<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(X) Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the Quarterly Period Ended June 30, 1997
or
( ) Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the Transition Period From To
Commission File Number: 1-13848
OAKLEY, INC.
(Exact name of registrant as specified in its charter)
Washington 95-3194947
---------- ----------
(State or other jurisdiction of (IRS Employer ID No.)
incorporation or organization)
One Icon
Foothill Ranch, California 92610
-------------------------- -----
(Address of principal (Zip Code)
executive offices)
(714) 951-0991
--------------
(Registrant's telephone number, including area code)
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 No X
----- -----
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Common Stock, par value $.01 per share 70,657,636 Shares
- -------------------------------------- -----------------
(Class) (Outstanding on August 7, 1997)
<PAGE>
OAKLEY, INC.
INDEX TO FORM 10-Q
PART I. FINANCIAL INFORMATION
ITEM 1 - Financial Statements
<TABLE>
<S> <C>
Consolidated Balance Sheets as of December 31, 1996 and June 30, 1997 (unaudited).......... 3
Consolidated Statements of Income for the three- and six-month periods ended June 30, 1996
and 1997 (unaudited)..................................................................... 4
Consolidated Statements of Cash Flows for the three- and six-month periods ended June 30,
1996 and 1997 (unaudited)................................................................ 5
Notes to Consolidated Financial Statements................................................. 6-7
ITEM 2 - Management's Discussion and Analysis of Financial Condition and
Results of Operations.................................................................... 8-12
PART II. OTHER INFORMATION
ITEM 1 - Legal Proceedings................................................................. 13-14
ITEM 2 - Changes in Securities............................................................. 14
ITEM 3 - Defaults Upon Senior Securities................................................... 14
ITEM 4 - Submission of Matters to a Vote of Security Holders............................... 14-15
ITEM 5 - Other Information................................................................. 15
ITEM 6 - Exhibits and Reports on Form 8-K.................................................. 16-18
Signatures................................................................................. 19
Exhibits................................................................................... 19
</TABLE>
2
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OAKLEY, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
ASSETS
<TABLE>
<CAPTION>
December 31, June 30,
1996 1997
------------------------
(unaudited)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 8,063 $ 5,898
Accounts receivable, less allowance for
doubtful accounts of $590 (1996), $591 (1997) 21,084 26,850
Inventories (Note 2) 29,553 27,087
Other receivables 1,465 1,984
Deferred income taxes 5,643 5,643
Prepaid expenses and other 5,822 4,163
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Total current assets 71,630 71,625
Property and equipment, net 72,942 95,867
Deposits 2,193 3,548
Other assets 11,480 12,210
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TOTAL ASSETS $ 158,245 $ 183,250
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---------- ---------
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Line of credit (Note 3) $ 18,000 $ 5,000
Accounts payable 7,997 11,506
Accrued expenses and other current liabilities 9,526 7,382
Income taxes payable - 5,769
Current maturities of long-term debt (Note 3) - 4,000
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Total current liabilities 35,523 33,657
Deferred income taxes 1,285 1,285
Long-term debt, net of current maturities (Note 3) - 21,000
COMMITMENTS AND CONTINGENCIES (Note 4)
SHAREHOLDERS' EQUITY
Preferred stock, par value $.01 per share: 20,000,000
shares authorized; no shares issued - -
Common stock, par value $.01 per share: 200,000,000
shares authorized; 70,960,012 (1996) and
70,657,636 (1997) issued and outstanding 710 707
Additional paid-in capital 58,218 55,077
Retained earnings 62,634 72,032
Foreign currency translation adjustment (125) (508)
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Total shareholders' equity 121,437 127,308
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TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 158,245 $ 183,250
---------- ---------
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</TABLE>
See accompanying notes to consolidated financial statements.
3
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OAKLEY, INC.
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
------------------------ -----------------------
1996 1997 1996 1997
--------- --------- ---------- --------
<S> <C> <C> <C> <C>
Net sales $ 62,764 $ 55,150 $ 111,470 $ 89,553
Cost of goods sold 18,109 19,095 32,751 33,842
--------- --------- ---------- ---------
Gross profit 44,655 36,055 78,719 55,711
Operating expenses:
Research and development 1,012 992 1,961 1,543
Selling 12,466 13,235 22,557 25,245
Shipping and warehousing 1,537 1,426 2,960 2,679
General and administrative 4,091 5,539 8,039 10,546
--------- --------- ---------- ---------
Total operating expenses 19,106 21,192 35,517 40,013
Operating income 25,549 14,863 43,202 15,698
Interest (income)/expense, net (113) 500 (302) 442
--------- --------- ---------- ---------
Income before provision for income taxes 25,662 14,363 43,504 15,256
Provision for income taxes 9,924 5,515 16,793 5,858
--------- --------- ---------- ---------
Net income $ 15,738 $ 8,848 $ 26,711 $ 9,398
--------- --------- ---------- ---------
--------- --------- ---------- ---------
Net income per common share $ 0.22 $ 0.13 $ 0.37 $ 0.13
--------- --------- ---------- ---------
--------- --------- ---------- ---------
Weighted average shares 71,988 70,709 71,916 70,688
--------- --------- ---------- ---------
--------- --------- ---------- ---------
</TABLE>
See accompanying notes to consolidated financial statements.
4
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OAKLEY, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands) (unaudited)
<TABLE>
<CAPTION>
Six Months Ended June 30,
-------------------------
1996 1997
--------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 26,711 $ 9,398
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 3,816 5,935
Deferred compensation 9 30
(Gain) loss on disposition of equipment (99) 67
Deferred income taxes, net 68 -
Changes in assets and liabilities, net of effects of business acquisition:
Accounts receivable (9,548) (5,756)
Inventories (1,153) 2,839
Other receivables (1,016) (519)
Prepaid expenses and other (1,289) 1,659
Accounts payable 1,929 3,129
Accrued expenses and other current liabilities 394 (2,349)
Income taxes payable (492) 5,769
-------- -------
Net cash provided by operating activities 19,330 20,202
CASH FLOWS FROM INVESTING ACTIVITIES:
Deposits 1,377 (1,355)
Acquisitions of property and equipment (20,792) (28,526)
Proceeds from sale of property and equipment 220 179
Acquisition of business - (2,600)
Other assets - 1,492
-------- -------
Net cash used in investing activities (19,195) (30,810)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from bank borrowings - 40,000
Repayments of bank borrowings - (28,000)
Repayments of S distribution notes (263) -
Issuance of common stock 19
Repurchase of common shares - (3,193)
-------- -------
Net cash (used in) provided by financing activities (263) 8,826
EFFECT OF EXCHANGE RATE CHANGES ON CASH (42) (383)
NET DECREASE IN CASH AND CASH EQUIVALENTS (170) (2,165)
CASH AND CASH EQUIVALENTS, beginning of period 9,760 8,063
-------- -------
CASH AND CASH EQUIVALENTS, end of period $ 9,590 $ 5,898
-------- -------
-------- -------
</TABLE>
See accompanying notes to consolidated financial statements.
5
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OAKLEY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - BASIS OF PRESENTATION
The accompanying consolidated financial statements of Oakley, Inc. and its
wholly-owned subsidiaries (the "Company") have been prepared pursuant to the
rules and regulations of the Securities and Exchange Commission ("SEC").
Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles ("GAAP") for complete
financial statements.
In the opinion of management, the consolidated financial statements contain
all adjustments, consisting only of normal recurring adjustments, considered
necessary for a fair statement of the balance sheets as of December 31, 1996
and June 30, 1997, the statements of income for the three- and six-month
periods ended June 30, 1996 and 1997 and the statements of cash flows for the
six-month periods ended June 30, 1996 and 1997. The results of operations
for the three- and six-month periods ended June 30, 1997 are not necessarily
indicative of the results of operations for the entire fiscal year ending
December 31, 1997.
NOTE 2 - INVENTORIES
Inventories consist of the following:
December 31, 1996 June 30, 1997
----------------- -------------
Raw Materials $ 16,039,000 $ 15,933,000
Finished Goods 13,514,000 11,154,000
------------- -------------
$ 29,553,000 $ 27,087,000
------------- -------------
------------- -------------
NOTE 3 - FINANCING ARRANGEMENTS
The Company has a $30.0 million line of credit with a bank syndicate. At
June 30, 1997, there were $5.0 million in borrowings outstanding under the
agreement.
In March 1997, the Company entered into a $25.0 million bridge financing with
a commercial bank with an original maturity date of July 18, 1997. Prior to
maturity, the Company extended the bridge loan to August 15, 1997. The
Company intends to refinance the bridge loan with a long-term note secured by
the Company's corporate and manufacturing facility located in Foothill Ranch,
California. Accordingly, a portion of the debt has been classified as
long-term in the accompanying balance sheet.
NOTE 4 - LITIGATION
During December 1996, three class action lawsuits were filed in the
California Superior Court for the County of Orange against the Company and
three of its officers and directors alleging material misstatements and
omissions in certain of the Company's public statements, Securities and
Exchange Commission filings and reports of third-party analysts. The
plaintiffs seek unspecified damages and other relief. In addition, one of
the lawsuits also asserted claims against firms who served as underwriters of
the June 6, 1996 offering of the Company's common stock by certain of its
shareholders. Pursuant to certain provisions of the underwriting agreement
between the Company and the firms, the Company agreed to indemnify the firms
against certain liabilities, including liabilities under the Securities Act.
In March 1997, the Company was named as a nominal defendant in a putative
derivative action against two of the Company's officers and directors based
on substantially the same allegations as those in the class actions. The
derivative plaintiff seeks to recover damages and other relief on behalf of
the Company. Although it is too soon to predict the outcome of the cases
with any certainty, based on its current understanding of the facts, the
Company believes that the plaintiffs' claims are without merit and intends to
vigorously defend the actions.
6
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In addition, the Company is currently involved in litigation incidental to
the Company's business. In the opinion of management, the ultimate
resolution of such litigation, in the aggregate, will not have a material
adverse effect on the accompanying financial statements.
NOTE 5 - NET INCOME PER SHARE
In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standard No. 128, "Earnings per Share" (FAS 128).
FAS 128 requires the Company to disclose a basic and diluted earnings per
share (EPS) calculation. Basic EPS excludes common stock equivalents from
the EPS calculation, while diluted EPS is calculated consistent with the
Company's primary earnings per share calculation. The Company will adopt the
provisions of FAS 128 within the 1997 year-end consolidated financial
statements. Adopting FAS 128 for the three- and six-month periods ended June
30, 1997 would not have had a material impact on the Company's reported net
income per share.
7
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion includes the operations of Oakley, Inc. and
subsidiaries for each of the periods discussed.
RESULTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 1997 AND 1996
NET SALES
Net sales decreased to $55.2 million for the three months ended June 30, 1997
from $62.8 million for the three months ended June 30, 1996, a decrease of
$7.6 million, or 12.1%. This decrease was the result of substantially lower
sales in all of the Company's older styles of sunglasses, including WIRES,
EYE JACKETS, STRAIGHT JACKETS, M FRAMES, ZEROS, TRENCHCOATS and its original
line of FROGSKINS which was replaced by a new line of FROGSKINS in December
1996. These decreases were partially offset by sales from the introduction
of new sunglasses, SQUARE WIRES in June 1996, PRO M FRAMES in October 1996, a
new line of FROGSKINS in December 1996, X METAL in February 1997, FIVES in
April 1997 and polarized FROGSKINS and STRAIGHT JACKETS in May 1997. The
Company's domestic sales declined 16.2% to $35.1 million from $41.9 million
in the comparable 1996 period, principally as a result of a 36.8% decline in
net sales to the Company's largest customer, Sunglass Hut, partially offset
by slightly higher net sales in the 1997 period to other domestic accounts.
The Company's international sales declined 3.8% to $20.1 million in 1997 from
$20.9 million in 1996, principally as a result of decreased sales in Japan
and South Africa as the Company transitions to a direct operation in both of
these markets and a reduction in sales to a limited number of large
distributors that significantly reduced purchases in older product lines,
partially offset by modestly higher net sales in the Company's direct
European operations. International net sales in the 1997 period were
negatively affected by the strength of the dollar compared to the functional
currency of direct operations in continental Europe.
GROSS PROFIT
Gross profit decreased to $36.1 million for the three months ended June 30,
1997 from $44.7 million for the three months ended June 30, 1996, a decrease
of $8.6 million, or 19.2%. As a percentage of net sales, gross profit
decreased to 65.5% in 1997 from 71.1% in 1996. Gross profit as a percentage
of net sales was negatively affected by a lower percentage of sales in the
Company's highest margin sunglasses, a shift in product mix to lower-margin
clothing and other accessories, increased depreciation expense, a devaluation
in the functional currency of the Company's direct operation in continental
Europe and continued production inefficiencies associated with the start-up
of the X METAL product line. The Company expects gross profit as a
percentage of net sales to continue to be affected by certain of the factors
discussed above through the balance of 1997.
OPERATING EXPENSES
Operating expenses increased to $21.2 million for the three months ended June
30, 1997 from $19.1 million for the three months ended June 30, 1996, an
increase of $2.1 million. Selling expenses increased $0.7 million to $13.2
million in 1997, or 23.9% of net sales, from $12.5 million, or 19.9% of net
sales, in 1996. This increase resulted from substantially higher warranty
expenses, higher sports marketing expenses and increased depreciation,
partially offset by, lower commissions and reduced advertising expenses.
General and administrative expenses increased $1.4 million to $5.5 million,
or 10.0% of net sales, in 1997 from $4.1 million, or 6.5% of net sales, in
1996 primarily due to added personnel, increased amortization expense related
to acquisitions completed since the second quarter of 1996 and higher
operating expenses associated with the Company's new
8
<PAGE>
headquarters. In addition, $1.3 million of the increase in the Company's
total operating expenses in the 1997 period was the result of the expansion
into three new direct markets.
OPERATING INCOME
The Company's operating income declined to $14.9 million for the three months
ended June 30, 1997 from $25.5 million for the three months ended June 30,
1996, a decrease of $10.6 million. This decrease was the result of the
Company's decrease in net sales and gross profit margin and an increase in
operating expenses as a percentage of net sales.
INTEREST EXPENSE, NET
The Company had interest expense of $0.5 million and interest income of
$25,000 in the 1997 period as compared with interest expense of $2,000
and interest income of $0.1 million for the comparable 1996 period.
NET INCOME
The Company's net income decreased to $8.8 million for the three months ended
June 30, 1997 from $15.7 million for the three months ended June 30, 1996.
SIX MONTHS ENDED JUNE 30, 1997 AND 1996
NET SALES
Net sales decreased to $89.6 million for the six months ended June 30, 1997
from $111.5 million for the six months ended June 30, 1996, a decrease of
$21.9 million, or 19.6%. This decrease was the result of substantially lower
sales in all of the Company's older styles of sunglasses, including WIRES,
EYE JACKETS, M FRAMES, ZEROS, TRENCHCOATS and its original line of FROGSKINS
which was replaced by a new line of FROGSKINS in December 1996. These
decreases were partially offset by sales from the introduction of new
sunglasses, including sports-specific M FRAMES and ZEROS in March 1996,
STRAIGHT JACKETS in May 1996, SQUARE WIRES in June 1996, PRO M FRAMES in
October 1996 a new line of FROGSKINS in December 1996, X METAL in February
1997, FIVES in April 1997 and polarized FROGSKINS and STRAIGHT JACKETS in May
1997. The Company's domestic sales declined 27.2% to $52.7 million from
$72.4 million in the comparable 1996 period, principally as a result of a
53.3% decline in net sales to the Company's largest customer, Sunglass Hut
and slightly lower net sales in the 1997 period to other domestic accounts.
The Company's international sales declined 5.6% to $36.9 million in 1997 from
$39.1 million in 1996, principally as a result of decreased sales in Japan
and South Africa as the Company transitions to a direct operation in both of
these markets and a reduction in sales to a limited number of large
distributors that significantly reduced purchases in older product lines,
partially offset by modestly higher net sales in the Company's direct
European operations. International net sales in the 1997 period were
negatively affected by the strength of the dollar compared to the functional
currency of direct operations in continental Europe.
GROSS PROFIT
Gross profit decreased to $55.7 million for the six months ended June 30,
1997 from $78.7 million for the six months ended June 30, 1996, a decrease of
$23.0 million, or 29.2%. As a percentage of net sales, gross profit
decreased to 62.2% in 1997 from 70.6% in 1996. Gross profit as a percentage
of net sales was negatively affected by fixed manufacturing costs spread over
lower sales volumes and a corresponding reduction in production levels, a
lower percentage of sales in the Company's highest margin sunglasses, a shift
in product mix to lower-margin clothing and other accessories, a devaluation
in the functional currency of the Company's direct operation in continental
Europe and continued production inefficiencies associated with the start-up
of the X METAL product line. The Company expects gross profit as a
percentage of net sales to continue to be affected by certain of the factors
discussed above through the balance of 1997.
9
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OPERATING EXPENSES
Operating expenses increased to $40.0 million for the six months ended June
30, 1997 from $35.5 million for the six months ended June 30, 1996, an
increase of $4.5 million. Research and development expenses decreased $0.4
million to $1.5 million in 1997. The 1997 period included a $0.9 million
reduction related to the forfeiture of the Chairman and President's 1996
bonus which had been accrued as of December 31, 1996. Excluding this
non-recurring adjustment, research and development expenses increased $0.5
million to $2.4 million in the 1997 period, or 2.7% of net sales, from $2.0
million, or 1.8% of net sales, in the 1996 period due to increased personnel
and product design activities. Selling expenses increased $2.6 million to
$25.2 million in 1997, or 28.1% of net sales, from $22.6 million, or 20.3% of
net sales, in 1996 as a result of substantially higher warranty expenses,
higher sports marketing expenses and increased depreciation, partially offset
by lower commissions. General and administrative expenses increased $2.5
million to $10.5 million, or 11.7% of net sales, in 1997 from $8.0 million,
or 7.2% of net sales, in 1996 primarily due to added personnel, increased
amortization related to acquisitions completed since the beginning of the
second quarter of 1996 and higher operating expenses associated with the
Company's new headquarters. For the six months ended June 30, 1997, general
and administrative expenses included income of $0.8 million paid to the
Company by Arnet Optic to settle litigation, $0.7 million of relocation costs
associated with the new facility and professional fees of $0.2 million
related to lawsuits filed by shareholders against the Company and six of its
officers (see Note 4 to the consolidated financial statements). In addition,
$2.0 million of the Company's total operating expenses in the 1997 period was
the result of the expansion into three new direst markets.
OPERATING INCOME
The Company's operating income declined to $15.7 million for the six months
ended June 30, 1997 from $43.2 million for the six months ended June 30,
1996, a decrease of $27.5 million. This decrease was the result of the
Company's decrease in net sales and gross profit margin and an increase in
operating expenses as a percentage of net sales.
INTEREST EXPENSE, NET
The Company had interest income of $82,000 in the 1997 period and interest
expense of $0.5 million, excluding $0.5 million of interest costs which were
capitalized in the period as part of the construction of its new facility, as
compared with interest expense of $5,000 and interest income of $0.3 million
for the comparable 1996 period.
NET INCOME
The Company's net income decreased to $9.4 million for the six months ended
June 30, 1997 from $26.7 million for the six months ended June 30, 1996.
10
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LIQUIDITY AND CAPITAL RESOURCES
The Company historically has financed its operations almost entirely with
cash flow generated from operations and borrowings from its credit facility.
Cash provided by operating activities totaled $20.1 million for the six
months ended June 30, 1997 and $19.3 million for the comparable period of
1996. During the six months ended June 30, 1997, the Company repurchased
304,000 shares of its common stock for $3.2 million. At June 30, 1997,
working capital was $38.0 million. Working capital may vary from time to
time as a result of seasonality, new product introductions, capital
expenditures, including purchases of equipment and changes in inventory
levels. In January 1997, the Company amended its unsecured line of credit to
increase its borrowing limits from $18.0 million to $30.0 million. At June
30, 1997, there were $5.0 million in borrowings outstanding under such
facility. To supplement the Company's current line of credit, in March 1997,
the Company secured a $25.0 million bridge loan with an original maturity
date of July 18, 1997. Prior to maturity, the Company extended such bridge
loan to August 15, 1997. The Company intends to refinance the bridge
financing with a 15-year note secured by the Company's corporate and
manufacturing facility located in Foothill Ranch, California. The Company
believes that existing capital, anticipated cash flow from operations and
current and anticipated credit facilities will be sufficient to meet
operating needs and capital expenditures for the foreseeable future.
Capital expenditures (other than those relating to the Company's new
facility) for the six months ended June 30, 1997 totaled $11.0 million. In
March 1997, the Company relocated to its new headquarters and manufacturing
facility in Foothill Ranch, California. The total cost to construct and
equip such facility was approximately $47 million, of which $28.6 million had
been expended through the end of 1996 and most of the remainder had been
incurred by June 30, 1997. The Company expects capital expenditures
(excluding those expenditures relating to the Company's new facility) for
1997 to total approximately $24.0 million, including additional investments
in an integrated, enterprisewide information system and equipment for the
development of a new product line.
SEASONALITY
Historically, the Company's sales, in the aggregate, generally have been
higher in the period from March to September, the period during which
sunglass use is typically highest. As a result, operating margins are
typically lower in the first and fourth quarters as fixed operating costs are
spread over generally lower sales volume. In anticipation of seasonal
increases in demand, the Company typically builds inventories in the fourth
quarter and first quarter when net sales have historically been lower.
BACKLOG
Historically, the Company has generally shipped domestic orders (other than
preseason orders for ski goggles and orders from certain sunglass specialty
chains) within one day of receipt and international orders within two weeks
of receipt. At June 30, 1997, the Company had a backlog of $19.5 million,
including backorders (merchandise remaining unshipped beyond its scheduled
shipping date) of $2.7 million as of such date.
INFLATION
The Company does not believe inflation has had a material impact on the
Company in the past, although there can be no assurance that this will be the
case in the future.
11
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FOREIGN CURRENCY
The Company's foreign subsidiaries sell in various countries and collect at
future dates in the customers' local currencies and purchase inventory in
U.S. Dollars. Accordingly, the Company is exposed to transaction gains and
losses that could result from changes in foreign currency exchange rates.
When considered appropriate, management may purchase financial instruments,
primarily forward exchange contracts, to reduce its exposure to these
exchange rate fluctuations. For the quarter ended June 30, 1997, the U.S.
Dollar strengthened significantly compared to the French franc, increasing
the average exchange rate from approximately 5.0 francs per U.S. Dollar for
the six months ended June 30, 1996 to approximately 5.7 francs per U.S.
Dollar for the six months ended June 30, 1997.
FORWARD-LOOKING STATEMENTS
When used in this document, the words "believes", "anticipates", "expects"
and similar expressions are intended to identify in certain circumstances
forward-looking statements. Such statements are subject to a number of risks
and uncertainties that could cause actual results to differ materially from
those projected, including risks related to the dependence on sales to
Sunglass Hut; the acceptance in the marketplace of new products; the ability
to source raw materials at prices favorable to the Company; currency
fluctuations; and other risks outlined in the Company's previously filed
public documents, copies of which may be obtained without cost from the
Company. Given these uncertainties, prospective investors are cautioned not
to place undue reliance on such statements. The Company also undertakes no
obligation to update these forward-looking statements.
12
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PART II - OTHER INFORMATION
ITEM 1. Legal Proceedings
The Company and certain of its officers have been named as defendants in
three putative class action lawsuits (the "California Securities Actions")
filed in December 1996 in the California Superior Court for the County of
Orange (the "Court"). The cases are captioned:
YOSEF S. ROSENSHEIN V. OAKLEY, INC., MIKE PARNELL, LINK NEWCOMB AND JIM
JANNARD, Case No. 773051 (filed December 17, 1996) (the "ROSENSHEIN
Action");
HERSCHEL HARMAN V. OAKLEY, INC., MIKE PARNELL, LINK NEWCOMB AND JIM
JANNARD, Case No. 773053 (filed December 17, 1996) (the "HARMAN Action");
and
ERIC SHER, HAROLD BARON AND DAVID O. ECKERT V. OAKLEY, INC., MIKE PARNELL,
LINK NEWCOMB, JIM JANNARD, MERRILL LYNCH & CO. AND ALEX BROWN & SONS,
INC., Case No. 773366 (filed December 24, 1996) (the "SHER Action," and
collectively with the Rosenshein and Harman Actions, the "California
Securities Actions").
By order dated January 30, 1997, the Court ordered that the California
Securities Actions be assigned to the Court's Complex Litigation Panel, where
they have since been consolidated. On April 18, 1997, the plaintiffs filed a
consolidated amended complaint in the California Securities Action. The
plaintiffs seek to represent a class of persons who purchased the Company's
common stock between March 22, 1996 and December 5, 1996.
The complaint in the California Securities Actions alleges claims for
violations of the antifraud provisions of the California Corporations Code,
unfair business practices and false advertising in violation of certain
provisions of the California Business and Professions Code, fraud and
negligent misrepresentation. The plaintiffs' claims are based on alleged
material misstatements and omissions in certain of the Company's public
statements, Securities and Exchange Commission filings and in the reports of
third-party analysts regarding the Company's retail distribution practices,
market conditions, new product developments and extensions of existing
product lines, business with Sunglass Hut and earnings prospects. The
plaintiffs seek unspecified damages and other relief against the Company and
the other defendants.
The plaintiffs in the California Securities Actions have also asserted claims
against Merrill Lynch & Co. ("Merrill Lynch") and Alex, Brown and Sons, Inc.
("Alex Brown"), which served as the U.S. Representatives of the U.S.
Underwriters of the June 6, 1996 offering of five million shares of common
stock of the Company by certain of its shareholders (the "Secondary
Offering"). By letter dated February 7, 1997, counsel for Merrill Lynch and
Alex Brown gave the Company notice pursuant to the indemnification provisions
of the U.S. Purchase Agreement dated June 6, 1996, for the Secondary Offering
and requested that the Company reimburse Merrill Lynch and Alex Brown on a
current basis for their attorneys' fees and expenses incurred in defending
the California Securities Action.
The Company and the other defendants have filed motions to dismiss the
California Securities Actions, which have not yet been heard. The plaintiffs
in the California Securities Actions have served document requests on the
Company and others.
13
<PAGE>
The Company has been named as a nominal defendant in a putative derivative
lawsuit against certain of its directors and officers filed in March 1997 in
the Court. The case is captioned BLACKMAN V. JAMES JANNARD, MIKE PARNELL AND
DOES 1 THROUGH 100, Case No. 777098 (filed March 27, 1997) (the "California
Derivative Action").
In the California Derivative Action, the plaintiff, purporting to sue on
behalf of the Company, alleges claims for breach of fiduciary duty,
constructive fraud, unjust enrichment and violations of the insider trading
provisions of the California Corporations Code. Like the California
Securities Actions, the plaintiff's claims in the California Derivative
Action are, among other things, based upon alleged material misstatements and
omissions in certain of the Company's public statements and Securities and
Exchange Commission filings regarding the Company, its operation and future
prospects. The plaintiff seeks to recover damages and other relief on behalf
of the Company. The defendants filed a motion to dismiss the original
complaint in the California Derivative Action, and the plaintiff subsequently
filed an amended complaint. The defendants have filed a motion to dismiss
the amended complaint in the California Derivative Action, but that motion
has not yet been heard.
Although it is too soon to predict the outcome of the California Securities
Actions and the California Derivative Action with any certainty, based on its
current knowledge of the facts, the Company believes that the plaintiffs'
claims are without merit and intends to vigorously defend the actions.
In addition, the Company is a party to various claims, complaints and other
legal actions that have arisen in the normal course of business from time to
time. The Company believes the outcome of these pending legal proceedings,
in the aggregate, will not have a material adverse effect on the operations
or financial position of the Company.
ITEM 2. Changes in Securities
None
ITEM 3. Defaults Upon Senior Securities
None
ITEM 4. Submission of Matters to a Vote of Security-Holders
(a) The Registrant's Annual Meeting of Shareholders was held on June 19, 1997.
(b) Proxies for the Annual Meeting were solicited pursuant to Regulation 14
under the Securities Exchange Act of 1934. There was no solicitation in
opposition to the management's nominees as listed in the proxy statement
to elect six Directors. All such nominees were elected.
14
<PAGE>
(c) The matters voted at the meeting and the results were as follows:
(1) To elect six Directors to serve as such until the next Annual
Meeting of Shareholders and until their successors are elected and
qualified.
FOR AGAINST
--- -------
Director # 1-Jim Jannard 68,409,907 453,788
Director # 2-Mike Parnell 68,411,242 452,453
Director # 3-Link Newcomb 68,404,746 458,949
Director # 4-Irene Miller 68,419,646 444,049
Director # 5-Orin Smith 68,421,746 441,949
Director # 6-Michael Jordan 66,710,479 2,153,216
(2) To ratify the selection of Deloitte & Touche LLP to serve as
independent auditors of the Company for the fiscal year ending
December 31, 1997.
FOR AGAINST ABSTAIN
--- ------- -------
68,537,400 138,078 188,217
ITEM 5. Other Information
None
15
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
The following exhibits are included in this report:
<TABLE>
<S> <C>
3.1 (1) Articles of Incorporation of the Company
3.2 (1) Bylaws of the Company
3.3 (5) Amendment No. 1 to the Articles of Incorporation as filed with
the Secretary of State of the State of Washington on
September 26, 1996
10.1 (1) Credit Agreement (the "Credit Agreement"), dated June 20, 1995,
between Oakley, Inc., Wells Fargo Bank, National Association, and
the Lenders named therein
10.2 (1) Collateral Account Agreement, dated June 20, 1995, between Oakley,
Inc. and Wells Fargo Bank, National Association, as agent for the
Lenders party to the Credit Agreement
10.3 (1) Security Agreement, dated June 20, 1995, between Oakley, Inc. and
Wells Fargo Bank, National Association, as agent for the Lenders
party to the Credit Agreement
10.4 (1) Security Agreement and Chattel Mortgage, dated June 20, 1995,
between Oakley, Inc. and Wells Fargo Bank, National Association,
as agent for the Lenders party to the Credit Agreement
10.5 (1) Trademark Collateral Security Agreement, dated June 20, 1995,
between Oakley, Inc. and Wells Fargo Bank, National Association,
as agent for the Lenders party to the Credit Agreement
10.6 (1) Patent Collateral Security Agreement, dated June 20, 1995, between
Oakley, Inc. and Wells Fargo Bank, National Association, as agent
for the Lenders party to the Credit Agreement
10.7 (1) Subordination Agreement, dated June 20, 1995, between Oakley, Inc.,
Buffalo Works, Inc., James H. Jannard and Mike D. Parnell
10.8 (2) Credit Agreement (the "Amended and Restated Credit Agreement"), dated
August 15, 1995, between Oakley, Inc., Wells Fargo Bank, National
Association, as agent and the Lenders named therein
10.9 (2) Collateral Account Agreement, dated August 15, 1995, between
Oakley, Inc. and Wells Fargo Bank, National Association, as agent
for the Lenders party to the Amended and Restated Credit Agreement
10.10 (2) Guaranty, dated August 15, 1995, by the Guarantors named therein
and Wells Fargo Bank, National Association, as agent for the
Lenders party to the Amended and Restated Credit Agreement
10.11 (2) Shareholder Pledge Agreement (original and English translation),
dated August 15, 1995 between Oakley, Inc. and Wells Fargo Bank,
National Association, as agent for the Lenders party to the Amended
and Restated Credit Agreement
10.12 (2) Subordination Agreement, dated August 15, 1995 between the Initial
Subordinated Creditors named therein and Wells Fargo Bank, National
Association, as agent for the Lenders party to the Amended and
Restated Credit Agreement
10.13 (2) Promissory Note, dated August 8, 1995 between Oakley, Inc. and
James H. Jannard
10.14 (2) Promissory Note, dated August 8, 1995 between Oakley, Inc. and
M. and M. Parnell Revocable Trust
10.15 (3) Termination and Release Agreement, dated as of August 15, 1995
between Oakley, Inc. and Wells Fargo Bank, National Association, as
agents for the Lenders party to the Credit Agreement
10.17 (5) Second Amendment to Amended and Restated Credit Agreement dated as
of October 10, 1996 by and among Oakley, Inc. Wells Fargo Bank,
National Association, as agent and the Lenders named therein
</TABLE>
16
<PAGE>
<TABLE>
<S> <C>
10.18 (5) Third Amendment to Amended and Restated Credit Agreement dated as
of November 25, 1996 by and among Oakley, Inc., Wells Fargo Bank,
National Association, as agent and the Lenders named therein
10.19 (5) Counterpart Subordination Agreement executed by Oakley (U.K.) Ltd.
to the Subordination Agreement, dated as of August 15, 1995 between
the Initial Subordinated Creditors and Wells Fargo Bank, National
Association, as Agent under the Credit Agreement
10.20 (3) First Amendment to Amended and Restated Credit Agreement dated
November 22, 1995 by and among Oakley, Inc., Wells Fargo Bank, National
Association, as agent and the Lenders named therein
10.21 (2) Agreement, dated July 17, 1995, between Oakley, Inc. and Michael Jordan
10.22 (1) Lease, dated September 15, 1988, between OO Partnership and Oakley, Inc.
10.23 (3) First Amendment to Lease dated December 31, 1995, by and between
Oakley, Inc., and OO Partnership
10.24 (1) Agreement, dated July 31, 1995, between OO Partnership and Oakley, Inc.
10.25 (1) Lease, dated March 5, 1990, between Weyerhauser Mortgage Company and
Oakley, Inc., as amended
10.26 (1) Sublease, dated August 17, 1992, between Western Digital Corporation and
Oakley, Inc., as amended
10.27 (1) Purchase Agreement and Escrow Instructions, dated December 9, 1994,
between Oakley, Inc. and Foothill Ranch Development Corporation
10.28 (3) Oakley, Inc. 1995 Stock Incentive Plan
10.29 (3) Oakley, Inc. Amended and Restated 1995 Stock Incentive Plan
10.30 (3) Oakley, Inc. Executive Officer Performance Bonus Plan
10.31 (1) Employment Agreement, dated as of August 1, 1995, between Oakley, Inc. and
Jim Jannard
10.32 (1) Employment Agreement, dated as of August 1, 1995, between Oakley, Inc. and
Mike Parnell
10.33 (5) Amendment No. 1 dated as of May 23, 1996 to Employment Agreement dated as of
August 1, 1995, between Oakley, Inc. and Mike Parnell
10.34 (5) Amendment No. 1 dated as of July 22, 1996 to Employment Agreement dated as of
August 1, 1995, between Oakley, Inc. and Jim Jannard
10.35 (1) Employment Agreement, dated as of April 1, 1995, between Oakley, Inc. and
Link Newcomb
10.36 (3) Indemnification Agreement, dated August 1, 1995, between Oakley, Inc. and
Jim Jannard
10.37 (1) Schedule of indemnification agreements between Oakley, Inc. and each of its
directors and executive officers
10.38 (1) Standard Form of Agreement between Owner and Project Manager, dated
December 30, 1994, between Oakley, Inc. and Snyder Langston
10.39 (1) Lease Agreement, dated January 26, 1995, between Oakley Europe, sarl and
Investipierre 7 (In French with English translation)
10.40 (3) Aircraft Lease Agreement, dated August 10, 1995, between Oakley, Inc. and X, Inc.
10.41 (3) Aircraft Lease Agreement, dated August 10, 1995, between Oakley, Inc. and
Time Tool Incorporated
10.42 (1) Registration Rights Agreement, dated August 1, 1995, between Oakley, Inc.,
Jim Jannard and the M. and M. Parnell Revocable Trust
10.43 (3) Indemnification Agreement, dated August 9, 1995, between Oakley, Inc.,
Jim Jannard and the M. and M. Parnell Revocable Trust
10.44 (4) Indemnification Agreement, dated June 6, 1996, between Oakley, Inc.,
Jim Jannard and the M. and M. Parnell Revocable Trust
</TABLE>
17
<PAGE>
<TABLE>
<S> <C>
10.45 (6) Fifth Amendment to Amended and Restated Credit Agreement dated as of June 30,
1996 by and among Oakley, Inc., Wells Fargo Bank, National Association, as
agent and the Lenders named therein
10.46 (6) Sixth Amendment to Amended and Restated Credit Agreement dated as of June 30,
1996 by and among Oakley, Inc., Wells Fargo Bank, National Association, as
agent and the Lenders named therein
10.47 (6) Employment Agreement, dated as of January 31, 1997, between Oakley, Inc.
and Link Newcomb
10.48 (6) Employment Agreement, dated as of January 16, 1997, between Oakley, Inc.
and Robert Bruning
10.49 (6) Pledge Agreement, dated as of January 1997, between Oakley, Inc. and
Wells Fargo Bank, National Association, as agent and the Lenders named therein
10.50 (6) Reciprocal Exclusive Dealing Agreement dated March 11, 1997 among Oakley, Inc.,
Gentex Optics, Inc. and Essilor International Compagnie Generale D'Optique, S.A.
(portions of this document have been omitted pursuant to a request for
confidential treatment)
10.51 (6) Promissory Note, dated March 20, 1997, between Oakley, Inc. and Bank of America
National Trust and Savings Association
10.52 (6) Amendment No. 2 to employment agreement, dated February 1, 1997, between
Oakley, Inc. and Mike Parnell
10.53 (6) Amendment No. 1 to employment agreement, dated February 1, 1997, between
Oakley, Inc. and Link Newcomb
10.54 Seventh Amendment to Amended and Restated Credit Agreement dated May 14, 1997
by and among Oakley, Inc., Wells Fargo Bank, National Association, as agent and
the Lenders named therein
10.55 Eighth Amendment to Amended and Restated Credit Agreement dated June 27, 1997
by and among Oakley, Inc., Bank of America National Trust and Savings
Association and Union Bank of California N.A.
11.1 Computation of Earnings per Common Share
27.1 Financial Data Schedule
</TABLE>
(1) Previously filed with the Registration Statement on Form S-1 of Oakley,
Inc. (Registration No. 33-93080)
(2) Previously filed with the Form 10-Q of Oakley, Inc. for the quarter ended
September 30, 1995.
(3) Previously filed with the Form 10-K of Oakley, Inc. for the year ended
December 31, 1995.
(4) Previously filed with the Form 10-Q of Oakley, Inc. for the quarter ended
June 30, 1996.
(5) Previously filed with the Form 10-K of Oakley, Inc. for the year ended
December 31, 1996.
(6) Previously filed with the Form 10-Q of Oakley, Inc. for the quarter ended
March 31, 1997.
The Company did not file any reports on Form 8-K during the six months ended
June 30, 1997.
18
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Oakley, Inc.
/s/ JIM JANNARD August 7, 1997
- -------------------------------
Jim Jannard
Chairman and President
/s/ LINK NEWCOMB August 7, 1997
- -------------------------------
Link Newcomb
Chief Operating Officer
(Principal Financial Officer)
/s/ DONNA GORDON August 7, 1997
- -------------------------------
Donna Gordon
Vice President of Finance
(Chief Accounting Officer)
19
<PAGE>
EXHIBIT 10.54
OAKLEY, INC.
SEVENTH AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT
This SEVENTH AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT
(this "Amendment") is dated as of May 14, 1997 and entered into by and among
OAKLEY, INC., a Washington corporation ("Company"), THE FINANCIAL
INSTITUTIONS LISTED ON THE SIGNATURE PAGES HEREOF (each individually referred
to herein as a "Lender" and collectively as "Lenders" and WELLS FARGO BANK,
NATIONAL ASSOCIATION ("Wells Fargo"), as current agent for Lenders (in such
capacity, "Agent") and, for purposes of Section 5, the Consenting Parties (as
defined therein), and is made with reference to that certain Amended and
Restated Credit Agreement dated as of August 15, 1995, as amended by the
First Amendment to Amended and Restated Credit Agreement, dated as of
November 22, 1995, by and among Company, Lenders and Agent, the Second
Amendment to Amended and Restated Credit Agreement, dated as of October 10,
1996, by and among Company, Lenders and Agent, the Third Amendment to Amended
and Restated Credit Agreement, dated as of November 25, 1996, the Fourth
Amendment to Amended and Restated Credit Agreement, dated as of January 29,
1997, by and among Company, Lenders and Agent, the Fifth Amendment to Amended
and Restated Credit Agreement, dated as of March 31, 1997, by and among
Company, Lenders and Agent, and the Sixth Amendment to Amended and Restated
Credit Agreement, dated as of March 31, 1997, by and among Company, Lenders
and Agent (as amended, the Credit Agreement"), by and among Company, Lenders
and Agent. Capitalized terms used herein without definition shall have the
same meanings herein as set forth in the Credit Agreement.
RECITALS
A. Wells Fargo desires to resign as Agent for the Lenders under the
Credit Agreement and the other Loan Documents.
B. Wells Fargo has sold and assigned all of its rights and obligations
as a Lender arising under the Credit Agreement and other Loan Documents with
respect to its Commitment and outstanding Loans in accordance with the terms
of the Assignment Agreements, effective as of May 8, 1997.
C. Company and Lenders desire to amend the Credit Agreement to provide
for the appointment of Bank of America National Trust and Savings Association
("BofA") as successor agent for the Lenders.
1
<PAGE>
D. Company and Lenders desire to further amend the Credit Agreement as
herein provided.
NOW, THEREFORE, in consideration of the premises and the agreements,
provisions and covenants herein contained, the parties hereto agree as
follows:
SECTION 1. MODIFICATIONS TO THE CREDIT AGREEMENT.
1.1 APPOINTMENT OF SUCCESSOR AGENT.
(a) Subject to the provisions of Section 9 of the Credit Agreement
(except for the notice requirements of Subsection 9.5 which are hereby waived
by the Company and the Lenders), Wells Fargo resigns as Agent for the Lenders
and the Lenders hereby appoint BofA as successor Agent and authorizes the
Agent to act as agent in accordance with the terms of the Credit Agreement
and the other Loan Documents.
(b) In the first sentence of Subsection 9.1 the name "BofA" is
substituted for the name "Wells Fargo" appearing therein.
(c) Subsection 9.2D is amended by adding the following sentence to the
end of such subsection:
"The Lenders acknowledge that, pursuant to such activities, BofA
or its affiliates may receive information regarding the Company.
(including information that may be subject to confidentiality
obligations in favor of the Company) and acknowledge that the Agent
shall be under no obligation to provide such information to them."
(d) Subsection 9.5 is amended by adding the following two sentences to
the end of such subsection:
"If no successor agent is appointed prior to the effective date
of the resignation of the Agent, the Agent may appoint, after
consulting with the Lenders and the Company, a successor agent from
among the Lenders. If no successor agent has accepted appointment as
Agent by the date which is 30 days following or retiring Agent's notice
of resignation, the retiring Agent's resignation shall nevertheless
thereupon become effective and the Lenders shall perform all of the
duties of the Agent hereunder until such time, if any, as the
Requisite Lenders appoint a successor agent as provided for above."
2
<PAGE>
1.2 AMENDMENTS TO SUBSECTION 1.1: CERTAIN DEFINED TERMS.
(a) The definition of "Base Rate" is amended to read:
"'Base Rate' means for any day, the higher of (a) the rate
which is 1/2 of 1% in excess of the Federal Funds Effective Rate and
(b) the Reference Rate."
(b) In the definition of "Eligible Assignee" the figure "$100,000,000"
is substituted for the figure "$10,000,000,000" appearing therein.
(c) The definition of "Exchange Rate" is amended to read:
"'Exchange Rate' means, on any date, as to any amount that is
expressed in a currency other than Dollars, the rate quoted by BofA
as the spot rate for the purchase by BofA of such currency with another
currency at its FX Trading Office at approximately 8:00 a.m.
(San Francisco time) on the date two Business Days prior to the date as
of which the foreign exchange computation is made."
(d) The definition of "Funding and Payment Office" is amended to read:
"'Funding and Payment Office' means the Office of the Agent located
at 1455 Market Street, 13th Floor, San Francisco, California 94103,
Attention: Agency Administrative Services 5596, or such other of Agent's
offices as Agent may designate from time to time".
(e) The definition of "Issuing Lender" is amended to read:
"'Issuing Lender' means, with respect to any Letter of Credit, BofA."
(f) The definition of "LIBOR" is amended to read:
"'LIBOR' means, for any Interest Period, the rate of interest per
annum determined by the Agent to be the arithmetic mean of the rates of
interest per annum at which deposits (in an amount approximately equal
to the amount of any requested LIBOR Loan and for the same term as the
Interest Period designated by Company for such Loan), are offered to major
banks in the London interbank market at their request at approximately
3
<PAGE>
11:00 a.m. (London time) two Business Days prior to the commencement of
such Interest Period, as adjusted for reserve requirements and rounded
upwards to the next highest one sixteenth of one percent (1/16%)."
(g) The definition of "Prime Rate" is deleted in its entirety.
(h) The definition of "Pro Rata Share" is amended to read:
"'Pro Rata Share' means, with respect to each Lender, the percentage
(expressed as a decimal, rounded to the ninth decimal place) obtained by
DIVIDING the Revolving Loan Exposure of that Lender by the aggregate
Revolving Loan Exposure of all Lenders, as such percentage may be
adjusted by assignments permitted pursuant to subsection 10.1; The
initial Pro Rata Share of each Lender is set opposite the name of that
Lender in Schedule 2.1 annexed hereto."
(i) The definition of "FX Trading Office" is added, in appropriate
alphabetical order, to read:
"'FX Trading Office' means the Foreign Exchange Trading Center
#5193, San Francisco, California, of BofA, or such other of BofA's
offices as BofA may designate from time to time."
(j) The definition of "Reference Rate" is added, in appropriate
alphabetical order, to read:
"'Reference Rate' means the rate of interest publicly announced
from time to time by BofA in San Francisco, California, as its
'Reference Rate'. The Reference Rate is set by BofA based upon various
factors including BofA's costs and desired return, general economic
conditions and other factors, and is used as a reference point for
pricing some loans, which may be priced at, above, or below such
announced rate. Any change in the Reference Rate announced by BofA
shall take effect at the opening of business on the day specified in
the public announcement of such change."
1.3 MODIFICATIONS TO SECTION 2. AMOUNTS AND TERMS OF COMMITMENTS
AND LOANS.
(a) The second sentence of Subsection 2.1B is amended to read:
4
<PAGE>
"Whenever Company desires that Leaders make Revolving Loans, it
shall deliver to Agent a Notice of Borrowing no later than 10:30 a.m.
(California time) at least three Business Days in advance of the
proposed Funding Date (in the case of a LIBOR Loan) and no later than
10:30 a.m. (California time) on the proposed Funding Date (in the case
of a Base Rate Loan)."
(b) In the second paragraph of Subsection 2.2D., the hour "10:30 a.m.
(California time)" is substituted for the hour "ll:00 a.m. (California time)"
appearing therein.
(c) In Subsection 2.4A.(i), the hour "10:30 a.m. (California time)" is
substituted for the hour "11:00 a.m. (California time)" appearing therein.
(d) In Subsection 2.4.B(i), the hour "10:30 a.m. (California time)" is
substituted for the hour "11:00 a.m. (California time)" appearing therein.
1.4 MODIFICATIONS TO SECTION 3. LETTERS OF CREDIT.
(a) The first sentence of Subsection 3.1B.(iii) is amended to read:
"Upon the issuance of any Letter of Credit, Issuing Lender shall
notify Agent and Agent shall notify each other Lender of such issuance,
which notice shall be accompanied by a copy of such Letter of Credit."
(b) In the third line of Subsection 3.1B.(iv), "Agent" is substituted
for "Issuing Lender" appearing therein.
(c) The final sentence of Subsection 3.2 is amended to read:
"Promptly upon receipt by Issuing Lender of any amount described in
clause (i)(b) of this Subsection 3.2, Agent shall distribute to each
other Lender its Pro Rata Share of such amount."
(d) In the fourth and tenth lines of Subsection 3.3C., "Agent" is
substituted for "Issuing Lender" appearing therein.
(e) At the end of the fourth line of Subsection 3.3C(ii), "Agent" is
substituted for "Issuing Lender" appearing therein.
5
<PAGE>
(f) In the fourth line of Subsection 3.3(d.(ii), "Agent" is substituted
for "Issuing Lender" appearing therein.
1.5 ASSIGNMENTS BY WELLS FARGO. Concurrently with the execution of
this Amendment and in accordance with the provisions of Subsection 10.1 of
the Credit Agreement, Wells Fargo, as assignor, and each of the other
Lenders, as assignees, shall execute the Assignment Agreements whereby Wells
Fargo shall assign all its rights and obligations as a Lender under the
Credit Agreement and other Loan Documents with respect to its Commitments and
any outstanding Loans to the assignees pursuant to the terms of the
respective Assignment Agreements.
1.6 MODIFICATIONS OF EXHIBITS.
(a) All references to "Wells Fargo, as Agent" in the Exhibits to the
Credit Agreement are hereby amended to substitute "Bank of America National
Trust and Savings Association, as Agent".
(b) Exhibit V to the Credit Agreement is hereby amended by deleting
said Exhibit V in its entirety and substituting in its' place a new Exhibit V
in the form attached hereto.
(c) Exhibit XI to the Credit Agreement is hereby amended by deleting
said Exhibit XI in its entirety and substituting in its place a new Exhibit
XI in the form attached hereto.
1.7 MODIFICATION OF SCHEDULE.
SCHEDULE 2.1: LENDERS' COMMITMENTS AND PRO RATA SHARES. SCHEDULE 2.1 to
the Credit Agreement is hereby amended by deleting said SCHEDULE 2.1 in its
entirety and substituting in its place thereof a new SCHEDULE 2.1 in the form
of Annex A to this Amendment.
SECTION 2. REPLACEMENT REVOLVING NOTES
Company agrees to execute and deliver to each Lender a new Revolving
Note (collectively, the "Replacement Revolving Notes") in the amount of such
Lender's Revolving Loan Commitment in the form of EXHibit A attached hereto.
Each Lender hereby agrees that on the Seventh Amendment Effective Date (as
defined hereinafter) such Lender shall return to Company for cancellation any
Notes in such Lender's possession evidencing Revolving Loans outstanding
prior to the effectiveness of this Amendment.
6
<PAGE>
SECTION 3. CONDITIONS TO EFFECTIVENESS
Section 1 of this Amendment shall become effective only upon the
satisfaction of all of the following conditions precedent (the date of
satisfaction of such conditions being referred to herein as the "Seventh
Amendment Effective Date"):
A. Company shall deliver to Lenders (or to Agent for Lenders with
sufficient originally executed copies, where appropriate, for each Lender and
its counsel) the following, each, unless otherwise noted, dated the Seventh
Amendment Effective Date:
1. Copies of this Amendment executed by Company and each Consenting
Party;
2. Signature and incumbency certificates of Company's and each
Guarantor's officers executing this Amendment and, in the case of Company,
the Replacement Revolving Notes; and
3. Replacement Revolving Notes executed by the Company,
substantially in the form of EXHIBIT A to this Amendment, with
appropriate insertions for each Lender as provided for in this Amendment.
B. On or before the Seventh Amendment Effective Date, Agent, on behalf
of Lenders, shall have received a counterpart of this Amendment executed by a
duly authorized officer of each Lender and copies of the Assignment
Agreements executed by Wells Fargo and the Lenders, respectively, and
consented to by the Company and the Agent.
C. On or before the Seventh Amendment Effective Date, Wells Fargo, as
retiring Agent, shall deliver to BofA, as successor Agent, executed originals
of all Loan Documents, including any pledged stock certificates and related
stock power assignments, in the possession of Wells Fargo and a copy of the
Register.
SECTION 4. COMPANY'S REPRESENTATIONS AND WARRANTIES
In order to induce Lenders to enter into this Amendment and to amend the
Credit Agreement in the manner provided herein, Company represents and
warrants to each Lender, as of the date hereof and as of the Seventh
Amendment Effective Date, that the following statements are true, correct and
complete:
7
<PAGE>
A. CORPORATE POWER AND AUTHORITY. Company has all requisite corporate
power and authority to enter into this Amendment and the Replacement
Revolving Notes, and to carry out the transactions contemplated by, and
perform its obligations under, the Credit Agreement as amended by this
Amendment (the "Amended Agreement") and the Replacement Revolving Notes.
B. AUTHORIZATION OF AGREEMENTS. The execution and delivery of this
Amendment and the performance of the Amended Agreement have been duly
authorized by all necessary corporate action on the part of Company and each
Consenting Party. The issuance, delivery and payment of the Replacement
Revolving Notes have been duly authorized by all necessary corporate action
on the part of the Company.
C. NO CONFLICT. The execution and delivery by Company and each
Consenting party of this Amendment and, in the case of Company, the
Replacement Revolving Notes, and the performance by Company and each
Consenting Party of the Loan Documents and, in the case of Company, the
Replacement Revolving Notes do not and will not (i) violate the Certificate
or Articles of Incorporation or Bylaws of Company or any of its Subsidiaries,
(ii) violate any provision of any law or any governmental rule or regulation
applicable to Company or any of its Subsidiaries or any order, judgment or
decree of any court or other agency of government binding on Company or any
of its Subsidiaries, which violation could reasonably be expected to have a
Material Adverse Effect, (iii) conflict with, result in a breach of or
constitute (with due notice or lapse of time or both) a default under any
Contractual Obligation of Company or any of its Subsidiaries in a manner that
could reasonably be expected to have a Material Adverse Effect, (iv) result
in or require the creation or imposition of any Lien upon any of the
properties or assets of Company or any of its Subsidiaries (other than any
Liens created under any of the Loan Documents in favor of Agent on behalf of
Lenders), or (v) require any approval of stockholders or any approval or
consent of any Person under any Contractual Obligation of Company or any of
its Subsidiaries.
D. GOVERNMENTAL CONSENTS. The execution and delivery by Company and
each Consenting Party of this Amendment and, in the case of Company, the
Replacement Revolving Notes, and the performance by Company and each
Consenting Party of the Loan Documents and, in the case of Company, the
Replacement Revolving Notes, do not and will not require any registration
with, consent or approval of, or notice to, or other action to, with or by,
any federal, state or other governmental authority or regulatory body.
8
<PAGE>
E. BINDING OBLIGATION. Each Loan Document and, in the case of Company,
the Replacement Revolving Notes have been duly executed and delivered by
Company and each Consenting party, as applicable, and are the legally valid
and binding obligations of Company and each Consenting Party thereto,
enforceable against each such Person in accordance with their respective
terms, except as may be limited by bankruptcy, insolvency, reorganization,
moratorium or similar laws relating to or limiting creditors' rights
generally or by equitable principles relating to enforceability.
F. ABSENCE OF DEFAULT. Upon giving effect to this Amendment, no event
has occurred and is continuing or will result from the consummation of the
transactions contemplated by this Amendment that would constitute an Event of
Default or a Potential Event of Default.
SECTION 5. ACKNOWLEDGEMENT AND CONSENT
Repeat Incorporated, an Arizona corporation ("Repeat"), and Barter
Optical, Inc., a Washington corporation ("Barter"), are parties to the
Guaranty, pursuant to which Repeat and Barter have guarantied the Obligations
of Company under the Credit Agreement. Repeat and Barter are collectively
referred to herein as the "Consenting Parties".
Each Consenting Party hereby acknowledges that it has reviewed the terms
and provisions of the Credit Agreement and this Amendment and consents to the
amendment of the Credit Agreement effected pursuant to this Amendment. Each
Consenting Party hereby confirms that the Guaranty will continue to guaranty
to the fullest extent possible the payment and performance of all "Guaranteed
Obligations" (as such term is defined in the Guaranty), including without
limitation the payment and performance of all such Guarantied Obligations, in
respect of the Obligations of Company now or hereafter existing under or in
respect of the Amended Agreement and all Notes.
Each Consenting Party acknowledges and agrees that the Guaranty shall
continue in full force and effect and that all of its obligations thereunder
shall be valid and enforceable and shall not be impaired or limited by the
execution or effectiveness of this Amendment. Each Consenting Party
represents and warrants that all representations and warranties contained in
the Guaranty and the Amended Agreement to which it is a party or otherwise
bound are true, correct and complete in all material respects on and as of
the Seventh Amendment Effective Date to the same extent as though made on and
as of that date, except to the extent such representations and warranties
specifically relate to an earlier date, in which case
9
<PAGE>
they were true, correct and complete in all material respects on and as of
such earlier date.
Each Consenting Party acknowledges and agrees that (i) notwithstanding
the conditions to effectiveness set forth in this Amendment, such Consenting
Party is not required by the terms of the Credit Agreement or any other Loan
Document to consent to the amendments to the Credit Agreement effected
pursuant to this Amendment and (ii) nothing in the Credit Agreement, this
Amendment or any other Loan Document shall be deemed to require the consent
of such Consenting Party to any future amendments to the Credit Agreement.
SECTION 6. MISCELLANEOUS
A. REFERENCE TO AND EFFECT ON THE CREDIT AGREEMENT AND THE OTHER
LOAN DOCUMENTS.
(i) On and after the Seventh Amendment Effective Date, each
reference in the Credit Agreement to "this Agreement", "hereunder",
"hereof", "herein" or words of like import referring to the Credit
Agreement, and each reference in the other Loan Documents to the
"Credit Agreement", "thereunder", "thereof" or words of like import
referring to the Credit Agreement shall mean and be a reference to
the Amended Agreement.
(ii) Except as specifically amended or waived by this Amendment,
the Credit Agreement and the other Loan Documents shall remain in full
force and effect and are hereby ratified and confirmed.
(iii) The execution, delivery and performance of this Amendment
shall not, except as expressly provided herein, constitute a waiver
of any provision of, or operate as a waiver of any right, power or
remedy of Agent or any Lender under, the Credit Agreement or any of
the other Loan Documents.
B. FEES AND EXPENSES. Company acknowledges that all costs, fees and
expenses as described in subsection 10.2 of the Credit Agreement incurred by
Agent and its counsel with respect to this Amendment and the documents and
transactions contemplated hereby shall be for the account of Company.
C. HEADINGS. Section and subsection headings in this Amendment are
included herein for convenience of reference only and shall not constitute a
part of this Amendment for any other purpose or be given any substantive
effect.
10
<PAGE>
D. APPLICABLE LAW. THIS AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF
THE PARTIES HEREUNDER SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND
ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF CALIFORNIA,
WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES.
E. COUNTERPARTS; EFFECTIVENESS. 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 an
original, but all such counterparts together shall constitute but one and the
same instrument; signature pages may be detached from multiple separate
counterparts and attached to a single counterpart so that all signature pages
are physically attached to the same document. This Amendment shall become
effective upon the execution of a counterpart hereof by Requisite Lenders and
each of the other parties hereto and receipt by Company and Agent of written
or telephonic notification of such execution and authorization of delivery
thereof.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed and delivered by their respective officers thereunto duly
authorized as of the date first written above.
OAKLEY, INC., as the Borrower
By:
-----------------------------------
Title:
--------------------------------
Notice Address:
Oakley, Inc.
1 Icon
Foothill Ranch, CA 92610
Telecopy: (714) 454-0394
Attn: Ms. Donna Gordon
Controller
(signatures continue)
11
<PAGE>
WELLS FARGO BANK, NATIONAL ASSOCIATION,
Individually and as retiring Agent
By:
-----------------------------------
Title:
--------------------------------
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION, as successor Agent
By:
-----------------------------------
Title:
--------------------------------
Notice Address:
Bank of America NT&SA
1455 Market Street, 12th Floor
San Francisco, CA 94103
Telecopy: (415) 436-3425
Attn: Agency Management
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION, as a Lender
By:
-----------------------------------
Title:
--------------------------------
Notice Address:
Bank of America NT&SA
3233 Park Center Drive
2nd Floor
Costa Mesa, CA 92626
Telecopy: (714) 850-6480
Attn: Ms. Elizabeth Amendt
(signatures continue)
12
<PAGE>
UNION BANK OF CALIFORNIA, N.A.,
(formerly named Union Bank) as a Lender
By:
-----------------------------------
Title:
--------------------------------
Notice Address:
Union Bank of California, N.A.
500 South Main Street
Suite 200
Orange, CA 92668
Telecopy: (714) 565-5725
Attn: Mr. Tim Carney
ACKNOWLEDGMENT AND CONSENT
BARTER OPTICAL, INC., as a
Consenting Party
By:
----------------------------
Title:
-------------------------
REPEAT INCORPORATED, as a
Consenting Party
By:
----------------------------
Title:
-------------------------
13
<PAGE>
ANNEX A
SCHEDULE 2.1
LENDERS' COMMITMENTS AND PRO RATA SHARES
Revolving Loan Pro Rata
Lender Commitment Share
- ------ --------------- ---------
Bank of America NT&SA $15,000,000 50%
Union Bank of NT&SACalifornia, N.A. $15,000,000 50%
TOTAL $30,000,000 100%
14
<PAGE>
OAKLEY, INC.
EIGHTH AMENDMENT TO AMENDED AND RESTATED
CREDIT AGREEMENT
This EIGHTH AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT (this
"Amendment") is dated as of June 27, 1997 and entered into by and among
OAKLEY, INC., a Washington corporation ("Company"), THE FINANCIAL
INSTITUTIONS LISTED ON THE SIGNATURE PAGES HEREOF (each individually referred
to herein as a "Lender" and collectively as "Lenders") and BANK OF AMERICA
NATIONAL TRUST AND SAVINGS ASSOCIATION, as current agent for Lenders (in such
capacity, "Agent") and, for purposes of Section 4 hereof, the Consenting
Parties (as defined herein), and is made with reference to that certain
Amended and Restated Credit Agreement dated as of August 15, 1995, as amended
by the First Amendment to Amended and Restated Credit Agreement, dated as of
November 22, 1995, the Second Amendment to Amended and Restated Credit
Agreement, dated as of October 10, 1996, the Third Amendment to Amended and
Restated Credit Agreement, dated as of November 25, 1996, the Fourth
Amendment to Amended and Restated Credit Agreement, dated as of January 29,
1997, the Fifth Amendment to Amended and Restated Credit Agreement, dated as
of March 31, 1997, the Sixth Amendment to Amended and Restated Credit
Agreement, dated as of March 31, 1997, and the Seventh Amendment to Amended
and Restated Credit Agreement, dated as of May 14, 1997, each by and among
Company, Lenders and Agent (as amended, the "Credit Agreement"). Capitalized
terms used herein without definition shall have the same meanings herein as
set forth in the Credit Agreement.
RECITALS
A. Company and Lenders desire to amend the Credit Agreement to
provide for certain clarifications of and technical modifications to the
terms thereof.
B. Lenders have agreed to waive certain provisions of the Credit
Agreement, as provided herein.
NOW, THEREFORE, in consideration of the premises and the agreements,
provisions and covenants herein contained, the parties hereto agree as
follows:
<PAGE>
SECTION 1. MODIFICATIONS AND WAIVERS TO THE CREDIT AGREEMENT.
Section 1.1. AMENDMENTS TO CREDIT AGREEMENT.
(a) Section 1.1 of the Credit Agreement is hereby amended by
inserting the following definition in the appropriate alphabetical order:
""OFFICE BUILDING CAPITAL EXPENDITURES" means Capital Expenditures
relating to the construction of Company's headquarters office building
located at 1 Icon, Foothill Ranch, Orange County, California 92610;
PROVIDED that any modifications or improvements to such office building
after 1997 shall not be deemed to be Office Building Capital Expenditures."
(b) Section 7.6A(i)(a) of the Credit Agreement is hereby amended by
deleting such clause in its entirety and inserting the following in replacement
therefor:
"(a) taxes paid in cash, minus tax refunds or reimbursements received
in cash which relate to such taxes paid during the four fiscal quarter
period referred to below,"
(c) Section 7.6A(i)(b) of the Credit Agreement is hereby amended by
deleting such clause in its entirety and inserting the following in replacement
therefor:
"(b) Capital Expenditures (other than Office Building Capital
Expenditures, Capital Expenditures attributable to Investments permitted
under Section 7.3 hereof and Capital Expenditures incurred in June 1996 in
the aggregate amount of $4,300,000 in connection with the acquisition of
the Nevada titanium facility) paid in cash and Stock Payments (determined
as of the last day of any fiscal quarter of Company for the four
consecutive fiscal quarters then ended in each case with respect to the
Company and its Subsidiaries on a consolidated basis in conformity with
GAAP) to"
(d) Section 7.6A of the Credit Agreement is
2
<PAGE>
hereby further amended by inserting the following at the end of such section:
"For purposes hereof, "current portion of Funded Debt" shall not
include any portion of Company's working capital Indebtedness which, by
its terms or by the terms of any instrument or agreement relating thereto
matures more than one year from, or is directly renewable or extendable
at the option of Company to a date more than one year from (including an
option of the Company obligating the lender or lenders of such
Indebtedness to extend credit over a period of one year or more from),
the last day of the fiscal quarter most recently completed."
(e) Section 7.8 of the Credit Agreement is hereby amended by deleting
the entirety of such section and inserting the following in replacement
therefor:
"Company shall not, and shall not permit its Subsidiaries to, make or
incur Office Building Capital Expenditures except during its 1995, 1996 or
1997 Fiscal Years and shall not permit the aggregate amount of all such
Office Building Capital Expenditures during all such Fiscal Years to exceed
$47,000,000."
Section 1.2 WAIVER OF SECTION 7.6A. The provisions of Section 7.6A
of the Credit Agreement are hereby waived and deemed to be of no force and
effect for the period from March 30, 1997 through and including the Eighth
Amendment Effective Date (as hereinafter defined).
SECTION 2. EFFECTIVENESS
Section 1 of this Amendment shall become effective (the date of such
effectiveness being referred to herein as the "Eighth Amendment Effective
Date") on the date that (a) Company shall deliver to Lenders (or to Agent for
Lenders with sufficient originally executed copies, where appropriate, for
each Lender) copies of this Amendment executed by Company and each Consenting
Party and (b) Agent, on behalf of Lenders shall have received a counterpart
of this Amendment duly executed by the Requisite Lenders.
3
<PAGE>
SECTION 3. COMPANY'S REPRESENTATIONS AND WARRANTIES
In order to induce Lenders to enter into this Amendment and to amend
the Credit Agreement in the manner provided herein, Company represents and
warrants to each Lender, as of the date hereof and as of the Eighth Amendment
Effective Date, that the following statements are true, correct and complete:
A. CORPORATE POWER AND AUTHORITY. Company has all requisite
corporate power and authority to enter into this Amendment and to carry out
the transactions contemplated by, and perform its obligations under, the
Credit Agreement as amended by this Amendment (the "Amended Agreement").
B. AUTHORIZATION OF AGREEMENTS. The execution and delivery of
this Amendment and the performance of the Amended Agreement have been duly
authorized by all necessary corporate action on the part of Company and each
Consenting Party.
C. NO CONFLICT. The execution, delivery and performance by
Company and each Consenting Party of this Amendment do not and will not (i)
violate the Certificate or Articles of Incorporation or Bylaws of Company or
any of its Subsidiaries, (ii) violate any provision of any law or any
governmental rule or regulation applicable to Company or any of its
Subsidiaries or any order, judgment or decree of any court or other agency of
government binding on Company or any of its Subsidiaries, which violation
could reasonably be expected to have a Material Adverse Effect, (iii)
conflict with, result in a breach of or constitute (with due notice or lapse
of time or both) a default under any Contractual Obligation of Company or any
of its Subsidiaries in a manner that could reasonably be expected to have a
Material Adverse Effect, (iv) result in or require the creation or imposition
of any Lien upon any of the properties or assets of Company or any of its
Subsidiaries (other than any Liens created under any of the Loan Documents in
favor of Agent on behalf of Lenders), or (v) require any approval of
stockholders or any approval or consent of any Person under any Contractual
Obligation of Company or any of its
4
<PAGE>
Subsidiaries.
D. GOVERNMENTAL CONSENTS. The execution, delivery and performance
by Company and each Consenting Party of this Amendment do not and will not
require any registration with, consent or approval of, or notice to, or other
action to, with or by, any federal, state or other governmental authority or
regulatory body.
E. BINDING OBLIGATION. This Amendment has been duly executed and
delivered by Company and each Consenting Party, as applicable, and is the
legally valid and binding obligation of Company and each Consenting Party,
enforceable against each such Person in accordance with its respective terms,
except as may be limited by bankruptcy, insolvency, reorganization,
moratorium or similar laws relating to or limiting creditors' rights
generally or by equitable principles relating to enforceability.
F. ABSENCE OF DEFAULT. Upon giving effect to this Amendment, no
event has occurred and is continuing or will result from the consummation of
the transactions contemplated by this Amendment that would constitute an
Event of Default or a Potential Event of Default.
SECTION 4. ACKNOWLEDGEMENT AND CONSENT
Repeat Incorporated, an Arizona corporation ("Repeat"), and Barter
Optical, Inc., a Washington corporation ("Barter"), are parties to the
Guaranty, pursuant to which Repeat and Barter have guarantied the Obligations
of Company under the Credit Agreement. Repeat and Barter are collectively
referred to herein as the "Consenting Parties".
Each Consenting Party hereby acknowledges that it has reviewed the
terms and provisions of the Credit Agreement and this Amendment and consents
to the amendment of the Credit Agreement effected pursuant to this Amendment.
Each Consenting Party hereby confirms that the Guaranty will continue to
guaranty to the fullest extent possible the payment and performance of all
"Guarantied Obligations" (as such term is defined in the Guaranty), including
without limitation the payment and performance of all such Guarantied
Obligations, in re-
5
<PAGE>
spect of the Obligations of Company now or hereafter existing under or in
respect of the Amended Agreement and all Notes.
Each Consenting Party acknowledges and agrees that the Guaranty
shall continue in full force and effect and that all of its obligations
thereunder shall be valid and enforceable and shall not be impaired or
limited by the execution or effectiveness of this Amendment.
Each Consenting Party acknowledges and agrees that (i)
notwithstanding the conditions to effectiveness set forth in this Amendment,
such Consenting Party is not required by the terms of the Credit Agreement or
any other Loan Document to consent to the amendments to the Credit Agreement
effected pursuant to this Amendment and (ii) nothing in the Credit Agreement,
this Amendment or any other Loan Document shall be deemed to require the
consent of such Consenting Party to any future amendments to the Credit
Agreement.
SECTION 5. MISCELLANEOUS
A. REFERENCE TO AND EFFECT ON THE CREDIT AGREEMENT AND THE OTHER
LOAN DOCUMENTS.
(i) On and after the Eighth Amendment Effective Date, each
reference in the Credit Agreement to "this Agreement", "hereunder",
"hereof", "herein" or words of like import referring to the Credit
Agreement, and each reference in the other Loan Documents to the
"Credit Agreement", "thereunder", "thereof" or words of like import
referring to the Credit Agreement shall mean and be a reference to
the Amended Agreement.
(ii) Except as specifically amended or waived by this Amendment,
the Credit Agreement and the other Loan Documents shall remain in
full force and effect and are hereby ratified and confirmed.
(iii) The execution, delivery and performance of this
Amendment shall not, except as expressly provided herein, constitute
a waiver
6
<PAGE>
of any provision of, or operate as a waiver of any right, power or
remedy of Agent or any Lender under, the Credit Agreement or any
of the other Loan Documents.
B. HEADINGS. Section and subsection headings in this Amendment
are included herein for convenience of reference only and shall not
constitute a part of this Amendment for any other purpose or be given any
substantive effect.
C. FEES AND EXPENSES. Company acknowledges that all costs, fees
and expenses as described in subsection 10.2 of the Credit Agreement incurred
by Agent and its internal counsel with respect to this Amendment and the
documents and transactions contemplated hereby shall be for the account of
Company.
D. APPLICABLE LAW. THIS AMENDMENT AND THE RIGHTS AND OBLIGATIONS
OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND
ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF CALIFORNIA,
WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES.
E. COUNTERPARTS; EFFECTIVENESS. 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 an
original, but all such counterparts together shall constitute but one and the
same instrument; signature pages may be detached from multiple separate
counterparts and attached to a single counterpart so that all signature pages
are physically attached to the same document. This Amendment shall become
effective upon the execution of a counterpart hereof by Requisite Lenders and
each of the other parties hereto and receipt by Company and Agent of written
or telephonic notification of such execution and authorization of delivery
thereof.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be duly executed and delivered by their respective officers thereunto duly
authorized as of the date first written above.
OAKLEY, INC., as the Borrower
By:
-----------------------------------
Title:
--------------------------------
7
<PAGE>
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION, as Agent
By:
-----------------------------------
Title:
--------------------------------
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION, as a Lender
By:
-----------------------------------
Title:
--------------------------------
UNION BANK OF CALIFORNIA N.A.,
(formerly named Union Bank) as a Lender
By:
-----------------------------------
Title:
--------------------------------
ACKNOWLEDGMENT AND CONSENT
BARTER OPTICAL, INC., as a
Consenting Party
By:
--------------------------------
Title:
-----------------------------
REPEAT INCORPORATED, as a
Consenting Party
By:
--------------------------------
Title:
-----------------------------
9
<PAGE>
Exhibit 11.1
OAKLEY, INC.
COMPUTATION OF EARNINGS PER COMMON SHARE
(IN THOUSANDS EXCEPT FOR PER SHARE AMOUNTS)
Three Months Ended
June 30, 1997
------------------
Common Shares and common share equivalents:
Number of shares outstanding at beginning of period 70,656
Weighted average common shares issued
from the exercise of stock options 2
Weighted average shares issuable upon the exercise of
common stock options net of shares assumed to be
repurchased from proceeds obtained therefrom 51
------------------
eighted average common and common equivalent
shares at end of period 70,709
------------------
------------------
Net income for primary net income per share $ 8,848
Net income per common and common equivalent shares $ 0.13
------------------
------------------
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1997
<CASH> 5,898
<SECURITIES> 0
<RECEIVABLES> 26,850
<ALLOWANCES> 591
<INVENTORY> 27,087
<CURRENT-ASSETS> 71,625
<PP&E> 95,867
<DEPRECIATION> 0
<TOTAL-ASSETS> 183,250
<CURRENT-LIABILITIES> 33,657
<BONDS> 0
0
0
<COMMON> 707
<OTHER-SE> 126,601
<TOTAL-LIABILITY-AND-EQUITY> 183,250
<SALES> 89,553
<TOTAL-REVENUES> 89,553
<CGS> 33,842
<TOTAL-COSTS> 33,842
<OTHER-EXPENSES> 40,013
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 442
<INCOME-PRETAX> 15,256
<INCOME-TAX> 5,858
<INCOME-CONTINUING> 9,398
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 9,398
<EPS-PRIMARY> 0.13
<EPS-DILUTED> 0
</TABLE>
