Stock
shall not participate in any such excess distribution in
their capacity as holders of Series A Preferred Stock.
SECTION 3. Conversion. The holders of any share of
Series A Preferred Stock shall not have the
-2-
<PAGE>
right to convert any such shares into shares of Common Stock
of the Corporation.
SECTION 4. Redemption.
(a) Optional Redemption. Following
notice pursuant to Section 4(c) hereof given to all holders
of Series A Preferred Stock during the period that shares of
Series A Preferred Stock are outstanding (the "Redemption
Period"), the Corporation may at the option of the Board of
Directors of the Corporation, redeem, out of funds legally
available therefor, in whole or in part the shares of Series
A Preferred Stock. The Corporation shall effect any such
redemption by paying in cash for each such share to be
redeemed an amount equal to the Liquidation Preference, per
share, on such shares being redeemed on the Redemption Date
(as hereinafter defined) (such per share amount is
hereinafter referred to as the "Redemption Amount").
(b) Mandatory Redemption. (i)
Subject to the terms of the Senior Indebtedness (as defined
below), on the third anniversary date from the issuance of
the Series A Preferred Stock, the Corporation shall redeem,
out of funds legally available therefor, all of the shares of
the Series A Preferred Stock (if not previously redeemed) at
the Redemption Amount per share pursuant to the terms of this
Section 4 following notice pursuant to Section 4(c) hereof
given to all holders of Series A Preferred Stock.
(ii) Notwithstanding
anything to the contrary contained herein, in the event that
the Corporation's EBITDA (as defined below) exceeds
US$18,400,000 for the year ended December 31, 1998 and Bolle
Inc. will be in compliance with the terms of Bolle Inc.'s
senior indebtedness pursuant to the terms of the credit
agreement among the Corporation, the lenders executing a
signature thereto and NationsBank, National Association, as
Agent, entered into in connection with the Corporation
becoming a separate public company as a result of a spinoff
by BEC Group, Inc., as may be amended from time to time (the
"Senior Indebtedness") after taking into account the
redemption pursuant to the terms of this Section 4(b)(ii), to
the extent that Bolle Inc. will have at least US$2,000,000
available to borrow pursuant to the terms of the Senior
Indebtedness after taking into account such redemption, the
Corporation shall redeem, out of funds legally available
therefor, the shares of the Series A Preferred Stock (if not
previously redeemed) at the Redemption Amount per share
pursuant to the terms of this Section 4 herein following
notice given within ten days after the Determination Date (as
defined below) in respect of the year ended
-3-
<PAGE>
December 31, 1998 pursuant to Section 4(c) hereof given to
all holders of Series A Preferred Stock. The determination of
EBITDA required to be made under this Section 4, shall be
made by the Corporation within ninety days following the
Corporation's year end (the "Determination Date").
(iii) Notwithstanding
anything to the contrary contained herein, in the event that
the Corporation's EBITDA exceeds US$24,700,000 for the year
ended December 31, 1999 Bolle Inc. will be in compliance with
the terms of the Senior Indebtedness after taking into
account the redemption pursuant to the terms of this Section
4(b)(iii), to the extent that Bolle Inc. will have at least
US$2,000,000 available to borrow pursuant to the terms of the
Senior Indebtedness after taking into account such
redemption, the Corporation shall redeem, out of funds
legally available therefor, the shares of the Series A
Preferred Stock (if not previously redeemed) at the
Redemption Amount per share pursuant to the terms of this
Section 4 herein following notice given within ten days after
the Determination Date in respect of year ended December 31,
1999 pursuant to Section 4(c) hereof given to all holders of
Series A Preferred Stock.
(iv) For purposes of this
Section 4, "EBITDA" means, with respect to the Corporation
and its subsidiaries for any period of computation thereof,
the sum of, without duplication, (i) consolidated net income,
(ii) consolidated interest expense, (iii) taxes on income,
(iv) amortization, and (v) depreciation, all determined on a
consolidated basis in accordance with generally accepted
accounting principles on a consistent basis.
(c) Redemption Procedures. In the
event of any redemption pursuant hereto, the Corporation
shall effect such redemption as described below. During the
Redemption Period, and at least 10 days prior to the date
fixed for any redemption of Series A Preferred Stock pursuant
to Section 4(a) or 4(b) above (the "Redemption Date"),
written notice shall be sent to each holder of record of
Series A Preferred Stock to be redeemed, notifying such
holder of the redemption to be effected, specifying the
Redemption Date, the Redemption Amount, the place at which
payment may be obtained and calling upon such holder to
surrender to the Corporation, in the manner and at the place
designated, his certificate or certificates representing the
shares to be redeemed (the "Redemption Notice"). On or after
the Redemption Date, each holder of Series A Preferred Stock
to be redeemed shall surrender to the Corporation the
certificate or certificates representing such
-4-
<PAGE>
shares, in the manner and at the place designated in the
Redemption Notice, and thereupon the Redemption Amount of
such shares shall be payable to the order of the person whose
name appears on such certificate or certificates as the owner
thereof and each surrendered certificate shall be cancelled.
In the event less than all the shares represented by any such
certificate are redeemed, a new certificate shall be issued
representing the unredeemed shares.
(d) Status of Redeemed or Purchased
Shares. Any shares of the Series A Preferred Stock at any
time purchased, redeemed or otherwise acquired by the
Corporation shall not be reissued and shall be retired.
(e) Sale of Business. In the event
that the Corporation does not give notice on or before the
third anniversary date from the issuance of the Series A
Preferred Stock, that it will redeem the Series A Preferred
Stock in full pursuant to the provisions of Section 4(c)
hereof, the holders of more than 90% of the Series A
Preferred Stock shall have the right, until the Series A
Preferred Stock has been redeemed, (i) subject to the terms
and provisions of the agreements entered into in connection
with the Senior Indebtedness, to appoint a majority of the
members of the Board of Directors of the Corporation, so long
as the Corporation is privately or closely held, and (ii)
subject to the terms and provisions of the agreements entered
into in connection with the Senior Indebtedness, to cause the
Corporation to use commercially reasonable efforts to either
obtain cash in order to redeem in full the Series A Preferred
Stock or to effect a commercially reasonable sale of the
Corporation's assets or the merger, consolidation or other
reorganization of the Corporation as soon as reasonably
practicable thereafter.
SECTION 5. Voting Rights. Subject to the provisions
of Section 4(c)(i) hereof, the holders of the Series A
Preferred Stock shall not be entitled to vote except as to
matters in respect of which they shall at the time be
indefeasibly vested by statute with such right.
SECTION 6. Protective Provisions. So long as any
shares of Series A Preferred Stock are outstanding, the
Corporation shall not, without first obtaining the approval
(by vote or written consent, as provided by law) of the
holders of at least 90% of the then outstanding shares of
Series A Preferred Stock:
(i) alter or change the
rights, preferences or privileges of the shares of Series A
-5-
<PAGE>
Preferred Stock so as to affect adversely the shares of such
series; and
(ii) the Corporation shall
not issue any class or series of Preferred Stock that ranks
Senior to or pari passu with the Series A Preferred Stock
with respect to dividend, redemption or liquidation rights.
SECTION 7. TRANSFERABILITY. The holders of
shares of the Series A Preferred Stock are entitled to
transfer shares of the Series A Preferred Stock to any of the
other holders of shares of Series A Preferred Stock, subject
to strict compliance with all applicable laws.
FIFTH: The name and the mailing address of the
incorporator is as follows:
Name Mailing Address
Peter H. Trembath c/o BEC Group, Inc.
1601 Valley View Lane
Dallas, TX 75234
SIXTH: The Corporation is to have perpetual
existence.
SEVENTH: Whenever a compromise or arrangement is
proposed between this Corporation and its creditors or any class of
them and/or between this Corporation and its stockholders or any class
of them, any court of equitable jurisdiction within the State of
Delaware may, on the application in a summary way of this Corporation
or of any creditor or stockholder thereof or on the application of any
receiver or receivers appointed for this Corporation under the
provisions of Section 291 of Title 8 of the Delaware Code or on the
application of trustees in dissolution or of any receiver or receivers
appointed for this Corporation under Section 279 of Title 8 of the
Delaware Code order a meeting of the creditors or class of creditors,
and/or of the stockholders or class of stockholders of this
Corporation, as the case may be, to be summoned in such manner as the
said court directs. If a majority in number representing three-fourths
in value of the creditors or class of creditors, and/or the
stockholders or class of stockholders of this Corporation, as the case
may be, agree to any compromise or arrangement and to any
reorganization of this Corporation as consequence of such compromise
or arrangement, the said compromise or arrangement and the said
reorganization shall, if sanctioned by the court to which the said
application has been made, be binding on all the creditors or class of
creditors, and/or on all the stockholders or class of stockholders of
this Corporation, as the case may be, and also on this Corporation.
-6-
<PAGE>
EIGHTH: For the management of the business and for
the conduct of the affairs of the Corporation, and in further
definition, limitation and regulation of the powers of the Corporation
and of its directors and of its stockholders or any class thereof, as
the case may be, it is further provided:
1. The management of the business and the
conduct of the affairs of the Corporation shall be vested in
its Board of Directors. The number of directors which shall
constitute the whole Board of Directors shall be fixed by, or
in the manner provided in, the By-laws. The phrase "whole
Board" and the phrase "total number of directors" shall be
deemed to have the same meaning to wit, the total number of
directors which the Corporation would have if there were no
vacancies.
2. After the original or other By-laws of
the Corporation have been adopted, amended, or repealed, as
the case may be, in accordance with the provisions of Section
109 of the General Corporation Law of the State of Delaware,
and, after the Corporation has received any payment for any
of its stock, the power to adopt, amend, or repeal the
By-laws of the Corporation may be exercised by the Board of
Directors of the Corporation; provided, however, that any
provision for the classification of directors of the
Corporation for staggered terms pursuant to the provisions of
subsection (d) of Section 141 of the General Corporation Law
of the State of Delaware shall be set forth in the initial
By-laws or in by-laws adopted by the stockholders entitled to
vote of the Corporation unless provisions for such
classification shall be set forth in this Certificate of
Incorporation.
3. Whenever the Corporation shall be
authorized to issue only one class of stock, each outstanding
share shall entitle the holder thereof to notice of, and the
right to vote at, any meeting of stockholders. Whenever the
Corporation shall be authorized to issue more than one class
of stock, no outstanding share of any class of stock which is
denied voting power under the provisions of the certificates
of incorporation shall entitle the holder thereof to the
right to vote at any meeting of the stockholders except as
the provisions of paragraph (2) of the subsection (b) of ss.
242 of the General Corporation Law of the State of Delaware
shall otherwise require;
-7-
<PAGE>
provided, that no share of any such class which is otherwise
denied voting power shall entitle the holder thereof to vote
upon the increase or decrease in the number of authorized
shares of said class.
4. Elections of directors need not be by written
ballot.
NINTH: The personal liability of the directors of
the Corporation is hereby eliminated to the fullest extent permitted
by paragraph (7) of subsection (b) of Section 102 of the General
Corporation Law of the State of Delaware, as the same may be amended
and supplemented.
TENTH: (a) The Corporation shall, to the fullest
extent permitted by the General Corporation Law, as the same may be
amended and supplemented, indemnify any and all persons whom it shall
have the power to indemnify under the General Corporation Law from and
against any and all of the expenses, liabilities or other matters
referred to in or covered by the General Corporation Law, and the
indemnification provided for herein shall not be deemed exclusive of
any other rights to which those indemnified may be entitled under any
By-law, agreement, vote of stockholders or disinterested directors or
otherwise, both as to action in his official capacity and as to action
in another capacity while holding such office, and shall continue as
to a person who has ceased to be a director, officer, employee or
agent and shall inure to the benefit of the heirs, executors and
administrators of such a person.
(b) Expenses incurred in defending
a civil or criminal action, suit or proceeding shall (in the case of any
action, suit or proceeding against a director of the Corporation) or may (in
the case of any action, suit or proceeding against an officer, trustee,
employee or agent) be paid by the Corporation in advance of the final
disposition of such action, suit or proceeding as authorized by the Board upon
receipt of an undertaking by or on behalf of the indemnified person to repay
such amount if it shall ultimately be determined that he is not entitled to be
indemnified by the Corporation as authorized in this Article.
(c) No director shall be personally
liable to the Corporation or any stockholder for monetary damages for breach of
fiduciary duty as director, except for any matter in respect of which such
director (a) shall be liable under Section 174 of the General Corporation Law
or successor provisions thereto, or (b) shall be liable by reason that, in
addition to any and all other requirements for liability, he
-8-
<PAGE>
(i) shall have breached his duty of
loyalty to the Corporation or its stockholders;
(ii) shall not have acted in good
faith or, in failing to act, shall not have acted in good faith;
(iii) shall have acted in a manner
involving intentional misconduct or a knowing violation of the law or, in
failing to act, shall have acted in a manner involving intentional misconduct
or knowing violation of the law; or
(iv) shall have derived an improper
personal benefit.
ELEVENTH: The Board of Directors shall have the
power to make, add to, delete from, alter and repeal the Corporation's
By-laws.
TWELFTH: The Corporation expressly elects not to be
governed by Section 203 of the Delaware General Corporation Law.
THIRTEENTH: From time to time any of the provisions
of this Certificate of Incorporation may be amended, altered or
repealed after authorization by the Board of Directors and the
affirmative vote of the holders of record of a majority of all of the
issued and outstanding shares of the Corporation entitled to vote in
respect thereof, and other provisions authorized by the laws of the
State of Delaware at the time in force may be added or inserted in the
manner and at the time prescribed by said laws, and all rights at any
time conferred upon the stockholders of the Corporation by this
Certificate of Incorporation are granted subject to the provisions of
this Article Fourteenth.
4. This Amended and Restated Certificate of Incorporation was
duly adopted by unanimous written consent of the stockholders in accordance
with the applicable provisions of Sections 228, 242 and 245 of the General
Corporation Law of the State of Delaware.
-9-
<PAGE>
IN WITNESS WHEREOF, said BOLLE INC. has caused this
certificate to be signed and attested by Ian G.H. Ashken, its Chief Financial
Officer, this _____ day of February, 1998.
BOLLE INC.
By:_________________________
Name: Ian G.H. Ashken
Title: Chief Financial Officer
-10-
<PAGE>
CERTIFICATE OF DESIGNATIONS
OF THE
SERIES B PREFERRED STOCK
OF BOLLE INC.
-----------------------------------
Pursuant to Section 151 of the
General Corporation Law of the
State of Delaware
-----------------------------------
The undersigned, Peter H. Trembath, does hereby certify as
follows:
FIRST: That he is the duly elected and acting Secretary of
Bolle Inc., a Delaware corporation (the "corporation").
SECOND: That the following resolution was duly adopted by the
Board of Directors of the corporation:
RESOLVED, that pursuant to authority conferred upon the Board
of Directors of the corporation in accordance with the General Corporation Law
of the State of Delaware and the provisions of the Restated Certificate of
Incorporation of the corporation (the "Restated Certificate"), there is hereby
created a new series of preferred stock of the corporation, which shall be
designated "Series B Preferred Stock" and shall consist of Ten Thousand
(10,000) shares, and have the powers, designations, preferences and relative,
participating, and other rights of the shares of such series, and the
qualifications, limitations and restrictions thereof, as set forth below.
SECTION 1. Dividends.
(a) The holders of the Series B Preferred Stock,
shall be entitled to accrue cumulative cash dividends, whether or not declared
by the Board of Directors of the corporation, at the dividend rate per annum as
set forth in Section 1(b) below and no more, on each share of Series B
Preferred Stock, payable semi-annually on June 30 and December 31 of each year
commencing December 31, 1997, such dividends shall be cumulative, so that if at
any time dividends per semi-annum at the applicable dividend rate, on each
share, shall not have been declared and paid, or set apart for payment, for all
preceding dividend periods, the deficiency shall be declared and paid, or set
apart for payment, before any dividends shall be declared and paid, or set
apart for payment, on the common stock (the "Common Stock") of the
<PAGE>
corporation or the Series A Preferred Stock (the "Series A Stock") of the
corporation.
(b) The dividend rate (the "Dividend Rate") for the
Series B Preferred Stock shall be at the per annum rate of:
(i) 5% of the Liquidation Preference per share per
annum during the period commencing on the date of issuance of shares of the
Series B Preferred Stock through December 31, 1997;
(ii) 6% of the Liquidation Preference per share per
annum during the period commencing January 1, 1998 through June 30, 1998;
(iii) 7% of the Liquidation Preference per share per
annum during the period commencing July 1, 1998 through December 31, 1998;
(iv) 8% of the Liquidation Preference per share per
annum during the period commencing January 1, 1999 through June 30, 1999;
(v) 9% of the Liquidation Preference per share per
annum during the period commencing July 1, 1999 through December 31, 1999; and
(vi) 10% of the Liquidation Preference per share per
annum commencing January 1, 2000 and thereafter until the Series B Preferred
Stock shall have been redeemed.
(c) Any unpaid dividends (whether declared or
accruing) on Series B Preferred Stock will bear interest at the applicable
Dividend Rate commencing from the date that such dividend has accrued up to and
including the date on which such dividend is paid. Holders of Series B
Preferred Stock will not receive any dividends other than the preferred
dividends provided for in this Section 1, and will not participate with the
Common Stock in the payment of dividends.
(d) Subject to the provisions of this Section 1(d),
the corporation will use its commercially reasonable efforts in good faith to
declare and pay accrued dividends on the shares of Series B Preferred Stock as
set forth in this Section 1. The corporation shall only declare or pay any
dividends on the Series B Preferred Stock out of funds legally available
therefor and to the extent that the corporation is permitted to declare or pay
such dividends under the terms and conditions of its senior indebtedness
pursuant to the terms of the credit agreement among the
2
<PAGE>
corporation, the lenders executing a signature thereto and NationsBank,
National Association, as Agent, entered into in connection with the corporation
becoming a separate public company as a result of a spinoff by BEC Group, Inc.,
as may be amended from time to time (the "Senior Indebtedness").
SECTION 2. Rights on Liquidation. In the event of any
voluntary or involuntary liquidation, dissolution or winding up of the
corporation (any such event being hereinafter referred to as a "Liquidation"),
before any distribution of assets of the corporation shall be made to or set
apart for the holders of Common Stock or Series A Stock, the holders of Series
B Preferred Stock shall be entitled to receive payment out of such assets of
the corporation in an amount equal to Five Thousand Five Hundred French Francs
(FF5,500) per share of Series B Preferred Stock (such amount being referred to
as the "Liquidation Preference" for the Series B Preferred Stock), plus any
accumulated and unpaid dividends thereon (whether or not earned or declared) on
the Series B Preferred Stock. If the assets of the corporation available for
distribution to the holders of Series B Preferred Stock shall not be sufficient
to make in full the payment herein required, such assets shall be distributed
pro-rata among the holders of Series B Preferred Stock based on the aggregate
Liquidation Preference of the shares of Series B Preferred Stock held by each
such holder. If the assets of the corporation available for distribution to the
holders of Series B Preferred Stock shall exceed the distribution required to
be made to the holders of Series B Preferred Stock as herein described, such
excess assets shall be distributed pro-rata among the holders of Common Stock
and the holders of Series B Preferred stock shall not participate in any such
excess distribution.
SECTION 3. Conversion. The holders of any share of Series B
Preferred Stock shall not have the right to convert any such shares into shares
of Common Stock of the corporation.
SECTION 4. Redemption.
(a) Optional Redemption. (i) Cash Redemption.
Following notice pursuant to Section 4(c)(ii) hereof given to all holders of
Series B Preferred Stock during the period (the "Redemption Period") so long as
shares of Series B Preferred Stock are outstanding, the corporation may at the
option of the Board of Directors of the corporation, redeem, out of funds
legally available therefor, in whole or in part the shares of Series B
Preferred Stock. The corporation shall effect any such redemption by paying in
cash (the "Cash Redemption") for each such share to be redeemed an amount equal
to the Liquidation Preference, per share, plus any accumulated and unpaid
dividends thereon (whether or not earned or declared) on such shares to the
Redemption Date (as
3
<PAGE>
hereinafter defined) (such total amounts are hereinafter referred to as the
"Redemption Price").
(ii) Debt Redemption. Following notice pursuant to
Section 4(c)(iii) below hereof given to all holders of Series B Preferred Stock
during the period (the "Debt Redemption Period") commencing January 1, 1998 and
so long as shares of Series B Preferred Stock are outstanding, the corporation
may, at the option of the Board of Directors of the corporation, redeem in
whole or in part the shares of Series B Preferred Stock. The corporation shall
effect any such redemption (the "Debt Redemption") by issuing to the holders of
the Series B Preferred Stock a subordinated debt instrument (the "Subordinated
Debt"). Except as otherwise provided in Section 4(e) below, the Subordinated
Debt shall contain substantially the same powers, designations, preferences and
relative, participating, or other rights, and qualifications, limitations and
restrictions as the Series B Preferred Stock including, but not limited to,
mandatory redemption and Cash Redemption rights, Liquidation rights and the
protections provided in Section 6 hereof.
(b) Mandatory Redemption. Notwithstanding anything
contained herein to the contrary, the corporation shall redeem, out of funds
legally available therefor, the Series B Preferred Stock (if not previously
redeemed) pursuant to the terms of Section 4 herein following notice pursuant
to Section 4(c)(ii) hereof given to all holders of Series B Preferred Stock,
upon the earlier occurrence of (i) on 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 corporation's Senior
Indebtedness, (B) such later date as redemption is first permitted under the
terms and conditions of the corporation's Senior Indebtedness; or (ii) the
closing of any equity financing by the corporation (a "Public Offering"), but
only to the extent of the net cash proceeds of such financing by the
corporation 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 corporation's Senior
Indebtedness; or (iii) a Change of Control (as defined in the agreements
relating to the corporation's Senior Indebtedness), which has resulted in the
corporation's payment in full of all amounts due with respect to its Senior
Indebtedness. Subject to the provisions of this Section 4(b), the corporation
will use its commercially reasonable efforts in good faith to redeem the Series
B Preferred Stock when required to be redeemed pursuant to the terms of this
Section 4(b). The corporation shall effect any such Cash Redemption by paying
in cash for each such share to be redeemed an amount equal to the
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Liquidation Preference, per share, plus any accumulated and unpaid dividends
thereon (whether or not earned or declared) on such shares to the Redemption
Date. The corporation shall use its commercially reasonable efforts to close a
Public Offering during 1998.
(c) Redemption Procedures. (i) General. In the event
of any redemption pursuant hereto, the corporation shall effect such redemption
as follows. The number of shares subject to redemption shall be allocated pro
rata among the holders of outstanding shares of Series B Preferred Stock based
upon the number of shares held by each such holder.
(ii) Cash Redemption Procedures. During the
Redemption Period, and at least 10 days prior to the date fixed for any
redemption of Series B Preferred Stock pursuant to Section 4(a)(i) above (the
"Redemption Date"), written notice shall be sent to each holder of record of
Series B Preferred Stock to be redeemed, notifying such holder of the
redemption to be effected, specifying the Redemption Date, the Redemption
Price, the place at which payment may be obtained and calling upon such holder
to surrender to the corporation, in the manner and at the place designated, his
certificate or certificates representing the shares to be redeemed (the
"Redemption Notice"). On or after the Redemption Date, each holder of Series B
Preferred Stock to be redeemed shall surrender to the corporation the
certificate or certificates representing such shares, in the manner and at the
place designated in the Redemption Notice, and thereupon the Redemption Price
of such shares shall be payable to the order of the person whose name appears
on such certificate or certificates as the owner thereof and each surrendered
certificate shall be cancelled. In the event less than all the shares
represented by any such certificate are redeemed, a new certificate shall be
issued representing the unredeemed shares.
(iii) Debt Redemption Procedures. During the Debt
Redemption Period, and at least 10 days prior to the date fixed for any
redemption of Series B Preferred Stock pursuant to Section 4(a)(ii) above (the
"Debt Redemption Date"), written notice shall be sent to each holder of record
of Series B Preferred Stock, notifying such holder of the redemption to be
effected, specifying the Debt Redemption Date, and calling upon such holder to
surrender to the corporation, in the manner and at the place designated, his
certificate or certificates representing the shares to be redeemed (the "Debt
Redemption Notice"). On or after the Debt Redemption Date, each holder of
Series B Preferred Stock to be redeemed shall surrender to the corporation the
certificate or certificates representing such shares, in the manner and at the
place designated in the Debt Redemption Notice, and thereupon the Subordinated
Debt
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instrument shall be delivered to the person whose name appears on such
certificate or certificates as the owner thereof and each surrendered
certificate shall be cancelled. In the event less than all the shares
represented by any such certificate are redeemed, a new certificate shall be
issued representing the unredeemed shares.
(iv) From and after the close of business on the
Redemption Date or the Debt Redemption Date, as the case may be, unless there
shall have been a default in payment of the Redemption Price or issuance of the
Subordinated Debt instrument, as the case may be, all rights of the holders of
the shares of Series B Preferred Stock designated for redemption as holders of
Series B Preferred Stock (except the right to receive the Redemption Price
without interest or the Subordinated Debt instrument, as the case may be, upon
surrender of their certificate or certificates) shall cease with respect to
such shares, and such shares shall not thereafter be transferred on the books
of the corporation or be deemed to be outstanding for any purpose whatsoever.
(d) Status of Redeemed or Purchased Shares. Any
shares of the Series B Preferred Stock at any time purchased, redeemed or
otherwise acquired by the corporation shall not be reissued and shall be
retired.
(e) Gross-Up Factor. In the event of any Debt
Redemption pursuant to Section 4(a)(ii) above, the interest rates from time to
time payable on such Subordinated Debt shall be equal to the Dividend Rates in
effect from time to time per Section 1(b) increased by a factor based upon the
amount directly attributable to the corporation's tax savings expected to be
received from the corporation's deduction of interest payments in respect of
the Subordinated Debt in computing the corporation's taxable income in respect
of each year that the Subordinated Debt is outstanding (the "Gross Up Factor").
The determinations required to be made under this Section 4(e), including
whether and when a Gross-Up Factor is required and the amount of such Gross-Up
Factor and the marginal combined Federal, state and local income tax rate and
other assumptions to be utilized in arriving at such determination, shall be
made by the corporation's independent auditors (the "Accounting Firm"), which
shall provide detailed supporting calculations both to the corporation and the
holders of the Subordinated Debt within ninety (90) days after the
corporation's year end. All fees and expenses of the Accounting Firm shall be
born solely by the corporation. Any Gross-Up Factor, as determined pursuant to
this Section 4(e), shall accrue for the benefit to the holders of the
Subordinated Debt as of the relevant dates set forth in such Section 1(b) and
all accrued interest and Gross Up Factor shall accumulate and be paid in
accordance with Section 1, including
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(without limitation) the provisions of Section 1(c). Any determination by the
Accounting Firm shall be binding upon the corporation and the holders of the
Subordinated Debt.
SECTION 5. Voting Rights. The holders of the Series B
Preferred Stock shall not be entitled to vote except as to matters in respect
of which they shall at the time be indefeasibly vested by statute with such
right.
SECTION 6. Protective Provisions. (a) So long as any shares
of Series B Preferred Stock are outstanding, the corporation shall not, without
first obtaining the approval (by vote or written consent, as provided by law)
of the holders of at least 90% of the then outstanding shares of Series B
Preferred Stock:
(i) alter or change the rights, preferences or
privileges of the shares of Series B Preferred Stock so as to affect adversely
the shares of such series;
(ii) declare or pay a dividend or otherwise make a
distribution on any security issued by the corporation which is junior to the
Series B Preferred Stock including the Series A Stock with respect to dividends
or upon liquidation (other than dividends or distributions payable in Common
Stock or other securities or rights convertible into or entitling the holder
thereof to receive, directly or indirectly, additional shares of Common Stock
of the corporation).
(iii) the corporation shall not enter into any
agreements that prohibit the corporation from declaring or paying dividends
hereunder or redeeming the Series B Preferred Stock other than the Senior
Indebtedness and any other agreements in effect as of the date of issuance of
the Series B Preferred Stock.
(iv) the corporation shall not issue any class or
series of Preferred Stock that ranks Senior to or pari passu with the Series B
Preferred Stock with respect to dividend, redemption or liquidation rights.
(b) in the event that the corporation does not
redeem the Series B Preferred Stock for cash in full on or before the third
anniversary date from the issuance of the Series B Preferred Stock, the
corporation shall be prohibited from issuing or incurring any Indebtedness for
Money Borrowed (as defined below) which ranks senior to or pari passu with the
Series B Preferred Stock, other than senior bank indebtedness (including Senior
Indebtedness) not to exceed $30 million in the aggregate, until the corporation
redeems for cash in full the Series B Preferred Stock. For purposes of this
Section 6(iv), Indebtedness for Money
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Borrowed shall mean all indebtedness in respect of money borrowed, evidenced by
a promissory note, bond, debenture or similar written obligation for the
payment of money, other than trade payables, capital leases, the deferred
purchase price of any property or asset, conditional sales or similar title
retention agreements incurred in the ordinary course of business.
SECTION 7. Transferability. The holders of shares of the
Series B Preferred Stock are entitled to transfer shares of the Series B
Preferred Stock, subject to strict compliance with all applicable laws.
SECTION 8. Priority. The Series B Preferred Stock ranks
senior to the Series A Stock with respect to dividend, redemption and
liquidation rights and otherwise.
IN WITNESS WHEREOF, Bolle Inc. has caused this Certificate of
Designations of the Series B Preferred Stock to be signed by Peter H. Trembath,
its Secretary, this ______ day of ____________, ____.
BOLLE INC.
By: __________________________
Name: Peter H. Trembath
Title: Secretary
<PAGE>
EX 3.3
BOLLE INC.
INCORPORATED UNDER THE LAWS OF
THE STATE OF DELAWARE
BY-LAWS
ARTICLE I
OFFICES
The registered office of Bolle Inc. (the "Corporation") in Delaware
shall be at 1013 Centre Road in the City of Wilmington, County of New Castle,
in the State of Delaware, and Corporation Service Company shall be the
registered agent of this Corporation in charge thereof. The Corporation may
also have such other offices at such other places, within or without the State
of Delaware, as the Board of Directors may from time to time designate or the
business of the Corporation may require.
ARTICLE II
STOCKHOLDERS
SECTION 1. ANNUAL MEETINGS. Subject to change by resolution
of the Board of Directors, the annual meeting of the Stockholders of the
Corporation for the purpose of electing directors and for the transaction of
such other business as may be brought before the meeting shall be held on the
___ day of ___ of each year, or as soon after such date as may be practicable.
If said day be a legal holiday, said meeting shall be held on the next
succeeding business day. The meeting may be held at such time and such place
within or without the State of Delaware as shall be fixed by the Board of
Directors and stated in the notice of the meeting. At the annual meeting any
business may be transacted and any corporate action may be taken, whether
stated in the notice of meeting or not, except as otherwise expressly provided
by statute or the Certificate of Incorporation.
SECTION 2. SPECIAL MEETINGS. Special meetings of the
stockholders for any purpose may be called at any time by a majority of the
Board of Directors, by the Chairman of the Board, or by the President, and
shall be called by the Chairman of the Board or by the President at the request
of the holders of a majority of the outstanding shares of capital stock
entitled to vote. Special meetings shall be held at such place or places within
or without the State of Delaware as shall from time to time be designated by
the Board of Directors and stated in the notice of such meeting. At a special
meeting no business shall be
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transacted and no corporate action shall be taken other than that stated in the
notice of the meeting.
SECTION 3. NOTICE OF MEETINGS. Except as otherwise expressly
required by law or the Certificate of Incorporation of the Corporation, written
notice stating the place and time of the meeting and the purpose or purposes of
such meeting, shall be given by the Secretary to each stockholder entitled to
vote thereat, by personal delivery or by mailing the same to him at his address
as it appears on the records of the Corporation not less than ten (10) nor more
than sixty (60) days prior to the meeting. Notice of any meeting of
stockholders shall not be required to be given to any stockholder who shall
attend such meeting in person or by proxy; and if any stockholder shall, in
person or by attorney thereunto duly authorized, waive notice of any meeting,
in writing or by telephone or facsimile, whether before or after such meeting
be held, the notice thereof need not be given to him. The attendance of any
stockholder at a meeting, in person or by proxy, without protesting prior to
the conclusion of the meeting the lack of notice of such meeting, shall
constitute a waiver of notice by him. Notice of any adjourned meeting of
stockholders need not be given except as provided in Section 5 of this Article
II.
SECTION 4. QUORUM. Any number of stockholders, together
holding at least a majority of the capital stock of the Corporation issued and
outstanding and entitled to vote, who shall be present in person or represented
by proxy at any meeting duly called, shall constitute a quorum for the
transaction of all business, except as otherwise provided by law, by the
Certificate of Incorporation or by these By-Laws. Where a separate vote by a
class or classes is required, a majority of the outstanding shares of such
class or classes, present in person or represented by proxy, shall constitute a
quorum entitled to take action with respect to that vote on that matter and the
affirmative vote of the majority of shares of such class or classes present in
person or represented by proxy at the meeting shall be the act of such class.
SECTION 5. ADJOURNMENT. At any meeting of stockholders,
whether or not there shall be a quorum present, the holders of a majority of
the shares voting at the meeting, whether present in person at the meeting or
represented by proxy at the meeting, may adjourn the meeting from time to time.
Except as provided by law, notice of such adjourned meeting need not be given
otherwise than by announcement of the time and place of such adjourned meeting
at the meeting at which the adjournment is taken. At any adjourned meeting at
which a quorum shall be present, any business may be transacted which might
have been transacted at the meeting as originally called.
SECTION 6. CONDUCT. The Chairman of the Board or, in his
absence or non-election, the Vice Chairman or, in his absence or non-election,
the President or, in the absence of both the
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foregoing officers, a Vice President shall call meetings of the stockholders to
order and shall act as Chairman of such meetings. In the absence of all of the
foregoing officers, holders of a majority in number of the shares of the
capital stock of the Corporation present in person or represented by proxy and
entitled to vote at such meeting shall elect a Chairman, who may be the
Secretary of the Corporation. To the maximum extent permitted by the law, such
presiding person shall have the power to set procedural rules, including but
not limited to rules respecting the time allotted to allow shareholders to
speak, governing all aspects of the conduct of such meetings. The Secretary of
the Corporation shall act as secretary of all meetings of the stockholders; but
in the absence of the Secretary, the Chairman may appoint any person to act as
secretary of the meeting.
SECTION 7. VOTING. Each stockholder shall, except as
otherwise provided by law or by the Certificate of Incorporation, at every
meeting of the stockholders be entitled to one vote in person or by proxy for
each share of capital stock entitled to vote held by such stockholder, but no
proxy shall be voted on after three years from its date, unless said proxy
provides for a longer period. Directors shall be elected by a plurality of the
votes of the shares present in person or represented by proxy at the meeting
and entitled to vote on the election of directors. Any other action shall be
authorized by a vote of a majority of the votes cast except where the General
Corporation Law prescribes a different percentage of votes and/or a different
exercise of voting power, and except as may be otherwise prescribed by the
provisions of the Certificate of Incorporation and these By-Laws.
SECTION 8. STOCKHOLDERS LIST. The officer of the Corporation
who has charge of the stock ledger of the Corporation shall prepare and make a
complete list of the stockholders entitled to vote at any meeting of
stockholders, arranged in alphabetical order with the address of each and the
number of shares held by each, which shall be open to the examination of any
stockholder, for any purpose germane to the meeting, during ordinary business
hours, for a period of at least ten (10) days prior to the meeting, either at a
place within the city where the meeting is to be held, which place shall be
specified in the notice of the meeting, or, if not so specified, at the place
where the meeting is to be held. The list shall also be produced and kept at
the time and place of the meeting during the whole thereof and may be inspected
by any stockholder who is present. The stock ledger of the Corporation shall be
the only evidence as to who are the stockholders entitled to examine the
ledger, the list required by this Section 8 of Article II or the books of the
Corporation, or to vote in person or by proxy at any meeting of stockholders.
SECTION 9. ADDRESS OF STOCKHOLDERS. Each stockholder shall
designate to the Secretary of the Corporation an address at
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which notices of meetings and all other corporate notices may be served upon or
mailed to him, and if any stockholder shall fail to designate such address,
corporate notices may be served upon him by mail directed to him at his last
known post office address.
SECTION 10. FIXING DATE FOR DETERMINATION OF STOCKHOLDERS OF
RECORD. In order that the Corporation may determine the stockholders entitled
to notice of or to vote at any meeting of stockholders or any adjournment
thereof, to express consent to corporate action in writing without a meeting,
to receive payment of any dividend or other distribution or allotment of any
rights, to exercise any rights in respect of any change, conversion or exchange
of stock or for the purpose of any other lawful action, the Board of Directors
may fix, in advance, a record date which shall not be more than sixty (60) nor
less than ten (10) days before the date of such meeting, nor more than sixty
days (60) prior to any other action, and only such stockholders as shall be
stockholders of record on the date so fixed shall be entitled to such notice of
and to vote at such meeting and any adjournment thereof, to express consent to
any such corporate action, to receive payment of such dividend or to receive
such allotment of rights, or to exercise such rights, as the case may be,
notwithstanding any transfer of any stock on the books of the Corporation after
any such record date fixed as aforesaid. If the stock transfer books are to be
closed for the purpose of determining stockholders entitled to notice of or to
vote at a meeting in the case of a merger or consolidation, the books shall be
closed at least twenty days before such meeting.
SECTION 11. INSPECTORS OF ELECTION. The Board of Directors
may at any time appoint one or more persons to serve as Inspectors of Election
at the next succeeding annual meeting of stockholders or at any other meeting
or meetings and the Board of Directors may at any time fill any vacancy in the
office of Inspector. If the Board of Directors fails to appoint Inspectors or
this office becomes vacant and is not filled by the Board of Directors, the
Chairman of any meeting of the stockholders may appoint one or more temporary
Inspectors for such meeting. All proxies shall be filed with the Inspectors for
such meeting. All proxies shall be filed with the Inspectors of Election of the
meeting before being voted upon.
SECTION 12. ACTION BY CONSENT. Unless otherwise provided in
the Certificate of Incorporation or restricted by the rules of the National
Association of Securities Dealers, Inc., any action required to be taken at any
meeting of stockholders, or any action which may be taken at any meeting of
such stockholders, may be taken without a meeting, without prior notice and
without a vote, if a consent in writing, setting forth the action so taken,
shall be signed by the holders of outstanding stock having not less than the
minimum number of votes that would be necessary to authorize or take such
action at a meeting at which all shares entitled to vote thereon were
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present and voted and shall be delivered to the Corporation by delivery to its
registered office in the State of Delaware, its principal place of business, or
an officer or agent of the Corporation having custody of the book in which
proceedings of meetings of stockholders are recorded. Delivery made to the
Corporation's registered office shall be by hand or by certified or registered
mail, return receipt requested. Prompt notice of the taking of the corporate
action without a meeting by less than unanimous written consent shall be given
to those stockholders who have not consented in writing. Action taken pursuant
to this paragraph shall be subject to the provisions of Section 228 of the
General Corporation Law.
ARTICLE III
BOARD OF DIRECTORS
SECTION 1. GENERAL POWERS. The property, affairs and business
of the Corporation shall be managed by or under the direction of the Board of
Directors. Any business may be transacted and any corporate action may be taken
at any regular or special meeting of the Board of Directors at which a quorum
shall be present, whether such business or proposed action be stated in the
notice of such meeting or not, unless special notice of such business or
proposed action shall be required by statute. The Board of Directors shall have
the power and authority to authorize the officers of the Corporation to enter
into such agreements as the Board of Directors shall deem appropriate including
the power and authority to authorize the seal of the Corporation to be affixed
to all papers that may require it.
SECTION 2. NUMBER, QUALIFICATION AND TERM OF OFFICE. The
number of directors shall be at least two and not more than twelve, except as
may otherwise be provided in the Certificate of Incorporation of the
Corporation. Directors need not be stockholders. The directors shall be elected
by the stockholders at the annual meeting of stockholders. Each director chosen
at an annual meeting shall, except as hereinafter provided, hold office until
the next annual election and until his successor shall have been elected and
shall qualify, or until his death or until he shall resign or shall have been
removed in the manner hereinafter provided. The Chairman of the Board, if one
be elected, and the Vice Chairman of the Board, if one be elected, shall be
chosen from among the directors. The number of directors may be increased or
decreased by action of the directors.
SECTION 3. QUORUM AND MANNER OF ACTION. Except as otherwise
provided by law or these By-Laws, a majority of the entire Board of Directors
shall be required to constitute a quorum for the transaction of business at any
meeting. At any meeting at which a quorum is present, the vote of a majority of
the members present shall be the act of the Board of Directors unless the act
of a greater number is specifically required by
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law or by the Certificate of Incorporation or these By-Laws. In the absence of
a quorum, a majority of the directors present may adjourn any meeting from time
to time until a quorum be had. Notice of any adjourned meeting need not be
given. The directors shall act only as a board and individual directors shall
have no power as such.
SECTION 4. NOTICE AND PLACE OF MEETINGS. The Board of
Directors may hold its meetings, have one or more offices and keep the books
and records of the Corporation at such place or places within or without the
State of Delaware as the Board may from time to time determine or as shall be
specified or fixed in the respective notices or waivers of notice thereof.
Notice of any special meeting, and, except as the Board of Directors may
otherwise determine by resolution, notice of any regular meeting also, shall be
mailed to each director addressed to him at his residence or usual place of
business at least three days before the day on which the meeting is to be held,
or if delivered to him personally, or transmitted by telecopies, overnight
mail, telegraph, cable, wireless, telephone or orally, not later than
twenty-four hours before the day on which the meeting is to be held. No notice
of the annual meeting of the Board of Directors shall be required if it is held
immediately after the annual meeting of the stockholders and if a quorum is
present.
SECTION 5. REGULAR MEETINGS. A regular meeting of the Board
of Directors shall be held for the election of officers and the transaction of
other business as soon as practicable after each annual meeting of
stockholders, and other regular meetings of said Board shall be held at such
times and places as said Board shall direct.
SECTION 6. SPECIAL MEETINGS. Special meetings of the Board of
Directors may be called by the Chairman of the Board of Directors or by the
President.
SECTION 7. ACTION BY CONSENT. Any action required or
permitted to be taken at any meeting of the Board or of any committee thereof
may be taken without a meeting, if a written consent thereto is signed by all
members of the Board or of such committee, as the case may be, and such written
consent is filed with the minutes of proceedings of the Board or committee.
SECTION 8. CONDUCT. At each meeting of the Board of
Directors, the Chairman of the Board or in his absence, the Vice Chairman of
the Board, or in his absence, the President, or in his absence or non-election,
a director chosen by a majority of the directors present shall act as Chairman.
The Secretary or, in his absence, an Assistant Secretary or, in the absence of
both the Secretary and an Assistant Secretary, any person appointed by the
Chairman shall act as Secretary of the meeting.
SECTION 9. RESIGNATIONS. Any director of the Corporation may
resign at any time by giving written notice to
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the Board of Directors, the President or the Secretary of the Corporation. The
resignation of any director shall take effect at the time specified therein;
and unless otherwise specified therein, the acceptance of such resignation
shall not be necessary to make it effective.
SECTION 10. REMOVAL OF DIRECTORS. Except as otherwise
provided by law, any director may be removed with or without cause, by the
affirmative vote of a majority of the shares of capital stock entitled to vote,
either by written consent or by consents or at any special meeting of the
stockholders called for that purpose, and the office of such director shall
forthwith become vacant.
SECTION 11. VACANCIES. Any vacancy in the Board of Directors
caused by death, resignation, removal, disqualification, an increase in the
number of directors or any other cause shall be filled by a majority of the
directors then in office, though less than a quorum, or by a sole remaining
director, provided, however, that the stockholders removing any director may at
the same meeting fill the vacancy caused by such removal, and provided,
further, that if the directors fail to fill any such vacancy, the stockholders
may at any special meeting called for that purpose fill such vacancy. Directors
chosen in accordance with this Section 11 of Article III shall hold office
until the next annual election of directors and until their successors are duly
elected and qualified, or until their earlier resignation or removal.
SECTION 12. COMPENSATION OF DIRECTORS. The directors shall
not receive any stated salary for their services as directors. However,
directors may receive such reasonable sums for their services and expenses as
may be directed by resolution of the Board; provided that nothing herein
contained shall be construed to preclude any director from serving the
Corporation in any other capacity and receiving compensation therefor. Members
of special or standing committees may be allowed like compensation for their
services and expenses.
SECTION 13. PARTICIPATION IN MEETINGS. Members of the Board
of Directors or of any committee may participate in any meeting of the Board or
committee, as the case may be, by means of conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other, and such participation shall constitute presence
in person at such meeting.
SECTION 14. INTERESTED DIRECTORS. No contract or transaction
between the Corporation and one or more of its directors or officers, or
between the Corporation and any other corporation, partnership, association, or
other organization in which one or more of its directors or officers are
directors or officers, or have a financial interest, shall be void or voidable
solely for this reason, or solely because the director or officer
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is present at or participates in the meeting of the Board of Directors or
committee thereof which authorizes the contract or transaction, or solely
because his or their votes are counted by such purpose if (i) the material
facts as to his or their relationship or interest and as to the contract or
transaction are disclosed or are known to the Board of Directors or the
committee, and the Board of Directors or committee in good faith authorizes the
contract or transaction by the affirmative votes of a majority of the
disinterested directors, even though the disinterested directors be less than a
quorum; or (ii) the material facts to his or their relationship or interest and
as to the contract or transaction are disclosed or are known to the
stockholders entitled to vote thereon, and the contract or transaction is
specifically approved in good faith by vote of the stockholders; or (iii) the
contract or transaction is fair as to the Corporation as of the time it is
authorized, approved or ratified, by the Board of Directors, a committee
thereof or the stockholders. Common or interested directors may be counted in
determining the presence of a quorum at a meeting of the Board of Directors or
of a committee which authorizes the contract or transaction.
ARTICLE IV
COMMITTEES
SECTION 1. EXECUTIVE COMMITTEE. The Board of Directors may,
by resolution passed by a majority of the whole Board, designate two or more of
their number to constitute an Executive Committee to hold office at the
pleasure of the Board, which Committee shall, during the intervals between
meetings of the Board of Directors, have and exercise all of the powers of the
Board of Directors in the management of the business and affairs of the
Corporation, subject only to such restrictions or limitations as the Board of
Directors may from time to time specify, or as limited by the Delaware
Corporation Law, and shall have power to authorize the seal of the Corporation
to be affixed to all papers which may require it.
Any member of the Executive Committee may be removed at any time, with or
without cause, by a resolution of a majority of the whole Board of Directors.
Any person ceasing to be a director shall ipso facto cease to be a member of
the Executive Committee.
Any vacancy in the Executive Committee occurring from any cause whatsoever may
be filled from among the directors by a resolution of a majority of the whole
Board of Directors.
SECTION 2. AUDIT COMMITTEE. The Board of Directors shall, by
resolution passed by a majority of the whole Board,
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designate two or more of their number to constitute an Audit Committee.
Any member of the Audit Committee may be removed at any time, with or without
cause, by a resolution of a majority of the whole Board of Directors.
Any person ceasing to be a director shall ipso facto cease to be a member of
the Executive Committee.
Any vacancy in the Audit Committee occurring from any cause whatsoever may be
filled from among the directors by a resolution of a majority of the whole
Board of Directors.
SECTION 3. OTHER COMMITTEES. Other committees, whose members
need not be directors, may be appointed by the Board of Directors or the
Executive Committee, which committees shall hold office for such time and have
such powers and perform such duties as may from time to time be assigned to
them by the Board of Directors or the Executive Committee.
Any member of such a committee may be removed at any time, with or without
cause, by the Board of Directors or the Executive Committee. Any vacancy in a
committee occurring from any cause whatsoever may be filled by the Board of
Directors or the Executive Committee.
SECTION 4. RESIGNATION. Any member of a committee may resign
at any time. Such resignation shall be made in writing and shall take effect at
the time specified therein, or, if no time be specified, at the time of its
receipt by the President or Secretary. The acceptance of a resignation shall
not be necessary to make it effective unless so specified therein.
SECTION 5. QUORUM. A majority of the members of a committee
shall constitute a quorum. The act of a majority of the members of a committee
present at any meeting at which a quorum is present shall be the act of such
committee. The members of a committee shall act only as a committee, and the
individual members thereof shall not have any powers as such.
SECTION 6. RECORD OF PROCEEDINGS, ETC. Each committee shall
keep a record of its acts and proceedings, and shall report the same to the
Board of Directors when and as required by the Board of Directors.
SECTION 7. ORGANIZATION, MEETINGS, NOTICES, ETC. A committee
may hold its meetings at the principal office of the Corporation, or at any
other place which a majority of the committee may at any time agree upon. Each
committee may make such rules as it may deem expedient for the regulation and
carrying on of its meetings and proceedings. Unless otherwise ordered by the
Executive Committee, any notice of a meeting of
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such committee may be given by the Secretary of the Corporation or by the
chairman of the committee and shall be sufficiently given if mailed to each
member at his residence or usual place of business at least two days before the
day on which the meeting is to be held, or if sent to him by telegraph, cable,
wireless, telephone or orally not later than twenty-four hours before the time
at which the meeting is to be held.
SECTION 8. COMPENSATION. The members of any committee shall
be entitled to such compensation as may be allowed them by resolution of the
Board of Directors.
ARTICLE V
OFFICERS
SECTION 1. NUMBER. The officers of the Corporation shall be a
Chairman of the Board, a Vice Chairman of the Board, a Chief Executive Officer,
a Chief Financial Officer and a Secretary. In addition, the Board may elect one
or more Vice Presidents, Treasurers, Assistant Treasurers, Assistant
Secretaries and such other officers as may be appointed in accordance with the
provisions of Section 3 of this Article V. Any number of offices may be held by
the same person, as the directors may determine.
SECTION 2. ELECTION, TERM OF OFFICE AND QUALIFICATIONS. The
officers, except as provided in Section 3 of this Article V, shall be elected
annually by the Board of Directors at their first meeting after each annual
meeting of the stockholders of the Corporation. Each officer, except such
officers as may be appointed in accordance with the provisions of Section 3 of
this Article V, shall hold office until his successor shall have been duly
elected and qualified, or until his death or until he shall have resigned or
shall have become disqualified or shall have been removed in the manner
hereinafter provided.
SECTION 3. SUBORDINATE OFFICER. The Board of Directors or the
Chief Executive Officer may from time to time appoint such other officers
(including, without limitation, a Treasurer, Assistant Treasurers, or Assistant
Secretaries), and such agents and employees of the Corporation as may be deemed
necessary or desirable. Such officers, agents and employees shall hold office
for such period and upon such terms and conditions, have such authority and
perform such duties as provided in these By-Laws or as the Board of Directors
or the Chief Executive Officer may from time to time prescribe. The Board of
Directors or the Chief Executive Officer may from time to time authorize any
officer to appoint and remove agents and employees and to prescribe the powers
and duties thereof.
SECTION 4. REMOVAL. Any officer of the Corporation may be
removed, either with or without cause, by the affirmative vote of a majority of
the Board of Directors.
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SECTION 5. RESIGNATIONS. Any officer may resign at any time
by giving written notice to the Board of Directors, the Chief Executive Officer
or the Secretary. Any such resignation shall take effect at the date of receipt
of such notice or at any later time specified therein; and unless otherwise
specified therein, the acceptance of such resignation shall not be necessary to
make it effective.
SECTION 6. VACANCIES. A vacancy in any office because of
death, resignation, removal, disqualification or any other cause shall be
filled for the unexpired portion of the term in the manner prescribed in these
By-Laws for regular election or appointment to such office.
SECTION 7. CHAIRMAN OF THE BOARD. The Chairman of the Board
shall be the Chief Executive Officer of the Corporation and shall preside, if
present, at all meetings of the stockholders and shall preside, if present, at
all meetings of the stockholders and at all meetings of the Board of Directors
and shall perform such other duties and have such other powers as from time to
time may be assigned by the Board of Directors or prescribed by these By-Laws.
SECTION 8. VICE CHAIRMAN OF THE BOARD. The Vice Chairman of
the Board shall, at the request of the Chairman of the Board or in his absence
or disability, perform the duties of the Chairman of the Board and when so
acting shall, have all the powers of, and be subject to all restrictions upon,
the Chairman of the Board and shall perform such other duties and have such
other powers as from time to time may be assigned to him by the Chairman of the
Board or prescribed by these By-Laws.
SECTION 9. CHIEF EXECUTIVE OFFICER. The Chief Executive
Officer shall have general direction of the affairs of the Corporation and
general supervision over its several officers, subject, however, to the control
of the Board of Directors, and in general shall perform such duties and,
subject to the other provisions of these By-Laws, have such powers incident to
the office of Chief Executive Officer and perform such other duties and have
such other powers as from time to time may be assigned to him by the Board of
Directors.
SECTION 10. CHIEF FINANCIAL OFFICER. The Chief Financial
Officer shall be responsible to the Board of Directors and the Chief Executive
Officer for all financial control and internal audit of the Corporation and its
subsidiaries. He shall perform such other duties as may be assigned to him by
the Board of Directors, the Chief Executive Officer or prescribed by these
By-Laws, and shall be responsible to a designated Vice President only for the
routine administrative matters pertaining to the duties of his office. The
Chief Financial Officer shall, in the absence of an appointed Treasurer,
perform the duties and functions of the Treasurer.
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SECTION 11. VICE PRESIDENT. A Vice President may sign with
the Chief Financial Officer or the Secretary or an Assistant Secretary
certificates of stock of the Corporation and shall have such other powers and
shall perform such other duties as from time to time may be assigned to him by
the Board of Directors or the Chief Executive Officer or prescribed by these
By-Laws.
SECTION 12. SECRETARY. The Secretary shall keep or cause to
be kept, in books provided for the purpose, the minutes of the meetings of the
stockholders, the Board of Directors and any committee when so required, shall
see that all notices are duly given in accordance with the provisions of these
By-Laws and as required by law, shall be custodian of the records and the seal
of the Corporation and see that the seal is affixed to all documents, the
execution of which on behalf of the Corporation under its seal is duly
authorized in accordance with the provisions of these By-Laws, shall keep or
cause to be kept a register of the post office address of each stockholder, may
sign with the Chairman of the Board, the Chief Executive Officer or any Vice
President certificates of stock of the Corporation, and in general shall
perform such duties and have such powers incident to the office of Secretary
and shall perform such other duties and have such other powers as from time to
time may be assigned to him by the Board of Directors or the Chief Executive
Officer or prescribed by these By-Laws.
SECTION 13. ASSISTANT SECRETARY. Any Assistant Secretary
shall, at the request of the Secretary or in his absence or disability, perform
the duties of the Secretary and when so acting shall have all the powers of,
and be subject to all the restrictions upon, the Secretary and shall perform
such other duties and have such other powers as from time to time may be
assigned to him by the Chief Executive Officer, the Secretary or the Board of
Directors or prescribed by these By-Laws.
SECTION 14. TREASURER. The Treasurer, if any, shall have
charge and custody of, and be responsible for, all funds and securities of the
Corporation, and deposit all such funds in the name of the Corporation in such
banks, trust companies or other depositories as shall be selected in accordance
with the provisions of these By-Laws, shall at all reasonable times exhibit his
books of account and records, and cause to be exhibited the books of account
and records of any corporation controlled by the Corporation to any of the
directors of the Corporation upon application during business hours at the
office of the Corporation, or such other corporation, where such books and
records are kept, shall, if called upon to do so, receive and give receipts for
monies due and payable to the Corporation from any source whatsoever, may sign
with the Chairman of the Board, the Chief Executive Officer or any Vice
President certificates of stock of the Corporation, and in general shall
perform such duties and have such powers incident to the office of Treasurer
and such other duties and have such other powers as from time to
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time may be assigned to him by the Board of Directors or the Chief Executive
Officer or prescribed by these By-Laws.
SECTION 15. ASSISTANT TREASURER. Any Assistant Treasurer
shall, at the request of the Treasurer or in his absence or disability, perform
the duties of the Treasurer and when so acting shall have all the powers of,
and be subject to all the restrictions upon, the Treasurer and shall perform
such duties and have such other powers as from time to time may be assigned to
him by the Chief Executive Officer, the Treasurer or the Board of Directors or
prescribed by these By-Laws.
SECTION 16. OTHER OFFICERS. Such officers as the Board of
Directors may choose shall perform such duties and have such powers as may be
appropriate to such officer or as from time to time may be assigned to them by
the Board of Directors. The Board of Directors may delegate to any other
officer of the Corporation the power to choose such other officers and to
prescribe their respective duties and powers.
SECTION 17. COMPENSATION. The compensation of the officers
shall be fixed from time to time by the Board of Directors, or by any committee
upon whom power in that regard may be conferred by the Board of Directors. No
officer shall be prevented from receiving such compensation by reason of the
fact that he is also a director of the Corporation.
SECTION 18. AUTHORITY OF OFFICERS. The officers of the
Corporation shall have such duties and authority as set forth in these By-Laws
and as shall be determined from time to time by the Board of Directors.
ARTICLE VI.
CAPITAL STOCK
SECTION 1. ISSUE OF CERTIFICATES OF STOCK. Certificates for
shares of the capital stock of the Corporation shall be in such form not
inconsistent with law as shall be approved by the Board of Directors. They
shall be numbered in order of their issue and shall be signed by the Chairman
of the Board or the Chief Executive Officer or any Vice President and the
Treasurer or any Assistant Treasurer, or the Secretary or any Assistant
Secretary of the Corporation, and the seal of the Corporation or a facsimile
thereof shall be impressed or affixed or reproduced thereon, provided, however,
that where such certificates are signed by a transfer agent or an assistant
transfer agent or by a transfer clerk acting on behalf of the Corporation and a
registrar, the signature of any such Chairman of the Board, Chief Executive
Officer, Vice President, Treasurer, Assistant Treasurer, Secretary or Assistant
Secretary may be facsimile. In case any officer, transfer agent or registrar
who shall have signed or whose facsimile signature shall have been placed upon
any such certificate or certificates shall cease to be such officer or officers
of the Corporation, whether because
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of death, resignation or otherwise, before such certificate or certificates
shall have been delivered by the Corporation, such certificate or certificates
may nevertheless be adopted by the Corporation and be issued and delivered as
though the person or persons who signed such certificate or certificates or
whose facsimile signature shall have been used thereon had not ceased to be
such officer or officers of the Corporation.
SECTION 2. UNCERTIFIED SHARES. Subject to any conditions
imposed by the Delaware General Corporation Law, the Board of Directors of the
Corporation may provide by resolution or resolutions that some or all of any or
all classes or series of the stock of the Corporation shall be uncertified
shares. Within a reasonable time after the issuance or transfer of any
uncertified shares, the Corporation shall send to the registered owner thereof
any written notice prescribed by the General Corporation Law.
SECTION 3. FRACTIONAL SHARE INTERESTS. The Corporation may,
but shall not be required to, issue fractions of a share. If the Corporation
does not issue fractions of a share, it shall (i) arrange for the disposition
of fractional interests by those entitled thereto, (2) pay in cash the fair
value of fractions of a share as of the time when those entitled to receive
such fractions are determined, or (3) issue scrip or warrants in registered
form (either represented by a certificate or uncertificated) or bearer form
(represented by a certificate) which shall entitle the holder to receive a full
share upon the surrender of such scrip or warrants aggregating a full share. A
certificate for a fractional share or an uncertificated fractional share shall,
but scrip or warrants shall not unless otherwise provided therein, entitle the
holder to exercise voting rights, to receive dividends thereon, and to
participate in any of the assets of the corporation in the event of
liquidation. The Board of Directors may cause scrip or warrants to be issued
subject to the conditions that they shall become void if not exchanged for
certificates representing the full shares or uncertificated full shares before
a specified date, or subject to the conditions that the shares for which scrip
or warrants are exchangeable may be sold by the Corporation and the proceeds
thereof distributed to the holders of scrip or warrants, or subject to any
other conditions which the Board of Directors may impose.
SECTION 4. REGISTRATION AND TRANSFER OF STOCK. The shares of
capital stock of the Corporation shall be issued in registered form. The name
of each person owning a share of the capital stock of the Corporation shall be
entered on the books of the Corporation together with the number of shares held
by him, the numbers of the certificates covering such shares and the dates of
issue of such certificates. The shares of stock of the Corporation shall be
transferable on the books of the Corporation by the holders thereof in person,
or by their duly authorized attorneys or legal representatives, on surrender
and cancellation
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of certificates for a like number of shares, accompanied by an assignment or
power of transfer endorsed thereon or attached thereto, duly executed, and with
such proof of the authenticity of the signature as the Corporation or its
agents may reasonably require. A record shall be made of each transfer. A
person in whose name shares of stock stand on the books of the Corporation
shall be deemed the owner thereof as regards the Corporation, and the
Corporation shall not be bound to recognize any equitable or other claim to or
interest in such shares on the part of any other person, whether or not it
shall have express or other notice thereof, except as otherwise provided by the
laws of the State of Delaware.
SECTION 5. LOST, STOLEN AND DESTROYED CERTIFICATES. The
holder of any stock issued by the Corporation shall immediately notify the
Corporation of any loss, theft, or destruction of the certificate therefor or
the failure to receive a certificate of stock issued by the Corporation, and
the Board of Directors or the Secretary of the Corporation may, in its or his
discretion, cause to be issued to such holder a new certificate or certificates
of stock, upon compliance with such rules, regulations and/or procedures as may
be prescribed or have been prescribed by the Board of Directors with respect to
the issuance of new certificates in lieu of such lost, stolen or destroyed
certificate or certificates of stock issued by the Corporation which are not
received. The Board of Directors or the Secretary of the Corporation may, in
its or his discretion, require the owner of the lost, stolen or destroyed
certificate, or his legal representatives, to give the Corporation a bond, in
such sum not exceeding double the value of the stock and with such surety or
sureties as they may require, to indemnify it against any claim that may be
made against it by reason of the issue of such new certificate and against all
other liability in the premises, or may remit such owner to such remedy or
remedies as he may have under the laws of the State of Delaware.
SECTION 6. TRANSFER AGENT AND REGISTRAR; REGULATIONS. The
Corporation shall, if and whenever the Board of Directors shall so determine,
maintain one or more transfer offices or agencies, each in the charge of a
transfer agent designated by the Board of Directors, where the shares of the
capital stock of the Corporation shall be directly transferable, and also one
or more registry offices, each in the charge of a registrar designated by the
Board of Directors, where such shares of stock shall be registered, and no
certificate for shares of the capital stock of the Corporation, in respect of
which a Registrar and/or Transfer Agent shall have been designated, shall be
valid unless countersigned by such Transfer Agent and registered by such
Registrar, if any. The Board of Directors shall also make such additional rules
and regulations as it may deem expedient concerning the issue, transfer and
registration of certificates for shares of the capital stock of the
Corporation.
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SECTION 7. BENEFICIAL OWNERS. The Corporation shall be
entitled to recognize the exclusive right of a person registered on its books
as the owner of shares to receive dividends, and to vote as such owner, and to
hold liable for calls and assessments a person registered on its books as the
owner of shares, and shall not be bound to recognize any equitable or other
claim to or whether or not it shall have express or other notice thereof,
except as otherwise provided by law.
SECTION 8. STOCKHOLDER APPROVALS. Except as otherwise
expressly required by law, any stock option or purchase plan pursuant to which
stock may be acquired by officers or directors of the Company must be approved
by the affirmative vote of a majority of the outstanding shares entitled to
vote thereon, provided that, where such option or purchase plan applies
generally to security holders of the Company or broadly to other employees of
the Company, stockholder approval shall not be required.
ARTICLE VII
DIVIDENDS, SURPLUS, ETC.
SECTION 1. GENERAL DISCRETION TO DIRECTORS. The Board of
Directors shall have power to fix and vary the amount to be set aside or
reserved as working capital of the Corporation, or as reserves, or for other
proper purposes of the Corporation, and, subject to the requirements of the
Certificate of Incorporation, to determine whether any, if any, part of the
surplus or net profits of the Corporation shall be declared as dividends and
paid to the stockholders, and to fix the date or dates for the payment of
dividends.
ARTICLE VIII
GENERAL PROVISIONS
SECTION 1. FISCAL YEAR. The fiscal year of the Corporation
shall commence on the first day of January and end on the last day of December.
SECTION 2. NOTICE. Except as otherwise expressly provided,
any notice required by these By-Laws to be given shall be sufficient if given
by depositing the same in a post office or letter box in a sealed postpaid
wrapper addressed to the person entitled thereto at his address, as the same
appears upon the books of the Corporation, or by telegraphing or cabling the
same to such person at such addresses; and such notice shall be deemed to be
given at the time it is mailed, telegraphed or cabled.
SECTION 3. WAIVERS OF NOTICE. Whenever any notice of any
nature is required by law, the provisions of the Certificate of Incorporation
or these By-Laws to be given, a waiver thereof in writing, signed by the person
or persons entitled to said
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notice, whether before or after the time stated therein, shall be deemed
equivalent thereto.
SECTION 4. QUALIFYING IN FOREIGN JURISDICTION. The Board of
Directors shall have the power at any time and from time to time to take or
cause to be taken any and all measures which they may deem necessary for
qualification to do business as a foreign corporation in any one or more
foreign jurisdictions and for withdrawal therefrom.
SECTION 5. PROXIES. Except as otherwise provided in these
By-Laws or in the Certificate of Incorporation of the Corporation, and unless
otherwise provided by resolution of the Board of Directors, the Chairman of the
Board may appoint from time to time an attorney or attorneys, or agent or
agents, of the Corporation, on behalf and in the name of the Corporation, to
cast the votes which the Corporation may be entitled to cast as a stockholder
or otherwise in any other corporation any of whose stock or other securities
may be held by the Corporation, at meetings of the holders of the stock or
other securities of such other corporation, or to consent in writing to any
action by such other corporation, and may instruct the person or persons so
appointed as to the manner of casting such votes or giving such consent, and
may execute or cause to be executed on behalf and in the name of the
Corporation and under its corporate seal, or otherwise, all such written
proxies or other instruments as he may deem necessary or proper in the
premises.
SECTION 6. CORPORATE SEAL. The Board of Directors shall
provide a suitable seal containing the name of the Corporation, which seal
shall be in the charge of the Secretary and which may be used by causing it or
a facsimile thereof to be impressed or affixed or reproduced or otherwise. If
and when so directed by the Board of Directors, a duplicate of the seal may be
kept and be used by an officer of the Corporation designated by the Board.
SECTION 7. DISBURSEMENTS. All checks, drafts or other orders
for the payment of money, notes or other evidences of indebtedness issued in
the name of the Corporation, shall be signed by such officer or officers, agent
or agents of the Corporation, and in such manner, as shall from time to time be
designated by resolution of the Board of Directors.
SECTION 8. DEPOSITS. All funds of the Corporation shall be
deposited from time to time to the credit of the Corporation in such bank or
banks, trust companies or other depositories as the Board of Directors may
select, and, for the purpose of such deposit, checks, drafts, warrants and
other orders for the payment of money which are payable to the order of the
Corporation, may be endorsed for deposit, assigned and delivered by any officer
of the Corporation, or by such agents of the Corporation as the Board of
Directors or the Chairman of the Board may authorize for that purpose.
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ARTICLE IX
INDEMNIFICATION
SECTION 1. POWER TO INDEMNIFY IN ACTIONS, SUITS OR
PROCEEDINGS OTHER THAN THOSE BY OR IN THE RIGHT OF THE CORPORATION. Subject to
Section 3 of this Article IX, the Corporation shall indemnify any person (to
the full extent permitted by the laws of the State of Delaware, as amended from
time to time) 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
administrative or investigative (other than an action by or in the right of the
Corporation) by reason of the fact that he is or was a director, officer,
employee or agent of the Corporation, or is or was serving at the request of
the Corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust, employee benefit plan, or other
enterprise, against expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by him in
connection with such action, suit or proceeding if he acted in good faith and
in a manner he 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. The
termination of any action, suit or proceeding by judgment, order, settlement,
conviction, or upon a plea of nolo contendere or its equivalent, shall not, of
itself, create a presumption that the person did not act in good faith and in a
manner which he 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 reasonable cause to believe that his conduct was unlawful.
SECTION 2. POWER TO INDEMNIFY IN ACTIONS, SUITS OR
PROCEEDINGS BY OR IN THE RIGHT OF THE CORPORATION. Subject to Section 3 of this
Article IX, the Corporation shall indemnify any person who was or is a party or
is threatened to be made a party to any threatened, pending or completed action
or suit, proceeding or claim by or in the right of the Corporation to procure a
judgment in its favor by reason of the fact that he is or was a director,
officer, employee or agent of the Corporation, or is or was serving at the
request of the Corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust, employee benefit plan or other
enterprises against expenses (including attorney's fees and expenses) actually
and reasonably incurred by him and to the extent permitted by applicable law in
connection with the defense or settlement of such action or suit if he acted in
good faith and in a manner he reasonably believed to be in or not opposed to
the best interests of the Corporation; except that no indemnification shall be
made in respect of any claim, issue or matter as to which such person shall
have been adjudged to be liable to the Corporation unless and only to the
extent that the Court of Chancery or the court in which such action or suit was
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brought shall determine upon application that, despite the adjudication of
liability but in view of all the circumstances of the case, such person is
fairly and reasonably entitled to indemnification for such expenses and amounts
which the Court of Chancery or such other court shall deem proper.
SECTION 3. AUTHORIZATION OF INDEMNIFICATION. Any
indemnification under this Article IX (unless ordered by a court) shall be made
by the Corporation only as authorized in the specific case upon a determination
that indemnification of the director, officer, employee or agent is proper in
the circumstances because he has met the applicable standard of conduct set
forth in Section 1 or Section 2 of this Article IX, as the case may be. Such
determination and determinations under Section 5 or 6 of this Article IX shall
be made (i) by the Board of Directors by a majority vote of a quorum consisting
of directors who were not parties to such action, suit or proceeding, or (ii)
if such a quorum is not obtainable, or, even if obtainable, a quorum of
disinterested directors so directs, by independent legal counsel in a written
opinion, or (iii) by the stockholders. To the extent, however, that a director
or officer, employee or agent of the Corporation has been successful on the
merits or otherwise in defense of any claim, issue or matter therein, he shall
be indemnified against expenses (including attorneys' fees and expenses)
actually and reasonably incurred by him in connection therewith, without the
necessity of authorization in the specific case.
SECTION 4. GOOD FAITH DEFINED.
(a) For purposes of any determination under Section 3 of
this Article IX, a person shall be deemed to have acted in good faith and in a
manner he reasonably believed to be in or not opposed to the best interests of
the Corporation, or, with respect to any criminal action or proceeding, to have
had no reasonable cause to believe his conduct was unlawful, if his action is
based on the records or books of account of the Corporation or another
enterprise, or on information supplied to him by the officers of the
Corporation or another enterprise or on information or records given or reports
made to the Corporation or another enterprise by an independent certified
public account or by an appraiser or other expert selected with reasonable care
by the Corporation or another enterprise. The term "another enterprise" as used
in this Section 4 shall mean any other corporation or any partnership, joint
venture, trust, employee benefit plan or other enterprise of which such person
is or was serving at the request of the Corporation as a director, officer,
agent or employee.
(b) References in this Article IX to "penalties" include
any excise taxes assessed on a person with respect to an employee benefit plan;
references in this Article IX to "serving at the request of the Corporation"
include any service as a director or officer (or if appropriate an employee or
agent) or
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former director or officer (or if appropriate a former employee or agent) of
the Corporation which imposes duties on, or involves services by, such person
with respect to an employee benefit plan or its participants or beneficiaries;
and a person who acted in good faith and in a manner he reasonably believed to
be in or not opposed to the best interests of the participants or beneficiaries
of such an employee benefit plan shall be deemed to have acted in good faith
and in a manner he reasonably believed to be in or not opposed to the best
interests of the Corporation.
(c) The provisions of this Section 4 shall not be
exclusive or to limit in any way the circumstances in which a person may be
deemed to have met the applicable standard of conduct set forth in Sections 1
or 2 of this Article IX, as the case may be.
SECTION 5. INDEMNIFICATION UPON APPLICATION; PROCEDURE UPON
APPLICATION; ETC. Except as otherwise provided in the proviso to Section 2 of
this Article IX:
(d) Any indemnification under Section 1 or 2 of this
Article IX shall be made no later than 45 days after receipt by the Corporation
of the written request by the director, officer, employee or agent or the
former director, officer, employee or agent, unless a determination is made
within said 45-day period in accordance with Section 3 of this Article IX that
such person has not met the applicable standard of conduct set forth in Section
1 or 2 of this Article IX.
(e) The right to indemnification under Section 1 or 2 of
this Article IX or advances under Section 6 of this Article IX shall be
enforceable by the director, officer, employee or agent or former director,
officer, employee or agent in any court of competent jurisdiction. The burden
of proving that indemnification is not appropriate shall be on the Corporation.
Neither the absence of any prior determination that indemnification is proper
in the circumstances, nor a prior determination that indemnification is not
proper in the circumstance, shall be a defense to the action or create a
presumption that the director or officer, or former director or officer, has
not met the applicable standard of conduct. The expenses (including attorneys'
fees and expenses) incurred by the director, officer, employee or agent in
connection with successfully establishing his right to indemnification, in
whole or in part, in any such action (or in any action or claim brought by him
to recover under any insurance policy or policies referred to in Section 9 of
this Article IX) shall also be indemnified by the Corporation.
(f) If any person is entitled under any provision of
this Article IX to indemnification by the Corporation for some or a portion of
expenses, judgments, fines, penalties or amounts paid in settlement incurred by
him, but not, however, for the total amount thereof, the corporation shall
nevertheless
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indemnify such person for the portion of such expense, judgments, fines,
penalties and amounts to which he is entitled.
SECTION 6. EXPENSES PAYABLE IN ADVANCE. Expenses (including
attorneys' fees and expenses) incurred by an officer, director, employee or
agent or a former officer, director, employee or agent in defending a civil or
criminal action or investigating a threatened or pending action, suit or
proceeding may be paid by the Corporation in advance of the final disposition
of such action, suit or proceeding as authorized by the Board of Directors in
the specific case upon receipt of an undertaking by or on behalf of the
director, officer, employee or agent to repay such amount unless it shall
ultimately be determined that he is entitled to be indemnified by the
Corporation as authorized in this Article IX; provided, however, that if he
seeks to enforce his rights in a court of competent jurisdiction pursuant to
Section 5(b) of this Article IX, said understanding to repay shall not be
applicable or enforceable unless and until there is a final court determination
that he is not entitled to indemnification as to which all rights of approval
have been exhausted or have expired.
SECTION 7. CERTAIN PERSONS NOT ENTITLED TO INDEMNIFICATION.
Notwithstanding any other provision of this Article IX, no person shall be
entitled to indemnification under this Article IX or to advances under Section
6 of this Article IX with respect to any action, suit, proceeding or claim
brought or made by him against the Corporation, other than an action, suit,
proceeding or claim seeking, or defending such person's right to,
indemnification and/or expense advances pursuant to this Article IX or
otherwise.
SECTION 8. NON-EXCLUSIVITY AND SURVIVAL OF INDEMNIFICATION.
The indemnification and advancement of expenses provided by, or granted
pursuant to, this Article IX shall not be deemed exclusive of any other rights
to which those seeking indemnification or advancement of expenses may be
entitled under any By-law, agreement, contract, vote of stockholders or
disinterested directors or pursuant to the direction (howsoever embodied) of
any court of competent jurisdiction or otherwise, both as to action in his
official capacity and as to action in another capacity while holding office, it
being the policy of the Corporation that indemnification and expense advances
to the persons specified in Section 1 and 2 of this Article IX shall be made to
the fullest extent permitted by law and, accordingly, in the event of any
change in law, by legislation or otherwise, permitting greater indemnification
and/or expense advances to any such person, the provisions of this Article IX
shall be construed so as to require such greater indemnification and/or expense
advances. The provisions of this Article IX shall not be deemed to preclude the
indemnification of any person who is not specified in Sections 1 or 2 of this
Article IX but whom the Corporation has the power or obligation to indemnify
under the provisions of the General Corporation Law of the State of
21
<PAGE>
Delaware, or otherwise. The indemnification and advancement of expenses
provided by or granted pursuant to this Article IX shall continue as to a
person who has ceased to be a director or officer (or if appropriate an
employee or agent) and shall inure to the benefit of the heirs, executors and
administrators of such person.
SECTION 9. INSURANCE. The Corporation may purchase and
maintain insurance on behalf of any person who is or was a director, officer,
employee or agent of the Corporation, or is or was serving at the request of
the Corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, employee benefit plan, trust or other
enterprise against any liability asserted against him and incurred by him in
any such capacity, or arising out of his status as such, whether or not the
Corporation would have the power or the obligation to indemnify him against
such liability under the provisions of this Article IX or the provisions of
Section 145 of the General Corporation Law of the State of Delaware. The
Corporation shall not be obligated under this Article IX to make any payment in
connection with any claim made against any person if and to the extent that
such person has actually received payment therefore under any insurance policy
or policies.
SECTION 10. MEANING OF "CORPORATION" FOR PURPOSES OF ARTICLE
IX. For purposes of this Article IX, references to "the Corporation" shall
include, in addition to the resulting corporation, any constituent corporation
(including any constituent of a constituent) absorbed in a consolidation or
merger which, if its separate existence had continued, would have had power and
authority to indemnify its directors, officers, employees or agents, so that
any person who is or was a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, shall stand
in the same position under the provisions of this Article IX with respect to
the resulting or surviving corporation as he would have with respect to such
constituent corporation if its separate existence had continued.
SECTION 11. LIMITATION ON ACTIONS. No legal action shall be
brought and no cause of action shall be asserted by or on behalf of the
Corporation or any affiliate of the Corporation against any person who is or
was a director or officer of the Corporation after the expiration of two years
from the date of accrual of such cause of action, and any claim or cause of
action of the Corporation or its affiliates shall be extinguished and deemed
released unless asserted by the timely filing of a legal action within such
two-year period; provided, however, that if any shorter period of limitations
is otherwise applicable to any such shorter period shall govern.
SECTION 12. SEVERABILITY. The provisions of this Article IX
shall be severable in the event that any provision hereof (including any
provision within a single section,
22
<PAGE>
subsection, clause, paragraph or sentence) is held invalid, void or otherwise
unenforceable on any ground by any court of competent jurisdiction. In the
event of any such holding, the remaining provisions of this Article IX shall
continue in effect and be enforceable to the fullest extent permitted by law.
ARTICLE X.
AMENDMENTS
These By-Laws may be altered, amended or repealed, in whole
or in part, or new By-Laws may be adopted by either the stockholders or by the
Board of Directors, provided, however, that notice of such alteration,
amendment, repeal or adoption of new By-Laws be contained in the notice of such
meeting of stockholders or Board of Directors, as the case may be. All such
amendments must be approved by either the holders of a majority of the
outstanding capital stock entitled to vote thereon or by a majority of the
entire Board of Directors then in office.
23
<PAGE>
EXHIBIT 4.1
[SPECIMEN COMMON STOCK CERTIFICATE]
[FACE OF CERTIFICATE]
COMMON STOCK COMMON STOCK
NUMBER SHARES
[BOLLE LOGO]
INCORPORATED UNDER THE LAWS OF SEE REVERSE FOR
THE STATE OF DELAWARE CERTAIN DEFINITIONS
CUSIP 097937 10 6
This Certifies that
is the owner of
FULLY PAID AND NON-ASSESSABLE SHARES OF THE COMMON STOCK,
PAR VALUE $.01 PER SHARE OF
Bolle Inc. transferable only on the books of the Corporation by the holder
hereof in person or by duly authorized attorney upon surrender of this
certificate properly endorsed
This certificate is not valid unless countersigned by the Transfer
Agent and Registrar.
Witness the facsimile seal of the Corporation and the facsimile
signatures of its duly authorized officers.
Dated: [SEAL OF BOLLE INC.] /s/ Peter H. Trembath
Secretary
Countersigned and Registered:
National City Bank /s/ Martin E. Franklin
(CLEVELAND, OHIO) TRANSFER AGENT Chairman of the Board
AND REGISTRAR
BY
AUTHORIZED SIGNATURE
<PAGE>
[BACK OF CERTIFICATE]
The following abbreviations, when used in the inscription on the face
of this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM - as tenants in common UNIF GIFT MIN ACT - Custodian
------ ------
(Cust) (Minor)
TEN ENT - as tenants by the entireties under Uniform Gifts to Minors
JT TEN - as joint tenants with Act
right of survivorship and ------------
not as tenants in common (State)
Additional abbreviations may also be used though not in the above list.
For Value received,___________________ hereby sell, assign and transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
[ ]
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS OF ASSIGNEE)
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Shares
- -------------------------------------------------------------------------
of the capital stock represented by the within Certificate, and do hereby
irrevocably constitute and appoint
Attorney
- ----------------------------------------------------------------------
to transfer the said stock on the books of the within-named
Corporation with full power of substitution in the premises.
Dated,
------------
NOTICE: THE SIGNATURE(S)
-------------------------------------------
TO THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME AS WRITTEN
UPON THE FACE OF THE CERTIFICATE, IN EVERY PARTICULAR,
WITHOUT ALTERATION OR ENLARGEMENT, OR ANY CHANGE WHATEVER.
SIGNATURE(S) GUARANTEED:
- --------------------------------------------
THE SIGNATURE(S) SHOULD BE GUARANTEED BY AN ELIGIBLE GUARANTOR INSTITUTION,
(BANKS, STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS AND CREDIT UNIONS WITH
MEMBERSHIP IN AN APPROVED SIGNATURE GUARANTEE MEDALLION PROGRAM), PURSUANT TO
S.E.C. RULE 17Ad-15.
<PAGE>
EX 4.3
[TO BE EXECUTED AT CLOSING]
July 9th, 1997
To the Series A
Preferred Stockholders
listed on the signature
pages hereof:
Re: BEC Group, Inc./Acquisition of Bolle
Etablissements S.N.C. ("Bolle France")
--------------------------------------
Gentlemen:
The undersigned is the owner of 1,295,564 shares (the "Shares") of
Common Stock, $.01 par value per share ("Common Stock") of BEC Group, Inc. (the
"Company"). The undersigned understands that the Company intends to acquire all
of the issued and outstanding shares of Bolle France (the "Transactions")
pursuant to the terms of the Share Purchase Agreement (the "Agreement"), dated
June 4, 1997, as amended, among BEC Group, Inc., Bolle Inc. and the Sellers
therein named.
In order to induce you to close the Transactions contemplated in the
Agreement, the undersigned agrees, for the benefit of the Company and you, that
immediately following the closing of the Transactions, the undersigned will
not, without the prior written consent of the holders of at least 90% of the
then outstanding shares of Series A Preferred Stock (the "90% Holders"), sell
any of the Shares owned by the undersigned on the date hereof until the date
that all of the shares of Series A Preferred Stock or the Subordinated Debt (as
defined in the Certificate of Designation of the Series A Preferred Stock as
filed with the Secretary of State of Delaware as of the date hereof (the
"Certificate")) including all accrued but unpaid dividends and/or interest, if
any, are redeemed in full (whether in cash or other cash equivalent accepted by
all of the Holders) by the Company.
Notwithstanding the foregoing, the undersigned may transfer any shares
either (i) to his immediate family members, or (ii) to trusts for his sole
benefit or the sole benefit of such immediate family members and to
partnerships in which such immediate family members and/or trusts are sole
partners; provided, however, that prior to any such transfer, each transferee
shall execute an agreement, whereby each transferee shall agree to receive and
hold such Shares subject to the restrictions set forth herein. In addition, the
undersigned may transfer any Shares (i) on death by Will or intestacy; (ii) to
charitable foundations up to a value of $50,000 per annum; or
<PAGE>
(iii) in transactions involving all the stockholders of the Company on a pro
rata basis, provided, however, that in the event of any such transaction which
results in the undersigned receiving any stock consideration in exchange for
the Shares, in part or in whole, such stock consideration received shall be
subject to the restrictive provisions set forth herein. For the purposes of
this paragraph, "immediate family" shall mean the spouse, lineal descendant,
father, mother, brother or sister of the undersigned.
Notwithstanding anything to the contrary contained herein, in the
event of a partial redemption of the Series A Preferred Stock or Subordinated
Debt, as the case may be, (whether in cash or other cash equivalent accepted by
all of the Holders) the undersigned shall be permitted to sell his Shares on a
pro rata basis in proportion to the aggregate Liquidation Preference (as
defined in the Certificate) of such number of shares of Series A Preferred
Stock redeemed and/or the principal amount of the Subordinated Debt that is
repaid (whether in cash or other cash equivalent accepted by all of the
Holders) compared to the aggregate Liquidation Prefernce of the total number of
shares of such Series A Preferred Stock originally issued.
The undersigned confirms that he understands that the holders of the
Series A Preferred Stock of the Company will rely upon the representations set
forth in this agreement in proceeding with the Transaction. This letter
agreement shall be binding on the undersigned.
Very truly yours,
[by] /s/ Ian G.H. Ashken
Martin E. Franklin
-2-
<PAGE>
The foregoing is accepted and agreed to as of the date first above written:
By: /s/ Robert Bolle
------------------------------------
Robert Bolle
58 Route de Marchon
01100 Oyonnax
By: /s/ Maurice Bolle
------------------------------------
Maurice Bolle
13 Rue Balland
01100 Oyonnax
By: /s/ Franck Bolle
------------------------------------
Franck Bolle
4 Boulevard Dupuy
01100 Oyonnax
By: /s/ Patricia Bolle
------------------------------------
Patricia Bolle
6 Rue du General de Gaulle
01100 Oyonnax
By: /s/ Brigitte Bolle
------------------------------------
Brigitte Bolle
25 Bis, Boulevard de la Saussaye
92200 Neuilly-sur Scinc
By: /s/ Christelle Roche
------------------------------------
Christelle Roche
2 Rue Macretet
01100 Arbent
-3-
<PAGE>
EX 4.4
December 4, 1997
Mr. Robert Bolle
Mr. Maurice Bolle
Mr. Franck Bolle
Mr. Patricia Bolle Passaquay
Ms. Brigitte Bolle
Mrs. Christelle Roche
Re:
Dear Sirs/Madame:
With regard to my letter, dated July 9, 1997, a copy of which is attached
hereto as Exhibit I, please be advised that all representations and agreements
set forth in said letter shall apply both to those shares I own of BEC Group,
Inc. (to be named "Lumen Technologies, Inc., in the future) common stock
referenced therein and shares of common stock of Bolle Inc. I may own hereafter
as a result of the proposed spinoff of Bolle inc.
Very truly yours,
Martin E. Franklin
<PAGE>
EX 4.5
EXECUTION COPY
WARRANT AGREEMENT
This WARRANT AGREEMENT (the "Agreement") dated as of December
__, 1997 is made by and among Bolle Inc., a Delaware corporation having its
executive offices at 555 Theodore Fremd Avenue, Suite B-302, Rye, New York,
10580 USA (the "Company") and Maurice Bolle, Robert Bolle, Franck Bolle,
Patricia Bolle Passaquay, Brigitte Bolle and Christelle Roche, each having a
business address at Rue Tacon, BP 139, Oyonnax, 01104 France (collectively, the
"Warrantholders").
The Company hereby agrees to issue to the Warrantholders,
Stock Purchase Warrants, as hereinafter described (the "Warrants"), to purchase
an aggregate of shares, subject to adjustment as provided for herein (the
"Shares") of common stock, par value $.01 per share of the Company (the "Common
Stock"). The number of Shares that each Warrantholder's Warrant shall obtain
upon exercise in full of such Warrant is set forth in Schedule 1 to this
Agreement. The Warrants shall be issued on the date of this Agreement (the
"Closing Date").
In consideration of the foregoing and for the purpose of
defining the terms and provisions of the Warrants and the respective rights and
obligations thereunder, the Company and the Warrantholders, for value received,
hereby agree as follows:
SECTION 1. TRANSFERABILITY AND FORM OF WARRANTS.
1.1. Registration. The Warrants shall be numbered and shall
be registered on the books of the Company when issued.
1.2. Transfer. The Warrants shall be transferable only on the
books of the Company maintained at its principal office in Rye, New York, USA
or wherever its principal executive offices may then be located upon delivery
thereof duly endorsed by the Warrantholder or by its duly authorized attorney
or representative, or accompanied by proper evidence of succession, assignment
or authority to transfer. Upon any registration of transfer, the Company shall
execute and deliver a new Warrant to the person entitled thereto. Subject to
the limitations set forth in Section 1.3 below, the Warrants may be sold,
transferred or otherwise disposed of by the Warrantholders at any time during
the period commencing at 9:00 a.m. New York City Time on July ___, 1999 (the
"Exercisability Date") and ending at 5:00 p.m. New York City Time on July ___,
2001 (the "Termination Date"); provided, however, that the Warrants may be
pledged at any time after the Closing Date, subject to compliance with all
applicable laws.
1.3. Limitations on Transfer of the Warrants. The Warrants
may not be sold, transferred, or otherwise disposed of by the Warrantholders in
the absence of registration of the Warrant under the Securities Act of 1933, as
amended (the "Securities Act"), and state securities laws, or an exemption
therefrom. A Warrant shall be divided or combined, upon request to the Company,
by the Warrantholder, into a certificate or certificates representing the right
to purchase the same, aggregate number of Shares purchasable under the Warrant.
Unless the context indicates otherwise, the term "Warrantholder" shall include
any transferee or transferees of the
<PAGE>
Warrants pursuant to this subsection 1.3, and the term "Warrant" shall include
any and all warrants outstanding pursuant to this Agreement, including those
evidenced by a certificate or certificates issued upon division, exchange,
substitution or transfer pursuant to this Agreement.
1.4. Form of Warrants.
(a) The text of the Warrants and the form of election to
purchase Shares shall be substantially as set forth in Exhibit A
attached hereto. The price per Share and the number of Shares issuable
upon exercise of the Warrant are subject to adjustment upon the
occurrence of certain events, all as hereinafter provided. The
Warrants shall be executed on behalf of the Company by its President
or a Vice President.
(b) A Warrant bearing the signature of an individual who was
at any time the proper officer of the Company shall bind the Company,
notwithstanding that such individual shall have ceased to hold such
office prior to the delivery of such Warrant or did not hold such
office on the date of this Agreement.
(c) The Warrant shall be dated as of the date of signature
thereof by the Company either upon initial issuance or upon division,
exchange, substitution or transfer.
1.5. Legend on Warrants and Share Certificates. The Warrants
and each certificate for Shares initially issued upon exercise of the Warrants,
shall bear the following legend:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), OR ANY STATE SECURITIES LAW. SUCH
SECURITIES MAY NOT BE SOLD, ASSIGNED, TRANSFERRED, EXCHANGED,
MORTGAGED, PLEDGED OR OTHERWISE DISPOSED OF OR ENCUMBERED
WITHOUT COMPLIANCE WITH THE SECURITIES ACT AND STATE
SECURITIES LAWS."
Any Warrant or certificate issued at anytime in exchange or substitution for
any Warrant or certificate bearing such legend shall also bear the above legend
unless, in the opinion of Willkie Farr & Gallagher or such other counsel as
shall be reasonably approved by the Company, the securities represented thereby
need no longer be subject to such restrictions.
SECTION 2. EXCHANGE OF WARRANT CERTIFICATE.
Any Warrant certificate may be exchanged without expense to
the Warrantholder (other than for the payment of any taxes associated with such
exchange) for another Warrant certificate or certificates entitling the
Warrantholder to purchase a like aggregate number of Shares as the Warrant
certificate or certificates surrendered then entitling such Warrantholder to
purchase. Any Warrantholder desiring to exchange a Warrant certificate shall
make such request in writing delivered to the Company, and shall surrender,
properly endorsed, the certificate evidencing the Warrant to be so exchanged.
Thereupon, the Company shall execute and deliver
-2-
<PAGE>
to the person entitled thereto a new Warrant certificate as so requested.
SECTION 3. TERM OF WARRANTS; EXERCISE OF WARRANTS.
Subject to the terms of this Agreement, a Warrantholder shall
have the right, at any time during the period commencing on the Exercisability
Date and ending on the Termination Date, to purchase from the Company up to the
number of Shares which the Warrantholder may at the time be entitled to
purchase pursuant to this Agreement, upon surrender to the Company, at its
principal office in Rye, New York, USA, of the certificate evidencing the
Warrant to be exercised, together with the purchase form on the reverse thereof
duly filled in and signed, and upon payment to the Company of the Warrant Price
(as defined in and determined in accordance with the provisions of Sections 7
and 8 hereof), for the number of Shares with respect to which such Warrant is
then exercised. Except as otherwise provided in this Agreement, payment of the
aggregate Warrant Price shall be made in cash, by cashier's check or by wire
transfer. Notwithstanding any other provision of this Agreement to the
contrary, no Warrant shall be exercised, in whole or in part, for an amount of
Shares that is less than 17,000 or the remaining Shares that such Warrantholder
is then able to purchase upon exercise of the Warrant.
Upon such surrender of the Warrant and payment of such
Warrant Price as aforesaid, the Company shall issue and cause to be delivered
with all reasonable dispatch (and, in any event, no later than 10 business days
from the date of such surrender and payment) to or upon the written order of
the Warrantholder and in such name or names as the Warrantholder may designate
certificate or certificates for the number of full Shares so purchased upon the
exercise of the Warrant, together with cash, as provided in Section 9 hereof
with respect to any fractional Shares otherwise issuable upon such surrender
and the cash, property and other securities to which the Warrantholder is
entitled pursuant to the provisions of Section 8. Such certificate or
certificates shall be deemed to have been issued and any person so designated
to be named therein shall be deemed to have become a holder of such Shares as
of the close of business on the date of the surrender of the Warrant and
payment of the Warrant Price, as aforesaid, notwithstanding that the
certificates representing such Shares shall not actually have been delivered or
that the stock and warrant transfer books of the Company shall then be closed.
A Warrant shall be exercisable, at the election of the Warrantholder, either in
full or from time to time in part and, in the event that the certificate
evidencing the Warrant is exercised with respect to less than all of the Shares
specified therein at any time prior to the Termination Date, a new certificate
evidencing the remaining Warrant shall be issued by the Company.
Notwithstanding anything herein to the contrary, the
Warrantholders may, at their option, at any time during the period commencing
on the Exercisability Date and ending on the Termination Date, exchange the
Warrants, in whole or in part (a "Warrant Exchange"), into the number of Shares
determined in accordance with this paragraph, by surrendering the certificate
evidencing the Warrant to be exchanged at the principal executive office of the
Company or at the office of its stock transfer agent, accompanied by a notice
stating such Warrantholder's intent to effect such exchange, the number of
Shares to be exchanged and the date on which the Warrantholder requests that
such Warrant Exchange occur (the "Notice of Exchange"). The Warrant Exchange
shall take place on the date specified in the Notice of Exchange or, if later,
the date the Notice of Exchange is received by the Company (the "Exchange
Date"). Certificates for
-3-
<PAGE>
the Shares issuable upon such Warrant Exchange and, if applicable, a new
Warrant certificate of like tenor evidencing the balance of the Shares
remaining subject to this Agreement, shall be issued as of the Exchange Date
and delivered to the Warrantholder within 10 business days following the
Exchange Date. In connection with any Warrant Exchange, this Agreement shall
represent the right to subscribe for and acquire the number of Shares (rounded
to the next highest integer) equal to (i) the number of Shares specified by the
Warrantholder in its Notice of Exchange (the "Total Number") less (ii) the
number of Shares equal to the quotient obtained by dividing (A) the product of
the Total Number and the existing Warrant Price by (B) the Current Market Price
(as defined in Section 8.1) of a share of Common Stock as at the Exchange Date.
SECTION 4. PAYMENT OF TAXES.
The Company shall pay all U.S. documentary stamp taxes, if
any, attributable to the initial issuance of the Shares; provided, however,
that the Company shall not be required to pay any tax or taxes which may be
payable with respect to any secondary transfer of the Warrant or the Shares.
SECTION 5. MUTILATED OR MISSING WARRANT.
In case the certificate or certificates evidencing a Warrant
shall be mutilated, lost, stolen or destroyed, the Company shall, at the
request of the Warrantholder, issue and deliver in exchange and substitution
for and upon cancellation of the mutilated certificate or certificates, or in
lieu of and substitution for the certificate or certificates lost, stolen or
destroyed, a new Warrant certificate or certificates of like tenor and
representing an equivalent right or interest, but only upon receipt of evidence
satisfactory to the Company of such mutilation, loss, theft or destruction of
such Warrant and of a bond of indemnity, if requested, also satisfactory in
form and amount at the applicant's cost. Applicants for such substitute Warrant
certificate shall also comply with such other reasonable regulations and pay
such other reasonable charges as the Company may prescribe.
SECTION 6. RESERVATION OF SHARES OF CAPITAL STOCK.
There has been reserved, and the Company shall at all times
keep reserved so long as the Warrants remains outstanding, out of its
authorized Common Stock, such number of shares of Common Stock as shall be
subject to purchase under the Warrants. Every transfer agent for the Common
Stock and other securities of the Company issuable upon the exercise of the
Warrants shall be irrevocably authorized and directed at all times to reserve
such number of authorized shares and other securities as shall be requisite for
such purpose. The Company shall keep a copy of this Agreement on file with
every transfer agent for the Common Stock and other securities of the Company
issuable upon the exercise of the Warrants. The Company shall supply such
transfer agent with duly executed stock and other certificates for such purpose
and shall provide or otherwise make available any cash which may be payable as
provided in Sections 8 and 9 hereof.
-4-
<PAGE>
SECTION 7. WARRANT PRICE.
The price per Share (the "Warrant Price") at which Shares
shall be purchasable upon the exercise of the Warrants shall be $ per Share,
subject to adjustment pursuant to Section 8 hereof.
SECTION 8. ADJUSTMENTS.
8.1. Definition of Current Market Price. For purposes of this
Section 8, the term "Current Market Price" shall mean, on any date specified
herein, (i) if the Common Stock is listed on any national securities exchange
or the Nasdaq National Market, the average of the last reported sales price (or
the average of the quoted closing bid and asked prices if there shall have been
no sales) of the Common Stock on such exchange or the Nasdaq National Market
(as the case may be) for a period of 20 trading days prior to such date, or
(ii) if the Common Stock is not so listed, on the basis of the average of the
mean of the last quoted bid and asked prices for the Common Stock for each day
in the 20 trading day period prior to such date, as reported by Nasdaq, or its
successor, or (iii) if the Common Stock is not so listed and if there are no
such closing bid and asked prices, on the basis of the fair market value per
share as reasonably determined in good faith by the Board of Directors of the
Company, but not less than the book value thereof as of the most recent fiscal
year of the Company.
8.2. Adjustment of Warrant Price and Number of Shares. The
number and kind of securities purchasable upon the exercise of the Warrants and
the Warrant Price shall be subject to adjustment from time to time upon the
happening of certain events, as follows:
(a) Adjustments.
(i) In case the Company shall (A) pay a dividend in
shares of Common Stock or make a distribution in shares of
Common Stock, (B) subdivide its outstanding Common Stock, (C)
combine its outstanding Common Stock into a smaller number of
shares of Common Stock or (D) issue by reclassification of
its Common Stock other securities of the Company, the number
of Shares purchasable upon exercise of the Warrant
immediately prior thereto shall be adjusted so that each
Warrantholder shall be entitled to receive, upon exercise of
its Warrant, the kind and number of Shares or other
securities of the Company which it would have owned or would
have been entitled to receive after the happening of any of
the events described above had its Warrant been exercised
immediately prior to the happening of such event or any
record date with respect thereto. Any adjustment made
pursuant to this paragraph (i) shall become effective
immediately after the effective date of such event and such
adjustment shall be retroactive to the record date, if any,
for such event.
(ii) Except in respect of transactions described in
paragraph (i) above, in case the Company shall sell or issue
Common Stock or rights, options, warrants or convertible
securities (or rights, options or warrants to
-5-
<PAGE>
purchase convertible securities) containing the right to
subscribe for or purchase shares of Common Stock
(collectively, "Rights"), and the sale or issuance price per
share of Common Stock (or in the case of any Rights, the sum
of the consideration paid or payable for any such Right
entitling the holder thereof to acquire one share of Common
Stock and such additional consideration paid or payable upon
exercise or conversion of any such Right to acquire one share
of Common Stock) is less than the Current Market Price as
determined as of the date of such sale or issuance, then the
number of Shares purchasable upon exercise of each Warrant
shall be increased by dividing such number of Shares by a
fraction of which the numerator shall be the number of shares
of Common Stock outstanding at the close of business on the
date fixed for such determination plus the number of shares
which the aggregate of the offering price of the total number
of shares so offered for subscription or purchase or subject
to such Rights or (or the aggregate conversion price of the
convertible securities so offered for subscription or
purchase) would purchase at such Current Market Price and the
denominator shall be the number of shares of Common Stock
outstanding at the close of business on the date fixed for
such determination plus the number of shares so offered for
subscription or purchase or subject to such Rights or (or
into which the convertible securities so offered for
subscription or purchase are convertible), such increase to
become effective immediately after the opening of business on
the day following the date fixed for such determination. For
the purposes of such adjustments, the Common Stock which the
holders of any such Rights shall be entitled to subscribe for
or purchase shall be deemed to be outstanding as of the date
of determination of stockholders entitled to receive such
Rights or the date of issuance of such Rights. If at the end
of the period during which such Rights are exercisable not
all such Rights shall have been exercised, the adjusted
number of Shares shall be immediately readjusted to what it
would have been based on the number of additional shares of
Common Stock actually issued. In addition, for purposes of
this subsection (ii), the number of shares of Common Stock
outstanding shall not include shares of Common Stock held in
the treasury of the Company.
(iii) Except in respect of transactions described in
paragraph (i) above, in case the Company shall declare,
order, pay or make a dividend or other distribution
(including, without limitation, any distribution of cash,
other or additional stock or other securities or property or
options), by way of dividend or spin-off, reclassification,
recapitalization or similar corporate rearrangement or
otherwise, but excluding dividends described in Section
8.2(b) hereof on the Common Stock, then in each case the
number of Shares thereafter purchasable upon the exercise of
each Warrant shall be determined by multiplying (A) the
number of Shares theretofore purchasable upon exercise of the
Warrant by (B) a fraction, of which the
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<PAGE>
numerator shall be the then Current Market Price on the
record date for the determination of stockholders entitled to
receive such dividend or other distribution, and of which the
denominator shall be such Current Market Price on such date
minus the amount of such dividend or distribution applicable
to one share of Common Stock. The Board of Directors of the
Company shall determine the amount of such dividend or
distribution allocable to one share of Common Stock and such
determination, if reasonable and based upon the Board of
Directors' good faith business judgment, shall be binding
upon the Warrantholders. Such adjustment shall be made
whenever any such distribution is made and shall become
effective on the date of distribution retroactive to the
record date for the determination of stockholders entitled to
receive such distribution.
(iv) No adjustment in the number of Shares
purchasable hereunder shall be required unless (A) such
adjustment would require an increase or decrease of at least
point seven-five percent (0.75%) in the number of Shares then
purchasable upon the exercise of the Warrants, or (B) a
notice of a Warrantholder's election to purchase has been
received by the Company with respect to the exercise of the
balance of the Shares purchasable pursuant to such Warrant
(prior to such required adjustment); provided, however, that
any adjustments which by reason of this paragraph (iv) are
not required to be made immediately shall be carried forward
and taken into account in any subsequent adjustment. In
calculating any adjustment hereunder, the Warrant Price shall
be calculated to the nearest .001 of a cent and the number of
Shares purchasable hereunder shall be calculated to the
nearest .001 of a share.
(v) Whenever the number of Shares purchasable upon
the exercise of the Warrant is adjusted as herein provided,
the Warrant Price payable upon exercise of the Warrant shall
also be adjusted by multiplying such Warrant Price
immediately prior to such adjustment by a fraction, of which
the numerator shall be the number of Shares purchasable upon
the exercise of the Warrant immediately prior to such
adjustment, and of which the denominator shall be the number
of Shares so purchasable immediately after such adjustment.
(vi) For the purpose of this section 8.2(a), the
term "Common Stock" shall mean (A) the class of stock
designated as the Common Stock of the Company at the date of
this Agreement or (B) any other class of stock resulting from
successive changes or reclassifications of such Common Stock
consisting solely of changes in par value, or from no par
value to par value. In the event that at any time, as a
result of an adjustment made pursuant to this Section 8 the
Warrantholders shall become entitled to purchase any
securities of the Company other than Common Stock, the
Company shall duly reserve such securities for issuance and
thereafter the number of such other securities so purchasable
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<PAGE>
upon exercise of a Warrant and the Warrant Price of such
securities shall be subject to the adjustment from time to
time in a manner and on terms as nearly equivalent as
practicable to the provisions with respect to the Shares
contained in this Section 8.
If the consideration provided for in any Right or the additional
consideration, if any, payable upon the conversion or exchange of any
Right shall be reduced, or the rate at which any Right is exercisable
or convertible into or exchangeable for shares of Common Stock shall
be increased, at any time under or by reason of provisions with
respect thereto designed to protect against dilution, then, effective
concurrently with each such change, the Warrant Price then in effect
shall first be adjusted to eliminate the effects (if any) of the
issuance (or deemed issuance) of such Right on the Warrant Price and
then readjusted as if such Right had been issued on the date of such
change with the terms in effect after such change, but only if as a
result of such adjustment the Warrant Price then in effect hereunder
is thereby reduced.
(b) No Adjustment for Dividends. Except as provided in
Section 8.2(a), no adjustment with respect to any ordinary dividends
(made out of current earnings) on shares of Common Stock shall be made
during the term of the Warrants or upon the exercise of a Warrant.
(c) Preservation of Purchase Rights Upon Reclassification,
Consolidation, etc. In case of any consolidation or merger of the
Company with or into another entity as a result of which the holders
of Common Stock become holders of other shares or securities of the
Company or of another entity or person, or such holders receive cash
or other assets, or in case of any sale or conveyance to another
person of the property, assets or business of the Company as an
entirety or substantially as an entirety, the Company or such
successor or purchasing entity or person, as the case may be, shall
execute with the Warrantholders an agreement that the Warrantholders
shall have the right thereafter upon payment of the Warrant Price in
effect immediately prior to such action to purchase upon exercise of
their respective Warrants the kind and amount of Shares and other
securities and property which it would have owned or have been
entitled to receive after the happening of such consolidation, merger,
sale or conveyance had its Warrant been exercised immediately prior to
such action and (ii) that the Warrants shall continue in full force
and effect notwithstanding the consummation of such transaction and
that such person or entity shall assume the obligations of the Company
hereunder. The agreements referred to in this Section 8.2(c) shall
provide for adjustments which shall be as nearly equivalent as may be
practicable to the adjustments provided for in the other provisions in
this Section 8. The provisions of this Section 8.2(c) shall similarly
apply to successive consolidations, mergers, sales or conveyances.
8.3. Statement on Warrants. Irrespective of any adjustment in
the Warrant Price or the number or kind of Shares purchasable upon the exercise
of a Warrant, a Warrant certificate or certificates therefore or thereafter
issued may continue to express the same price and number and kind of shares as
are stated in a Warrant initially issuable pursuant to this Agreement.
-8-
<PAGE>
8.4. Notice of Adjustment. Whenever the Warrant Price shall
be adjusted pursuant to this Section 8, the Company shall forthwith file at
each office designated for the exercise of the Warrants, a statement, signed by
the Chairman of the Board, the President, any Vice President or Treasurer of
the Company, showing in reasonable detail the facts requiring such adjustment
and the Warrant Price that will be effective after such adjustment. Each such
statement shall be made available at all reasonable times for inspection by any
Warrantholder. The Company shall also cause a notice setting forth any such
adjustments to be sent by mail, first class, postage prepaid, to each
Warrantholder.
8.5. Notice of Certain Events. If at any time after the
Closing Date:
(a) the Company shall pay any dividend upon its Common Stock
or make any distribution to the holders of its Common Stock;
(b) the Company shall offer for subscription pro rata to the
holders of its Common Stock any additional shares of stock of any
class or other Rights;
(c) the Company shall offer any other Rights to the holders
of its Common Stock;
(d) there shall be any capital reorganization, or
reclassification of the capital stock of the Company or any of its
subsidiaries, or consolidation or merger of the Company with or into
any other corporation or entity, or consolidation or merger of any
other corporation or entity with or into the Company, or the sale,
lease, conveyance, exchange or transfer of all or substantially all of
the property or assets of the Company to any other corporation or
entity; or
(e) 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 notice to the
Warrantholders of the date on which the books of the Company shall close or a
record shall be taken for such dividend, distribution, subscription or other
rights, or (y) the date (or, if not then known, a reasonable approximation
thereof by the Company) on which such reorganization, reclassification,
consolidation, merger, sale, lease, conveyance, exchange, transfer,
dissolution, liquidation or winding up shall take place, as the case may be.
Such notice shall also specify (or, if not then known, reasonably approximate)
the date as of which the holders of Common Stock of record shall be paid or
shall receive such dividend, distribution, subscription or other rights, or
shall be entitled to exchange their Common Stock for securities or other
property deliverable upon such reorganization, reclassification, consolidation,
merger, sale, lease, conveyance, exchange, transfer, dissolution, liquidation
or winding up, as the case may be. Such notice shall be given at the time
notice thereof (if any) is given to the holders of Common Stock and, in any
event, not later than 20 days prior to the date specified in clause (x) or (y)
of this subparagraph, as the case may be. Such notice shall also state that the
action in question or the record date is subject to the effectiveness of a
registration statement under the Securities Act of 1933, as amended, or to a
favorable vote of stockholders, if either is required.
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<PAGE>
8.6. Reservation. The Company shall at all times reserve and
keep available out of its authorized but unissued Common Stock the full number
of shares of Common Stock deliverable upon the exercise of the Warrants and
shall take all such action and obtain all such permits or orders as may be
necessary to enable the Company lawfully to issue such Common Stock upon the
exercise of the Warrants.
SECTION 9. FRACTIONAL INTERESTS.
The Company shall not be required to issue fractional Shares
on the exercise of the Warrants. If any fraction of a Share would, except for
the provisions of this Section 9, be issuable on the exercise of the Warrants
(or specified portions thereof), the Company shall pay an amount in cash equal
to the Current Market Price as determined pursuant to Section 8.1 above of such
fractional Share.
SECTION 10. NO RIGHTS AS STOCKHOLDERS.
Nothing contained in this Agreement or in the Warrants shall
be construed as conferring upon the Warrantholders or their transferees any
rights as a stockholder of the Company.
SECTION 11. NOTICES.
All notices and other communications under this Agreement
shall be in writing and shall be delivered by hand or mailed by overnight
courier or by registered mail or certified mail, postage prepaid:
(a) if to the Warrantholders, to each Warrantholder at the
address specified on Schedule 1 to this Agreement with respect to that
Warrantholder or at such other address as a Warrantholder may have furnished
the Company in writing, or
(b) if to the Company, at 555 Theodore Fremd Avenue, Suite
B-302, Rye, NY 10580, marked for the attention of Martin E. Franklin, Chairman,
or at such other address as it may have furnished in writing to the
Warrantholders.
Any notice so addressed shall be deemed to be given: if
delivered by hand, on the date of such delivery; if mailed by courier, on the
first business day following the date of such mailing; and if mailed by
registered or certified mail, on the third business day after the date of such
mailing.
SECTION 12. SUCCESSORS.
All the covenants and provisions of this Agreement by or for
the benefit of the Company or the Warrantholders shall bind and inure to the
benefit of their respective successors and assigns hereunder.
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<PAGE>
SECTION 13. MERGER OR CONSOLIDATION OF THE COMPANY.
The Company shall not merge or consolidate with or into any
other corporation or sell all or substantially all of its property to another
corporation, unless the provisions of subsection 8.2(c) are complied with.
SECTION 14. REPRESENTATIONS.
14.1. Corporate Organization. The Company is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware and has the corporate power to carry on its business as it is
now being conducted or currently proposed to be conducted. The Company is duly
qualified as a foreign corporation to do business, and is in good standing, in
each jurisdiction where the character of its properties owned or held under
lease or the nature of its activities makes such qualification necessary,
except where the failure to be so qualified will not have a material adverse
effect on the business, properties, assets, condition (financial or otherwise),
liabilities or operations of the Company and its subsidiaries taken as a whole.
14.2. Capitalization of the Company; Title to the Shares.
(a) The authorized capital stock of the Company consists of
shares of Common Stock, par value $.01 per share and shares of
preferred stock, $.01 par value per share. As of , 1997, (i)
shares of Company Common Stock, (ii) 64,120 shares of Series A
preferred stock and (iii) shares of Series B preferred stock were
issued and outstanding. As of the date hereof, there are no bonds,
debentures, notes or other indebtedness having the right to vote on
any matters on which the Company's stockholders may vote issued or
outstanding. As of the date hereof, except for the Warrants
contemplated by this Agreement, there are no options, warrants, calls
or other rights, agreements or commitments presently outstanding
obligating the Company to issue, deliver or sell shares of its
capital stock or debt securities, or obligating the Company to grant,
extend or enter into any such option, warrant, call or other such
right, agreement or commitment.
(b) The Shares will be duly authorized and validly issued,
and will be fully paid and nonassessable and no personal liability
will attach to the ownership thereof. Upon exercise of a Warrant, the
Company will deliver valid and marketable title to the Shares issuable
as a result of such exercise, free and clear of any liens, claims,
charges, security interests, legal or equitable encumbrances,
limitations or restrictions. Except for this Agreement, there are no
contracts, agreements, understandings, arrangements or restrictions
related to the ownership or voting of the Warrants or the Shares.
SECTION 15. REGISTRATION RIGHTS
15.1. Registration on Demand.
(a) During the two-year period commencing on the date that a
Warrant is first exercised by any Warrantholder, upon prior written
notice (a "Demand Notice") to the
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<PAGE>
Company from holders representing at least a majority of the then
outstanding Registrable Securities (as defined in subparagraph (c)
below), determined as if the Warrants had been fully exercised, to the
effect that the holders of Registrable Securities desire to register
any of their Registrable Securities under the Securities Act, the
Company shall within 10 business days after receiving any Demand
Notice give notice (the "Company's Notice") to the other holders of
Registrable Securities stating the identity of the holders requesting
registration and the number of Registrable Securities proposed to be
sold thereby, and take appropriate action as promptly as practicable
after its receipt of the Demand Notice to file with the Securities and
Exchange Commission (the "Commission") a registration statement on the
appropriate form covering all Registrable Securities specified in the
Demand Notice and by such other holders (by notice given to the
Company within 15 days after their receipt of the Company's Notice),
(ii) use commercially reasonable efforts to cause such registration
statement to become effective under the Securities Act and (iii) use
commercially reasonable efforts to qualify the Registrable Securities
subject to the Demand Notice for sale in such states as reasonably
requested by the holders of a majority of Registrable Securities to be
included in such registration, if necessary; provided such effort
shall not require the Company to qualify as a foreign corporation or
subject itself to taxation in any jurisdiction where it is not already
so qualified or subject. The Company shall be obligated to effect only
one registration pursuant to this Section 15.1.
(b) The holders of the Registrable Securities to be included
in any registration pursuant to this Section 15.1 shall be obligated
to pay all registration expenses (as that term is defined in Section
15.5 hereof) of such registration whether or not such registration is
ever deemed effective. The Company agrees to use its best efforts to
effect any registration pursuant to this Section 15.1 in a cost
effective manner, consistent with prudent business practices for such
registrations.
(c) For purposes of this Agreement, "Registrable Securities"
shall mean, collectively (i) the Shares and (ii) any securities issued
or issuable with respect to the Shares by way of stock dividend, stock
split, in connection with a combination of shares, recapitalization,
merger, consolidation or other reorganization or otherwise.
Registrable Securities will cease to be such when (i) a registration
statement covering such Registrable Securities has been declared
effective, (ii) they shall have been otherwise transferred, and the
Company shall have delivered new certificates or other evidences of
ownership for them not subject to any stop transfer order or other
restriction on transfer and not bearing a legend restricting transfer
in the absence of an effective registration or an exemption from the
registration requirements of the Securities Act and subsequent
disposition of them shall not require registration or qualification of
them under the Securities Act or any similar state law then in force,
or (iii) they shall have ceased to be outstanding.
(d) Any registration initiated by the holders of Registrable
Securities as a demand registration pursuant to this Section 15.1
shall count as a demand registration for purposes of this Section 15.1
when such registration shall have been filed with the Commission and
becomes effective and in the event such registration statement is
withdrawn at the request of the initialing holder(s) of Registrable
Securities prior to its becoming effective, unless such holder pays
all expenses (as defined in Section 15.5).
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<PAGE>
(e) Notwithstanding the provisions of Section 15.1(a) of this
Agreement, the Company shall not be required to register Registrable
Securities which, together with any other securities to be included in
such registration, are equivalent to less than 17,000 shares of Common
Stock, subject to equitable adjustment in case the Company shall (A)
pay a dividend in shares of Common Stock or make a distribution in
shares of Common Stock, (B) subdivide its outstanding Common Stock,
(C) combine its outstanding Common Stock into a smaller number of
shares of Common Stock or (D) issue by reclassification of its Common
Stock other securities of the Company.
(f) The Company shall use its best efforts to maintain the
effectiveness of a registration statement filed pursuant to this
Section 15.1 for a period of 180 days from its effective date.
(g) The managing underwriter, if any, of any offering of
Registrable Securities contemplated by this Section 15.1 shall be
chosen by the holders of a majority of Registrable Securities included
therein, which managing underwriter shall be reasonably acceptable to
the Company.
15.2. Incidental Registration.
(a) If at any time or times after the Exercisability Date,
the Company intends to file a registration statement on Form S-1, S-2
or S-3 (or other appropriate form) for the registration of an offering
of equity securities with the Commission, the Company shall notify
each of the holders of record of Registrable Securities at least 30
days prior to each such filing of the Company's intention to file such
a registration statement, such notice shall state the number of shares
of equity securities proposed to be registered thereby. If any holder
of Registrable Securities notifies the Company within 30 days after
receipt of such notice from the Company of its desire to have included
in such registration statement any of its Registrable Securities, then
the Company shall cause the Company to include such shares in such
registration statement. The Company shall pay all the "expenses" (as
defined in Section 15.5 hereof) of such registration, excluding
underwriting discounts and commissions.
(b) The Company may in its discretion withdraw any
registration statement filed pursuant to this Section 15.2 subsequent
to its filing without liability to the holders of Registrable
Securities.
15.3. Allocations. In the event that any managing underwriter
for any offering described in Section 15.2 above notifies the Company that, in
good faith, it is able to proceed with the proposed offering only with respect
to a smaller number (the "Maximum Number") of securities than the total number
of Registrable Securities proposed to be offered by holders thereof, plus the
total number of securities proposed to be offered by the Company and all others
entitled to registration rights under such registration statement, then the
aggregate number of Registrable Securities that may be included in the proposed
offering by the holders thereof and the total number of securities that may be
included in the proposed offering by all other holders (other than the Company)
including shares in such registration statement shall equal the Maximum
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<PAGE>
Number less the number of shares proposed to be offered by the Company, such
difference to be allocated first in favor of the holders of Registrable
Securities and thereafter pro rata in accordance with the number of shares
proposed to be offered by each such party.
15.4. Indemnity. In connection with a registration statement
filed with the Commission pursuant to this Section 15, the Company shall
provide each holder of Registrable Securities included in such registration
statement, and each officer and director of any thereof, and each person who
controls such holder within the meaning of Section 15 of the Securities Act,
and Section 20 of the Securities Exchange Act of 1934 (the "Exchange Act"),
with indemnification against any losses, claims, damages or liabilities,
reasonable attorneys fees, costs or expenses and costs and expenses of
investigating and defending any such claims, (collectively "Damages"), joint or
several, to which any of them may become subject under the federal securities
laws, or otherwise, in form and substance as is customarily given to
underwriters in an underwritten offering of securities. Each holder including
Registrable Securities in any such registration statement agrees that it shall
indemnify the Company, and each officer and director thereof, and each person
who controls the Company within the meaning of Section 15 of the Securities Act
and Section 20 of the Exchange Act, against any Damages, in form and substance
as is customarily given by underwriters to a corporation in an underwritten
public offering of securities; provided, however, that (i) any such holder
shall be liable under this Section 15.4 only to the extent that any such
Damages arises out of or are based upon an untrue statement or alleged untrue
statement or omission or alleged omission made in such registration statement
in reliance upon and in conformity with written information furnished by such
holder, specifically for use in the preparation thereof; and (ii) the maximum
amount which may be recovered from such holder shall be limited to the amount
of the proceeds received by such holder from the sale of his/her Registrable
Securities pursuant to such registration statement.
15.5. Expenses. The Company shall bear all expenses,
excluding fees and expenses of counsel for any selling stockholders and
excluding underwriting discounts and commissions, in connection with a
registration of Common Stock pursuant to Section 15.2. As used in this Section
15, "expenses" of a registration shall mean all expenses required to be
disclosed in Part II of the Form S-1 registration statement, or in a comparable
section of any similar form permitting an underwritten public offering, as well
as expenses of underwriters customarily reimbursed by issuers or selling
stockholders, excluding transfer taxes.
15.6. Rule 144. The Company agrees that it will file in a
timely manner all reports required to be filed by it pursuant to the Securities
Act and the Exchange Act and will take further action as and when any holder of
Registrable Securities may reasonably request in order that such holder may
effect sales of Registrable Securities pursuant to Rule 144 under the
Securities Act.
SECTION 16. APPLICABLE LAW.
THIS AGREEMENT SHALL BE DEEMED TO BE A CONTRACT MADE UNDER
THE LAWS OF THE STATE OF NEW YORK AND FOR ALL PURPOSES SHALL BE CONSTRUED IN
ACCORDANCE WITH THE INTERNAL LAWS OF SAID STATE.
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<PAGE>
SECTION 17. BENEFITS OF THIS AGREEMENT.
Except as otherwise provided herein, nothing in this
Agreement shall be construed to give to any person or corporation other than
the Company and the Warrantholders any legal or equitable right, remedy or
claim under this Agreement, and this Agreement shall be for the sole and
exclusive benefit of the Company and the Warrantholders.
[Signature page follows]
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<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to
be duly executed, all as of the day and year first above written.
BOLLE INC.
------------------------------
By: Martin E. Franklin
Title: Chairman of the Board
------------------------------
Maurice Bolle
------------------------------
Robert Bolle
------------------------------
Franck Bolle
------------------------------
Patricia Bolle Passaquay
------------------------------
Brigitte Bolle
------------------------------
Christelle Roche
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<PAGE>
SCHEDULE 1
Name and Address
of Warrantholder No. of Shares
- ---------------- -------------
Mr. Maurice Bolle
13 rue Balland
01100 Oyonnax, France...........................................
Mr. Robert Bolle
58 route de Marchon
01100 Oyonnax, France...........................................
Mr. Franck Bolle
4 boulevard Dupuy
01100 Oyonnax, France...........................................
Mrs. Patricia Bolle Passaquay
6 rue General De Gaulle
01100 Arbant, France............................................
Ms. Brigitte Bolle
25 bis boulevard de la Saussaye
92200 Neuilly-sur-Seine, France.................................
Mrs. Christelle Roche
2 rue Macrete
01100 Arbent, France............................................
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<PAGE>
EXHIBIT A
WARRANT No._____
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), OR ANY STATE SECURITIES LAW. SUCH SECURITIES MAY
NOT BE SOLD, ASSIGNED, TRANSFERRED, EXCHANGED, MORTGAGED, PLEDGED OR
OTHERWISE DISPOSED OF OR ENCUMBERED WITHOUT COMPLIANCE WITH THE
SECURITIES ACT AND STATE SECURITIES LAWS."
WARRANT TO PURCHASE UP TO ____________ SHARES
OF COMMON STOCK OF
BOLLE INC. PAR VALUE $.01 PER SHARE
Exercisable commencing July ___, 1999;
Void after July ___, 2001.
THIS CERTIFIES that, for value received, ("Holder"), or registered
assigns, is entitled, subject to the terms and conditions set forth in this
Warrant, to purchase from Bolle Inc., a Delaware corporation (the "Company"),
up to ____________ shares of Common Stock, $.01 par value, of the Company, at
any time commencing 9:00 a.m. New York City time on July ___, 1999 and
continuing up to 5 p.m. New York City time on July ___, 2001 at a price per
Share of $ , per share, such number of Shares and price per Share being
subject to adjustment from time to time as set forth in the Warrant Agreement
referred to below. This Warrant is issued pursuant to a Warrant Agreement by
and among the Company, the Holder and certain other holders of Warrants, dated
as of December ___, 1997 (the "Warrant Agreement"), and is subject to all the
terms thereof, including the limitations on transferability set forth therein.
This Warrant may be exercised by the holder hereof, in whole or in part (but
not, in certain circumstances, as to a fractional share), by the presentation
and surrender of this Warrant with the form of Election to Purchase duly
executed, at the principal office of the Company (or at such other address as
the Company may designate by notice in writing to the holder hereof at the
address of such holder appearing on the books of the Company), and upon payment
to the Company of the purchase price in cash, by cashier's check or by wire
transfer or by any other means permitted under the terms of the Warrant
Agreement. Notwithstanding the foregoing, this Warrant may not be exercised for
an amount of Shares that is less than 17,000 or the remaining Shares that such
Warrantholder is then able to purchase upon exercise of the Warrant. The Shares
so purchased shall be deemed to be issued to the holder hereof as the record
owner of such Shares as of the close of business on the date on which this
Warrant shall have been surrendered
A-1
<PAGE>
and payment made for such Shares. Certificates for the Shares so purchased
shall be delivered or mailed to the holder promptly after this Warrant shall
have been so exercised, and, unless this Warrant has expired or has been
exercised in full, a new Warrant identical in form but representing the number
of Shares with respect to which this Warrant shall not have been exercised
shall also be issued to the holder hereof.
Nothing contained herein shall be construed to confer upon the holder of this
Warrant, as such, any of the rights of a stockholder of the Company.
Dated: ______________
BOLLE INC.
By:
-------------------------------
[Title]
A-2
<PAGE>
BOLLE INC.
ELECTION TO PURCHASE
Bolle Inc.:
The undersigned hereby irrevocably elects to exercise the right of purchase
represented by the within Warrant for, and to purchase thereunder, Shares
provided for therein, and requests that certificates for the Shares be issued
in the name of:
- -------------------------------------------------------------------------------
(Please Print Name, Address and Social Security Number)
and, if said number of Shares shall not be the total number of Shares
purchasable hereunder, that a new Warrant certificate for the balance of the
Shares purchasable under the within Warrant certificate be registered in the
name of the undersigned Warrantholder or his/her Assignee as below indicated
and delivered to the address stated below:
Dated: ____________, 19__
Name of Warrantholder or
Assignee (Please Print):
-------------------------------------
Address:
-----------------------------------------------------
Signature:
----------------------------------
Signature Guaranteed: Note: The above signature must correspond
with the name as written upon the face of
this Warrant certificate in every
particular, without alteration or
enlargement or any change whatever, unless
this Warrant has been assigned.
A-3
<PAGE>
(To be signed only upon assignment of Warrant)
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto
- -------------------------------------------------------------------------------
(Name and Address of Assignee must be Printed or Typewritten)
the within Warrant, hereby irrevocably constituting and appointing
Attorney to transfer said Warrant on the books of the Company, with full power
of substitution in the premises.
Dated:______________________, 19__
-------------------------------------------
Signature of Registered Holder
Signature Guaranteed: Note: The signature of this assignment must
correspond with the name as it appears upon
the face of the within Warrant certificate
in every particular, without alteration or
enlargement or any change whatever.
<PAGE>
EX 4.6
BOLLE INC.
1998 STOCK INCENTIVE PLAN
PURPOSE
The purpose of the Plan is to provide a means through which the
Company and its Subsidiaries and Affiliates may attract able persons to enter
and remain in the employ of the Company and its Subsidiaries and Affiliates and
to provide a means whereby employees, directors and consultants of the Company
and its Subsidiaries and Affiliates can acquire and maintain Common Stock
ownership, or be paid incentive compensation measured by reference to the value
of Common Stock, thereby strengthening their commitment to the welfare of the
Company and its Subsidiaries and Affiliates and promoting an identity of
interest between stockholders and these employees.
So that the appropriate incentive can be provided, the Plan provides
for granting Incentive Stock Options, Nonqualified Stock Options, Stock
Appreciation Rights, Restricted Stock Awards, Phantom Stock Unit Awards,
Performance Share Unit Awards and Stock Bonus Awards, or any combination of the
foregoing. The Plan also provides for the automatic formula grant of Restricted
Stock to Non-Employee Directors.
DEFINITIONS
The following definitions shall be applicable throughout the Plan.
<PAGE>
"Affiliate" means any affiliate of the Company within the meaning of 17
CFR ss. 230.405.
"Award" means, individually or collectively, any Incentive Stock Option,
Nonqualified Stock Option, Stock Appreciation Right, Restricted Stock
Award, Phantom Stock Unit Award, Performance Share Unit Award, Stock Bonus
Award or Director Stock Award.
"Award Period" means a period of time within which performance is measured
for the purpose of determining whether an Award of Performance Share Units
has been earned.
"BEC" means BEC Group, Inc., a Delaware corporation and former Parent of
the Company.
"Board" means the Board of Directors of the Company.
"Cause" means the Company, a Subsidiary or Affiliate having cause to
terminate a Participant's employment or service under any existing
employment, consulting or any other agreement between the Participant and
the Company or a Subsidiary or Affiliate or, in the absence of such an
employment, consulting or other agreement, upon (i) the determination by
the Committee that the Participant has ceased to perform his duties to the
Company, a Subsidiary or Affiliate (other than as a result of his
incapacity due to physical or mental illness or injury), which failure
amounts to an intentional and extended neglect of his duties to such
party, (ii) the Committee's determination that the Participant has engaged
or is about to engage in conduct materially injurious to the Company, a
Subsidiary or Affiliate or (iii) the Participant having been convicted of
a felony.
"Change in Control" shall, unless the Board otherwise directs by
resolution adopted prior thereto or, in the case of a particular award,
the applicable Award agreement states otherwise, be deemed to occur if (i)
any "person" (as that term is used in Sections 13 and 14(d)(2) of the
Exchange Act) is or becomes the beneficial owner (as that term is used in
Section 13(d) of the Exchange Act), directly or indirectly, of 50% or more
of either the outstanding shares of Common Stock or the combined voting
power of the Company's then outstanding voting securities entitled to vote
generally, (ii) during any period of two consecutive years beginning on
the date of the consummation of the Spinoff, individuals who constitute
the Board at the beginning of such period cease for any reason to
constitute at least a majority thereof, unless the election or the
nomination for election by the Company's shareholders of each new director
was approved by a vote of at least three-quarters of the directors then
still in office who were directors, or approved by directors, at the
beginning of the Spinoff period or (iii) the Company undergoes a
liquidation or dissolution or a sale of all or substantially all of the
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assets of the Company. Neither the Spinoff nor any merger, consolidation
or corporate reorganization in which the owners of the combined voting
power of the Company's then outstanding voting securities entitled to vote
generally prior to said combination, own 50% or more of the resulting
entity's outstanding voting securities shall, by itself, be considered a
Change in Control.
"Code" means the Internal Revenue Code of 1986, as amended. Reference in
the Plan to any section of the Code shall be deemed to include any
amendments or successor provisions to such section and any regulations
under such section.
"Committee" means the full Board, the Compensation Committee of the Board
or such other committee of at least two people as the Board may appoint to
administer the Plan.
"Common Stock" means the common stock par value $0.01 per share, of the
Company.
"Company" means Bolle Inc.
"Date of Grant" means the date on which the granting of an Award is
authorized or such other date as may be specified in such authorization.
"Director Stock Option" means the Award of a Nonqualified Stock Option to
Non-Employee Directors pursuant to Section 12.
"Director Stock Option Agreement" means the agreement entered into with
respect to a Director Stock Option pursuant to Section 12.
"Disability" means disability as defined in the long-term disability plan
of the Company, a Subsidiary or Affiliate, as may be applicable to the
Participant in question, or, in the absence of such a plan, the complete
and permanent inability by reason of illness or accident to perform the
duties of the occupation at which a Participant was employed or served
when such disability commenced or, if the Participant was retired when
such disability commenced, the inability to engage in any substantial
gainful activity, in either case as determined by the Committee based upon
medical evidence acceptable to it.
"Disinterested Person" means a person who is (i) a "nonemployee director"
within the meaning of Rule 16b-3 under the Exchange Act, or any successor
rule or regulation and (ii) an "outside director" within the meaning of
Section 162(m) of the Code; provided, however, that clause (ii) shall
apply only with respect to grants of Awards with respect to which the
Company's tax deduction could be limited by Section 162(m) of the Code if
such clause did not apply.
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"Eligible Person" means any (i) person regularly employed by the Company,
a Subsidiary or Affiliate who satisfies all of the requirements of Section
6; provided, however, that no such employee covered by a collective
bargaining agreement shall be an Eligible Person unless and to the extent
that such eligibility is set forth in such collective bargaining agreement
or in an agreement or instrument relating thereto; (ii) director of the
Company, a Subsidiary or Affiliate; or (iii) consultant to the Company, a
Subsidiary or Affiliate.
"Exchange Act" means the Securities Exchange Act of 1934.
"Fair Market Value" on a given date means (i) if the Stock is listed on a
national securities exchange, the mean between the highest and lowest sale
prices reported as having occurred on the primary exchange with which the
Stock is listed and traded on the date prior to such date, or, if there is
no such sale on that date, then on the last preceding date on which such a
sale was reported; (ii) if the Stock is not listed on any national
securities exchange but is quoted in the National Market System of the
National Association of Securities Dealers Automated Quotation System on a
last sale basis, the average between the high bid price and low ask price
reported on the date prior to such date, or, if there is no such sale on
that date, then on the last preceding date on which a sale was reported;
(iii) if the Stock is not listed on a national securities exchange nor
quoted in the National Market System of the National Association of
Securities Dealers Automated Quotation System on a last sale basis, the
amount determined by the Committee to be the fair market value based upon
a good faith attempt to value the Stock accurately and computed in
accordance with applicable regulations of the Internal Revenue Service; or
(iv) notwithstanding clauses (i) - (iii) above, with respect to Awards
granted as of the consummation of the Spinoff, the initial offering price
of the Stock to the public in connection with the Spinoff.
"Holder" means a Participant who has been granted an Award.
"Incentive Stock Option" means an Option granted by the Committee to a
Participant under the Plan which is designated by the Committee as an
Incentive Stock Option pursuant to Section 422 of the Code.
"Non-Employee Director" means a director of the Company who is not also an
employee of the Company.
"Nonqualified Stock Option" means an Option granted by the Committee to a
Participant under the Plan which is not designated by the Committee as an
Incentive Stock Option.
"Normal Termination" means termination of employment or service with the
Company and all Subsidiaries and Affiliates:
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Upon retirement pursuant to the retirement plan of the Company, a
Subsidiary or Affiliate, as may be applicable at the time to the
Participant in question;
On account of Disability;
With the written approval of the Committee; or
By the Company, a Subsidiary or Affiliate without Cause.
"Option" means an Award granted under Section 7 of the Plan.
"Option Period" means the period described in Section 7(c).
"Option Price" means the exercise price set for an Option described in
Section 7(a).
(ab) "Participant" means an Eligible Person who has been selected by
the Committee to participate in the Plan and to receive an Award pursuant to
Section 6 and a Non-Employee Director who has received an automatic grant of
Options pursuant to Section 12.
(ac) "Performance Goals" means the performance objectives of the
Company, a Subsidiary or Affiliate during an Award Period or Restricted Period
established for the purpose of determining whether, and to what extent, Awards
will be earned for an Award Period or Restricted Period.
(ad) "Performance Share Unit" means a hypothetical investment
equivalent equal to one share of Stock granted in connection with an Award made
under Section 9 of the Plan.
(ae) "Phantom Stock Unit" means a hypothetical investment equivalent
equal to one share of Stock granted in connection with an Award made under
Section 10 of the Plan.
(af) "Plan" means the Company's 1998 Stock Incentive Plan.
(ag) "Restricted Period" means, with respect to any share of
Restricted Stock or any Phantom Stock Unit, the period of time determined by
the Committee during which such Award is subject to the restrictions set forth
in Section 10.
(ah) "Restricted Stock" means shares of Stock issued or transferred to
a Participant subject to forfeiture and the other restrictions set forth in
Section 10.
(ai) "Restricted Stock Award" means an Award of Restricted Stock
granted under Section 10 of the Plan.
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(aj) "Securities Act" means the Securities Act of 1933, as amended.
(ak) "Spinoff" means the pro rata spinoff to the stockholders of BEC
of all of the common stock of the Company held by BEC in connection with a
Registration Statement on Form S-1.
(al) "Stock" means the Common Stock or such other authorized shares of
stock of the Company as the Committee may from time to time authorize for use
under the Plan.
(am) "Stock Appreciation Right" or "SAR" means an Award granted under
Section 8 of the Plan.
(an) "Stock Bonus" means an Award granted under Section 11 of the
Plan.
(ao) "Stock Option Agreement" means the agreement between the Company
and a Participant who has been granted an Option pursuant to Section 7 which
defines the rights and obligations of the parties as required in Section 7(d).
(ap) "Subsidiary" means any subsidiary of the Company as defined in
Section 424(f) of the Code.
(aq) "Vested Unit" shall have the meaning ascribed thereto in Section
10(e).
EFFECTIVE DATE, DURATION
The Plan is effective as of January , 1998, the date of adoption of
the Plan by the Board.
The expiration date of the Plan, after which no Awards may be granted
hereunder, shall be January , 2008; provided, however, that the administration
of the Plan shall continue in effect until all matters relating to the payment
of Awards previously granted have been settled.
ADMINISTRATION
The Committee shall administer the Plan. Unless otherwise determined
by the Board, each member of the Committee shall, at the time he takes any
action with respect to an Award under the Plan, be a Disinterested Person. The
majority of the members of the Committee shall constitute a quorum. The acts of
a majority of the members present at any meeting at which a quorum is present
or acts approved in writing by a majority of the Committee shall be deemed the
acts of the Committee.
Subject to the provisions of the Plan, the Committee shall have
exclusive power to:
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Select the Eligible Persons to participate in the Plan;
Determine the nature and extent of the Awards, other than Director Stock
Options, to be made to each Participant;
Determine the time or times when Awards, other than Director Stock
Options, will be made;
Determine the duration of each Award Period and Restricted Period, except
with respect to a Director Stock Option;
Determine the conditions to which the payment of Awards, other than
Director Stock Options, may be subject;
Establish the Performance Goals for each Award Period;
Prescribe the form of Stock Option Agreement or other form or forms
evidencing Awards; and
Cause records to be established in which there shall be entered, from time
to time as Awards are made to Participants, the date of each Award, the
number of Incentive Stock Options, Nonqualified Stock Options, SARs,
Phantom Stock Units, Performance Share Units, shares of Restricted Stock
and Stock Bonuses awarded to each Participant, the expiration date, the
Award Period and the duration of any applicable Restricted Period.
The Committee shall have the authority, subject to the provisions of
the Plan, to establish, adopt, or revise such rules and regulations and to make
all such determinations relating to the Plan as it may deem necessary or
advisable for the administration of the Plan. The Committee's interpretation of
the Plan or any documents evidencing Awards granted pursuant thereto and all
decisions and determinations by the Committee with respect to the Plan shall be
final, binding, and conclusive on all parties unless otherwise determined by
the Board.
GRANT OF AWARDS; SHARES SUBJECT TO THE PLAN
The Committee may, from time to time, grant Awards of Options, Stock
Appreciation Rights, Restricted Stock, Phantom Stock Units, Performance Share
Units and/or Stock Bonuses to one or more Eligible Persons; provided, however,
that:
Subject to Section 14, the aggregate number of shares of Stock available
for issuance with respect to all Awards is 2,000,000 shares;
Such shares shall be deemed to have been used in payment of Awards whether
they are actually delivered or the Fair Market Value equivalent of such
shares is paid in cash. In the event any Option, SAR not attached to an
Option, Restricted Stock, Phantom Stock Unit or Performance Share Unit
shall be
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<PAGE>
surrendered, terminate, expire, or be forfeited, the number of shares of
Stock no longer subject thereto shall thereupon be released and shall
thereafter be available for new Awards under the Plan;
Stock delivered by the Company in settlement of Awards under the Plan may
be authorized and unissued Stock or Stock held in the treasury of the
Company or may be purchased on the open market or by private purchase; and
No person may be granted Options or SARs under the Plan with respect to
more than 2,000,000 shares of Stock.
ELIGIBILITY
Participation shall be limited to Eligible Persons who have received
written notification from the Committee, or from a person designated by the
Committee, that they have been selected to participate in the Plan and
Non-Employee Directors who receive Director Stock Options.
DISCRETIONARY GRANT OF STOCK OPTIONS
The Committee is authorized to grant one or more Incentive Stock
Options or Nonqualified Stock Options to any Eligible Person; provided,
however, that no Incentive Stock Options shall be granted to any Eligible
Person who is not an employee of the Company or a Subsidiary. Each Option so
granted shall be subject to the following conditions, or to such other
conditions as may be reflected in the applicable Stock Option Agreement.
OPTION PRICE. The exercise price ("Option Price") per share of Stock for
each Option shall be set by the Committee at the time of grant but shall
not be less than (i) in the case of an Incentive Stock Option, and subject
to Section 7(e), the Fair Market Value of a share of Stock at the Date of
Grant, and (ii) in the case of a Non-Qualified Stock Option, the par value
of a share of Stock; provided, however, that all Options intended to
qualify as "performance-based compensation" under Section 162(m) of the
Code shall have an Option Price per share of Stock no less than the Fair
Market Value of a share of Stock on the Date of Grant.
MANNER OF EXERCISE AND FORM OF PAYMENT. Options which have become
exercisable may be exercised by delivery of written notice of exercise to
the Committee accompanied by payment of the Option Price. The Option Price
shall be payable in cash and/or shares of Stock valued at the Fair Market
Value at the time the Option is exercised (provided, however, that such
shares have either been held for six months or previously acquired on the
open market) or, in the discretion of the Committee, either (i) in other
property having a fair market value on the date of exercise equal to the
Option Price, or (ii) by delivering to the Committee a copy of irrevocable
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instructions to a stockbroker to deliver promptly to the Company an amount
of sale or loan proceeds sufficient to pay the Option Price.
OPTION PERIOD AND EXPIRATION. Options shall vest and become exercisable in
such manner and on such date or dates determined by the Committee and
shall expire after such period, not to exceed ten years, as may be
determined by the Committee (the "Option Period"); provided, however, that
notwithstanding any vesting dates set by the Committee, the Committee may
in its sole discretion accelerate the exercisability of any Option for any
reason, which acceleration shall not affect the terms and conditions of
any such Option other than with respect to exercisability. If an Option is
exercisable in installments, such installments or portions thereof which
become exercisable shall remain exercisable until the Option expires.
Unless otherwise stated in the applicable Option Agreement, the Option
shall expire earlier than the end of the Option Period in the following
circumstances:
If prior to the end of the Option Period, the Holder shall undergo a
Normal Termination, the Option shall expire on the earlier of the last
day of the Option Period or the date that is three months after the
date of such Normal Termination. In such event, the Option shall
remain exercisable by the Holder until its expiration, only to the
extent the Option was exercisable at the time of such Normal
Termination.
If the Holder dies prior to the end of the Option Period and while
still in the employ or service of the Company, a Subsidiary or
Affiliate, or within three months of Normal Termination, the Option
shall expire on the earlier of the last day of the Option Period or
the date that is twelve months after the date of death of the Holder.
In such event, the Option shall remain exercisable by the person or
persons to whom the Holder's rights under the Option pass by will or
the applicable laws of descent and distribution until its expiration,
only to the extent the Option was exercisable by the Holder at the
time of death.
If the Holder ceases employment or service with the Company and all
Subsidiaries and Affiliates for reasons other than Normal Termination
or death, the Option shall expire immediately upon such cessation of
employment or service.
STOCK OPTION AGREEMENT - OTHER TERMS AND CONDITIONS. Each Option granted
under the Plan shall be evidenced by a Stock Option Agreement, which shall
contain such provisions as may be determined by the Committee and, except
as may be specifically stated otherwise in such Stock Option Agreement,
which shall be subject to the following terms and conditions:
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Each Option or portion thereof that is exercisable shall be
exercisable for the full amount or for any part thereof.
Each share of Stock purchased through the exercise of an Option shall
be paid for in full at the time of the exercise. Each Option shall
cease to be exercisable, as to any share of Stock, when the Holder
purchases the share or exercises a related SAR or when the Option
expires.
Subject to Section 13(k), Options shall not be transferable by the
Holder except by will or the laws of descent and distribution and
shall be exercisable during the Holder's lifetime only by him.
Each Option shall vest and become exercisable by the Holder in
accordance with the vesting schedule established by the Committee and
set forth in the Stock Option Agreement.
Each Stock Option Agreement may contain a provision that, upon demand
by the Committee for such a representation, the Holder shall deliver
to the Committee at the time of any exercise of an Option a written
representation that the shares to be acquired upon such exercise are
to be acquired for investment and not for resale or with a view to the
distribution thereof. Upon such demand, delivery of such
representation prior to the delivery of any shares issued upon
exercise of an Option shall be a condition precedent to the right of
the Holder or such other person to purchase any shares. In the event
certificates for Stock are delivered under the Plan with respect to
which such investment representation has been obtained, the Committee
may cause a legend or legends to be placed on such certificates to
make appropriate reference to such representation and to restrict
transfer in the absence of compliance with applicable federal or state
securities laws.
Each Incentive Stock Option Agreement shall contain a provision
requiring the Holder to notify the Company in writing immediately
after the Holder makes a disqualifying disposition of any Stock
acquired pursuant to the exercise of such Incentive Stock Option. A
disqualifying disposition is any disposition (including any sale) of
such Stock before the later of (a) two years after the Date of Grant
of the Incentive Stock Option or (b) one year after the date the
Holder acquired the Stock by exercising the Incentive Stock Option.
INCENTIVE STOCK OPTION GRANTS TO 10% STOCKHOLDERS. Notwithstanding
anything to the contrary in this Section 7, if an Incentive Stock Option
is granted to a Holder who owns stock representing more than ten percent
of the voting power of all classes of stock of the Company or of a
Subsidiary, the Option Period shall not exceed five years from the Date of
Grant of such Option and the Option Price shall be at least
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110 percent of the Fair Market Value (on the Date of Grant) of the Stock
subject to the Option.
$100,000 PER YEAR LIMITATION FOR INCENTIVE STOCK OPTIONS. To the extent
the aggregate Fair Market Value (determined as of the Date of Grant) of
Stock for which Incentive Stock Options are exercisable for the first time
by any Participant during any calendar year (under all plans of the
Company and its Subsidiaries) exceeds $100,000, such excess Incentive
Stock Options shall be treated as Nonqualified Stock Options.
VOLUNTARY SURRENDER. The Committee may permit the voluntary surrender of
all or any portion of any Nonqualified Stock Option and its corresponding
SAR, if any, granted under the Plan to be conditioned upon the granting to
the Holder of a new Option for the same or a different number of shares as
the Option surrendered or require such voluntary surrender as a condition
precedent to a grant of a new Option to such Participant. Such new Option
shall be exercisable at an Option Price, during an Option Period, and in
accordance with any other terms or conditions specified by the Committee
at the time the new Option is granted, all determined in accordance with
the provisions of the Plan without regard to the Option Price, Option
Period, or any other terms and conditions of the Nonqualified Stock Option
surrendered.
STOCK APPRECIATION RIGHTS
Any Option granted under the Plan may include SARs, either at the Date
of Grant or, except in the case of an Incentive Stock Option, by subsequent
amendment. The Committee also may award SARs to Eligible Persons independent of
any Option. An SAR shall be subject to such terms and conditions not
inconsistent with the Plan as the Committee shall impose, including, but not
limited to, the following:
VESTING. SARs granted in connection with an Option shall become
exercisable, be transferable and shall expire according to the same
vesting schedule, transferability rules and expiration provisions as the
corresponding Option. An SAR granted independent of an Option shall become
exercisable, be transferable and shall expire in accordance with a vesting
schedule, transferability rules and expiration provisions as established
by the Committee and reflected in an Award agreement.
AUTOMATIC EXERCISE. If on the last day of the Option Period (or in the
case of an SAR independent of an Option, the period established by the
Committee after which the SAR shall expire), the Fair Market Value of the
Stock exceeds the Option Price (or in the case of an SAR granted
independent of an Option, the Fair Market Value of the Stock on the Date
of Grant), the Holder has not exercised the SAR or the corresponding
Option, and neither the SAR nor the
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corresponding Option has expired, such SAR shall be deemed to have been
exercised by the Holder on such last day and the Company shall make the
appropriate payment therefor.
PAYMENT. Upon the exercise of an SAR, the Company shall pay to the Holder
an amount equal to the number of shares subject to the SAR multiplied by
the excess, if any, of the Fair Market Value of one share of Stock on the
exercise date over the Option Price, in the case of an SAR granted in
connection with an Option, or the Fair Market Value of one share of Stock
on the Date of Grant, in the case of an SAR granted independent of an
Option. With respect to SARs exercised before the Company has been subject
to the reporting requirements of Section 13(a) of the Exchange Act for one
year, the Company shall issue or transfer to the Participant shares of
Stock with a Fair Market Value at such time equal to 100 percent of any
such excess. With respect to SARs exercised after the Company has been
subject to such reporting requirements for at least one year, the Company
shall pay such excess in cash, in shares of Stock valued at Fair Market
Value, or any combination thereof, as determined by the Committee.
Fractional shares shall be settled in cash.
METHOD OF EXERCISE. A Participant may exercise an SAR at such time or
times as may be determined by the Committee at the time of grant by filing
an irrevocable written notice with the Committee or its designee,
specifying the number of SARs to be exercised, and the date on which such
SARs were awarded.
EXPIRATION. Except as otherwise provided in the case of SARs granted in
connection with Options, an SAR shall expire on a date designated by the
Committee which is not later than ten years after the Date of Grant of the
SAR.
PERFORMANCE SHARES
AWARD GRANTS. The Committee is authorized to establish Performance Share
programs to be effective over designated Award Periods determined by the
Committee. At the beginning of each Award Period, the Committee will
establish in writing Performance Goals based upon financial objectives for
the Company for such Award Period and a schedule relating the
accomplishment of the Performance Goals to the Awards to be earned by
Participants. Performance Goals may include absolute or relative growth in
earnings per share or rate of return on stockholders' equity or other
measurement of corporate performance and may be determined on an
individual basis or by categories of Participants. The Committee shall
determine the number of Performance Share Units to be awarded, if any, to
each Participant who is selected to receive such an Award. The Committee
may add new Participants to a Performance Share program after its
commencement by making pro rata grants.
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DETERMINATION OF AWARD. At the completion of a Performance Share Award
Period, or at other times as specified by the Committee, the Committee
shall calculate the number of shares of Stock earned with respect to each
Participant's Performance Share Unit Award by multiplying the number of
Performance Share Units granted to the Participant by a performance factor
representing the degree of attainment of the Performance Goals.
PARTIAL AWARDS. A Participant for less than a full Award Period, whether
by reason of commencement or termination of employment or otherwise, shall
receive such portion of an Award, if any, for that Award Period as the
Committee shall determine.
PAYMENT OF PERFORMANCE SHARE UNIT AWARDS. Performance Share Unit Awards
shall be payable in that number of shares of Stock determined in
accordance with Section 9(b); provided, however, that, at its discretion,
the Committee may make payment to any Participant in the form of cash upon
the specific request of such Participant. The amount of any payment made
in cash shall be based upon the Fair Market Value of the Stock on the day
prior to payment. Payments of Performance Share Unit Awards shall be made
as soon as practicable after the completion of an Award Period.
ADJUSTMENT OF PERFORMANCE GOALS. The Committee may, during the Award
Period, make such adjustments to Performance Goals as it may deem
appropriate, to compensate for, or reflect, (i) extraordinary or
non-recurring events experienced during an Award Period by the Company or
by any other corporation whose performance is relevant to the
determination of whether Performance Goals have been attained; (ii) any
significant changes that may have occurred during such Award Period in
applicable accounting rules or principles or changes in the Company's
method of accounting or in that of any other corporation whose performance
is relevant to the determination of whether an Award has been earned or
(iii) any significant changes that may have occurred during such Award
Period in tax laws or other laws or regulations that alter or affect the
computation of the measures of Performance Goals used for the calculation
of Awards; provided, however, that with respect to such Awards intended to
qualify as "performance-based compensation" under Section 162(m) of the
Code, such adjustment shall be made only to the extent that the Committee
determines that such adjustments may be made without a loss of
deductibility for such Award under Section 162(m) of the Code.
DISCRETIONARY RESTRICTED STOCK AWARDS AND PHANTOM STOCK UNITS
AWARD OF RESTRICTED STOCK AND PHANTOM STOCK UNITS.
The Committee shall have the authority (1) to grant Restricted Stock
and Phantom Stock Unit Awards to Eligible
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Persons, (2) to issue or transfer Restricted Stock to Participants,
and (3) to establish terms, conditions and restrictions applicable to
such Restricted Stock and Phantom Stock Units, including the
Restricted Period, which may differ with respect to each grantee, the
time or times at which Restricted Stock or Phantom Stock Units shall
be granted or become vested and the number of shares or units to be
covered by each grant.
The Holder of a Restricted Stock Award shall execute and deliver to
the Company an Award agreement with respect to the Restricted Stock
setting forth the restrictions applicable to such Restricted Stock. If
the Committee determines that the Restricted Stock shall be held in
escrow rather than delivered to the Holder pending the release of the
applicable restrictions, the Holder additionally shall execute and
deliver to the Company (i) an escrow agreement satisfactory to the
Committee, and (ii) the appropriate blank stock powers with respect to
the Restricted Stock covered by such agreements. If a Participant
shall fail to execute a Restricted Stock agreement and, if applicable,
an escrow agreement and stock powers, the Award shall be null and
void. Subject to the restrictions set forth in Section 10(b), the
Holder shall generally have the rights and privileges of a stockholder
as to such Restricted Stock, including the right to vote such
Restricted Stock. At the discretion of the Committee, cash dividends
and stock dividends with respect to the Restricted Stock may be either
currently paid to the Holder or withheld by the Company for the
Holder's account, and interest may be paid on the amount of cash
dividends withheld at a rate and subject to such terms as determined
by the Committee. Cash dividends or stock dividends so withheld by the
Committee shall not be subject to forfeiture.
Upon the Award of Restricted Stock, the Committee shall cause a stock
certificate registered in the name of the Holder to be issued and, if
it so determines, deposited together with the stock powers with an
escrow agent designated by the Committee. If an escrow arrangement is
used, the Committee shall cause the escrow agent to issue to the
Holder a receipt evidencing any stock certificate held by it
registered in the name of the Holder.
The terms and conditions of a grant of Phantom Stock Units shall be
reflected in a written Award agreement. No shares of Stock shall be
issued at the time a Phantom Stock Unit Award is made, and the Company
will not be required to set aside a fund for the payment of any such
Award. Holders of Phantom Stock Units shall receive an amount equal to
the cash dividends paid by the Company upon one share of Stock for
each Phantom Stock Unit then credited to such Holder's account
("Dividend Equivalents"). The Committee shall, in its sole discretion,
determine whether to credit to the
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account of, or to currently pay to, each Holder of an Award of Phantom
Stock Units such Dividend Equivalents. Dividend Equivalents credited
to a Holder's account shall be subject to forfeiture on the same basis
as the related Phantom Stock Units, and may bear interest at a rate
and subject to such terms as are determined by the Committee.
RESTRICTIONS.
Restricted Stock awarded to a Participant shall be subject to the
following restrictions until the expiration of the Restricted Period,
and to such other terms and conditions as may be set forth in the
applicable Award agreement: (1) if an escrow arrangement is used, the
Holder shall not be entitled to delivery of the stock certificate; (2)
the shares shall be subject to the restrictions on transferability set
forth in the Award agreement; (3) the shares shall be subject to
forfeiture to the extent provided in subparagraph (d) and the Award
Agreement and, to the extent such shares are forfeited, the stock
certificates shall be returned to the Company, and all rights of the
Holder to such shares and as a shareholder shall terminate without
further obligation on the part of the Company.
Phantom Stock Units awarded to any Participant shall be subject to (1)
forfeiture until the expiration of the Restricted Period, to the
extent provided in subparagraph (d) and the Award agreement, and to
the extent such Awards are forfeited, all rights of the Holder to such
Awards shall terminate without further obligation on the part of the
Company and (2) such other terms and conditions as may be set forth in
the applicable Award agreement.
The Committee shall have the authority to remove any or all of the
restrictions on the Restricted Stock and Phantom Stock Units whenever
it may determine that, by reason of changes in applicable laws or
other changes in circumstances arising after the date of the
Restricted Stock Award or Phantom Stock Award, such action is
appropriate.
RESTRICTED PERIOD. The Restricted Period of Restricted Stock and Phantom
Stock Units shall commence on the Date of Grant and shall expire from time
to time as to that part of the Restricted Stock and Phantom Stock Units
indicated in a schedule established by the Committee.
FORFEITURE PROVISIONS. Except to the extent determined by the Committee
and reflected in the underlying Award agreement, in the event a Holder
terminates employment with the Company and all Subsidiaries and Affiliates
during a Restricted Period, that portion of the Award with respect to
which restrictions have not expired ("Non-Vested Portion") shall be
treated as follows.
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Upon the voluntary resignation of a Participant or discharge by the
Company, a Subsidiary or Affiliate for Cause, the Non-Vested Portion
of the Award shall be completely forfeited.
Upon Normal Termination, the Non-Vested Portion of the Award shall be
prorated for service during the Restricted Period and shall be
received as soon as practicable following termination.
Upon death, the Non-Vested Portion of the Award shall be prorated for
service during the Restricted Period and paid to the Participant's
beneficiary as soon as practicable following death.
DELIVERY OF RESTRICTED STOCK AND SETTLEMENT OF PHANTOM STOCK UNITS. Upon
the expiration of the Restricted Period with respect to any shares of
Stock covered by a Restricted Stock Award, the restrictions set forth in
Section 10(b) and the Award agreement shall be of no further force or
effect with respect to shares of Restricted Stock which have not then been
forfeited. If an escrow arrangement is used, upon such expiration, the
Company shall deliver to the Holder, or his beneficiary, without charge,
the stock certificate evidencing the shares of Restricted Stock which have
not then been forfeited and with respect to which the Restricted Period
has expired (to the nearest full share) and any cash dividends or stock
dividends credited to the Holder's account with respect to such Restricted
Stock and the interest thereon, if any.
Upon the expiration of the Restricted Period with respect to any
Phantom Stock Units covered by a Phantom Stock Unit Award, the Company shall
deliver to the Holder, or his beneficiary, without charge, one share of Stock
for each Phantom Stock Unit which has not then been forfeited and with respect
to which the Restricted Period has expired ("Vested Unit") and cash equal to
any Dividend Equivalents credited with respect to each such Vested Unit and the
interest thereon, if any; provided, however, that, if so noted in the
applicable Award agreement, the Committee may, in its sole discretion, elect to
pay cash or part cash and part Stock in lieu of delivering only Stock for
Vested Units. If cash payment is made in lieu of delivering Stock, the amount
of such payment shall be equal to the Fair Market Value of the Stock as of the
date on which the Restricted Period lapsed with respect to such Vested Unit.
STOCK RESTRICTIONS. Each certificate representing Restricted Stock awarded
under the Plan shall bear the following legend until the lapse of all
restrictions with respect to such Stock:
"Transfer of this certificate and the shares represented
hereby is restricted pursuant to the terms of a Restricted Stock
Agreement, dated as of , between
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Bolle Inc. and . A copy of such Agreement is on file at the
offices of the Company at ."
Stop transfer orders shall be entered with the Company's transfer agent and
registrar against the transfer of legended securities.
STOCK BONUS AWARDS
The Committee may issue unrestricted Stock under the Plan to Eligible
Persons, alone or in tandem with other Awards, in such amounts and subject to
such terms and conditions as the Committee shall from time to time in its sole
discretion determine. Stock Bonus Awards under the Plan shall be granted as, or
in payment of, a bonus, or to provide incentives or recognize special
achievements or contributions.
AUTOMATIC GRANTS OF STOCK OPTIONS TO NON-EMPLOYEE DIRECTORS
Upon the consummation of the Spinoff each Non-Employee Director shall
be automatically granted a Nonqualified Stock Option to purchase 3,333 shares
of Stock. Thereafter, on the date any person first becomes a Non-Employee
Director, such person shall be automatically granted without further action by
the Board or the Committee a Nonqualified Stock Option to purchase 3,333 shares
of Stock. Thereafter, beginning in 1999, for the remainder of the term of the
Plan and provided he remains a Non-Employee Director of the Company, on the
date of each of the Company's Annual Meeting of Stockholders, each Non-Employee
Director shall be automatically granted without further action by the Board or
the Committee a Nonqualified Stock Option to purchase 1,000 shares of Stock.
All such Options granted to Non-Employee Directors shall hereinafter be
referred to as Director Stock Options.
(a) OPTION PRICE; TERM. All Director Stock Options shall have an
Option Price per share equal to the Fair Market Value of a share of Stock on
the Date of Grant. All Director Stock Options shall vest and become exercisable
over a period of four years at the rate of 25% of each grant annually on each
of the four consecutive anniversaries of the Date of Grant directly following
the Date of Grant provided the Non-Employee Director's services as a director
continues through each such anniversary. The term of each Non-Employee Director
Option ("Term"), after which each such Option shall expire, shall be ten years
from the date of Grant.
(b) EXPIRATION. If prior to the expiration of the Term of a Director
Stock Option the Non-Employee Director shall cease to be a member of the Board
for any reason other than his death, the
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Director Stock Option shall expire on the earlier of the expiration of the Term
or the date that is three months after the date of such cessation. If prior to
the expiration of the Term of a Director Stock Option a Non-Employee Director
shall cease to be a member of the Board by reason of his death, the Director
Stock Option shall expire on the earlier of the expiration of the Term or the
date that is one year after the date of such cessation. In the event a
Non-Employee Director ceases to be a member of the Board for any reason, any
unexpired Director Stock Option shall thereafter be exercisable until its
expiration only to the extent that such Option was exercisable at the time of
such cessation.
(c) DIRECTOR STOCK OPTION AGREEMENT. Each Director Stock Option shall
be evidenced by a Director Stock Option Agreement, which shall contain such
provisions as may be determined by the Committee.
(d) NONTRANSFERABILITY. Subject to Section 13(k), Director Stock
Options shall not be transferable except by will or the laws of descent and
distribution and shall be exercisable during the Non-Employee Director's
lifetime only by him.
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GENERAL
ADDITIONAL PROVISIONS OF AN AWARD. Awards under the Plan also may be
subject to such other provisions (whether or not applicable to the benefit
awarded to any other Participant) as the Committee determines appropriate
including, without limitation, provisions to assist the Participant in
financing the purchase of Stock upon the exercise of Options, provisions
for the forfeiture of or restrictions on resale or other disposition of
shares of Stock acquired under any Award, provisions giving the Company
the right to repurchase shares of Stock acquired under any Award in the
event the Participant elects to dispose of such shares, and provisions to
comply with Federal and state securities laws and Federal and state tax
withholding requirements. Any such provisions shall be reflected in the
applicable Award agreement.
PRIVILEGES OF STOCK OWNERSHIP. Except as otherwise specifically provided
in the Plan, no person shall be entitled to the privileges of stock
ownership in respect of shares of Stock which are subject to Awards
hereunder until such shares have been issued to that person.
GOVERNMENT AND OTHER REGULATIONS. The obligation of the Company to make
payment of Awards in Stock or otherwise shall be subject to all applicable
laws, rules, and regulations, and to such approvals by governmental
agencies as may be required. Notwithstanding any terms or conditions of
any Award to the contrary, the Company shall be under no obligation to
offer to sell or to sell and shall be prohibited from offering to sell or
selling any shares of Stock pursuant to an Award unless such shares have
been properly registered for sale pursuant to the Securities Act with the
Securities and Exchange Commission or unless the Company has received an
opinion of counsel, satisfactory to the Company, that such shares may be
offered or sold without such registration pursuant to an available
exemption therefrom and the terms and conditions of such exemption have
been fully complied with. The Company shall be under no obligation to
register for sale under the Securities Act any of the shares of Stock to
be offered or sold under the Plan. If the shares of Stock offered for sale
or sold under the Plan are offered or sold pursuant to an exemption from
registration under the Securities Act, the Company may restrict the
transfer of such shares and may legend the Stock certificates representing
such shares in such manner as it deems advisable to ensure the
availability of any such exemption.
TAX WITHHOLDING. Notwithstanding any other provision of the Plan, the
Company, a Subsidiary or an Affiliate, as appropriate, shall have the
right to deduct from all Awards cash and/or Stock, valued at Fair Market
Value on the date of payment, in an amount necessary to satisfy all
Federal, state or local taxes as required by law to be withheld with
respect
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to such Awards and, in the case of Awards paid in Stock, the Holder or
other person receiving such Stock may be required to pay to the Company or
a Subsidiary, as appropriate, prior to delivery of such Stock, the amount
of any such taxes which the Company or Subsidiary is required to withhold,
if any, with respect to such Stock. Subject in particular cases to the
disapproval of the Committee, the Company may accept shares of Stock of
equivalent Fair Market Value in payment of such withholding tax
obligations if the Holder of the Award elects to make payment in such
manner.
CLAIM TO AWARDS AND EMPLOYMENT RIGHTS. No employee or other person shall
have any claim or right to be granted an Award under the Plan or, having
been selected for the grant of an Award, to be selected for a grant of any
other Award. Neither the Plan nor any action taken hereunder shall be
construed as giving any Participant any right to be retained in the employ
or service of the Company, a Subsidiary or an Affiliate.
DESIGNATION AND CHANGE OF BENEFICIARY. Each Participant shall file with
the Committee a written designation of one or more persons as the
beneficiary who shall be entitled to receive the amounts payable with
respect to an Award of Performance Share Units, Phantom Stock Units or
Restricted Stock, if any, due under the Plan upon his death. A Participant
may, from time to time, revoke or change his beneficiary designation
without the consent of any prior beneficiary by filing a new designation
with the Committee. The last such designation received by the Committee
shall be controlling; provided, however, that no designation, or change or
revocation thereof, shall be effective unless received by the Committee
prior to the Participant's death, and in no event shall it be effective as
of a date prior to such receipt. If no beneficiary designation is filed by
the Participant, the beneficiary shall be deemed to be his or her spouse
or, if the Participant is unmarried at the time of death, his or her
estate.
PAYMENTS TO PERSONS OTHER THAN PARTICIPANTS. If the Committee shall find
that any person to whom any amount is payable under the Plan is unable to
care for his affairs because of illness or accident, or is a minor, or has
died, then any payment due to such person or his estate (unless a prior
claim therefor has been made by a duly appointed legal representative)
may, if the Committee so directs the Company, be paid to his spouse,
child, relative, an institution maintaining or having custody of such
person, or any other person deemed by the Committee to be a proper
recipient on behalf of such person otherwise entitled to payment. Any such
payment shall be a complete discharge of the liability of the Committee
and the Company therefor.
NO LIABILITY OF COMMITTEE MEMBERS. No member of the Committee shall be
personally liable by reason of any contract or other instrument executed
by such member or on his behalf in his
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capacity as a member of the Committee nor for any mistake of judgment made
in good faith, and the Company shall indemnify and hold harmless each
member of the Committee and each other employee, officer or director of
the Company to whom any duty or power relating to the administration or
interpretation of the Plan may be allocated or delegated, against any cost
or expense (including counsel fees) or liability (including any sum paid
in settlement of a claim) arising out of any act or omission to act in
connection with the Plan unless arising out of such person's own fraud or
willful bad faith; provided, however, that approval of the Board shall be
required for the payment of any amount in settlement of a claim against
any such person. The foregoing right of indemnification shall not be
exclusive of any other rights of indemnification to which such persons may
be entitled under the Company's Articles of Incorporation or By-Laws, as a
matter of law, or otherwise, or any power that the Company may have to
indemnify them or hold them harmless.
GOVERNING LAW. The Plan shall be governed by and construed in accordance
with the internal laws of the State of New York without regard to the
principles of conflicts of law thereof.
FUNDING. Except as provided under Section 10, no provision of the Plan
shall require the Company, for the purpose of satisfying any obligations
under the Plan, to purchase assets or place any assets in a trust or other
entity to which contributions are made or otherwise to segregate any
assets, nor shall the Company maintain separate bank accounts, books,
records or other evidence of the existence of a segregated or separately
maintained or administered fund for such purposes. Holders shall have no
rights under the Plan other than as unsecured general creditors of the
Company, except that insofar as they may have become entitled to payment
of additional compensation by performance of services, they shall have the
same rights as other employees under general law.
NONTRANSFERABILITY. A person's rights and interest under the Plan,
including amounts payable, may not be sold, assigned, donated, or
transferred or otherwise disposed of, mortgaged, pledged or encumbered
except, in the event of a Holder's death, to a designated beneficiary to
the extent permitted by the Plan, or in the absence of such designation,
by will or the laws of descent and distribution; provided, however, the
Committee may, in its sole discretion, allow for transfer of Awards other
than Incentive Stock Options to other persons or entities, subject to such
conditions or limitations as it may establish.
RELIANCE ON REPORTS. Each member of the Committee and each member of the
Board shall be fully justified in relying, acting or failing to act, and
shall not be liable for having so relied, acted or failed to act in good
faith, upon any report made by the independent public accountant of the
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Company and its Subsidiaries and Affiliates and upon any other information
furnished in connection with the Plan by any person or persons other than
himself.
RELATIONSHIP TO OTHER BENEFITS. No payment under the Plan shall be taken
into account in determining any benefits under any pension, retirement,
profit sharing, group insurance or other benefit plan of the Company or
any Subsidiary except as otherwise specifically provided in such other
plan.
EXPENSES. The expenses of administering the Plan shall be borne by the
Company and its Subsidiaries and Affiliates.
PRONOUNS. Masculine pronouns and other words of masculine gender shall
refer to both men and women.
TITLES AND HEADINGS. The titles and headings of the sections in the Plan
are for convenience of reference only, and in the event of any conflict,
the text of the Plan, rather than such titles or headings shall control.
TERMINATION OF EMPLOYMENT. For all purposes herein, a person who transfers
from employment or service with the Company to employment or service with
a Subsidiary or Affiliate or vice versa shall not be deemed to have
terminated employment or service with the Company, a Subsidiary or
Affiliate.
CHANGES IN CAPITAL STRUCTURE
Awards granted under the Plan and any agreements evidencing such
Awards, the maximum number of shares of Stock subject to all Awards and the
maximum number of shares of Stock with respect to which any one person may be
granted Options or SARs during any year shall be subject to adjustment or
substitution, as determined by the Committee in its sole discretion, as to the
number, price or kind of a share of Stock or other consideration subject to
such Awards or as otherwise determined by the Committee to be equitable (i) in
the event of changes in the outstanding Stock or in the capital structure of
the Company by reason of stock dividends, stock splits, reverse stock splits,
recapitalizations, reorganizations, mergers, consolidations, combinations,
exchanges, or other relevant changes in capitalization occurring after the Date
of Grant of any such Award or (ii) in the event of any change in applicable
laws or any change in circumstances which results in or would result in any
substantial dilution or enlargement of the rights granted to, or available for,
Participants in the Plan, or which otherwise warrants equitable adjustment
because it interferes with the intended operation of the Plan. In addition, in
the event of any such adjustments or substitution, the aggregate number of
shares of Stock available under the Plan shall be appropriately adjusted by the
Committee, whose determination shall be conclusive. Any adjustment in Incentive
Stock Options under this Section 14 shall be made only to the extent not
constituting a "modification"
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within the meaning of Section 424(h)(3) of the Code, and any adjustments under
this Section 14 shall be made in a manner which does not adversely affect the
exemption provided pursuant to Rule 16b-3 under the Exchange Act. Further, with
respect to Awards intended to qualify as "performance-based compensation" under
Section 162(m) of the Code, such adjustments or substitutions shall be made
only to the extent that the Committee determines that such adjustments or
substitutions may be made without a loss of deductibility for Awards under
Section 162(m) of the Code. The Company shall give each Participant notice of
an adjustment hereunder and, upon notice, such adjustment shall be conclusive
and binding for all purposes.
Notwithstanding the above, in the event of any of the following:
A. The Company is merged or consolidated with another
corporation or entity and, in connection therewith,
consideration is received by shareholders of the Company in a
form other than stock or other equity interests of the
surviving entity;
B. All or substantially all of the assets of the Company are
acquired by another person;
C. The reorganization or liquidation of the Company; or
D. The Company shall enter into a written agreement to undergo
an event described in clauses A, B or C above,
then the Committee may, in its discretion and upon at least 10 days advance
notice to the affected persons, cancel any outstanding Awards and pay to the
Holders thereof, in cash or stock, or any combination thereof, the value of
such Awards based upon the price per share of Stock received or to be received
by other shareholders of the Company in the event. The terms of this Section 14
may be varied by the Committee in any particular Award agreement.
EFFECT OF CHANGE IN CONTROL
Except to the extent reflected in a particular Award agreement:
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In the event of a Change in Control, notwithstanding any vesting schedule
with respect to an Award of Options (including Director Stock Options),
SARs, Phantom Stock Units or Restricted Stock, such Option or SAR shall
become immediately exercisable with respect to 100 percent of the shares
subject to such Option or SAR, and the Restricted Period shall expire
immediately with respect to 100 percent of such Phantom Stock Units or
shares of Restricted Stock.
In the event of a Change in Control, all incomplete Award Periods in
effect on the date the Change in Control occurs shall end on the date of
such change, and the Committee shall (i) determine the extent to which
Performance Goals with respect to each such Award Period have been met
based upon such audited or unaudited financial information then available
as it deems relevant, (ii) cause to be paid to each Participant partial or
full Awards with respect to Performance Goals for each such Award Period
based upon the Committee's determination of the degree of attainment of
Performance Goals, and (iii) cause all previously deferred Awards to be
settled in full as soon as possible.
In addition, in the event of a Change in Control, the Committee may in its
discretion and upon at least 10 days' advance notice to the affected
persons, cancel any outstanding Awards and pay to the Holders thereof, in
cash or stock, or any combination thereof, the value of such Awards based
upon the price per share of Stock received or to be received by other
shareholders of the Company in the event.
The obligations of the Company under the Plan shall be binding upon any
successor corporation or organization resulting from the merger,
consolidation or other reorganization of the Company, or upon any
successor corporation or organization succeeding to substantially all of
the assets and business of the Company. The Company agrees that it will
make appropriate provisions for the preservation of Participant's rights
under the Plan in any agreement or plan which it may enter into or adopt
to effect any such merger, consolidation, reorganization or transfer of
assets.
NONEXCLUSIVITY OF THE PLAN
Neither the adoption of this Plan by the Board nor the submission of
this Plan to the stockholders of the Company for approval shall be construed as
creating any limitations on the power of the Board to adopt such other
incentive arrangements as it may deem desirable, including, without limitation,
the granting of stock options otherwise than under this Plan, and such
arrangements may be either applicable generally or only in specific cases.
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AMENDMENTS AND TERMINATION
The Board may at any time terminate the Plan. Subject to Section 14,
with the express written consent of an individual Participant, the Board or the
Committee may cancel or reduce or otherwise alter outstanding Awards if, in its
judgment, the tax, accounting, or other effects of the Plan or potential
payouts thereunder would not be in the best interest of the Company. The Board
or the Committee may, at any time, or from time to time, amend or suspend and,
if suspended, reinstate, the Plan in whole or in part; provided, however, that
without further stockholder approval neither the Board nor the Committee shall
make any amendment to the Plan which would materially alter the Plan or which
would specifically:
Materially increase the maximum number of shares of Stock which may be
issued pursuant to Awards, except as provided in Section 14;
Change the maximum Option Price;
Extend the maximum Option Period;
Extend the termination date of the Plan; or
Change the class of persons eligible to receive Awards under the Plan;
EFFECT OF SECTION 162(M) OF THE CODE
Generally, in order for Options and SARs to qualify as
"performance-based compensation" (within the meaning of Section 162(m) of the
Code), they must be issued under a plan approved by the shareholders of a
company, granted by a Disinterested Committee and must have a per share
exercise price no less than the Fair Market Value of one share of Stock as of
the date of grant. In addition, the plan must state the maximum number of
shares that may be granted with respect to Options or SARs to any person during
a specified time period.
Because the Company was a subsidiary of BEC, a "publicly held
corporation" (within the meaning of Section 162(m) of the Code), that became
"publicly held" (within the meaning of Section 162(m) of the Code) as a result
of a spinoff, the Plan is exempt from the shareholder approval requirements of
Section 162(m) of the Code for a period of time pursuant to Treasury Regulation
Section 1.167-27(f)(4)(iii). The Company may rely on this exemption only for
Options and SARs granted prior to the first regularly scheduled meeting of the
shareholders of the Company that occurs more than twelve months after the date
that the
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Company so became a publicly held corporation. Thereafter, in order for Options
and SARs to qualify as "performance-based compensation" (within the meaning of
Section 162(m) of the Code) the shareholder approval requirements of Section
162(m) of the Code must be satisfied and the Plan must be approved by a vote of
the shareholders of the Company.
* * *
As adopted by the Board of Directors of
Bolle Inc. as of January , 1998
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RULES OF THE BOLLE INC.
STOCK OPTION PLAN
FOR FRENCH EMPLOYEES
1. INTRODUCTION
Bolle Inc.(the "Company") has established the Bolle Inc. 1998 Stock Incentive
Plan (the "US Plan") for the benefit of certain employees of the Company, its
subsidiaries and affiliates, including its French Subsidiaries, BOLLE S.N.C.
and BOLLE DIFFUSION (the "Subsidiaries") of which the Company holds indirectly
100% of the capital. The Board of Directors of the Company has determined that
it is advisable to establish a sub-plan for the purposes of permitting stock
options granted under the US Plan to qualify for favorable French tax and
social security treatment. The Board of Directors, therefore, intends to
establish a sub-plan of the US Plan for the purpose of granting options which
qualify for the favorable tax and social security treatment in France
applicable to options granted under the Law n(0) 70-1322 of December 31, 1970,
as subsequently amended, to qualifying employees who are resident in France for
French tax purposes. The terms of the US Plan, as set out in Appendix 1 hereto,
shall, subject to the modifications in the following rules, constitute the
Bolle Inc. Stock Option Plan for French Employees (the "French Plan"). Under
the French Plan, the qualifying employees will be granted only stock options.
In no case will they be granted other Awards, as referred to in the US Plan.
2. DEFINITIONS
Terms used in the French Plan shall have the same meanings as set
forth in the US Plan, except as specifically provided herein.
For the purposes of this French Plan, the term "Option" shall have the
following meaning:
Purchase options, that are rights to acquire shares repurchased by the
Company prior to the grant of said options.
3. ENTITLEMENT TO PARTICIPATE
Any Employee of the Subsidiaries shall be eligible to receive Options
under the French Plan. However, options cannot be issued under the French Plan
to employees or executives owning more than ten percent (10%) of the Company's
capital shares or to individuals other than employees and corporate executives
of the Subsidiaries. Options may not be issued to directors of the
Subsidiaries, unless they are employed by the Subsidiaries.
<PAGE>
4. OPTION PRICE
The Option Price per share of common stock payable pursuant to Options
issued hereunder shall be fixed by the Committee on the date the Option is
granted, but in no event shall the Option Price per share be less than the
greater of:
a. with respect to purchase options over the common stock, the
higher of either 95% of the average quotation price of such
common stock during the 20 days of quotation immediately
preceding the grant date or 95% of the average purchase price
paid for such common stock by the Company;
b. the minimum option exercise price permitted under the US
Plan.
5. EXERCISE OF AN OPTION
Upon exercise of an Option, the full Option Price will have to be paid
either by check or credit transfer.
The shares acquired upon exercise of an Option will be recorded in an account
in the name of the shareholder.
6. CHANGES IN CAPITALIZATION
In compliance with French law, neither the Option Price nor the number
of shares subject to an Option issued hereunder, shall be modified during the
Options' duration. Adjustments to the Option Price or number of shares subject
to an Option issued hereunder shall be made to preclude the dilution or
enlargement of benefits under such Option only in the case of one or more of
the following transactions by the Company:
a. an increase of corporate capital by cash contribution;
b. an issuance of convertible or exchangeable bonds;
c. a capitalization of retained earnings, profits, or issuance
premiums;
d. a distribution of retained earnings by payment in cash or shares;
and
e. a reduction of corporate capital by set off against losses.
7. DEATH
In the event of the death of a French Holder, said individual's heirs
may exercise the Option within 6 months following the death, but any vested
Option which remains
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unexercised shall expire 6 months following the date of the Holder's death.
8. INTERPRETATION
It is intended that Options granted under the French Plan shall
qualify for the favorable tax and social security treatment applicable to stock
options granted under the Law n(0) 70-1322 of December 31, 1970, as
subsequently amended, and in accordance with the relevant provisions set forth
by French tax law and the French tax administration. The terms of the French
Plan shall be interpreted accordingly.
9. AMENDMENTS
Subject to the terms of the US Plan, the Committee reserves the right
to amend or terminate the French Plan at any time.
10. ADOPTION
The French Plan was adopted by a meeting of the Board of Directors of
the Company, held on January __, 1998.
--------------------------
For Bolle Inc.
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EX 10.2
EMPLOYMENT AGREEMENT
This Employment Agreement (the "Agreement"), dated July 9, 1997, is made
between Societe Bolle SNC (the "Company") and Mr. Franck Bolle (the
"Employee").
WHEREAS, the Company wishes to hire the Employee and retain his services
according to the terms and conditions contained herein; and
WHEREAS, the Employee wishes to accept this employment according to the terms
and conditions contained herein;
THE PARTIES AGREE TO THE FOLLOWING:
1. EMPLOYMENT. The Company shall employ the Employee, and the Employee accepts
to serve the Company, pursuant to the general terms of the Collective
Bargaining Agreement applicable to the "Plastic Materials Transformation"
industry (the "Collective Bargaining Agreement") and the specific conditions
contained herein.
2. TERM. The Agreement shall be for an indefinite term beginning on the date of
execution. The parties agree that there shall be no probation period. Except in
the case of gross or willful misconduct or of force majeure, the party wishing
to terminate this Agreement shall inform the other party of such intended
termination by written notice, sent by registered mail, return receipt
requested, at least three months prior to the date of such intended
termination. Should the Company wish to terminate the Agreement during the
first three years following the date of execution of the Agreement for any
reason other than gross or willful misconduct by the Employee, the Company
shall pay the Employee, on the date of termination, a contractual severance
payment which, when added to the statutory severance payments and payments
during the notice period due under applicable law and the Collective Bargaining
Agreement, shall be equal to the salary that the Employee would have received
from the date of termination until the expiration of the three-year period
mentioned above.
3. FUNCTIONS. During the term of the Agreement, the Employee shall be employed
as Director of International Operations and shall perform all functions related
to this position or which may be requested by the management of the Company in
accordance with his position. The Employee shall devote his entire time and
abilities to these functions and to the Company's business in order to promote
the interests of the Company.
4. COMPENSATION. As compensation for his services, the Employee shall receive
an annual salary of FF 1,200,000, net of statutory social security
contributions owed by the Employee (the "Base Salary"). Said salary shall be
reviewed every year and shall be increased annually by a minimum of 3%. The
Employee shall also
<PAGE>
be entitled, as of December 31, 1997, 1998 and 1999, to an annual bonus which
shall vary from 25% of the Base Salary if Bolle Inc. meets its annual business
plan objectives up to 50% of the Base Salary if Bolle Inc. meets 120% of its
annual business plan objectives. This bonus shall be calculated pro rata if
Bolle Inc. meets between 100% and 120% of its annual business plan objectives.
Said annual business plan objectives shall be determined on a reasonable basis
by the Board of Directors of Bolle Inc. following consultation with the
Employee, in accordance with accounting terms and principles in effect in
France. The Employee's compensation shall be paid in accordance with the
Company's current compensation policies. During the term of the Agreement, the
Employee shall be entitled to participate in all of the Company's employee
benefit plans in accordance with the provisions of such plans applicable to
beneficiaries thereunder. The Company reserves the right to modify or suspend
such plans. In addition to the above compensation, the Employee shall receive
100,000 options in accordance with the BEC Group, Inc. stock option plan (the
"Plan"), which shall qualify as such for purposes of French tax law, at an
exercise price to be determined in accordance with the provisions of the Plan.
5. REIMBURSEMENT OF EXPENSES. In consideration of his management position at
the Company, the Employee shall be reimbursed for any travel, lodging and all
other professional expenses which he may incur. Reimbursement shall be made
upon submission by the Employee of an expense report accompanied by relevant
documentation. In addition, the Employee shall keep, and shall be entitled to
use, the Company credit card.
6. COMPANY VEHICLE. The Employee shall continue to be entitled to a Company
automobile for his professional use under the same conditions which exist on
the date of this Agreement. In case a replacement vehicle is needed, it shall
be of a similar type as that which the Company currently furnishes to the
Employee.
7. REPRESENTATIONS OF THE EMPLOYEE. The Employee represents and warrants that
he is not a party to, nor in any way bound by, any other agreements or
engagements, nor subject to any restrictions, including any agreements arising
out of former employment and containing confidentiality or non-compete clauses,
which could have a material effect on the Company's business or on the
performance by the Employee of his duties as set forth in this Agreement.
8. CONFIDENTIALITY. Other than as shall be necessary in the ordinary course of
his employment by the Company, the Employee agrees not to divulge to any third
party any non-public confidential information or proprietary information
including commercial, financial, technical, and legal information, trade
secrets and know-how, whether relating to the products, organization,
production, development strategy, the lists of
-2-
<PAGE>
customers, subcontractors and suppliers, the business partners, or generally,
the business of the Bolle Group.
Upon termination of the Agreement for any reason, the Employee shall
immediately return to the Company any and all reports, data, plans, lists of
clients, subcontractors or suppliers, and any computer software, recordings,
documents or diskettes in his possession which contain any information, trade
secrets or non-public confidential knowledge relating to the Company.
9. NON-COMPETITION. Should the Company terminate the Agreement for any reason
other than gross or willful misconduct, the Employee shall not be subject to
any non-compete clause. Should the Employee terminate the Contract during the
three-year period provided for under Article 2 of the Agreement, the Employee
expressly agrees until the expiration of such period not to serve in any
company which produces or sells products which are in competition with those of
the Company in whatever quality, or to create in France for his own account, or
directly or indirectly participate in, any company of a similar type. In
return, the Company shall pay the Employee, in such an event, an annual sum
equal to 10% of the Employee's last pre-termination monthly salary per month of
non-competition. Should the Employee terminate the Agreement after the end of
the three-year period provided for under Article 2 of the Agreement, the
Company shall have the right to require the Employee not to compete, beginning
on the date of termination, according to the terms described above, for a term
of one year, renewable no more than twice. In return, the Company shall pay the
Employee an annual sum during the period of non-competition equal to twelve
times the Employee's last monthly salary as of the date of termination. In any
event, the Company shall have the right to either reduce the length of the
period during which the non-compete clause applies, or to forego said
non-compete clause, provided that the Company informs the Employee of such by
registered mail, return receipt requested, within eight days following
notification of termination of the Agreement; in this event, the Employee will
not be entitled to any payments. If the non-compete obligations contained in
this Article cannot be fully performed, they shall be performed to the full
extent permitted by the law, and the Employee agrees that the scope of these
obligations may be reduced by the Company in connection with any legal action
which may be taken against the Company.
10. PENALTY CLAUSE. The parties agree that the restrictions contained in
Articles 8 and 9 above are fair and reasonable to the parties. The Employee
agrees that any breach of the restrictions contained in Articles 8 and 9 above
would cause actual harm to the Company for which money damages would be an
insufficient remedy. Consequently, the Company reserves the right to obtain the
cessation of any such breach and compensation therefor by any legal means.
-3-
<PAGE>
11. APPLICABLE LAW--JURISDICTION. This Agreement shall be governed by French
law, both as to its performance and termination, and the Labor Grievances Court
of Oyonnax shall have exclusive original jurisdiction over any litigation
arising hereunder.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the dates
set forth above.
BOLLE SNC FRANCK BOLLE
By: Patricia Bolle /s/ Franck Bolle
Title: Manager
/s/ Patricia Bolle
Acknowledged and Agreed:
BEC GROUP INC.
By: /s/ Ian Ashken
Title:
CERTIFICATION OF FAIR AND ACCURATE TRANSLATION
Pursuant to Rule 306 of Regulation S-T, the undersigned hereby
certifies that the above Employment Agreement is a fair and accurate English
translation of the original agreement, entitled "Contrat de Travail," entered
into between Societe Bolle SNC and Franck Bolle as of July 7, 1997. Upon
request, a copy of the original document shall be provided to the Securities
and Exchange Commission or its staff.
BOLLE INC.
By: /s/Ian G.H. Ashken
--------------------
Name: Ian G.H. Ashken
Title: Executive Vice
President of Finance
and Administration
-4-
<PAGE>
EX 10.3
EMPLOYMENT AGREEMENT
This Employment Agreement (the "Agreement"), dated July 9, 1997, is made
between Societe Bolle SNC (the "Company") and Ms. Patricia Bolle Passaquay (the
"Employee").
WHEREAS, the Company wishes to hire the Employee and retain her services
according to the terms and conditions contained herein; and
WHEREAS, the Employee wishes to accept this employment according to the terms
and conditions contained herein;
THE PARTIES AGREE TO THE FOLLOWING:
1. EMPLOYMENT. The Company shall employ the Employee, and the Employee accepts
to serve the Company, pursuant to the general terms of the Collective
Bargaining Agreement applicable to the "Plastic Materials Transformation"
industry (the "Collective Bargaining Agreement") and the specific conditions
contained herein.
2. TERM. The Agreement shall be for an indefinite term beginning on the date of
execution. The parties agree that there shall be no probation period. Except in
the case of gross or willful misconduct or of force majeure, the party wishing
to terminate this Agreement shall inform the other party of such intended
termination by written notice, sent by registered mail, return receipt
requested, at least three months prior to the date of such intended
termination. Should the Company wish to terminate the Agreement during the
first three years following the date of execution of the Agreement for any
reason other than gross or willful misconduct by the Employee, the Company
shall pay the Employee, on the date of termination, a contractual severance
payment which, when added to the statutory severance payments and payments
during the notice period due under applicable law and the Collective Bargaining
Agreement, shall be equal to the salary that the Employee would have received
from the date of termination until the expiration of the three-year period
mentioned above.
3. FUNCTIONS. During the term of the Agreement, the Employee shall be employed
as Director of Export Sales and shall perform all functions related
to this position or which may be requested by the management of the Company in
accordance with her position. The Employee shall devote her entire time and
abilities to these functions and to the Company's business in order to promote
the interests of the Company.
4. COMPENSATION. As compensation for her services, the Employee shall receive
an annual salary of FF 1,200,000, net of statutory social security
contributions owed by the Employee (the "Base Salary"). Said salary shall be
reviewed every year and shall be increased annually by a minimum of 3%. The
Employee shall also
<PAGE>
be entitled, as of December 31, 1997, 1998 and 1999, to an annual bonus which
shall vary from 25% of the Base Salary if Bolle Inc. meets its annual business
plan objectives up to 50% of the Base Salary if Bolle Inc. meets 120% of its
annual business plan objectives. This bonus shall be calculated pro rata if
Bolle Inc. meets between 100% and 120% of its annual business plan objectives.
Said annual business plan objectives shall be determined on a reasonable basis
by the Board of Directors of Bolle Inc. following consultation with the
Employee, in accordance with accounting terms and principles in effect in
France. The Employee's compensation shall be paid in accordance with the
Company's current compensation policies. During the term of the Agreement, the
Employee shall be entitled to participate in all of the Company's employee
benefit plans in accordance with the provisions of such plans applicable to
beneficiaries thereunder. The Company reserves the right to modify or suspend
such plans. In addition to the above compensation, the Employee shall receive
100,000 options in accordance with the BEC Group, Inc. stock option plan (the
"Plan"), which shall qualify as such for purposes of French tax law, at an
exercise price to be determined in accordance with the provisions of the Plan.
5. REIMBURSEMENT OF EXPENSES. In consideration of her management position at
the Company, the Employee shall be reimbursed for any travel, lodging and all
other professional expenses which she may incur. Reimbursement shall be made
upon submission by the Employee of an expense report accompanied by relevant
documentation. In addition, the Employee shall keep, and shall be entitled to
use, the Company credit card.
6. COMPANY VEHICLE. The Employee shall continue to be entitled to a Company
automobile for her professional use under the same conditions which exist on
the date of this Agreement. In case a replacement vehicle is needed, it shall
be of a similar type as that which the Company currently furnishes to the
Employee.
7. REPRESENTATIONS OF THE EMPLOYEE. The Employee represents and warrants that
she is not a party to, nor in any way bound by, any other agreements or
engagements, nor subject to any restrictions, including any agreements arising
out of former employment and containing confidentiality or non-compete clauses,
which could have a material effect on the Company's business or on the
performance by the Employee of her duties as set forth in this Agreement.
8. CONFIDENTIALITY. Other than as shall be necessary in the ordinary course of
her employment by the Company, the Employee agrees not to divulge to any third
party any non-public confidential information or proprietary information
including commercial, financial, technical, and legal information, trade
secrets and know-how, whether relating to the products, organization,
production, development strategy, the lists of
-2-
<PAGE>
customers, subcontractors and suppliers, the business partners, or generally,
the business of the Bolle Group.
Upon termination of the Agreement for any reason, the Employee shall
immediately return to the Company any and all reports, data, plans, lists of
clients, subcontractors or suppliers, and any computer software, recordings,
documents or diskettes in her possession which contain any information, trade
secrets or non-public confidential knowledge relating to the Company.
9. NON-COMPETITION. Should the Company terminate the Agreement for any reason
other than gross or willful misconduct, the Employee shall not be subject to
any non-compete clause. Should the Employee terminate the Contract during the
three-year period provided for under Article 2 of the Agreement, the Employee
expressly agrees until the expiration of such period not to serve in any
company which produces or sells products which are in competition with those of
the Company in whatever quality, or to create in France for her own account, or
directly or indirectly participate in, any company of a similar type. In
return, the Company shall pay the Employee, in such an event, an annual sum
equal to 10% of the Employee's last pre-termination monthly salary per month of
non-competition. Should the Employee terminate the Agreement after the end of
the three-year period provided for under Article 2 of the Agreement, the
Company shall have the right to require the Employee not to compete, beginning
on the date of termination, according to the terms described above, for a term
of one year, renewable no more than twice. In return, the Company shall pay the
Employee an annual sum during the period of non-competition equal to twelve
times the Employee's last monthly salary as of the date of termination. In any
event, the Company shall have the right to either reduce the length of the
period during which the non-compete clause applies, or to forego said
non-compete clause, provided that the Company informs the Employee of such by
registered mail, return receipt requested, within eight days following
notification of termination of the Agreement; in this event, the Employee will
not be entitled to any payments. If the non-compete obligations contained in
this Article cannot be fully performed, they shall be performed to the full
extent permitted by the law, and the Employee agrees that the scope of these
obligations may be reduced by the Company in connection with any legal action
which may be taken against the Company.
10. PENALTY CLAUSE. The parties agree that the restrictions contained in
Articles 8 and 9 above are fair and reasonable to the parties. The Employee
agrees that any breach of the restrictions contained in Articles 8 and 9 above
would cause actual harm to the Company for which money damages would be an
insufficient remedy. Consequently, the Company reserves the right to obtain the
cessation of any such breach and compensation therefor by any legal means.
-3-
<PAGE>
11. APPLICABLE LAW--JURISDICTION. This Agreement shall be governed by French
law, both as to its performance and termination, and the Labor Grievances Court
of Oyonnax shall have exclusive original jurisdiction over any litigation
arising hereunder.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the dates
set forth above.
BOLLE SNC PATRICIA BOLLE
By: Franck Bolle /s/ Patricia Bolle Passaquay
Title: Manager
/s/ Franck Bolle
Acknowledged and Agreed:
BEC GROUP INC.
By: /s/ Ian Ashken
Title:
CERTIFICATION OF FAIR AND ACCURATE TRANSLATION
Pursuant to Rule 306 of Regulation S-T, the undersigned hereby
certifies that the above Employment Agreement is a fair and accurate English
translation of the original agreement, entitled "Contrat de Travail," entered
into between Societe Bolle SNC and Franck Bolle as of July 7, 1997. Upon
request, a copy of the original document shall be provided to the Securities
and Exchange Commission or its staff.
BOLLE INC.
By: /s/Ian G.H. Ashken
--------------------
Name: Ian G.H. Ashken
Title: Executive Vice
President of Finance
and Administration
-4-
<PAGE>
EX 10.5
MANAGEMENT SERVICES AGREEMENT
Management Services Agreement dated as of October ____, 1997
("Agreement") by and between Bolle Inc., a Delaware corporation ("Bolle"), and
BEC Group, Inc., a Delaware corporation ("BEC").
W I T N E S S E T H
WHEREAS, BEC is experienced in the overall management and direction of
corporations which design, develop, manufacture and distribute products for
specialized markets throughout the world; and;
WHEREAS, Bolle, a manufacturer of sunglasses, eyeglasses and goggles,
desires to engage BEC to provide managerial and other advisory services to
Bolle and its subsidiaries, and BEC desires to accept such engagement;
NOW THEREFORE, in consideration of the premises and mutual covenants
and agreements hereinafter set forth, the parties hereto, desiring to be
legally bound, do hereby agree as follows:
1. ENGAGEMENT OF BEC. Bolle hereby engages BEC, and BEC hereby accepts
such engagement, to provide managerial and other advisory services on a
continuing basis to Bolle and its subsidiaries, upon the terms and conditions
hereinafter set forth.
2. SERVICES.
2.1 SCOPE OF SERVICES. Subject to the terms and conditions
hereof, BEC shall provide on a continuing basis to Bolle and
its subsidiaries such managerial and advisory services
relating to Bolle and its subsidiaries, as are specified in
Section 2.2 hereof and as Bolle may reasonably request from
time to time having regard to BEC's experience and expertise,
personnel and the remuneration payable to BEC under this
Agreement. Under no circumstances shall BEC be required to
provide the services of outside professionals or consultants
in fulfilling its obligations hereunder, except on such terms
and conditions as may be agreed between the parties from time
to time.
2.2 SPECIFIC SERVICES. The services BEC shall provide to
Bolle and its subsidiaries hereunder shall include, but not
be limited to, the following:
(a) advice and assistance as to the general and
corporate policies and strategic planning and
direction of Bolle and its subsidiaries and, in
connection therewith, make available the services of
Martin E. Franklin and Ian G.H. Ashken;
<PAGE>
(b) making available personnel of BEC to serve as
directors on the boards of directors of Bolle and
its subsidiaries and on committees of such board of
directors as Bolle and its subsidiaries may
reasonably request;
(c) advice and assistance in dealing with
regulators, including, without limitation, public
hearings involving Bolle or any of its subsidiaries
before governmental and regulatory bodies;
(d) advice and assistance involving investor
relations for Bolle, including without limitation,
communication with Bolle's investors, analysts and
securities regulators and the preparation and filing
by Bolle of disclosure documents and reports
required to be filed by it in accordance with
applicable securities laws, rules and regulations;
(e) advice and assistance with respect to the
financial affairs of Bolle and its subsidiaries,
including, without limitation, the evaluation of
budgets, business plans, capital expenditure
proposals and financial projections for Bolle and
its subsidiaries, monitoring of Bolle's operational
results (including those of its subsidiaries) and
consultation with management of Bolle with respect
to those results;
(f) advice and assistance in connection with the
raising by Bolle or any of its subsidiaries of
external debt or equity capital and dealings by
Bolle and its subsidiaries with their respective
bankers and other sources of financial assistance;
(g) advice and assistance in connection with
interest rate risk management, foreign exchange
management and excess cash investment;
(h) advice and assistance in connection with the
acquisition and divestiture of related operations;
(i) advice and assistance with regard to community
relations and public relations programs;
(j) advice, assistance and coordination in pension
planning matters;
(k) advice, assistance and coordination involving
insurance matters, including, without limitations,
risk management, planning, disaster advice and
coordination of insurance programs with affiliated
companies;
(l) advice and assistance in connection with Bolle's
relationship with external auditors and internal
audits conducted to review the corporate operations
and affairs of Bolle and its subsidiaries,
(including, without limitation, assistance in
identifying areas in which operational improvements
can be made);
2
<PAGE>
(m) advice and assistance in further developing
policies and procedures for Bolle and its
subsidiaries relating to financial, accounting,
human resource and benefits matters;
(n) monitoring international developments and new
business opportunities and consulting with
management of Bolle regarding same.
3. FEES AND EXPENSES.
3.1 MANAGEMENT FEE. In consideration of the services to be
rendered by BEC hereunder, Bolle shall pay to BEC a monthly
fee of $60,000 (the "Management Fee"), together with any
relevant sales taxes during each year that this Agreement
remains in effect. The Management Fee shall be paid in
arrears within five (5) days after the end of each month
included within the term of this Agreement.
3.2 EXPENSES. If, during the term of this Agreement, BEC
incurs any identifiable, reasonable out-of-pocket expenses
(including, without limitation, travel and living expenses)
in respect of the services rendered by BEC hereunder, BEC
shall be entitled to obtain reimbursement from Bolle of such
expenses upon providing Bolle with an invoice setting forth
the particulars of the expenses for which BEC is claiming
reimbursement hereunder. Notwithstanding the foregoing, BEC
shall not be entitled to reimbursement for any known single
item of expense in excess of $10,000 unless such expense
shall have been pre-approved by the President of Bolle. Any
amount due BEC under this Section 3.2 shall be paid by Bolle
within five (5) days after the end of the month in which the
invoice covering such amount was delivered to Bolle.
3.3 LATE PAYMENTS. Notwithstanding any provision contained
herein to the contrary, if and to the extent that payment of
any of the amounts described in Section 3.1 or 3.2 hereof
would result in Bolle or any of its subsidiaries being in
default under any agreement with a bank or similar lending
institution, Bolle may defer payment thereof until such time,
but only until such time, as the payment would not result in
Bolle being in default under such agreement, provided that if
such default continues for more than three (3) months BEC
shall not be obligated to provide any services pursuant to
this Agreement until such time as all outstanding amounts
have been paid in accordance with this Agreement. Any payment
to be made to BEC pursuant to this Agreement that is not paid
when due (including, without limitation, pursuant to the
deferment contemplated in the preceding sentence) shall bear
interest from the date such payment is due until the date
such payment is made at a rate per annum equal to the prime
rate of the New York City branch of NationsBank, N.A. during
such period, adjusted on a daily basis for changes in that
rate, plus 2% per annum.
4. LIMITATION OF LIABILITY. BEC assumes no responsibility to Bolle
hereunder other than as expressly set forth herein. BEC shall not be liable to
Bolle hereunder except for actual damages where BEC has acted in bad faith or
has been grossly negligent in the performance of
3
<PAGE>
its obligations hereunder. Bolle agrees to indemnify and hold harmless BEC from
and against any and all losses, damages, claims, liabilities, deficiencies,
costs and expenses (including reasonable attorney's fees) ("Losses") incurred
or suffered by BEC or any of its subsidiaries, arising from or in connection
with the services provided by BEC or any of its subsidiaries pursuant to this
Agreement other than Losses suffered or incurred as a result of BEC's bad faith
or gross negligence in the performance of its obligations hereunder.
5. INDEPENDENT CONTRACTOR. BEC shall act as the independent contractor
of Bolle. BEC shall not be the legal agent of Bolle for any purpose whatsoever
and therefore has no right or authority to make or underwrite any promise,
warranty or representation, to execute any contract or otherwise to assume any
obligation or responsibility in the name of or on behalf of Bolle, except to
the extent hereafter specifically authorized in writing by Bolle. BEC shall
advise all third parties with whom it deals in the performance of services
hereunder of such lack of authority. Bolle shall not be bound by or liable to
any third party for any act or for any obligation or debt incurred by BEC
toward such third party, except to the extent hereafter specifically agreed to
in writing by Bolle.
6. TERMS. The initial term of this Agreement shall commence as of the
date hereof and shall continue through and include the third anniversary of the
date hereof. Thereafter, the term of this Agreement shall automatically
continue in full force and effect for succeeding one-year periods unless either
party hereto shall give notice of termination to the other no later than ninety
(90) days prior to the expiration of the initial term, or any renewal term then
in effect, as the case may be. The respective rights and obligations of Bolle
and BEC which have accrued hereunder at the time of expiration of this
Agreement shall not be affected by such expiration.
7. MISCELLANEOUS.
7.1 NOTICES. All notices and other communications required or
permitted hereunder shall be in writing. Notices and other
communications shall be delivered personally (including by
any reputable overnight courier) or sent by certified or
registered mail, postage prepaid, or by telecopier and shall
be deemed received, in the case of personal delivery, when
delivered, in the case of mailing, on the third day after
mailing, and in the case of telecopy transmission, upon
transmittal.
All notices and other communications given pursuant to this
Agreement shall be addressed as follows:
(a) If to Bolle, to it at:
Bolle Inc.
3890 Elm Street
Denver, CO 80207
Telecopier: (303) 321-6952
Attention: Mr. Gary Kiedaisch
4
<PAGE>
(b) If to BEC, to it at:
BEC Group, Inc.
555 Theodore Fremd Avenue
Suite B-302
Rye, New York 10580
Telecopier: (914) 967-9405
Attention: Mr. Martin E. Franklin
Either party hereto may change the person to whom or the
address or telecopier number to which notices and other
communications are to be given hereunder, but any such notice
or other communication shall be effective only when actually
received by the other party hereto.
7.2 ENTIRE AGREEMENT. This Agreement contains the entire
agreement between the parties hereto with respect to the
subject matter hereof and supersedes any and all prior
arrangements, agreements or understandings, whether written
or oral. During the initial term of this Agreement, no
amendment, modification or waiver of any of the terms or
provisions of Section 3 hereof shall be valid or binding
unless set forth in writing and signed by Bolle and BEC. No
other amendment, modification or waiver of any of the terms
or provisions hereof shall be valid or binding unless set
forth in writing and signed by Bolle and BEC.
7.3 NON-WAIVER. The waiver of, or failure to take action with
regard to, any breach of any term or condition of this
Agreement shall not be deemed to constitute a continuing
waiver or a waiver of any other breach of the same or any
other term or condition.
7.4 HEADINGS. The headings contained in this Agreement are
for reference purposes only and shall not affect in any way
the meaning or interpretation of this Agreement.
7.5 COUNTERPARTS. This Agreement may be executed in more than
one counterpart and if so executed, each of such counterparts
shall be deemed to be an original, and, when executed by both
parties hereto, all such counterparts shall be read together
as one agreement.
7.6 SUCCESSORS AND ASSIGNS. This Agreement shall be binding
upon and inure to the benefit of the parties hereto, their
successors and assigns, but may not be assigned by either
party without the prior written consent of the other.
7.7 SEVERABILITY. If any term or provision of this Agreement
shall be held or determined to be unenforceable, the balance
of this Agreement shall nevertheless be valid and enforceable
subject to an equitable revision to be negotiated by the
parties hereto with the objective of maintaining the original
balance between their respective rights and obligations.
5
<PAGE>
7.8 GOVERNING LAW. This Agreement shall be enforced, governed
and construed by and interpreted under the laws of the State
of New York applicable to contracts made and to be performed
wholly within such State without giving effect to the
principles of conflict of laws thereof.
7.9 FURTHER ASSURANCES. Each party hereto shall cooperate,
shall take such further action and shall execute and deliver
such further documents as may be reasonably requested by any
other party in order to fulfill the purposes of this
Agreement.
IN WITNESS WHEREOF this Agreement has been executed by the parties
hereto as of the date first above written.
BOLLE INC.
By:
----------------------------------
Name:
Title:
BEC GROUP, INC.
By:
----------------------------------
Name:
Title:
6
<PAGE>
EX 10.6
BILL OF SALE AND ASSIGNMENT AGREEMENT
THIS BILL OF SALE AND ASSIGNMENT AND ASSUMPTION AGREEMENT,
dated as of October 1, 1997, is made in consideration of Ten Dollars ($10.00)
and other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, between BEC GROUP, INC., a Delaware corporation
("Assignor") and BOLLE INC., a Delaware corporation ("Assignee").
1. Assignor hereby grants, conveys, sells, assigns, transfers and
delivers to Assignee, its successors and assigns, and Assignee hereby purchases
and accepts from Assignor, all of Assignor's right, title and interest in all
assets and liabilities of Assignor, other than (i) the assets and liabilities
of or relating to Assignor's ORC Business (as defined below) and (ii) the items
listed in Schedule A hereto. All such assets and liabilities conveyed hereby
are referred to hereinafter as the "Acquired Assets". The Acquired Assets
include (without limitation) the items listed in Schedule B attached hereto.
For purposes of this Agreement, the ORC Business shall mean (i) all shares of
capital stock of Assignor's following subsidiaries and/or affiliates: ORC
Technologies, Inc., ORC Caribe, Optical Radiation Foreign Sales Corporation,
and Voltarc Technologies, Inc. held by Assignor or by any of such entities and
the business, assets and liabilities of or directly related to such entities;
and (ii) all assets and liabilities included in Assignor's pro forma balance
sheet attached hereto as Exhibit I; provided, that notwithstanding anything
contained in this Paragraph 1 to the contrary, Assignor retains all right,
title and interest in and to the items identified in Schedule A hereto, but the
parties mutually acknowledge and agree that such items identified in Schedule A
do not constitute part of the ORC Business.
2. Title to the Acquired Assets shall pass to Assignee upon the date
of this Assignment Agreement.
3. Assignee assumes, and agrees to pay when and as due and to
discharge, all debts, liabilities, obligations, taxes, liens and encumbrances
of any kind, character or description, whether accrued, absolute, contingent or
otherwise (and whether or not reflected or reserved against in the balance
sheets, books of account and records of Assignor) in respect of (a) the
Acquired Assets and/or (b) the items identified in Schedule A hereto.
4. Assignee hereby further agrees to execute and deliver an
indemnification agreement, in form satisfactory to Assignor, pursuant to which
Assignee shall indemnify and hold Assignor harmless from and against any and
all loss, damage or expense (a) related to or arising from or in connection
with the Acquired Assets and/or (b) otherwise not related to or arising from or
in connection with the ORC Business (including, without limitation, related to
or arising in connection with the items identified in Schedule A hereto).
5. Assignor hereby constitutes and appoints Assignee its true and
lawful attorney, with full power of substitution, in the name of Assignee or in
the name of Assignor, but on behalf of and for the sole benefit of Assignee, to
institute and prosecute all proceedings which Assignee may deem proper in order
to receive, collect, assert or enforce any claim, right or title of any kind in
or to the Acquired Assets, to defend and compromise any and all such action and
<PAGE>
execute instruments in relation thereto as Assignee shall deem advisable.
Without limiting the foregoing, Assignor hereby authorizes Assignee and its
officers to endorse or assign any instrument, contract or chattel paper
relating to the Acquired Assets.
6. Assignor further agrees that it will at any time and from time to
time, at the request of Assignee, execute and deliver to Assignee all other and
further instruments necessary to vest in Assignee full title, right and
interest in or to any of the property, assets or rights which this instrument
purports to transfer to Assignee.
7. All of the terms and provisions of this Assignment will be binding
upon Assignor and its respective successors and assigns and will inure to the
benefit of Assignee and its respective successors and assigns.
8. This Bill of Sale and Assignment Agreement shall be governed by,
and construed and enforced in accordance with, the laws of the State of New
York.
IN WITNESS WHEREOF, the parties hereto have executed and delivered
this Bill of Sale and Assignment Agreement as of the date first above written.
ASSIGNOR
BEC GROUP, INC.
By:
--------------------------------------
Name: Martin E. Franklin
Title: Chairman and Chief Executive
Officer
ASSIGNEE:
BOLLE INC.
By:
--------------------------------------
Name: Gary Kiedaisch
Title:
2
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SCHEDULE A
RIGHTS, INTEREST, ETC. RETAINED BY BEC
IN CONNECTION WITH WHICH BOLLE
WILL ASSUME LIABILITY AND INDEMNIFY BEC
I. Rights and obligations under various arrangements with HMG World-Wide
Corporation (and its subsidiary Intermark Corp.), including (without
limitation):
A. Stock Purchase Agreement, dated as of September 30, 1995, by and
between BEC Group, Inc. as assignee of Benson Eyecare Corporation
("Benson") and Intermark Corp.
B. Assignment and Assumption Agreement, dated September 30, 1995.
C. Guaranty, dated September 30, 1995, by Benson in favor of HMG
Worldwide In-Store Marketing Corporation.
II. Certain agreements relating to arrangements among Wells Fargo Bank
(Texas), National Association, as successors to First Interstate Bank
of Texas, N.A., and BEC, as successor to Foster Grant Group, L.P.:
A. Guaranty Agreement by BEC, dated March 31, 1995, in favor of First
Interstate Bank (as amended).
B. Indemnity Agreement, dated March 31, 1994 [sic], from Foster Grant
Group, L.P. et al in favor of First Interstate Bank, N.A. (as
amended).
III. Any remaining Benson or BEC obligations and rights relating to:
A. The Agreement and Plan of Merger among Benson Eyecare Corporation,
BEC Acquisition Corp. and Bolle America, Inc., dated as of July
26, 1995.
B. The Asset Purchase Agreement by and among Benson Eyecare
Corporation, BEC Group, Inc. and Optical Radiation Corporation and
Monsanto Company, dated May 3, 1996.
C. The merger of Essilor Acquisition Corporation into Benson Eyecare
Corporation, effective on May 3, 1996.
IV. Pending Litigation:
A. Herb Morris & Partners, Ltd. v. Opti-Ray, Inc. and Benson Eyecare
Corporation.
B. Thomas W. Dornfeld v. Omega Optical Co., L.P., Omega Group
Limited, and Benson Eyecare Corporation.
C. Magnivision, Inc. v. The Bonneau Company.
D. Alan Katz, Trustee, v. Essomega Corporation, f/k/a Benson Eyecare
Corporation, and BEC Group, Inc.
V. Stock Purchase and Option Agreement, dated November 14, 1996, by and
among BEC and Lantis Eyewear Corporation (as amended), relating to
shares transferred to Assignee by this Assignment. Assignor and
Assignee, by execution and delivery of this Assignment, mutually
acknowledge and agree that Assignee will promptly deliver such shares
at Assignor's direction upon any execution of such option and that
Assignor will promptly transfer to Assignee all consideration
received in connection with any such exercise.
<PAGE>
SCHEDULE B
LIST OF ASSETS/LIABILITIES
ASSIGNED TO/ASSUMED BY
BOLLE INC.
I. All interests, rights, duties and obligations of BEC Group, Inc.
("BEC") relating to Accessories Associates, Inc. ("AAi"), including
(without limitation):
A. Stock Purchase Agreement, dated as of November 13, 1996, by and
among BEC, AAi, et al.
B. Exchange and Registration Rights Agreement, dated December 11,
1996, by and among AAi, Foster Grant Holdings, Inc. ("FGH"), BEC,
et al.
C. Certificate No. P-1, representing 100 shares of FGH Series A
Preferred Stock.
II. All interests, rights, duties and obligations in and related to
Superior Vision Services, Inc.:
A. Loan Agreement, dated September 30, 1994 (as subsequently amended).
B. Revolving Credit Promissory Note, dated September 30, 1994, for
maximum principal amount of $1,000,000 (as amended) and any note
issued in replacement or substitution therefor.
C. Share Certificate No. 5, representing 8,800 shares of common stock.
D. Share Certificate No. 1, representing 17,825 shares of Series A
Preferred Stock.
E. Share Certificate No. 3, representing 41, 782 shares of Series B
Preferred Stock.
F. BEC's rights and obligations pursuant to ancillary documents, such
as the Shareholder Agreement (as subsequently amended).
III. Certain Assets, Rights and Obligations Relating to Sterling Vision,
Inc.
A. Covenant not to compete and guarantee of Pembridge Optical
Partners, Inc. obligations pursuant to Asset Purchase Agreement,
dated August 26, 1994, by and between Pembridge Optical Partners,
Inc. and Sterling Vision, Inc.
B. Note Amendment and Conversion Agreement, dated April 21, 1997, and
all rights and obligations in connection therewith.
IV. Management Agreement between BEC and Eyecare Products, plc.
V. All BEC's rights, title and interest in and to shares of stock of
Eyecare Products, plc. subject to the agreement described in Schedule
B.V. hereto.
VI. All right and interest in and to rental payments receivable by BEC (as
assignor) pursuant to:
A. Industrial Lease by and between Bartley Optical Sales, Inc. and ORC
Technologies, Inc. (f/k/a/ Optical Radiation Corporation) dated as
of December 8, 1995; and
B. Lease Agreement, dated as of May 3, 1996, by and between Monsanto
Company and ORC Technologies, Inc. (f/k/a Optical Radiation
Corporation).
In each case, subject to all of the remaining terms and conditions of each
such lease and the rights of assignor's senior lenders with respect thereto.
<PAGE>
EX 10.7
INDEMNIFICATION AGREEMENT
Indemnification Agreement dated as of __________, 1997 by and among
BEC Group, Inc., a Delaware corporation ("BEC"), BILC Acquisition Corp., a
Delaware corporation, a wholly owned subsidiary of BEC ("Acquisition"), and
Bolle Inc., a Delaware corporation ("Bolle").
WHEREAS, BEC has determined to transfer to Bolle assets and
liabilities pursuant to the Bill of Sale and Assignment Agreement between BEC
and Bolle which will be dated as of October 1, 1997 a copy of which is attached
hereto as Exhibit 1 (the "Contribution Agreement"), and to distribute to the
holders of BEC common stock all of BEC's interest in Bolle (the "Spinoff"), and
the consummation of the Spinoff prior to the consummation of the Merger (as
defined below) is a condition precedent to the consummation of the Merger;
WHEREAS, BEC, Acquisition and ILC Technology, Inc. a California
corporation ("ILCT"), have previously entered into an Agreement and Plan of
Merger (the "Merger Agreement") dated October 30, 1997, a copy of which is
attached hereto as Exhibit 2, providing for the merger of ILCT with and into
Acquisition immediately after the consummation of the Spinoff and satisfaction
of the other conditions contained in the Merger Agreement (the "Merger");
WHEREAS, the closing of the Merger is conditioned upon the execution
of this Agreement by the parties;
WHEREAS, the parties hereto desire to enter into this Agreement in
consideration for, among other things, the benefits resulting from the transfer
to Bolle by BEC of various assets pursuant to the Contribution Agreement and in
satisfaction of the closing condition contained in the Merger Agreement;
WHEREAS, BEC and Acquisition desire to enter into this Agreement in
consideration for, among other things, the assumption of certain liabilities by
Bolle pursuant to the Contribution Agreement and the satisfaction of the
aforementioned closing condition; and
WHEREAS, the parties to this Agreement have determined that it is
necessary and desirable to set forth certain agreements that will govern
various tax matters, indemnity matters and other matters that may arise in
connection with the Spinoff;
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements, provisions and covenants contained in this Agreement, the parties
agree as follows:
SECTION 1. Definitions. The following terms shall have the following
definitions:
"Bolle Group" shall have the meaning as defined in the Merger
Agreement.
"Consolidated Net Worth" of a person or entity means the consolidated
shareholders' equity in such person or entity calculated in accordance with
generally accepted accounting principles, applied on a basis consistent with
past practices and consistent with those applied in
<PAGE>
preparing BEC's consolidated financial statements and Bolle's consolidated
financial statements.
"Environmental Laws" shall have the meaning as defined in the Merger
Agreement.
"Indemnification Period" shall mean from the date of the Spinoff until
June 30, 2000 with respect to all Losses for which indemnification is provided
pursuant to this Agreement, other than (i) Losses indemnified pursuant to
Section 2(a)(iii) hereunder in which case the "Indemnification Period" shall be
seven (7) years, or (ii) Losses indemnified against or arising as a result of
or in connection with Taxes which are the responsibility of the Indemnifying
Parties pursuant to Section 3 hereof, in which case the "Indemnification
Period" shall be the full period of any applicable statutes of limitations
(giving effect to any waiver, mitigation or extension thereof).
"Indemnified Parties" means BEC and Acquisition, together with any and
all other Subsidiaries and affiliates of BEC other than members of the Bolle
Group.
"Indemnifying Parties" means, jointly and severally, Bolle and such
other persons required to become Indemnifying Parties pursuant to this
Agreement.
"Loss" or "Losses" means any losses, claims, damages, deficiencies,
liabilities, costs and expenses (including reasonable expenses of investigation
and reasonable attorney's fees and disbursements), net of tax benefits received
as a result of such Loss and net of any insurance recoveries actually received
to the extent such recoveries do not adversely affect coverage under or the
future cost of such insurance or adversely affect the subrogation rights of any
insurer of the party that has received any such insurance recovery.
"Minimum Consolidated Tangible Net Worth" means the Consolidated
Tangible Net Worth (as defined below) of Bolle and its Subsidiaries, as of the
date of the Spinoff, plus the amount of any additional equity raised through
the public markets by Bolle or any member of the Bolle Group subsequent to the
Spinoff (while a member of the Bolle Group), net of all transactional expenses
associated therewith. The Consolidated Tangible Net Worth of Bolle and its
Subsidiaries shall be determined by subtracting all intangible assets included
in the computation of Consolidated Net Worth at the time in question from such
Consolidated Net Worth ("Consolidated Tangible Net Worth")) as evidenced by a
certificate to that effect issued by the Treasurer or Chief Financial Officer
of Bolle.
"ORC Business" means the businesses, assets and liabilities of, or
directly related to, ORC Technologies, Inc., ORC Caribe, Optical Radiation
Foreign Sales Corporation, Voltarc Technologies, Inc. ("Voltarc"), including
the businesses, assets and liabilities of ILC, and including all assets and
liabilities included in BEC's pro forma balance sheet included in Schedule 2.6
to the Merger Agreement; provided, that "ORC Business" shall not include any
items or matters identified in Schedule A or Schedule B to the Contribution
Agreement.
"Post-Spinoff Tax Period" means any Tax period beginning after the end
of the date of the Spinoff; provided that with respect to a Tax period that
begins on or before the date of the
2
<PAGE>
Spinoff and ends thereafter, the portion of such Tax period beginning after the
date of the Spinoff shall also be a Post-Spinoff Tax Period.
"Pre-Spinoff Tax Period" means any Tax period ending on or before the
end of the date of the Spinoff; provided that, with respect to a Tax period
that begins on or before the date of the Spinoff and ends thereafter, the
portion of such Tax period up to and including the date of the Spinoff shall
also be a Pre-Spinoff Tax Period.
"Restricted Payments" means (i) the payment or declaration of any
dividend, in cash or otherwise, or the making of any similar payment or
distribution on common stock of any Indemnifying Party or any of their
Subsidiaries, other than dividends or distributions payable in shares of
capital stock of the Indemnifying Party or any of their Subsidiaries, provided
that such distributed capital stock shall not have any mandatory redemption or
other payment requirements; (ii) the purchase, redemption or other acquisition
or retirement for value of any common or other voting class of stock of any
Indemnifying Party or any of their Subsidiaries; (iii) any loan or advance to,
or guarantee of any indebtedness of, non-affiliates of any Indemnifying Party
or non-affiliates of any Indemnifying Party's Subsidiaries; (iv) any direct or
indirect purchase or other acquisition (other than a purchase or acquisition
where the consideration to be paid is comprised substantially of capital stock
of any Indemnifying Party or any of their Subsidiaries) by any Indemnifying
Party or any of their Subsidiaries of a beneficial or equity interest in any
person other than in, or which results in, a direct or indirect 50% or more
owned subsidiary of any Indemnifying Party; or (v) any capital contribution to
any subsidiary that is not a direct or indirect 50% or more owned Subsidiary of
any Indemnifying Party; or (vi) except as permitted pursuant to Section 5(f)
herein, the sale or distribution (other than to another Indemnifying Party) of
more than 50% of the outstanding capital stock of any Subsidiary of any
Indemnifying Party, provided that in the case of clauses (iv) and (v) hereof
the portion of such subsidiary not owned directly or indirectly by Bolle is
owned by a person or entity who is not an Affiliate of Bolle.
"Subsidiaries" or "Subsidiary" of a person or entity means any entity
or entities 50% or more of which is directly or indirectly owned or which are
controlled by such person or entity and, in the case of BEC, includes Voltarc.
"Tax" or "Taxes" means (i) any tax, governmental fee or other like
assessment or charge of any kind whatsoever (including, without limitation,
withholding on amounts paid to or by any person), together with any interest,
penalty, addition to tax or additional amount imposed by any governmental
authority (a "Taxing Authority") responsible for the imposition of any such tax
(domestic or foreign), (ii) liability for the payment of any amounts of the
type described in (i) as a result of BEC or any Subsidiary being a member of an
affiliated, consolidated, combined or unitary group, or being a party to any
agreement or arrangement as a result of which liability of BEC or any
Subsidiary to a Taxing Authority is determined or taken into account with
reference to the liability of any other person, and (iii) liability of BEC or
any Subsidiary for the payment of any amount as a result of being party to any
tax sharing agreement or arrangement, or with respect to the payment of any
amount of the type described in (i) or (ii) as a result of any express or
implied obligation to indemnify any other Person.
3
<PAGE>
Section 2. Indemnification. In addition to the obligations of the
parties contained in Sections 3 and 4 hereof, after the effective date of the
Spinoff:
(a) The Indemnifying Parties agree to indemnify and hold
harmless the Indemnified Parties from and against any and all Losses as
incurred or suffered by an Indemnified Party, arising out of or in connection
with or related to:
(i)(x) BEC and its Subsidiaries, excluding the ORC
Business for purposes of this Section 2(a)(i)(x), up until the Spinoff, whether
or not the Loss is based upon any breach of any agreement, obligation, covenant
or warranty in this Agreement by the Indemnified Parties or the Indemnifying
Parties or any misrepresentation by any of them contained in the Merger
Agreement or this Agreement or any set of facts, which is disclosed in any
section of the Merger Agreement or any agreements, schedules or documents
referred to therein, and (y) Bolle and its Subsidiaries or their respective
successors, subsequent to the Spinoff;
(ii) the enforcement by the Indemnified Parties of
their rights under this Agreement;
(iii) any Environmental Laws, whether asserted
against BEC and/or Bolle or any other Subsidiary of BEC before or after the
Spinoff, at, or in connection with (A) the business operations of BEC or its
Subsidiaries or predecessors prior to the date of the Spinoff and the current,
past or future business operations of the Bolle Group or any of its
predecessors, (B) the ownership, lease or operation of any facility or property
presently or previously owned, leased or operated by BEC or its Subsidiaries or
predecessors, to the extent any Loss in connection therewith relates to any
condition existing at or prior to the date of the Spinoff or any facility or
property presently, previously or in the future owned, leased or operated by an
Indemnifying Party or any of its Subsidiaries or predecessors, or (C) items
disclosed on Schedule 2.17 of the Merger Agreement;
(iv) any and all claims by Monsanto Corporation, or
its successors or assigns for indemnification obligations of BEC or any of its
Subsidiaries in connection with the Asset Purchase Agreement among Benson
Eyecare Corporation, BEC, ORC Technologies, Inc. and Monsanto Corporation dated
February 11, 1996;
(v) the items identified in (i) Schedule A to the
Contribution Agreement other than to the extent relating to the ORC Business
and (ii) Schedule B to the Contribution Agreement; and
(vi) any untrue statement or alleged untrue
statement of a material fact contained in the Form S-1 registration statement
filed by Bolle with the Securities and Exchange Commission with respect to the
Spinoff or any amendment thereof or any omission or alleged omission to state
therein a material fact necessary to make the statements therein, in the light
of the circumstances under which they were made, not misleading.
(b) The Indemnified Parties jointly and severally agree to
indemnify and hold
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<PAGE>
harmless the Indemnifying Parties from and against any and all Losses, as they
are incurred or suffered by the Bolle Group, arising out of or in connection
with or related to (i) the conduct of the business of BEC and its Subsidiaries,
after the Spinoff, (ii) other than as provided in Section 2(a)(iii), the
conduct of the ORC Business before or after the Spinoff, or (iii) the
Indemnifying Parties in enforcing their rights under this Agreement.
Section 3. Taxes.
(a) BEC, Bolle and Acquisition agree that Bolle and its
Subsidiaries shall be included in the consolidated Federal income tax return
filed by BEC for the period from January 1, 1997 through December 31, 1997
unless another date is required by federal tax law, and BEC shall be
responsible for making all payments for such periods to the extent required to
be made by BEC under applicable law, including, without limitation, all taxes,
if any, arising out of or as a result of the Merger or Spinoff, subject to the
Indemnifying Parties' indemnification and payment obligations as set forth in
this Section 3.
(b)(i) The Indemnifying Parties shall indemnify and hold the
Indemnified Parties harmless from and against any and all (x) Taxes of BEC or
any of its Subsidiaries (including the Bolle Group) except to the extent such
Taxes arise from or in connection with the ORC Business, (y) Taxes imposed as a
result of the Spinoff or any transaction described on Schedule 4.2 of the
Merger Agreement and (z) liabilities, costs, expenses (including, without
limitation, reasonable expenses of investigation and attorneys' fees and
expenses), losses, damages, assessments, settlements or judgments directly
arising out of or incident to the imposition, assessment or assertion of any
Tax described in (x) or (y), including those incurred in the contest in good
faith in appropriate proceedings relating to the imposition, assessment or
assertion of any such Tax. If Bolle or any of its Subsidiaries has a current
year loss or credit, computed on a stand-alone basis, in the tax period in
which the Spinoff occurs which reduces the Tax liability for such period
attributable to the ORC Business for which BEC is liable hereunder, the
Indemnifying Parties' liability for Taxes under this Section shall be reduced
by the amount by which the Tax liability for such period attributable to the
ORC Business is reduced by such losses or credits. Furthermore, if BEC, Bolle
or any of their respective Subsidiaries has an unutilized net operating loss,
capital loss or tax credit carryforward or similar tax asset incurred in
periods prior to the Spinoff, after effecting any carryback required by law,
such carryforward or other asset, to the maximum extent permitted by law, (A)
shall first be claimed as a deduction or a credit (as the case may be) in
computing the Taxes for the tax period in which the Spinoff occurred for which
the Indemnifying Parties have the responsibility of indemnifying the
Indemnified Parties under this Agreement and thereafter shall be allocated to
reduce the income of whichever party can utilize such carryforward or other
asset or, if both the Indemnifying Parties and the Indemnified Parties can
utilize such carryforward or other assets, shall be divided equally between
them in computing their relative tax liabilities in the tax period which
includes the Spinoff, and (B) to the extent that any such carryforward or other
asset still exists for carryover after effecting the provisions of clause (A)
such carryforward or other asset shall, to the maximum extent permitted by
applicable Tax laws, including by reattribution under Reg. Section
1.1502-20(g), be apportioned to the Indemnified Parties without any payment or
reimbursement if such losses or credits are used to offset any Taxes that the
Indemnified Parties
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<PAGE>
have incurred or will incur.
(ii) The Indemnified Parties shall be entitled to
all refunds of Taxes attributable to a Pre-Spinoff Tax Period, except to the
extent such refund is attributable to a Tax for which the Indemnifying Parties
have made an indemnity payment pursuant to this Agreement.
(iii) The Indemnified Parties shall indemnify and
hold the Indemnifying Parties harmless from and against any Taxes attributable
to the ORC Business for all tax periods whether before or after the Spinoff, as
well as all other Taxes attributable to BEC for any Post-Spinoff Tax Period,
except as otherwise provided hereunder.
(c)(i) The Indemnified Parties agree that they shall be
responsible for the preparation and filing of all combined, consolidated, and
unitary returns filed with respect to at least one Indemnified Party and at
least one Indemnifying Party (each a "Consolidated Return") and separate
returns filed with respect to any Indemnified Party, in respect of any
Pre-Spinoff Tax Period and any Tax period that includes (but does not end on)
the date of the Spinoff. Any such return shall be prepared in a manner
consistent with past practice and without a change of any election or any
accounting method and shall be submitted by the Indemnified Parties to the
Indemnifying Parties at least 30 days prior to the due date (including
extensions) of such return. With respect to any such return for which the
Indemnifying Parties have an indemnification obligation hereunder, the
Indemnifying Parties and their professional advisors shall have the right, at
the Indemnifying Parties' expense, to review such return. If the Indemnifying
Parties, within ten (10) business days after delivery of any such return,
notify the Indemnified Parties in writing that they object to any items in such
return for which the Indemnifying Parties have an indemnification obligation
hereunder, the disputed items shall be resolved (within a reasonable time,
taking into account the deadline for filing such return) in the manner set
forth in Section 3(e) hereof. To the extent that such returns require a tax
payment indemnified against by the Indemnifying Parties as provided in Section
3(b)(i) hereof, the Indemnifying Parties shall, no later than five (5) business
days before the due date for payment of Taxes with respect to any such return,
deliver such payment by check (subject to collection) made out to the
appropriate Taxing Authority. The Indemnified Parties shall sign and file such
return with the proper Taxing Authority, together with such Bolle check and
together with any additional amounts required to be paid by the Indemnified
Parties and for which the Indemnified Parties are not indemnified under this
Agreement. In the case of any Consolidated Return related to a Pre-Spinoff Tax
Period, the Indemnifying Parties' liability shall be the Indemnifying Parties'
share of the Tax liability of the consolidated, combined or unitary group,
computed in a manner consistent with past practice. If upon audit it is found
that the payment from Indemnifying Parties was not adequate to discharge their
liability as set forth herein, then Indemnifying Parties shall pay such
additional Taxes as may be incurred with respect thereto; if upon review or
audit it is found that the payment from the Indemnifying Parties exceeded their
respective liability as set forth herein, then the Indemnified Parties shall
deliver to the Indemnifying Parties the amount of any Tax refund including
interest received with respect to any such excess.
(c)(ii) The Indemnifying Parties shall be responsible for
preparing and filing any
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foreign, federal, state and local tax returns relating solely to any
Indemnifying Party.
(c)(iii) The parties shall cooperate with each other in the
preparation of any return and the conduct of any audit or other proceedings
involving any Indemnified Party and any Indemnifying Party. The Indemnified
Parties and the Indemnifying Parties, without charge, shall provide the
requesting party with such assistance and documents as may be reasonably
requested by such party in connection with the preparation of any return or the
conduct of any audit or other proceeding. The Indemnified Parties and the
Indemnifying Parties agree to keep each other fully informed of all matters
relating to any tax return, audit or judicial or administrative proceeding,
including without limitation any settlement negotiations. In the event of an
audit or contest with any Taxing Authority relating to Taxes for a Pre-Spinoff
Tax Period for which the Indemnifying Parties may be liable under this
Agreement, the Indemnified Parties shall be responsible for conducting all Tax
audits with the participation (at the Indemnifying Parties' expense) of the
Indemnifying Parties and the Indemnified Parties, shall have the right to
control at their sole expense subject to Section 3(b)(i), and make all
decisions regarding such audit or contest (except that the Indemnifying Parties
and the Indemnified Parties shall mutually select a forum for contest), so long
as such control and/or decisions by the Indemnified Parties do not have an
adverse effect on the Indemnifying Parties' tax liability or the amount of the
Indemnifying Parties' indemnification hereunder. If such control or any
decision may have such an adverse effect on the Indemnifying Parties, then the
written consent of the party or parties so adversely or potentially adversely
affected shall be required, which consent shall not be unreasonably withheld or
delayed. The parties agree to use their reasonable best efforts to conclude all
Tax audits as quickly as possible.
(d) No party will, nor will it cause or permit any of its
Subsidiaries to, initiate contact with any Taxing Authority, volunteer
information to any Taxing Authority, make any changes in tax accounting methods
or conventions, make or rescind any election, or report or treat any specified
item on any Tax return for any Post-Spinoff Tax Period, in a manner
inconsistent with the manner in which such specific item was reported or
treated on any such Tax return for any Pre-Spinoff Tax Period, if any such
action would have an effect of either increasing the Tax liability or reducing
the Tax assets of another party for any Pre-Spinoff Tax Period. The
Indemnifying Parties agree not to take or cause or permit any of their
Subsidiaries to take any action that is inconsistent with the prior practices
of BEC in connection with any tax return, audit, or judicial or administrative
proceeding, including, without limitation, the making or rescinding of any
election, which would have an effect of increasing the Tax liability or
reducing the Tax assets of the Indemnified Parties or the ORC Business, without
the prior written consent of BEC. Nothing herein shall restrict any of the
parties from treating any item for tax purposes in a manner which is consistent
with the practices of each of BEC and Bolle prior to the day of Spinoff.
Furthermore, all Taxes of Bolle, BEC, and their respective Subsidiaries will be
apportioned to the period up to and including the Spinoff and the period after
the Spinoff by closing the books of Bolle, BEC and the Subsidiaries as of the
end of the day of the Spinoff and any Taxes computed on the basis of passage of
time shall be pro-rated on a daily basis. All determinations necessary to give
effect to the foregoing allocations shall be made in a manner consistent with
prior practice of BEC and its Subsidiaries.
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(e) If the parties disagree as to the amount of any payment
to be made under or on any other matter arising under this Section 3, the
parties shall attempt in good faith to resolve such dispute, and any
agreed-upon amount shall be paid to the appropriate party. If such dispute is
not resolved within 15 days following written notice from any party hereto to
any other party hereto that a dispute subject to this subsection (e) exists,
then the parties shall jointly retain an independent accounting firm to resolve
the dispute. If and to the extent that a dispute presents legal issues, the
independent accounting firm shall have authority to consult an independent law
firm. The fees of the independent accounting firm and the independent law firm
shall be borne equally by the Indemnifying Parties and the Indemnified Parties,
and the decision of such independent accounting firm and/or the independent law
firm which shall be rendered within ten (10) days following final submissions
by the parties to such firm shall be final and binding on all parties.
Following the decision of the independent accounting firm and/or the
independent law firm, the parties shall each take or cause to be taken any
action that is necessary or appropriate to implement such decision of the
independent accounting firm and/or the independent law firm.
(f) Any payment made between an Indemnified Party and an
Indemnifying Party under this Agreement shall be appropriately adjusted to take
account of any subsequent change or adjustment (as a result of an audit or
other proceeding or otherwise) in the circumstances as a result of which the
payment was originally required hereunder. Any such adjustment shall be made
when there has been a "Final Determination" of the adjustment. For purposes of
this Agreement, "Final Determination" shall mean (i) with respect to federal
taxes, a "determination" as defined in Section 1313(a) of the Code or execution
of an Internal Revenue Service Form 870AD and, with respect to Taxes other than
federal taxes, any final determination of liability in respect of a Tax that,
under applicable law, is not subject to further appeal, review or modification
through proceedings or otherwise (including the expiration of a statute of
limitations or a period for the filing of claims for refunds, amended returns
or appeals from adverse determinations) or (ii) the payment of Tax by any
Indemnified Party, any Indemnifying Party or any of their Affiliates, whichever
is responsible for payment of such Tax under applicable law, with respect to
any item disallowed or adjusted by a Taxing Authority, provided that such
responsible party determines that no action should be taken to recoup such
payment and the Indemnifying Parties or the Indemnified Parties, as the case
may be, agree. The party to the Final Determination of the adjustment shall
provide notice of such Final Determination to the other party within five (5)
business days of such Final Determination. The parties shall in good faith
agree, in accordance with the principles of this Agreement, as to the amount of
adjustment as it relates to any payment made under this Agreement. In the event
the parties do not agree, the dispute shall be resolved as provided in Section
3(e) hereof. Payment of the amount due pursuant to this Section 3(f) shall be
made within five (5) business days after agreement by the parties (or the
resolution pursuant to Section 3(e) hereof).
(g) The Indemnified Parties, on the one hand, and the
Indemnifying Parties, on the other hand, shall retain all Tax returns,
schedules and workpapers, and all material records or other documents relating
thereto, until the earlier of (i) the expiration of the statute of limitations
(including extensions, waivers and mitigations thereof) of the taxable years to
which such Tax returns and other documents relate or (ii) one hundred twenty
(120) days after
8
<PAGE>
the delivery of notice to the other party to the effect that it shall dispose
of such Tax returns or other documents, unless it is requested by such party
within one hundred twenty (120) days of delivery of such notice (with which
request it shall comply within thirty (30) days of receipt) that it transfer
such Tax returns or other documents to such other party. Any information
obtained under this Section 3 shall be kept confidential, except as may be
otherwise necessary in connection with the filing of Tax returns or claims for
refund or in conducting any audit or other proceeding.
Section 4. Termination of Tax Sharing Agreement. All tax sharing or
similar agreements (if any) between BEC and its Subsidiaries, on the one hand,
and Bolle and its Subsidiaries, on the other, are terminated as of the Spinoff
and shall be of no further, force and effect. All claims for indemnification
for Taxes between the parties shall be made and resolved in accordance with
terms of this Agreement.
Section 5. Limitations on Indemnifying Parties.
(a) Except to the extent this provision is waived in writing
by and in the sole discretion of BEC and subject to Section 5(f), the
Indemnifying Parties covenant and agree that subsequent to the Spinoff, no
Restricted Payments shall be made by any Indemnifying Party or any of its
Subsidiaries in violation of the provisions of Section 5(f), if, immediately
prior to or subsequent to such payment (after giving pro forma effect to the
making of such Restricted Payment), the Consolidated Tangible Net Worth of the
Indemnifying Parties does not and will not be at least equal to the Minimum
Consolidated Tangible Net Worth of the Indemnifying Parties. Upon the request
of any Indemnified Party, an Indemnifying Party intending to make a Restricted
Payment shall provide a certificate issued by an officer of such Indemnifying
Party certifying that such Restricted Payment (except for payments made by one
Indemnifying Party to any other Indemnifying Party or any of their
Subsidiaries) is permitted within the terms of this Agreement. Provided the
Indemnifying Parties are not then in default of any of their obligations under
this Agreement and that there are no claims for indemnification under this
Agreement then pending, this Section 5(a) shall expire on the later of: (i) the
date when all tax liabilities for any Pre-Spinoff Tax Liability, including
without limitation, Taxes arising out of or resulting from the Spinoff or any
transaction described on Schedule 4.2 of the Merger Agreement, have been
finally determined and paid in full or the applicable statutes of limitations
have run (giving effect to any waiver, extension or mitigation thereof), or
(ii) the date BEC's obligations under the Essilor Agreement have terminated
(the "Restriction Period").
(b) Subsequent to the Spinoff and during the Restriction
Period, no Indemnifying Party shall and no Indemnifying Party shall permit any
of its Subsidiaries to (directly or indirectly) consolidate or merge with or
into any other person (whether or not such Indemnifying Party or such
Subsidiary is the surviving corporation) or (directly or indirectly) transfer
all or substantially all of its properties and assets as an entirety to any
person (whether by sale, merger or consolidation or otherwise), unless:
(i) such Indemnifying Party or such Subsidiary shall
be the continuing person, or the person formed by such consolidation with or
into which such Indemnifying Party
9
<PAGE>
or such Subsidiary is merged or to which the properties and assets of such
Indemnifying Party or such Subsidiary substantially as an entirety are
transferred shall be a corporation organized and existing under the laws of the
United States or any state thereof or the District of Columbia and shall
expressly assume, by an agreement supplemental hereto, executed and delivered
to the Indemnified Parties, in form reasonably satisfactory to the Indemnified
Parties, all the obligations and restrictions of the Indemnifying Parties under
this Agreement; and
(ii) such surviving corporation or transferee shall
in the case of a merger or consolidation or sale of substantially all assets of
an Indemnifying Party or any of their Subsidiaries, have a Consolidated
Tangible Net Worth immediately after giving effect to such transaction on a pro
forma basis that when aggregated with the Consolidated Tangible Net Worth of
all other surviving Indemnifying Parties not a party to such transaction (and
after taking into account all intercompany adjustments which would be required
by GAAP to consolidate such Consolidated Tangible Net Worths) equals or exceeds
the Minimum Consolidated Tangible Net Worth.
(c) In connection with any consolidation, merger or transfer
of substantially all the assets of an Indemnifying Party or any of their
Subsidiaries contemplated by Section 5(b) hereof, the Indemnifying Parties
shall deliver, or cause to be delivered, to the Indemnified Parties, in form
and substance reasonably satisfactory to the Indemnified Parties, an officer's
certificate stating that such consolidation, merger, transfer or lease and the
supplemental agreement in respect thereto comply with Section 5(b) and that all
conditions precedent therein provided for relating to such transaction have
been complied with.
Thereafter the predecessor corporation in the case of a consolidation
or merger or the transferor in the case of a transfer of all of the properties
and assets shall be relieved of all obligations and covenants under this
Agreement and its corporate existence may be terminated (by merger, dissolution
or otherwise), but the predecessor corporation in the case of a transfer of
less than substantially all the assets shall not be released from its
obligation hereunder.
(d) Upon any consolidation or merger, or conveyance or
transfer of all or substantially all of the properties and assets of an
Indemnifying Party or any of their Subsidiaries as the case may be, in
accordance with Section 5(b) and 5(c), the successor corporation formed by such
consolidation or into which such Indemnifying Party or such Subsidiary, as the
case may be, is merged or to which such conveyance or transfer is made shall
succeed to, and be substituted for, and may exercise every right and power of,
such Indemnifying Party or such Subsidiary, as the case may be, under this
Agreement with the same effect as if such successor corporation had been named
as an Indemnifying Party herein.
(e) Subsequent to the Spinoff and during the Restriction
Period, no Indemnifying Party nor any of their Subsidiaries may enter into a
liquidation or dissolution without the prior written consent of the Indemnified
Parties.
(f) Notwithstanding anything contained in this Section 5, an
Indemnifying Party may sell all the issued and outstanding stock of any
Subsidiary of such Indemnifying Party,
10
<PAGE>
or sell all or a substantial part of the assets of any Subsidiary of such
Indemnifying Party so long as, (i) such sale is for fair market value, (ii) the
sale price is retained by an Indemnifying Party, (iii) after given effect to
such transaction, the aggregate Consolidated Tangible Net Worth of all
remaining Indemnifying Parties equals or exceeds the Minimum Consolidated
Tangible Net Worth, and (iv) such Indemnifying Party delivers to the
Indemnified Parties in form and substance reasonably satisfactory to the
Indemnified Parties, an officer's certificate stating that such sale complies
with this Section 5 and that all conditions precedent contained therein
relating to such transaction have been complied with.
(g) Notwithstanding anything contained in this Section 5, an
Indemnifying Party may, spinoff, distribute, transfer, liquidate or sell all of
the issued and outstanding stock of any Subsidiary, provided that such
Subsidiary shall assume, jointly and severally with all other Indemnifying
Parties all obligations for indemnification and restrictions of an Indemnifying
Party pursuant to this Agreement, unless where as a result of such Spinoff
distribution, transfer, liquidation or sale the aggregate Consolidated Tangible
Net Worth of all remaining Indemnifying Parties, after giving effect to such
spinoff, distribution, transfer or sale, equals or exceeds the Minimum
Consolidated Tangible Net Worth, in which event such Subsidiary shall not be
obligated to assume any such liability.
Section 6. Indemnification Procedure and Indemnification Period.
(a) Except as may be otherwise provided pursuant to Section 3
hereof, the Indemnified Parties shall, with respect to claims asserted against
the Indemnified Parties by any third party, give written notice to the
Indemnifying Parties of any liability which might give rise to a claim for
indemnity hereunder within thirty (30) days of the receipt of any written claim
or notice from any such third party, but no later than twenty (20) days prior
to the date any answer, responsive pleading or other response may be due with
respect thereto, and with respect to any other matter for which the Indemnified
Parties may seek indemnification hereunder, the Indemnified Parties shall give
prompt written notice to the Indemnifying Parties of any liability which might
give rise to a claim for indemnity; provided, however that any failure to give
such notice will not constitute a waiver of any rights of the Indemnified
Parties except to the extent that the rights of the Indemnifying Parties are
materially prejudiced thereby.
(b) Except with respect to claims governed by Section 3
hereof, the Indemnifying Parties, or any of them, shall have the right, and
their election, to take over the defense or settlement of any such claim by
giving written notice to the Indemnified Parties at least fifteen (15) days
prior to the time with an answer or other responsive pleading or notice with
respect thereto may be required. If the Indemnifying Parties make such an
election, they may conduct the defense of such claim through counsel of their
choosing (subject to the Indemnified Parties' approval of such counsel, which
shall not be withheld unreasonably), and shall be solely responsible for all
expenses in connection therewith. The Indemnifying Parties shall not settle any
such claim without prior notice to and consultation with the Indemnified
Parties, and no such settlement involving any equitable relief or which might
have an adverse effect on the Indemnified Parties may be agreed to without the
prior written consent of the Indemnified Parties. So long as the Indemnifying
Parties are diligently contesting in good faith
11
<PAGE>
any such claim, the Indemnified Parties may pay or settle such claim only at
their expense and the Indemnifying Parties will not be responsible for the use
of separate legal counsel to the Indemnified Parties unless the named parties
to any proceeding include both Indemnifying Parties and Indemnified Parties in
representation of both by the same counsel would be inappropriate under the
circumstances. If the Indemnifying Parties do not make such a election, or
having made such election do not, in the reasonable opinion of the Indemnified
Parties proceed diligently to defend such claim, then the Indemnified Parties
may (after written notice to the Indemnifying Parties), at the expense of the
Indemnifying Parties pursuant to the terms of this Agreement, take over defense
of such claim and handle such claim at their sole discretion, and the
Indemnifying Parties shall be bound by any defense or settlement that the
Indemnified Parties may make in good faith with respect to any such claim in
accordance with and subject to the terms hereof.
(c) The parties agree to cooperate in defending such third
party claims and the Indemnified Parties shall provide such cooperation and
such access to their books, records and properties as the Indemnifying Parties
may reasonably request with respect to any matter for which indemnification is
sought hereunder, and the parties hereto agree to cooperate with each other in
order to insure the proper and adequate defense thereof.
(d) With regard to claims of third parties for which
indemnification is payable hereunder, indemnification shall be paid by the
Indemnifying Parties within five (5) business days following the earlier to
occur of:
(i) entry of a judgment against the Indemnified
Parties; or
(ii) a settlement of the claim, in accordance with
the terms of such settlement.
With regard to any claim for Taxes subject to Section 3 hereof,
indemnification shall be paid by the Indemnifying Parties within five (5)
business days following receipt by the Indemnifying Parties of written notice
from any Indemnified Party stating that any amount subject to indemnification
under such Section 3 has been paid by an Indemnified Party and the amount
thereof and the indemnity payment requested.
With regard to any other claim for which indemnification is payable
hereunder, indemnification shall be paid promptly by the Indemnifying Parties
upon demand by the Indemnified Parties but in any event within five (5)
business days following such demands.
(e) In the event any claims are asserted against the
Indemnifying Parties by any third party or by an Indemnified Party, or with
respect to any other matter which might give rise to a claim for
indemnification hereunder or for which the Indemnifying Parties may seek
indemnification hereunder, the procedures set forth in Sections 6(a) through
6(d) above and Section 7 below shall apply as if the Indemnifying Parties were
the "Indemnified Parties", and as if the Indemnified Parties were the
"Indemnifying Parties" for such purposes.
12
<PAGE>
(f) The liability of any party to indemnify any other under
the terms of this Agreement shall expire with respect to all claims and/or
potential claims thirty (30) days after the expiration of the relevant
Indemnification Period, other than claims or potential claims with respect to
which written notice has been duly given with respect thereto for which the
indemnified party shall continue to be entitled to indemnification hereunder
until the claim for such indemnity has been finally determined provided,
however, except for claims relating to Losses indemnified pursuant to Section
2(a)(iii), all claims shall expire six (6) months from the date such claim is
made unless such claim is being diligently prosecuted in good faith by the
party seeking indemnification hereunder, except if failure to proceed results
after an indemnifying party hereunder has assumed control of the defense or
settlement of such claim.
Section 7. No Contribution. The Indemnifying Parties shall not be
entitled to seek or obtain any contribution, reimbursement or other
participation, direct or indirect, from the Indemnified Parties in respect of
any payment made or to be made by the Indemnifying Parties hereunder or arising
out of this Agreement, notwithstanding the fact that the Loss for which the
Indemnifying Parties are liable results from or is contributed to by any breach
by an Indemnified Party or any misrepresentation by BEC or any of their
respective Subsidiaries contained in the Merger Agreement or any agreement,
document, instrument or schedule referred to therein or contemplated thereby.
Section 8. Validity. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or enforceability or
any other provision of this Agreement, which shall remain in full force and
effect; provided, however that if any mutual covenant contained herein is
declared invalid or unenforceable with respect to the Indemnified Parties, on
the one hand, or the Indemnifying Parties, on the other hand, by any court of
competent jurisdiction or governmental authority, such mutual covenant shall
become invalid or unenforceable with respect to the opposite group to such
covenant and provided further, that this ss.8 shall not be construed to affect
any other rights of any party hereto under applicable principles of contract
law, including without limitation the principles of failure of consideration
and mutual dependency.
Section 9. Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be deemed to have been
duly given when delivered in person, by verified telecopy, by expedited
delivery service (such as Federal Express) or by registered or certified mail
(postage prepaid, return receipt requested) to the respective parties as
follows:
(i) if to any of the Indemnified Parties, at:
BEC Group, Inc.
555 Theodore Fremd Avenue
Suite B-302
Rye, New York 10580
Telecopy No.: 914-967-9405
ATTN: Martin E. Franklin
13
<PAGE>
with copy to:
BEC Group, Inc.
1601 Valle View
2nd Floor
Dallas, Texas 75234
Attn: General Counsel
(ii) if to any of the Indemnifying Parties, at:
Bolle Inc.
555 Theodore Fremd Ave
Rye, New York 10580
Telecopy No.: 914-967-9405
ATTN: Gary Kiedaisch
with copy to:
Kane Kessler, P.C.
1350 Avenue of the Americas
New York, New York 10019
ATTN: Robert L. Lawrence, Esq.
Such notice shall be effective on the day following receipt of delivery in
person, by verified telecopy or by expedited delivery service and shall be
effective four days after mailing in accordance with the foregoing. The person
to whom notice is to be given, and any address, may be changed from time to
time in the manner set forth above (provided that any such change shall be
effective only upon receipt thereof).
Section 10. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York, regardless of
the laws that might otherwise govern under applicable principles of conflicts
of laws thereof. Venue for any legal action under this Agreement shall be in
the federal or state courts located in the State and County of New York, All
parties hereunder hereto hereby submit themselves to the jurisdiction of such
courts for the purpose of this Agreement and hereby waive trial by jury in any
action, counterclaim or proceeding of any kind arising under or out of or in
connection with this Agreement, the negotiations leading thereto, the
inducements to the parties to enter into this Agreement and to the transactions
it contemplates.
Section 11. Descriptive Headings. The descriptive headings herein are
inserted for convenience of reference only and are not intended to be part of
or to affect the meaning or interpretation of this Agreement.
Section 12. Parties-in-Interest. This Agreement shall be binding upon
and inure solely
14
<PAGE>
to the benefit of each party hereto, and nothing in this Agreement, express or
implied, is intended to confer upon any other person any rights, benefits or
remedies of any nature whatsoever under or by reason of this Agreement.
Section 13. Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed to be an original, but all of
which shall constitute one and the same agreement, provided that at least one
counterpart is executed by each party herein named.
Section 14. Successors. All agreements of the parties in this
Agreement shall bind their respective successors.
Section 15. Assignment. This Agreement is not assignable by any of the
parties hereto without the prior written consent of the other parties hereto.
15
<PAGE>
IN WITNESS WHEREOF, each of the parties has caused this Agreement to
be executed on its behalf by its officers thereunto duly authorized, all as of
the day and year first above mentioned.
BEC GROUP, INC.
By:
------------------------------
Its:
-----------------------------
BILC ACQUISITION CORP.
By:
------------------------------
Its:
-----------------------------
BOLLE INC.
By:
------------------------------
Its:
-----------------------------
16
<PAGE>
EX 10.8
- -------------------------------------------------------------------------------
EXCLUSIVE CUSTOMER AGREEMENT
by and between
BOLLE INC.
and
ALYN CORPORATION
dated as of
October 23, 1997
- -------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C> <C>
Page
ARTICLE 1. DEFINITIONS...........................................................................................1
ARTICLE 2. DESIGN OF PRODUCT; MANUFACTURE OF PRODUCT.............................................................3
2.1. Design...........................................................................................3
2.2. Tooling..........................................................................................4
2.3. Manufacturing....................................................................................4
ARTICLE 3. PURCHASE PRICE AND PAYMENT TERMS......................................................................4
3.1. Purchase Price...................................................................................4
3.2. Payment Terms....................................................................................4
ARTICLE 4. PURCHASE ORDERS AND DELIVERY..........................................................................5
4.1. Quantity.........................................................................................5
4.2. Purchase Orders..................................................................................5
4.3. Acceptance and Acknowledgment....................................................................5
4.4. Order Discrepancy................................................................................5
4.5. Substantial Performance..........................................................................5
4.6. Return Policy....................................................................................5
4.7. Point of Delivery and Risk of Loss...............................................................6
4.8. Invoice..........................................................................................6
4.9. Taxes............................................................................................6
4.10. Title to Non-Conforming, Product................................................................6
4.11. Designation of Carrier, Freight and other Related Charges.......................................6
ARTICLE 5. EXCLUSIVE CUSTOMER RELATIONSHIP.......................................................................6
5.1. Maintenance of Exclusivity; Related Sole Remedy..................................................6
5.2. Continuing Development...........................................................................7
5.3. Display of Boralyn(Registered Trademark)(Registered Trademark) Name
and Trademark...................................................................................7
5.4. Marketing Effort by Bolle........................................................................7
5.5. Right to Approve Bolle Promotion Protocol........................................................8
5.6. Right to Approve Alyn Advertisements.............................................................8
5.7. Bolle's Sole Control of Customer Matters.........................................................8
5.8. Survival of Certain Provisions...................................................................8
ARTICLE 6. REPRESENTATIONS AND WARRANTIES OF ALYN................................................................9
6.1. Authority; Binding Effect........................................................................9
6.2. Patents, Trademarks and Lawsuits.................................................................9
6.3. Warranties......................................................................................10
ARTICLE 7. REPRESENTATIONS AND WARRANTIES OF Bolle..............................................................10
7.1. Authority; Binding Effect.......................................................................10
7.2. Warranties......................................................................................10
ARTICLE 8. CONFIDENTIALITY AND INVENTIONS.......................................................................11
8.1. Disclosure of Confidential Information..........................................................11
8.2. Exclusions from Confidential Information........................................................11
8.3. Term of Confidential Obligations................................................................12
(i)
<PAGE>
8.4. Inventions......................................................................................12
8.5. Transfer of Ownership; Return of Information....................................................12
ARTICLE 9. INDEMNIFICATION......................................................................................13
9.1. Indemnification by Alyn.........................................................................13
9.2. Indemnification by Bolle........................................................................13
ARTICLE 10. TERMINATION.........................................................................................14
10.1. Term...........................................................................................14
10.2. Termination By Non-Breaching Party.............................................................14
10.3. Effect of Termination..........................................................................14
ARTICLE 11. INSURANCE...........................................................................................15
11.1. Required Limits................................................................................15
11.2. Certificates of Insurance......................................................................15
ARTICLE 12. PUBLICITY...........................................................................................16
ARTICLE 13. MISCELLANEOUS.......................................................................................16
13.1. Governing Law..................................................................................16
13.2. Counterparts...................................................................................16
13.3. Headings.......................................................................................17
13.4. Severability...................................................................................17
13.5. Force Majeure..................................................................................17
13.6. Notices........................................................................................17
13.7. Waiver, Modification of Agreement..............................................................18
13.8. Entire Agreement...............................................................................18
13.9. Assignment.....................................................................................19
13.10. Remedies......................................................................................19
13.11. Superseding Provisions........................................................................19
</TABLE>
SCHEDULES AND EXHIBITS
Schedule 1.9 Product Description
Schedule 3.1 Price Schedule
Schedule 4.1 Minimum Purchases To Maintain Exclusive Customer
Relationship
Schedule 5.1 Order to be Placed Upon Agreement Signature
(ii)
<PAGE>
This Exclusive Customer Agreement (referred to hereinafter as
the "Agreement") is entered into as of this 23rd Day of October, 1997, by and
between BOLLE INC. ("Bolle"), a Delaware corporation, with offices at 555
Theodore Fremd Avenue, Suite B-302, Rye, NY 10580, and ALYN CORPORATION
("Alyn"), a Delaware corporation with executive offices at 16761 Hale Avenue,
Irvine, California 92606. Throughout this Agreement, Bolle and Alyn shall be
referred to, collectively, as "the Parties" and, each individually, as a
"Party."
PRELIMINARY STATEMENTS
WHEREAS, Alyn has been awarded a U.S. Patent and a Divisional
Patent for its boron carbide metal matrix composite known as Boralyn
(Registered Trademark), which, among other things, can be used in the
manufacture of frames for sunglasses; and
WHEREAS, Bolle is engaged, among other things, in the
manufacture and sale of sunglasses; and
WHEREAS, initially Bolle wishes to buy from Alyn, and Alyn
desires to sell to Bolle, pursuant to this Agreement, certain quantities of
frames for glasses made from and/or using or incorporating Alyn's patented
Boralyn (Registered Trademark) material for the eventual manufacture of
sunglasses, upon the terms and conditions set forth herein;
NOW, THEREFORE, for and in consideration of the premises and
the mutual promises and benefits contained herein, the receipt and sufficiency
of which is hereby acknowledged, the Parties hereto hereby agree as follows:
ARTICLE 1.
DEFINITIONS
As used in this Agreement, the following terms shall have the
meanings set forth below:
1.1. "Affiliate," when used with respect to a party in
question, means any natural person, corporation, firm, partnership, or other
entity who is an executive officer or director of such party in question or
which, directly or indirectly, owns, is owned by, or is under common ownership
with such party in question to the extent of more than twenty (20%) percent of
the equity having the power either to vote on or to direct the affairs of such
party in question, or otherwise controls, is controlled by or is under common
control with such party in question.
1.2. "Commercial Alyn Product" shall mean the first
Boralyn(Registered Trademark)-based frame components for sunglasses assembled
by Bolle into completed units that meet the design specifications and
<PAGE>
acceptance criteria prescribed in Section 2.1 hereof and that are suitable for
such assembly by Bolle in commercial volume.
1.3. "Confidential Information" means all proprietary Know
How (as hereinafter defined). As used herein, the term "Alyn Confidential
Information" shall mean Confidential Information that is proprietary to Alyn;
the term "Bolle Confidential Information" shall mean Confidential Information
that is proprietary to Bolle; and the term "Joint Confidential Information"
shall mean Confidential Information that is first developed during discussions
between the parties under this Agreement and that is identified as Confidential
Information by either Party.
1.4. "Delivery Date" means any date upon which a Product is
to be delivered by Alyn pursuant to a Purchase Order from Bolle.
1.5. "Effective Date" shall mean date of final signatures to
this Agreement.
1.6. "Know How" means all data, instructions, processes,
formula, expert opinions, and information relating to the manufacture, use,
sale, marketing, or marketing forecasts, or information of a commercial nature
regarding a Product or any Bolle Product. Know How shall include, without
limitation, all chemical, toxicological, physical, analytical, safety, quality
control, manufacturing and other data and information relating to the
manufacture, fabrication, use, or sale of any Product or any Bolle Product.
1.7. "Month" means any calendar month; "Sales Quarter" means
any three (3) consecutive Months within, and forming a quarterly portion of, a
Sales Year; "Year" means any twelve (12) consecutive Months; and "Sales Year"
means any consecutive twelve (12) Month period comprised of four (4)
consecutive Sales Quarters.
1.8. "Non-Conforming Product" means a Product that has been
delivered to Bolle hereunder but does not meet the warranty for that Product
set forth in Article 6 hereof.
1.9. "Product" shall mean, initially upon execution of this
Agreement, the Commercial Alyn Product identified in Section 1.2 hereof and
Schedule 1.9 hereto, delivered by Alyn to Bolle in unfinished form in
accordance with the design specifications and acceptance criteria prescribed in
Section 2.1 hereof that relate thereto, and, thereafter, the term "Product" or
"Products" shall also mean any subsequent or additional Boralyn (Registered
Trademark)-based eyeglass components that are assembled by Bolle into a
sunglasses that meet design specifications and acceptance criteria prescribed
therefor by Bolle in commercial volume, and that is or has been added to
Schedule 1.9 hereafter by mutual agreement of the Parties.
2
<PAGE>
1.10. "Purchase Order," when used with respect to a Product,
shall mean a written and binding order on behalf of Bolle submitted to and
accepted by Alyn with respect to the delivery of such Product by Alyn to Bolle,
all in accordance with the terms and provisions hereof.
1.11. "Purchase Price" shall have such meaning as is set
forth in Section 3.1 of this Agreement.
1.12. "Unit" consists of a frame with temples, as cast and
trimmed prior to finishing, hinges, nose pads and other items that are capable
of being assembled by Bolle into sunglasses, and that initially is a Commercial
Alyn Product (as defined in Section 1.2 hereof) and thereafter is a Product (as
defined in Section 1.9 hereof), that is designed to yield Bolle Product in
accordance with the design specifications set forth in Section 2.1 hereof.
1.13. "Design" shall have the meaning set forth in Section
2.1 of this Agreement.
1.14. "Patents and Trademarks" shall have the meaning set
forth in Section 6.2 of this Agreement.
1.15. "Manufacturing Plant" shall have the following
meanings:
(a) an "Alyn Manufacturing Plant" shall mean any
plant or facility at which one or more Products (including a Commercial Alyn
Product) is manufactured and that is owned or operated by Alyn or one of its
Affiliates, and shall include (but not be limited to) Alyn's facility at
Irvine, California;
(b) an "Alyn-Approved Manufacturing Plant" shall
mean any plant or facility that is not owned or operated by either of the
Parties, but is approved by Alyn and at which the manufacture of one or more
Products (including a Commercial Alyn Product) is under the sole, direct
supervision and control of Alyn;
1.16. "Bolle Product" shall mean completed sunglasses that
have been assembled by Bolle from a Product, including initially a Commercial
Alyn Product.
ARTICLE 2.
DESIGN OF PRODUCT; MANUFACTURE OF PRODUCT
2.1. The design of each Product (the "Design") shall be in
accordance with approved specifications of Bolle as set forth in drawings, in
other suitable written or CAD data or physical model format, or in such other
form as is customarily used by Bolle, and delivered to Alyn by Bolle. Bolle
shall also specify in writing to Alyn the acceptance criteria and
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anticipated testing procedures that Bolle will apply to each Product. Alyn and
Bolle shall cooperate with each other in connection with the development of
each Design. The Design of each Product is and shall be considered proprietary
to Bolle, and Alyn shall not sell or distribute any Product to any third party
or use any Design, or cooperate with others in using the Design. The acceptance
of a Design in final form will be the responsibility of Bolle, which acceptance
shall be signified in writing delivered to Alyn.
2.2. Tooling. After the approval by Bolle of the Design for
each Product (including the Commercial Alyn Product), Alyn shall develop the
proper tooling for the manufacture of such Product in the form in which it is
to be delivered to Bolle. Bolle shall pay for tooling, prototype and
production, for the units. The price for tooling for one Design is $65,000. For
additional Designs, the incremental cost for tooling shall be $15,000 per
Design. Bolle shall, at its expense, develop the proper tools for the
completion of the fabrication of that Product into a Bolle Product following
Bolle's receipt of such Product from Alyn; the tooling shall remain the
property of Bolle.
2.3. Manufacturing. Until a Product reaches the stage where
it is to be delivered by Alyn to Bolle, such Product shall be manufactured at
an Alyn Manufacturing Plant. All processes and materials (other than tooling
referred to in Section 2.2 above) used at an Alyn Manufacturing Plant or an
Alyn-Approved Manufacturing Plant in the manufacture of any Product, until the
Product is shipped to Bolle, remain the sole property of Alyn, provided,
however, a Product in completed form, when delivered to Bolle in accordance
with the terms and conditions hereof, shall become the property of Bolle.
ARTICLE 3.
PURCHASE PRICE AND PAYMENT TERMS
3.1. Purchase Price. The Purchase Price for each Product
(the "Purchase Price") will be calculated in accordance with Schedule 3. 1,
Price Schedule. In all cases, the Purchase Price shall be FOB the applicable
Alyn Manufacturing Plant or Alyn-Approved Manufacturing Plant, as the case may
be, in the United States, with all freight, shipping, taxes and other similar
charges being borne by Bolle.
3.2. Payment Terms. Bolle shall pay the Purchase Price for a
given Product (if it is not a Non-Conforming Product) within forty-five (45)
days of the receipt of such Product by Bolle at Bolle's facility. If Bolle
makes such payment within ten (10) days of the receipt of the Product, Bolle
shall be entitled to a one (l%) percent discount on the Purchase Price. The
payment shall be increased by a late fee of one and one-half (1 1/2%) percent
of the Purchase Price for any Product received
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by Bolle for each thirty (30) calendar day period that payment is past due.
ARTICLE 4.
PURCHASE ORDERS AND DELIVERY
4.1. Quantity. Solely for the purpose of facilitating Alyn's
production planning and organization, Bolle shall, at least one (1) month prior
to the beginning of each Calendar Year reflected in Schedule 4.1 hereto,
provide Alyn in writing a forecast with respect to Bolle's anticipated minimum
quantities for each Product for such Calendar Year, and thereafter Bolle shall,
at the beginning of each Calendar Quarter within such Calendar Year advise Alyn
in writing of any change in such anticipated minimum quantities. The advice and
Forecast provided by Bolle to Alyn under this Section 4.1 shall not be a
binding purchase commitment by Bolle and shall not constitute a Purchase Order.
4.2. Purchase Orders. Bolle shall submit to Alyn Purchase
Orders specifying, subject to Section 4.1, the quantities of Product that Bolle
shall purchase and the Delivery Dates of such Product; provided, however, that
no Delivery Date shall be less than ninety (90) days (or such shorter period as
shall be discussed and developed as the production and delivery process becomes
institutionalized in good faith by the Parties) from the date of receipt by
Alyn of such Purchase Order, and provided further, however, that Delivery Dates
for each Product shall be spaced over a reasonable period on a quarterly and
annual basis.
4.3. Acceptance and Acknowledgment. Alyn shall accept each
Purchase Order, shall acknowledge in writing the receipt and such acceptance of
each Purchase Order, and shall confirm Delivery Dates for quantities of Product
that are the subject of each Purchase Order.
4.4. Order Discrepancy. In the event of any discrepancy
between (i) the provisions set forth in this Agreement and (ii) any Purchase
Order, Purchase Order confirmation, Order acknowledgment or other communication
(whether acknowledged or not) between the Parties relating to an order of
Products, the provisions of this Agreement shall prevail unless otherwise
mutually agreed in writing.
4.5. Substantial Performance. The obligation of Alyn,
pursuant to any Purchase Order, to supply a particular amount of Product on a
Delivery Date shall be deemed satisfied upon delivery by Alyn of no less than
95% of the amount of Product specified.
4.6. Rerturn Policy. Bolle agrees that Bolle shall not be
permitted to return to Alyn any Product delivered pursuant
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to a Purchase Order for credit, unless such goods constitute Non-Conforming
Products.
4.7. Point of Delivery and Risk of Loss. Product shall be
delivered FOB the Alyn Manufacturing Plant or the Alyn-Approved Manufacturing
Plant in the United States, as the case may be, and Alyn shall provide Bolle
with written notice of delivery of such Product. The risk of loss shall pass to
Bolle upon receipt of the Product by Bolle's authorized agents at that
facility. Bolle will confirm delivery, in writing, within three (3) business
days of receipt of Product. Bolle will be responsible for payment for all
Product shipped according to the terms of this Agreement.
4.8. Invoice. Upon delivery of the Product in accordance
with a Purchase Order, Alyn shall present to Bolle an invoice for the quantity
of the Product covered thereby, in each case at the Purchase Price determined
pursuant to the terms of Article 3.
4.9. Taxes. Any federal, state, county, or municipal sales
or use tax, excise, or similar charge, or any other tax assessment (other than
that assessed against income), or other charge lawfully assessed or charged by
any governmental agency or authority on the sale, use, or transportation of any
Product pursuant to this Agreement shall be paid by the Party against whom such
tax or charge is assessed.
4.10. Title to Non-Conforming Product. The Parties agree
that title to any Non-Conforming Product shall revert to Alyn or its designee
upon return of such Non-Conforming Product by Bolle to Alyn. Non-Conforming
product shall be returned at Alyn's expense.
4.11. Designation of Carrier; Freight and other Related
Charges. Bolle shall be solely responsible for designating and retaining the
carrier for shipment of Product to Bolle or for Bolle's account and shall bear
all freight, shipping, tax and other similar charges.
ARTICLE 5.
EXCLUSIVE CUSTOMER RELATIONSHIP
5.1. Maintenance of Exclusivity; Related Sole Remedy
(a) In addition to the restriction set forth in
Section 2.1 above, upon the terms and subject to the conditions set forth
herein, Alyn hereby agrees that it shall not sell any sunglasses or any frames
or components therefor, except for "frame only" prescription glasses, to any
person, firm or entity other than Bolle during the Exclusive Period
(hereinafter defined). Alyn acknowledges that any sale of prescription
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glasses shall be to the premium end of the "frame only" market. Alyn shall
provide Bolle written notice of its intent to enter into any agreement to
manufacture prescription frames, over $100,000 per annum, to any other company
at least one week prior to signing any such agreement. Any agreement will
acknowledge Bolle's right to sell sunglasses or frames to all channels of
distribution, including optical stores.
(b) The Exclusive Period shall commence on the Date
of the first commercial shipment of Product from Alyn to Bolle and shall
terminate three (3) years after that date. The three (3) year term will be
renewed on an exclusive basis for an additional three (3) years if Bolle meets
the contractual requirements and agrees to purchase a minimum level of units as
outlined in Schedule 4.1.
(c) The Agreement shall include an order for 50,000
units to be delivered not later than June 30, 1998, provided Alyn is able to
tool and begin production by March 31, 1998. An example of this order is shown
on Schedule 5.1. The June 30, 1998 delivery date will be delayed by one day for
each day beyond December 1, 1997 by which Bolle is late in delivering final
designs to Alyn.
(d) If Bolle shall fail to submit Purchase Orders
for the minimum amount of Units of a Product in any Sales Year in accordance
with Schedule 4.1, and Alyn shall have delivered written notice thereof to
Bolle of such failure in accordance with the provisions hereof and such breach
has not been cured within the periods allowed in Schedule 4.1, then the
customer relationship between Bolle and Alyn with respect to such Product
during the remainder of the Term hereof shall cease to be exclusive.
5.2. Continuing Development. As part of their
overall mutual development program, Alyn and Bolle shall each use all
reasonable efforts and cooperation to develop techniques and processes for the
design and production of Products that will improve Product performance, and
any such development will be covered by and be subject to the terms,
provisions, respective rights and obligations of this Agreement, without
further consideration (except for the payment of the Purchase Price in
accordance with, and compliance with the other terms and conditions of, this
Agreement).
5.3. Display of Boralyn (Registered Trademark) (Registered
Trademark) name and Trademark. Alyn agrees that Bolle may market the Bolle
products under one or more Bolle Trademarks or Names which shall be proprietary
to Bolle. The name "Boralyn (Registered Tradmark)" shall be displayed on any
Bolle Product.
5.4. Marketing Effort by Bolle. Bolle will commit reasonable
marketing resources to actively promote the technical merits of a Boralyn
(Registered Trademark) frame for sunglasses, including an initial launch at the
March 1998 Vision Expo East show in New York.
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5.5. Right to Approve Bolle Promotion Protocol.
Samples of the text of all advertising or other promotional material prepared
by or for Bolle and referring to Alyn or Boralyn (Registered Trademark) ,
including but not limited to brochures, radio or television commercials,
worldwide web sites, and magazine and newspaper advertisements, shall be
submitted at least five (5) business days prior to the first use or publication
thereof, to Alyn for its approval, which approval shall not be unreasonably
withheld or delayed, provided, however, if any such material shall be required,
in the opinion of Bolle's legal counsel, to be filed with the Securities and
Exchange Commission in order to comply with any requirement of the Federal
securities laws or to be the subject of a press release to satisfy listing
requirements of NYSE or other regulatory body, and notice thereof shall be
given to Alyn by Bolle, then such five (5) day period shall be adjusted in
accordance with such requirement, which shall be specified in such notice.
Bolle shall not publish or distribute such advertising or other promotional
material unless and until Bolle has received written or facsimile approval
thereof from Alyn.
5.6. Right to Approve Alyn Advertisements. Samples
of all advertising or other promotional material prepared by or for Alyn and
referring to Bolle or any Product, including but not limited to brochures,
radio or television commercials, worldwide web sites, and magazine and
newspaper advertisements, shall be submitted at least five (5) business days
prior to any proposed sale, shipment, publication or other distribution, to
Bolle for its approval, which approval shall not be unreasonably withheld or
delayed, provided, however, if any such material shall be required, in the
opinion of Alyn's legal counsel, to be filed with the Securities and Exchange
Commission in order to comply with any requirement of the Federal securities
laws or to be the subject of a press release to satisfy listing requirements of
NASDAQ (or a stock exchange), and notice thereof shall be given to Bolle by
Alyn, then such five (5) day period shall be adjusted in accordance with such
requirement, which shall be specified in such notice. Alyn shall not publish or
distribute any such advertising or other promotional material unless and until
Alyn has received written or facsimile approval thereof from Bolle.
5.7. Bolle's Sole Control of Customer Matters. In
entering into this Agreement, each Party acknowledges that, except as herein
otherwise expressly provided, Bolle has and shall retain the complete and
unfettered right and discretion as to all matters affecting its marketing and
sale of all Bolle Products, and nothing in this Agreement shall in any way
affect or otherwise restrain Bolle's unilateral and independent pricing
decision on the sale or resale (whether at wholesale or retail) of a Bolle
Product to any third party.
5.8. Survival of Certain Provisions. The rights and
obligations set forth in the provisions of Sections 5.3, 5.4,
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5.5 and 5.6 herein shall survive the termination of this Agreement.
ARTICLE 6.
REPRESENTATIONS AND WARRANTIES OF ALYN
Alyn represents and warrants to Bolle as follows:
6.1. Authority; Binding Effect. Alyn is a
corporation duly organized and existing under the laws of Delaware; Alyn has
the corporate power and authority to execute, deliver, and perform this
Agreement and the transactions contemplated hereby and the execution and
delivery of this Agreement have been duly authorized by Alyn; the execution,
delivery, and performance of this Agreement and the consummation of the
transactions contemplated hereby do not and will not violate or conflict with
any provision of Alyn's Certificate of Incorporation or Bylaws or, to the best
knowledge of the individuals signing this Agreement, any agreement, instrument,
law or regulation to which Alyn is a party or by which Alyn is Bollend; no
governmental or other approval or authorization of this Agreement or the acts
or transactions contemplated hereby is required by law or otherwise in order to
make this Agreement binding upon Alyn; and this Agreement, and all other
instruments required hereby to be executed and delivered to Bolle by Alyn are,
or when delivered to Bolle in accordance herewith, will be, legal, valid and
binding instruments of Alyn enforceable in accordance with its terms.
6.2. Patents, Trademarks and Lawsuits
(a) Alyn owns all patents, rights to patents, patent
applications, trademarks and trade names necessary for it to satisfy the
conditions of its performance hereunder (the "Patents and Trademarks").
(b) The issued Patents and Trademarks are subsisting
and have not been adjudged invalid or unenforceable, in whole or in part, and
there is no litigation or proceeding pending or threatened concerning the
validity or enforceability of the issued Patents and Trademarks.
(c) To the best of Alyn's knowledge, each of the
issued Patents and Trademarks is valid and enforceable.
(d) To the best of Alyn's knowledge, there is no
infringement by others of the issued Patents and Trademarks.
(e) No claim has been made that the use of any of
the Patents and Trademarks does or may violate the rights of any third person,
and to the best of Alyn's knowledge the use of the Patents and Trademarks does
not infringe upon the patent or trademark rights of any third party.
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6.3. Warranties.
(a) Alyn warrants to Bolle that each Product
delivered to Bolle pursuant to this Agreement will be of good material and
workmanship, free from defects, and conform to the specifications, Design and
samples regarding that Product as described in Schedule 1.9 and prescribed in
accordance with Section 2.1 of this Agreement. Alyn warrants that all Product
will be manufactured according to agreed upon tolerances and material
specifications. Tolerances and material specifications will be confirmed on the
Alyn Order Acknowledgment provided to Bolle upon acceptance of any Bolle
Purchase Order.
(b) ALYN MAKES NO REPRESENTATIONS OR WARRANTIES
EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT AND ALYN SHALL HAVE NO
LIABILITY OR RESPONSIBILITY FOR, WITH RESPECT TO OR STEMMING FROM ANY PRODUCT
EXCEPT (i) AT ITS EXPENSE (INCLUDING FREIGHT CHARGES IN AND OUT) TO PROMPTLY
REPAIR OR REPLACE ANY PRODUCT THAT IS DEFECTIVE AND IS RETURNED TO IT and (ii)
THAT WHICH IS PROVIDED FOR IN THIS AGREEMENT.
ARTICLE 7.
REPRESENTATIONS AND WARRANTIES OF BOLLE
Bolle represents and warrants to Alyn as follows:
7.1. Authority; Binding Effect. Bolle Inc., a
corporation duly organized and existing under the laws of the State of
Delaware; has the power and authority to execute, deliver, and perform this
Agreement and the transactions contemplated hereby, and the execution and
delivery of this Agreement have been duly authorized by Bolle. The execution,
delivery, and performance of this Agreement and the consummation of the
transactions contemplated hereby do not and will not violate or conflict with
any provision of Bolle's Certificate of Incorporation or Bylaws or, to the best
of the knowledge of the individuals signing this Agreement, any agreement,
instrument, law, or regulation to which Bolle is a party or by which Bolle is
Bollend; no governmental or other approval or authorization of this Agreement
or the acts or transactions contemplated hereby is required by law or otherwise
in order to make this Agreement binding upon Bolle; and this Agreement, and all
other instruments required hereby to be executed and delivered to Alyn by Bolle
are, or when delivered will be, legal, valid, and binding instruments of Bolle
enforceable in accordance with its terms.
7.2. Warranties
(a) Bolle represents that its normal product
warranties, as in effect from time to time, shall apply to the Bolle Products.
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(b) BOLLE MAKES NO REPRESENTATIONS OR WARRANTIES
EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT.
ARTICLE 8.
CONFIDENTIALITY AND INVENTIONS
8.1. Disclosure of Confidential Information. During
the Term of this Agreement, Alyn will disclose Alyn Confidential Information to
Bolle and Bolle will disclose Bolle Confidential Information to Alyn on the
following terms:
(a) The recipient will receive, maintain, and hold
Confidential Information in strict confidence and will, at a minimum, use the
same level of care in safeguarding it that it uses with its own confidential
material of a similar nature;
(b) The recipient will take all such steps as may be
reasonably necessary to prevent the disclosure of Confidential Information; and
(c) The recipient will not utilize Confidential
Information, other than strictly
for meeting its obligations hereunder, without first having obtained the
disclosing Party's written consent to such utilization.
8.2. Exclusions from Confidential Information. The
commitments set forth in Section 8.1 above shall not extend to any portion of
Confidential Information:
(a) which is known to the recipient prior to
disclosure or is information generally available to the public;
(b) which was not acquired, directly or indirectly
and/or in any manner, from the disclosing Party and which the recipient
lawfully had in its possession prior to the Effective Date;
(c) which, hereafter, through no act or omission on
the part of the recipient, becomes information generally available to the
public;
(d) which corresponds in substance to information
furnished to the recipient on a nonconfidential basis by any third party having
a legal right to do so; or
(e) which is required to be disclosed in response to
legal process, or to the extent a Party is advised by counsel that such action
is required or advisable to comply with federal or state laws or regulations;
provided that the Party whose Confidential Information is being disclosed is
notified in writing by the disclosing Party so as to allow an opportunity for
the Party whose Confidential Information is being disclosed to seek a
protective order or other relief.
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8.3. Term of Confidential Obligation. The
obligations of each Party regarding Confidential Information received from the
other Party and regarding Joint Confidential Information shall survive
termination of this Agreement for a period of three Years.
8.4. Inventions.
(a) Patentable or potentially patentable inventions
arising during the term of this Agreement as a direct result of work performed
hereunder ("Inventions") shall be the property of either party alone or both
parties jointly, depending on the inventorship thereof.
(b) Each Party shall promptly and fully disclose to
the other Party each Invention upon its conception and/or its reduction to
practice.
(c) Each Party shall have the first right, after
consultation with the other Party, to file, prosecute, issue and maintain
patent applications and patents covering Inventions as to which it has an
ownership interest. If either Party elects not to do so, and if patent coverage
licensed to the other Party is potentially available, then it shall offer to
the other Party the opportunity to pursue such patent applications and patents.
8.5. Transfer of Ownership; Return of Information
(a) Neither this Agreement nor any disclosure made
hereunder by either Party shall be deemed, by implication or otherwise, to vest
in the recipient any ownership right to any patents, trademarks, Confidential
Information, or trade secrets.
(b) At any time upon written request by the
disclosing Party, (i) its Confidential Information, including any copies, shall
be destroyed or returned to the disclosing Party (with the exception of a
single copy thereof which may be kept by the recipient to establish the extent
of disclosure of Confidential Information by the disclosing Party) and (ii) all
documents, drawings, sketches, models, designs, data, memoranda, tapes,
records, and any other material whatsoever developed by the recipient which
relates to such Confidential Information, including all copies and/or any other
form of reproduction and/or description thereof made by the recipient (with the
exception of a single copy thereof which may be kept by the recipient to
establish the extent of disclosure of Confidential Information by the
disclosing Party), shall be returned to the disclosing Party or destroyed.
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ARTICLE 9.
INDEMNIFICATION
9.1. Indemnification by Alyn. Alyn shall indemnify
and hold harmless Bolle and its officers, directors, shareholders, agents,
employees and Affiliates (collectively, "Bolle") from and against any and all
liability, damage, loss, cost, or expense (including reasonable attorneys' fees
and disbursements) resulting from any third party claim made, investigation,
product recall, or legal proceeding (individually and collectively, a
"Proceeding") brought against Bolle or to which Bolle is subject to the extent
such Proceeding arises or is alleged to arise as a result of (i) Alyn's
negligence or willful misconduct; (ii) Alyn's breach of any of its
representations or warranties set forth herein; (iii) Alyn's material breach of
any of the other terms of this Agreement, or (iv) is otherwise caused by or
arises or is alleged to arise out of the manufacture, storage, or sale of any
Product by Alyn. Upon being notified of any such Proceeding, Bolle shall
promptly notify Alyn in writing thereof and shall permit Alyn, at the sole cost
and expense to Alyn, to defend and control the defense of such Proceeding.
Bolle shall have the right to participate in the defense of such Proceeding at
its own expense to the extent Bolle's interests may be affected in such
Proceeding.
9.2. Indemnification by Bolle. Bolle shall indemnify
and hold harmless Alyn and its officers, directors, shareholders, agents,
employees and Affiliates (collectively, "Alyn") from and against any and all
liability, damage, loss, cost, or expense (including reasonable attorneys' fees
and disbursements) resulting from any third party claim made, investigation,
product recall, or legal proceeding (individually and collectively, a
"Proceeding") brought against Alyn or to which Alyn is subject to the extent
such Proceeding arises or is alleged to arise as a result of (1) Bolle's
negligence or willful misconduct; (ii) Bolle's breach of any of its
representations or warranties set forth herein; (iii) Bolle's material breach
of any of the other terms of this Agreement; (iv) is made in connection with a
Bolle Product and arises or is alleged to arise other than from breach of the
Product warranties made by Alyn to Bolle herein; or (v) is otherwise caused by
or arises or is alleged to arise out of the marketing, distribution or sale of
a Bolle Product by Bolle, including (but not by way of limitation) by reason of
infringement on any trademark or other contravention or violation of any right
or property interest of any other individual person, firm, company, corporation
or other entity. Upon being notified of any such claim, investigation or legal
proceeding, Alyn shall promptly notify Bolle in writing thereof and shall
permit Bolle at its sole cost and expense to defend and control the defense of
such claim or legal proceeding. Alyn shall have the right to participate in the
defense of such claim or legal proceeding at its own expense to the extent that
Alyn's interests may be affected in such Proceeding.
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ARTICLE 10.
TERMINATION
10.1. Term. The term ("Term") of this Agreement
shall be three (3) years from the date of the first commercial shipment of
Product from Alyn to Bolle or, unless the Term hereof is extended by mutual
agreement of the Parties, in accordance with the provisions of Article 5
hereof, or, unless earlier terminated, in accordance with the terms and
conditions hereof. If Bolle does not meet the purchase requirements described
in Article 4.1, subject to the cure periods contained in Schedule 4.1, or fails
to deliver the completed design information for the first Product by February
1, 1998 that would allow fulfillment of the initial purchase order, then Alyn
can terminate this Agreement and shall be free thereupon to enter into an
exclusive customer relationship relating to frames for sunglasses with any
person, firm or entity. If Alyn cannot, after using reasonable efforts, produce
a commercial product by June 30, 1998, either party can terminate this
agreement. However, when Alyn is able to produce commercial Products, Alyn will
offer Bolle the right to be the exclusive customer on terms similar to those
outlined in this Agreement.
10.2. Termination By Non-Breaching Party. In
addition and subject to Alyn's right to terminate the exclusive customer
relationship set forth in this Agreement pursuant to Article 5 hereof, Alyn or
Bolle may immediately terminate this Agreement upon giving written notice
thereof to the other Party in the event that the other Party shall have
breached or defaulted in any material respect in the performance of an
obligation imposed on such other Party hereunder; provided, that in the case of
a breach or default other than a failure to make a payment when due, the
non-breaching Party shall have notified the breaching Party in writing of such
breach or default, and within thirty (30) calendar days after the date of such
notice, the breaching Party shall not have cured such breach or default, and,
provided further, however, that in the case of a breach or default that
involves the failure to make a payment when due, the non-breaching Party shall
have notified the breaching Party in writing of such breach or default and,
within five (5) business days after the date of such notice, the breaching
Party shall not have cured such breach or default.
10.3. Effect of Termination. If this Agreement is
terminated pursuant to the provisions of this Article 10, the provisions of
this Agreement that have been designated to survive termination shall so
survive and, in addition, Bolle and Alyn shall be bound by the following
provisions:
10.3.1. Pending Purchase Orders. All pending
Purchase Orders placed by Bolle on or before the receipt of a notice of
termination for any Product shall be fulfilled by Alyn, delivered on the
Delivery Dates requested by Bolle, and be paid
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for in accordance with the terms and provisions hereof, provided, however, if
this Agreement is terminated pursuant to the provisions of Section 10.2 and
Bolle is the breaching or defaulting Party, then Alyn, upon such termination,
shall have no further obligation to fulfill any outstanding Purchase Order
unless the purchase price with respect to such Purchase Order shall have been
paid in advance.
10.3.2. Sale of Remaining Inventory. Subsequent to
termination of this Agreement Bolle shall have the right to continue to market,
sell, and distribute its entire inventory on hand of any Product or Bolle
Product, provided, however, if this Agreement is terminated pursuant to the
provisions of Section 10.2 and Bolle is the breaching or defaulting Party, then
Bolle shall liquidate such entire inventory on hand in a fashion that is
reasonably expected to minimize any resulting damages to the Boralyn
(Registered Trademark) trademark as promptly as reasonably practicable.
10.3.3. Return of Confidential Information. After this
Agreement is terminated, all Confidential Information shall be immediately
returned by the recipients to the disclosing Parties as set forth in Section
8.3.
ARTICLE 11.
INSURANCE
11.1. Required Limits. Bolle and Alyn shall each maintain
insurance in at least the following amounts:
(a) Commercial General Liability insurance,
including premises, products, operations, and contractual coverage, in the
total amount of not less than $2,000,000 per claim;
(b) Umbrella insurance for Commercial General
Liability, bodily injury or property damage in the total amount of not less
than $2,000,000 per occurrence and $ 10,000,000 annual aggregate; and
(c) Workers' Compensation insurance in the amount
required by law.
11.2. Certificates of Insurance
(a) Bolle shall have its insurance carrier or
carriers furnish to Alyn certificates that all insurance required under this
Agreement is in force, such certificates to indicate any deductible and/or
self-insured retention, and the effective expiration dates of policies, and
such certificates to stipulate that Alyn shall be given written notice of all
cancellation, non-renewal, or material changes in the policy.
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(b) Alyn shall have its insurance carrier or
carriers furnish to Bolle certificates that all insurance required under this
Agreement is in force, such certificates to indicate any deductible and/or
self-insured retention, and the effective expiration dates of policies, and
such certificates to stipulate that Bolle shall be given written notice of all
cancellation, non-renewal, or material changes in the policy.
ARTICLE 12.
PUBLICITY
Except as set forth hereinbelow, none of Alyn, Bolle or any
of their respective Affiliates (the "Proposing Party") shall cause or permit
the oral or written release of any statement, press release, advertisement,
information, publicity or public statement (individually or collectively, a
"Release") referring to this Agreement or the other Party without the other
Party's prior written approval which shall not be unreasonably withheld or
delayed following five (5) days' written notice from the Proposing Party.
Further, if any of Alyn, Bolle or any of their respective Affiliates
determines, upon advice of counsel, that it is required by law to issue a
Release, such Party shall notify the other Party of this determination and
provide the other Party a reasonable opportunity to review such Release and to
make such reasonable changes not conflicting with applicable requirements of
law. In the event that applicable securities laws or stock exchange listing
obligations require the filing of this Agreement, the filing Party shall apply
to have the information contained in Schedules 1.9, 3.1 and 4.1 of this
Agreement filed on a confidential basis.
ARTICLE 13.
MISCELLANEOUS
13.1. Governing Law. This Agreement shall be governed by and
construed and interpreted in accordance with the laws of the State of
California, without giving effect to the principles of choice of law of such
state. The Parties hereby consent to personal jurisdiction in the United States
District Court for the Central District of California, Southern Division, and
waive any and all personal rights under the law of any jurisdiction to object
on any basis (including, without limitation, inconvenience of forum) to
jurisdiction of such court for the purpose of such litigation to enforce this
Agreement or any rights of either Party with respect to the subject matter
hereof.
13.2. Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall for all purposes be deemed to be an
original and all of which shall constitute the same instrument.
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13.3. Headings. The headings of the Articles and Sections of
this Agreement are intended solely for convenience and shall not be deemed to
constitute part of this Agreement or to affect the construction or
interpretation hereof.
13.4. Severability. In the event that a court of competent
jurisdiction holds that particular provisions or requirements of this Agreement
are in violation of any law of the United States or any state thereof, such
provisions or requirements shall not be enforced except to the extent they are
not in violation of any such law, and all other provisions and requirements of
this Agreement shall remain in full force and effect.
13.5. Force Majeure. Any delay in the performance of any of
the duties or obligations of either Party hereto (except the payment of money
owed) shall not be considered a breach of this Agreement and the time required
for performance shall be extended for a period equal to the period of such
delay, provided that such delay has been caused by or is the result of any acts
of God; acts of the public enemy; insurrections; war; riots; embargoes, labor
disputes, including strikes, lockouts, job actions, or boycotts; fires;
explosions; floods; shortages of material or energy; delay in transportation;
any orders, actions or regulations of any governmental or regulatory authority
that will prohibit either Party from ordering or furnishing their respective
products or performing any other aspect of their respective obligations under
this Agreement; or other unforeseeable causes beyond the control and without
the fault or negligence of the Party so affected. The Party so affected shall
give prompt notice to the other Party of such cause, and shall take whatever
reasonable steps are necessary to relieve the effect of such cause as rapidly
as possible.
13.6. Notices. All notices hereunder, other than day-to-day
communications, shall be in writing and delivered (i) personally, (ii) by
registered or certified mail, postage prepaid, (iii) by overnight courier
service, or (iv) by facsimile, confirmed promptly by one of the foregoing
delivery methods, to the following addresses of the respective Parties:
If to Bolle, individual copies to:
Gary Kiedaisch
Chief Executive Officer
Bolle Inc.
555 Theodore Fremd Avenue
Rye, NY 10580
Phone: (914) 967-9400
Fax: (914) 967-9405
17
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with a copy to:
Robert L. Lawrence, Esq.
Kane Kessler LLC
1350 Avenue of the Americas
New York, NY 10019
Phone: (212) 541-6222
Fax: (212) 245-3009
If to Alyn, individual copies to:
Robin A. Carden, President and
Chief Executive Officer, and
Walter Menetrey, Chief Operating Officer
Alyn Corporation
16761 Hale Avenue
Irvine, CA 92715
Phone: (714) 475-1525
Fax: (714) 475-1531
with a copy to:
Gerald A. Eppner, Esq.
Battle Fowler LLP
75 East 55th Street
New York, New York 10022
Phone: (212) 856-8077
Fax: (212) 856-7823
Notices shall be effective: (a) upon receipt if personally
delivered or delivered by confirmed facsimile; (b) on the fifth business day
following the date of mailing, if mailed; and (c) upon receipt, if sent by
overnight courier service. A Party may change its address listed above by
notice to the other Party.
13.7. Waiver; Modification of Agreement. No waiver or
modification or amendment of any of the terms of this Agreement, including
Schedules and Exhibits, shall be valid unless in writing and signed by
authorized representatives of both Parties hereto. Failure by either Party to
enforce any rights under this Agreement shall not be construed as a waiver of
such rights nor shall a waiver by either Party in one or more instances be
construed as constituting a continuing waiver or as a waiver in other
instances.
13.8. Entire Agreement. This Agreement constitutes the
entire agreement between the Parties concerning the subject matter hereof and
supersedes all written or oral prior agreements or understandings with respect
thereto. No course of dealing or usage of trade shall be used to modify the
terms hereof except as expressly set forth otherwise herein.
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13.9. Assignment. This Agreement shall not be assigned by
either Party without the prior written consent of the other Party, which
consent shall not be unreasonably withheld; provided that either Bolle or Alyn
may assign its rights and obligations hereunder in whole or in part, to its
Affiliates. Any assignment according to the terms of this section shall be
binding upon, inure to the benefit of, and be enforceable by, the assignee and
any successors in interest of the assignee. Such assignment shall not release
or relieve Bolle or Alyn, as the case may be, of any of its duties and/or
obligations under this Agreement. Consent to one assignment shall not be deemed
consent for any subsequent assignments.
13.10. Remedies. In addition to the right to terminate this
Agreement upon the breach or default of a Party, the other Party shall be
entitled to any other remedies to which it may be entitled at law or in equity
including, but not limited to, monetary damages. The provisions concerning
remedies contained in Article 5 of this Agreement shall, with respect to
matters that are the subject of said Article 5, supersede the provisions of
this Section 13.10.
13.11. Superseeding Provisions. The provisions of this
Agreement shall supersede any inconsistent provisions in any Purchase Order and
shall be interpreted and construed in accordance with this Section 13.11 and
Section 4.4 hereof.
IN WITNESS WHEREOF, the Parties have caused this Agreement to
be executed by their duly authorized officers on the respective dates
hereinafter set forth:
BOLLE INC. ALYN CORPORATION
By:/s/ Gary Kiedaisch By:/s/ Robin A. Carden
--------------------------- ---------------------------
C.E.O. Robin A. Carden
President & Chief Executive
Officer
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SCHEDULE 1.9
PRODUCT DESCRIPTION
Type/Description
of Product
Frames and temple pieces used in non-prescription sunglasses using precision
pressure cast Boralyn (Registered Trademark)(Registered Trademark) material. It
is recognized that the Boralyn (Registered Trademark)(Registered Trademark)
frames and temple pieces can be sold, on a non-exclusive basis, to the
prescription market in the form of "Frame Only" condition. Alyn will give Bolle
written notice at least one week prior to signing any Agreement to manufacture
"frame only" product with orders exceeding $100,000 per annum.
Bolle intends to launch three styles initially, a metal Breakaway (Registered
Trademark), a modified Escape (Registered Trademark), and one completely new
design. It is Bolle's intent to have the Bolle Boralyn (Registered
Trademark)(Registered Trademark) collection as a significant segment of their
metals marketing campaign. It is acknowledged that Bolle may continue to sell
its existing metal product line.
<PAGE>
SCHEDULE 4.1
MINIMUM PURCHASES
TO MAINTAIN EXCLUSIVE CUSTOMER RELATIONSHIP
To maintain the exclusive customer relationship, the minimum quantities to be
ordered in any sales year by Bolle are:
Sales Year Number of Units
Minimum Quantities Year 1 100,000
Year 2 150,000
Year 3 200,000
Renewal Quantities Year 4 250,000
Year 5 275,000
Year 6 300,000
In any sales quarter, Bolle will purchase at least 13.5% of the minimum for
that sales year.
Minimum Q1 Q2 Q3 Q4
Cumulative
Purchases 13.5% 30% 50% 100%
If, in any quarter, Bolle falls short of these minimums, Bolle will have ninety
(90) days to catch-up and cure. If, in any year, Bolle falls short of the
minimums, Bolle will have thirty (30) days to catch-up and cure.
The first sales year begins on the first day of commercial shipments from Alyn
to Bolle.
<PAGE>
SCHEDULE 5.1
ORDER TO BE PLACED UPON
AGREEMENT SIGNATURE
50,000 Units Frames and Temple Pieces for
Glasses in Accordance with
Drawing No:________ @ $10.75 per Unit = $537,500
Delivery by June 30, 1998
<PAGE>
Bolle Inc.
555 Theodore Fremd Avenue
Suite B-302
Rye, New York 10580
Tel: (914) 967-9400
Fax: (914) 967-9405/7
January 6, 1998
Mr. Roger Gibbons
Mr. Eric Collicoat
Bill Bass Optical Party Ltd.
37 Thistlethwaite Street,
P.O. Box 21
South Melbourne, Victoria 3205
Australia
Dear Roger & Eric:
We are pleased to present our proposal for Bolle Inc. or one of its affiliates
("Bolle Inc.") to acquire 75% of the shares of Bill Bass Optical Pty Ltd,
("Bill Bass") and Parkhurst Oaks Ltd ("Parkhurst"), 100% of the shares of Bolle
Asia Ltd ("Bolle Asia") and 49% of the shares of Bolle Sunglass Ltd (UK)
("Bolle Sunglass") (collectively, "Bolle Australia") (the "Acquisition").
1. Purchase Price. The purchase consideration will be A$9.375 million
consisting of: (i) A$5.875 million in cash and (ii) a A$3.5 in registered
shares of Bolle Inc. common stock.
2. Structure. The Acquisition will be structured so as to provide the Sellers
with the most advantageous Australian tax treatment for the sale of their
shares in Bill Bass and Parkhurst. The shares in Bolle Asia and Bolle Sunglass
will be purchased directly by Bolle Inc. or one of its subsidiaries and not as
subsidiaries or investments of Bill Bass.
3. Due Diligence. Upon signing of a definitive agreement, Bolle Inc. will have
access at reasonable times, so as not to disrupt Bolle Australia operations, in
order to undertake a due diligence investigation of the business. In the
meantime, Bolle Australia will supply the most
<PAGE>
Mr. Roger Gibbons
Mr. Eric Collicoat
January 6, 1998
Page 2
recent monthly management financial statements as they become available.
4. Timing. The parties will proceed diligently and in good faith to use their
best efforts to negotiate and execute a definitive purchase agreement (the
"Agreement") within forty-five (45) days of the date of this letter. The
Agreement shall contain customary representations, warranties and other terms
and conditions found in agreements of this nature. The transaction will be
consummated following the creation of Bolle Inc. as a separate public company,
scheduled for January 1998.
5. Ongoing investment in Bill Bass and Parkhurst. You will collectively
continue to own 25% of Bill Bass and Parkhurst and will benefit from 25% of the
profits of Bill Bass and Parkhurst and maintain an economic interest in 25% of
the Company. You will be entitled to receive your pro rata share of any
distributions from Bill Bass and Parkhurst which will not be less than 20% of
annual profits. The companies will continue to be operated in a manner
consistent with past practice and any accounting changes that would impact
profitability (e.g. intercompany charges) will be eliminated for purposes of
calculating stand alone profitability. At any time Bolle Inc. will have the
right to buy your shares at fair market value as mutually agreed or as
determined by a mutually agreed accounting firm, but you will only be required
to sell if the valuation is at least A$3.125 million.
You will have the right to "put" your remaining shares under the following
circumstances.
(i) Neither Martin Franklin, Gary Kiedaisch or Ian Ashken are on the board
of Bolle Inc. In this case you would have the right to put at any time
during the six months after their departure providing our "exit" from
Bolle Inc. was above the average price for the first five days trading
of Bolle Inc. common stock. The six month period is designed to enable
Roger Gibbons and Eric Collicoat to reach their own arrangement with
"new management" failing which they can exit their shares. The
employment agreements would continue.
(ii) Five years has elapsed from the initial transaction date and the Bolle
Inc. share price has either doubled during this period or there has
been a
<PAGE>
Mr. Roger Gibbons
Mr. Eric Collicoat
January 6, 1998
Page 3
1 3/4x increase over the deemed equity value as per the warrant
strike price agreed with the Bolle family of $66 million. This value
will translate into a price per share at the time of the IPO. This
provision would continue after five years, to activate when Bolle
Inc.'s share price has met one of these requirements.
In either case the minimum price would be A$3.125. In addition, we would agree
to include language in the agreement that in valuing the business on the
exercise of the option we would be looking to value the company at a 4X
multiple of future maintainable operating profits. Obviously one of the key
factors in evaluating the ongoing business will be the strength of the
management team Eric Collicoat and Roger Gibbons have built up to succeed them.
6. (i) Bolle Inc. and Bolle America hereby acknowledge that the
assets of Bill Bass to be purchased by Bolle Inc. at closing
shall not include:
(a) The Sydney property at 21-27 Mitchell Road, Brookvale and 27
Sydenham Road, Brookvale being the whole of the land in
volume 7396 Folio 36 and Register Folio 1/733384.
(b) William Bass & Co Pty Ltd.
(c) The monthly dividend of $25,000 paid for each of July, August
and September 1997.
(d) A dividend of up to A$700,000 payable to Bill Bass Optical
shareholders prior to the closing, provided that the
additional profit after taxes shown in the Adjusted Balance
Sheet of A$690,00 has been generated by Bill Bass Optical and
the Net Tangible Assets at Closing are higher than those
shown in the Adjusted Balance Sheet.
The above have been or will be paid to shareholders and
associates of Bill Bass firstly by way of clearance of loan
accounts
<PAGE>
Mr. Roger Gibbons
Mr. Eric Collicoat
January 6, 1998
Page 4
Sunnyco ($2,160)
Roger Gibbons $2,375
Tickworth Pty Ltd $388,921
Second Pasdenom $95,340
Bill Bass Trust $724,102
and if any balance by way of fully franked dividend.
(ii) Bolle Inc. and Bolle Australia acknowledge the Adjusted
Balance Sheet - 31/12/97 of Bill Bass attached hereto
reflects the adjusted Balance Sheet of Bill Bass which
confirm the agreed assets of Bill Bass at closing as
represented by Bill Bass and acknowledged by Bolle Inc. in
the course of negotiations. Attached hereto and marked with
the letter "A" is the said Adjusted Balance Sheet which shall
form part of the Letter of Intent.
7. Conditions to the Closing. The obligations of Bolle Inc. and Bolle Australia
to close the Acquisition is subject to the following conditions:
(i) Completion of due diligence by Bolle Inc. to its satisfaction on or
before the date of entering into the Agreement.
(ii) Receipt of clean audited June 30, 1997 and 1996 financial statements
of Bolle Australia.
(iii) The parties shall have entered into the Agreement and all attendant
documents thereto in a form satisfactory to both parties.
(iv) Approvals, if any, of all applicable governmental regulatory agencies
and all other appropriate parties, with respect to the transactions
contemplated by the Acquisition, shall have been obtained.
(v) Entering into mutually acceptable employment agreements with Mr. Roger
Gibbons and Mr. Eric Collicoat including five-year non-competition
<PAGE>
Mr. Roger Gibbons
Mr. Eric Collicoat
January 6, 1998
Page 5
agreements from the date the employment agreements expire.
(vi) Entering into a mutually acceptable 3 year lease agreement, with a 3
year renewal provision and option to buy (at fair market value at the
date of exercise), on the Melbourne property.
(vii) Net Tangible Assets at December 31, 1997 to be A$2.55 million or
higher.
(viii) Bolle Inc.'s registration statement having been declared ineffective.
Bolle Australia will have operated its business only in the ordinary course
consistent with past practice since June 30, 1997 and there will have been no
distributions or other out of the ordinary cash payments to the shareholders
since that date except for the A$25,000 per month distributed between July 1,
1997 and September 30, 1997. At Closing, Bill Bass will change its year end to
December 31st and its name to an appropriate "Bolle" name.
8. Miscellaneous.
(a) Bolle Inc. and the shareholders of Bolle Australia will each be
responsible for their own costs and expenses relating to this
transaction incurred since December 31, 1996.
(b) No public announcement or other publicity regarding this letter, the
Agreement or the transactions contemplated hereby or thereby, shall be
made by any party prior to or after the date hereof without the prior
consent of both Bolle Inc. and Bolle Australia as form, content,
timing, and manner of distribution. Notwithstanding the foregoing,
nothing in this Agreement shall preclude Bolle Inc. and Bolle
Australia or its affiliates from making any public announcement or
filing required by federal or state securities laws or stock exchange
rules.
(c) This Letter of Intent shall be interpreted and enforced in accordance
with the laws of the State of Victoria, Australia.
<PAGE>
Mr. Roger Gibbons
Mr. Eric Collicoat
January 6, 1998
Page 6
(d) This Letter of Intent may be signed in counterparts, each of which
shall be deemed to be an original and both of which shall constitute
one account.
(e) The Sellers will have no economic interest, direct or indirect, in the
business of William Bass & Co. after April 30, 1998.
Neither Bolle Inc. or Bolle Australia intend that this letter, or any actions
of the parties with respect hereto, be, or be deemed to constitute, a legally
binding obligation. A binding commitment with respect to the transactions
contemplated hereby will result only from the execution of the Agreement
relating to such transactions, subject to the conditions expressed therein.
Notwith-standing the foregoing, the terms of this paragraph 8 shall be binding
upon the parties hereto.
If the foregoing accurately sets forth mutual intention with respect to the
principal terms of the proposed transaction, please execute and return the
enclosed copy of this letter to the undersigned.
Bolle Inc.
By:/s/ Martin E. Franklin
----------------------
Martin E. Franklin
Chairman
AGREED TO AND ACCEPTED ON
15 January, 1998
By:/s/ Roger Gibbons By:/s/ Eric Collicoat
----------------- ------------------
Roger Gibbons Eric Collicoat
<PAGE>
EX 10.22
INDEMNIFICATION AGREEMENT
AGREEMENT made as of this _____ day of ____________, 1998, between
_________, a Delaware Corporation (the "Company"), and _______________
("Indemnitee").
WHEREAS, it is essential to the Company and its stockholders to
attract and retain qualified and capable non-employee directors;
WHEREAS, the Certificate of Incorporation of the Company (the
"Certificate of Incorporation") and the By-laws of the Company (the "By-laws")
allow the Company to indemnify and advance expenses to its directors;
WHEREAS, historically, basic protection against undue risk of personal
liability of directors has been provided through insurance coverage affording
reasonable protection at reasonable cost;
WHEREAS, it is presently uncertain whether, and to what extent, such
insurance is or will continue to be available to the Company at a reasonable
cost for the protection of Indemnitee;
WHEREAS, in recognition of Indemnitee's need for protection against
personal liability in order to induce Indemnitee to continue to serve the
Company in an effective manner, and to supplement or replace the Company's
directors' and officers' liability insurance coverage, and, in part, to provide
Indemnitee with specific contractual assurance that the protection provided by
the Certificate of Incorporation and the By-laws will be available to
Indemnitee (regardless of, among other things, any amendment to or revocation
of the Certificate of Incorporation and the By-laws), the Company wishes to
provide the Indemnitee with the benefits contemplated by this Agreement; and
WHEREAS, as a result of the provision of such benefits Indemnitee has
agreed to continue to serve the Company as a director;
NOW, THEREFORE, the parties hereto hereby agree as follows:
1. Definitions: The following terms used herein, shall have the
following respective meanings:
(a) AFFILIATE: of a specified Person is a Person who, directly or
indirectly through one or more intermediaries, controls or is controlled by, or
is under common control with, the Person specified. The term ASSOCIATE used to
indicate a relationship with any Person shall mean (i) any
1
<PAGE>
corporation or organization (other than the Company or a Subsidiary) of which
such Person is an officer or partner or is, directly or indirectly, the
Beneficial Owner of ten (10) percent or more of any class of Equity Securities;
(ii) any trust or other estate in which such Person has a substantial
beneficial interest or as to which such Person serves as a trustee or in a
similar fiduciary capacity (other than an Employee Plan Trustee); (iii) any
Relative of such Person; or (iv) any officer or director of any corporation
controlling or controlled by such Person.
(b) BENEFICIAL OWNERSHIP: shall be determined, and a Person shall be
the BENEFICIAL OWNER of all securities which such Person is deemed to own
beneficially, pursuant to Rule 13d-3 of the General Rules and Regulations under
the Securities Exchange Act of 1934, as amended (or any successor rule or
statutory provision), or, if such Rule 13d-3 shall be rescinded and there shall
be no successor rule or statutory provision thereto, pursuant to such Rule
13d-3 as in effect on the date hereof; provided, however, that a Person shall,
in any event, also be deemed to be the Beneficial Owner of any Voting Shares:
(A) of which such Person or any of its Affiliates or Associates is, directly or
indirectly, the Beneficial Owner; or (B) of which such Person or any of its
Affiliates or Associates has (i) the right to acquire (whether such right is
exercisable immediately or only after the passage of time), pursuant to any
agreement, arrangement or understanding or upon the exercise of conversion
rights, exchange rights, warrants or options, or otherwise, and (ii) sole or
shared voting or investment power with respect thereto pursuant to any
agreement, arrangement, understanding, relationship or otherwise (but shall not
be deemed to be the Beneficial Owner of any Voting Shares solely by reason of a
revocable proxy granted for a particular meeting of stockholders, pursuant to a
public solicitation of proxies for such meeting, with respect to shares of
which neither such Person nor any such Affiliate or Associate is otherwise
deemed the Beneficial Owner), or (C) of which another Person is, directly or
indirectly, the Beneficial Owner if such first mentioned Person or any of its
Affiliates or Associates acts with such other Person as a partnership,
syndicate or other group pursuant to any agreement, voting or disposing of any
shares of capital stock of the Company; and provided further, however, that (i)
no director or officer of the Company, nor any Associate or Affiliate of any
such director or officer, shall, solely by reason of any or all of such
directors and officers acting in their capacities as such, be deemed for any
purpose hereof, to be the Beneficial Owner of any Voting Shares of which any
other such director or officer (or any Associate or Affiliate thereof) is the
Beneficial Owner (ii) no trustee of an employee stock ownership or similar plan
of the Company or any Subsidiary ("Employee Plan Trustee") or any Associate or
Affiliate of any such Trustee, shall solely by reason of being an Employee Plan
Trustee or Associate or Affiliate of an Employee Plan Trustee, be deemed for
any purposes hereof to be the Beneficial Owner of any Voting Shares held by or
under any such plan shall not be deemed to trigger any of Indemnitee's rights
hereunder.
2
<PAGE>
(c) A CHANGE IN CONTROL: shall be deemed to have occurred if (A) (i)
any Person (other than (a) the Company or any subsidiary, (b) any pension,
profit sharing, employee stock ownership or other employee benefit plan of the
Company or any subsidiary or any trustee of or fiduciary with respect to any
such plan when acting in such capacity, or (c) any Person who is as of the date
hereof the Beneficial owner of 20% or more of the total voting power of the
Voting Shares) is or becomes, after the date of this Agreement, the Beneficial
Owners of 30% or more of the total voting power of the Voting Shares, and (ii)
Franklin, Kanders, and Ashken are the Beneficial Owners in the aggregate of
less than 25% of the Voting Shares, (B) during any period of two consecutive
years, individuals who at the beginning of such period constitute the Board of
Directors of the Company and any new directors whose election or appointment by
the Board of Directors or nomination or recommendation for election by the
Company's stockholders was approved by a vote of at least two-thirds (2/3) of
the directors then still in office who either were directors at the beginning
of the period or whose election or nomination for election was previously so
approved, cease for any reason to constitute a majority thereof, or (C) the
stockholders of the Company approve a merger or consolidation of the Company
with any other corporation, other than a merger or consolidation which would
result in the Voting Shares of the Company outstanding immediately prior
thereto continuing to represent (either by remaining outstanding or by being
converted into Voting Shares of the surviving entity) at least 50% of the total
voting power represented by the Voting Shares of the Company or such surviving
entity outstanding, or the stockholders of the Company approve a plan of
complete liquidation of the company or an agreement for the sale or disposition
by the Company of all or substantially all of the Company's assets.
(d) CLAIM: means any pending or completed action, suit, arbitration or
proceeding, or any inquiry or investigation, whether brought by or in the right
of the Company or otherwise, whether civil, criminal, administrative,
investigative or other, or any appeal therefrom.
(e) EQUITY SECURITY: shall have the meaning given to such term under
Rule 3all-1 of the General Rules and Regulations under the Securities Exchange
Act of 1934, as in effect on the date hereof.
(f) D&O INSURANCE: means any valid directors' and officers' liability
insurance policy maintained by the Company for the benefit of the Indemnitee,
if any.
(g) DETERMINATION: means a determination, and DETERMINED means a
matter which has been determined based on the facts known at the time, by: (i)
a majority vote of a quorum of disinterested directors, or (ii) if such a
quorum is not obtainable, or even if obtainable, if a quorum of disinterested
directors so directs, by independent legal counsel in a written opinion, or, in
the event there has been a change in Control, by Indemnitee as set forth in
Section 6, or (iii) a majority of the disinterested stockholders of the
Company, or (iv) a final adjudication by a court
3
<PAGE>
of competent jurisdiction.
(h) EXCLUDED CLAIM: means any payment for Losses or Expenses in
connection with any Claim: (i) based or attributable to Indemnitee gaining in
fact any personal profit or advantage to which Indemnitee is not entitled; or
(ii) for the return by Indemnitee of any remuneration paid to Indemnitee
without the previous approval of the stockholders of the Company which is
illegal; or (iii) for any accounting of profits in fact made from the purchase
or sale by Indemnitee of Securities of the company within the meaning of
Section 16 of the Security Exchange Act of 1934, as amended, or similar
provisions of any state law; or (iv) resulting from Indemnitee's knowingly
fraudulent, dishonest or willful misconduct; or (v) the payment of which by the
Company under this Agreement is not permitted by applicable law.
(i) EXPENSES: means any reasonable expenses incurred by Indemnitee as
a result of a Claim or Claims made against Indemnitee for Indemnifiable Events
including, without limitation, reasonable attorneys' fees and all other costs,
expenses and obligations paid or incurred in connection with investigation,
defending, being a witness in or participating in (including an appeal), or
preparing to defend, be a witness in or participate in any Claim relating to
any Indemnifiable Event.
(j) FINES: means any fine, penalty or, with respect to an employee
benefit plan, any excise tax or penalty assessed with respect thereto.
(k) INDEMNIFIABLE EVENT: means any event or occurrence, occurring
prior to or after the date of the Agreement, related to the fact that
Indemnitee is, was or has agreed to serve as a director of the Company, or by
reason of anything done or not done by Indemnitee, including, but not limited
to, any breach of duty, neglect, error, misstatement, misleading statement,
omission, or other act done or wrongfully attempted by Indemnitee, or any of
the foregoing alleged by any claimant, in any such capacity.
(l) LOSSES: means any amounts or sums which Indemnitee is legally
obligated to pay as a result of a Claim or Claims made against Indemnitee, for
Indemnifiable Events including, without limitation, damages, judgments, and
sums or amounts paid in settlement of a Claim or Claims, and Fines.
(m) PERSON: means any individual, partnership, corporation, business
trust, joint stock company, trust, unincorporated association, joint venture,
governmental authority or other entity of whatever nature.
(n) POTENTIAL CHANGE IN CONTROL: shall be deemed to have occurred if
(A) the Company enters into an agreement, the consummation of which would
result in the occurrence of a Change
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in Control; or (B) the Board of Directors adopts a resolution to the effect
that, for purposes of this Agreement, a Potential Change in Control has
occurred.
(o) RELATIVE: means a Person's spouse, parents, children, siblings,
mother- and father-in-law, sons-and daughters-in-law, and brothers- and
sisters-in-law.
(p) REVIEWING PARTY: means any appropriate person or body consisting
of a member or member of the Company's Board of Directors or any other person
or body appointed by the Board (including the Special Independent Counsel
referred to in Section 6) who is not a party to the particular Claim for which
Indemnitee is seeking indemnification.
(q) SUBSIDIARY: means any corporation of which a majority of any class
of Equity Security is owned, directly or indirectly, by the Company.
(r) TRUST: means the trust established pursuant to Section 7 hereof.
(s) VOTING SHARES: means any issued and outstanding shares of capital
stock of the Company entitled to vote generally in the election of directors.
2. Basic Indemnification Agreement. In consideration of, and as an
inducement to, the Indemnitee rendering valuable services to the Company, the
Company agrees that in the event Indemnitee is or becomes a party to or witness
or other participant in a claim by reason of (or arising in part out of) an
Indemnifiable Event, the Company will indemnify Indemnitee to the fullest
extent authorized by law, against any and all Losses and Expenses (including
all interest, assessments, and other charges paid or payable in connection with
or in respect of such Losses and Expenses) of such Claim, whether or not such
Claim proceeds to judgment or is settled of otherwise is brought to a final
disposition, subject in each case, to the further provisions of this Agreement.
3. Limitations on Indemnification. Notwithstanding the provisions of
Section 2, Indemnitee shall not be indemnified and held harmless from an Losses
or Expenses (a) which have been Determined as provided herein, to constitute an
Excluded Claim; (b) indemnifiable hereunder if and to the extent that
Indemnitee has actually received payment in connection with such Losses and
Expenses pursuant to the Certificate of Incorporation, By-laws, D&O Insurance
or otherwise; or (c) other than pursuant to the last sentence of Section 4(d)
or Section 14, in connection with any claim or proceeding initiated by
Indemnitee, or brought or made by Indemnitee against the Company or any
director or officer of the Company, unless the Company has joined in or the
Board of Directors has authorized such claim or proceeding.
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4. Indemnification Procedures.
(a) Promptly after receipt by Indemnitee of the notice of any claim,
Indemnitee shall, if indemnification with respect thereto may be sought from
the Company under this Agreement, notify the Company of the commencement
thereof; provided, however, that the failure to give such notice promptly shall
not affect or limit the Company's obligations with respect to the matters
described in the notice of such claim, except to the extent that the Company is
prejudiced thereby. Indemnitee agrees, further, not to make any admission or
effect any settlement with respect to such Claim without the consent of the
Company, except any Claim with respect to which the Indemnitee has undertaken
the defense in accordance with second to the last sentence of Section 4 (d).
(b) If, at the time of the receipt of such notice, the Company has D&O
Insurance in effect, the Company shall give prompt notice of the commencement
of any Claim to the insurers in accordance with the procedures set forth in the
respective policies. The Company shall thereafter take all necessary or
desirable action to cause such insurers to pay, on behalf of Indemnitee, all
Losses and Expenses payable as a result of such Claim.
(c) To the extent the Company does not at the time of the Claim have
applicable D&O Insurance, or if a Determination is made that any Expenses
arising out of such Claim will not be payable under the D&O Insurance then in
effect, the Company shall be obligated to pay the Expenses of any Claim in
advance of the final disposition thereof and the company, if appropriate, shall
be entitled to assume the defense of such Claim, with counsel reasonable
satisfactory to Indemnitee, upon the delivery to Indemnitee of reasonable
written notice of its election to do so. After delivery of such notice, the
Company will not be liable to Indemnitee under the Agreement for any legal or
other Expenses subsequently incurred by Indemnitee in connection with such
defense other than reasonable Expenses of investigation; provided that
Indemnitee shall have the right to employ its counsel in such Claim but the
fees and expenses of such counsel incurred after deliver of notice from the
Company of its assumption of such defense shall be at the Indemnitee's expense;
provided further that if: (i) the employment of the counsel by Indemnitee has
been previously authorized by the Company or (ii) the Company shall not, in
fact, have employed counsel to assume the defense of such action, the
reasonable fees and expenses of counsel shall be at the expense of the Company.
(d) All payments on account of the Company's indemnification
obligations under this Agreement shall be made within sixty (60) days of
Indemnitee's written request therefor unless a Determination is made that the
Claims giving rise to Indemnitee's request are Excluded Claims or otherwise not
payable under this Agreement, provided that all payments on account of the
Company's obligation to pay Expenses under Section 4 (c) of this Agreement
prior to the final disposition of any Claim shall be made within thirty (30)
days of Indemnitee's written request
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therefor and such obligation shall not be subject to any such Determination but
shall be subject to Section 4 (e) of this Agreement. Notwithstanding the
foregoing, such sixty (60) day period may be extended for a reasonable time,
not to exceed an additional thirty (30) days, if the Person making the
Determination with respect to entitlement to indemnification in good faith
requires such additional time for the obtaining or evaluating of documentation
and/or information relating thereto. In the event the Company takes the
position that Indemnitee is not entitled to indemnification in connection with
the proposed settlement of any Claim, Indemnitee shall have the right at his
own expense to undertake defense of any such Claim, insofar as such proceeding
involves Claims against the Indemnitee, by written notice given to the Company
within ten (10) days after the Company has notified Indemnitee in writing of
its contention that Indemnitee is not entitled to Indemnification; provided,
however, that the failure to give such notice within such ten-day period shall
not affect or limit the Company's obligations with respect to any such claim if
such Claim is subsequently determine not be an Excluded Claim or otherwise to
be payable under this Agreement, except to the extent that the Company is
prejudiced thereby. If it is subsequently determined in connection with such
proceeding that the Indemnifiable Events are not Excluded Claims and that
Indemnitee, therefore, is entitled to be indemnified under the provision of
Section 2 hereof, the Company shall promptly indemnify Indemnitee.
(e) Indemnitee hereby expressly undertakes and agrees to reimburse the
Company for all Losses and Expenses paid by the Company in connection with any
Claim against Indemnitee in the event and only to the extent that a
Determination shall have been made by a court of competent jurisdiction in a
decision from which there is no further right to appeal that Indemnitee is not
entitled to be indemnified by the Company for such Losses and Expenses because
the Claim is an Excluded Claim or because Indemnitee is otherwise not entitled
to payment under the Agreement.
(f) In connection with any Determination as to whether Indemnitee is
entitled to be indemnified hereunder, the burden of proof shall be on the
Company to establish that Indemnitee is not so entitled.
(g) Indemnitee hereby expressly undertakes and agrees to (i) notify
(and deliver to, as applicable) the Company in writing of any and all
information or documents relating to any Claim or matter which may entitle
Indemnitee to indemnification for Losses or Expenses under this Agreement; and
(ii) to notify the Company in writing of any and all developments relating to
any Claim to which the Company has notified Indemnitee in writing pursuant to
the terms of Section 4 (d) herein of its contention that Indemnitee is not
entitled to indemnification under this Agreement.
5. Settlement. The Company shall have no obligation to indemnify
Indemnitee under this Agreement for any amounts paid in settlement of any Claim
effected without the Company's prior written consent. The Company shall not
settle any Claim in which it takes the position that
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<PAGE>
Indemnitee is not entitled to indemnification in connection with such
settlement without the consent of Indemnitee, nor shall the Company settle any
Claim in any manner which would impose any Fine or any obligation on
Indemnitee, without Indemnitee's written consent. Neither the Company nor
Indemnitee shall unreasonably withhold its or his consent to any proposed
settlement.
6. Change in Control: Extraordinary Transactions. The Company and
Indemnitee agree that if there is a Change in Control of the Company (other
than a Change in Control which has been approved by a majority of the Company's
Board of Directors who were directors immediately prior to such Change in
Control), then all Determinations thereafter with respect to the rights of
Indemnitee to be paid Losses and Expenses under this Agreement shall be made
only by a special independent counsel (the "Special Independent Counsel")
selected by Indemnitee and approved by the Company (which approval shall not be
unreasonably withheld) or by a court of competent jurisdiction. The Company
shall pay the reasonable fees of such Special Independent Counsel and shall
indemnify such Special independent Counsel against any and all reasonable
expenses (including reasonable attorneys' fees), claims, liabilities and
damages arising out of or relating to this Agreement or its engagement pursuant
hereto.
The Company covenants and agrees that, in the event of a Change in
Control of the type described in clause (c) of Section 1 (c), the Company will
use its best efforts (a) to have the obligations of the Company under this
Agreement including, but not limited to, those under section 7, expressly
assumed by the surviving, purchasing or succeeding entity, or (b) otherwise
adequately to provide for the satisfaction of the Company's obligations under
this Agreement, in a manner reasonably acceptable to the Indemnitee.
7. Establishment of Trust. In the event of a Potential Change in
Control, the Company shall, upon written request by Indemnitee, create a trust
(the "Trust") for the benefit of Indemnitee and from time to time, upon written
request of Indemnitee, shall fund the Trust in an amount sufficient to satisfy
any and all Losses and Expenses which are actually paid or which Indemnitee
reasonably determines from time to time may be payable by the Company under
this Agreement. The amount or amounts to be deposited in the Trust pursuant to
the foregoing funding obligation shall be determined by the Reviewing Party, in
any case in which the Special Independent Counsel is involved. The terms of the
Trust shall provide that upon a Change in Control: (i) the Trust shall not be
revoked or the principal thereof invaded without the written consent of
Indemnitee; (ii) the trustee of the Trust shall advance within twenty (20) days
of a request by Indemnitee, any and all Expenses to Indemnitee (and Indemnitee
hereby agrees to reimburse the Trust under the circumstances under which
Indemnitee would be required to reimburse the Company under Section 4 (e) of
this Agreement; (iii) the Company shall continue to fund the Trust from time to
time in accordance with the funding obligations set forth above;
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(iv) the trustee of the Trust shall promptly pay to Indemnitee all Losses and
Expenses for which Indemnitee shall be entitled to indemnification pursuant to
this Agreement; and (v) all unexpended funds in the Trust shall revert to the
Company upon a final determination by a court of competent jurisdiction in a
final decision from which there is not further right of appeal that Indemnitee
has been indemnified under the terms of this Agreement. The trustee of the
Trust shall be chosen by Indemnitee and shall be approved by the Company, which
approval shall not be unreasonably withheld.
8. No Presumption. For purposes of this Agreement, the termination of
any Claim by judgment, order, settlement (whether with or without court
approval) or conviction, or upon a plea of nolo contendere, or its equivalent,
shall not, of itself, create a presumption that Indemnitee did not meet any
particular standard of conduct or have any particular belief or that a court
has determined that indemnification is not permitted by applicable law.
9. Non-exclusivity, Etc. . The rights of Indemnitee hereunder shall be
in addition to any other rights Indemnitee may have under the Certificate of
Incorporation, the By-laws, the Delaware General Corporation Law, any vote of
stockholders or disinterested directors or otherwise, both as to action in
Indemnitee's official capacity and as to action in any other capacity by
holding such office, and shall continue after Indemnitee ceases to serve the
Company as a director for so long as Indemnitee shall be subject to any Claim
by reason of (or arising in part out of) an Indemnifiable Event. To the extent
that a change in the Delaware General Corporation Law (whether by statute or
judicial decision) permits greater indemnification by agreement than would be
afforded currently under the Certificate of Incorporation, the By-laws and this
Agreement, it is the intent of the parties hereto that Indemnitee shall enjoy
by this Agreement the greater benefits so afforded by such change.
10. Liability Insurance. To the extent the Company maintains an
insurance policy or policies providing directors' and officers' liability
insurance, Indemnitee shall be covered by such policy or policies, in
accordance with its or their terms, to the maximum extent of the coverage
available for any director of the Company.
11. Subrogation. In the event of payment under this Agreement, the
Company shall be subrogated to the extent of such payment to all of the rights
of recovery of Indemnitee who shall execute all papers required and shall do
everything that may be necessary to secure such rights, including the execution
of such documents necessary to enable the Company effectively to bring suit to
enforce such rights.
12. Partial Indemnity, Etc. If Indemnitee is entitled under any
provision of this Agreement to indemnification by the Company for some or a
portion of the Losses and Expenses of a Claim but not, however, for all of the
total amount thereof, the Company shall nevertheless indemnify
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Indemnitee for the portion thereof to which Indemnitee is entitled. Moreover,
notwithstanding any other provision of this Agreement, to the extent that
Indemnitee has been successful on the merits or otherwise in defense of any or
all claims relating in whole or in part to any Indemnifiable Event or in
defense of any issue or matter therein, including dismissal without prejudice,
Indemnitee shall be indemnified against all Expenses incurred in connection
therewith.
13. Liability of Company. Indemnitee agrees that neither the
stockholders nor the directors nor any officer, employee, representative or
agent of the Company shall be personally liable for the satisfaction of the
company's obligations under this Agreement and Indemnitee shall look solely to
the assets of the Company for satisfaction of any Claims hereunder.
14. Enforcement.
(a) Indemnitee's right to indemnification and other rights under this
Agreement shall be specifically enforceable by Indemnitee only in the state or
Federal courts of the States of Delaware or New York and shall be enforceable
notwithstanding any adverse Determination by the Company's Board of Directors,
independent legal counsel, the Special Independent Counsel or the Company's
stockholders and no such Determination shall create a presumption that
Indemnitee is not entitled to be indemnified hereunder. In any such action the
Company shall have the burden of proving that indemnification is not required
under this Agreement.
(b) In the event that any action is instituted by Indemnitee under
this Agreement, or to enforce or interpret any of the terms of this Agreement,
Indemnitee shall be entitled to be paid all court costs and reasonable
expenses, including reasonable counsel fees, incurred by Indemnitee with
respect to such actions, unless the court determines that each of the material
assertions made by Indemnitee as a basis for such action was not made in good
faith or was frivolous.
15. Severability. In the event that any provision of this Agreement is
determined by a court to require the Company to do or to fail to do an act
which is in violation of applicable law, such provision (including any
provision within a single section, paragraph or sentence) shall be limited or
modified in its application to the minimum extent necessary to avoid a
violation of laws, and, as so limited or modified, such provision and the
balance of this Agreement shall be enforceable in accordance with their terms
to the fullest extent permitted by law.
16. Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of Delaware applicable to agreements
made and to be performed entirely within such State.
17. Consent to Jurisdiction. The Company and Indemnity each hereby
irrevocably consents to the jurisdiction of the courts of the States of
Delaware and New York for all purposes
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in connection with any action or proceeding which arises out of or relates to
this Agreement and agrees that any action instituted under this Agreement shall
be brought only in the state and Federal courts of the States of Delaware and
New York.
18. Notices. All notices or other communication required or permitted
hereunder shall be sufficiently given for all purposes if in writing and
personally delivered or sent by registered or certified mail, return receipt
requested, with postage prepaid addressed as follows, or to such other address
as the parties shall have given notice of pursuant hereto:
(a) If to the Company, to:
555 Theodore Fremd Avenue
Suite B-302
Rye, New York 10580
(b) If to the Indemnitee, to:
----------------------------
----------------------------
----------------------------
19. Counterparts. This Agreement may be signed in counterparts, each
of which shall be an original and all of which, when taken together, shall
constitute one and the same instrument.
20. Successors and Assigns. This Agreement shall be (i) binding upon
all successors and assigns of the Company, including any direct or indirect
successor by purchase, merger, consolidation or otherwise to all or
substantially all of the business and/or assets of the Company, and (ii)
binding upon and inure to the benefit of any successors and assigns, heirs, and
personal or legal representatives of Indemnitee.
21. Amendment: Waiver. No amendment, modification, termination or
cancellation of this Agreement shall be effective unless made in a writing
signed by each of the parties hereto. No waiver of any of the provision of this
Agreement shall be or shall constitute a waiver of any other provision hereof
(whether or not similar) nor shall such waiver constitute a continuing waiver.
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IN WITNESS WHEREOF, the Company and Indemnitee have executed this
Agreement as of the day and year first above written.
INDEMNITEE
--------------------------------
Name:
BEC GROUP, INC.
By:
------------------------------
Name:
Title:
ATTEST:
By:
--------------------------
Name:
Title:
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Exhibit 21.1
SUBSIDIARIES OF BOLLE INC.
SUBSIDIARY JURISDICTION OF
INCORPORATION
Direct subsidiaries
of Bolle Inc.
Bolle America, Inc. Delaware
Tavister Ltd. United Kingdom
Indirect subsidiary
of Bolle Inc. which is
included in Tavister Ltd.
Bolle International S.A. France
Indirect subsidiary of Bolle Inc.
which is included in Bolle
International S.A.
Holding BF S.A. France
Indirect subsidiaries of Bolle Inc.
which are included in
Holding BF S.A.
Etablissements Bolle, S.N.C. France
Bolle Protection SARL France
Bolle Diffusion SARL France
Bolle Nederland BV Netherlands
<PAGE>
THE BOARD OF DIRECTORS
BOLLE AMERICA, INC.
We consent to the use of our report included herein and to the reference to
our firm under the heading "Experts" in the prospectus.
/s/ KPMG Peat Marwick LLP
KPMG Peat Marwick LLP
February 2, 1998
Denver, Colorado
<PAGE>
Consent of Independent Accountants
February 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 Amendment No. 3 to Form S-1 of Bolle Inc. of our
report dated November 26, 1997 relating to the combined financial statements of
Holding BF SA, which appears in such Prospectus. We also consent to the
reference to us under the heading "Experts" in such Prospectus.
Befec-Price Waterhouse
Lyon, France
/s/ Olivier Auscher
- -------------------------
Olivier Auscher
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Prospectus constituting part of this
Registration Statement on Amendment No. 3 to Form S-1 of Bolle Inc. of our
report dated March 10, 1997 relating to the consolidated financial statements
of Bolle Inc., which appears in such Prospectus. We also consent to the
reference to us under the heading "Experts" in such Prospectus.
/s/ PRICE WATERHOUSE LLP
Dallas, Texas
February 3, 1998
