<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarterly Period Ended March 31, 1997 Commission File Number 0-21068
-------------- -------
SIGHT RESOURCE CORPORATION
- --------------------------------------------------------------------------------
(Exact name of Registrant as specified in its charter)
Delaware 04-3181524
- --------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
67 South Bedford Street
Burlington, MA 01803
- --------------------------------------------------------------------------------
(Address of principal executive offices)
617-229-1100
--------------------------------------------------------------------------
(Issuer's telephone number)
N/A
- --------------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed
since the last report)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Securities Exchange Act of 1934 during the past 12 months (or
for such shorter period that the issuer was required to file such reports), and
(2) has been subject to such filing requirements for the past 90 days.
Yes X No
--- ---
APPLICABLE ONLY TO CORPORATE ISSUERS:
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date:
On April 28, 1997, 8,618,704 shares of common stock, par value $0.01 per share,
were outstanding.
TOTAL PAGES 13
EXHIBIT INDEX AT PAGE 12
<PAGE> 2
<TABLE>
SIGHT RESOURCE CORPORATION
INDEX
<CAPTION>
PART I. FINANCIAL INFORMATION PAGE
----
<S> <C> <C>
Item 1 Financial Statements
Consolidated Balance Sheets as of March 31, 1997 and
December 31, 1996 3
Consolidated Statements of Operations for the Three
Months Ended March 31, 1997 and 1996 4
Consolidated Statements of Cash Flows for the Three
Months Ended March 31, 1997 and 1996 5
Notes to Consolidated Financial Statements 6
Item 2 Management's Discussion and Analysis of Financial Condition and
Results of Operations 9
<CAPTION>
PART II. OTHER INFORMATION
Item 6 Exhibits and Reports on Form 8-K 12
Signatures 13
</TABLE>
2
<PAGE> 3
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
<TABLE>
SIGHT RESOURCE CORPORATION
Consolidated Balance Sheets
(In thousands, except share and per share data)
<CAPTION>
March 31, December 31,
1997 1996
-------- ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 8,252 $ 9,924
Accounts receivable, net of allowance
of $381 and $353, respectively 1,875 1,405
Inventories 2,395 2,489
Prepaid expenses and other current assets 967 286
Assets held for sale 360 458
-------- --------
Total current assets 13,849 14,562
-------- --------
Property and equipment 6,470 6,030
Less accumulated depreciation (1,414) (1,095)
-------- --------
Net property and equipment 5,056 4,935
-------- --------
Other assets:
Intangible assets, net 11,604 11,768
Other assets 847 165
-------- --------
Total other assets 12,451 11,933
-------- --------
$ 31,356 $ 31,430
======== ========
LIABILITIES & STOCKHOLDERS' EQUITY
Current liabilities:
Revolving note payable $ 1,475 $ 475
Current portion of long term debt 1,400 800
Accounts payable 1,384 1,843
Accrued expenses 4,395 3,670
-------- --------
Total current liabilities 8,654 6,788
-------- --------
Non-current liabilities:
Long term debt, less current maturities --- 1,600
Other liabilities 280 276
-------- --------
Non-current liabilities 280 1,876
-------- --------
Stockholders' equity:
Preferred Stock, $.01 par value. Authorized 5,000,000
shares; no shares issued and outstanding --- ---
Common Stock, $.01 par value. Authorized 20,000,000
shares; issued 8,648,768 at March 31, 1997
and December 31, 1996. 86 86
Additional paid-in capital 37,690 37,510
Common stock issuable, 71,181 shares at March 31,
1997 and December 31, 1996 432 432
Treasury stock at cost
(shares at March 31, 1997: 30,600) (137) ---
Accumulated deficit (15,649) (15,262)
-------- --------
Total stockholders' equity 22,422 22,766
-------- --------
$ 31,356 $ 31,430
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE> 4
SIGHT RESOURCE CORPORATION
<TABLE>
Consolidated Statements of Operations
(In thousands, except per share data)
<CAPTION>
Three Months Ended
March 31, March 31,
1997 1996
---------------------------
<S> <C> <C>
Net revenue $10,440 $ 5,660
Cost of revenue 3,849 2,262
------- -------
Gross profit 6,591 3,398
Selling, general and administrative expenses 7,000 4,082
------- -------
Loss from operations (409) (684)
------- -------
Other income (expense)
Interest income 102 94
Interest expense (80) (58)
------- -------
Total other income (expense) 22 36
------- -------
Net loss ($387) ($648)
======= =======
Net loss per common share ($0.04) ($0.10)
======= =======
Weighted average number of common
shares outstanding 8,638 6,347
======= =======
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE> 5
<TABLE>
SIGHT RESOURCE CORPORATION
Consolidated Statements of Cash Flows
(In thousands)
<CAPTION>
Three Months Ended
March 31, 1997 March 31, 1996
------------------- -------------------
<S> <C> <C>
Operating activities:
Net loss ($387) ($648)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 483 435
Changes in operating assets and liabilities:
Accounts receivable (470) (378)
Inventories 94 (114)
Prepaid expenses and other current assets (681) (373)
Accounts payable and accrued expenses 266 (399)
------- -------
Net cash used in operating activities (695) (1,477)
------- -------
Investing activities:
Purchases of property and equipment (440) (229)
Proceeds from sale of assets 98 376
Other assets (502) (37)
------- -------
Net cash provided by(used in) investing activities (844) 110
------- -------
Financing activities:
Principal payments on long term debt --- (100)
Other liabilities 4 10
Net proceeds from exercise of warrants --- 1
Purchase of common stock for treasury (137) ---
------- -------
Net cash used in financing activities (133) (89)
------- -------
Net (decrease) in cash and cash equivalents (1,672) (1,456)
Cash and cash equivalents, beginning of period 9,924 8,035
------- -------
Cash and cash equivalents, end of period $ 8,252 6,579
======= =======
Supplemental Disclosure:
Interest paid $ 102 $ 44
======= =======
Equity issued associated with
credit agreement $ 180 ---
======= =======
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE> 6
SIGHT RESOURCE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
(1) THE COMPANY
(a) Nature of Business
The business of Sight Resource Corporation is to participate in the
delivery of a complete range of eye care products and services through
integrated networks of opticians, optometrists and ophthalmologists.
(b) US Acquisitions
During 1995, the Company acquired two primary eye care chains,
effective January 1, 1995 and July 1, 1995, respectively. The
aggregate purchase price paid in connection with the acquisitions
consisted of (i) $2,660 in cash, (ii) 555,525 shares of common stock,
(iii) the assumption of approximately $1,600 of net liabilities, and
(iv) $660 payable over a 3 year period and $250 payable over 18
months, contingent upon the occurrence of certain future events. The
transactions were accounted for using the purchase method of
accounting.
Effective July 1, 1996, the Company purchased certain assets and
assumed certain liabilities of The E.B. Brown Optical Company and
Brown Optical Laboratories, Inc. as well as entered into a merger with
E.B. Brown Opticians, Inc. (together "EB Brown") for approximately
$4,000 in cash, 521,997 shares of common stock issued, 71,181 shares
of common stock to be issued and $1,400 in notes payable over an
eighteen month period. EB Brown operates forty-two eye care centers
located throughout Ohio and western Pennsylvania which provide
optometric and audiology goods and services to persons with vision and
hearing disorders. The transaction was accounted for using the
purchase method of accounting.
The results of operations of the three acquisitions have been included
in the consolidated financial statements from their respective dates
of acquisition. The excess of the purchase price and expenses
associated with each acquisition over the estimated fair value of the
net assets acquired has been recorded as goodwill.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Basis of Presentation
The accompanying consolidated financial statements have been prepared
by the Company without audit, pursuant to the rules and regulations of
the Securities and Exchange Commission. In the opinion of the Company,
these consolidated financial statements contain all adjustments
(consisting of only normal, recurring adjustments) necessary to
present fairly the financial position of Sight Resource Corporation as
of March 31, 1997 and the results of its operations and cash flows for
the three months ended March 31, 1997 and 1996.
The accompanying consolidated financial statements and related notes
should be read in conjunction with the audited consolidated financial
statements which are contained in the Company's Annual Report on Form
10-K for the year ended December 31, 1996.
(b) Principles of Consolidation
The accompanying consolidated financial statements include the
accounts of the Company, its wholly-owned subsidiaries and entities in
which the Company's subsidiaries assume the financial risks and
rewards of such entities through a management contract. The Company
6
<PAGE> 7
SIGHT RESOURCE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
has no direct equity ownership in the management service
organizations. All significant intercompany balances and transactions
have been eliminated.
In preparation of these consolidated financial statements in
conformity with generally accepted accounting principles, management
of the Company has made estimates and assumptions that affect the
reported amounts of assets and liabilities, such as accounts
receivable, inventory impairment of property and equipment and
intangibles. Actual results could differ from those estimates.
(c) Revenue Recognition
Under existing revenue sharing arrangements for refractive surgery
where the Company is not responsible for patient billing, the Company
receives a specified payment from the hospital or center for each
refractive surgical procedure performed. Accordingly, the Company
recognizes revenue on a per procedure basis at the time procedures are
performed. Under existing revenue-sharing arrangements for refractive
surgery where the Company is responsible for the collection from the
patient and payment to the ophthalmologist and other operating costs,
the total patient charge is recorded as revenue with the corresponding
expenses recorded in cost of revenue.
Revenue and the related costs from the sale of eyewear are recognized
at the time an order is placed. Revenue is reported net of contractual
allowances.
(d) Inventories
Inventories primarily consist of the costs of eyeglass frames, contact
lenses, ophthalmic lenses, sunglasses and other optical products and
are valued at the lower of cost (using the first-in, first-out method)
or market.
(e) Property and Equipment
Property and equipment is stated at cost. The Company provides for
depreciation at the time the property and equipment is placed in
service. The straight-line method is used over the estimated useful
life of the assets.
(f) Intangible Assets
Intangible assets resulting from business acquisitions consist of
customer lists, trademarks, non-compete agreements and the excess cost
of the acquisition over the fair value of the net assets acquired
(goodwill). Certain values assigned are based upon independent
appraisals and are amortized on a straight line basis over a period of
five to twenty-five years. The Company assesses the recoverability of
unamortized intangible assets on an ongoing basis by comparing
anticipated operating profits and future, undiscounted cash flows to
net book value.
(g) Deferred Revenue
The Company recognizes revenue from the sales of its contact lens
purchasing program over the life of the program.
7
<PAGE> 8
SIGHT RESOURCE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
(h) Net Loss Per Share
Net loss per share of common stock is based on the weighted average
number of common shares outstanding. Common stock equivalents are not
included in the calculation because they are antidilutive.
(3) DEBT
<TABLE>
Debt is as follows:
<CAPTION>
MARCH 31, DECEMBER 31,
1997 1996
---- ----
<S> <C> <C>
Bank term loan secured by all assets of one of the Company's
subsidiaries $ - $1,000
Unsecured notes payable, 7% interest rate, $400 due on
September 18, 1997 and $1,000 due on March 18, 1998; due on
demand if the Company's cash balance is less than $2,800 1,400 1,400
------ ------
1,400 2,400
Less current maturities 1,400 800
------ ------
Long term debt, less current maturities $ 0 $1,600
====== ======
</TABLE>
At December 31, 1996, the Company had available a revolving credit facility in
the amount of $500 based on eligible accounts receivable and inventory balances.
As of December 31, 1996, $25 was unused.
On February 20, 1997, the Company entered into a Credit Agreement (the
"Agreement") with a bank pursuant to which the Company can borrow $5,000 on a
term loan basis and $5,000 on a revolving credit basis, subject to certain
performance criteria. These loans are secured by all assets of the Company and
its wholly owned subsidiaries. As of March 31, 1997, the entire term loan was
unused and $1,475 is outstanding on the revolving note. The revolving note bears
interest at the bank's prime rate plus 1.25% (9.75% at March 31, 1997). As part
of the Agreement, the Company issued to the bank warrants to purchase 150,000
shares of the common stock at a purchase price of $4.625 per share. The warrants
expire December 31, 2003.
8
<PAGE> 9
PART I:
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
"SAFE HARBOR" STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF
1995
Statements contained in this document which are not historical fact are
forward-looking statements based upon management's current expectations that are
subject to risks and uncertainties that could cause actual results to differ
materially from those set forth in or implied by forward-looking statements.
These risks are described in the Company's Form 10K for the fiscal year ended
December 31, 1996 filed with the Securities and Exchange Commission.
OVERVIEW
The Company provides a complete range of eye care products and services through
integrated networks of opticians, optometrists and ophthalmologists. The
Company's services are provided primarily to persons with common vision
disorders, as well as to persons with sight-threatening conditions. The
Company's operations currently consist of 72 eye care centers, a centralized
optical laboratory and distribution center, two management service organizations
("MSOs") and ten laser vision correction ("LVC") centers which the Company has
established in association with leading hospitals, ambulatory surgery centers
and ophthalmologists.
The Company's objective is to become the leading integrated provider of eye care
products and services in select, regional markets. To develop significant
regional integrated networks, the Company's business strategy focuses on (i)
acquiring and integrating the assets of regional multi-site eye care centers and
the practices of eye care professionals (optometrists and ophthalmologists),
(ii) employing or entering into management services contracts with these
professionals, (iii) continuing to market comprehensive and competitively priced
eye care programs to leading HMOs, insurance companies and other third party
payors in the Company's regional markets, (iv) expanding strategic affiliations,
for pathology co-management opportunities, with select hospitals, ambulatory
surgery centers and eye care professionals and (v) continuing to market and
provide access to LVC services through the Company's eye care centers.
The Company believes that its integrated approach to eye care provides
significant advantages, benefits and opportunities to patients, providers and
payors. Patients benefit from the convenience of eye care products and services
delivered at a single location. Eye care professionals benefit from the
supplemental management and administrative services and resources provided by
the Company, permitting them to continue to dedicate their time and effort to
their patients and professional practices. Payors benefit from the Company's
ability to conveniently provide a complete range of eye care products and
services with the highest quality at the lowest cost.
9
<PAGE> 10
RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1997 AND 1996
NET REVENUE. The Company generated net revenue of approximately $10.4 million
during the three months ended March 31, 1997, from the operation of its 72 eye
care centers and ten laser vision correction centers as compared to net revenue
of approximately $5.7 million from its 29 eye care centers and six laser vision
correction centers for the same period in 1996. Of the $4.7 million, or 82.5%,
increase in net revenue, approximately $3.9 million relates to the additional
forty-two eye care centers acquired effective July 1, 1996. The remaining
increase is due to increases in laser vision correction services and revenue
generated in existing eye care centers.
COST OF REVENUE. Cost of revenue increased from approximately $2.3 million for
the three months ended March 31, 1996 to approximately $3.9 million for the
three months ended March 31, 1997. Cost of revenue as a percent of net revenue
decreased from 40.0% for the three months ended March 31, 1996 to 36.9% for the
three months ended March 31, 1997. The decrease as a percentage of net revenue
is attributable to reduced depreciation on ophthalmic equipment after the write
down due to the asset impairment recognized in the fourth quarter of 1996, as
well as manufacturing efficiencies realized at the Company's central lab. Cost
of revenue for the three months ended March 31, 1997 and 1996 principally
consisted of (i) the cost of manufacturing, purchasing and distributing optical
products to its customers and (ii) the cost of delivering laser vision
correction services, including depreciation and maintenance on excimer lasers.
SELLING, GENERAL AND ADMINISTRATION EXPENSES. Selling, general and
administration expenses were approximately $7.0 million for the three months
ended March 31, 1997 as compared to approximately $4.1 million for the three
months ended March 31, 1996. The increase primarily relates to payroll and
facility costs incurred in operating additional eye care centers in the first
quarter of fiscal 1997 as compared to the first quarter of fiscal 1996. Selling,
general and administrative expenses, as a percentage of net revenue, declined
from 72.1% in 1996 to 67.0% in 1997. This decrease is primarily a result of
operating efficiencies which the Company began to realize from the acquisition
and expansion of multi-site eye care centers.
OTHER INCOME AND EXPENSES. Interest income totaled $102,000 for the three months
ended March 31, 1997 as compared to $94,000 for the three months ended March 31,
1996. This increase resulted from the investment of a higher average cash
balance during the first quarter of 1997 as compared to the same period in 1996.
Interest expense totaled $80,000 for the three months ended March 31, 1997 as
compared to $58,000 for the three months ended March 31, 1996. The increase is
associated with a higher average balance of debt outstanding in the first
quarter of 1997 as compared to the same period in prior year.
NET LOSS. The Company realized a net loss of $387,000 ($0.04 per share) for the
three months ended March 31, 1997, as compared to $648,000 ($0.10 per share) for
the three months ended March 31, 1996.
10
<PAGE> 11
LIQUIDITY AND CAPITAL RESOURCES
At March 31, 1997, the Company had approximately $8.3 million in cash and cash
equivalents and working capital of approximately $5.2 million in comparison to
approximately $9.9 million in cash and cash equivalents and working capital of
approximately $7.8 million as of December 31, 1996. The decrease in working
capital is mainly due to debt becoming current as of March 31, 1997.
<TABLE>
As of March 31, 1997, the Company had securities outstanding which provide it
with potential sources of financing as outlined below:
<CAPTION>
Securities Potential
proceeds
- -------------------------------------------------------------- -----------
<S> <C> <C>
Warrants 2,472,100 $14,800,000
Class A Warrants 85,000 500,000
Unit Purchase Options 215,000 3,700,000
IPO Representative Warrants 85,000 1,300,000
Creditanstalt Warrants 150,000 694,000
Representative Warrants 170,000 1,400,000
-----------
$22,394,000
===========
</TABLE>
There can be no assurance that the Company will obtain any such proceeds from
the exercise of the above securities.
On February 20, 1997, the Company entered into a Credit Agreement (the
"Agreement") with a bank pursuant to which the Company can borrow $5 million on
a term loan basis and $5 million on a revolving credit basis, subject to certain
performance criteria. These loans are secured by all assets of the Company and
its wholly owned subsidiaries. Amounts borrowed under the Agreement will be used
to finance future acquisitions, provide ongoing working capital and for other
general corporate purposes. In addition, the Company refinanced existing bank
debt using the revolving credit facility. As part of the Agreement, the Company
issued to the bank warrants to purchase 150,000 shares of the common stock at a
purchase price of $4.625 per share. The warrants expire December 31, 2003.
The Company anticipates that its working capital and sources of capital, such as
the new credit facility, will be adequate to fund the Company's currently
proposed activities for at least the next twelve months. The Company anticipates
using financing vehicles such as bank debt and other sources of funding, such as
additional equity offerings, to achieve its business plan, including the
acquisition of multi-site eye care centers. By acquiring multi-site eye care
centers, the Company gain a critical mass of locations ensuring that potential
patients and third party payors will have convenient access to a wider variety
of eye care services. It also allows the Company to deliver these services at
considerable savings by using existing corporate and operational infrastructure,
which includes store operations, MIS, manufacturing, purchasing, distribution
and training. The Company is currently evaluating potential acquisition
candidates. Without additional funding, the Company's rate of acquisition and
size of acquisition could be limited.
11
<PAGE> 12
PART II. OTHER INFORMATION
Item 6 EXHIBITS AND REPORTS ON FORM 8-K
a. Exhibits furnished as Exhibits hereto:
10.1 Amendment No. 1 to Employment Agreement dated January 2, 1997,
among Cambridge Eye Associates, Inc., Sight Resource Corporation
and Elliot S. Weinstock, O.D.
b. On March 7, 1997, the Company filed a Form 8-K related to the
Credit Agreement, dated February 20, 1997, between the Company and
Creditanstalt Corporate Finance Corporation, Inc.
12
<PAGE> 13
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Sight Resource Corporation
Date: May 5, 1997 /S/ WILLIAM G. MCLENDON
----------- ------------------------
William G. McLendon
Chief Executive Officer and President
(principal executive officer)
Date: May 5, 1997 /S/ ALAN MACDONALD
----------- ------------------------
Alan MacDonald
Vice President, Finance and Administration
(principal financial and accounting
officer)
13
<PAGE> 1
EXHIBIT 10.1
AMENDMENT NO. 1 TO EMPLOYMENT AGREEMENT
---------------------------------------
THIS AMENDMENT (the "Amendment"), dated as of January 2, 1997, and among
CAMBRIDGE EYE ASSOCIATES, INC. (f/k/a CEA Acquisition Corp.), a Delaware
corporation (the "Company"), SIGHT RESOURCE CORPORATION (f/k/a NewVision
Technology, Inc.), a Delaware corporation ("SRC"), and ELLIOT S. WEINSTOCK, O.D.
(the "Employee").
WHEREAS, the parties have previously entered into an Employment Agreement
dated as of February 24, 1995 (the "Agreement"; capitalized terms used herein
without definition having the meanings ascribed to such terms in the Agreement),
pursuant to which, among other things, the Employee serves as the Company's
President;
WHEREAS, in connection with the settlement of a dispute between Irwin Mesch
("Mesch") on the one hand, and the Employee, the Company, ESW, Inc. (f/k/a
Cambridge Eye Associates. Inc.), Thomas J. Baker and SRC on the other hand, the
parties and Mesch entered into a Settlement Agreement and Mutual Release dated
as of December 27, 1995, pursuant to which, among other things, the Company and
SRC transferred to Mesch the aggregate sum of $288,000 and an aggregate of
14,300 shares of common stock of SRC (the "Mesch Settlement"); and
WHEREAS, in connection with the foregoing, the parties desire to amend
and/or clarify certain terms and provisions of the Agreement.
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereby agree as follows:
Section 1. RELEASE. In consideration of the amendments to the Agreement
described below, and in exchange for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged by all parties hereto,
each of SRC, the Company, Douglas Vision World, Inc., Cambridge Eye Doctors of
New Hampshire, Inc., E.B. Brown Opticians, Inc. and Optometric Providers, Inc.
on behalf of itself and its respective agents, successors, predecessors,
assigns, employees, officers, directors, shareholders, parents, subsidiaries and
affiliated corporations, partners, limited partners, trustees, servants and
attorneys (collectively, the "SRC Releasors") hereby forever releases,
discharges and covenants not to sue each of the Employee and ESW, Inc. and their
respective heirs, administrators, executors, agents, servants, successors,
assigns, predecessors, employees, officers, directors, shareholders, parents,
subsidiaries and affiliated corporations, partners,
<PAGE> 2
limited partners, trustees and attorneys (collectively, the "Employee
Releasees") of, from and concerning all manner of actions, causes of action,
suits, sums of money, covenants, contracts, agreements, promises, liabilities,
damages, rights, claims and demands whatsoever, whether in law or in equity
(collectively, the "Claims"), whether known or unknown, vested or contingent,
direct or indirect, which any SRC Releasor ever had, now has or hereafter may
have against any Employee Releasee for any reason whatsoever, in each case which
Claim (a) is based on an action or failure to act from the beginning of the
world to the date of this Amendment and (b) arises out of or in any way relates
to (i) the Agreement, (ii) the Asset Transfer Agreement dated as of February 24,
1995 by and among SRC, the Company, ESW, Inc. (f/k/a Cambridge Eye Associates,
Inc.) and the Employee, (iii) any Ancillary Agreement (as defined in such Asset
Transfer Agreement), (iv) the Optometric Records Transfer Agreement, dated
February 24, 1995, among ESW, Inc., Optometric Providers, Inc. and the Company,
(v) the Amended and Restated Credit Agreement, dated as of February 24, 1995,
between the Company and Arab Banking Corporation and all documents related to
the transactions contemplated thereby, (vi) the Advisory Board Agreement, dated
August 18, 1994, between the Employee and SRC, (vii) the Non-Disclosure and
Confidentiality Agreement, dated August 18, 1994, between SRC and the Employee,
(viii) the Non-Qualified Stock Option Agreement, dated August 19, 1994, as
amended, between SRC and the Employee, (ix) Mesch and (x) the Mesch Settlement.
Section 2. AMENDMENT TO DUTIES AS PRESIDENT. The last sentence of
Section 1 of the Agreement is amended by deleting such sentence in its entirety
and substituting in lieu thereof the following:
"Until January 5, 1997, you agree to devote your full business time and
energies to the business and affairs of the Company and its Subsidiaries,
if any, as is necessary from time to time for your fulfillment of your
obligations to the Company hereunder. From January 5 through December 31,
1997, you agree to devote approximately two full business days per week to
the business and affairs of the Company and its Subsidiaries which (i)
relate to Optometric Providers, Inc. or (ii) which relate to the Management
Agreement between the Company and Optometric Providers, Inc."
Section 3. AMENDMENT TO TERM OF EMPLOYMENT. Section 2(a) of the
Agreement is amended by deleting the words "the third anniversary thereof" in
the second line thereof and inserting in lieu thereof the words "December 31,
1997" in lieu thereof.
Section 4. AMENDMENT TO COMPENSATION AS PRESIDENT.
-2-
<PAGE> 3
Section 3(a) of the Agreement is amended by deleting such subsection in its
entirety and substituting in lieu thereof the following new Section 3(a):
In consideration for your services under this Agreement (i) until January
5, 1997 you shall be paid at the annual rate of One Hundred Seventy-Five
Thousand Dollars ($175,000) and (ii) after January 5, 1997 you shall be
paid at the annual rate of Seventy Thousand Dollars ($70,000), subject in
each case to increase from time to time by action of the Board in
accordance with your performance and the Company's performance ("Base
Salary"), and payable at such intervals as may be agreed upon by the
Company and you, less any amounts required to be withheld under applicable
law. Such compensation will be reduced by any disability payments which you
receive with respect to the applicable period under this Agreement, after
taking into account the tax benefit (if any) of such payments."
Section 5. AMENDMENT TO SEVERANCE PROVISIONS. (a) In connection with
the foregoing amendments to the Agreement, Section 3(b) of the Agreement is
amended by deleting such subsection in its entirety and substituting in lieu
thereof the following new Section 3(b):
"(b) In the event your employment shall be terminated by the Company
without Cause at any time prior to December 31, 1997, or in the event that
you terminate your employment hereunder prior to December 31, 1997 by
reason of any material change in your duties imposed by the Board of
Directors of the Company (other than any change contemplated by that
certain Amendment No. 1 to this Agreement dated as of January 2, 1997) or
by reason of any material breach by the Company of its obligations to you,
the Company shall (i) during the period beginning on the date of such
termination and ending on December 31, 1997, pay you the Base Salary to
which you would be entitled to during such period pursuant to Section 3(a)
and (ii) during the period beginning on the date of such termination and
ending on the earlier of June 30, 1998 and the date which is 12 months
after the date of such termination, pay and provide to you such benefits as
you were then receiving or entitled to pursuant to Section 6(a) hereof;
PROVIDED, HOWEVER, that the benefits described in paragraph 2 of Schedule A
to the Agreement, shall continue as provided in such paragraph 2.
(b) In connection with the foregoing amendments to the Agreement, the
fourth paragraph of Section 7 of the Agreement is amended by deleting such
paragraph in its entirety and substituting in lieu thereof the following new
paragraph:
-3-
<PAGE> 4
"In the event of such a termination of employment as a result of your death
or total and permanent disability, the Company shall have no further
obligations hereunder except as provided in Sections 3 and 9 hereof and
except as provided below in this Section 7:
(a) In the event of death prior to December 31, 1997, (i) the Company
shall pay to your estate amounts, at the Base Salary rate in effect on
the termination date, payable in monthly payments, through December
31, 1997 and (ii) through the earlier of June 30, 1998 and the date
which is 12 months after your death, your estate shall be entitled to
continue to receive the benefits you have been receiving or were
entitled to under paragraph 3 of Schedule A and under paragraph 2 of
Schedule A; and
(b) In the event of total and permanent disability prior to December
31, 1997, (i) the Company shall pay to you (or your estate) amounts,
at the Base Salary rate in effect on the termination date, payable in
monthly payments, through December 31, 1997 and (ii) through the
earlier of June 30, 1998 and the date which is 12 months after such
termination date you (or your estate) shall continue to be entitled to
receive such benefits as you were then receiving pursuant to Section
6(a) hereof and under paragraph 2 of Schedule A. Amounts to which you
would otherwise be entitled under clause (i) of this subparagraph (b)
above shall be reduced by the amount of any disability insurance
proceeds actually paid to you or paid for your benefit (or to your
estate or legal representatives) with respect to such payment period
following the termination date under any disability policy provided by
the Company.
(c) In connection with the foregoing amendments to the Agreement, the
first sentence of Section 8(a) of the Agreement is amended by deleting such
sentence in its entirety and substituting in lieu thereof the following new
sentence:
"In the event you, the Company, or a successor to the Company elects to
terminate your employment upon a Change of Control (as defined in Section
8(b) below), provided that the terminating party gives notice of such
termination (a "Change of Control Notice") within twenty-four (24) months
of a Change of Control, then upon such termination pursuant to this
paragraph, you (or your estate, if you die prior to receiving the payments
hereinafter set forth in this
-4-
<PAGE> 5
sentence) shall, through the period ending on December 31, 1997, be
entitled to receive, in monthly payments, your Base Salary in effect on the
date of such termination."
Section 6. AMENDMENT TO COMPETITION. In connection with the foregoing
amendments to the Agreement, Section 10 of the Agreement shall be amended by
deleting such Section in its entirety, which amendment shall only become
effective as of the date which is the later of (i) the date you cease to be an
employee of the Company or any of its affiliates and (ii) the date you cease to
be a director of SRC.
Section 7. AMENDMENT TO NOTICE PROVISION. Section 15 of the Agreement
is amended to provide that the address for notices and communications to the
Employee is as follows: 53 Brush Hill Road, Sherborn, MA 01770.
Section 8. CONFORMING AMENDMENT. In connection with the foregoing
amendments to the Agreement, the term "Acquisition" appearing in Sections 24 and
25 is deleted and the term "the Company" is inserted in lieu thereof.
Section 9. FURTHER ASSURANCES; COVENANTS. Each party hereby agrees, at
any time and from time to time after the date hereof, at the reasonable request
of the other party, to execute and deliver such other agreements, certificates
or instruments as may be reasonably requested in order to more effectively amend
the Agreement as set forth above. SRC and the Company hereby represent and
covenant as follows: (i) as promptly as practicable after the execution and
delivery of this Amendment, the Employee shall be replaced as a Trustee of the
Cambridge Eye Associates so-called "401(k) plan"; and (ii) the Key Man Life
Insurance Policy regarding the Employee and referred to in Section 4.01(f) of
the Amended and Restated Credit Agreement, dated as of February 24, 1995,
between the Company and Arab Banking Corporation, has been terminated and is no
longer in effect.
Section 10. ADVISORY BOARD. The Advisory Board Agreement, dated August
18, 1994 between the Employee and SRC and the Non-Disclosure and Confidentiality
Agreement, dated August 18, 1994, between SRC and the Employee are hereby
terminated and are null and void and of no further force or effect.
Section 11. EFFECT OF AMENDMENT. The parties hereby ratify and confirm
all of the provisions of the Agreement, as amended hereby, and agree and
acknowledge that the Agreement as so amended remains in full force and effect.
-5-
<PAGE> 6
Section 12. GOVERNING LAW. This Amendment shall be deemed to be a
contract made under the laws of the Commonwealth of Massachusetts and for all
purposes shall be governed by and construed in accordance with the laws of the
Commonwealth of Massachusetts applicable to contracts to be made and performed
entirely within the Commonwealth of Massachusetts.
Section 13. COUNTERPARTS. This Amendment may be executed in any number
of counterparts and each of such counterparts shall for all purposes be deemed
to be an original, and all such counterparts shall together constitute but one
and the same instrument.
-6-
<PAGE> 7
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed, all as of the day and year first above written.
SIGHT RESOURCE CORPORATION
By /s/ William G. McLendon
------------------------------------
William G. McLendon
President
Hereunto Duly Authorized
CAMBRIDGE EYE ASSOCIATES, INC.
By: /s/ Alan MacDonald
------------------------------------
Alan MacDonald
Treasurer
Hereunto Duly Authorized
/s/ Elliot S. Weinstock
------------------------------------
Elliot S. Weinstock
For Purposes of Section 1:
Douglas Vision World, Inc.
By /s/ Alan MacDonald
------------------------------------
Name:
Title:
Hereunto Duly Authorized
Cambridge Eye Doctors of New Hampshire, Inc.
By /s/ Alan MacDonald
------------------------------------
Name:
-7-
<PAGE> 8
Title:
Hereunto Duly Authorized
E.B. Brown Opticians, Inc.
By /s/ Alan MacDonald
------------------------------------
Name:
Title:
Hereunto Duly Authorized
Optometric Providers, Inc. (f/k/a New Vision Optometry, Inc.)
By /s/ Alan MacDonald
------------------------------------
Name:
Title:
Hereunto Duly Authorized
-8-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM SIGHT
RESOURCE CORPORATION'S BALANCE SHEET AND STATEMENT OF OPERATIONS AS OF AND FOR
THE THREE MONTHS ENDED MARCH 31, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 1997.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 8,252
<SECURITIES> 0
<RECEIVABLES> 1,875
<ALLOWANCES> 381
<INVENTORY> 2,395
<CURRENT-ASSETS> 13,849
<PP&E> 6,470
<DEPRECIATION> (1,414)
<TOTAL-ASSETS> 31,356
<CURRENT-LIABILITIES> 8,654
<BONDS> 0
0
0
<COMMON> 86
<OTHER-SE> 22,336
<TOTAL-LIABILITY-AND-EQUITY> 31,356
<SALES> 10,440
<TOTAL-REVENUES> 10,440
<CGS> 3,849
<TOTAL-COSTS> 7,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (22)
<INCOME-PRETAX> (387)
<INCOME-TAX> 0
<INCOME-CONTINUING> (387)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (387)
<EPS-PRIMARY> (.04)
<EPS-DILUTED> (.04)
</TABLE>
