<PAGE>
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 28, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES ACT OF 1934
Commission File Number 0-20001
NATIONAL VISION ASSOCIATES, LTD.
(Exact name of Registrant as specified in its charter)
Georgia
(State or other jurisdiction of
incorporation or organization)
58-1910859
(I.R.S. Employer Identification No.)
296 Grayson Highway
Lawrenceville, Georgia
(Address of principal executive offices)
30245
(Zip Code)
Registrant's telephone number, including area code: (770) 822-3600
Securities registered pursuant to Section 12(b) of the Act:
None
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Securities registered pursuant to Section 12(g) of the Act:
Common Stock, par value $.01 per share
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject
to such filing requirements for the past 90 days. Yes X No
----- -----
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
The number of shares of Common Stock of the registrant outstanding as
of February 3, 1997, was 20,651,359. The aggregate market value of shares
of Common Stock held by non-affiliates of the registrant as of February 3,
1997, was approximately $84.3 million based on a closing price of $4.875
on the NASDAQ Stock Market on such date. For purposes of this computation,
all executive officers and directors of the registrant are deemed to be
affiliates. Such determination should not be deemed to be an admission
that such directors and officers are, in fact, affiliates of the registrant.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the following documents have been incorporated by reference
into the parts indicated: the Company's definitive Proxy Statement for the
1997 Annual Meeting of Shareholders to be filed with the Securities and
Exchange Commission not later than 120 days after the end of the fiscal year
covered by this report--Part III.
The Exhibit Index is located at pages 23 - 28.
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PART I
ITEM 1. BUSINESS
National Vision Associates, Ltd. (the "Company") is engaged in the
retail sale of optical goods and services as a licensee operating within
discount department stores. Pursuant to an agreement (the "Wal-Mart
Agreement") with Wal-Mart Stores, Inc. ("Wal-Mart"), the Company operates,
as of February 3, 1997, 328 retail vision centers in stores owned and
operated by Wal-Mart. As of the same date, the Company also operates 18
vision centers in Mexico pursuant to a license agreement (the "Mexico
Agreement") with Wal-Mart de Mexico, S.A. de C.V. ("Wal-Mart Mexico").
The Company also owns fifty percent of a joint venture company which
operates three locations in Eastern Europe in department stores owned by
Tesco, PLC. (The Company has previously announced that it intends to
sell its interest in the joint venture.)
The discussion in this "Business" section relates only to the
Company's domestic business, except where expressly stated to the
contrary. See "Mexican Operations" below for a description of the
Company's Mexican operations and how they differ from the Company's
domestic business.
MARKETING STRATEGY
The Company generally employs a marketing philosophy of offering
quality and value at "everyday low prices" with "customer satisfaction
guaranteed." Management constantly strives to identify new means of
accomplishing its overall goal of being a low-cost provider of quality
retail optical products.
VISION CENTER OPERATIONS
Each of the Company's existing Wal-Mart vision centers occupies
approximately 1,000 square feet in the front of the host store, with
separate areas for merchandise display, customer service, contact lens
fitting and a laboratory. Services of independent optometrists are
available from clinics which are approximately 500 square feet and located
in, adjacent to, or nearby the vision center, depending on regulatory
requirements. Each vision center has a laboratory containing a patternless
edging and fitting unit and other equipment that, coupled with the on-site
inventory of frames, spectacle lenses, and contact lenses, allows the
Company to give prompt, one-hour service to many customers who request
quick delivery. In each vision center, the Company maintains an
on-premises inventory of approximately 1,250 eyeglass frames, 1,380
pairs of spectacle lenses, and 850 pairs of contact lenses, together
with assorted sunglasses, eyeglass cases, eyeglass accessories, and
contact lens accessories.
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OPTICAL PROFESSIONALS
A key element of the Company's business strategy is the availability
of independent optometrists at clinics in, adjacent to, or nearby the
Company's vision centers. Additionally, the Wal-Mart Agreement requires
that such services be available for a minimum of 48 hours per week to the
extent permitted by applicable law. These optometrists, whose activities
and relationships with entities such as the Company are subject to state
and local regulation, are not employed by, and receive no compensation from,
the Company. See "Government Regulation." Such independent optometrists
sublicense the eye examination facilities and equipment from the Company.
In January 1997, the Company completed various transactions related to
its relationship with each of Eyecare Leasing, Inc., which had previously
recruited optometrists for the Company pursuant to a consulting agreement
and Stewart-Phillips, Inc., which had recruited optometrists practicing
adjacent to the Company's vision centers in California. The transactions
involved the termination of such consulting agreement and transfer of
the responsibilities of Stewart-Phillips, Inc. to a subsidiary of the
Company. (See Note 15 to consolidated financial statements.)
MANAGEMENT INFORMATION AND FINANCIAL SYSTEMS
In 1996, the Company completed the installation of a new point of sale
system and a new perpetual inventory system in all domestic store locations.
The system facilitates the processing of customer sales information and
replenishment of store inventory by passing such information, including
customer specific orders, to the Company's home office and Company in-house
lens laboratory for further processing.
RELATIONSHIP WITH HOST COMPANIES
Master Agreements
-----------------
The Company's relationship with each of Wal-Mart and Wal-Mart Mexico
is governed by a master license agreement which grants a separate license
to the Company for each vision center. Each agreement provides for the
payment of minimum and percentage license fees and contains other customary
terms and conditions. Certain terms are described below:
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<TABLE>
<CAPTION>
Term of Company
Each License Options Other
------------ ------- -----
<S> <C> <C> <C>
Wal-Mart one for
Agreement 9 yrs. three yrs. 1
Mexico
Agreement 5 yrs. two for two 2
yrs.; one
for one yr.
</TABLE>
(1) The Wal-Mart Agreement provides that Wal-Mart is to offer the Company
the opportunity to open, no later than May 1, 1998, at least 400 vision
centers (including those currently open). In January 1995, the Company
made a lump sum payment in exchange for such commitment. Such payment
is being amortized over the initial term of vision centers opened after
January 1, 1995.
(2) The Company has a right of first refusal in Mexico for any store in which
Wal-Mart Mexico proposes to open a vision center. The Mexico Agreement
contains a mutual non-competition agreement preventing each party from
dealing with other parties (excluding affiliates of the Company and
Wal-Mart Mexico) in Mexico for the operation of vision centers in a host
environment. The Mexico Agreement also contains provisions which
entitle each party to terminate the license for each vision center if
such vision center fails to meet certain minimum sales requirements.
No Assurances of Expansion
--------------------------
Future additional expansion in stores of any of the Company's hosts
beyond those currently under contract is out of the control of the Company
and there can be no assurance that any host will offer the Company any
additional vision centers or that any such offer will be on terms that are
the same as or similar to the terms contained in the current agreements.
Management periodically discusses expansion opportunities with each host,
but there can be no assurance that these discussions will result in
additional vision centers being offered to the Company.
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Manufacturing and Distribution
------------------------------
The Company currently utilizes two in-house lens laboratories and
one independent laboratory to manufacture prescription eyeglasses for its
vision centers. Substantially all prescription spectacle requirements
of the Company's domestic vision centers opened in the future will be
supplied from Company-owned laboratories. The Company has a state-of-
the-art coating facility in its Lawrenceville headquarters, capable of
coating lenses with anti-reflective and mirror surfaces. Each vision
center has its own finishing laboratory which manufactures lenses for
approximately half of all customers purchasing spectacle lenses.
The Company's centralized distribution center in its Lawrenceville,
Georgia headquarters facility provides lens blanks, frames, sunglasses
and contact lenses to all vision centers. The Company's central
distribution center and all laboratories are interfaced with the Company's
management information system. The Company's central distribution center
replenishes inventory, including frames, and spectacle and contact lenses,
to the Company's vision centers throughout the United States by overnight
delivery services. Completed prescription glasses and spectacle lenses are
sent by overnight delivery services to the vision centers through the
distribution center from the Company's in-house laboratories and outside
laboratory.
Government Regulation
---------------------
The Company is subject to a variety of federal, state, and local
laws, regulations, and ordinances, including state and local laws and
regulations regarding advertising, zoning, qualifications and practices of
the opticians employed by the Company, relations between independent
optometrists and optical firms such as the Company, and various trade
practices such as country of origin product labeling. In addition,
certain of the Company's products, specifically contact lenses and
contact lens solutions, must comply with quality control standards
set by the United States Food and Drug Administration. The Company
believes it is in substantial compliance with all material governmental
regulations applicable to its operations.
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Although government regulation has increased the cost to the
Company of commencing operations and decreased its flexibility in managing
its business, government regulation has not, to date, had a material
adverse effect on the Company's overall operations or financial
performance, or on its overall relationships with independent optometrists.
It is nevertheless possible that new regulations or new interpretations of
current regulations could materially increase the Company's cost of doing
business or have a material adverse impact on the Company's sales by
restricting or eliminating the services of an optometrist in, adjacent to,
or nearby the Company's vision centers. This risk is enhanced since the
Company's competitors often serve as, or exert influence on, local regulators
of the eyecare industry.
Competition
-----------
The retail eyecare industry in the United States is highly
competitive. In addition to optical chains such as Pearle Vision and
LensCrafters, and other department store chains such as Sears Roebuck
(through its Sears Optical Center locations), there are numerous retail
optical stores, individual retail outlets and individual opticians,
optometrists, and ophthalmologists providing the public all or some of the
goods and services the Company sells or makes available through its vision
centers. Optical retailers generally serve individual, local or regional
markets, and, as a result, competition is fragmented and varies substantially
among locations and geographic areas. Several of the Company's competitors
have financial resources substantially greater than those of the Company.
The Company believes that its primary competitive advantages are its
locations in a prominent position in its host stores, its quality products
and value at low prices, and its customer-driven service philosophy.
Additionally, the Company competes on the basis of the quality and
consistency of service, convenience, speed of delivery, and selection.
Wal-Mart operates its own optical division. As of February 3, 1997,
such division operated approximately 600 vision centers. No assurance can
be given that Wal-Mart will not continue to allocate increasing numbers of
vision centers to its own optical division.
The Company's future ability to expand in the United States outside
of the Wal-Mart chain is limited by the potential adverse impact on the
Company's relations with Wal-Mart that may result from any Company
competition with any Wal-Mart optical center. The Company regularly
explores opportunities to expand outside of Wal-Mart and, depending on
the circumstances, would consider a variety of options such as expanding
in another host environment, opening free standing vision centers, and
acquiring an optical chain.
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Mexican Operations
------------------
OPERATIONS. In general, the Company's vision centers in stores owned
by Wal-Mart Mexico are laid out, equipped, and operated in substantially
the same manner as the Company's domestic vision centers. On-site inventory
consists of a similar product mix as in the Company's domestic vision
centers. The Mexican operation is currently sourcing a majority of its
inventory requirements locally and distributing products through its locally
operated distribution center. The Mexican operation will consider increasing
its existing lens processing and distribution center operations in Mexico
if the number of vision centers in operation grows to a level that would
justify such operations. Basic merchandising and marketing methods used
in Mexico are comparable to those used by the Company in its domestic
operations, though these techniques are modified as needed to reflect
cultural and national differences.
REGULATORY ENVIRONMENT. The Company's Mexican operations are subject
to regulatory environments that are different in many ways from (and less
extensive than) the regulations currently applicable to the Company's
United States operations.
RISKS. The Company's Mexican operations face risks substantially
similar to those faced by the Company in connection with its domestic
operations, including dependence on the host store and expansion
requirements. There can be no assurance that such operations will be
able to attain profitability. In addition, such operations expose the
Company to all of the risks arising from investing and operating in
foreign countries generally, including a different regulatory, political,
and governmental environment, currency fluctuations, currency devaluations,
inflation, price controls, restrictions on profit repatriation, lower per
capita income and spending levels, import duties and other impediments to
the delivery of inventory and equipment to vision center locations,
value-added taxes, and difficulties of cross-cultural marketing.
ECONOMIC AND POLITICAL ENVIRONMENT. Regulations in Mexico do not
currently include currency controls, restrictions on profit repatriation,
limitations on foreign ownership, or restrictions on sourcing of products
that would adversely affect the Company's operations. The cumulative
translation adjustment in shareholders' equity for operations in foreign
countries at December 28, 1996 was approximately $4.1 million.
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As a result of devaluation of the peso in prior years, the Company
has in the past adjusted its retail pricing. Further pricing adjustments
are contingent upon competitive pricing levels in the marketplace.
Management is monitoring the continuing impact of this devaluation and
the resulting inflationary trends.
The Securities and Exchange Commission has qualified Mexico as a highly
inflationary economy under the provisions of SFAS No. 52 - Foreign Currency
Translation. Consequently, in 1997, the financial statements of the
Mexico operation will be remeasured with the U.S. dollar as the functional
currency. Any gain or loss resulting from changes in foreign currency rates
between the peso and the U.S. dollar, as calculated in the remeasurement
process, will be recorded in the Company's statement of operations.
Trade Names and Trademarks
--------------------------
In connection with its Wal-Mart vision centers, the Company must use
the tradename "Vision Center located in Wal-Mart" and indicate that the
vision centers are operated by the Company. Vision centers in stores owned
by Wal-Mart Mexico do business under the name "Centro de Vision." The
Company also has licensed the right to use the "Gitano" and "Guy Laroche"
trademarks in its domestic vision centers pursuant to license agreements
providing for royalty payments and containing other customary terms and
conditions. The Gitano and Guy Laroche agreements expire on June 30, 1997
and December 31, 1998, respectively, and each agreement may be renewed,
subject to various conditions. Discussions concerning renewal of the
Gitano agreement and renegotiation of the Guy Laroche agreement are in
progress.
Employees
---------
As of December 28, 1996, the Company employed approximately 1,533
associates on a full-time basis and 542 associates on a part-time basis,
of whom approximately 1,847 were engaged in retail sales, 114 in laboratory
and distribution operations, and 114 in management and administration.
Apart from its Mexican employees, none of the associates employed by the
Company is covered by any collective bargaining agreements. All associates
(with the exception of home office personnel) employed in the Company's
Mexican operations are covered by collective bargaining agreements. The
Company considers its employment relations to be good, and to date the
Company has not experienced any significant difficulties in staffing its
vision centers.
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Foreign and Domestic Operations
-------------------------------
See Note 14 to the consolidated financial statements contained
elsewhere in this report for additional information regarding the
Company's foreign and domestic operations.
ITEM 2. PROPERTIES
The Company's 328 domestic vision centers in operation as of
February 3, 1997 are located in the following states:
Alabama 5 New Jersey 11
Alaska 3 New Mexico 7
Arizona 14 New York 26
California 75 North Carolina 34
Colorado 8 North Dakota 4
Connecticut 5 Oregon 9
Georgia 33 Pennsylvania 18
Hawaii 4 South Carolina 10
Kansas 6 South Dakota 1
Louisiana 1 Tennessee 1
Maryland 1 Texas 6
Massachusetts 4 Virginia 19
Minnesota 1 Washington 3
Montana 2 West Virginia 5
Nevada 7 Wyoming 1
New Hampshire 4
The Company's foreign vision centers in operation as of February 3,
1997 are located in the following countries:
Czech Republic and Slovakia 3
Mexico 18
The Company's home office is located in approximately 66,000 square feet
of space in Lawrenceville, Georgia, and is subleased from Wal-Mart through
the year 2001 (with an option to renew for approximately seven additional
years) at a monthly lease rate of approximately $17,000. The Company's
Lawrenceville headquarters also hosts a training center, the Company's
central distribution center, an anti-reflective and mirror coating facility,
and a lens laboratory.
The Company's Los Angeles laboratory is also held under lease, which
expired in January 1997. Discussions concerning an extension are in progress.
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ITEM 3. LEGAL PROCEEDINGS
The Company is not currently a party to any legal proceedings the result
of which management believes could have a material adverse effect upon its
business or financial condition. The Company is currently the defendant
in a lawsuit (Commercial Court of Paris, Case No. RG 95 108253) in France
arising out of the Company's sale of its French operations. The suit was
initiated on December 6, 1995 by Grand Optical Photoservice, S.A. ("GPS")
to block the Company's sale of its French operations to a third party. GPS
claims that, in selling its French operations to a third party, the Company
breached a letter of intent it had previously signed with GPS. By a decision
dated December 14, 1995, the trial court rejected the plaintiff's claims
and fined the plaintiff for filing a frivolous claim. The plaintiff has
filed an appeal. The Company believes that the plaintiff's claims are
without merit.
The Company received a deficiency notice (dated September 11, 1996)
from the Internal Revenue Service claiming, for the 1992 tax year, that a
deficiency in the amount of $228,531 is owed to the Internal Revenue Service,
that the Company was not entitled to a certain deduction in the amount of
$4,353,367 (relating to the exercise of certain stock options - see Note 5
to consolidated financial statements), and that the Company was subject to
the alternative minimum tax. The Company vigorously disputes these
allegations, is of the opinion that they are without merit, and has
retained counsel to contest the deficiency notice. Through its counsel,
the Company filed a petition in October 1996 in the U.S. Tax Court (Docket
No. 23670-96), contesting the deficiency notice.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the last
quarter of fiscal 1996.
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS
The Company's Common Stock is traded on the NASDAQ National Market System
under the symbol "NVAL".
The following table sets forth for the periods indicated the high and low
closing prices of the Company's Common Stock in the over-the-counter market on
the NASDAQ National Market System.
<TABLE>
<CAPTION>
Quarter Ended High Low
------------- ---- ---
<S> <C> <C>
1995 April 1 $5.125 $3.50
July 1 $5.75 $3.75
September 30 $4.375 $3.75
December 30 $4.25 $2.875
1996 March 30 $3.625 $2.50
June 29 $5.125 $3.00
September 28 $5.125 $4.00
December 28 $4.5625 $3.25
</TABLE>
As of February 3, 1997, there were approximately 700 holders of record
of the Company's Common Stock, including shares held in nominee or street
name by brokers.
It is the present intention of the Company's board of directors not
to pay dividends but rather to use the Company's cash resources for the
expansion of its operations and repayment of the Company's revolving credit
facility. Future dividend policy will depend upon the earnings and
financial condition of the Company, the Company's need for funds, and
other factors.
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ITEM 6. SELECTED FINANCIAL DATA
The following selected financial data of the Company with respect to
the consolidated financial statements for the years ended December 31,
1992, 1993, 1994, December 30, 1995 and December 28, 1996 is derived from
the Company's consolidated financial statements. The selected financial
data set forth below should be read in conjunction with the consolidated
financial statements and notes thereto included elsewhere herein. For
information on dispositions of certain business operations, see Note 13
to consolidated financial statements.
<TABLE>
<CAPTION>
Year Ended December 31, December 30, December 28,
------------------------------ ------------ ------------
1992 1993 1994 (1) 1995 (2) 1996
---- ---- -------- -------- ----
(000's except per share information and statistical data)
<S> <C> <C> <C> <C> <C>
STATEMENTS OF OPERATIONS DATA:
Net Sales $48,141 $88,340 $119,395 $145,573 $160,376
Cost of Goods Sold 21,180 41,445 53,898 67,966 76,692
------- ------- -------- -------- --------
Gross Profit 26,961 46,895 65,497 77,607 83,684
Gross Profit Percentage 56% 53% 55% 53% 52%
Selling, General, and Administrative
Expenses 24,500 48,602 63,911 74,390 76,920
Provision for Dispositions (3) -- 7,727 -- 958 --
Other Nonrecurring Charges (3) -- 2,750 -- 1,053 --
Stock Compensation Expense 39 834 -- -- --
------- ------- -------- -------- --------
Operating Income (Loss) 2,422 (13,018) 1,586 1,206 6,764
Other Income (Expense), Net (452) 154 (1,195) (2,626) (2,084)
------- ------- -------- -------- --------
Income (Loss) Before Income Taxes 1,970 (12,864) 391 (1,420) 4,680
Income Tax Benefit (Expense) (4) (710) 900 (40) (100) (1,200)
------- ------- -------- -------- --------
Net Income (Loss) $ 1,260 $(11,964) $ 351 $ (1,520) $ 3,480
======= ======== ======== ======== ========
Net Income (Loss) Per Common Share (5) $ .07 $ (.59) $ .02 $ (.07) $ .17
======= ======== ======== ======== ========
Earnings before Interest, Taxes, $ 5,628 $ (7,506) $ 9,153 $ 11,584 $ 16,816
Depreciation and Amortization
As a Percentage of Sales 11.7% -8.5% 7.7% 8.0% 10.5%
STATISTICAL DATA (UNAUDITED):
Domestic Vision Centers Open at
End of Period 128 186 261 319 320
Mexico and Eastern Europe Vision
Centers Open at End of Period 2 19 30 26 21
Average Weekly Consolidated Sales
Per Vision Center (6) $10,562 $10,224 $ 9,455 $8,685 $9,311
Average Weekly Sales Per Domestic
Vision Center (6) $10,562 $11,029 $10,067 $9,105 $9,635
Average Weekly Sales Per Vision Center
in Mexico and Eastern Europe (6) -- $ 6,801 $ 4,056 $2,874 $3,890
</TABLE>
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<TABLE>
<CAPTION>
December 31, December 30, December 28,
---------------------------------- ------------ ------------
1992 1993 1994(1) 1995(2) 1996
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working Capital $18,332 $ 6,954 $ 8,430 $14,556 $13,802
Total Assets 53,921 66,172 78,293 81,237 74,264
Long-Term Debt and Capital Lease
Obligations 1,725 15,135 30,479 38,000 26,500
Shareholders' Equity 42,665 31,577 29,613 26,326 29,906
Long-Term Debt and Lease Obligations
as a Percentage of Shareholders'
Equity 4% 48% 103% 144% 89%
</TABLE>
(1) Financial information for 1994 includes results of international
operations for the 11 months ended November 30, 1994. See Note 2 to
consolidated financial statements.
(2) Financial information for 1995 includes results of international
operations for the 12 months ended November 30, 1995. See Note 2
to consolidated financial statements.
(3) In 1995, the Company decided to dispose of its non-core business
operations, resulting in a $2 million provision. See Note 13 to
consolidated financial statements.
(4) Effective January 1, 1992, the Company elected to convert from an
S Corporation to a C Corporation for income tax reporting purposes.
(5) Net income (loss) per common share is computed based on the weighted
average number of common stock and stock equivalent shares outstanding
during the period. Except when antidilutive, options for the purchase
of common shares have been included as if exercised as of the date of
grant, using the treasury stock method.
(6) Calculated from sales from each month during the period divided by
the number of store weeks of sales during the period, excluding
stores not open a full month.
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Results of Operations
- ---------------------
The Company's results of operations in any period are significantly
affected by the number of vision centers opened and operating during such
period. Given the Company's rapid expansion to 341 vision centers at
December 28, 1996, and dispositions of significant operating units (both
domestic and foreign), period-to-period comparisons may not be meaningful
and the results of operations for historical periods may not be indicative
of future results. Results for 1995 included nonrecurring charges
approximating $2 million. (See Note 13 to consolidated financial statements.)
Effective January 1, 1995, the Company changed its year end to a more
standard 52/53 week retail calendar with the fiscal year ending on the
Saturday closest to December 31. International operations were reported
using a fiscal year ended November 30. As a result of these changes, 1994
consolidated results include the results of international operations for the
11 months ended November 30, 1994. The effect of this change was not
material. (See Note 2 to consolidated financial statements.)
Year Ended December 28, 1996 Compared to Year Ended December 30, 1995
- ---------------------------------------------------------------------
Consolidated Results in Fiscal 1996
- -----------------------------------
NET SALES. 1996 net sales increased to $160.4 million from $145.6
million for 1995, due to the net effect of the following: (a) an increase
in the number of domestic vision centers; (b) a 4% increase in comparable
sales for domestic vision centers (those open for at least one year); and
(c) a reduction in revenues resulting from the disposition and closure
of businesses in the fourth quarter 1995 and the first quarter 1996.
Consolidated average weekly net sales per vision center increased from
approximately $8,700 in 1995 to $9,300 in 1996 due primarily to the
disposition of underperforming vision centers in the Venture and Mexican
operations. The improvement in average weekly net sales for comparable
domestic stores was partially offset by a reduction in average weekly net
sales for vision centers opened in 1996.
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In the first quarter 1996, the Company implemented a new merchandising
program for spectacles. Initially, the new program served to increase the
average number of sales transactions per vision center (market share)
over the prior year, but at a lower dollar value per transaction. The
Company experienced an increase in average number of transactions per
vision center for the remainder of the year. In the latter part of 1996,
the average transaction value increased. For the year, the improvement
in sales resulting from market share increases more than offset the effect
on sales resulting from the decline in the average transaction value. The
Company expects this positive trend to continue.
Consistent with the trend experienced in 1994 and 1995, average
weekly sales volumes for new domestic vision centers opened in 1996 were
lower than vision centers opened in the previous year. The effect of
lower new store results in 1996, which had a negative impact on consolidated
average weekly sales, was offset by an increase in average weekly sales
for stores opened in 1995 and 1994.
GROSS PROFIT. Gross profit in 1996 increased to $83.7 million from
$77.6 million in 1995, primarily because of increased net sales. Gross
profit as a percentage of sales declined from 53.3% in 1995 to 52.2% in
1996. The Company maintained margins from product sales at store level,
but margins were negatively affected by a reduction in promotional
monies from vendors (because of fewer store openings) and increased
freight costs related to store inventory resets. Management expects the
gross profit percentage to be positively affected in 1997 as a result
of the transaction with Eyecare Leasing, Inc. and Stewart-Phillips, Inc.,
which closed in early January 1997. (See Note 15 to consolidated
financial statements.)
SELLING, GENERAL, AND ADMINISTRATIVE ("SG&A") EXPENSES. SG&A expenses
(which include both vision center operating expenses and home office
overhead) increased to $77 million in 1996 from $74.4 million in 1995,
reflecting the addition of new vision centers in 1996. Average weekly
store expense per vision center remained constant. As a percentage of
sales, SG&A expenses decreased from 51% in 1995 to 48% in 1996. The
decrease was attributable to comparable store sales increases achieved
during 1996 and to continued improved efficiencies in the operation of
administrative offices.
OTHER INCOME (EXPENSE). Other expense decreased from $2.6 million
in 1995 to $2.1 million in 1996 due to a decrease in average borrowings
by the Company under its credit facility, in addition to a reduction in
the effective interest rate paid by the Company in 1996 versus 1995.
Management expects interest expense to increase in 1997 as a result of the
transaction with Eyecare Leasing, Inc. and Stewart-Phillips, Inc., which
closed in early January 1997. (See Note 15 to consolidated financial
statements.)
Page 16 of 58<PAGE>
<PAGE>
PROVISION FOR INCOME TAXES. The effective income tax rate in 1996
is 26%. In light of the sale of the unprofitable Venture domestic operations
in the first quarter of 1996, the Company reassessed the realizability of
domestic net operating loss carryforwards and accordingly reduced the
valuation allowance in 1996. Given current circumstances, the Company does
not expect to further reduce the allowance in 1997; consequently, the
effective income tax rate in 1997 is expected to be between 38% and 40%.
NET INCOME. In 1996, the Company achieved net income of $3.5 million,
or $0.17 per share, as compared to a net loss of $1.5 million, or $0.07
per share in 1995. Results of operations for 1995 included charges
approximating $2 million. (See Note 13 to consolidated financial
statements.)
International Results in Fiscal 1996
- ------------------------------------
At November 30, 1996, the Company operated 21 vision centers
internationally versus 36 vision centers at November 30, 1995. International
locations included 18 in Mexico and two and one in the Czech Republic
and Slovakia, respectively. Financial results for international operations
during 1996 are based on the 12 months ended November 30 (see Note 2 to
consolidated financial statements).
NET INTERNATIONAL SALES. Net international sales for the 12 months
ended November 30, 1996 were $3.8 million, a decrease from $8.9 million
during the 12 months ended November 30, 1995. Such decrease was principally
due to closure of vision centers in France and in Mexico.
GROSS PROFIT. Gross profit decreased to $1.6 million from $4.4 million
in 1995, primarily the result of the decreased sales. Gross profit as a
percentage of sales declined from 49% in 1995 to 43% in 1996, due primarily
to the effect of selling the French operation, which realized a higher gross
profit percentage than the average for the international business.
SELLING, GENERAL, AND ADMINISTRATIVE EXPENSES EXCLUDING INTERCOMPANY
ALLOCATIONS. SG&A expense decreased from $5.8 million for the 12 months
ended 1995 to $2.0 million for the 12 months ended November 30, 1996, as
a result of the dispositions mentioned above. SG&A expense as a percentage
of sales decreased to 53% for the 12 months ended November 30,
1996 from 65% of sales for the 12 months ended November 30, 1995. Reductions
in selected expenses at store level coupled with favorable leveraging of
administrative expense reduced SG&A expense as a percentage of sales.
OPERATING LOSS. The operating loss for international operations does not
include allocated corporate overhead, interest or taxes. International
operations generated a net operating loss of $612,000 in the 12 months ended
November 30, 1996, as opposed to net operating loss of $1.3 million in the
12 months ended November 30, 1995. Mexican operations generated an operating
loss of $294,000 in the 12 months ended November 30, 1996.
Page 17 of 58<PAGE>
<PAGE>
Year Ended December 30, 1995 Compared to Year Ended December 31, 1994
- ---------------------------------------------------------------------
GENERAL. The Company posted a net loss of $0.07 per share in 1995 on
sales of $145.6 million compared to net income of $0.02 per share in 1994 on
sales of $119.4 million. Results for 1995 included provisions aggregating
$2.0 million for disposition of assets and nonrecurring charges related to
the Company's operations in Venture stores, Eastern Europe, and closure of
ten locations in Mexico, along with a write-down of certain assets obtained
in foreclosure proceedings. (See Note 13 to consolidated financial
statements.) Excluding such provisions, 1995 operating income was $3.2
million, an increase of 100% from operating income of $1.6 million in 1994.
Operations in Venture vision centers and vision centers in France generated
approximately $2.6 million in operating losses in 1995, exclusive of
provisions for disposition of these operations.
Consolidated Results in Fiscal 1995
- -----------------------------------
NET SALES. 1995 net sales increased to $145.6 million from $119.4
million for calendar 1994, primarily because of the increase in the number
of vision centers from 298 as of December 31, 1994 to 355 at December 30,
1995. Excluding Venture vision centers, comparable sales for domestic
vision centers (those open for at least one year) were down 0.5% for 1995.
Consolidated average weekly net sales per vision center decreased from
$9,500 to $8,700 because of lower sales in new vision centers and in Venture
and Mexico vision centers. In 1994 and particularly in 1995, new domestic
vision centers (excluding those in Venture stores) had sales volumes
significantly lower than vision centers opened in the previous year.
GROSS PROFIT. Gross profit in 1995 increased to $77.6 million from
$65.5 million in 1994, primarily because of increased net sales.
Efficiencies were achieved in laboratory operations and merchandising;
however, the value of such efficiencies was more than offset by increased
license fees payable to Wal-Mart. Gross profit percentage accordingly
decreased from 55% in 1994 to 53% in 1995.
SELLING, GENERAL, AND ADMINISTRATIVE ("SG&A") EXPENSES. SG&A expenses
(which include both vision center operating expenses and home office overhead)
increased to $74.4 million in 1995 from $63.9 million in 1994, reflecting
additional vision centers in 1995. Average weekly store expense per vision
center remained constant. As a percentage of sales, SG&A expenses decreased
to 51% in 1995 from 54% in 1994 because of favorable leveraging of home
office and vision center overhead resulting from increased sales and improved
systems.
Page 18 of 58<PAGE>
<PAGE>
OTHER INCOME (EXPENSE). Other expense increased from $1.2 million in
1994 to $2.6 million in 1995, due to an increase in interest expense. As a
result of the Company's increased borrowings in 1995, coupled with an
increase in rates, interest expense on the Company's credit revolver
increased to $3.0 million in 1995 from $1.4 million in 1994.
NET LOSS. In 1995, the Company incurred a net loss of $1.5 million,
or $0.07 per share, as compared to net income of $351,000, or $0.02 per
share, in 1994.
International Results in Fiscal 1995
- ------------------------------------
At November 30, 1995, the Company operated 36 vision centers
internationally versus 37 vision centers at November 30, 1994.
International locations included 23 in Mexico, ten in France, two and one
in the Czech Republic and Slovakia, respectively, at November 30, 1995.
Financial results for international operations during 1995 and 1994 are
based on the 12 months and 11 months respectively ended November 30
(see Note 2 to consolidated financial statements).
NET INTERNATIONAL SALES. Net international sales for the 12 months
ended November 30, 1995 were $8.9 million, an increase from $7.3 million
during the 11 months ended November 30, 1994. Such increase was principally
due to the increased number of foreign vision centers. Average weekly
sales were $5,100 in 1995 versus $4,900 in 1994.
GROSS PROFIT. Gross profit increased to $4.4 million from $3.4 million
in 1994, primarily the result of increased sales. Gross profit percentage
was 49% for 1995 versus 47% for 1994 due for the most part to improved gross
margin percentage in France and Eastern Europe offset by reduced gross
margin percentage in Mexico.
SELLING, GENERAL, AND ADMINISTRATIVE EXPENSES EXCLUDING INTERCOMPANY
ALLOCATIONS. SG&A expense was $5.8 million or 65% of sales for the 12
months ended November 30, 1995, an increase from $5.9 million or 80% of
sales for the 11 months ended November 30, 1994. Increased sales and
favorable leveraging of home office expense reduced SG&A expense as a
percentage of sales.
OPERATING LOSS. The operating loss for international operations does
not include allocated corporate overhead, interest or taxes. International
operations generated a net operating loss of $1.3 million (inclusive of a
net gain of $145,000 relating to the sale of the Company's French
operations offset by closure of ten locations in Mexico) in the 12 months
ended November 30, 1995 as opposed to an operating loss of $2.5 million
in 1994. The Mexican operations generated an operating loss of $1.3 million
(inclusive of a charge of $346,000 relating to the closure of ten locations)
in the 12 months ended November 30, 1995 versus an operating loss of $1.3
million during the 11-month period ended November 30, 1994.
Page 19 of 58<PAGE>
<PAGE>
Inflation
- ---------
Although the Company cannot determine the precise effects of inflation,
it does not believe inflation has had a material effect on its domestic
sales or results of operations. The Company cannot determine whether
inflation will have a material long-term effect on its sales or results of
operations. The currency devaluation in Mexico, which began in late 1994,
has increased inflation and thereby may cause consumers to reduce
discretionary purchases such as eyeglasses.
The Securities and Exchange Commission has qualified Mexico as a highly
inflationary economy under the provisions of SFAS No. 52 - Foreign Currency
Translation. Consequently, in 1997, the financial statements of the Mexico
operation will be remeasured with the U.S. dollar as the functional currency.
Any gain or loss resulting from changes in foreign currency rates between
the peso and the U.S. dollar, as calculated in the remeasurement process,
will be recorded in the Company's statement of operations. The Company
is exploring options to reduce this financial risk.
Liquidity and Capital Resources
- -------------------------------
In 1994, the Company entered into a three-year $45 million revolving
credit facility syndicated by a major regional bank. The Company's credit
facility contains, among other covenants, a material adverse change clause,
certain minimum net worth requirements, as well as a covenant which limits
the ability of the Company to expand outside of its domestic Wal-Mart vision
centers. In December of 1996, the facility was extended until May 1998.
As of December 28, 1996, the Company had borrowed $26.5 million under
its credit facility versus outstanding borrowings of $38 million as of
December 31, 1996.
During 1996, store openings and other capital requirements were funded
through internal cash flow. Proceeds from the sale of the French business
and current year earnings were the primary factors increasing cash flow
during 1996, which allowed the Company to reduce outstanding borrowings.
In connection with a transaction which closed in January 1997, the
Company incurred long-term debt of approximately $4.1 million. (See
Note 15 to consolidated financial statements.) This debt is being ratably
amortized over a twelve-year period.
In December of 1994, the Company paid $173,000 in connection with an
agreement to cap certain interest rates under its credit facility up to
$15 million. The agreement caps LIBOR at 7.5% per annum unless
the LIBOR rate is above 9% per annum in which case the protected rate
is 9% per annum. The cap agreement expires February 1997. In 1995,
the Company entered into a two-year interest rate swap agreement (with a
term expiring on February 20, 1998) which effectively converts underlying
variable rate debt based on LIBOR to fixed rate debt. The notional
principal amount is $20 million, with an effective fixed rate of 7.305%.
Page 20 of 58<PAGE>
<PAGE>
As of February 3, 1997, the Company plans to open approximately 40
domestic and approximately 6 Mexican vision centers during the remainder
of 1997. Average costs for domestic vision centers have approximated
$145,000 for fixed assets, $35,000 for inventory, and $20,000 for pre-opening
expenses. Capital for leasehold improvements and start-up costs in Mexican
vision centers should approximate $31,000 per vision center.
At February 1, 1997, the Company had borrowed $25.5 million under its
credit facility, as amended. In 1997, the Company expects to fund expansion
from internal cash flow and to further reduce borrowings under its credit
facility. The Company anticipates that internally generated funds, as well
as funds available under the Company's revolving credit facility, will be
sufficient to fund the ongoing operating costs associated with its current
vision centers and vision centers scheduled to be opened during 1997 and 1998.
Risk Factors
- ------------
Any expectations, beliefs, and other non-historical statements contained
in this 10-K are forward looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995 (the "Act"). Actual results may
differ materially due to a variety of factors that affect the Company. Such
factors are described in a cautionary statement for purposes of the "Safe
Harbor" provisions of the Act, contained in the Company's Current Report on
Form 8-K filed with the Securities and Exchange Commission on January 17,
1997.
Recent Accounting Pronouncements
- --------------------------------
Effective in 1996, the Company adopted Statement of Financial Accounting
Standards No. 121 ("FAS 121") "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed Of" which establishes
standards for determining when impairment losses on long-lived assets have
occurred and how impairment losses should be measured. The financial
statement impact of adopting FAS 121 is not material.
Effective in 1996, the Company adopted the disclosure option of
Statement of Financial Accounting Standards No. 123 ("FAS 123") "Accounting
for Stock-Based Compensation." FAS 123 requires that companies which
do not choose to account for stock-based compensation as prescribed by
the statement, shall disclose the pro forma effects on earnings and
earnings per share as if FAS 123 had been adopted. Additionally,
certain other disclosures are required with respect to stock compensation
and the assumptions used to determine the pro forma effects of FAS 123.
See Note 5 of Notes to Consolidated Financial Statements for the FAS 123
disclosures, as described.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Consolidated Financial Statements of the Company are included as a
separate section of this Report commencing on page 30.
ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
There have been no disagreements with accountants on accounting and
financial disclosure.
Page 21 of 58<PAGE>
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The section entitled "Election of Directors" contained in the definitive
proxy statement to holders of the Company's Common Stock in connection with
the solicitation of proxies to be used in voting at the 1997 Annual Meeting
of Shareholders is hereby incorporated by reference for the purpose of
providing information about the identification of directors.
ITEM 11. EXECUTIVE COMPENSATION
The section entitled "Compensation of Executive Officers" contained in
the definitive proxy statement to holders of the Company's Common Stock in
connection with the solicitation of proxies to be used in voting at the
1997 Annual Meeting of Shareholders is hereby incorporated by reference
for the purpose of providing information about executive compensation.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The section entitled "Common Stock Ownership of Certain Beneficial
Owners and Management" contained in the definitive proxy statement to
holders of the Company's Common Stock in connection with the solicitation
of proxies to be used in voting at the 1997 Annual Meeting of Shareholders
is hereby incorporated by reference for the purpose of providing information
about security ownership of certain beneficial owners and management.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The section entitled "Compensation Committee Interlocks and Insider
Participation" contained in the definitive proxy statement to holders of
the Company's Common Stock in connection with the solicitation of proxies
to be used in voting at the 1997 Annual Meeting of Shareholders is hereby
incorporated by reference for the purpose of providing information about
transactions with management and others and certain business relationships.
Page 22 of 58<PAGE>
<PAGE>
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) (1) and (2) The Consolidated Financial Statements and Schedule of
the Company and its subsidiaries are filed herewith as a separate section
of this Report commencing on page 30.
(3) The following exhibits are filed herewith or incorporated by
reference:
Exhibit
Number
3.1a -- Amended and Restated Articles of Incorporation of the
Company.
3.2a -- Amended and Restated By-Laws of the Company.
4.1n -- Form of Common Stock Certificate.
4.2o -- Amended and Restated Articles of Incorporation of the
Company.
4.5n -- Rights Agreement dated as of January 17, 1997 between
the Company and Wachovia Bank of North Carolina, N.A.
10.7a -- Sublease Agreement, dated December 16, 1991, by and
between Wal-Mart Stores, Inc. and the Company.
10.10a++ -- Employment Agreement of Edward G. Weiner, dated as of
March 2, 1992.
10.15b++ -- Non-Employee Director Stock Option Plan, dated as of
July 13, 1992.
10.17c -- Form indemnification agreement for directors and
executive officers of the Company (attached to form
agreement is schedule identifying dates and signatories
to such agreements).
Page 23 of 58<PAGE>
<PAGE>
Exhibit
Number
10.24d++ -- Employment Agreement of Sandra M. Buffa, dated as of
June 15, 1993.
10.34e -- Vision Center Master License Agreement, dated as of
June 16, 1994, by and between Wal-Mart Stores, Inc. and
the Company. [Portions of Exhibit 10.34 have been
omitted pursuant to an order for confidential treatment
granted by the Commission. The omitted portions have
been filed separately with the Commission.]
10.36f -- $45,000,000 Revolving Credit Facility, dated as of
November 15, 1994, among the Company, Wachovia Bank of
Georgia, N.A., Trust Company Bank, and Bank South, N.A.
10.36.1f -- First Amendment to Credit Agreement, dated as of
February 22, 1995, among the Company, Wachovia Bank of
Georgia, N.A., Trust Company Bank, and Bank South, N.A.
10.36.2g -- Second Amendment to Credit Agreement, dated as of
October 4, 1995, among the Company, Wachovia Bank of
Georgia, N.A., Trust Company Bank, and Bank South, N.A.
10.36.3g -- Third Amendment to Credit Agreement, dated as of
November 3, 1995, among the Company, Wachovia Bank of
Georgia, N.A., SunTrust Bank Atlanta (formerly Trust
Company Bank), and Bank South, N.A.
10.36.4h -- Fourth Amendment to Credit Agreement, dated as of
February 15, 1996, among the Company, Wachovia Bank of
Georgia, N.A., SunTrust Bank, Atlanta (formerly Trust
Company Bank), and Nationsbank, N.A. (South) (formerly
known as Bank South, N.A.).
10.36.5** -- Fifth Amendment to Credit Agreement, dated as of
December 12, 1996, among the Company, Wachovia Bank of
Georgia, N.A., SunTrust Bank, Atlanta, and NationsBank,
N.A.
Page 24 of 58<PAGE>
<PAGE>
Exhibit
Number
10.37f++ -- Split Dollar Life Insurance Agreement, dated as of
November 3, 1994, among the Company, A. Kimbrough Davis,
as Trustee, and James W. Krause.
10.39f++ -- NVAL 1995 Level IV Management Incentive Plan
10.40f++ -- Letter Agreement between the Company and D. Michael
Lampman, dated as of October 19, 1993.
10.41i++ -- Letter Agreement between the Company and Edward G.
Weiner, dated as of May 16, 1995.
10.42j -- Purchase Agreement dated as of December 12, 1995 by and
between International Vision Associates, Ltd. and
Carrefour France (includes (a) list identifying omitted
schedules and (b) agreement to furnish supplementally a
copy of any omitted schedule to the Commission upon
request).
10.43j -- Agreement for the Purchase and Sale of Assets dated as of
September 1, 1995 by and among National Vision
Associates, Ltd., Optical Ventures, Inc. and Uhlemann
Optical Company (includes (a) list identifying omitted
schedules and (b) agreement to furnish supplementally
a copy of any omitted schedule to the Commission upon
request).
10.44j -- Agreement for the Purchase and Sale of Assets dated as of
December 26, 1995 by and between National Vision
Associates, Ltd. and Budget Opticals of America, Inc.
(includes (a) list identifying omitted schedules and
(b) agreement to furnish supplementally a copy of any
omitted schedule to the Commission upon request).
10.45j -- Agreement for the Purchase and Sale of Assets dated
as of January 10, 1996 by and between National Vision
Associates, Ltd. and Comprehensive Eyecare, Ltd.
(includes (a) list identifying omitted schedules and
(b) agreement to furnish supplementally a copy of any
omitted schedule to the Commission upon request).
Page 25 of 58<PAGE>
<PAGE>
Exhibit
Number
10.46h -- Agreement dated as of November 23, 1995 by and between
Mexican Vision Associates Operadora, S. de R.L. de C.V.
and Wal-Mart de Mexico, S.A. de C.V. in original Spanish
and an uncertified English translation. [Portions of
Exhibit 10.46 have been omitted pursuant to a request
for confidential treatment filed with the Commission.
The omitted portions have been filed separately with
the Commission.]
10.47k++ -- Executive Relocation Policy
10.48l++ -- Restated Stock Option and Incentive Award Plan
10.49**++ -- Change in Control Agreement, dated November 6, 1996,
between the Company and the executive officers listed
on the attached schedule.
10.50** -- Agreement for Assignment of License Interests and Related
Matters dated as of November 1, 1996 by and among the
Company and other parties (includes (a) list identifying
omitted schedules and (b) agreement to furnish
supplementally a copy of any omitted schedule to the
Commission upon request).
11** -- Statement Re: Computation of Net Income (Loss) Per Share.
21** -- Subsidiaries of the Registrant
23** -- Consent by Arthur Andersen LLP
27** -- Financial Data Schedule
99.1o -- Press Release dated January 17, 1997.
a Incorporated by reference to the Company's Registration Statement
on Form S-1, registration number 33-46645, filed with the Commission
on March 25, 1992, and amendments thereto.
b Incorporated by reference to the Company's Registration Statement on
Form S-1, registration number 33-52766, filed with the Commission
on October 2, 1992, and amendments thereto.
c Incorporated by reference to the Company's Form 10-K for the fiscal
year ended December 31, 1992.
Page 26 of 58<PAGE>
<PAGE>
Exhibit
Number
d Incorporated by reference to the Company's Form 10-Q for the
quarterly period ended September 30, 1993.
e Incorporated by reference to the Company's Form 10-Q for the
quarterly period ended September 30, 1994.
f Incorporated by reference to the Company's Form 10-K for the
fiscal year ended December 31, 1994.
g Incorporated by reference to the Company's Form 10-Q for the
quarterly period ended September 30, 1995.
h Incorporated by reference to the Company's Form 10-K for the
fiscal year ended December 30, 1995.
i Incorporated by reference to the Company's Form 10-Q for the
quarterly period ended July 1, 1995.
j Incorporated by reference to the Company's Form 8-K filed on
January 16, 1996.
k Incorporated by reference to the Company's Form 10-Q for the
quarterly period ended March 30, 1996.
l Incorporated by reference to the Company's Form 10-Q for the
quarterly period ended June 29, 1996.
m Incorporated by reference to the Company's Registration Statement
on Form 8-A filed with the Commission on January 17, 1997.
n Incorporated by reference to the Company's Registration Statement
on Form 8-A (there designated as Exhibit 10.1) filed with the
Commission on January 17, 1997.
o Incorporated by reference to the Company's Form 8-K filed with the
Commission on January 17, 1997.
** Filed with this Form 10-K.
Page 27 of 58<PAGE>
<PAGE>
Exhibit
Number
++ Management contract or compensatory plan or arrangement in which
a director or named executive officer participates.
(b) No reports on Form 8-K have been filed during October,
November, or December, 1996.
Page 28 of 58<PAGE>
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
NATIONAL VISION ASSOCIATES, LTD.
By: /s/James W. Krause
James W. Krause
Chairman of the Board,
President and Chief Executive
Officer and Director
Date: February 12, 1997
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant on February 12, 1997, in the capacities indicated.
Signature Title
/s/
_____________________________
James W. Krause Chairman of the Board, President
and Chief Executive Officer and Director
/s/
_____________________________
Sandra M. Buffa Senior Vice President, Finance and
Treasurer, and Director (Principal
Financial Officer)
/s/
_____________________________
Angus C. Morrison Vice President, Corporate Controller
(Principal Accounting Officer)
/s/
_____________________________
David I. Fuente Director
/s/
_____________________________
Ronald J. Green Director
/s/
_____________________________
Campbell B. Lanier, III Director
/s/
_____________________________
J. Smith Lanier, II Director
Page 29 of 58<PAGE>
<PAGE>
NATIONAL VISION ASSOCIATES, LTD. AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULE
AS OF DECEMBER 31, 1994, DECEMBER 30, 1995 AND DECEMBER 28, 1996
TOGETHER WITH
AUDITORS' REPORT
Page 30 of 58<PAGE>
<PAGE>
NATIONAL VISION ASSOCIATES, LTD. AND SUBSIDIARIES
INDEX TO FINANCIAL STATEMENTS AND SCHEDULE
The following consolidated financial statements and schedule of the
Registrant and its subsidiaries are submitted herewith in response to
Item 8 and Item 14(a)1 and to Item 14(a)2, respectively.
Page
____
Report of Independent Public Accountants 32
Consolidated Balance Sheets as of December 30, 1995 and
December 28, 1996 33
Consolidated Statements of Operations for the
Years Ended December 31, 1994, December 30, 1995 and
December 28, 1996 34
Consolidated Statements of Shareholders' Equity for
the Years Ended December 31, 1994, December 30, 1995 and
December 28, 1996 35
Consolidated Statements of Cash Flows for the Years Ended
December 31, 1994, December 30, 1995 and December 28, 1996 36
Notes to Consolidated Financial Statements and Schedule 37
Schedule II, Valuation and Qualifying Accounts 58
All other schedules for which provision is made in the applicable
accounting regulations of the Securities and Exchange Commission are not
required under the related instructions, are inapplicable, or have been
disclosed in the notes to consolidated financial statements and,
therefore, have been omitted.
Page 31 of 58<PAGE>
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders of National Vision
Associates, Ltd. and Subsidiaries:
We have audited the accompanying consolidated balance sheets of
NATIONAL VISION ASSOCIATES, LTD. (a Georgia corporation) AND SUBSIDIARIES
as of December 30, 1995 and December 28, 1996 and the related consolidated
statements of operations, shareholders' equity, and cash flows for the
years ended December 31, 1994, December 30, 1995 and December 28, 1996.
These financial statements and the schedule referred to below are the
responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements and schedule based on our
audits.
We conducted our audits 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 audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of National
Vision Associates, Ltd. and subsidiaries as of December 30, 1995 and
December 28, 1996 and the results of their operations and their cash
flows for the years ended December 31, 1994, December 30, 1995 and
December 28, 1996 in conformity with generally accepted accounting
principles.
Our audits were made for the purpose of forming an opinion on the
basic financial statements taken as a whole. The schedule listed in the
index to consolidated financial statements is presented for purposes of
complying with the Securities and Exchange Commission's rules and is
not part of the basic financial statements. This schedule has been
subjected to the auditing procedures applied in the audit of the basic
financial statements and, in our opinion, fairly states in all material
respects the financial data required to be set forth therein in relation
to the basic financial statements taken as a whole.
ARTHUR ANDERSEN LLP
Atlanta, Georgia
February 10, 1997
Page 32 of 58<PAGE>
<PAGE>
<TABLE>
<CAPTION>
NATIONAL VISION ASSOCIATES, LTD. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 30, 1995 and December 28, 1996
(000's except share information)
1995 1996
____ ____
ASSETS
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 1,307 $ 1,110
Accounts receivable (net of allowance: 1995 - $339; 1996 - $353) 2,674 4,164
Receivable from sale of French operations 3,774
Inventories 21,376 23,970
Store preopening costs (net of accumulated amortization: 1995 - $755; 1996 - $605) 880 240
Assets held for sale 445
Other current assets 1,011 944
------- -------
Total current assets 31,467 30,428
------- -------
PROPERTY AND EQUIPMENT:
Equipment 37,038 38,573
Furniture and fixtures 16,283 17,136
Leasehold improvements 12,615 13,178
Construction in progress 2,266 1,669
------- -------
68,202 70,556
Less accumulated depreciation (19,155) (27,206)
------- -------
Net property and equipment 49,047 43,350
------- -------
ORGANIZATION COSTS (net of accumulated amortization: 1995 - $529; 1996 - $503) 182 108
------- -------
OTHER ASSETS AND DEFERRED COSTS (net of accumulated amortization:
1995 - $190; 1996 - $226) 541 378
_______ _______
$81,237 $74,264
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 8,537 $ 8,283
Accrued expenses and other current liabilities 7,894 8,343
Current portion of long-term debt and capital lease obligations 158
Current portion of capital lease obligations due to related parties 322
------- -------
Total current liabilities 16,911 16,626
------- -------
LONG-TERM DEBT, less current portion 38,000 26,500
------- -------
Deferred Income Tax Liabilities 1,232
------- -------
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY:
Preferred stock, $1 par value; 5,000,000 shares authorized, none issued -- --
Common stock, $.01 par value; 100,000,000 shares authorized,
20,586,505 and 20,644,752 shares issued and outstanding as
of December 30, 1995 and December 28, 1996, respectively 206 206
Additional paid-in capital 42,147 42,166
Retained deficit (11,873) (8,393)
Cumulative foreign currency exchange rate translation (4,154) (4,073)
------- -------
Total shareholders' equity 26,326 29,906
------- -------
$81,237 $74,264
======= =======
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
Page 33 of 58<PAGE>
<PAGE>
<TABLE>
<CAPTION>
NATIONAL VISION ASSOCIATES, LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Years Ended December 31, 1994, December 30, 1995 and December 28, 1996
(000's except per share information)
1994 1995 1996
---- ---- ----
<S> <C> <C> <C>
NET SALES $119,395 $145,573 $160,376
COST OF GOODS SOLD 53,898 67,966 76,692
-------- -------- --------
GROSS PROFIT 65,497 77,607 83,684
SELLING, GENERAL, AND
ADMINISTRATIVE EXPENSES 63,911 74,390 76,920
PROVISION FOR DISPOSITION OF
ASSETS 958
OTHER NONRECURRING CHARGES 1,053
-------- -------- --------
OPERATING INCOME 1,586 1,206 6,764
-------- -------- --------
OTHER EXPENSE, NET 1,195 2,626 2,084
-------- -------- --------
INCOME (LOSS) BEFORE INCOME TAXES 391 (1,420) 4,680
PROVISION FOR INCOME TAXES 40 100 1,200
-------- -------- --------
NET INCOME (LOSS) $ 351 $ (1,520) $ 3,480
======== ======== ========
NET INCOME (LOSS) PER COMMON SHARE $ .02 $ (.07) $ .17
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
Page 34 of 58<PAGE>
<PAGE>
<TABLE>
<CAPTION>
NATIONAL VISION ASSOCIATES, LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
For the Years Ended December 31, 1994, December 30, 1995, and December 28, 1996
(000's except share information)
Additional Retained Cumulative
Common Stock Paid-In Earnings Translation
Shares Amount Capital (Deficit) Adjustments Total
------ ------ ---------- --------- ----------- -----
<S> <C> <C> <C> <C> <C> <C>
BALANCE, December 31, 1994 20,510,402 $205 $42,133 $(10,353) $(2,372) $29,613
Exercise of stock options 76,103 1 14 15
Foreign Currency Exchange Rate Translation (1,782) (1,782)
Net Loss (1,520) (1,520)
---------- ---- ------- -------- ------- -------
BALANCE, December 30, 1995 20,586,505 206 42,147 (11,873) (4,154) 26,326
Exercise of stock options 58,247 19 19
Foreign Currency Exchange Rate Translation 81 81
Net Income 3,480 3,480
---------- ---- ------- -------- ------- -------
BALANCE, December 28, 1996 20,644,752 $206 $42,166 $ (8,393) $(4,073) $29,906
========== ==== ======= ======== ======= =======
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
Page 35 of 58<PAGE>
<PAGE>
<TABLE>
<CAPTION>
NATIONAL VISION ASSOCIATES, LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Years Ended December 31, 1994, December 30, 1995 and December 28, 1996
(000's)
1994 1995 1996
---- ---- ----
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 351 $ (1,520) $ 3,480
-------- ------- --------
Adjustments to reconcile net income (loss) to
net cash provided by (used in) operating activities:
Provision for disposition of assets 958
Provision for other nonrecurring charges 1,053
Depreciation and amortization 7,567 10,378 10,054
Provision for Deferred Income Tax Expense 1,002
Changes in assets and liabilities:
Receivables 408 (701) 2,224
Inventories (1,388) (2,467) (2,594)
Store preopening costs (1,657) (1,288) (657)
Other current assets 104 (34) 68
Accounts payable, accrued expenses, and other
current liabilities (1,259) (88) 200
-------- ------- ---------
Total adjustments 3,775 7,811 10,297
-------- ------- ---------
Net cash provided by operating activities 4,126 6,291 13,777
-------- ------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (15,963) (13,175) (2,713)
Organization costs 226 (18) (190)
Change in other assets (1,017) 47 579
Change in other liabilities 230
-------- ------- ---------
Net cash (used in) investing activities (16,754) (13,146) (2,094)
-------- -------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings (repayment) on bank line of credit 16,000 8,000 (11,500)
Net repayment on long-term debt and capital leases (659) (471) (480)
Net proceeds from issuance of common stock 57 15 19
-------- -------- ---------
Net cash provided by (used in) financing activities 15,398 7,544 (11,961)
-------- -------- ---------
Effect of foreign currency exchange rate changes (2,372) (1,782) 81
-------- -------- ---------
NET INCREASE (DECREASE) IN CASH 398 (1,093) (197)
CASH, beginning of year 2,002 2,400 1,307
-------- -------- ---------
CASH, end of year $ 2,400 $ 1,307 $ 1,110
======== ======== =========
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
Page 36 of 58<PAGE>
<PAGE>
NATIONAL VISION ASSOCIATES, LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULE
December 31, 1994, December 30, 1995 and December 28, 1996
1. ORGANIZATION AND OPERATIONS
National Vision Associates, Ltd. (the "Company") is engaged in the
retail sale of optical goods and services as a licensee operating within
mass merchandise department stores. The Company is largely dependent on
Wal-Mart Stores, Inc. ("Wal-Mart") for continued operation of current
vision centers and expansion with new vision centers (Note 3).
2. SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The consolidated financial statements include the accounts of the
Company and its subsidiaries. All significant intercompany balances and
transactions have been eliminated in consolidation. Effective
January 1, 1995, the Company changed its year end to a 52/53 week retail
calendar with the fiscal year ending on the Saturday closest to December 31.
Pursuant to such calendar, financial information for each of 1995 and 1996
is presented for the 52-week period ended December 30 and December 28,
respectively. Financial information for 1994 is presented as previously
reported for the year ended December 31. Due to various statutory and
other considerations, international operations were not changed to this
52/53 week calendar. To allow for more timely consolidation and reporting,
international operations are reported beginning with fiscal 1994 using a
fiscal year ending November 30. As a result of these changes, consolidated
results include the results of international operations for the 11, 12,
and 12 months ended November 30, 1994, 1995, and 1996, respectively. For
December 1994, international operations reported a net loss of approximately
$170,000. Certain amounts in the December 31, 1994 and December 30, 1995
consolidated financial statements have been reclassified to conform to the
December 28, 1996 presentation.
Revenue Recognition
The Company recognizes revenues and the related costs from retail
sales when at least 50% of the payment has been received.
Cash and Cash Equivalents
The Company considers cash on hand, short-term cash investments, and
checks that have not been processed by financial institutions to be cash
and cash equivalents. The aggregate amount of outstanding checks not
processed at December 28, 1996 was $440,000. The Company's policy
is to maintain uninvested cash at minimal levels. Cash includes cash
equivalents which represent highly liquid investments with a maturity of
one month or less. The carrying amount approximates fair value. The
Company restricts investment of temporary cash investments to financial
institutions with high credit standing.
Page 37 of 58<PAGE>
<PAGE>
Inventories
Inventories are valued at the lower of weighted average cost or
market. Market represents the net realizable value.
Store Preopening Costs
Preopening costs which are directly associated with the opening of
new vision centers are capitalized and amortized using the straight-line
method over 12 months beginning with the commencement of each vision center's
operations. The average cost capitalized per vision center approximated
$23,000.
Property and Equipment
Property and equipment are stated at cost. For financial reporting
purposes, depreciation is computed using the straight-line method over
the assets' estimated useful lives or terms of the related leases,
whichever is shorter. Accelerated depreciation methods are used for
income tax reporting purposes. For financial reporting purposes, the
useful lives used for computation of depreciation range from five to ten
years for equipment, from three to nine years for furniture and fixtures,
from three to six years for hardware and software related to information
systems processing, and nine years for leasehold improvements. At the
time property and equipment are retired, the cost and related accumulated
depreciation are removed from the accounts and any gain or loss is credited
or charged to income. Maintenance and repairs are charged to expense as
incurred. Replacements and improvements are capitalized. Assets held
for sale is comprised of property and equipment which are valued at the
lower of carrying amount or net realizable value.
Balance Sheet Financial Instruments: Fair Values
The carrying amount reported in the consolidated balance sheets for
cash, accounts receivable, accounts payable and short-term debt approximates
fair value because of the immediate or short-term maturity of these financial
instruments. The carrying amount reported for long-term debt approximates
fair value because the underlying instrument is a variable rate note that
reprices frequently. The fair value of the Company's fixed interest rate
hedge agreement is based on estimates using standard pricing models that take
into consideration current interest rate market conditions supplied by
independent financial institutions.
Financial instruments which potentially subject the Company to
concentrations of credit risk consist principally of trade accounts
receivable. The risk is limited due to the large number of individuals
and entities comprising the Company's customer base and their dispersion
across many different industries and geographies.
Page 38 of 58<PAGE>
<PAGE>
Income Taxes
The Company accounts for income taxes as defined in Statement of
Financial Accounting Standards No. 109 ("SFAS No. 109"), "Accounting for
Income Taxes." Deferred income taxes are recorded using enacted tax laws
and rates for the years in which the taxes are expected to be paid. Deferred
income taxes are provided for depreciation, store preopening costs,
organization costs, inventory basis differences, and accrued expenses where
there is a temporary difference in recording such items for financial
reporting and income tax reporting purposes.
Organization Costs
Organization costs of the Company and subsidiaries have been
capitalized and are being amortized on a straight-line basis over a
five-year period.
Advertising and Promotion Expense
The Company accounts for advertising costs in accordance with the
American Institute of Certified Public Accountants Statement of Position
No. 93-7 "Reporting on Advertising Costs." Production costs of future
media advertising and related promotion campaigns are deferred until
the advertising events occur. All other advertising and promotion
costs are expensed when incurred.
Other Income and Expense
Other income and expense represents net financing costs associated
with the Company's financing activities, including interest costs on
borrowings under the revolving credit facility, amortization of
interest rate hedge and swap agreements, purchase discounts on invoice
payments, interest income on cash investments and realized exchange
gains or losses resulting from foreign currency transactions.
Foreign Currency Translation
The financial statements of foreign subsidiaries are translated
into U.S. dollars in accordance with Statement of Financial Accounting
Standards No. 52 ("SFAS No. 52"). Translation adjustments, which result
from the process of translating foreign financial statements into U.S.
dollars, are accumulated as a separate component of shareholders' equity.
The Securities and Exchange Commission has qualified Mexico as a highly
inflationary economy under the provisions of SFAS No. 52 for reporting periods
starting in 1997. In 1997, the financial statements of the Mexico operation
will be remeasured with the U.S. dollar as the functional currency. Any gain
or loss will be recorded in the Company's statement of operations.
Use of 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 those
estimates.
Page 39 of 58<PAGE>
<PAGE>
3. WAL-MART AND VENTURE MASTER LICENSE AGREEMENTS
Wal-Mart Agreement
In 1994, the Company and Wal-Mart replaced their original agreement with
a new master license agreement (the "Wal-Mart Agreement"), which increased
license fees payable by the Company and also granted the Company the
opportunity to operate up to 400 vision centers (320 vision centers were
in operation at year end 1996) in existing and future Wal-Mart stores. In
January 1995, the Company made a lump sum payment in exchange for such
opportunity. The payment is being amortized over the initial term of the
vision centers opened subsequent to January 1, 1995. Each vision center
covered by the Wal-Mart Agreement has a separate license. Pursuant to the
Wal-Mart Agreement, the term of each such license is nine years with a
renewable option for one additional three-year term.
Venture Agreement
In 1993, the Company and Venture Stores, Inc. executed a master license
agreement which granted the Company a right of first refusal to open vision
centers in all Venture stores. In 1995, the Company decided to dispose of
all of its operations in Venture stores and completed such dispositions
in 1995 and early 1996.
(See Note 13.)
4. FOREIGN AGREEMENTS
Mexico Agreements
Pursuant to an agreement with Almacenes Aurrera, S.A. de C.V., the
Company owned and operated vision centers using the "Aurrera" name for
nine-year terms in certain of Aurrera's retail discount stores. In 1995,
the Company decided to close all of such vision centers, six of which
were closed in 1995 and ten of which were closed in January and February
1996. (See Note 13.)
In 1994, the Company opened 8 vision centers in stores owned and
operated by Wal-Mart de Mexico, S.A. de C.V. In 1995, the Company
completed the negotiation of a master license agreement governing these
vision centers. Pursuant to this agreement, each vision center has an
individual base term of five years from the date of opening, followed
by two options (each for two years), and one option for one year. Each
party has the right to terminate a location which fails to meet specified
sales levels. The agreement provides for annual fees based on a minimum
and percentage of sales. The agreement also gives the Company a right
of first refusal to open vision centers in all stores in Mexico owned
by Wal-Mart de Mexico. As of December 28, 1996, the Company operated
18 vision centers in Wal-Mart de Mexico stores.
Page 40 of 58<PAGE>
<PAGE>
Other Agreements
In 1993, foreign subsidiaries of the Company executed license
agreements with each of Carrefour, S.A. (in France) and Zellers Inc. (in
Canada). In 1995, the Company sold the operations in France. (See Note
13.) In June 1994, the Company sold certain of its assets relative to
the Canadian operation to a partnership in which the Company holds an
18% interest. In connection with the sale of its assets, the Company
received a promissory note, which was settled in 1996. In conjunction
with such settlement, the Company also agreed to transfer its 18%
interest in the partnership.
The Company owns 50% of a joint venture which owns and operates
three vision centers located in Tesco, PLC stores in Eastern Europe.
Each vision center is located within a Tesco store and is subject to a
separate agreement. Each agreement provides for the payment of minimum
and percentage rent. In 1995, the Company announced its intention to
sell its joint venture interest in these vision centers. (See Note 13.)
5. EQUITY TRANSACTIONS
Stock Option Plans
In 1996, the Company adopted the Restated Stock Option and Incentive
Award Plan (the "Plan") pursuant to which incentive stock options
qualifying under Section 422A of the Internal Revenue Code and nonqualified
stock options may be granted to key employees. The Plan replaced and
restated all the Company's prior key employee stock option plans. A total
of up to 3,350,000 shares of common stock may be granted under the Plan
(a total of up to 2,350,000 shares were available for grant under the
prior plans). The Plan is administered by the Compensation Committee of
the Company's Board of Directors. The Compensation Committee has the
authority to determine the persons receiving options, option prices, dates
of grants, and vesting periods, although no option may have a term exceeding
ten years. Options granted prior to 1996 have a term of five years. At
December 28, 1996, 1,830,166 options were outstanding at exercise prices
ranging from $0.44 to $21.38.
Directors' Stock Option Plan
In July 1992, the Company adopted the Non-Employee Director Stock
Option Plan (the "Directors Plan"), pursuant to which stock options for
up to 270,000 shares of Common Stock may be granted to nonemployee
directors. The Directors Plan provides for the grant of options to
purchase 30,000 shares of the Company's Common Stock with an exercise
price of $15.08 to each of the four nonemployee directors serving on the
date of adoption and automatic grants of additional options to purchase
7,500 shares of the Company's common stock upon each anniversary of the
Directors Plan to each nonemployee director serving on such date. Of
the options granted, 50% of the shares under each option are exercisable
on the second anniversary of the grant date, 75% in three years, and
100% in four years. All option grants are at exercise prices no less
than the market value of a share of Common Stock on the date of grant
and are exercisable for a five-year period. Options covering 157,500
shares under the Directors Plan were exercisable at December 28, 1996.
Page 41 of 58<PAGE>
<PAGE>
All Stock Option Plans
All exercise prices represent the estimated fair value of the Common
Stock on the date of grant as determined by the Board of Directors. Of the
options granted, 50% of the shares under each option are exercisable after
two years from the grant date, 75% in three years, and 100% in four years.
Options covering 208,123, 79,303 and 55,371 shares were exercised in 1994,
1995, and 1996, respectively. Options covering 219,600, 388,354 and 696,609
shares were exercisable at December 31, 1994, December 30, 1995, and December
28, 1996, respectively. Options covering 412,018 and 202,963 shares were
canceled in 1995 and 1996, respectively.
The Company has adopted the disclosure provisions of Statement
of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation." The Company will continue to account for stock option
awards in accordance with APB Opinion No. 25. Had compensation cost for
the Plan been determined based on the fair value at the grant date for
awards in 1995 and 1996 consistent with the provisions of SFAS No. 123,
the Company's net earnings and earnings per share would have been reduced
to the pro forma amounts indicated below:
1995 1996
As Reported: ---- ----
Net Earnings $(1,520) $3,480
=====================
Earnings per share ($0.07) $ 0.17
=====================
Pro Forma:
Net Earnings ($1,769) $3,163
=====================
Earnings per share ($0.09) $ 0.15
=====================
The fair value of each option grant is estimated on the date of grant
using the Black - Scholes option - pricing model with the following
weighted average assumptions used for grants in 1995 and 1996: dividend
yield of 0.0%; expected volatility of 86%; risk free interest rates
of 6.7% (1995) and 5.9% (1996); and expected lives of 4.34 years.
At December 31, 1996, 1,643,357 options were outstanding at exercise
prices ranging from $0.44 to $7.88, with a weighted average remaining
contractual life of 4.32 years, of which 464,485 options are currently
exercisable at a weighted average price of $6.24 per share. Additionally,
426,809 options were outstanding at exercise prices ranging from $10.75
to $21.38 with a weighted average remaining contractual life of 2.68
years, of which 232,124 options are currently exercisable at a weighted
average price of $16.74 per share.
Page 42 of 58<PAGE>
<PAGE>
Principal Shareholder Transactions
Effective in 1990, the Vice-Chairman (then the Chairman) of the
Company (the "Vice- Chairman") granted two options (the "Vendor Options")
covering an aggregate of 239,922 shares of Common Stock owned by him to
two principals of one of the Company's vendors. The exercise price for
these options was $0.22 per share, the fair market value of the shares
as of the date of grant. One option terminated in 1996. The other
option (which covers 159,948 shares) vests over a four-year period and
expires in 1997.
On November 13, 1990, in consideration of the services rendered by
two principals (each, an "Optionee") in two companies recruiting
optometrists for the Company (Notes 8 and 15), the Vice-Chairman entered
into option agreements (the "Option Agreements") which granted each
Optionee the option (the "Option") to acquire from the Vice-Chairman
683,775 shares of Common Stock, 384,750 shares of which were granted on
November 13, 1990 exercisable for no cash consideration, and 299,025
shares of which were granted on February 14, 1991 with an exercise price
of $0.22 per share, plus accrued interest. The Vice-Chairman
permitted each Optionee to partially exercise the Option (for no
consideration) in August 1992 with respect to 136,755 of the shares
subject to the Option. There remained 547,020 shares of Common Stock under
each Option (all such shares, collectively, the "Option Shares"). In 1993,
the Company filed with the Securities and Exchange Commission (the
"Commission") a registration statement (the "Registration Statement")
on Form S-3 pursuant to which (a) the transfer of the Option Shares
from the Vice-Chairman to each Optionee and (b) the potential sale of
certain of the Option Shares by each Optionee, was registered with the
Commission. Each Optionee exercised the Option immediately upon the
effective date of the Registration Statement in the second quarter of 1994.
Upon the exercise of all the Options, the Company became entitled to
a tax benefit valued at approximately $4.1 million, which is equal to the
number of Option Shares multiplied by the difference between the market price
of the Option Shares as of the date of exercise and the exercise price for
the Option Shares, adjusted for the impact of tax rates. The tax benefit
will be treated as a contribution to capital and will have no impact on
earnings for financial reporting purposes. The timing and the amount of
the benefit from the tax deduction will depend on future earnings of the
Company. The Company has recorded a valuation allowance against the tax
benefit. The foregoing tax consequences would also apply upon the exercise
of the remaining Vendor Option. The Company has received a deficiency notice
from the Internal Revenue Service with respect to the tax benefit the
Company expects to realize from the exercise of the Options. (See Note 9.)
Preferred Stock
The Company is authorized to issue up to 5,000,000 shares of preferred
stock, par value $1 per share, with such terms, characteristics and
designations as may be determined by the Board of Directors. No such
shares are issued and outstanding. In January 1997, the Company adopted
a shareholder rights plan. (See Note 15.)
Page 43 of 58<PAGE>
<PAGE>
6. LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS
Long-term debt and capital lease obligations at December 30, 1995 and
December 28, 1996 consisted of the following (all amounts except monthly
loan installments and interest rates in 000's):
<TABLE>
<CAPTION>
1995 1996
---- ----
<S> <C> <C>
Borrowings under revolving credit facility,
aggregate outstanding balance due for repayment
in May, 1998 $38,000 $26,500
Capital lease obligations with a related lease finance
company, due in aggregate monthly installments of
$38,000, including imputed interest at 14% per annum 322
Capital lease and other obligations, due in aggregate monthly
installments of $24,000, including imputed interest at
rates of 9.9% to 19.5% per annum 158
------- -------
38,480 26,500
Less current portion 480 -0-
------- -------
$38,000 $26,500
======= =======
</TABLE>
The Company's capital lease obligations, which were secured by certain
equipment, furniture and fixtures with a net book value of $1,170,000 at
December 30, 1995, were extinguished in full during 1996.
In November 1994, the Company entered into a syndicated $45 million
three-year unsecured revolving credit facility. The Company's credit
facility (as amended) contains, among other covenants, a material adverse
change clause, certain minimum net worth requirements, as well as a covenant
which limits the ability of the Company to expand outside of its domestic
Wal-Mart vision centers. Commitment fees payable on the average daily
balance of the unused portion of the line of credit were .30% per annum in
1996. The Company paid approximately $31,000, $32,000 and $40,000 in
commitment fees in 1994, 1995 and 1996, respectively. Interest on the
outstanding advances is based on certain financial covenants and applicable
interest rates for Eurodollar or base loan borrowings, as defined in the
agreement. In December 1996, the Company extended the facility until May
1998.
Page 44 of 58<PAGE>
<PAGE>
In December of 1994, the Company paid $173,000 in connection with an
agreement to cap certain interest rates under its credit facility up to
$15 million. The agreement caps LIBOR at 7.5% per annum unless the
LIBOR rate is above 9% per annum in which case the protected rate is 9%
per annum. The cap agreement expires in February 1997. In 1995, the
Company entered into a two-year interest rate swap agreement (with a
term expiring on February 20, 1998) which effectively converts underlying
variable rate debt based on LIBOR to fixed rate debt. The notional
principal amount is $20 million, with an effective fixed rate of 7.305%.
The fair market value of the fixed rate hedge approximates book value.
As of December 28, 1996, the Company had borrowed $26.5 million under
its credit facility at a weighted average interest rate of 7.38%. The
aggregate fair value of the Company's long-term debt and capital lease
obligations is estimated to approximate their carrying value.
7. RELATED-PARTY TRANSACTIONS
The Company purchased and leased certain furniture and fixtures from
a company which was owned by the spouse of the Vice-Chairman, who was
also a member of the Company's board of directors until her resignation
in March 1992. On November 3, 1992, the furniture and fixtures company
was sold to an unrelated party, which made installment payments to the
spouse of the Vice-Chairman. Until 1996, the Company purchased furniture
and fixtures from this company. In the opinion of management, such purchases
were on an arms-length basis. The aggregate amount of purchases of furniture
and fixtures was approximately $3.9 million and $2.4 million in 1994 and in
1995, respectively. In 1991, certain amounts due to the furniture and
fixture company were assigned to a lease finance company which is owned by
another shareholder/director of the Company. The Company made lease
payments (including principal and interest) of $455,000, $417,000, and
$341,000 to this lease finance company in 1994, 1995, and 1996, respectively.
Such lease was paid in full as of September, 1996.
During 1994, 1995, and 1996, the Company purchased its business and
casualty insurance policies through an insurance agency in which a
shareholder/director has a substantial ownership interest. Total
premiums paid for policies acquired through the insurance company during
1994, 1995, and 1996 were approximately $1.3 million, $910,000, and
$844,000, respectively. The Audit Committee of the Company's Board
of Directors has approved such purchases.
In 1993, the Company executed a lease (the "Airplane Lease") with
a company wholly owned by the Vice-Chairman. In 1994, the Company
made $26,000 in payments under the Airplane Lease. The Audit
Committee had approved the Airplane Lease, which was terminated in
November 1994.
Page 45 of 58<PAGE>
<PAGE>
8. COMMITMENTS AND CONTINGENCIES
Noncancelable Operating Lease and License Agreements
As of December 28, 1996, the Company is a lessee under noncancelable
operating lease agreements for certain equipment which expire at various
dates through 1998. Additionally, the Company is required to pay its
host department store companies minimum and percentage license fees.
Effective December 20, 1991, the Company entered into a lease agreement
with Wal-Mart for approximately 66,000 square feet of corporate office space.
The term of the lease is ten years with a renewal option of seven years.
The Company paid Wal-Mart approximately $215,000 annually in rental fees in
1994, 1995, and 1996.
Effective July 1995, the Company entered into an operating lease for
a computer equipment upgrade that provides processing for the newly
installed management information and financial systems. The term of the
lease is three years. Lease expense is approximately $8,000 monthly.
Effective the first quarter, 1996, the Company entered into operating
leases for 34 vehicles. The terms of the leases are cancellable by the
Company at any time, but the Company expects to retain the leases for three
years. Lease expense is approximately $13,800 monthly.
Under the lease for its Los Angeles laboratory, the Company paid
$99,000, $102,000, and $101,000 in rental fees in 1994, 1995, and 1996,
respectively.
Aggregate future minimum payments under the license and lease
arrangements are as follows (amounts in 000's):
1997 $16,389
1998 16,360
1999 16,078
2000 14,347
2001 11,529
Thereafter 17,052
-------
$91,755
=======
Total expenses recognized under these license and lease arrangements
were approximately $10.1 million, $17.0 million, and $19.9 million for the
years ended December 31, 1994, December 30, 1995, and December 28, 1996,
respectively.
Page 46 of 58<PAGE>
<PAGE>
Gitano and Guy Laroche Trademark Licenses
The Company has separate license agreements with Gitano, Inc. and
Guy Laroche of North America, Inc., giving the Company the right to use
the trademarks "Gitano" and "Guy Laroche", respectively, in its vision
centers in North America. Each agreement requires the Company to pay
minimum and percentage royalties on retail and wholesale sales.
The Gitano agreement expires on June 30, 1997 and the Guy Laroche
agreement expires on December 31, 1998. Each agreement may be renewed,
subject to various conditions. Under the Gitano agreement, the Company
paid $97,000, $142,000, and $111,000 in fees during 1994, 1995, and 1996,
respectively. Under the Guy Laroche agreement, the Company paid $100,000,
$200,000, and $250,000 in fees during 1994, 1995, and 1996, respectively.
Consulting and Management Agreement
Among other things, the Wal-Mart Agreement (Note 3) requires an
independent, licensed optometrist to practice adjacent to or near each of
the Company's vision centers for at least 48 hours per week. The Company
entered into a consulting and management service agreement, as
amended, with two companies jointly owned by two shareholders to
recruit such optometrists for certain of its vision centers. Subject
to applicable state regulations, this agreement, among other things,
requires the Company to provide space and certain equipment to the
optometrists and requires the recruiting entities to pay to the Company
certain amounts as defined in the agreement. The Company received
$2.6 million, $2.5 million, and $2.9 million pursuant to this agreement
during 1994, 1995, and 1996, respectively. This agreement was terminated
in January, 1997. (See Note 15.)
Employment Agreements
Two executive officers are employed pursuant to employment agreements
which provide for an annual salary and certain other benefits. Each
agreement further provides that the Company may at any time terminate
the executive's employment upon six months notice or upon no notice if
such termination is for cause, as defined.
Page 47 of 58<PAGE>
<PAGE>
There are agreements between the Company and six of its executive
officers which provide severance benefits in the event of termination of
employment under certain circumstances following a change in control of
the Company (as defined). The circumstances are termination by the Company
(other than because of death or disability commencing prior to a threatened
change in control (as defined), or for cause (as defined), or by the officer
as the result of a voluntary termination (as defined). Following any such
termination, in addition to compensation and benefits already earned, the
officer will be entitled to receive a lump sum severance payment equal to
up to three times the officer's annual rate of base salary. The term of
each agreement is for a rolling three-years unless the Company gives notice
that it does not wish to extend such term, in which case the term of the
agreement would expire three years from the date of the notice.
9. INCOME TAXES
The Company accounts for income taxes under Statement of Financial
Accounts Standards (SFAS) No. 109 "Accounting for Income Taxes," which
requires the use of the liability method of accounting for deferred income
taxes. The components of the net deferred tax assets/(liabilities) are as
follows (amounts in 000's):
<TABLE>
<CAPTION>
As of December 30, As of December 28,
1995 1996
<S> <C> <C>
Total deferred tax liabilities $(5,460) $(6,347)
Total deferred tax assets 11,235 10,658
Valuation allowance (5,775) (5,543)
------- -------
Net deferred tax assets (liabilities) $ 0 $(1,232)
======= =======
</TABLE>
Page 48 of 58<PAGE>
<PAGE>
The sources of the difference between the financial accounting and tax
basis of the Company's liabilities and assets which give rise to the deferred
tax liabilities and deferred tax assets and the tax effects of each are as
follows (amounts in 000's):
<TABLE>
<CAPTION>
As of December 30, As of December 28,
1995 1996
---- ----
<S> <C> <C>
Deferred tax liabilities:
Depreciation $ 5,305 $ 6,062
Store preopening costs 155 91
Other 194
------- -------
$ 5,460 $ 6,347
======= =======
Deferred tax assets:
Accrued expenses and reserves $ 1,496 $ 1,471
Inventory basis differences 524 326
Net operating loss carryforwards 9,182 8,650
Other 33 211
------- -------
$11,235 $10,658
======= =======
</TABLE>
The consolidated provision for income taxes consists of the following
(amounts in 000's):
<TABLE>
<CAPTION>
Year Ended
-------------------------------------------------------------
December 31, December 30, December 28,
1994 1995 1996
---- ---- ----
<S> <C> <C> <C>
Current:
Federal $ 50 $ 135
State $40 50 63
--- ---- ------
40 100 198
--- ---- ------
Deferred:
Federal 897
State 105
--- ---- ------
0 0 1,002
--- ---- ------
Total provision for income taxes $40 $100 $1,200
=== ==== ======
</TABLE>
Page 49 of 58<PAGE>
<PAGE>
The tax expense (benefit) differs from the amounts resulting from
multiplying income before income taxes by the statutory federal income tax
rate for the following reasons (amounts in 000's):
<TABLE>
<CAPTION>
Year Ended December 31, December 30, December 28,
1994 1995 1996
---- ---- ----
<S> <C> <C> <C>
Federal income tax at statutory rate $ 133 $(483) $1,591
State income taxes, net of federal income
tax benefit 40 50 69
Foreign losses not deductible for U.S.
federal tax purposes 1,076 686 63
Valuation allowance for U.S. state and
federal taxes (1,241) (181) (556)
Other 32 28 33
------ ----- ------
$ 40 $ 100 $1,200
====== ===== ======
</TABLE>
At December 28, 1996, the Company had a valuation allowance of $5.5
million due to the uncertainty regarding the realizability of its net
operating loss carryforwards. A portion of the net operating loss
carryforward deferred tax asset (approximately $4.1 million) relates
to tax benefits (subject to the outcome of the audit discussed below)
from the exercise of stock options granted by the Vice Chairman to two
shareholders who own consulting companies which recruited optometrists for
the Company (Note 5). No compensation expense was recorded for financial
reporting purposes as there was no difference between the fair market
value and the option price of the shares at the date of grant. This
benefit will be recorded as an addition to paid-in-capital (and a
reduction in the valuation allowance) when realized.
At December 28, 1996, the Company had U.S. regular tax net operating
loss carryforwards of $27 million (of which approximately $10.7 million
relates to the tax benefits from the exercise of stock options discussed
above) and alternative minimum tax net operating loss carryforwards of
approximately $3.9 million which can reduce future federal income taxes.
If not utilized, these carryforwards will expire beginning in 2007.
At December 28, 1996, the Company had foreign tax net operating
loss carryforwards in excess of $4.7 million which are available to reduce
future foreign income taxes relative to the operations in Mexico and
Eastern Europe. If not utilized, these carryforwards will expire
beginning in 1997.
Page 50 of 58<PAGE>
<PAGE>
As a result of an examination by the Internal Revenue Service ("IRS")
of the Company's 1992 tax return, the Company received a deficiency notice
from the IRS, challenging the tax benefit relating to the exercise of
stock options referred to above. The Company has filed a petition in the
U.S. Tax Court, contesting the deficiency notice. The Company does not
expect that the outcome of this proceeding will have a material adverse
impact on the financial statements or conditions of the Company.
10. NET INCOME (LOSS) PER COMMON SHARE
Net income (loss) per common share is computed based on the weighted
average number of common stock and stock equivalent shares outstanding
during the period. Except when anti-dilutive, options for the purchase
of common stock have been included as exercised (using the treasury stock
method) as of the date of grant. Common stock equivalents have been
excluded from the calculation of weighted average shares outstanding
during 1995, as the effect would be anti-dilutive. The weighted average
number of common shares outstanding used in the calculation is as follows:
<TABLE>
<CAPTION>
Year Ended December 31, December 30, December 28,
1994 1995 1996
---- ---- ----
<S> <C> <C> <C>
Weighted average
number of shares
outstanding 20,665,257 20,537,799 20,706,629
========== ========== ==========
</TABLE>
11. SUPPLEMENTAL CASH FLOW INFORMATION
Supplemental cash flow information is as follows (amounts in 000's):
<TABLE>
<CAPTION>
Year Ended December 31, December 30, December 28,
1994 1995 1996
---- ---- ----
<S> <C> <C> <C>
Cash paid for-
Interest $1,548 $2,750 $2,565
Income taxes 64 244 149
</TABLE>
Page 51 of 58
<PAGE>
<PAGE>
12. SELECTED QUARTERLY FINANCIAL DATA
Selected quarterly data for the Company for the years ended December 30,
1995 and December 28, 1996 is as follows (amounts in 000's except per share
information):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 30, 1995:
Quarter Ended
- --------------------------------------------------------------------------------------------------------------------------------
April 1 July 1 September 30 December 30
------- ------ ------------ -----------
<S> <C> <C> <C> <C>
Net Sales $37,168 $35,725 $37,733 $34,947
Cost of Goods Sold 16,714 16,586 17,861 16,805
------- ------- ------- -------
Gross Profit 20,454 19,139 19,872 18,142
Selling, General, and
Administrative Expenses 18,734 17,314 18,487 19,855
Provision for Disposition of Assets (a) 1,111 (153)
Other Nonrecurring Charges (a) 900 153
------- ------- ------- -------
Operating Income (Loss) 1,720 1,825 (626) (1,713)
Other Expense, Net 551 775 619 681
------- ------- ------- -------
Income (Loss) Before Income Taxes 1,169 1,050 (1,245) (2,394)
Income Tax Benefit/(Provision) (332) (240) 372 100
------- ------- ------- -------
Net Income (Loss) $ 837 $ 810 $ (873) $(2,294)
======= ======= ======= =======
Net Income (Loss) Per Common Share $ 0.04 $ 0.04 $ (0.04) $ (0.11)
======= ======= ======= =======
</TABLE>
(a) At September 30, 1995, the Company recorded a provision of $1.1
million for the disposition of the Venture operations and recorded
other nonrecurring charges of $900,000 to reduce Company assets
held for disposition to management's estimate of their net realizable
value. In the fourth quarter 1995, the Company recorded a gain of
$491,000 relative to the sale of its French operations, which was
offset by additional provisions relative to the disposition of the
Venture operations, the Aurrera store closures in Mexico, and the
net realizable value of other assets held for sale. (See Note 13.)
Page 52 of 58<PAGE>
<PAGE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 28, 1996:
Quarter Ended
- --------------------------------------------------------------------------------------------------------------------------------
March 30 June 29 September 28 December 28
-------- ------- ------------ -----------
<S> <C> <C> <C> <C>
Net Sales $40,133 $40,525 $41,347 $38,371
Cost of Goods Sold 18,724 19,133 19,684 19,151
------- ------- ------- -------
Gross Profit 21,409 21,392 21,663 19,220
Selling, General, and
Administrative Expenses 19,386 19,202 19,679 18,653
------- ------- ------- -------
Operating Income 2,023 2,190 1,984 567
Other Expense, Net 659 507 453 465
------- ------- ------- -------
Income Before Income Taxes 1,364 1,683 1,531 102
Provision for Income Taxes 373 431 321 75
------- ------- ------- -------
Net Income $ 991 $ 1,252 $ 1,210 $ 27
======= ======= ======= =======
Net Income Per Common Share $ .05 $ .06 $ .06 $ --
======= ======= ======= =======
</TABLE>
Page 53 of 58<PAGE>
<PAGE>
13. DISPOSITIONS AND OTHER NONRECURRING CHARGES
Sale of French Operations
On December 29, 1995, the Company sold its shares in IVACAR, S.A., its
French subsidiary, to Carrefour France, for the sum of 18,000,000 FF
($3.7 million U.S.), paid in cash at the closing. The initial sum was
received the first business day of 1996. In connection with this transaction,
the Company recorded a gain of $491,000 in 1995. Such gain was offset by
the provisions discussed below.
Sale of Venture Operations
The Venture operations were disposed of in three separate transactions.
In anticipation of the disposition of the Venture operations, a provision
of $1.4 million was recorded in 1995 to reduce the net assets of the
Venture operations to management's estimate of net realizable value.
The three transactions are described as follows:
A. Chicago Locations. On October 1, 1995, the Company agreed to
sell its six Chicago locations, including assets associated with
the store locations, to Uhlemann Optical Company for notes in the
total amount of $614,000. In connection with such transaction,
the Company agreed to lend the purchaser up to $200,000 for working
capital. The transaction closed on October 26, 1995.
B. Texas Locations. On January 4, 1996, the Company agreed to sell
its 11 Texas locations, including certain assets associated with
the store locations, to Budget Opticals of America, Inc. for
a secured note in the amount of $256,000. The transaction closed
on January 6, 1996.
C. St. Louis Locations. On January 12, 1996, the Company agreed to
sell its eight St. Louis locations, including certain assets
associated with the store locations, to Comprehensive Eyecare, Ltd.
for secured notes in the amount of $752,000. In connection with
such transaction, the Company agreed to lend the purchaser up to
$50,000 for working capital. The transaction closed on January 14,
1996.
Page 54 of 58<PAGE>
<PAGE>
In September, 1996, Comprehensive Eyecare, Ltd. settled its
obligation at the net book value of the promissory notes recorded by the
Company under the terms of the sales agreement. In the opinion of
management, the promissory notes outstanding from the Chicago and Texas
sales transactions are recorded at net realizable value.
Net sales and operating losses for each operation (exclusive of
disposition costs, allocated corporate overhead, interest and taxes) for
each period presented is summarized as follows (000's):
Venture France
Year Ended December 28, 1996
Net Sales $ 37 $ 402
Operating Losses $ (81) $ (240)
Year Ended December 30, 1995
Net Sales $ 2,257 $ 5,117
Operating Losses $(2,073) $ (523)
Year Ended December 31, 1994
Net Sales $ 2,415 $ 2,417
Operating Losses $(2,071) $(1,144)
Investment in Czech Republic and Slovakia
In 1995, the Company decided that it would pursue the disposition of its
share of the joint venture. A provision of $300,000 was recorded to reflect
management's estimate of net realizable value of the Company's investment
in such joint venture.
Aurrera Store Closures
In 1995, the Company decided to close 16 underperforming vision centers
located in Aurrera stores. The Mexican operations recorded a $346,000
provision to reduce the assets in those locations to management's estimate
of net realizable value and record separation costs for employees. The
Company closed six vision centers in February 1995 and the remainder in the
first quarter 1996.
Foreclosure Proceedings - Frame Manufacturer
In February 1995, the Company foreclosed on its security interest
covering the assets of CompuFrame, a frame manufacturer. The Company
recorded a provision of $400,000 to reduce the net carrying amount of assets
held for sale to management's estimate of their net realizable value. The
remaining assets were liquidated in 1996.
The net assets of the Venture operations and the frame manufacturer
have been classified as assets held for sale in the current asset section
of the Company's balance sheet at December 30, 1995. The dispositions
were completed in 1996. For purposes of the accompanying statements of cash
flows, the change in components comprising assets held for sale is reflected
in the original balance sheet classification.
Page 55 of 58<PAGE>
<PAGE>
14. FOREIGN AND DOMESTIC OPERATIONS
The geographic distributions of the Company's sales, transfers between
geographic areas, identifiable assets, and operating income for the years
ended December 31, 1994, December 30, 1995, and December 28, 1996 are
summarized in the following table (amounts in 000's). Transfers between
geographic areas are generally at cost plus freight, duties, and transfer
fees. Identifiable assets include all assets associated with operations in
the indicated geographic areas excluding intercompany receivables and
investments. Operating income (loss) for the geographic areas does not
include allocated corporate overhead, interest, or taxes.
<TABLE>
<CAPTION>
1994 1995 1996
---- ---- ----
<S> <C> <C> <C>
Sales:
United States $112,109 $136,633 $156,599
International 7,286 8,940 3,777
-------- -------- --------
$119,395 $145,573 $160,376
======== ======== ========
Transfers between geographic areas:
United States $ 588 $ 361 $ 211
======== ======== ========
Identifiable Assets:
United States $ 67,609 $ 74,060 $ 71,590
International 10,003 7,177 2,674
-------- -------- --------
Total Assets $ 77,612 $ 81,237 $ 74,264
======== ======== ========
Operating Income:
United States before other
nonrecurring charges $ 3,825 $ 4,642 $ 7,376
Other writeoffs and reserves (2,156)
-------- -------- --------
United States 3,825 2,486 7,376
International (2,239) (1,280) (612)
-------- -------- --------
Operating income $ 1,586 $ 1,206 $ 6,764
======== ======== ========
</TABLE>
Page 56 of 58<PAGE>
<PAGE>
15. SUBSEQUENT EVENTS
In January 1997, the Company completed various transactions related to
its relationship with each of Eyecare Leasing, Inc., which had recruited
optometrists for the Company pursuant to a consulting agreement, and Stewart-
Phillips, Inc., which had recruited optometrists practicing adjacent to the
Company's vision centers in California. The transactions involved the
termination of such consulting agreement and transfer of the responsibilities
of Stewart-Phillips, Inc. to a subsidiary of the Company. The aggregate cost
of the transactions was $4.6 million, which will be capitalized as an
intangible asset and amortized over the remaining life of the store leases.
The Company made a lump sum payment of $500,000 at closing and entered into
promissory obligations for the balance, payable over a 12-year period at
6.4% interest. The transactions are not expected to have a material impact
on the financial statements or condition of the Company.
In January of 1997, the Company's Board of Directors approved a
Shareholders Rights Plan. The Rights Plan provides for the distribution of
one Right for each outstanding share of the Company's Common Stock held of
record as of the close of business on January 27, 1997 or that thereafter
becomes outstanding prior to the earlier of the final expiration date of
the Rights or the first date upon which the Rights become exercisable. Each
Right entitles the registered holder to purchase from the Company one
one-hundredth of a share of Series A Participating Cumulative Preferred
Stock, par value $0.01 per share, at a price of $40.00, subject to adjustment.
The Rights are not exercisable until ten calendar days after a person or
group buys or announces a tender offer for 15% or more of the Company's
Common Stock, or if any person or group has acquired such an interest, the
acquisition by that person or group of an additional 2% of the Company's
Common Stock. In the event the Rights become exercisable, holders of Rights
would have the right to receive, upon exercise thereof at the then current
exercise price of the Right, that number of shares of Common Stock (or,
under certain circumstances, an economically equivalent security or securities
of the Company) having a market value of two times the exercise price of the
Right. The Rights will expire on January 26, 2007, unless extended or unless
either the Rights are earlier redeemed by the Company in whole, but not in
part, at a price of $0.001 per Right, or the Rights are earlier redeemed.
Page 57 of 58<PAGE>
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE II
NATIONAL VISION ASSOCIATES, LTD. AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
December 31, 1994, December 30, 1995, and December 28, 1996
(in 000's)
Additions
------------------------------
Balance at Charged to Charged to Balance at
Description Beginning of Period Cash and Expense Other Accounts Deductions End of Period
- ----------- ------------------- ---------------- -------------- ---------- -------------
<S> <C> <C> <C> <C>
Year ended
December 31, 1994:
Allowance for
Uncollectible
Accounts Receivable $70 $423 $240 $253
Year ended
December 30, 1995:
Allowance for
Uncollectible
Accounts Receivable $253 $216 $130 $339
Year ended
December 28, 1996:
Allowance for
Uncollectible
Accounts Receivable $339 $177 $163 $353
</TABLE>
Page 58 of 58
<PAGE>
FIFTH AMENDMENT TO CREDIT AGREEMENT
THIS FIFTH AMENDMENT TO CREDIT AGREEMENT (this "Amendment") is dated
as of the 12th day of December, 1996, among NATIONAL VISION ASSOCIATES, LTD.
(the "Borrower"), WACHOVIA BANK OF GEORGIA, N.A., as Agent (the "Agent"),
WACHOVIA BANK OF GEORGIA, N.A., SUNTRUST BANK, ATLANTA, and NATIONSBANK,
N.A. (collectively, the "Banks");
W I T N E S S E T H:
WHEREAS, the Borrower, the Agent and the Banks are parties to that
certain Credit Agreement, dated as of the 15th day of November, 1994, as
amended by First Amendment to Credit Agreement dated as of February 23, 1995,
Second Amendment to Credit Agreement dated as of October 4, 1995, Third
Amendment dated as of November 3, 1995, and Fourth Amendment dated as of
February 15, 1996 (as so amended, the "Credit Agreement");
WHEREAS, the Borrower has requested and the Agent and the Banks have
agreed to certain amendments to the Credit Agreement, subject to the terms
and conditions hereof;
NOW, THEREFORE, for and in consideration of the above premises and other
good and valuable consideration, the receipt and sufficiency of which hereby
is acknowledged by the parties hereto, the Borrower, the Agent and the Banks
hereby covenant and agree as follows:
1. Definitions. Unless otherwise specifically defined herein, each
term used herein which is defined in the Credit Agreement shall have the
meaning assigned to such term in the Credit Agreement. Each reference to
"hereof", "hereunder", "herein" and "hereby" and each other similar reference
and each reference to "this Agreement" and each other similar reference
contained in the Credit Agreement shall from and after the date hereof refer
to the Credit Agreement as amended hereby.
2. Amendments to Section 1.01. (a) The definition of "Termination Date"
set forth in Section 1.01 of the Credit Agreement is amended in its entirety
as follows:
"Termination Date" means May 15, 1998.
(b) The definition of "Consolidated Tangible Net Worth" set forth in
Section 1.01 of the Credit Agreement is amended in its entirety as follows:
"Consolidated Tangible Net Worth" means, at any time,
Stockholders' Equity, less the sum of the value, as set forth or
reflected on the most recent consolidated balance sheet of the
Borrower and its Consolidated Subsidiaries, prepared in accordance
with GAAP, of:
1<PAGE>
<PAGE>
(A) Any surplus resulting from any write-up of assets
subsequent to December 31, 1993;
(B) All assets which would be treated as intangible
assets for balance sheet presentation purposes under GAAP, including
without limitation goodwill (whether representing the excess of cost
over book value of assets acquired, or otherwise), trademarks,
tradenames, copyrights, patents and technologies, and unamortized debt
discount and expense;
(C) To the extent not included in (B) of this definition,
any amount at which shares of Capital Stock of the Borrower appear as
an asset on the balance sheet of the Borrower and its Consolidated
Subsidiaries;
(D) Loans or advances to stockholders, directors,
officers or employees; and
(E) To the extent not included in (B) of this definition,
deferred expenses.
Provided, however, Consolidated Tangible Net Worth shall include the
unamortized portion of goodwill from time to time, not exceeding $4,500,000,
which arises out of the transactions provided for in a certain Agreement for
Assignment of License Interests and Related Matters dated as of November 1,
1996, by and among the Borrower, certain of the Subsidiaries, Eyecare
Leasing, Inc., an Alabama corporation, Stewart-Phillips, Inc., a California
corporation, James A. Stewart, and Stephen F. Phillips.
3. Amendment to Section 5.25. Section 5.25 of the Credit Agreement
hereby is amended in its entirety as follows:
SECTION 5.25. Senior Debt. The Borrower shall not permit the
aggregate outstanding principal amount of Senior Debt (other than
Senior Debt under this Agreement) to exceed $10,000,000.00 at any time.
Exhibit H to the Credit Agreement accordingly hereby is amended to conform
the text of Section 5.25 contained in paragraph 6 thereof as such Section
5.25 is amended by this paragraph 3 of this Amendment.
5. Restatement of Representations and Warranties. The Borrower
hereby restates and renews each and every representation and warranty
heretofore made by it in the Credit Agreement and the other Loan Documents
as fully as if made on the date hereof and with specific reference to this
Amendment and all other loan documents executed and/or delivered in
connection herewith.
2<PAGE>
<PAGE>
6. Effect of Amendment. Except as set forth expressly hereinabove,
all terms of the Credit Agreement and the other Loan Documents shall be
and remain in full force and effect, and shall constitute the legal, valid,
binding and enforceable obligations of the Borrower. The amendments
contained herein shall be deemed to have prospective application only,
unless otherwise specifically stated herein.
7. Ratification. The Borrower hereby restates, ratifies and reaffirms
each and every term, covenant and condition set forth in the Credit Agreement
and the other Loan Documents effective as of the date hereof.
8. Counterparts. This Amendment may be executed in any number of
counterparts and by different parties hereto in separate counterparts, each
of which when so executed and delivered shall be deemed to be an original
and all of which counterparts, taken together, shall constitute but one and
the same instrument.
9. Section References. Section titles and references used in this
Amendment shall be without substantive meaning or content of any kind
whatsoever and are not a part of the agreements among the parties hereto
evidenced hereby.
10. No Default. To induce the Agent and the Banks to enter into
this Amendment and to continue to make advances pursuant to the Credit
Agreement, the Borrower hereby acknowledges and agrees that, as of the
date hereof, and after giving effect to the terms hereof, there exists
(i) no Default or Event of Default and (ii) no right of offset, defense,
counterclaim, claim or objection in favor of the Borrower arising out of
or with respect to any of the Loans.
11. Further Assurances. The Borrower agrees to take such further
actions as the Agent shall reasonably request in connection herewith to
evidence the amendments herein contained to the Borrower.
12. Governing Law. This Amendment shall be governed by and
construed and interpreted in accordance with, the laws of the State of
Georgia.
13. Conditions Precedent. This Amendment shall become effective
only upon execution and delivery of this Amendment by each of the parties
hereto.
3<PAGE>
<PAGE>
IN WITNESS WHEREOF, the Borrower, the Agent and each of the Banks has
caused this Amendment to be duly executed, under seal, by its duly authorized
officer as of the day and year first above written.
NATIONAL VISION ASSOCIATES, LTD.,
as Borrower (SEAL)
By: /s/ Sandra M. Buffa
Title: Senior Vice President
WACHOVIA BANK OF GEORGIA, N.A.,
as Agent and as a Bank (SEAL)
By: /s/ Jake Vogelsang
Title: Banking Officer
SUNTRUST BANK, ATLANTA,
as a Bank (SEAL)
By: /s/ Dennis H. James
Title: Assistant Vice President
By: /s/ J. Christopher Deisley
Title: First Vice President
NATIONSBANK, N.A.,
as a Bank (SEAL)
By: /s/ W. Brad Davis
Title: Senior Vice President
4
<PAGE>
AGREEMENT
THIS AGREEMENT, effective as of this 6th day of November, 1996, by
and between National Vision Associates, Ltd., a Georgia corporation (the
"Company"), and ------------------------- (the "Executive").
W I T N E S S E T H:
WHEREAS, the Company wishes to assure both itself and its key
employees of continuity of management and objective judgment in the event of
any Change in Control (as defined below) of the Company and to provide certain
other benefits, and the Executive is a key employee of the Company and an
integral part of its management;
NOW, THEREFORE, for and in consideration of the premises and the
mutual covenants herein contained, the parties hereby agree as follows:
I. TERM OF AGREEMENT.
This Agreement shall be effective immediately upon its execution by
the parties hereto. The term of this Agreement shall be for a rolling, three
(3) year term commencing on the date hereof, and shall be deemed automatically
(without further action by either the Company or the Executive) to extend each
day for an additional day such that the remaining term of the Agreement shall
continue to be three (3) years; provided, however, that on Executive's 62nd
birthday this Agreement shall cease to extend automatically and, on such date,
the remaining "term" of this Agreement shall be three (3) years; provided
further, that the Company may, by notice to the Executive, cause this
Agreement to cease to extend automatically and, upon such notice, the "Term"
of this Agreement shall be three (3) years following such notice.
II. DEFINITIONS.
1. Base Amount - The term "Base Amount" shall have the same meaning
as ascribed to it under Section 280G(b) (3) of the Internal Revenue Code of
1986, as amended (the "Code").
2. Board - The Board of Directors of the Company, or its successor.
3. Cause - The term "Cause" as used herein shall mean: (i) any act
that constitutes, on the part of the Executive, (a) fraud, dishonesty, gross
negligence, or willful misconduct and (b) that directly results in material
injury to the Company, or (ii) the Executive's material breach of this
Agreement, or (iii) the Executive's conviction of a felony or crime involving
moral turpitude. A termination of the Executive for "Cause" based on clause
(i) or (ii) of the preceding sentence shall take effect thirty (30) days
after the Company gives written notice of such termination to the Executive
specifying the conduct deemed to qualify as Cause, unless the Executive shall,
during such 30-day period, remedy the events or circumstances constituting
Cause to the reasonable satisfaction of the Company. A termination for Cause
based on clause (iii) above shall take effect immediately upon giving of the
termination notice.
1<PAGE>
<PAGE>
4. Change in Control - The term "Change in Control" as used herein
shall mean the occurrence of one of the following:
(i) the Company consolidates or merges with or into another
corporation, or is otherwise reorganized, if the Company
is not the surviving corporation in such transaction or if
after such transaction any other corporation, association
or other person, entity or group or the shareholders thereof
own, direct and/or indirectly, more than 50% of the then
outstanding shares of common stock or more than 50% of
the assets of the Company; or
(ii) more than 35% of the then outstanding shares of common
stock of the Company are, in a single transaction or in a
series of related transactions, sold or otherwise
transferred to or are acquired by any other corporation,
association or other person, entity or group, whether or
not any such shareholder or any shareholders included in
such group were shareholders of the Company prior to the
Change in Control; or
(iii) all or substantially all of the assets of the Company are
sold or otherwise transferred to or otherwise acquired by
any other corporation, association or other person, entity
or group; or
(iv) the occurrence of any other event or circumstance which is
not covered by (i) through (iii) above which the Board
determines affects control of the Company and constitutes
a Change in Control for purpose of this Agreement.
5. Disability - The term "Disability" shall mean the Executive's
inability as a result of physical or mental incapacity to substantially
perform his duties for the Company on a full-time basis for a period of six
(6) months.
6. Excess Severance Payment - The term "Excess Severance Payment"
shall have the same meaning as the term "excess parachute payment" defined
in Section 280G(b) (1) of the Code.
7. Severance Payment - The term "Severance Payment" shall have
the same meaning as the term "parachute payment" defined in Section 280G(b)(2)
of the Code.
8. Present Value - The term "Present Value" shall have the same
meaning as provided in Section 280G(d) (4) of the Code.
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9. Protected Period. The greater of (a) 18 months or (b) the
number (rounded downward to the nearest whole number) of months equal to (1)
the Executive's current salary (as defined in Section III.2(a) of this
Agreement) divided by (2) $10,000, provided, however, that in no event
shall the Protected Period exceed 36 months.
10. Reasonable Compensation - The term "Reasonable Compensation"
shall have the same meaning as provided in Section 280G(b) (4) of the Code.
11. Threatened Change in Control - Any pending tender offer for
the Company's outstanding shares of common stock, or any pending offer to
acquire the Company by merger or consolidation, or any other pending action
or plan to effect a Change in Control of the Company.
III. BENEFITS UPON TERMINATION.
1. Termination Upon Change in Control - If a Change in Control
or Threatened Change in Control occurs during the term of this Agreement
and the Executive's employment is terminated (i) within twenty-four (24)
months following the date of the Change in Control, (ii) within six (6)
months prior to the date of the Change in Control as a part of such Change
in Control, or (iii) during the period commencing on the date a Threatened
Change in Control becomes manifest and until it ends, and in the case of
(i), (ii), or (iii), such termination is a result of Involuntary
Termination or Voluntary Termination, as defined below, then the benefits
described in Section 2 below shall, subject to Section IV.5 of this
Agreement, be paid or provided to the Executive. The fact that Executive
is eligible for early, normal or delayed retirement under a Company
retirement plan at the time of his termination shall not make him ineligible
to receive benefits hereunder.
(a) Involuntary Termination - For purposes hereof, "Involuntary
Termination" shall mean termination of employment that is
involuntary on the part of the Executive and that occurs for
reasons other than for Cause, Disability, or death.
(b) Voluntary Termination - For purposes hereof, "Voluntary
Termination" shall mean termination of employment that is
voluntary on the part of the Executive, and, in the judgment of
the Executive, is due to
(i) the assignment to the Executive of any duties inconsistent
with the Executive's title and status in effect prior to the
Change in Control or Threatened Change in Control, or an
adverse alteration in the nature or status of the Executive's
responsibilities at the Company from those in effect
immediately prior to the Change in Control or Threatened
Change in Control (other than any such alteration primarily
attributable to the fact that the Company may no longer be a
public company);
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(ii) a reduction by the Company of the Executive's base
salary from such salary in effect prior to the Change in
Control or Threatened Change in Control;
(iii) the relocation of the Company's principal executive
offices to a location outside of the Atlanta, Georgia
metropolitan area, or the Company's requiring the Executive
to be based anywhere other than the Company's principal
executive offices, except for required travel on the
Company's business to an extent substantially consistent
with the Executive's present business travel obligations;
(iv) the failure by the Company, without the Executive's
consent, to pay to the Executive any portion of the
Executive's then current compensation (including base salary
and annual bonus), or to pay to the Executive any portion
of an installment of deferred compensation under any deferred
compensation program of the Company, within seven (7) days of
the date such compensation is due;
(v) the failure by the Company to continue in effect any
compensation plan in which the Executive participates
immediately prior to the Change in Control or Threatened
Change in Control, which is material to the Executive's total
compensation, including but not limited to the Company's
annual bonus plan, Restated Stock Option and Incentive Award
Plan, or any substitute plans adopted prior to the Change in
Control or Threatened Change in Control, unless an equitable
arrangement (embodied in an ongoing substitute or alternative
plan) has been made with respect to such plan, or the failure
by the Company to continue the Executive's participation in
such plan (or in such substitute or alternative plan) on a
basis not materially less favorable, both in terms of the
amount of benefits provided and the level of the Executive's
participation relative to other participants, as existed at
the time of the Change in Control or Threatened Change in
Control; or
(vi) the failure by the Company to continue to provide the
Executive with benefits substantially similar to those enjoyed
by the Executive under any of the Company's life insurance,
medical, health and accident or disability plans in which
the Executive was participating at the time of the Change
in Control or Threatened Change in Control, the taking of
any action by the Company which would directly or indirectly
materially reduce any of such benefits or deprive the
Executive of any material fringe benefit enjoyed by the
Executive at the time of the Change in Control or Threatened
Change in Control.
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A termination shall not be considered voluntary within the meaning of this
Agreement if such termination is the result of Cause, Disability, or death
of the Executive. The Executive's continued employment shall not constitute
consent to, or a waiver of rights with respect to, any act or failure to act
relating to Voluntary Termination hereunder.
2. Benefits to be Provided - If the Executive becomes eligible
for benefits under Section 1 above, the Company shall pay or provide to the
Executive the compensation and benefits set forth in this Section 2,
provided, that if the Executive's Voluntary Termination is due to reasons
stated in Sections 1(b)(i) or 1(b)(iii) above, the payments or benefits
under subsections (a), (b) and (d) below shall only be provided for the
Protected Period and be paid in the manner described in Section 2(a) below.
(a) Salary - The Executive will continue to receive his current
salary (subject to withholding of all applicable taxes and any
amounts referred to in Section 2(b) below) for a period of
thirty-six (36) months from his date of termination in the same
manner as it was being paid as of the date of termination;
provided, however, that the salary payments provided for hereunder
shall be paid in a single lump sum payment, to be paid not later
than 30 days after his termination of employment; provided,
further, that the amount of such lump sum payment shall be
determined by taking the salary payments to be made and
discounting them to their Present Value on the date Executive's
employment is terminated. For purposes hereof, the Executive's
"current salary" shall be the highest rate in effect during the
six-month period prior to the Executive's termination.
(b) Health and Life Insurance Coverage - The health and life
insurance benefits coverage (including any executive medical
plan or split dollar insurance plan) provided to the Executive
at his date of termination shall be continued by the Company at
its expense at the same level and in the same manner as if his
employment had not terminated (subject to the customary changes
in such coverages if the Executive retires, reaches age 65 or
similar events), beginning on the date of such termination and
ending on the date twenty-four (24) months from the date of such
termination. Any additional coverages the Executive had at
termination, including dependent coverage, will also be continued
for such period on the same terms, to the extent permitted
by the applicable policies or contracts. Any costs the Executive
was paying for such coverages at the time of termination shall be
paid by the Executive by separate check payable to the Company
each month in advance. If the terms of any benefit plan referred
to in this Section do not permit continued participation by the
Executive, then the Company will arrange for other coverage at
its expense providing substantially similar benefits. The
coverages provided for in this Section shall be applied against
and reduce the period for which COBRA will be provided.
(c) Stock Options - As of the Executive's date of termination,
all outstanding stock options granted to the Executive under any
stock option plan or program maintained by the Company, shall
become 100% vested and immediately exercisable.
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(d) Effect of Death - In the event of the Executive's death after
he becomes entitled to benefits hereunder, the benefits shall be
continued for the remainder of the 24-month period to his spouse.
If the Executive is not married, the benefits shall cease on his
date of death.
IV. LIMITATION OF BENEFITS.
1. Limitation of Amount - Notwithstanding anything in this
Agreement to the contrary, if any of the compensation or benefits payable,
or to be provided, to the Executive by the Company under this Agreement are
treated as Excess Severance Payments (whether alone or in conjunction with
payments or benefits outside of this Agreement), the compensation and
benefits provided under this Agreement shall be modified or reduced in
the manner provided in Section 2 below to the extent necessary so that
the compensation and benefits payable or to be provided to the Executive
under this Agreement that are treated as Severance Payments, as well as any
compensation or benefits provided outside of this Agreement that are so
treated, shall not cause the Company to have paid an Excess Severance
Payment. In computing such amount, the parties shall take into account
all provisions of Code Section 280G, and the regulations thereunder,
including making appropriate adjustments to such calculation for amounts
established to be Reasonable Compensation. The determinations under this
Section IV.1 with regard to Excess Severance Payments shall be made by an
independent accounting firm selected by the Company and the Executive,
which shall provide detailed supporting calculations to the parties.
2. Modification of Amount - In the event that the amount of any
Severance Payments which would be payable to or for the benefit of the
Executive under this Agreement must be modified or reduced to comply with
this Article, the Executive shall direct which Severance Payments are to
be modified or reduced; provided, however, that no increase in the amount
of any payment shall be made without the consent of the Company.
3. Avoidance of Penalty Taxes - This Article shall be
interpreted so as to avoid the imposition of excise taxes on the Executive
under Section 4999 of the Code or the disallowance of a deduction to the
Company pursuant to Section 280G(a) of the Code with respect to amounts
payable under this Agreement. In connection with any Internal Revenue
Service examination, audit or other inquiry, the Company and the Executive
agree to take action to provide, and to cooperate in providing, evidence
to the Internal Revenue Service (and, if applicable, the state revenue
department) that the compensation and benefits provided under this
Agreement do not result in the payment of Excess Severance Payments.
4. Additional Limitation - In addition to the limits otherwise
provided in this Article, to the extent permitted by law the Executive may
in his sole discretion elect to reduce (or change the timing of) any
payments he may be eligible to receive under this Agreement to prevent
the imposition of excise taxes on the Executive under Section 4999 of
the Code or otherwise reduce or delay liability for taxes owed under
the Code.
6<PAGE>
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5. Pooling of Interests Accounting - During the two-year period
commencing on the date of this Agreement, the compensation and benefits
provided for in Section III.2 of this Agreement shall not be payable
following a transaction involving a Change in Control or Threatened Change
in Control if both of the following circumstances exist:
(a) The provisions contained in Article III of this Agreement
create conditions which would, in the opinion of the independent
certified public accountants of the Company, preclude the use of
pooling of interests accounting, and
(b) The completion of the transaction is conditioned upon the
use of pooling of interests accounting.
If both of the above described circumstances exist, then the
Company and the Executive shall promptly, reasonably and in good faith
endeavor to replace and supersede this Agreement with a new agreement which
(a) permits the transaction to be accounted for as a pooling of interests
and (b) gives the Executive the economic and other benefits provided for in
this Agreement.
V. MISCELLANEOUS.
1. Notices - Any notice to a party required or permitted to be
given hereunder shall be in writing and shall be deemed given when delivered
and shall be hand delivered, sent by facsimile transmission with request
for confirmation of receipt, or mailed registered or certified mail (return
receipt requested), to such party at such party's address as specified below,
or at such other address as such party shall specify by notice to the other.
If to the Company, to 296 Grayson Highway, Lawrenceville, Georgia
30245.
If to the Executive, to his last address shown on the records of
the Company. The Executive shall be responsible for providing the Company
with a current address.
2. Assignment - This Agreement shall inure to the benefit of and
shall be binding upon the parties hereto and their respective executors,
administrators, heirs, personal representatives and successors, but, except
as hereinafter provided, neither this Agreement nor any right hereunder
may be assigned or transferred by either party thereto, or by any
beneficiary or any other person, nor be subject to alienation, anticipation,
sale, pledge, encumbrance, execution, levy or other legal process of any
kind against the Executive, his beneficiary or any other person.
Notwithstanding the foregoing, any person or business entity succeeding
to substantially all of the business of the Company by purchase, merger,
consolidation, sale of assets or otherwise, shall be bound by and shall
adopt and assume this Agreement and the Company shall obtain the assumption
of this Agreement by such successor. Failure by the Company to obtain
7<PAGE>
<PAGE>
such assumption and agreement prior to the effective date of any such
succession shall be a breach of this Agreement and shall entitle Executive
to the same compensation and benefits upon Involuntary Termination or
Voluntary Termination as if a Change in Control or Threatened Change in
Control had occurred. If the Executive shall die while any amount would
still be payable to the Executive hereunder (other than amounts which, by
their terms, terminate upon the death of the Executive) if the Executive
had continued to live, all such amounts, unless otherwise provided herein,
shall be paid in accordance with the terms of this Agreement to the
executors, personal representatives or administrators of the Executive's
estate.
3. No Obligation to Fund - The agreement of the Company (or its
successor) to make payments to the Executive hereunder shall represent
solely the unsecured obligation of the Company (and its successor), except
to the extent the Company (or its successors) in its sole discretion elects
in whole or in part to fund its obligations under this Agreement pursuant
to a trust arrangement or otherwise.
4. Applicable Law - This Agreement shall be governed by and
construed and enforced in accordance with the laws of the State of Georgia.
5. Arbitration of Disputes; Expenses - All claims by the
Executive for compensation and benefits under this Agreement shall be
directed to and determined by the Board and shall be in writing. Any denial
by the Board of a claim for benefits under this Agreement shall be
delivered to the Executive in writing and shall set forth the specific
reasons for the denial and the specific provisions of this Agreement
relied upon. The Board shall afford a reasonable opportunity to the
Executive for a review of a decision denying a claim and shall further
allow the Executive to appeal to the Board a decision of the Board within
sixty (60) days after notification by the Board that the Executive's claim
has been denied. Any further dispute or controversy arising under or in
connection with this Agreement shall be settled exclusively by arbitration
in Atlanta, Georgia, in accordance with the commercial arbitration rules
of the American Arbitration Association then in effect. The arbitration
award shall be final and binding upon the parties and judgment upon the
award may be entered on the arbitrator's award in any court having
jurisdiction. In the event the Executive incurs legal fees and other
expenses in seeking to obtain or to enforce any rights or benefits provided
by this Agreement and is successful, in whole or in part, in obtaining or
enforcing any such rights or benefits through settlement, arbitration or
otherwise, the Company shall promptly pay the Executive's reasonable
legal fees and expenses incurred in enforcing this Agreement and the
fees of the arbitrator. Except to the extent provided in the preceding
sentence, each party shall pay its own legal fees and other expenses
associated with any dispute, provided, that the fee for the arbitrator
shall be shared equally.
6. Amendment - This Agreement may only be amended by a written
instrument signed by the parties hereto, which makes specific reference to
this Agreement.
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7. Severability - If any provision of this Agreement shall be
held invalid or unenforceable by any court of competent jurisdiction, such
holding shall not invalidate or render unenforceable any other provisions
hereof.
8. Other Benefits - Nothing in this Agreement shall limit or
replace the compensation or benefits payable to the Executive, or otherwise
adversely affect the Executive's rights, under any other benefit plan,
program or agreement to which the Executive is a party.
IN WITNESS WHEREOF, the Company has caused this Agreement to be
executed on its behalf by its duly authorized officers and the Executive
has hereunder set his hand, as of the date first above written.
NATIONAL VISION ASSOCIATES, LTD.
By:
Title:
(Corporate Seal)
Attest:
Secretary
EXECUTIVE
/s/
9
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SCHEDULE TO CHANGE IN CONTROL AGREEMENT
The following executive officers have executed this form agreement:
Michael J. Boden
Sandra M. Buffa
Mitchell Goodman
James W. Krause
D. Michael Lampman
Robert W. Stein
<PAGE>
AGREEMENT FOR
ASSIGNMENT OF LICENSE INTERESTS AND
RELATED MATTERS
Agreement made as of November 1, 1996 by and among National Vision
Associates, Ltd., a Georgia corporation ("NVAL"), NVAL Visioncare Systems
of California, Inc., a California corporation ("NVS-C"), NVAL Visioncare
Systems of North Carolina, Inc., a North Carolina corporation ("NVS-NC"),
Eyecare Leasing, Inc., an Alabama corporation ("ELI"), Stewart-Phillips,
Inc., a California corporation ("SPI"), James A. Stewart, O.D., an
optometrist licensed in the State of Alabama ("Stewart"), and Stephen F.
Phillips, O.D., an optometrist licensed in the State of Florida
("Phillips").
Recitals
A. NVAL provides vision care products and services in Wal-Mart stores
pursuant to a certain Vision Center Master License Agreement dated as of
June 16, 1994.
B. On or about November 19, 1990, NVAL and ELI executed an agreement
with respect to certain consulting and management services ELI was to
perform for the benefit of NVAL. This agreement was subsequently amended
by six addendums to the agreement.
C. NVAL entered into a master assignment agreement dated March 1, 1991
with SPI pursuant to which NVAL assigned to SPI certain rights of NVAL with
respect to certain optometric clinics located in California. Immediately
prior to the Closing Time (as defined below), NVAL and SPI will, subject
to the terms and conditions of this agreement, enter into a successor
master assignment agreement, which will confirm and modify the original
master assignment in various respects. Pursuant to the successor master
assignment agreement, NVAL will assign to SPI certain rights of NVAL
with respect to optometric clinics located in California and West Virginia.
D. Each of NVS-C and NVS-NC is an affiliate of NVAL.
E. Stewart and Phillips are officers and the principals of ELI and
of SPI.
F. NVAL and ELI wish to terminate their consulting agreement, subject
to the terms and conditions of this agreement. In connection with such
termination, NVAL wishes to purchase the goodwill and miscellaneous assets
associated with ELI's business.
G. Subject to the terms and conditions of this agreement, SPI intends
to assign to NVS-C, and NVS-C intends to receive from SPI, the interest of
SPI in the master assignment agreement, insofar as such master assignment
agreement applies to optometric clinics located in California. Subject to
the terms and conditions of this agreement, SPI intends to assign to NVS-NC,
and NVS-NC intends to receive from SPI, the interest of SPI in the master
assignment agreement, insofar as such master assignment agreement applies
to optometric clinics located in West Virginia.
1<PAGE>
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Agreement
The parties agree as follows:
1. Definitions. As used herein, the terms identified below in this
Section 1 shall have the meanings indicated.
A. The Act. The Knox-Keene Health Care Service Plan Act of
1975 of California.
B. Agreement. This Agreement, including all Exhibits and
Schedules listed on the Index.
C. Bill of Sale. Bill of sale whereby ELI conveys the
Miscellaneous Assets to NVAL. A copy of the Bill of Sale
is attached as Exhibit A.
D. California Assignment. Agreement by which SPI assigns the
California License Interest to NVS-C. A copy of the
California Assignment is attached as Exhibit B.
E. California License Interest. The right, title, and interest
of SPI under the Master Assignment Agreement with respect to
the Clinic Spaces (and accompanying Clinic Personalty) located
in California.
F. California Note. Promissory note in the amount of $2,655,000
made by NVAL in favor of SPI. A copy of the California Note
is attached as Exhibit C.
G. California Optometrist. An Optometrist whose Optometric
Sublicense covers a Clinic Space located in California.
H. Clinic Personalty. All "Clinic Personalty", as defined in
Section 4(a) of the Master Assignment Agreement.
I. Clinic Spaces. All "Clinic Spaces", as defined in the
recitals to the Master Assignment Agreement.
J. Closing. The completion of the transactions contemplated
hereby, as described in Section 7 hereof.
K. Closing Date. The later of (a) January 3, 1997 and (b) the
first day of the first month which is at least 5 days after
the date NVS-C receives notice from the Department that NVS-C
has been granted the License.
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L. Closing Time. 10:00 a.m. on the Closing Date, or the time
on the Closing Date at which the Closing actually occurs. All
events that are to occur at the Closing Time shall, for all
purposes, be deemed to occur simultaneously and to have
occurred at the close of business on the Closing Date.
M. Consulting and Management Services Agreement. Consulting and
Management Services Agreement dated as of December 18, 1990
by and between NVAL and ELI, including a First Addendum dated
as of December 18, 1990, Second Addendum dated as of March 1,
1991, Amended and Restated Second Addendum dated as of
March 1, 1991, Third Addendum dated as of January 1, 1992,
Fourth Addendum dated as of August 6, 1993, Fifth Addendum
dated as of October 1, 1993, and a Sixth Addendum dated as
of April 1, 1994. A copy of the Consulting Agreement is
attached as Exhibit D.
N. Credit Agreement. Credit agreement dated as of November 15,
1994 among NVAL, Wachovia Bank of Georgia, N.A., Trust
Company Bank, and Bank South, N.A.
O. Department. The California Department of Corporations.
P. Execution Date. November 1, 1996.
Q. Goodwill. All goodwill and know-how of and know-how ELI
associated with its business, including, without limitation,
contacts, information, files about, lists of practicing
optometrists in all states of the United States except
California and West Virginia, rights to (and all goodwill
associated with) the name "Eyecare Leasing", and any and
all Records (as defined in Section 5A6 hereof) insofar as
such Records relate to and concern ELI and Optometrists in
states other than California and West Virginia.
R. Goodwill Assignment. Assignment by ELI to NVAL of ELI's
interest in the Goodwill. A copy of the Assignment is
attached as Exhibit E.
S. Index. Index of Exhibits and Schedules to this Agreement,
as attached.
T. License. The license as a specialized health care service
plan for which NVS-C is applying under the Act.
U. License Interests. Collectively, the California License
Interest and the West Virginia License Interest.
3<PAGE>
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V. Master Assignment Agreement. Master Assignment Agreement by
and between NVAL and SPI dated as of June 16, 1994 and is
to be executed and delivered prior to the Closing Time
pursuant to Section 6A hereof. A copy of the Master
Assignment Agreement is attached as Exhibit F.
W. Miscellaneous Assets. The assets of ELI listed on
Schedule 1W.
X. Noncompetition Agreements. An agreement between NVAL and
Stewart and an agreement between NVAL and Phillips pursuant
to which each of Stewart and Phillips agrees not to engage
in certain activities competitive with NVAL. A copy of each
such agreement is attached as Exhibit G-1 and G-2.
Y. Noncompetition Notes. A promissory note in the principal
amount of $125,000 made by NVAL in favor of Stewart and a
promissory note in the amount of $125,000 made by NVAL in
favor of Phillips. A copy of each such note is attached
as Exhibit H-1 and H-2.
Z. Notes. Collectively, the California Note, the Noncompetition
Notes, the Termination and Goodwill Note, and the West
Virginia Note.
AA. NVAL Group. Individually and collectively, NVAL, NVS-C, and
NVS-NC.
AB. Optometric Sublicenses. (i) Sublicenses with optometrists
executed by SPI with respect to the Clinic Spaces and (ii)
sublicenses with optometrists executed by ELI as agent of
NVAL pursuant to the Consulting Agreement. A copy of the
standard forms of the Optometric Sublicenses is attached as
Exhibit I.
AC. Optometrist. An optometrist (or a professional corporation
controlled by such optometrist) who is a party to an
Optometric Sublicense.
AD. Person. An individual, a corporation, an association, a
partnership, a trust, a joint venture, an unincorporated
organization, or a governmental entity (or any department,
agency, or political subdivision thereof).
AE. Preclosing Payment. Payment in the amount of $100,000,
made by NVAL to ELI, in the circumstances described in and
pursuant to the provisions of Section 10 hereof.
AF. SPI Group. Individually and collectively, SPI, ELI, Stewart,
and Phillips.
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AG. Technical Assistance Agreements. An agreement between NVAL
and Stewart and an agreement between NVAL and Phillips for
the performance of certain technical services. A copy of
each such agreement is attached as Exhibit J-1 and J-2.
AH. Termination Agreement. Agreement by NVAL and ELI, terminating
the Consulting Agreement. A copy of the Termination Agreement
is attached as Exhibit K.
AI. Termination and Goodwill Note. Promissory note in the
principal amount of $1,105,000 made by NVAL in favor of ELI.
A copy of the Termination Note is attached as Exhibit L.
AJ. West Virginia Assignment. Agreement by which SPI assigns
the West Virginia License Interest to NVS-NC. A copy of the
West Virginia Assignment is attached as Exhibit M.
AK. West Virginia License Interest. The right, title, and
interest of SPI under the Master Assignment Agreement with
respect to the Clinic Spaces (and accompanying Clinic
Personalty) located in West Virginia.
AL. West Virginia Note. Promissory note in the principal amount
of $90,000 made by NVAL in favor of SPI. A copy of the West
Virginia Note is attached as Exhibit N.
2. Conveyances and Actions. On the terms and conditions hereinafter
set forth, (a) SPI shall transfer and assign to NVS-C, and NVS-C shall take
and accept, the California License Interest, (b) SPI shall transfer and
assign to NVS-NC, and NVS-NC shall take and accept, the West Virginia
License Interest, (c) ELI shall sell to NVAL, and NVAL shall purchase from
ELI, the Goodwill and the Miscellaneous Assets, (d) NVAL and ELI shall
terminate the Consulting Agreement, and (e) the other deliveries and
exchanges of documents as described in Section 7 hereof shall take place.
3. Purchase Price and Allocation.
A. Purchase Price. The purchase price for the (a) California
License Interest shall be $3,000,000, (b) West Virginia
License Interest shall be $100,000, (c) Goodwill shall be
$750,000, (d) termination of the Consulting Agreement shall
be $500,000, and (e) Miscellaneous Assets shall be $4,000,
in each case to be paid at the Closing, in the manner
described in Section 7 hereof. Each of (a),(b),(c) and (e)
shall be deemed capital assets.
B. Allocation. Each member of the NVAL Group, on the one hand,
and each member of the SPI Group, on the other hand, agrees
that the purchase price and allocation described in Section
3A hereof represents the results of their economic
negotiations and the present fair market value of each of
the assets described above.
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4. Representations and Warranties.
A. By SPI Group. Each of the SPI Group represents and warrants
(jointly and severally) to and for the benefit of each of the
NVAL Group as follows as of the Execution Date and the Closing
Date:
1. Existence and Authority. Each of SPI and ELI is a
corporation duly organized, validly existing and in good
standing under the laws of the state of its incorporation
with corporate power to own and operate its business and
properties and to carry on its business as presently
conducted. The execution, delivery and performance
of this Agreement has been duly authorized by all
corporate action required on the part of each of SPI
and ELI, and no further corporate action will be
necessary on the part of each of SPI and ELI to make
this Agreement valid and binding upon each of them.
2. Compliance with Laws. Each of SPI and ELI has fully
complied with all federal, state and local laws, rules
and regulations with respect to the recruitment of
optometrists. (The parties acknowledge and agree
that this representation and warranty does not extend
to the manner in which any Optometrist conducts his or
her practice.)
3. Enforceability. This Agreement constitutes a legal,
valid and binding obligation of each of SPI and ELI,
enforceable in accordance with its terms, and will not
result in the violation of any term or provision of
the articles of incorporation or by-laws of each of
SPI and ELI or the laws of any jurisdiction to which
either of SPI and ELI may be subject or of any agreement,
contract or indenture to which either of SPI or ELI is
a party or by which any of SPI, ELI or the License
Interests may be bound or affected; nor is any consent
or approval of any Person to the consummation of the
transactions herein described necessary or required,
other than as expressly provided herein.
4. Title. SPI has good and marketable title to and is the
sole and lawful owner of the License Interests with
full right, power and authority to transfer SPI's
rights, titles and interest in and to the California
License Interest and the West Virginia License Interest
to NVS-C and NVS-NC, respectively. (The parties
acknowledge and agree that the right, title, and
interest of SPI in the Clinic Spaces and Clinic
Personalty derive solely from SPI's status as a
party to the Master Assignment Agreement.) The
License Interests are currently and will be on the
Closing Date owned by SPI free and clear of any claim,
6<PAGE>
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lien, encumbrance, security interest,judgment,
mortgage, pledge, conditional sales agreement, contract
of sale, restriction or charge of any nature whatsoever,
or any other liability or encumbrance of any kind or
character. SPI has duly filed or will file when due
all tax returns and reports with respect to taxes
imposed upon the License Interests, or taxes imposed
on SPI which might create a lien or encumbrance relating
to any period prior to the Closing Date on the License
Interests or which would be a valid and subsisting
lien thereon after transfer thereof to NVS-C and NVS-NC,
respectively, and SPI has paid or will pay when due all
of such taxes. ELI has good and marketable title to
and is the sole and lawful owner of the Miscellaneous
Assets and the Goodwill with full right, power and
authority to transfer ELI's rights, titles and interest
in and to the Miscellaneous Assets and the Goodwill.
The Miscellaneous Assets and the Goodwill are currently
and will be on the Closing Date owned by ELI free and
clear of any claim, lien, encumbrance, security interest,
judgment, mortgage, pledge, conditional sales agreement,
contract of sale, restriction or charge of any nature
whatsoever, or any other liability or encumbrance of
any kind or character.
5. Condition. To the best of its knowledge, all the
Miscellaneous Assets will be on the Closing Date in
good condition and repair, subject to normal wear and
tear, suited for the use intended and operated in
conformity with all applicable laws, rules, regulations
and ordinances, including without limitation all
applicable building and zoning laws, ordinances and
regulations. To the best of its knowledge, there are
no defects or conditions which would cause the
Miscellaneous Assets to be or to become inoperable or
unsafe.
6. Litigation. To the best of its knowledge, there is
no claim, action, counterclaim, suit, proceeding or
investigation pending or threatened against any member
of the SPI Group, before any court or any arbitrator
or governmental agency affecting the License Interests,
the Clinic Personalty, any Optometric Sublicenses, or
the consummation of the transactions contemplated hereby.
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7. Licenses. Each of SPI and ELI possesses all franchises,
certificates, licenses, permits and other authorizations
from public, government, regulatory or judicial
authorities, free from restrictions not customary for
comparable businesses, that are necessary for the
ownership, maintenance and operation of (as to SPI only)
the License Interests, and each of SPI and ELI is not in
violation thereof. There are no approvals of
governmental, regulatory or judicial bodies necessary
for the consummation of the transactions contemplated
by this Agreement, other than as expressly provided
herein. (The parties acknowledge and agree that this
representation and warranty does not extend to the manner
in which any Optometrist conducts his or her practice.)
8. Optometric Sublicenses. Each Optometric Sublicense is
valid and in full force and effect in accordance with its
terms. A true and correct copy of the standard form of
each Optometric Sublicense is attached and made part of
Exhibit I. Schedule 4A8 accurately and completely sets
forth, for each Optometric Sublicense, (i) the parties
to the Optometric Sublicense, (ii) the date of its
execution, (iii) the location of the property which is
the subject of the Optometric Sublicense, (iv) license
fees payable thereunder, (v) the standard form on which
it is based, and (vi) any terms and provisions which
differ from those contained in the standard form
for such Optometric Sublicense. There has not been any
amendment, modification, or variation of any of the
Optometric Sublicenses other than as reflected on
Schedule 4A8 and each Optometric Sublicense truly,
accurately, and completely sets forth all terms and
conditions of the entire contractual relationship
between SPI and the Optometrist and between the
Optometrist and ELI, as agent for NVAL. Except as
disclosed on Schedule 4A8, there is not under any
Optometric Sublicense any default (or any claim of
default) by any party to such Optometric Sublicense, or
any event of default or event which with notice or
lapse of time or both would constitute a default by
such party and in respect of which such party has not
taken adequate steps to prevent a default on its part
from occurring. Neither SPI nor ELI has received (or
has notice of) any exercise (by any Person (including,
without limitation, any Optometrist)) of a right to
cancel or terminate (whether or not arising out of an
alleged default) any Optometric Sublicense. The
interest of each of SPI and ELI in and under each
Optometric Sublicense is unencumbered and is subject
to no present claim, contest, dispute, action or
threatened action at law or in equity or otherwise.
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Each of SPI and ELI has performed all the obligations
required to be performed by each of them under each of
the Optometric Sublicenses. SPI is lawfully in possession
of all property which is the subject of each Optometric
Sublicense. Except as disclosed in Schedule 4A8, no
options have been granted by SPI or ELI to others to
purchase, lease or otherwise acquire any interest in
the property, or any part thereof, which is the subject
of any Optometric Sublicense. Each Optometric Sublicense
for Clinic Space can, by its terms, be assigned to NVS-C
and NVS-NC as appropriate, without the consent of any
Person and without penalty or cost or decreased license
fees payable thereunder to NVS-C or NVS-NC, as
appropriate.
9. Compliance with Agreements. Each of SPI and ELI is
(and, at all times prior to the Execution Date, has been)
in compliance with all terms and conditions of each of
the predecessor master assignment agreement described in
Recital C hereof and the Consulting Agreement,
respectively.
10. No Contracts. Other than the Optometric Sublicenses and
except as disclosed in Schedule 4A10, each of SPI and
ELI is not a party to any contract, agreement, or
understanding whatsoever with respect to or in any way
relating to (or delegating duties or responsibilities
under) (i) the Master Assignment Agreement, (ii) the
Consulting Agreement, (iii) the Miscellaneous Assets, or
(iv) any space (including, without limitation, the
Clinic Spaces) subject to the Optometric Sublicenses.
11. Disclosure. The representations and warranties contained
in this Section 4A do not contain any untrue statement
of a fact or omit to state a fact necessary in order
to make the statements and information contained herein
not materially misleading.
12. Investment. Each of SPI and ELI (i) understands that
the Notes have not been, and will not be, registered
under the Securities Act of 1933, as amended, or under
any state securities laws, and are being offered and
sold in reliance upon federal and state exemptions for
transactions not involving any public offering, (ii)
is acquiring the applicable Notes solely for its own
account for investment purposes, and not with a view
to the distribution thereof (except to Stewart and
Phillips, as shareholders of each of SPI and ELI), (iii)
is a sophisticated investor with knowledge and
experience in business and financial matters, (iv) has
received certain information concerning NVAL and has
had the opportunity to obtain additional information
as desired in order to evaluate the merits and the
risks inherent in holding the Notes, (v) is able to
bear the economic risk and lack of liquidity inherent
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in holding the Notes, and (vi) is an "accredited
investor" as defined in Regulation D promulgated by
the Securities and Exchange Commission.
B. By NVAL Group. Each of the NVAL Group represents and warrants
(jointly and severally) to and for the benefit of each of the SPI
Group as follows as of the Execution Date and the Closing Date:
1. Existence and Authority. Each of NVAL, NVS-C, and NVS-NC
is a corporation duly organized, validly existing and in
good standing under the laws of the state of its
incorporation with corporate power to own and operate
its business and properties and to carry on its business
as presently conducted. The execution, delivery and
performance of this Agreement has been duly authorized
by all corporate action required on the part of each of
NVAL, NVS-C, and NVS-NC, and no further corporate action
will be necessary on the part of each of NVAL, NVS-C,
and NVS-NC to make this Agreement valid and binding
upon each of them.
2. Enforceability. This Agreement constitutes a legal,
valid and binding obligation of each of NVAL, NVS-C,
and NVS-NC, enforceable in accordance with its terms,
and will not result in the violation of any term or
provision of the articles of incorporation or by-laws
of each of NVAL, NVS-C, and NVS-NC or the laws of any
jurisdiction to which NVAL, NVS-C and NVS-NC may be
subject or of any agreement, contract or indenture to
which NVAL, NVS-C, or NVS-NC is a party or by which
any of NVAL, NVS-C, or NVS-NC may be bound or affected;
nor is any consent or approval of any Person to the
consummation of the transactions herein described
necessary or required, other than as expressly provided
herein.
3. Litigation. To the best of its knowledge, there is no
claim, action, counterclaim, suit, proceeding or
investigation pending or threatened against any member
of the NVAL Group, before any court or any arbitrator
or governmental agency affecting the License Interests,
the Clinic Personalty or the consummation of the
transactions contemplated hereby.
4. Disclosure. The representations and warranties contained
in this Section 4B do not contain any untrue statement
of a fact or omit to state a fact necessary in order
to make the statements and information contained herein
not materially misleading.
5. Compliance with Credit Agreement. NVAL is in compliance
with all terms and conditions of the Credit Agreement.
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5. Conduct of Business Pending Closing.
A. SPI Group. Each member of the SPI Group covenants and
agrees that, between the Execution Date and the Closing Date:
1. Business. The business and operations of each of SPI
and ELI shall, subject to Section 5A4 hereof, be
conducted only in the ordinary course and each of SPI
and ELI shall use its best efforts to preserve the
goodwill of Optometrists and other Persons having
business with each of SPI and ELI.
2. Miscellaneous Assets. ELI will maintain the
Miscellaneous Assets in the same condition as on the
Execution Date, ordinary wear and tear excepted.
3. Liens. SPI will not sell or transfer, mortgage, pledge
or subject to any lien, charge or other encumbrance any
asset included in the License Interests.
4. Sublicenses. Each of SPI and ELI will not enter into
any (a) new optometric sublicenses or (b) amendments
to any of the Optometric Sublicenses, without the prior
written consent of a member of the NVAL Group.
5. Cooperation. Each member of the SPI Group shall fully
cooperate with NVS-C in connection with its (a)
application to obtain the License and (b) request to
the Department that the Department approve the
transaction whereby the California License Interest is
transferred by SPI to NVS-C. Such cooperation shall
include, without limitation, (a) promptly assisting
NVS-C in (i) responding to requests by the Department
for information or documentation, and (ii) obtaining
from the California Optometrists executed provider
agreements with NVS-C (in form and substance satisfactory
to NVS-C and the Department), (b) promptly executing and
delivering documents or instruments requested by NVS-C
or the Department, and (c) traveling to California,
when and as requested by NVS-C, to meet with, as
appropriate, (i) representatives of the Department,
(ii) California Optometrists, and (iii) representatives
of NVS-C. All such cooperation shall be at the cost
and expense of SPI except that, if SPI incurs out of
pocket expenses on or after November 1, 1996 in
connection with such cooperation, such expenses shall
be reimbursed by a member of the NVAL Group.
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6. Access. Each of SPI and ELI will permit representatives
of any member of the NVAL Group to have full access to
all books, records, software, hardware, contracts, files,
and documents (all the foregoing, collectively, "Records")
and premises and personnel relating to SPI, ELI, or their
respective businesses, including, without limitation,
Records relating to the License Interests, the Optometric
Sublicenses, and any Optometrist. Neither the granting
of such access nor the information obtained from any
Records shall impair or in any way affect the
representations, warranties, and covenants made in this
Agreement by any member of the SPI Group or the rights
of any member of the NVAL Group with respect thereto,
under this Agreement or otherwise.
7. Notice of Developments. Each member of the SPI Group
will give prompt written notice to NVAL of any material
adverse development causing a breach of any of its own
representations and warranties in Section 4A hereof. No
disclosure by any party pursuant to this Section 5A7,
however, shall be deemed to prevent or cure any
misrepresentation, breach of warranty, or breach of
covenant.
8. Exclusivity. Each of SPI and ELI will not (a) solicit,
initiate, or encourage the submission of any proposal
or offer from any Person relating to the acquisition of
any capital stock or other voting securities, or any
substantial portion of the assets, of SPI or ELI
(including any acquisition structured as a merger,
consolidation, or share exchange) or any sale or
disposition of any, all, or part of the License
Interests, or the Optometric Sublicenses, or (b)
participate in any discussions or negotiations regarding,
furnish any information with respect to, assist or
participate in, or facilitate in any other manner any
effort or attempt by any Person to do or seek any of
the foregoing. Each of SPI and ELI will notify NVAL
immediately if any Person makes any proposal, offer,
inquiry, or contact with respect to any of the foregoing.
9. Employee. SPI and Stewart and Phillips shall assist in
NVS-C's obtaining the services of Scott Swanson, O.D.,
as Director of Quality Assurance for NVS-C, on terms
satisfactory to NVS-C.
10. General. Each member of the SPI Group shall exercise
its best efforts to take all action and to do all things
necessary, proper, and advisable to consummate the
transactions contemplated herein.
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B. NVAL Group. Each member of the NVAL Group covenants and
agrees that, between the Execution Date and the Closing Date:
1. Notice of Developments. Each member of the NVAL Group
will give prompt written notice to the SPI Group of any
material adverse development causing a breach of any of
its own representations and warranties in Section 4B
hereof. No disclosure by any party pursuant to this
Section 5B1, however, shall be deemed to prevent or
cure any misrepresentation, breach of warranty, or
breach of covenant.
2. Capital Contributions. NVAL shall cause each of the
California Note and West Virginia Note to be contributed
to the capital of each of NVS-C and NVS-NC, respectively.
3. General. Each member of the NVAL Group shall exercise
its best efforts to take all action and to do all things
necessary, proper, and advisable to consummate the
transactions contemplated herein.
6. Conditions to Closing.
A. In Favor of NVAL Group. The obligation of each member of the
NVAL Group to consummate the transactions contemplated hereby
is subject to the satisfaction, at or before the Closing Time,
of the following conditions:
1. Representations and Warranties. All representations and
warranties made in Section 4A hereof shall be true on
and as of the Closing Date as though such representations
and warranties were made on and as of the Closing Date.
2. Covenants. Each member of the SPI Group shall have
performed and complied in all material respects with all
covenants and agreements and satisfied all conditions
that each such party is required by this Agreement to
perform and comply with before or at the Closing.
3. Documents. All documents and instruments required to be
delivered by each member of the SPI Group pursuant to
this Agreement prior to or at the Closing Time shall
have been delivered prior to or at such time.
4. License. NVS-C shall have obtained the License on terms
and conditions satisfactory to it.
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5. Department. The Department shall have consented, on
terms and conditions satisfactory to NVS-C, to the
transaction whereby the California License Interest is
transferred by SPI to NVS-C.
6. Credit Agreement. The banks which are parties to the
Credit Agreement have either (a) approved this Agreement
and the transactions contemplated hereby or (b) have
executed an amendment to the Credit Agreement which,
either expressly or by implication, permits each member
of the NVAL Group to consummate the transactions
contemplated hereby without there being a breach or
default under the Credit Agreement by NVAL, in either
case on terms and conditions satisfactory to each member
of the NVAL Group.
7. Master Assignment Agreement. SPI shall have, prior to
the Closing Time, executed the Master Assignment
Agreement and delivered such agreement to NVAL.
8. Actions. All actions to be taken by each member of the
SPI Group in connection with the transactions contemplated
herein and all certificates, opinions, instruments, and
other documents required to consummate the transactions
contemplated herein will be reasonably satisfactory in
form and substance to each member of the NVAL Group.
B. In Favor of SPI Group. The obligation of each member of the
SPI Group to consummate the transactions contemplated hereby
is subject to the satisfaction, at or before the Closing Time,
of the following conditions:
1. Representations and Warranties. All representations and
warranties made in Section 4B hereof shall be true on and
as of the Closing Date as though such representations and
warranties were made on and as of the Closing Date.
2. Covenants. Each member of the NVAL Group shall have
performed and complied in all material respects with all
covenants and agreements and satisfied all conditions
that each such party is required by this Agreement to
perform and comply with before or at the Closing.
3. Documents. All documents, payments, and instruments
required to be delivered by each member of the NVAL
Group pursuant to this Agreement prior to or at the
Closing Time shall have been delivered prior to or at
such time.
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4. Actions. All actions to be taken by each member of the
NVAL Group in connection with the transactions
contemplated herein and all certificates, opinions,
instruments, and other documents required to consummate
the transactions contemplated herein will be reasonably
satisfactory in form and substance to each member of
the SPI Group.
7. Closing.
A. Time and Place. The Closing will take place on the Closing
Date at the offices of NVAL at 296 Grayson Highway,
Lawrenceville, Georgia.
B. Documents and Instruments. The following items will be
delivered at the Closing Time:
1. Deliveries by SPI. SPI shall execute and deliver:
a. California Assignment. The California Assignment to
NVS-C.
b. West Virginia Assignment. The West Virginia
Assignment to NVS-NC.
2. Delivery by ELI. ELI shall execute and deliver to NVAL
(a) the Goodwill Assignment and (b) the Bill of Sale.
3. Deliveries by SPI Group. The SPI Group will deliver to
NVAL:
a. Opinion Letter. An opinion letter of Doffermyre
Shields Canfield Knowles & Devine, counsel for the
SPI Group, dated as of the Closing Date, in the
form of Exhibit O.
b. Closing Certificate. A certificate substantially
in the form of Exhibit P, dated as of the Closing
Date, and signed by each of Stewart and Phillips, to
the effect that the representations and warranties
of the SPI Group contained in Section 4A hereof are
true and correct on and as of the Closing Date.
c. Resolutions. Certified copies of resolutions of the
Board of Directors and the shareholders of each of
SPI and ELI authorizing the execution, delivery,
and performance (by SPI and ELI, respectively) of
this Agreement.
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4. Delivery by NVS-C. NVS-C will deliver the executed
California Note to SPI.
5. Delivery by NVS-NC. NVS-NC will deliver the executed
West Virginia Note to SPI.
6. Deliveries by NVAL. NVAL will execute and deliver:
a. Termination and Goodwill Note. The Termination and
Goodwill Note to ELI.
b. Noncompetition Notes. A Noncompetition Note to
Stewart and a Noncompetition Note to Phillips.
c. Cash Payments. The following payments (made by
corporate check):
i. $345,000 to SPI, with respect to the California
License Interest.
ii. $10,000 to SPI, with respect to the West Virginia
License Interest.
iii. $85,000 (less one half the Preclosing Payment
(if any) which may have been made pursuant to
Section 10 hereof) to ELI, with respect to the
Goodwill.
iv. $60,000 (less one half the Preclosing Payment
(if any) which may have been made pursuant to
Section 10 hereof) to ELI, with respect to the
termination of the Consulting Agreement.
v. $4,000 for the Miscellaneous Assets.
d. Closing Certificate. A certificate substantially in
the form of Exhibit Q, dated as of the Closing Date,
and signed by an officer of NVAL, to the effect that
the representations and warranties of the NVAL Group
contained in Section 4B hereof are true and correct
on and as of the Closing Date.
7. Exchanges.
a. Termination Agreement. NVAL and ELI will execute and
exchange the Termination Agreement.
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b. Noncompetition Agreements. NVAL and Stewart will
execute and exchange and NVAL and Phillips will
execute and exchange the applicable Noncompetition
Agreement.
c. Technical Assistance Agreements. NVAL and Stewart
will execute and exchange and NVAL and Phillips will
execute and exchange the applicable Technical
Assistance Agreement.
8. Indemnification.
A. Obligation. Each member of the SPI Group on the one hand and
of the NVAL Group on the other hand ("Indemnitor") jointly
and severally agrees to indemnify and hold harmless each member
of the other group, its affiliates, officers and directors
(hereinafter collectively, "Indemnitee") from and against and
in respect of any and all loss, damage, liability, cost
and expense, including reasonable attorney's fees and amounts
paid in settlement, suffered or incurred by any Indemnitee by
reason of or arising out of any misrepresentation, breach of
warranty or breach or nonfulfillment of any agreement of the
other party hereto contained in this Agreement or in any
certificate, schedule, instrument or document delivered
pursuant to the provisions of this Agreement. It is expressly
agreed that, subject to the provisions of Section 12N hereof,
no member of the NVAL Group, nor its successors and assigns,
shall have the right to offset its obligations under the Notes.
B. Claims. If any claim or action by a third party arises after
the Closing Date for which Indemnitor may be liable under the
terms hereof, then Indemnitee shall notify Indemnitor within
a reasonable time after such claim or action arises and is
known to Indemnitee, and shall give Indemnitor a reasonable
opportunity:
1. to conduct any proceedings or negotiations in connection
therewith and necessary or appropriate to defend
Indemnitee;
2. to take all other required steps or proceedings to settle
or defend any such claim or action; and
3. to employ counsel to contest any such claim or action
in the name of Indemnitee or otherwise.
The expenses of all proceedings, contests or lawsuits with
respect to such claims or actions shall be borne by Indemnitor.
If Indemnitor wishes to assume the defense of such claim or
action, then Indemnitor shall give written notice to
Indemnitee within 30 days after notice from Indemnitee
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of such claim or action (unless the claim or action reasonably
requires a response in less than 30 days after the notice
is given to Indemnitor, in which event Indemnitor shall notify
Indemnitee at least 10 days prior to such reasonably required
response date), and Indemnitor shall thereafter assume the
defense of any such claim or liability, through counsel
reasonably satisfactory to Indemnitee; provided that
Indemnitee may participate in such defense at its own expense
and shall, in any event, have the right to control the
defense of the claim or action.
C. Defense. If Indemnitor does not assume the defense of, or
if after so assuming Indemnitor fails to defend, any such
claim or action, then Indemnitee may defend against such
claim or action in such manner as it may deem appropriate
(provided that Indemnitor may participate in such defense
at its own expense) and Indemnitee may settle such claim or
litigation on such terms as it may deem appropriate and in
good faith, and Indemnitor shall promptly reimburse Indemnitee
for the amount of all expenses, legal and otherwise,
reasonably and necessarily incurred by Indemnitee in
connection with the defense against the settlement of such
claim or action. If no settlement of such claim or litigation
is made, Indemnitor shall satisfy any judgment rendered with
respect to such claim or in such action, before Indemnitee
is required to do so, and pay all expenses, legal or
otherwise, reasonably and necessarily incurred by Indemnitee
in the defense of such claim or litigation.
D. Judgment. If a judgment is rendered against Indemnitee in
any action covered by the indemnification hereunder, or any
lien in respect of such judgment attaches to any of the
assets of Indemnitee, Indemnitor shall immediately upon
such entry or attachment pay such judgment in full or
discharge such lien unless, at the expense and direction of
Indemnitor, an appeal is taken under which the execution of
the judgment or satisfaction of the lien is stayed. If and
when a final judgment is rendered in any such action,
Indemnitor shall forthwith pay such judgment or discharge
such lien before Indemnitee is compelled to do so.
9. Bulk Sales Act and Non-Assumption of Liabilities.
A. Bulk Sales Act. Each of SPI and ELI does hereby jointly and
severally indemnify and hold harmless each member of the NVAL
Group against any claims made by creditors of SPI or ELI,
including but not limited to any losses, reasonable expenses
and attorney fees which are incurred by any member of the NVAL
Group as the result of any litigation, action, or proceeding
which may arise out of any failure of SPI or ELI to comply
with the bulk sales act of either California or of Georgia.
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B. Non-Assumption of Liabilities. Except and only except as
expressly stated to the contrary in this Agreement, no member
of the NVAL Group does or will hereby assume or be responsible
for any liability or obligation whatsoever of any of the
members of the SPI Group.
10. Preclosing Payment. If and only if the Closing Date has not
occurred on or before January 3, 1997, then NVAL shall on such date deliver
the Preclosing Payment to ELI. If the Closing subsequently occurs pursuant
to this Agreement, then the Preclosing Payment shall be applied in the manner
described in Section 7B6 hereof. If the Closing does not subsequently
occur pursuant to this Agreement, then the Preclosing Payment shall be
returned by ELI to NVAL no later than March 1, 1997. Failure by ELI to
timely return such payment shall be deemed a default by ELI under the
Consulting Agreement.
11. Termination.
A. Termination of Agreement. Certain of the parties hereto
may terminate this Agreement as provided below:
1. The parties hereto may terminate this Agreement by
written consent at any time prior to the Closing.
2. Any member of the NVAL Group may terminate this
Agreement by giving written notice to SPI at any time
prior to the Closing (a) in the event any member of
the SPI Group has breached any material representation,
warranty, or covenant contained in this Agreement in
any material respect, NVAL has notified SPI of the
breach, and the breach has continued without cure for
a period of 30 days after the notice of breach or (b)
if the Closing shall not have occurred on or before
February 28, 1997, by reason of the failure of any
condition precedent under Section 6A hereof (unless
the failure results primarily from any member of the
NVAL Group itself breaching any representation, warranty,
or covenant contained in this Agreement).
3. Any member of the SPI Group may terminate this Agreement
by giving written notice to NVAL at any time prior to
the Closing (a) in the event any member of the NVAL
Group has breached any material representation, warranty,
or covenant contained in this Agreement in any material
respect, SPI has notified NVAL of the breach, and the
breach has continued without cure for a period of
30 days after the notice of breach or (b) if the Closing
shall not have occurred on or before February 28, 1997,
by reason of the failure of any condition precedent
under Section 6B hereof (unless the failure results
primarily from any member of the SPI Group itself
breaching any representation, warranty, or covenant
contained in this Agreement).
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B. Effect of Termination. If any party hereto terminates this
Agreement pursuant to Section 11A hereof, all rights and
obligations of the parties hereunder shall terminate without
any liability of any party to any other party (except for
any liability pursuant to Section 10 hereof or of any
party then in breach).
12. Miscellaneous Provisions.
A. Survival of Representations. All statements contained herein
or in any certificate or other instrument delivered by or
on behalf of any of the parties hereto or in connection with
the transactions contemplated hereby shall be deemed
representations, warranties, covenants and agreements
made by the respective parties to this Agreement and shall
survive the consummation of the transactions contemplated
herein.
B. Specific Performance. The parties acknowledge that irreparable
damage would result if this Agreement is not specifically
enforced and that, therefore, the rights and obligations of
the parties under this Agreement may be enforced by a decree
of specific performance issued by a court of competent
jurisdiction. Such remedy shall, however, not be exclusive and
shall be in addition to any other remedies which any party may
have under this Agreement or otherwise.
C. Waiver of Right to Rescind. If the transactions contemplated
hereby are consummated, each party hereto waives
(notwithstanding any breach by any party of its representations,
warranties, or covenants set forth in this Agreement) any
rights it may have to rescind either this Agreement or the
transactions contemplated hereby. The foregoing waiver shall
not affect any other rights or remedies available to the
parties under this Agreement or otherwise.
D. Notices. This Section governs the transmission of all notices.
1. Address.
a. To Any Member of the NVAL Group. All notices to any
member of the NVAL Group must be delivered to 296
Grayson Highway, Lawrenceville, Georgia 30245, Attn:
Vice President, General Counsel, or such other
address of which such party notifies SPI.
20<PAGE>
<PAGE>
b. To Any Member of the SPI Group. All notices to any
member of the SPI Group must be delivered to
__________________ with a copy to: Everette
Doffermyre, Esq., Doffermyre Shields Canfield
Knowles & Devine, 1355 Peachtree Street, Suite 1600,
Atlanta, Georgia 30309, or to such other address of
which such party has notified NVAL.
2. Manner of Delivery. All notices shall be hand delivered
or sent by (a) registered or certified mail, postage
prepaid, with return receipt requested; or (b) recognized
overnight courier service.
3. Effective Time of Notice. Notices shall be deemed
delivered (a) upon receipt if delivered by hand; (b)
three business days after mailing if mailed (provided
that any such mailed notice is sent by certified mail,
postage prepaid, with return receipt requested and
a return receipt is received); or (c) one business day
after deposit with an overnight courier service if
delivered by overnight courier.
E. Pronouns. The use of the neuter singular pronoun to refer to
any party shall be deemed a proper reference even though
such party may be an individual, group of individuals,
association, partnership, or corporation or groups of
corporations. The necessary grammatical changes required
to make the provisions of this Agreement apply in the plural
sense where a party consists of more than one Person shall
in all instances be assumed as though in each case fully
expressed.
F. Applicable Law. Subject to the following sentence, this
Agreement shall be governed by, construed, and enforced in
accordance with the laws of Georgia without giving effect
to its conflict of laws principles or rules. Notwithstanding
the foregoing, each of the California Assignment and the
California Note shall be governed by, construed, and enforced
in accordance with the laws of California without giving
effect to its conflict of laws principles or rules.
G. Expenses. Whether or not the transactions contemplated
hereby are consummated, the parties shall pay their own
respective expenses.
H. Attorney Fees. In the event of any litigation arising out
of this Agreement, the non-prevailing party will pay the
expenses of the prevailing party, including, without
limitation, reasonable attorney and accounting fees.
21<PAGE>
<PAGE>
I. Time of Essence. Time is of the essence under this Agreement,
including the Notes.
J. Headings. The headings in this Agreement are solely for
convenience of reference and shall be given no effect in the
construction or interpretation of this Agreement.
K. Publicity. No member of the SPI Group shall issue any press
release or make any other public statement relating to or
connected with or arising out of this Agreement or the
matters contained herein, without obtaining the prior
written approval of NVAL of the contents and the manner of
presentation and publication thereof. At least one day
prior to issuing any press release concerning this
Agreement, NVAL shall provide a proposed draft thereof to
ELI and shall in good faith consider any comments ELI
may have, provided that (1) such comments are provided to
NVAL within 24 hours of delivery of the press release by
NVAL to ELI and (2) NVAL shall have no legal obligation
to revise the press release.
L. Severability. Any term or provision of this Agreement that
is invalid or unenforceable in any situation in any
jurisdiction shall not affect the validity or enforceability
of the remaining terms and provisions hereof or the validity
or enforceability of the offending term or provision in any
other situation or in any other jurisdiction.
M. No Third Party Beneficiary. This Agreement does not confer
any rights or remedies upon any Person not a party hereto.
N. Arbitration. Any dispute or controversy arising out of,
based on, or in connection with this Agreement, or any
transaction contemplated hereby shall, subject to the other
provisions of this Section 12N, be settled by arbitration
to be held in Atlanta, Georgia in accordance with the rules
then in effect of the American Arbitration Association or
any successor thereto. The arbitrator may grant injunctions
or other relief (including, by way of example and not by
limitation, allowing a party hereto to offset its
obligations under or exercise rights of recoupment with
respect to the Notes or other instruments) in such dispute
or controversy. The decision of the arbitrator shall be
final, conclusive, and binding on the parties to the
arbitration. Judgment may be entered on the arbitrator's
decision in any court having jurisdiction, and the parties
irrevocably consent to the jurisdiction of the Georgia
courts for this purpose. In any such arbitration, the
parties waive personal service of any process or other
papers and agree that service thereof may be made in
accordance with Section 12D hereof. The losing party in
such arbitration shall pay all the costs and expenses of
such arbitration and all the reasonable counsel fees
and expenses of all the other parties thereto.
Notwithstanding the foregoing provisions of this Section 12N,
any dispute or controversy arising out of, based on, or in
connection with either or both of the Noncompetition
22<PAGE>
<PAGE>
Agreements shall be brought in the forum described in Section
4I of each of the Noncompetition Agreements.
O. Further Assurances. From time to time subsequent to the
Closing Date, each party shall at the request of any other
party execute and deliver such additional instruments,
conveyances, transfers and other assurances and take such
other actions as the requesting party may reasonably request
in order to complete the transactions contemplated by this
Agreement and to carry out its provisions.
P. Assignment. No member of the SPI Group may assign its
rights or delegate its duties under this Agreement.
Q. Entire Agreement; Amendments. This Agreement contains the
entire understanding of the parties with respect to the
subject matter contained herein. This Agreement supersedes
all prior agreements and understandings between the parties
with respect to such subject matter. This Agreement may be
modified only by an agreement in writing signed by the
parties hereto. The terms "hereof, "hereunder" and similar
terms refer to the specified provision or provisions of
this Agreement for Assignment of License Interests and
Related Matters.
IN WITNESS WHEREOF, the parties have executed this Agreement for
Assignment of License Interests and Related Matters as of the Execution
Date.
NATIONAL VISION ASSOCIATES, LTD. EYECARE LEASING, INC.
By /s/ Mitchell Goodman By /s/ James A. Stewart, O.D.
Name: Mitchell Goodman Name: James A. Stewart, O.D.
Title: Vice President Title: President
NVAL VISIONCARE SYSTEMS STEWART-PHILLIPS, INC.
OF CALIFORNIA, INC.
By /s/ Mitchell Goodman By /s/ James A. Stewart, O.D.
Name: Mitchell Goodman Name: James A. Stewart, O.D.
Title: Vice President Title: President
NVAL VISIONCARE SYSTEMS
OF NORTH CAROLINA, INC.
By /s/ Mitchell Goodman /s/ James A. Stewart, O.D.
Name: Mitchell Goodman James A. Stewart, O.D.
Title: Vice President
/s/ Stephen F. Phillips, O.D.
Stephen F. Phillips, O.D.
23
<PAGE>
<PAGE>
AGREEMENT FOR
ASSIGNMENT OF LICENSE INTERESTS AND
RELATED MATTERS
INDEX TO EXHIBITS AND SCHEDULES
EXHIBITS: SCHEDULES:
A Bill of Sale 1W Miscellaneous Assets
B California Assignment 4A8 Optometric Sublicenses
C California Note 4A10 Contracts
D Consulting Agreement
E Goodwill Assignment
F Master Assignment Agreement
G-1 Noncompetition Agreement
between NVAL and Stewart
G-2 Noncompetition Agreement
between NVAL and Phillips
H-1 Noncompetition Note in favor
of Stewart
H-2 Noncompetition Note in favor
of Phillips
I Optometric Sublicenses
J-1 Technical Assistance Agreement
between NVAL and Stewart
J-2 Technical Assistance Agreement
between NVAL and Phillips
K Termination Agreement
L Termination and Goodwill Note
M West Virginia Assignment
N West Virginia Note
O Opinion of Counsel for SPI Group
P Closing Certificate by Stewart
and Phillips
Q Closing Certificate by Officer
of NVAL
<TABLE>
<CAPTION>
EXHIBIT 11
NATIONAL VISION ASSOCIATES, LTD. AND SUBSIDIARIES
STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS
Year Ended Year Ended Year Ended
December 31, December 30, December 28,
1994 1995 1996
------------ ------------ ------------
<S> <C> <C> <C>
NET INCOME (LOSS) $ 351,000 $(1,520,000) $ 3,480,000
=========== =========== ===========
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING 20,422,808 20,537,799 20,618,349
Common stock equivalents using the
treasury stock method 242,449 -0- (a) 88,280
----------- ----------- -----------
AVERAGE COMMON SHARES
OUTSTANDING, as adjusted 20,665,257 20,537,799 20,706,629
=========== ========== ===========
NET INCOME (LOSS) PER
COMMON SHARE $ 0.02 $ (0.07) $ 0.17
=========== ========== ===========
</TABLE>
(a) Common stock equivalents are excluded from the calculation of weighted
average shares outstanding during 1995 as the effect would
be anti-dilutive.
EXHIBIT 21
SUBSIDIARIES OF THE REGISTRANT
1. Mexican Vision Associates, S.A. de C.V.
2. Mexican Vision Associates Operadora, S. de R.L. de C.V.
3. Mexican Vision Associates Servicios, S. de R.L. de C.V.
4. NVAL Healthcare Systems, Inc.
5. NVAL Visioncare Systems of California, Inc.
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation
of our report included in this Form 10-K, into the Company's previously
filed Registration Statement File No. 33-71882.
/s/ Arthur Andersen LLP
Atlanta, Georgia
February 10, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONDENSED CONSOLIDATED BALANCE SHEET AT DECEMBER 28, 1996 (UNAUDITED) AND
THE CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS FOR THE 12 MONTHS ENDED
DECEMBER 28, 1996 (UNAUDITED) AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000868263
<NAME> NATIONAL VISION ASSOCIATES, LTD.
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-28-1996
<PERIOD-START> DEC-31-1995
<PERIOD-END> DEC-28-1996
<CASH> 1,110
<SECURITIES> 0
<RECEIVABLES> 4,517
<ALLOWANCES> 353
<INVENTORY> 23,970
<CURRENT-ASSETS> 30,428
<PP&E> 70,556
<DEPRECIATION> 27,206
<TOTAL-ASSETS> 74,264
<CURRENT-LIABILITIES> 16,626
<BONDS> 0
0
0
<COMMON> 206
<OTHER-SE> 29,700
<TOTAL-LIABILITY-AND-EQUITY> 74,264
<SALES> 160,376
<TOTAL-REVENUES> 160,376
<CGS> 76,692
<TOTAL-COSTS> 76,692
<OTHER-EXPENSES> 76,920
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,084
<INCOME-PRETAX> 4,680
<INCOME-TAX> 1,200
<INCOME-CONTINUING> 3,480
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,480
<EPS-PRIMARY> .17
<EPS-DILUTED> .17
</TABLE>
