-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, DnY7hVknPxhHfx4Q0a1mj/Y8WBu+AuQ+kREc954QlFKkDWwlATmTf5WXJwx/nJTb KlITYj5OiF1dGblxDoogRA== 0000950136-98-000694.txt : 19980416 0000950136-98-000694.hdr.sgml : 19980416 ACCESSION NUMBER: 0000950136-98-000694 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 19971221 FILED AS OF DATE: 19980415 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: BOLLE INC CENTRAL INDEX KEY: 0001049588 STANDARD INDUSTRIAL CLASSIFICATION: OPHTHALMIC GOODS [3851] IRS NUMBER: 133934135 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 000-23899 FILM NUMBER: 98594726 BUSINESS ADDRESS: STREET 1: 555 THEODORE FREMD AVE STREET 2: STE B 302 CITY: RYE STATE: NY ZIP: 10580 BUSINESS PHONE: 9149679400 MAIL ADDRESS: STREET 1: 555 THEODORE FREMD AVE STREET 2: STE B 302 CITY: RYE STATE: NY ZIP: 10580 10-K 1 FORM 10-K UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K [ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 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 000-23899 BOLLE INC. ---------- (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) Delaware 13-393-4135 - ------------------------ ----------- (STATE OF INCORPORATION) (I.R.S. EMPLOYER IDENTIFICATION NO.) 555 Theodore Fremd Avenue, Rye, NY 10580 - ---------------------------------- ----- (ADDRESS OF PRINCIPAL EXECUTIVE OFFICE) (ZIP CODE) Registrant's telephone number, including area code: 914-967-9475 Securities registered pursuant to Section 12(b) of the Act: Name of each exchange Title of each class on which registered - ------------------------------ ------------------- None Securities registered pursuant to Section 12(g) of the Act: Common Stock. INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS REQUIRED TO BE FILED BY SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 DURING THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE REGISTRANT WAS REQUIRED TO FILE SUCH REPORTS) AND (2) HAS BEEN SUBJECT TO SUCH FILING REQUIREMENTS FOR THE PAST 90 DAYS. YES _X_ NO ___ THE AGGREGATE MARKET VALUE OF THE VOTING STOCK HELD BY NON AFFILIATES OF THE REGISTRANT AT APRIL 14, 1998 WAS $ 41,490,988, COMPUTED BY REFERENCE TO THE CLOSING PRICE AS OF THAT DATE. THE NUMBER OF SHARES OUTSTANDING OF THE REGISTRANT'S ONLY CLASS OF COMMON STOCK AS OF APRIL 14, 1998 WAS 6,638,558 SHARES. DOCUMENTS INCORPORATED BY REFERENCE: NONE. INDICATE BY CHECK MARK IF DISCLOSURE OF DELINQUENT FILERS PURSUANT TO ITEM 405 OF REGULATION S-K IS NOT CONTAINED HEREIN AND WILL NOT BE CONTAINED TO THE BEST OF REGISTRANT'S KNOWLEDGE IN DEFINITIVE PROXY OR INFORMATION STATEMENTS INCORPORATED BY REFERENCE IN PART III OF THIS FORM 10-K OR ANY AMENDMENT TO THIS FORM 10-K. [ X ] BOLLE INC. ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1997 TABLE OF CONTENTS Page PART I ----- Item 1. Business....................................................... 1 Item 2. Properties..................................................... 8 Item 3. Legal Proceedings.............................................. 8 Item 4. Submission of Matters to a Vote of Security Holders............ 8 PART II Item 5. Market for Registrant's Common Equity and Related Stockholder Matters................................ 8 Item 6. Selected Financial Data........................................ 9 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.................. 11 Item 7A. Quantitative and Qualitative Disclosures About Market Risk..... 15 Item 8. Financial Statements and Supplementary Data.................... 15 Item 9. Changes In and Disagreements With Accountants on Accounting and Financial Disclosure......................... 36 PART III Item 10. Directors and Executive Officers of the Registrant............. 36 Item 11. Executive Compensation......................................... 38 Item 12. Security Ownership of Certain Beneficial Owners and Management.......................................... 43 Item 13. Certain Relationships and Related Transactions................. 44 PART IV Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K........................................ 47 PART I ITEM 1. BUSINESS GENERAL Bolle Inc. (the "Company" or "Bolle") was organized on February 3, 1997 in connection with the July 1997 acquisition by the Company's then parent corporation, BEC Group, Inc., which changed its name to Lumen Technologies, Inc. on March 11, 1998 (hereinafer "BEC" or "Lumen"), of Holding B.F. ("Bolle France") Bolle France is a French holding company, which at the time of acquisition owned the Bolle(Registered Trademark) design and manufacturing operation and certain distribution interests, including the worldwide rights to the Bolle(Registered Trademark) brand. The Company is a holding company, the principal subsidiaries of which are Bolle America, Inc. ("Bolle America") and Bolle France. Bolle America is the exclusive distributor of Bolle (Registered Trademark) brand products in the United States and Mexico. The Company also owns an interest in several other entities which hold exclusive Bolle (Registered Trademark) brand distribution rights in other markets throughout the world. On March 11, 1998, BEC distributed to its stockholders of record as of such date all of BEC's equity interest in the Bolle and Bolle's business (the "Spinoff"). Shares distributed in the Spinoff were registered with the Securities and Exchange Commission ("SEC") and are listed on NASDAQ under the symbol "BEYE.". INTRODUCTION The Company designs, manufactures and markets premium sunglasses and sport shields, goggles and safety and tactical eyewear under the Bolle(Registered Trademark) brand. Bolle(Registered Trademark) products enjoy worldwide recognition and a high quality image in the sport and active lifestyle markets, particularly skiing, golf and cycling, as well as a growing reputation in the larger, fashion driven recreational sunglass market. The Company's safety and tactical business, which accounts for approximately half of the Company's aggregate unit sales, serves the specialty segment of the safety eyewear market, including laser protection products and military applications. The Company broadened the reach of this business by introducing its safety eyewear products into the U.S. market in 1998. The recent creation of Bolle Inc. through the combination of Bolle America and Bolle France consolidates the Company's ownership of the worldwide rights to the Bolle(Registered Trademark) trademark for the Company's products with its international manufacturing and distribution capabilities under one organization. For the first time, the Company is positioned to develop and execute a unified marketing strategy targeted at promoting the Company's competitive advantages. The Company believes that these advantages include its strong brand name, integrated design, production and marketing capabilities, superior technology, specialized product offerings, established international distributors in over 40 countries and a one hundred year long heritage of producing quality products. The Company intends to integrate its international distributors into a cohesive worldwide network and to add new distributors through acquisitions or distributorship agreements. In recent years, the retail sunglass market has experienced the emergence of a specific premium market, reflected by increased sales of higher priced and quality oriented products. Based on available industry data, the Company believes that sales of premium sunglasses grew from $825 million in 1989 to $1.6 billion in 1996. The Company competes in the premium sunglass market. The factors which contribute to the growth of this market include advancements in product technology, growing demand for specialized sunglasses, increased health concerns and greater fashion and image consciousness, all of which encourage multiple purchases. Safety and tactical eyewear products may be designed for general or special purpose. The Company competes in the special purpose safety and tactical eyewear market. The factors which may contribute to the potential growth of this market include increasing regulation of safety eyewear, new special purpose applications, advancements in product technology and growing demand for more style oriented products. The Company believes that both its sunglass and safety and tactical eyewear products, with their increased user-specific characteristics and proven reputation for style and high performance, are suited to today's consumer preferences in their respective markets. The Company has recently announced the following corporate developments, which constitute a significant start to its growth strategy: Worldwide Marketing Initiative. The Company has launched a worldwide marketing initiative to promote a consistent brand image through (i) coordinated advertising campaigns in major international and local media and at retail locations, (ii) focused sponsorship of athletes attracting international interest, (iii) for the first time, a single marketing and product brochure for distributors worldwide. Through a sport-specific approach the Company plans to emphasize the technological characteristics, style and performance of Bolle(Registered Trademark) products. The Company also believes that the impact of its worldwide marketing initiative will be maximized by its parallel efforts to build a cohesive distribution network. Significant Endorsement Advertising. As part of its strategy of building a unified global marketing program, the Company has entered into agreements with several world famous athletes to endorse Bolle products. Such athletes include Martina Hingis, the youngest number one-ranked player in the history of women's tennis, Jacques Villeneuve, the Formula One racing world champion, Picabo Street and Jean-Luc Cretier, Olympic super G and downhill gold medalists, respectively, and Steve Jones, -2- winner of the U.S. Open golf championship. In addition, Bolle has sponsorship programs with over a thousand athletes worldwide who wear Bolle(Registered Trademark) products in competition. Focused Product Offerings. In 1992, the Company was the first to introduce a line of sunglasses specifically designed for golfers. The market for premium sunglasses has shown a trend towards consumer preference for sport-specific eyewear. The Company has a tradition of designing and manufacturing sport-specific eyewear in cooperation with its sponsored athletes. The Company is in the process of focusing its lines and collections of sunglasses and sport glasses based on their use rather than their design, style or other defining criteria. For instance, in cooperation with a major distribution of tennis products, the Company recently introduced a new sunglass model specifically suited to the needs of tennis players with a high performance selective light filtration system designed to enhance the clarity of yellow tennis balls. The Company believes that its experience in designing sport specific eyewear products makes it particularly well positioned to respond to current trends in consumer preferences. Alyn Supply Agreement. Consistent with its traditional focus on technological innovation, in October 1997, the Company has entered into the three-year exclusive Alyn supply agreement with Alyn, a manufacturer of specialized metal frames, to create premium sunglass frames using Boralyn(Registered Trademark), a special patented metal matrix providing greater strength and stiffness to weight ratios than titanium, which is currently considered the leading metal for advanced metal eyewear. Development work on the Boralyn(Registered Trademark) line is in progress with launch planned for 1999. Acquisition of Distributors. As part of its strategy of consolidating its distributors, in March 1998, the Company acquired Bolle Canada, the distributor of the Company's products in Canada. The Company has executed a non-binding letter of intent to purchase 75% of Bill Bass Optical and affiliate thereof, the largest independent and principal distributor of the Company's products in Australia, where the Company believes Bill Bass Optical commands a leading market share. As part of this proposed acquisition, the Company will purchase 100% of the outstanding shares of Bolle Asia Ltd. ("Bolle Asia") (the distributor of the Company's sunglasses in Southeast Asia), and the remaining 49% of the shares that the Company does not own of Bolle Sunglasses Ltd. ("Bolle Sunglasses") (the distributor of the Company's sunglasses in the U.K.) for an aggregate price of approximately $6,250,000, consisting of $3,900,000 in cash and $2,350,000 in Common Stock. It is contemplated that the transaction will be completed in the second quarter of 1998, and, thereupon, that the sellers would collectively retain a 25% ownership interest in Bill Bass Optical providing them with a 25% share in the profits generated by Bill Bass Optical and a pro rata share of any distributions therefrom. The Company believes that its competitive position is enhanced through (i) its broad array of distribution channels, which reduces its reliance on any one channel, (ii) its target markets due to its use of local subcontractors to manufacture certain products, (iii) its internal design capabilities, and (iv) the diversity of its safety and tactical product lines. The Company believes that its flexible manufacturing and design capabilities allow the Company to maintain a valuable costs structure and minimal inventories and to respond quickly to shifting trends in the industry. PRODUCTS General The Company designs, manufactures and markets premium sunglasses and sport shields ranging in retail price from $30 to $165 and ski goggles at most price points. The Company currently offers approximately 180 models of sunglasses, sport shields and goggles in 15 collections for a total of approximately 400 separate product offerings. Each year, the Company attempts to introduce a number of new models and collections and retire slower moving product offerings. Recently introduced Bolle(Registered Trademark) products include the Breakaway(Trademark) and Snakes(Trademark) collections. The Company believes that the continued introduction of new and innovative products will be important to its success and that it must continue to respond to changing consumer preferences in the areas of style, function and technological innovation. Active Lifestyle Focus Bolle(Registered Trademark) sunglasses are particularly suitable to most athletic endeavors, from recreational activities to hard-core competition, such as skiing, snowboarding, triathlon, surfing, golf and other outdoor pursuits and generally to the needs of customers having an active lifestyle. Bolle(Registered Trademark) sport shields and goggles are offered for a broad range of sports activities, including road and high-speed sports, squash, racquetball and other high impact sports, golf, surfing and windsurfing, rock and ice sports as well as sky diving. Bolle(Registered Trademark) ski goggles are designed to provide performance and protection to persons facing the elements encountered in skiing, snowboarding and other winter sports. Sales in the ski goggle market are dependent to a significant extent on weather conditions and the quality and duration of the ski season. Bolle(Registered Trademark) safety and tactical eyewear includes safety glasses and goggles, face shields, laser eye protection devices and other specialized safety and tactical eyewear products. -3- Technological Characteristics Bolle(Registered Trademark) Frames. Bolle(Registered Trademark) nylon frames are lightweight and virtually unbreakable. The Company uses an hydrated "memory" nylon, a virtually unbreakable material obtained through a proprietary process owned by the Company. The Company uses this special process to saturate the nylon material so that it retains moisture. Bolle (Registered Trademark) nylon frames return to their original shape after a mistreatment, which significantly improves product life. Pigments are incorporated during the manufacturing process and are therefore unalterable. Grylamid frames are used for their transparent properties and light weight while metal frames employ state-of-the-art alloys which provide durability and resiliency while offering modern styling. Frames are offered in a variety of monochromatic versions from black to fluorescent pink to white as well as in exotic versions from patterns in the "Graffiti" line to various sparkling colors in the "Crystal" line and most recently "Cyber" colors. Bolle also distributes metal frames primarily through its optical distribution network. Bolle(Registered Trademark) Polycarbonate Lenses. The Company's primary lens material is polycarbonate, a lighter and more impact resistant material than glass, which provides high protection from damaging sun light. The Company was among the first to incorporate lightweight polycarbonate lenses for use in recreational eyewear, including sunglasses and sport glasses. The Company has since developed its own polycarbonate lens, the Bolle(Registered Trademark) 100 which is capable of stopping 100% of ultraviolet rays, 100% of infrared rays and 56% of blue light. This lens can achieve this high performance without any surface coating. Its filtering power is due exclusively to absorbers included in the material and its application is used in sun protection, computer work, welding and lasers. Approximately 85% of the Company's total current production features polycarbonate lenses. The Company believes the use of polycarbonate lenses has played an important role in its ability to manufacture high performance technologically-advanced eyewear products. Although polycarbonate is three times lighter than glass and maintains perfect optical quality, it is twenty times more impact resistant than glass and can be pierced without creasing, cracking or splitting. Optically correct polycarbonate lenses are quartz coated for scratch resistance. Polycarbonate lenses are available in a variety of colors including smoke, vermilion, amber, emerald and clear, each adapted to particular weather conditions. Acrylic, Acetate and Glass Lenses. Other lens materials in the Company's product lines include acrylic, acetate and glass. Acrylic is a durable yet inexpensive material used in the Company's medium-priced collections that allows the Company to offer products at an economical price point. Acrylic lenses are lighter than glass, pass tests adopted by the U.S. Food and Drug Administration for impact resistance and offer scratch resistance through quartz coating. CR-39(Registered Trademark) plastic lenses are available in clear, yellow, vermilion, smoke and all-weather designs. Spectra lens coatings that are available include blue, green, orange, rose, gold and silver. The Polarized lens collection features glass lenses, offering light smoke, dark smoke and light brown polarization. Polarized lenses reduce surface glare. Multilayer colored lens coatings include blue, violet, green, red, gun and infrared. Optional Features The Company offers an interchangeable lens system (marketed under the Breakaway(Trademark) brand), which enables consumers to customize the style and functions of certain Bolle(Registered Trademark) products by adapting different lenses to the same frame. Also offered with many Bolle(Registered Trademark) products is a patented Sport Optical System(Trademark), which the Company has designed to satisfy the needs of an increasing number of its customers requiring sport glasses with corrective lenses. Along with anti-scratch coating and polarization, most Bolle(Registered Trademark) sport and protective eyewear products offer anti-fog coating, which the Company was the first to develop for its ski goggles in 1973. SAFETY AND TACTICAL PRODUCT The Company carries a line of approximately 50 safety and tactical styles and produces customer specific designs for special purpose applications. The products are based around the Company's proprietary "memory" nylon frames and carboglass lenses, a high impact and scratch resistant material based on polycarbonate, but sprayed with quartz crystal coating. The Bolle safety spectacle range provides style, function and comfort using advanced technology and materials. As well as manufacturing safety glasses for standard industrial requirements, the Company specializes in specific application eyewear such as Laser glasses, chemical splash protection and military approved products. A number of the designs are based on the sunglass collection; similarly a number of the technological features used on Bolle sunglasses are developed from Bolle's in-house R&D laboratory. ADVERTISING AND MARKETING As a result of its recent acquisition of Bolle France, the Company owns the production and design capabilities of Bolle France and the worldwide rights to the Bolle(Registered Trademark) brand for its products. This -4- organization enables the Company to create and execute a consistent and unified worldwide marketing and distribution strategy. This strategy is focused on leveraging Bolle(Registered Trademark)'s superior technology and established distributors in over 40 countries to expand aggressively the Bolle(Registered Trademark) brand with consistency of brand image and design innovation. The Company's worldwide marketing initiative includes a unified marketing and product brochure for distributors worldwide, coordinated advertising campaigns in major international and local media and at retail locations, increased sponsorship of significant sport competitions and athletes attracting international interest and the unification of the Company's sport celebrity endorsement program. The Company's marketing strategy also includes training retail salespersons to understand fully the specifics of Bolle(Registered Trademark) products and in-store education highlighting the Bolle(Registered Trademark) style and technical features. The Company expects that the impact of its worldwide marketing initiative will be maximized by its parallel efforts to build a cohesive distribution network. The Company expects to coordinate future introductions of new Bolle(Registered Trademark) products, such as a new motorsports line, both with its international distributors and through new distribution channels so as to maximize the benefits which the Company may derive from its worldwide rights to the Bolle(Registered Trademark) brand and enhance global sales. The Company's marketing initiative will seek to emphasize through a unified sport-specific approach the technological frame and lens characteristics and long-standing proven reputation for style and performance of Bolle(Registered Trademark) products. The Company intends to unify and expand its sponsoring program through the use of endorsement arrangements with sports celebrities and professional athletes. Endorsement contracts typically have a two-to three-year term, providing the Company with flexibility to renew such contracts. The Company has sponsored athletes in a number of venues including the Tour de France, the Olympic Games and the Pro Golf Tour. French Olympic gold medal ski champion Luc Alphand uses and endorses the Company's Chrono line of ski goggles. Martina Hingis, the youngest number one-ranked player in the history of women's tennis, has agreed to wear exclusively Bolle(Registered Trademark) sunglasses, sport glasses and ski goggles at all public events and for recreation, and to appear in advertisements and promotions for Bolle(Registered Trademark) products worldwide. Jacques Villeneuve, the 1997 Formula One racing world champion and Picabo Street, winner of the gold medal in the Super G competition in the 1998 Winter Olympic Games and have also agreed to wear exclusively Bolle(Registered Trademark) sunglasses, sport glasses and ski goggles at all public events for recreation, and to appear in advertisements and promotions for Bolle(Registered Trademark) products worldwide. The Company also sponsors a variety of teams and organizations including sport federations and the Professional Golfers Association. These sponsorships are a cost effective means of publicizing the Bolle(Registered Trademark) brand name and demonstrate the Company's ability to deliver quality products that satisfy the performance needs of a broad array of sports. The Company intends to capitalize on the opportunity to consolidate globally the brand management and marketing of the Bolle(Registered Trademark) brand for its products. This will enable the coordination of new product releases worldwide and promote a consistent brand image and an international, focused athlete sponsorship program. DESIGN AND PRODUCTION Design. The Company employs a four person design team in Oyonnax and maintains relationships with outside design agencies under the supervision of Mr. Maurice Bolle. Mr. Maurice Bolle designed the famous cat eye sunglass in the 1950's. The Bolle design team oversees the entire design process, from carving the actual frame out of acetate to mold creation, forming, polishing and the final lens development stage. Approximately 20 new molds are designed each year. The Company currently houses a library of approximately 700 molds. The molds for each Bolle(Registered Trademark) design have been inventoried in a warehouse at the Company's facilities in Oyonnax, France and the Company believes it maintains the capability to produce over 97% of the products represented by its mold inventory. Production. Although the Company has outsourced the completion of a substantial number of steps in the process it uses to manufacture its products, the Company still closely oversees the activities of its subcontractors. This enables the Company to retain control over the entire assembly process that leads to any finished Bolle(Registered Trademark) product, including the production of eyeglass frames through injection molding and of foam cushioning and straps for the Company's sport products as well as the creation of design applications added to eyeglass frames. The majority of the subcontractors of the Company are -5- located in the immediate vicinity of the Company's facilities in Oyonnax, France and the manufacture of Bolle(Registered Trademark) products is their primary activity. The Company has not entered into binding agreements with its subcontractors and has not outsourced the production of items involving proprietary processes. However, the Company believes that its history of good relations with such subcontractors and the close proximity of these subcontractors to its operations provides a conducive environment for continued good business relations. The Company believes its arrangements with subcontractors enable it to maintain a variable cost structure and minimal inventory levels as well as to respond quickly to shifting trends in the industry. Products manufactured entirely by the Company include those made pursuant to orders that are not large enough to warrant subcontractor production, or which require the utilization of certain molds which do not fit the machine specifications of subcontractors or which correspond to new or specific design requirements, such as hard eyewear cases or certain eyeglass frames which feature a wire-reinforced temple. The Company also participates in original equipment manufacturing for other manufacturers of premium-priced eyewear at its manufacturing facility. Although such arrangements do not represent a significant portion of its business, the Company believes the manufacturing of these products is evidence of its continued reputation as a quality producer of high performance eyewear. SUPPLIERS Raw Materials The Company generally obtains the raw materials required for use in eyewear production, such as polycarbonate and nylon, from distributors of such materials and occasionally directly from suppliers. The Company is not dependent on any one source for supply of such materials and has not in the past had, and does not expect in the future to have, difficulty in obtaining materials. These materials are generally available from a number of U.S. and international suppliers. Metal Frames Pursuant to its supply agreement with the Company, Alyn, the exclusive manufacturer of Boralyn(Registered Trademark), a special proprietary metal matrix providing greater strength and stiffness to weight ratios than titanium, has agreed to provide the Company exclusively with sunglass frames using Boralyn(Registered Trademark), which is currently considered the leading metal for advanced metal eyewear. Alyn has retained the right to provide certain prescription eyeglass frames to other customers. In order to retain exclusivity, the Company must maintain certain specified minimum purchase amounts, starting at 100,000 units for the first year and increasing by 50,000 units per year through the fourth year and by 25,000 units per year for the two remaining years. The Alyn Supply Agreement is for a term of three years beginning with the first shipment of frames from Alyn to the Company, and extends for an additional three years if the Company meets its contractual requirements and agrees to certain specified purchase levels. COMPETITION The Company faces intense competition in the premium sunglasses and ski goggle business. The premium sunglass industry is dominated by three large competitors, Bausch & Lomb, Luxottica and Oakley, with a combined share of the U.S. premium sunglass market estimated at approximately 60%. The rest of the market is fragmented, with numerous small competitors. The Company competes with a number of manufacturers, importers and distributors whose brand names may enjoy greater brand recognition than that of Bolle(Registered Trademark). The principal methods of competition are style, product performance, price and brand recognition. Most competitors of the Company offer a portfolio of brands, as opposed to focusing exclusively on one brand, as do the Company and Oakley. In addition, the Company faces intense competition in safety and tactical eyewear market, including competition from Bacou, Uvex, Dalloz, Karsurg and a number of Far East manufacturers who have copied the Company's styles. Competition is based on quality, price, reputation and technological features. Companies active in the Company's industry must respond simultaneously to changes in fashion and technology, yet maintain inexpensive and rapid production in order to remain competitive. Moreover, general economic conditions and regulatory policies complicate these companies' ability to address all factors effectively. Consequently, these companies alleviate the complexity through reliance on name brands and images. Consumers' purchasing decisions are often the result of highly subjective -6- preferences which can be influenced by many factors, including, among others, advertising, media, promotions and product endorsements. The Bolle(Registered Trademark) name has been recognized for decades and the Company believes that it is well positioned to retain such strong recognition in the future. The Company believes that its competitive advantages include its strong brand name; product quality; product performance; leading edge styling; integrated design, production and marketing; superior technology and technological innovation; specialized product offerings; price; and international distribution networks. The Company also believes that the competitive advantage constituted by the Company's right to market Bolle(Registered Trademark) products in the United States through multiple retail distribution channels, including general and specialty sporting goods stores and optometrists, ophthalmologists and opticians, is important to its competitive position. The Company believes its continued success will depend upon its ability to remain competitive in its product areas. With several of its competitors having greater financial, research and development, manufacturing and marketing experience and resources than the Company, the Company faces substantial long term competition. The failure to compete successfully in the future could result in a material deterioration of customer loyalty and the Company's image and could have a material adverse effect on the Company's business. CUSTOMERS The distributors owned by the Company are not dependent upon a single customer or a few customers. None of the Company's customers account for more than 10% of the Company's consolidated revenues. Bolle America's top 25 customers represent approximately half of its total net sales. In addition to its relationships with large chains, Bolle America has an established distribution network to thousands of smaller customers. QUALITY CONTROL AND PRODUCT IMPROVEMENT Bolle(Registered Trademark) products are subject to stringent quality control requirements. At every step of the production process, each piece of a product is inspected by hand before moving to the next level of production. The Company estimates that each unit of eyewear undergoes a minimum of four quality control inspections before it leaves the facility. Technicians test random samples from the manufacturing facility and from subcontractors to check for durability and other production specifications. Product improvements are continually developed in the Company's testing laboratory. For instance, the Company tests the fit of its sport and safety goggles by using a machine which agitates particles in the air and measures the amount of particles which pass through the edges of the product. The Company's testing laboratory meets all British, German and U.S. international standards for testing. High velocity and radiation testing are conducted regularly. Laser coating units and spectrophotometers add to the Company's ability to produce superior products. SALES AND DISTRIBUTION The Company sells its products through a worldwide network of both affiliated and independent wholesale distributors in over 40 countries, which in turn distribute Bolle(Registered Trademark) products to retail outlets. Information regarding the sales, operating profit or loss and identifiable assets attributable to the Company's U.S. and foreign operations for the year ended December 31, 1997 is set forth in Note 16 to the Company's Consolidated Financial Statements included in this Form 10-K. Prior to the acquisition of Bolle France by the Company in July 1997, the Company had no foreign operations and the information regarding the sales, operating profit or loss and identifiable assets of the Company for the years ended December 31, 1997, 1996 and 1995, which is provided in note 16 to the Company's Consolidated Financial Statements, is primarily attributable to Bolle America's U.S. operations. During 1997, 61% of total sales were to North American distributors, 29% of sales were in Europe, 10% of sales were in Australia and Asia and the rest of the world. In the United States, the Company sells its products through a nationwide network of approximately 200 independent sales representatives and distributors to over 10,000 accounts, which include general and specialty sporting good stores, opticians, ophthalmologists and optometrists, golf pro shops, retail sunglass stores and mail order catalog companies. -7- The Company's retail products distribution operations are designed to meet the individual inventory and service requirements of its customers. Products are shipped in a variety of volumes, ranging from full truck loads, to small order to pre-stocked displays. Most orders are shipped by ground service via common carriers to either a customer's distribution center or directly to the customer's retail location. The Company believes that its operations are capable of meeting a customer's individual service needs. Howard Leight Industries ("Howard Leight"), a major distributor of industrial safety products, has committed to purchase from the Company certain safety eyewear products for exclusive marketing and sale through industrial supply networks in North and South America. In February 1998, Bacou USA, one of the main competitors of the Company, purchased Howard Leight. The Company has consented to the assignment of the Howard Leight Agreement to Bacou. Under the Agreement (as amended), if Bacou fails to make minimum purchases aggregating $3,500,000 by December 31, 1998, Bacou must pay to the Company liquidated damages equal to 27.5% of any shortfall in such purchases. Pursuant to the Agreement, the Company and Bacou further agree to work toward an agreement by September 30, 1998 to develop the worldwide Bolle(Registered Trademark) safety business and continue to explore mutually advantageous business opportunities. The agreement has an initial term of seven years, beginning October 15, 1997, and is automatically renewed thereafter for successive one-year terms unless either party gives three months' notice of termination. Additionally, either party may terminate the Agreement effective December 31, 1998 upon sixty (60) days written notice prior to that date. The Company plans to consolidate certain of its distributors through acquisitions or other arrangements over the next three years. As part of this strategy, the Company has executed letters of intent to purchase 75% of Bill Bass Optical, the largest independent distributor of the Company's products and the principal distributor of the Company's products in Australia, whose sales of Bolle(Registered Trademark) products in Australia exceeded $10 million in 1997. The Company believes that this will provide the potential for increases in the efficiency and utilization of its distribution channels. In addition, the Company has also entered into a letter of intent to bring its shareholding in Bolle UK to 75%. SEASONALITY The Company's sunglass business is seasonal in nature with the second quarter having the highest sales due to the increased demand for sunglasses during that period. The Company's goggle business is seasonal in nature with the first quarter having the highest sales due to the increased demand for goggles during the ski season. This seasonality is partially offset by safety eyewear sales worldwide. REGULATION The Company has been specifically certified by appropriate industry and governmental authorities to manufacture sunglasses, sport products and industrial protection products as well as laser protection products and eyewear produced for specific military orders. INTELLECTUAL PROPERTY The Company, directly or indirectly, owns the exclusive right to a number of registered trademarks in the United States and other countries, including Bolle (Registered Trademark); Bolle PC (Registered Trademark); ACRYLEX (Registered Trademark); ALIEN (Registered Trademark); CONTOUR (Registered Trademark); CHRONOSHIELD (Registered Trademark); MICRO EDGE (Registered Trademark); GEOMETRIC (Registered Trademark); TIGER SNAKE (Registered Trademark); SUNSPENDER (Registered Trademark); Bolle EYEZONE (Registered Trademark); EYEZONE DESIGN (Registered Trademark); NORTHERN LIGHTS (Registered Trademark); PUT 'EM ON YOUR FACE (Registered Trademark); EAGLE VISION (Registered Trademark); TACTICAL (Registered Trademark); AVANT EDGE (Registered Trademark); bf (Registered Trademark); MAURICE BOLLE (Registered Trademark); CARBO GLAS (Registered Trademark); AQUASHIELD (Registered Trademark); and the Snakes design. In addition, Bolle America has applications pending to register a number of additional trademarks, including BREAKAWAY (Trademark), SEE BETTER, PLAY BETTER (Trademark); Bolle MADNESS (Trademark); Bolle ATTACK (Trademark); Bolle ESCAPE (Trademark); Bolle CARBONEX (Trademark); VAPOR TRAIL (Trademark); and TOUR ELITE (Trademark). The Company has a number of design and utility patents registered in the United States and other countries and owns the Bolle(Registered Trademark) trademark for the Company's products. The Company's United States patents have expiration dates ranging from 2001 to 2015; certain of these patents are subject to the payment of maintenance fees to maintain their registration. These patents are intended to protect the unique design and functional characteristics of certain Bolle(Registered Trademark) products from duplication by competitors. There can be no assurance that any individual patent will provide substantial protection or be of commercial value. The loss of any one patent would not have a material adverse effect on the business of the Company. EMPLOYEES As of April 14, 1998, the Company had approximately 160 employees, about half of which were assigned to the Company's design, production and distribution operations in France and the remainder to its distribution operations in the United States and other parts of the world. None of the Company's employees working in the United States is subject to a collective bargaining agreement. Employees of the Company working in France are subject to the provisions of the French Labor Code and a collective bargaining agreement. The Company considers its relations with its employees in the United States and France to be satisfactory. ENVIRONMENTAL REGULATION Manufacturing operations managed by corporations in which the Company has an interest are subject to regulation by various foreign, federal, state and local agencies concerned with environmental control. The Company believes that these facilities are in substantial compliance with all existing foreign, federal, state and local environmental regulations. ITEM 2. PROPERTIES As of April 10, 1998, the locations of the Company's principal facilities are as follows:
LOCATION PRINCIPAL USE/USER(S) APPROXIMATE SQUARE FOOTAGE - -------- --------------------- -------------------------- Oyonnax, France Manufacturing plant, design center, warehouse and office space/Bolle France 90,000 Denver, Colorado Warehouse and office space (lease commencing May 1, 1998) /Bolle America 30,000
The Company owns all of its manufacturing facilities in France and leases its Denver facilities. The Company's main manufacturing facility in France, located just outside Oyonnax, France., houses the majority of the manufacturing activities of the Company as well as the quality control functions, management, and design. In addition, the Company, through a wholly-owned subsidiary, owns and leases to an unaffiliated lessee an approximately 150,000 square foot building located in Farmer's Branch, Texas. The property is subject to a mortgage held by Wells Fargo Bank (Texas) in the current principal amount of approximately $3.5 million. The Company has entered into a contract for the sale of this building. ITEM 3. LEGAL PROCEEDINGS While the Company is engaged in routine litigation incidental to its business, the Company believes that there are no material pending legal proceedings to which it is a party or to which any of its property is the subject. In connection with the Spinoff, the Company agreed to indemnify Lumen against liabilities which may arise from certain pending litigation not relating to the Company's operations. The Company does not believe that any of such pending litigation constitutes material legal proceedings for the Company. -8- ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS No matters were submitted to a vote of the Company's stockholders during the fourth quarter of 1997. PART II ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS The Company's common stock commenced trading publicly on March 12, 1998. The Company's common stock is listed on the NASDAQ National Market under the symbol "BEYE." Therefore, there is no relevant historical public market information for the fiscal years ended December 31, 1997 and 1996. As of April 14, 1998, there were approximately 600 stockholders of record of the Company's common stock (representing approximately 5,000 beneficial owners of the Company's common stock). No dividends have ever been declared on the Company's common stock, other than as disclosed in the Selected Historical Financial Data set forth below and other than in connection with the distribution of shares of common stock in immediately prior to the Spinoff in order to effect a stock split in anticipation of effecting the spinoff. The Company has no intention of paying dividends in the foreseeable future. It is the present policy of the Company's Board of Directors that any retained earnings accumulated will be used to finance future acquisitions and expansion of the Company's operations. Pursuant to the terms of the Amended and Restated Share Purchase Agreement, dated July 9, 1997, by and among the Company, on the one hand, and Mr. Robert Bolle, Mr. Maurice Bolle, Mr. Franck Bolle, Ms. Patricia Bolle Passaquay, Ms. Brigitte Bolle and Ms. Christelle Roche (collectively, the "Sellers") on the other hand, the Company issued to the Sellers an aggregate of 64,120 shares of Series A Preferred Stock. Holders of the Series A Preferred Stock are not entitled to receive dividends. Upon any voluntary or involuntary liquidation, dissolution or winding up of the Company before any distribution of assets of the Company shall be made to or set apart for the holders of Common Stock, the holders of the Series A Preferred Stock will be entitled to receive from the Company's assets legally available for distribution to stockholders, a payment in an amount equal to the greater of (i) 1,000 French Francs per share or (ii) the French Franc equivalent of US $172.41 per share of Series A Preferred Stock. After payment of the full amount of the liquidation distributions to which they are entitled, the holders of the Series A Preferred Stock will have no right or claim to any of the remaining assets of the Company. In the event that upon any such voluntary or involuntary liquidation, dissolution or winding up, the available assets of the Company are insufficient to pay the amount of the liquidation distributions on all outstanding shares of Series A Preferred Stock, then the holders of the Series A Preferred Stock shall share ratably in any such distribution of assets in proportion to the full liquidating distributions to which they would otherwise be respectively entitled. The Series A Preferred Stock is not convertible or exchangeable for any other securities of the Company. Shares of the Series A Preferred Stock will be redeemed by the Company upon 10 days' prior written notice on the third anniversary of their issuance, subject to the provisions of the Company's senior indebtedness in effect at the effective time of the Spinoff (which includes indebtedness under the Credit Agreement)(the "Senior Indebtedness"). Prior to that, the Company may redeem any shares of Series A Preferred Stock at any time upon 10 days' prior written notice. In addition, in the event the Company's EBITDA exceeds US $18,400,000 for the fiscal year 1998 or US $24,700,000 for the fiscal year 1999, the Company shall be obligated to redeem, upon 10 days' prior written notice, and within 110 days after the close of the relevant fiscal year, any shares of Series A Preferred Stock then outstanding, provided in each case that Bolle remains in compliance with the financial covenants contained in the Senior Indebtedness after giving effect to such redemption and US $2,000,000 million is available for borrowing by Bolle under such senior indebtedness. In the event that the Series A Preferred Stock is not redeemed in full by its due date, it will begin accruing interest from July 2000. Generally, the shares of Series A Preferred Stock have no voting rights. If the Company fails to give notice of a redemption within three years of the date of issuance of any shares of Preferred Stock, the holders of more than 90% of such shares shall have the right to cause the Company to use commercially reasonable efforts to either obtain cash in order to redeem in full such shares or to effect without delay a commercially reasonable sale of the Company's assets or the merger, consolidation or other reorganization of the Company. So long as any shares of Series A Preferred Stock are outstanding, the Company shall not, without the consent of holders of at least 90% of such shares, (i) alter or change the rights, preferences or privileges of such shares or (ii) issue any class or series of preferred stock ranking senior or pari passu with the Series A Preferred Stock with respect to dividend, redemption or liquidation rights. Shares of Series A Preferred Stock may only be transferred to persons who are already holders of such shares and in accordance with applicable law. The issuance of such Series A Preferred Stock and Series B Preferred Stock was exempt from the registration provisions of the Securities Act of 1933 pursuant to Section 4(a) thereof and rules promulgated thereunder, and the securities so issued were deemed to be restricted securities. No underwriter was engaged in connection with such issuance of securities. In March 1998, subsequent to the period covered by this Form 10-K, the Company additionally issued certain shares of Series B Preferred Stock. ITEM 6. SELECTED HISTORICAL FINANCIAL DATA The following selected historical financial data have been derived from audited historical financial statements and should be read in conjunction with the consolidated financial statements of the Company included herein. The Company was formed in 1997 to complete the acquisition of Bolle France and therefore has no historical activity or financial statements. Bolle America was purchased by Lumen in November 1995 in a pooling of interests transaction. In conjunction with the purchase of Bolle France, Bolle America became a subsidiary of the Company. Accordingly, for accounting purposes only, Bolle America is treated as the acquiror of Bolle France and therefore the predecessor business for historical financial statement purposes. -9-
YEAR ENDED DECEMBER 31, (IN THOUSANDS EXCEPT FOR PER SHARE DATA) 1997(1) 1996(2) 1995(3) 1994(4) 1993 Statement of Operations Data: Net sales $32,160 $24,425 $24,829 $23,094 $18,377 Cost of sales 15,354 12,130 12,181 10,814 9,126 Gross profit 16,806 12,295 12,648 12,280 9,251 Selling, general and 16,342 11,374 10,275 8,871 7,384 administrative expenses (including advertising and sponsoring expenses) Merger and acquisition integration related expenses 3,750 -- 3,050 -- -- Interest expense (income) 963 (256) (302) 316 336 Other expense (income) (693) (450) 48 (104) (295) Income (loss) before (3,556) 1,627 (423) 3,197 1,826 income taxes Provision for (benefit 1,099 635 364 1,260 700 from) income taxes Net income (loss) $(4,655) $992 $(787) $1,937 $1,126 Net income (loss) per share $2,586.11 $9,920.00 $(0.22) $0.65 $0.38 Weighted average shares outstanding 1.8 0.1 3,510.6 2,997.0 2,963.0 French Franc per US Dollar exchange rate used(5) 5.9843 BALANCE SHEET DATA: Working capital $(20,936) $8,535 $11,395 $12,781 $1,060 (deficiency) Total assets 94,697 15,624 16,309 17,549 9,629 Long term debt -- -- -- 57 49 Mandatorily redeemable 11,055 -- -- -- -- preferred stock Stockholders' equity 18,843 9,743 12,770 13,433 1,584 French Franc per US 5.9912 Dollar exchange rate used(5) (1) On July 10, 1997, the Company acquired Bolle France and related assets in a transaction accounted for as a purchase. Accordingly, the results of operations for Bolle France are included in historical results of operations from that date. (2) In 1996, the Company paid a dividend to BEC (its then current stockholder) of $4,019. (3) In November 1995, BEC acquired Bolle America in a transaction accounted for as a pooling of interests. Accordingly, Bolle America is included in all periods presented. (4) In 1994, Bolle America paid a $50 dividend to its then current shareholders. (5) Represents the exchange rates used to translate the results of operations and balance sheet amounts of Bolle France. The exchange rate shown for the actual results of operations for the year ended December 31, 1997 represents the average exchange rate for the six months ended December 31, 1997 used to translate the results of operations of Bolle France included in the Company's actual results.
-10- ITEM 7 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS GENERAL Due to the acquisition of Bolle France on July 10, 1997, only six months of results of operations of Bolle France are included in the results of operations for the year ended December 31, 1997. In conjunction with the acquisition of Bolle France and following the Spinoff, it is anticipated the Company will be subject to interest on approximately $16 million of senior indebtedness at an average current rate of approximately 6%. Although this represents significantly less than the indebtedness owed to Lumen prior to the Spinoff, it is nevertheless higher than indebtedness had been prior to the Bolle France acquisition. In addition, the acquisition of Bolle France has resulted in additional depreciation and amortization of approximately $2.1 million, significantly increasing selling, general and administrative expenses as a percentage of sales. The Company has begun to develop and implement a global brand management and marketing program, resulting in increased advertising expenses. There is no guarantee that such increased expenses will result in increased sales. It is not anticipated that operating on a standalone basis following the Spinoff will have a significant impact on the results of operations, financial position or cash flows of the Company other than that which is disclosed herein. The Company was operated as a separate segment of Lumen's business and will, under a Management Service Agreement, continue to receive management and administrative services from Lumen on similar terms to those reflected in the historical financial statements. The Company is in the process of upgrading its information systems to support the implementation of its worldwide marketing strategy. The new applications are expected to function properly with respect to dates in the year 2000 and thereafter and the new single currency which is scheduled to be introduced by the European Union at the beginning of 1999. The Company started implementing the planned applications in 1997 and plans to finish during 1999. This upgrading process will significantly affect many aspects of the Company's business, including its manufacturing, sales and marketing functions. The successful implementation and integration of the new applications will be important to facilitate future growth. The Company could experience unanticipated delays in the upgrading of its information systems and such upgrading could cause significant disruption in operations. If the Company is not successful in upgrading its information systems, fails to train its personnel in their use in a timely manner or if the Company experiences difficulties in the upgrading process, the Company could experience problems with the delivery of its products or its ability to access timely and accurate financial and operating information could be adversely affected. In addition, delays in implementing the new systems could require additional expenditures by the Company to modify or replace portions of its existing information systems so that they will function properly with respect to dates in the year 2000 and thereafter and the new European currency. There can be no assurance that the Company will be able to correct any problems with respect to such dates or the new currency in a timely manner. Any failure by the Company to respond properly to these problems or any other difficulties which the Company may face with its information systems could have a material adverse effect on the Company's business and financial results. YEAR ENDED DECEMBER 31, 1997 COMPARED TO THE YEAR ENDED DECEMBER 31, 1996 Net sales of $32.2 million for the year ended December 31, 1997 increased from $24.4 million for the comparable period in 1996 despite a $5.7 million decrease in sales in the United States, resulting from the acquisition of Bolle France on July 10, 1997. For the year ended December 31, 1997 North American Sales (primarily in the United States) represented 61% of net sales with European sales representing 29%. Soft conditions in the U.S. Market for premium sunglasses contributed to the decrease in sales in North America. A major retail distributor of premium sunglasses, which had been growing rapidly up until the fourth quarter of 1996, began closing outlets and returning excess inventory at the end of 1996 and into 1997, negatively affecting the entire premium sunglass industry. This customer represented approximately 14% of sales for the year ended December 31, 1996 and less than approximately 6% of sales for the year ended December 31, 1997. While overall retail sales continued to grow, many premium sunglass manufacturers had overproduced in anticipation of significantly higher sales and took significant returns which eroded profit margins. The Company does not expect this trend to continue in 1998. Gross margin increased from 50.3% for the year ended December 31, 1996 to 52.3% for the year ended December 31, 1997, reflecting the higher gross margins of the integrated manufacturing and distribution operations of the Company following the Acquisition. -11- Advertising and sponsoring expenses increased $0.5 million on a sales increase of $7.7 million due to the acquisition of Bolle France. For the year ended December 31, 1997 selling, general and administrative expenses of $12.6 million increased form $8.1 million for the year ended December 31, 1996, reflecting the acquisition of Bolle France. As a percentage of sales, selling, general and administrative expenses increased due to the 1997 combination of manufacturing and distribution sales. Acquisition integration related expenses of $3.75 million in 1997 represent the following expenses incurred in connection with the integration of Bolle France and creation of Bolle Inc.: (i) a reserve for the return of product from the Company's owned and non-owned distributors in conjunction with the redefining and streamlining of Bolle Inc.'s new product line, and (ii) the legal, production and marketing expenses related to the set up of a new logo for Bolle(Registered Trademark) worldwide and the creation of the first worldwide catalog. Interest expense of $1.0 million for the year ended December 31, 1997 reflects the interest expense on the debt incurred to fund the acquisitions of Bolle France. In the comparable period in 1996 Bolle America's cash on hand generated interest income of $0.3 million. Other income consists of allocated equity income and management fee income from BEC's investment in Eyecare Products of $0.6 million for the year ended December 31, 1997 and $0.4 million for the year ended December 31, 1996. This income was allocated to the Company by Lumen. For each of the years ended December 31, 1997 and 1996 other income also included $0.1 million of foreign exchange transaction gains. The Company recorded a net tax provision of $1.1 million despite the loss before taxes of $3.6 million for the year ended December 31, 1997. A provision was recorded as a result of the Company establishing a valuation allowance against the entire domestic net deferred tax asset for 1997. The acquisition of Bolle France in 1997 had a significant impact on the tax rate. In 1996, the effective tax rate was 39.0% of net income before taxes. -12- Year ended December 31, 1996 compared to year ended December 31, 1995 Net sales were flat for the year ended December 31, 1996 compared to the prior year. Although the premium sunglass market continued to grow, Bolle America (the only business included in the Company at that time) was affected by industry problems described above that reduced sales in the fourth quarter. At the end of 1996 and into 1997, the Company's "grass roots" distribution to many smaller, loyal retail outlets worked in its favor by lessening the effect of sales declines experienced in certain of the Company's larger customers. For the years ended December 31, 1996 and 1995, the Company's sales were substantially all in the United States. During 1996 and 1995 the Company purchased substantially all of its products from Bolle France, which did not change its pricing significantly during those years. Accordingly, the gross margin of 50% in 1996 did not change materially from the 1995 gross margin of 51%. For the year ended December 31, 1996, advertising and sponsoring expenses were $3.3 million versus $2.7 million for the prior year. This increase in dollars and as a percentage of sales was due to the Company's strategy of building the brand in the United States where it competes with other brands which are heavily marketed and advertised. Selling general and administrative costs increased from $7.6 million in 1995 to $8.1 million in 1996 primarily due to corporate allocation of its Lumen's general and administrative expenses in 1996. In 1995, because the Company was acquired by Lumen in November, no allocations were effected. In November 1995, the Company was acquired by Lumen in a transaction accounted for as a pooling of interests. Accordingly, the merger related costs of $3.1 million are included in the results of the Company for 1995. In both 1996 and 1995, the Company's cash on hand resulted in interest income of $0.3 million. Other income in 1996 includes $0.4 million of allocated equity income from BEC's investment in Eyecare Products. This income was allocated to the Company by BEC. During 1995, because the acquisition of the Company by BEC did not occur until November, the comparable equity income was not allocated. The 1995 amount consists of foreign exchange losses. The effective tax rate of 39% in 1996 represents an operating basis provision while the 1995 benefit reflects the significant effect of the merger related expenses. -13- Liquidity and capital resources Net cash provided by operating activities during the year ended December 31, 1997 of $1.1 million represents the net loss offset by the positive effect of non cash expenses and the reduction of inventory and accounts receivable. Depreciation and amortization for the year ended December 31, 1997 was $1.5 million compared to $0.4 million for 1996, reflecting the acquisition of Bolle France. Cash paid for acquisitions in 1997 represents the purchase of Bolle France net of cash received with the acquisition. Capital expenditures of $0.7 million were also increased due to the acquisition. These operating and investing activities were financed through proceeds from indebtedness to related parties, primarily through borrowings from Lumen which were funded by Lumen through its revolving credit facility. During 1997 the Company borrowed US Dollars from Lumen at a rate of 8% and French Francs at a rate of 5.5%. On March 11, 1998 the Company executed a separate credit facility (the "New Credit Facility") with substantially the same terms as the Lumen facility. Proceeds from the New Credit Facility were used to repay a portion of indebtedness to related parties. There will be no intercompany credit arrangements between Lumen and the Company. The Company will lend cash to its subsidiaries in substantially the same manner as Lumen lends to the Company and its subsidiaries. Management believes that the New Credit Facility, along with cash provided from operations will be sufficient to fund the Company's cash operating and investing requirements for the foreseeable future. It is not expected that repatriation of French Franc cash flows, if any, will have a significant impact on liquidity. Net cash provided by operating activities during the year ended December 31, 1996 consisted of net income and increases in accounts payable offset by increases in receivables from related parties and inventory. The Company's cash was paid to Lumen from which it received interest income. Net cash used by operating activities in 1995 consisted of the net loss resulting from the merger-related expenses and increases in net working capital. Cash on hand as a result of the December 1994 offering was used to finance investing activities. In connection with the Bill of Sale and Assignment Agreement (the "Contribution Agreement"), between Lumen and the Company, approximately $17 million of indebtedness to related parties incurred to finance the acquisition of Bolle France was capitalized. This reduction in the Company's debt improves working capital levels. The Company expects cash flows from operations combined with available borrowing capacity to be sufficient to fund the Company's future operating and investing needs through at least 1998. -14- ITEM 7A. QUALITATIVE AND QUANTITAVE DISCLOSURES ABOUT MARKET RISK Approximately $18 million of the Company's revenues for the year ended December 31, 1997 and $70 million of its total assets as of December 31, 1997 were denominated in French Francs. Substantially all of the Company's approximately $36 million of indebtedness at December 31, 1997 was denominated in French Francs at a fixed interest rate of 5.5%. The Company may from time to time enter into forward or option contracts to hedge the related foreign exchange risks. The Company does not enter into market risk sensitive transactions for trading or speculative purposes. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA -15- REPORT OF INDEPENDENT ACCOUNTANTS To the Board of Directors and Stockholders of Bolle Inc. In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of operations, of comprehensive income (loss), of stockholders' equity and of cash flows present fairly, in all material respects, the financial position of Bolle Inc. and its subsidiaries at December 31, 1997 and 1996, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1997, in conformity with generally accepted accounting principles. These financial statements are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with generally accepted auditing standards which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for the opinion expressed above. As discussed in Notes 1 and 2, on March 11, 1998, the Company's parent, Lumen Technologies, Inc. (formerly BEC Group, Inc.), distributed the Company's stock to Lumen shareholders via a spinoff. Contemporaneously with the Spinoff, certain assets and liabilities were transferred from Lumen to the Company and a portion of the Company's indebtedness to related parties was contributed to the capital of the Company, resulting in a decrease in current liabilities of approximately $16 million and an increase in stockholders' equity of approximately $13 million. PRICE WATERHOUSE LLP Dallas, Texas April 15, 1998 -16- BOLLE INC. CONSOLIDATED BALANCE SHEETS (AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
DECEMBER 31, ------------------------------ ASSETS 1997 1996 ---- ---- Current Assets: Cash and cash equivalents $ 1,204 $ 311 Trade receivables from related parties (Note 14) 1,120 Trade receivables, less allowances of $857 and $445 11,332 4,895 Inventories 11,734 8,388 Prepaid and other current assets 1,617 822 -------------- ------------- Total current assets 27,007 14,416 Property and equipment, net 4,687 534 Trademark, net 39,029 Goodwill and other intangible assets, net 23,447 646 Other assets 527 28 -------------- ------------- Total assets $ 94,697 $15,624 ============== ============= LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 6,247 $ 3,488 Indebtedness to related parties (Note 10) 35,782 1,420 Accrued compensation 1,111 146 Other accrued expenses 4,803 827 -------------- ------------- Total current liabilities 47,943 5,881 Deferred tax liability 14,000 Other long-term liabilities 2,856 -------------- ------------- Total liabilities 64,799 5,881 -------------- ------------- Mandatorily redeemable preferred stock--redemption value $11,055; par value $.01; 64,120 shares authorized, issued and outstanding 11,055 Stockholders' equity: Investment by stockholder 9,743 Common stock--par value $.01; 25,000 shares authorized, 2,000 shares issued and outstanding Additional paid-in capital 23,960 Cumulative translation adjustment (462) Accumulated deficit (4,655) ---------- ---------- Total stockholders' equity 18,843 9,743 Total liabilities, mandatorily redeemable preferred stock ---------- ---------- and stockholders' equity $ 94,697 $ 15,624 ========== ==========
See accompanying notes to consolidated financial statements. -17- BOLLE INC. CONSOLIDATED STATEMENTS OF OPERATIONS (AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
FOR THE YEAR ENDED DECEMBER 31, ---------------------------------------------------- 1997 1996 1995 ---- ---- ---- Net sales $ 32,160 $ 24,425 $ 24,829 Costs and expenses: Costs of sales 15,354 12,130 12,181 Selling, general and administrative 12,584 8,105 7,610 expenses Advertising and sponsoring expenses 3,758 3,269 2,665 Merger and acquisition integration related expenses 3,750 3,050 Interest (income) expense 963 (256) (302) Other (income) expense (693) (450) 48 ----------------- -------------- -------------- Total costs and expenses 35,716 22,798 25,252 ----------------- -------------- -------------- Income (loss) before income taxes (3,556) 1,627 (423) Provision for income taxes 1,099 635 364 ----------------- -------------- -------------- Net income (loss) $ (4,655) 992 (787) ================= ============== ============== Basic and diluted earnings (loss) per share $ (2,586.11) $ 9,920.00 $ (0.22) ================= ============== ============== Weighted average shares outstanding 1,800 100 3,510,624 ================= ============== ==============
See accompanying notes to consolidated financial statements. -18- BOLLE INC. STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (Amounts in thousands) FOR THE YEAR ENDED DECEMBER 31, ------------------------------- 1997 1996 1995 -------- -------- -------- Net income (loss) $(4,655) $ 992 $ (787) Foreign currency translation adjustments (462) Reclassification adjustment - (before taxes) ------- ------- ------- Comprehensive income (loss) before tax (5,117) $ 992 (787) Other comprehensive income tax effect 142 ------- ------- ------- Comprehensive income (loss) $(4,975) $ 992 $ (787) ======= ======= ======= See accompanying notes to consolidated financial statements. -19- BOLLE INC. CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995 (Amounts in thousands, except share data)
COMMON STOCK ----------------- ADDITIONAL CUMULATIVE PAR PAID-IN ACCUMULATED TRANSLATION TOTAL SHARES VALUE CAPITAL DEFICIT ADJUSTMENT EQUITY ------ ----- ---------- --------- ----------- ------ Balance - December 31, 1994 $13,433 ----------- 1995: Net loss (787) Compensation expense accrued for stock options 124 ----------- Balance - December 31, 1995 12,770 1996: Net income 992 Dividend to Lumen (4,019) ----------- Balance-December 31, 1996 $9,743 =========== 1997: Beginning balance - January 1, 1997 $9,743 $9,743 Capitalization of Bolle Inc. - February 3,1997 1,900 -- 10,915 10,915 =========================================================================================================== Common stock issued in connection with Bolle France acquisition 100 -- 3,302 3,302 Net income (loss) $(4,655) (4,655) Cumulative translation adjustment $(462) (462) ------------ -------- ------------- ----------- --------- ------- Balance - December 31, 1997 2,000 -- $ 23,960 $(4,655) $(462) $18,843 ============ ======== ============= =========== ========= =======
See accompanying notes to consolidated financial statements. -20- BOLLE INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (AMOUNTS IN THOUSANDS)
FOR THE YEAR ENDED DECEMBER 31 --------------------------------- 1997 1996 1995 ---- ---- ---- Cash flows from operating activities: Net income (loss) $ (4,655) $ 992 $ (787) Adjustments to reconcile income (loss) to net cash provided (used) by operating activities: Merger and acquisition integration related 1,823 99 expenses, net of payments Depreciation and amortization 1,477 386 254 Bad debt expense 489 73 183 Loss (gain) on sale of property and equipment 19 1 Changes in current assets and liabilities (net of effect of companies acquired): Accounts receivable 2,515 821 (203) Receivables from related parties (1,120) (736) 736 Inventories 2,821 (1,470) (2,063) Other assets (726) 291 (528) Accounts payable 2,584 1,135 (323) Accrued expenses and other (4,128) (191) (176) -------- -------- -------- Net cash provided (used) by operating activities 1,099 1,302 (2,808) -------- -------- -------- Cash flows from investing activities: Cash expended in acquisitions, net of cash received (33,290) Capital expenditures (665) (319) (131) Proceeds from sale of fixed assets 65 2 Non-compete agreement and intangible assets (100) (2) (815) -------- -------- -------- Net cash used by investing activities (33,990) (319) (946) -------- -------- -------- Cash flows from financing activities: Proceeds (payments) from long-term obligations (18) (21) (78) Proceeds (payments) on indebtedness to related parties 34,362 (1,000) (1,600) Proceeds from issuance of common stock (21) -------- -------- -------- Net cash provided (used) by financing activities 34,344 (1,021) (1,699) -------- -------- -------- Effect on cash of changes in foreign exchange rates (560) Net increase (decrease) in cash 893 (38) (5,453) Cash and cash equivalents at beginning of period 311 349 5,802 -------- -------- -------- Cash and cash equivalents at end of period $ 1,204 $ 311 $ 349 ======== ======== ========
(continued) -21- Interest paid $ 46 $ 5 $ 42 Income taxes paid 2,635 * * o Income taxes were paid by the Company's parent for the years ended December 31, 1995 and 1996 as it has been part of a U.S. tax group since 1995. In 1997, only the Company's domestic income taxes were paid by the Parent on behalf of the Company. Accordingly, the income taxes paid by the Company in 1997 represent foreign income taxes. Noncash transactions: 1997 o The acquisition of Bolle France discussed in Note 3 was funded through a combination of cash, equity and debt. The fair values of the assets and liabilities at the dates of acquisition are presented as follows: Cash $ 1,294 Accounts receivable 9,441 Inventories 6,167 Other current assets 388 Property and equipment 3,949 Goodwill 22,642 Trademark 40,000 Other assets 181 Short-term debt (175) Accounts payable and accrued liabilities (9,756) Deferred tax liability (14,000) Other long-term liabilities (1,896) 1996 and 1995 o During the fourth quarter of 1996, Bolle America forgave the repayment of a $4,019 advance made to Lumen during the year. The forgiveness of the advance was characterized as a dividend in 1996. o There were no non-cash transactions during the year ended December 31, 1995. (See accompanying notes to consolidated financial statements) -22- BOLLE INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA, UNLESS OTHERWISE NOTED) NOTE 1 -- SPINOFF SUBSEQUENT TO YEAR END At December 31, 1997 Bolle Inc. (the "Company") was a subsidiary of Lumen Technologies, Inc. (formerly known as BEC Group, Inc.)("Lumen"). On March 11, 1998, Lumen distributed the stock of Bolle Inc. to Lumen's shareholders (the "Spinoff") and the Company began trading on the NASDAQ National Market under the symbol "BEYE" on March 12, 1998. In connection with the Spinoff, pursuant to a Bill of Sale and Assignment Agreement entered into between Lumen and the Company immediately prior to the consummation of the Spinoff (the "Contribution Agreement"), (i) Lumen assigned to the Company all of Lumen's assets other than assets related to the ORC Business (as defined in the Contribution Agreement) and certain other specified assets retained by Lumen; and (ii) the Company assumed all of Lumen's liabilities prior to the Spinoff other than those related to the ORC Business. Pursuant to this agreement, approximately $17 million of the Company's indebtedness to related parties was contributed to the capital of the Company and the remaining balance was refinanced via a bank credit facility. In connection with the Spinoff, the Company assumed all obligations and liabilities of Lumen to each of Maurice Bolle, Robert Bolle, Franck Bolle, Patricia Bolle Passaquay, Brigitte Bolle and Christelle Roche (collectively, the "Sellers," and each a "Seller") incurred by Lumen in connection with the purchase of Bolle France and Lumen was released from all such obligations or liabilities. In addition, each Seller conveyed to the Company all shares of Series A Preferred Stock of Lumen (the "Lumen Preferred Stock") held by such Seller and the Company issued in exchange to each Seller, shares of its Series B Preferred Stock (the "Bolle Series B Preferred Stock") in proportion to the number of shares of Lumen Preferred Stock conveyed by such Seller to the Company. No shares of Bolle Common Stock were issued to the holders of outstanding shares of Bolle Series B Preferred Stock pursuant to the Spinoff. Lumen canceled all warrants (the "Lumen Warrants") and the Company issued in exchange to each holder of canceled Lumen Warrants, warrants to purchase Bolle Common Stock (the "Bolle Warrants") in proportion to the number of Lumen Warrants held by such holder prior to the cancellation. No shares of Bolle Common Stock were issued to holders of outstanding Bolle Warrants pursuant to the Spinoff. NOTE 2 -- GENERAL INFORMATION, BUSINESS AND BASIS OF PRESENTATION GENERAL INFORMATION The Company was organized on February 3, 1997 to effect the July 1997 acquisition by Lumen of Holding B.F. (hereinafter referred to as "Bolle France"), the French holding company that owned the Bolle design, manufacturing and certain distribution interests, including the worldwide rights to the Bolle(Registered Trademark) brand. The Company is a holding company, the principal subsidiaries of which are Bolle America, Inc. ("Bolle America") and Bolle France. Bolle America was acquired by Lumen in November 1995 in a transaction accounted for as a pooling of interests. The Company and Lumen entered into a management services agreement (the "Management Agreement") contemporaneously with the Spinoff pursuant to which certain executives of Lumen will provide key management services to the Company for an initial term of three years. The agreement is thereafter automatically renewed for successive one-year periods until terminated by either party upon at least 90 days written notice prior to the expiration of the initial, or any renewal, term then in effect. BUSINESS Bolle Inc. is a vertically integrated, designer, manufacturer and marketer of Bolle(Registered Trademark) premium -23- sunglasses, goggles, and tactical and safety eyewear. Products are manufactured by Bolle France in Oyonnax, France and through subcontractors and sold to distributors or direct customers primarily located in the United States, Europe, Australia and Canada. BASIS OF PRESENTATION Bolle America was a wholly owned subsidiary of Lumen at the time the Company was formed. The net assets of Bolle America were contributed to the Company by Lumen as of July 1, 1997. At that time, the net book value of Bolle America was $11,038 including retained earnings of $359. Accordingly, the financial position and results of operations of Bolle Inc. presented herein are those of the Company's predecessor for accounting purposes, Bolle America, prior to the acquisition of Bolle France. The results of operations of Bolle France are included beginning on July 9, 1997, (the closing date of the Bolle France acquisition described in Note 3 below). For the periods subsequent to the acquisition of Bolle America by Lumen, certain revenues and expenses reflected in the financial statements include allocations of certain corporate expenses from Lumen. These allocations include income from Lumen's investment in Eyecare Products Plc, as well as expenses for general management, treasury, legal, tax, financial reporting, auditing, insurance, investor and public relations and information management. Allocations were primarily based on relative sales. These financial statements also reflect the allocation of certain corporate assets including those relating to taxes. Management believes that the foregoing allocations were made on a reasonable basis; however, the allocations of costs and expenses do not necessarily indicate the costs that would have been or will be incurred by the Company on a stand-alone basis. Also, the financial information included in the financial statements may not necessarily reflect the financial position, results of operations and cash flows of the Company in the future or what the financial position and results of operations would have been if it had been a separate, stand-alone company during the periods covered. The accompanying financial statements do not give effect to the Contribution Agreement, which was executed subsequent to year end. On a proforma basis, had the Contribution Agreement been effective at December 31, 1997, the effect would have been to increase assets by $10,680 (unaudited), decrease liabilities by $11,615 (unaudited), increase mandatorily redeemable preferred stock by $9,294 (unaudited), and increase equity $13,001 (unaudited). For periods prior to 1997, equity is presented in the accompanying consolidated balance sheets and statements of stockholders' equity on one line. Presentation of traditional equity categories is not considered meaningful. Effective January 1, 1997, equity is presented in the traditional manner. NOTE 3 -- ACQUISITIONS On July 9, 1997, the Company acquired, in a transaction accounted for as a purchase, all of the shares of Bolle France which included Bolle France and several consolidated and unconsolidated affiliates, for a total purchase price of approximately $58,235, comprised of cash of $31,000, Lumen Series A mandatorily redeemable preferred stock of $9,294, Company mandatorily redeemable preferred stock of $11,055 and Company common stock of $3,302, as well as direct acquisition costs of $3,585. Where such consideration was denominated in French Francs, the July 10, 1997 exchange rate of 5.9197 was used to translate to US Dollars. A summary of the allocation of purchase price is as follows: Current assets $17,290 Property and equipment 3,949 Goodwill 22,642 Trademarks 40,000 Other assets 181 Current liabilities (9,931) Long term liabilities (15,896) ------- $58,235 ======= -24- The land included in property and equipment was purchased from the Sellers as part of a separate contract, therefore its specific purchase price of $422 is included as its fair value in property and equipment. The building was revalued based on management estimates resulting in a step up of $1,824 in value. This amount is also included in property and equipment. For all other property and equipment purchased, book value was assumed to approximate fair value. Based upon an independent appraisal obtained by the Company, the Bolle(R) trademark was valued at $40,000. The remainder of the excess of purchase price over book value of $22,642 was allocated to goodwill. The trademark and goodwill are being amortized over 40 years (Note 5). Management does not expect material changes to the purchase accounting. NOTE 4 -MERGER AND ACQUISITION INTEGRATION RELATED EXPENSES Acquisition integration related expenses of $3.75 million in 1997 represent the following expenses incurred in connection with the integration of Bolle France and creation of Bolle Inc.: (i) a reserve for the return of product from the Company's owned and non-owned distributors in conjunction with the redefining and streamlining of Bolle Inc.'s new product line, and (ii) the legal, production and marketing expenses related to the set up of a new logo for Bolle(R) worldwide and the creation of the first worldwide catalog. Merger related expenses in 1995 represent $3.1 million of transaction costs associated with the pooling of interests between Lumen and Bolle America discussed in Note 1. NOTE 5 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Principles of Consolidation The consolidated financial statements include the accounts of the Company and its majority-owned subsidiaries. Investments in less than 50% owned entities and certain greater than 50% owned entities are accounted for by the equity method. Investments in less than 20% owned entities are accounted for by the cost method (Note 9). All significant intercompany transactions, profits and accounts are eliminated in consolidation. Cash Equivalents Cash equivalents include all temporary cash investments with original maturities of three months or less. The carrying value is equal to market value. Revenue Recognition The Company recognizes revenue at the time of shipment with estimates provided for returns based on historical experience. Concentration of Credit Risk and Major Customers In the opinion of management, concentration of credit risk varies significantly on a country-by-country basis. With the acquisition of Bolle France, the Company now sells to customers throughout the world, with the majority of sales to customers in the United States, Europe, Australia and Canada. Credit is generally extended based on an evaluation of the customer's financial condition and its relationship with the Company, and collateral is generally not required. Credit risk is affected by conditions or occurrences in the local economies and relative strength of the local environment in each of the countries where the Company's customers operate. The Company establishes an allowance for doubtful accounts based on factors surrounding the credit risk of specific customers, historical trends and other information. For the years ended December 31, 1996 and 1995, the Company had sales to a specific customer located in -25- the United States that represented 14% and 11% of net sales. For the year ended December 31, 1997, no single customer contributed more than 10% of the Company's net sales. Foreign Currency Translation For subsidiaries which operate in a local currency environment, assets and liabilities are translated into U.S. dollars at year end exchange rates in effect at the balance sheet date. Income and expense items are translated at average rates prevailing during the year. Translation adjustments for these subsidiaries are accumulated in a separate component of equity. Foreign Currency Transactions Prior to July 1997, the Company had entered into a series of agreements with Bolle France providing a series of fixed exchange rates on the French franc/U.S. dollar exchange rate for inventory purchases from them. From time to time, the Company may also enter into foreign currency forward contracts to hedge against the effects of foreign currency fluctuations on inventory purchases and the settlement of trade accounts payable. There were no such contracts in effect subsequent to July 1, 1997. Foreign currency transaction gains and losses are recorded in other income when the underlying transactions are settled. Inventories Inventories, which consist primarily of raw materials and finished goods held for resale, are stated at the lower of cost or market value. Costs include material, direct labor, and overhead. The Company determines inventory value on an average cost basis. Warranties Certain sales are subject to warranty against defects in material and workmanship. The Company provides for such potential future costs at the time the sales are recorded based on historical experience. Property and Equipment Property and equipment are stated at cost. Additions and improvements are capitalized. Maintenance and repairs are expensed as incurred. Depreciation is computed on a straight line or accelerated basis for financial reporting purposes, and on an accelerated basis for tax purposes, over the estimated useful lives of the assets. Useful lives range from 3 to 7 years for office equipment, fixtures and molds and up to 30 years for buildings. Asset cost and accumulated depreciation amounts are removed for dispositions and retirements, with resulting gains and losses reflected in earnings. Trademark, Goodwill and Other Intangible Assets Trademark represents the Bolle(Registered Trademark) brand. Goodwill represents the excess cost over the fair value of net assets acquired in business combinations accounted for under the purchase method. Other intangible assets consist principally of a non-compete agreement. Trademark, goodwill and other intangible assets are amortized on a straight line basis over estimated useful lives which approximate 40 years for the Bolle trademark, 40 years for goodwill and from 3-10 years for other identifiable intangibles. At each balance sheet date, the Company evaluates the realizability of trademark, goodwill and other intangible assets based upon expectations of undiscounted cash flows of each subsidiary having a significant trademark, goodwill or other intangible asset balance. Should this review indicate that trademark, goodwill or other intangible assets will not be recoverable, the Company's carrying value of the trademark, goodwill or other intangible assets will be reduced by the estimated shortfall of discounted cash flows. Based upon its most recent analysis, the Company believes that no impairment of the trademark, goodwill or other intangible assets exists. Impairment of Long-Lived Assets -26- At each balance sheet date, the Company evaluates the realizability of long-lived assets based on expectations of undiscounted cash flows. Should this review indicate that the cost of long-lived assets may be impaired, an evaluation of recoverability would be performed. If an evaluation is required, the estimated future undiscounted cash flows associated with the asset would be compared to the carrying amount of the asset to determine whether a write-down to market value is required. Income Taxes Deferred income taxes are provided on the difference in basis of assets and liabilities between financial reporting and tax returns using enacted tax rates. A valuation allowance is recorded when realization of deferred tax assets is not assured. Earnings Per Share Basic earnings per share is computed pursuant to SFAS No. 128 "Earnings Per Share," by dividing net earnings or loss available to common stockholders by the weighted average number of outstanding shares of common stock. Diluted earnings per share includes weighted average common stock equivalents outstanding during each year in the denominators, unless the effect is antidilutive. Common stock equivalents consist of the dilutive effect of common shares which may be issued upon exercise of stock options, warrants or conversion of debt. Bolle America was a public company from January 1, 1995 to November 2, 1995 with 4,212,729 shares outstanding at the date of acquisition by Lumen. Lumen cancelled all but 100 shares upon acquisition. Such shares remained unchanged until the capitalization of Bolle Inc. in February 1997 when 1,900 additional shares were issued. As a wholly owned subsidiary, the Company had no common stock equivalents. The historical actual shares issued are used to calculate weighted average shares outstanding during 1995 and 1996. Since the Company has no dilutive securities outstanding at December 31, 1997, basic earnings per share is equivalent to diluted earnings per share. In accordance with the Securities and Exchange Commission Staff Accounting Bulletin No. 98, the weighted average number of outstanding common shares is calculated based on the historical timing of the common stock transactions. Pension and post retirement indemnity The Employees of Bolle America currently participate in a 401(k) Savings plan administered by Lumen. No pension, post-retirement or other benefit arrangements have been established by Bolle, Inc. A provision of $150 is recorded for the termination indemnity of the legal employees of Bolle France and its subsidiaries. These indemnities are due to employees who leave Bolle France or its subsidiaries at retirement age (65) and depend upon the length of the employee's service and salary level. The obligation, which is not funded, is calculated using an actuarial method (discount rate of 6.19%, salary increase of 2.5%) and considers staff turnover and mortality statistics until retirement age. There are no other pensions, post-retirement or post-employment obligations to Bolle France as such employee benefits are provided by the French Social Security System. Reclassifications Certain amounts in 1995 and 1996 financial statements have been reclassified to conform with the 1997 presentation. Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reported period. Actual results could differ from these estimates. Fair Value -27- At December 31, 1997, the carrying value of financial instruments such as trade receivables, accounts payable and short term debt approximated their fair values based on the short term maturities of these instruments. New Accounting Pronouncements SFAS No. 129, "Disclosure of information about Capital Structure" reiterates the disclosure requirements set forth in existing pronouncements as they relate to an entity's capital structure and contains no changes in disclosure requirements other than making them applicable to all entities. Because the Company complies with the disclosure requirements of existing pronouncements, there was no impact of the adoption of SFAS No. 129 in the Company's financial statements. SFAS No. 130, "Reporting Comprehensive Income", establishes guidelines for all items that are to be recognized under accounting standards as components of comprehensive income to be reported in the financial statements. The statement is effective for all periods beginning after December 15, 1997 and reclassification of financial statements for earlier periods presented will be required for comparative purposes. The Company has adopted SFAS No. 130 in its financial statements for the year ended December 31, 1997. SFAS No. 131, "Disclosures about Segments of an Enterprise and Related Information", establishes standards for reporting of operating segment information in annual financial statements and requires that those enterprises report selected information about operating segments in interim financial statements issued to shareholders. The statement is effective for all periods beginning after December 15, 1997. The Company presently reports as one operating segment and two geographical segments, and expects to continue to do so. The Company plans to adopt SFAS No. 131 in its financial statements for the year ended December 31, 1998. NOTE 6 -- INVENTORIES Inventories consist of the following at:
DECEMBER 31, ---------------------------- 1997 1996 -------------- ------------- Raw materials $ 1,362 $ Work in progress 2,595 Finished goods 9,595 8,635 Reserves (1,818) (247) -------------- ------------- $ 11,734 $ 8,388 ============== ============= NOTE 7 -- PROPERTY AND EQUIPMENT Property and equipment consists of the following at: DECEMBER 31, ---------------------------- 1997 1996 -------------- ------------- Land $ 417 $ Buildings 2,169 5 Machinery and equipment 2,197 369 Computer hardware and software 847 593 -28- DECEMBER 31, ---------------------------- 1997 1996 -------------- ------------- Furniture and fixtures 202 98 -------------- ------------- 5,832 1,065 Less: accumulated depreciation (1,145) (531) -------------- ------------- $ 4,687 $ 534 ============== =============
Depreciation expense for the years ended December 31, 1997, 1996 and 1995 was $705, $216 and $172, respectively. The minimum future rental expense for property and buildings under operating lease is as follows: 1998 $146 1999 73 2000 73 2001 73 2002 73 Thereafter 20 ----- $458 ===== NOTE 8 -- TRADEMARK, GOODWILL AND OTHER INTANGIBLE ASSETS Trademark, goodwill and other intangible assets and related accumulated amortization consist of the following:
DECEMBER 31, ------------------------------ 1997 1996 -------------- ------------- Goodwill $ 22,979 $ Non compete agreement 900 800 Other identifiable intangible assets 16 16 -------------- ------------- 23,895 816 Less Accumulated amortization (448) (170) -------------- ------------- $ 23,447 $ 646 ========== ========== Trademark $ 39,523 $ Less: Accumulated amortization (494) -------------- ------------- $ 39,029 $ ========== ==========
The Company entered into a non-compete agreement with the former president of Bolle America for the period November 2, 1995 through December 31, 2005. The Company paid $800 at November 2, 1995, $100 in 1997 and will pay $100 per year from January 1, 1998 to 2005. Amortization expense for the years ended December 31, 1997, 1996 and 1995 was $772, $170 and $82, respectively. NOTE 9 -- EQUITY IN AFFILIATED COMPANIES The Company sells its products to three related party distributors, Bolle Sunglasses UK, Bolle Japan and Bolle Canada. All investments are accounted for under the equity method of accounting. The Company's equity in the net -29- assets of these entities is approximately $75. No equity income or loss was recognized during 1997. Subsequent to year end the Company has acquired 100% of Bolle Canada and entered into a letter of intent to acquire 100% of Bolle Sunglasses U.K. NOTE 10 --CREDIT FACILITIES During the years ended December 31, 1997, 1996 and 1995, the Company was party to a revolving intercompany credit arrangement with Lumen whereby interest was earned at a rate of 5% on excess cash and interest was charged at a rate of 8% on outstanding borrowings. Since the acquisition of Bolle France, the revolving intercompany credit arrangement was adjusted to allow for French Franc denominated borrowings by Bolle France at a French market rate of 5.5%. This rate will be reset annually. The debt incurred to finance the cash portion of the consideration has been pushed down to Bolle Inc. under this arrangement. On March 11, 1998, in connection with the Spinoff described in Note 1, the Company entered into a $28 million credit facility (the "New Agreement") with a syndicate of lenders led by NationsBank N.A. The New Agreement provides for a $10 million Term Loan denominated in French Francs, payments due quarterly over five years, and a revolving line of credit of $18 million, including a letter of credit subfacility of $5 million. The interest rate applicable to the facilities will equal the Base Rate or the Eurodollar Rate or the French Franc Libor Rate (each as defined in the New Agreement), as the Company may from time to time elect. The Base rate will generally be equal to the sum of (a) the greater of (i) the prime rate as announced from time to time by NationsBank or (ii) the Federal Funds Rate plus one-half percent (0.5%) and (b) a margin ranging form 0% to 1.0% depending on the Company's satisfaction of certain financial criteria. The Eurodollar Rate will generally be equal to the interbank offered rate, as adjusted, to give effect to reserve requirements, plus a margin ranging from 1.0% to 2.5%, depending upon the Company's satisfaction of certain financial criteria. The terms of the New Agreement require the Company to maintain certain financial ratios. NOTE 11 -- INCOME TAXES The Company accounts for income taxes under SFAS No. 109, "Accounting for Income Taxes". SFAS No. 109 requires an asset and liability approach to accounting for income taxes. The Company has reorganized the structure of various entities comprising Bolle France so that Bolle France will file one consolidated tax return for 1998 and subsequent thereto. Following the March 1998 Spinoff of the Company, Bolle Inc. will file its consolidated tax return separate from Lumen. Income(loss) before provision for income taxes consists of the following for the periods ended: DECEMBER 31, -------------------------------------------- 1997 1996 1995 -------------- -------------- -------------- U.S. $ (4,713) $1,627 $(423) Foreign 1,157 -------------- -------------- -------------- $ (3,556) $1,627 $(423) ============== ============== ============== The provision for income taxes, prepared as if Bolle were a stand alone company, consists of the following for the periods ended:
DECEMBER 31, -------------------------------------------- 1997 1996 1995 -------------- -------------- -------------- UNITED STATES: Current Federal $ $542 $616 State and local 81 103 Deferred 445 12 (355) -------------- -------------- -------------- 445 635 364 -------------- -------------- -------------- FOREIGN: Current 1,803 -30- DECEMBER 31, -------------------------------------------- 1997 1996 1995 -------------- -------------- -------------- UNITED STATES: Current Deferred (1,149) -------------- -------------- -------------- 654 -------------- -------------- -------------- Total provision for income taxes $ 1,099 $635 $364 ============== ============== ==============
The Company's effective tax rates differ from the Federal statutory rate as follows:
DECEMBER 31, 1997 1996 1995 ------ ------ ------ Expected tax (benefit) at statutory rate (34.0%) 34.0% (34.0)% State income taxes (benefit) (3.0%) 3.5% 16.1% Non-deductible and merger related expenses 7.9% 104.0% Valuation allowance 60.0% Other, net 1.5% ------ ----- ----- 30.9% 39.0% 86.1% ====== ===== =====
Significant components of deferred income taxes are as follows for the periods ended:
DECEMBER 31, --------------------------------- 1997 1996 --------------- -------------- Current deferred tax assets: Net operating loss carry forward $ 828 Accounts receivable 61 $168 Non qualified stock options 54 54 Inventories 1,186 129 Accrued expenses 362 83 --------------- -------------- Total gross current deferred tax assets 2,491 434 Non-current deferred tax assets: Intangibles 12 Accrued expenses 440 Fixed assets 23 6 --------------- -------------- Total non-current deferred tax assets 463 18 --------------- -------------- Gross deferred tax asset 2,954 452 Valuation allowance (2,132) --------------- -------------- Deferred tax asset 822 452 --------------- -------------- Current deferred tax liability: Other liabilities (155) Non current deferred tax liability: Intangibles (14,000) --------------- -------------- Gross deferred tax liability (14,155) --------------- -------------- Net deferred tax asset (liability) $ (13,333) $452 =============== ==============
The Company recorded gross deferred tax assets of $2,954 and $452 for the years ended December 31, 1997 and 1996, respectively. A valuation allowance has been established for the entire net tax benefit associated with substantially all carryforwards and temporary differences at December 31, 1997, for the domestic operations, as their realization was not assured. The effect on the income tax provision related to the valuation allowance was a charge of $2,132 for 1997. Net operating loss carryforwards amount to approximately $2.2 million and $0 at December 31, 1997 and 1996, respectively. The net operating loss carryforwards begin to expire in the year 2011. NOTE 12 -- MANDATORILY REDEEMABLE PREFERRED STOCK In connection with the acquisition of Bolle France described in Note 3, the Company issued 64,120 shares of Bolle Series A Preferred Stock with a redemption value of $11,055. Shares of the Bolle Series A Preferred Stock will be redeemed by the Company on the third anniversary of their issuance, subject to the provisions of the New Agreement. Prior to that, the Company may redeem any shares of Bolle Series A Preferred Stock at any time. Further, -31- in the event that the Company's EBITDA exceeds $18,400 for the fiscal year 1998 or $24,700 for the fiscal year 1999, the Company will be obligated to redeem any shares of the Bolle Series A Preferred Stock then outstanding, provided that in each case the Company remains in compliance with the financial covenants contained in any senior indebtedness in effect as of June 4, 1997 as amended after giving effect to such redemption and $2,000 is available for borrowing by the Company under the New Agreement. The carrying value of the Bolle Series A Preferred Stock approximates its fair value. NOTE 13 -- STOCK OPTION PLANS Until the Spinoff, the Company participated in the Lumen stock incentive plan. Such options were exercisable into common stock of Lumen. Accordingly, Lumen disclosures for the Company employees included in the Lumen stock incentive plan are shown below. All option information has been restated to give effect to the May 3, 1996 and March 12, 1998 reverse stock splits. Following the March 1998 Spinoff, the Company adopted its own separate stock option and incentive plan similar to the Lumen plan. The Company applies APB Opinion No. 25 and related Interpretations in accounting for its stock option plans, which are described below. Accordingly, no compensation cost has been recognized for its stock option plans. Had compensation cost been determined based on the fair market value at the grant dates for awards to Company employees under those plans consistent with the method provided by SFAS No. 123, the Company's net income (loss) and net income (loss) per share would have been as follows: DECEMBER 31, -------------------------------------------- 1997 1996 1995 -------------- ----------------------------- Net income (loss): As reported $(4,655) $992 $(787) Pro forma $(4,884) $706 $(1,398) Basic and diluted earnings (loss) per share: As reported $(2,586.11) $9,920.00 $(0.22) Proforma $(2,713.33) $7,060.00 $(0.40) The fair value of each option grant is estimated on the date of grant using the Black-Scholes option pricing model with the following weighted average assumptions used for all grants:
1997 1996 1995 ---- ---- ---- Dividend yield 0% 0% 0% Expected volatility 50% 64% 64% Risk free rate of return 6.5% 5% 5% Expected turnover 7% 7% 7% Expected term 5 years 5 years 5 years
The weighted average fair values of all Benson Eyecare Corporation (Lumen's predecessor, "Benson") options granted during the years ended December 31, 1996 and 1995 were $10.24 and $9.60, respectively. The weighted average fair value of all Lumen options granted during 1997 and 1996 was $8.98 and $9.96, respectively. Lumen may grant nonqualified stock options, incentive stock options or stock appreciation rights to officers, directors, consultants and key employees of Lumen. As a result of a merger and asset sale on May 3, 1996, all Benson options were canceled. Option holders received consideration (including new Lumen options) for their Benson options. Accordingly, all options were issued under the Lumen Stock Compensation Plan, on or after May 3, 1996. A summary of the transactions for Benson options held by Company employees is as follows: -32-
OPTION PRICE RANGE PER BENSON NUMBER OF EXPIRATION DATE SHARE BENSON SHARES Outstanding at 12/31/94 Granted $12.26-$18.00 126 Exercised -- Cancelled $18.00-$18.00 (2) ---------------- Outstanding at 12/31/95 $12.26-$18.00 124 1996 - 2000 Granted -- Exercised -- -- Cancelled -- -- Cancelled in connection with merger and asset sale $12.26-$18.00 (124) ---------------- Outstanding at 12/31/96 -- ================
-33- A summary of the transactions for Lumen options held by Company employees is as follows:
WEIGHTED AVERAGE NUMBER OF EXERCISE LUMEN OPTIONS PRICE PER LUMEN ------------- SHARE ---------------- Outstanding at 12/31/95 -- Granted 9.96 99 Exercised -- Cancelled 9.96 (15) ------------- Outstanding at 12/31/96 9.96 84 Granted 8.98 439 Exercised 10.34 (2) Forfeited 10.12 (27) ------------- Outstanding at 12/31/97 9.08 494 =============
Options generally vest evenly over a three-or four-year period beginning one year from the date of grant and expire seven years from the date of grant. The 34 exercisable Lumen options held by Company employees at December 31, 1997 had an option price range of $6.78 -- $10.25 and a weighted average exercise price of $9.42 per Lumen share. The weighted average remaining contractual life of the 494 Lumen options held by Company employees outstanding at December 31, 1997 was approximately 6.2 years. NOTE 14 -- RELATED PARTY TRANSACTIONS On March 11, 1998, in conjunction with the Spinoff, (see Note 1) the Company executed a Management Services Agreement with certain executives of Lumen pursuant to which certain executives of Lumen will provide key management services to the Company. The Management Services Agreement has an initial term of three years. The agreement thereafter automatically renews for successive one-year periods until terminated by either party upon at least ninety days written notice. During the initial term of the Management Services Agreement, the Company will pay Lumen $720 per year for such services. With the acquisition of Bolle France, the Company has transactions with related parties (Lumen, Bolle Sunglasses UK, Bolle Japan and Bolle Canada), for which transactions and balances have been disclosed under the captions "Trade receivables from related parties" and "Indebtedness to related parties." Such transactions are realized at conditions equivalent to those prevailing for unrelated parties. NOTE 15 -- COMMITMENTS AND CONTINGENCIES The Company is subject to various litigation incidental to its business. Irrespective of any indemnification that may be received, the Company does not believe that exposure on any matter will result in a significant impact on the financial position, results of operations or cash flows of the Company. -34- NOTE 16 -- GEOGRAPHIC INFORMATION The Company operates in one principal industry segment: the design, manufacture and marketing of premium sunglasses, goggles and safety and tactical eyewear. Products are manufactured by Bolle France in Oyonnax, France and through subcontractors and sold to distributors or direct customers primarily located in the United States, Europe, Australia and Canada. The Company had no international sales until the acquisition of Bolle France in the third quarter of 1997.
Geographic information is as follows: DECEMBER 31, ------------------------------------------- 1997 1996 1995 ------------- ------------- ------------- Net sales to unaffiliated customers North America $ 19,769 $24,425 $24,829 Europe 9,207 Other 3,184 ------------- ------------- ------------- Total net sales $ 32,160 $24,425 $24,829 ============= ============= ============= (Transfers between geographic areas eliminated consolidation) North America $ 4,976 Europe 2,941 ------------- ------------- ------------- Total transfers $ 7,917 -- -- ============= ============= ============= Income (loss) before income taxes North America $ 285 $921 $ 2,373 Europe 133 Other 46 Interest, merger and acquisition integration related expenses and other income, net (4,020) 706 (2,796) ------------- ------------- ------------- Total income (loss) before income taxes $ (3,556) $ 1,627 $ (423) ============= ============= ============= Identifiable assets: North America $ 12,049 $15,624 $16,309 Europe 82,648 Corporate assets ------------- ------------- ------------- Total identifiable assets $ 94,697 $15,624 $16,309 ============= ============= =============
Net sales to unaffiliated customers are classified based on the location of the customers. Transfers between geographic areas are recorded at amounts generally above cost and in accordance with the rules and regulations of the respective governing tax authorities. Income (loss) before income taxes consists of total net sales less operating expenses and does not include merger and acquisition integration related expenses, interest and other income, net. Identifiable assets of geographic areas are those assets used in the Company's operations in each area. -35- ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE There were no disagreements with the Company's independent accountants on any matter of accounting principles or practices, financial disclosure, or auditing scope or procedure, which if not resolved to such accountants' satisfaction would have caused them to make reference to the subject matter of the disagreement in connection with their report. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT The following table sets forth the names, ages and positions of the executive officers and members of, and nominee for election to, the Company's board of directors. Their respective backgrounds are described following the table.
NAME AGE POSITION - ---- --- -------- Martin E. Franklin(1)(2) 33 Chairman of the Board of Directors Gary A. Kiedaisch(1) 51 President, Chief Executive Officer and Director Ian G. H. Ashken(1)(2) 37 Executive Vice President of Finance and Administration, Chief Financial Officer, Assistant Secretary and Director Nora A. Bailey(3)(4) 56 Director Franck Bolle(1) 41 Director Patricia Bolle Passaquay(1) 40 Director David L. Moore(2)(3)(4) 40 Director David S. Moross(3)(4) 38 Director - -------------------------------------------------------------------------------------------------------
(1) Member of Executive Committee (2) Member of Nominating Committee (3) Member of Audit Committee (4) Member of Compensation Committee -36- Directors of the Company are elected annually at the annual meeting of stockholders. The next annual meeting of stockholders is tentatively scheduled for May 1998. All of the officers identified above serve at the discretion of the Board of Directors of the Company. Other than Franck Bolle and Patricia Bolle Passaquay, who are cousins, there are no family relationships between any persons identified above. The following are brief biographies of persons identified above. Martin E. Franklin was elected Chairman of the Board of Directors of the Company in February 1997. Mr. Franklin was elected Chairman of the Board and Chief Executive Officer of Lumen in December 1995 and served as its Chief Executive Officer from 1995 until March 1998. Mr. Franklin was Chairman of the Board and Chief Executive officer of BEC's predecessor, Benson Eyecare Corporation ("Benson") from October 1992 to May 1996 and President from November 1993 to May 1996. Mr. Franklin has been the Chairman and Chief Executive Officer of Pembridge Holdings, Inc. since 1990. From 1988 to 1990, Mr. Franklin was Managing Director of Pembridge Associates, Inc. Both Pembridge Associates, Inc. and Pembridge Holdings, Inc. specialized in merchant banking and related services. Mr. Franklin has been Chairman and Chief Executive Officer of Marlin Holdings, Inc., the general partner of Marlin Capital, L.P., since October 1996. Mr. Franklin is non-executive Chairman and a director of Eyecare Products plc and also serves on the boards of Lumen Technologies, Inc., Specialty Catalog Corp. and certain private companies. Mr. Franklin received his B.A. in Political Science from the University of Pennsylvania. Gary A. Kiedaisch was appointed President, Chief Executive Officer and a member of the Board of Directors of the Company and was appointed to its Board of Directors in July 1997. From 1989 until his appointment as the Chief Executive Officer of the Company, Mr. Kiedaisch had been President and Chief Executive Officer of the Mt. Mansfield Company d/b/a Stowe Mountain Resort, a wholly owned subsidiary of multi-national insurance and financial services conglomerate American International Group. Prior to his tenure in Stowe, he held executive positions with several high visibility companies in the winter sports industry including AMF Head Ski Worldwide, Raichle Monitor USA, Blizzard North America and Hart Ski Manufacturing Company, where he had responsibility for worldwide marketing, coordinating and consolidating distributor networks and unifying worldwide brand identification. Ian G.H. Ashken, A.C.A. was elected Executive Vice President, Chief Financial Officer, Assistant Secretary and a Director of the Company in February 1997. Mr. Ashken was elected Executive Vice President, Chief Financial Officer, Assistant Secretary and a Director of BEC in December 1995. Mr. Ashken was Chief Financial Officer of Benson and a director of Benson from October 1992 to May 1996. Mr. Ashken also served as Benson's Executive Vice President from October 1994 to May 1996; Secretary from October 1992 to December 1993; and, Assistant Secretary from December 1993 to May 1996. Mr. Ashken has been the Executive Vice President and a director of Pembridge Holdings, Inc. since 1990. Since October 1996, Mr. Ashken has been Vice Chairman of Marlin Holdings, Inc., the general partner of Marlin Capital, L.P. Mr. Ashken is a director of Eyecare Products plc. and Lumen Technologies, Inc. Mr. Ashken received his B.A. (Hons) in Economics and Accounting from the University of Newcastle in England. Franck Bolle has been a member of the Board of Directors of the Company since July 1997. Mr. Bolle was appointed President and Director of International Operations of Bolle France in July 1997. Mr. Bolle has been a member of the executive management of Bolle France since 1984 and as such has shared responsibility with Ms. Passaquay for the day-to-day operations of Bolle France. Prior to joining Bolle France, Mr. Bolle served as Sales Manager of a home improvement supplies manufacturer. Mr. Bolle holds a degree in business administration with a concentration in marketing from Ecole Libre des Sciences Commerciales Appliquees of Paris, France. Patricia Bolle Passaquay has been a member of the Board of Directors of the Company and Director of Export Sales since July 1997. Ms. Passaquay has been a member of the executive management of Bolle France since 1981 and as such has shared responsibility with Mr. Franck Bolle for the day-to-day operations of Bolle France. Ms. Passaquay holds a degree in business administration with a concentration in marketing from Ecole Libre des Sciences Commerciales Appliquees of Paris, France. -37- David L. Moore became a member of the Bolle Board in March 1998. Mr. Moore has been President and Chief Executive Officer of Century 21 Home Improvements, and for more than fifteen years has been President and Chief Executive Officer of Garden State Brickface, Inc., a leading New York metropolitan area residential and commercial remodeling firm. Mr. Moore received his B.A. in Economics from Amherst College and his M.B.A. from Harvard University. Mr. Moore also is a director of Lumen Technoloties, Inc. Nora A. Bailey, Esq. became a member of the Company's Board of Directors in March 1996. Ms. Bailey is a federal income tax attorney with a specialty in mergers and acquisitions and has many multinational clients. Ms. Bailey and her firm from time to time have been engaged to provide legal advice to the Company. Until 1993, she was a partner in Ivins, Phillips & Barker in Washington D.C., which she joined in 1972. Ms. Bailey received her J.D. from the University of Michigan Law School.. Ms. Bailey also is a director of Lumen Technologies, Inc. David S. Moross became a member of the Company's Board in March 1998. Mr. Moross is presently active in the executive management of Whitehall Financial Group, a holding company that invests throughout the world, and is a member of its Board of Directors. Mr. Moross has also served as a consultant and investment strategist to International Management Group. He serves on the Board of American Phoenix Group of New York and served as President and Chief Executive Officer of Kalvin-Miller International, Inc., a national insurance broker. Mr. Moross received his B.A. in economics from the University of Texas at Austin. COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT. Section 16(a) of the Securities Exchange Act of 1934, (the "Exchange Act"" requires the Company's directors and executive officers, and persons who own more than ten percent (10%) of a registered class of the Company's equity securities, to file with the Securities and Exchange Commission ("SEC") and the stock exchange upon which the Company's stock is listed, initial reports of ownership and reports of changes in ownership of common stock and other equity securities of the Company. Officers, directors and greater than ten-percent shareholders are required to SEC regulation to furnish the Company with copies of all Section 16(a) forms they file. The Company's securities did not trade publicly until March 12, 1998; consequently, no persons described above were subject to Section 16(a) reporting requirements, all Section 16(a) filing requirements applicable to its officers, directors and greater than ten percent (10%) beneficial owners were complied with. ITEM 11. EXECUTIVE COMPENSATION For all of 1997, the executive officers of the Company, other than Gary A. Kiedaisch, its Chief Executive Officer, were officers of Lumen, and the compensation of such executive officers was paid by Lumen. Although such compensation was in part for services rendered to the Company, the full amounts thereof are provided below because, prior to the Spinoff, the Company was a subsidiary of Lumen and no apportionment between Lumen and the Company was made on an ongoing basis. SUMMARY OF COMPENSATION The following Summary Compensation Table sets forth information concerning compensation earned by the Company's Chief Executive Officer and its other executive officers in the fiscal year ended December 31, 1997. SUMMARY COMPENSATION TABLE
LONG-TERM COMPENSATION -------------- ANNUAL COMPENSATION(1) AWARDS ------------------------------------------ NUMBER OF SECURITIES UNDERLYING SALARY BONUS OPTION/ ALL OTHER NAME AND PRINCIPAL POSITION YEAR ($) ($) SARS(3) COMPENSATION - ---------------------------- ------ --------- --------- -------------- ------------ Gary A. Kiedaisch Chief Executive Officer ... 1997 103,846 37,500 166,667 0 Martin E. Franklin(2) Executive Chairman ......... 1997 257,500 300,000 183,333 34,541(4) Ian G. H. Ashken(2) Executive Vice President of Finance and Administration, Chief Financial Officer and Assistant Secretary .. 1997 206,000 168,750 33,333 27,546(4)
- ------------ (1) The compensation of the Company's executive officers was paid entirely by Lumen in 1997. (2) This information reflects the aggregate compensation paid by Lumen for the services of Messrs. Franklin and Ashken as officers of both Lumen and the Company. The part of this compensation relating to services provided to the Company cannot be determined separately. (3) All awards reflected in this column represent Bolle options currently held by the Company's executive officers which were received, pursuant to the Spinoff, in exchange for Lumen options granted in 1997. (4) Includes (i) $5 million and $3 million "split dollar" life insurance policies maintained by the Company for Messrs. Franklin and Ashken, respectively, for which Messrs. Franklin and Ashken reported $28,877 and $21,882, respectively, as income in 1997 and (ii) employer matching contributions under Lumen's 401(k) savings plan of $5,664 for each of Messrs. Franklin and Ashken in 1997. (5) The salary and bonus of each of Messrs. Franklin and Asken are reflected as a $719,000 selling, general and administrative charge in the Company's 1997 financial statements. See page F- . -38- OPTION GRANTS IN 1997 The following table sets forth information regarding Bolle options currently held by the Company's executive officers which were received, pursuant to the Spinoff, in exchange for Lumen options granted in 1997. In accordance with the rules of the Commission, the table sets forth the hypothetical gains or "option spreads" that would exist for the options at the end of their terms. These gains are based on assumed rates of annual compound stock price appreciation of 5% and 10% from the date the options were granted to the end of the option terms. OPTION GRANTS IN FISCAL 1997
INDIVIDUAL GRANTS -------------------------------- POTENTIAL REALIZABLE VALUE AT ASSUMED ANNUAL RATES OF NUMBER OF STOCK PRICE APPRECIATION SECURITIES PERCENT OF TOTAL FOR UNDERLYING OPTIONS GRANTED TO EXERCISE OPTION TERM (2)(3) OPTIONS EMPLOYEES IN PRICE EXPIRATION -------------------------- NAME GRANTED (1) FISCAL 1997 PER SHARE DATE 5% 10% - ---- ----------- ----------- --------- ---- -- --- Gary A. Kiedaisch . 166,667 19% $0.76 July 7, 2004(4) $ 865,088 $2,016,024 Martin E. Franklin 183,333 21% 0.57 March 25, 2007(5) $1,322,290 $1,831,261 Ian G.H. Ashken ... 33,333 4% 0.57 May 3, 2007(5) $ 240,416 $ 332,957
- ------------ (1) The options shown in the table were granted at fair market value. (2) The assumed annual compound rates of stock price appreciation are mandated by the rules of the Commission and do not represent the Company's estimate or projection of future stock prices. (3) Since there was no public market, and therefore no market price, for the Company's Common Stock on December 31, 1997, and since the Company's executive officers were granted only Lumen options in 1997, the information provided in this column is based on the 500,000, 550,000 and 100,000 Lumen options granted to Messrs. Kiedaisch, Franklin and Ashken, respectively, in 1997, each with an exercise price of $4.25 per share. (4) 125,000 of Mr. Kiedaisch's options will vest on each of July 7, 1998, 1999, 2000, and 2001. (5) These options will vest on the earlier of (a) the date on which the Company's common stock has traded at an average closing bid price equal to $8 per share for a twenty (20) consecutive trading day period or (b) March 25, 2005. BEC OPTIONS EXERCISED IN LAST FISCAL YEAR; FISCAL YEAR ENDED OPTION VALUES The following table summarizes certain information regarding certain year end option values of Bolle options currently held by the Company's executive officers which were received pursuant to the Spinoff, in exchange for Lumen options granted in 1997.
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS AT F-Y END AT FY-END (1) ($)(1) -------------- ------------------------------- EXERCISABLE/ EXERCISABLE/ NAME UNEXERCISABLE UNEXERCISABLE - ---- -------------- ------------------------------- Gary A. Kiedaisch . 0/166,667 0/843,750(2) Martin E. Franklin 45,833/320,833 1,131,656/1,352,844(3) Ian G. H. Ashken .. 31,250/93,750 124,453/356,484(4)
- ------------ (1) Since there was no public market, and therefore no market price, for the Company's Common Stock on December 31, 1997, and since the Company's executive officers held only Lumen options as of that date, the information provided in this column is based on information regarding such Lumen options and on the December 31, 1997 closing price of Lumen common stock of $5.937 per share. 39 (2) Based on a total of 0 exercisable and 500,000 unexercisable Lumen options held by Mr. Kiedaisch on December 31, 1997 with an exercise price of $4.25 per share. (3) Based on a total of 137,500 exercisable and 962,500 unexercisable Lumen options held by Mr. Franklin on December 31, 1997 with an average exercise price of $4.98 and $4.56 per share for exercisable and unexercisable options, respectively. (4) Based on a total of 93,750 exercisable and 281,250 unexercisable Lumen options held by Mr. Ashken on December 31, 1997 with an average exercise price of $4.61 and $4.67 per share for exercisable and unexercisable options, respectively. DIRECTORS' COMPENSATION Members of the Company's Board of Directors other than those who are employees of the Company and the Chairman of the Board, will receive for 1998 an annual fee of $15,000 for their services as directors and as members of any committees of the Company's Board of Directors on which they serve. Thereafter, members of the Company's Board of Directors other than those who are employees of the Company and the Chairman of the Board, will receive an annual retainer fee in an amount to be determined. Non-employee directors also receive automatic stock option grants under the Company's 1998 Stock Incentive Plan. See "--Bolle 1998 Stock Incentive Plan" below. Mr. Kiedaisch is compensated pursuant to an employment agreement with the Company. See "--Employment Agreement" below. EMPLOYMENT AGREEMENT Mr. Kiedaisch is employed full time pursuant to an employment agreement with the Company for a term ending on August 4, 2000, unless earlier terminated by either party. At that time, the agreement will automatically extend for additional one year terms unless either party gives six months written notice prior to the end of the initial term or 90 days written notice prior to the end of any renewal term. Mr. Kiedaisch's employment agreement provides for annual base compensation of $250,000 and entitles Mr. Kiedaisch to a bonus for the year 1997 and each full year thereafter which varies based on the Company's annual earnings reaching certain milestones. Mr. Kiedaisch also received a grant of Lumen options which were exchanged upon the completion of the Spinoff for 166,667 options to purchase shares of Common Stock. Pursuant to a separate Memorandum of Understanding, Mr. Kiedaisch will be entitled to a cash payment from the Company if the value of the nominal gains on the options (the "Nominal Gain") at the close of business on July 6, 2001 falls below certain levels as follows: if Mr. Kiedaisch is still employed on July 6, 2001 or his employment has been terminated prior to that date without cause, and the Nominal Gain is less than $500,000, the Company shall pay to Mr. Kiedaisch the difference between $500,000 and the Nominal Gain. If Mr. Kiedaisch's employment has been terminated prior to July 6, 2001 other than without cause, and the Nominal Gain is less than $338,000, the Company shall pay to Mr. Kiedaisch the difference between $338,000 and the Nominal Gain. The employment agreement restricts Mr. Kiedaisch from competing against the Company and its affiliates in the United States or any other territory where the Company does business or in which the Company's products are marketed for a period of one year following the expiration of the employment agreement and further contains certain anti-solicitation and confidentiality provisions. The Company may terminate the employment agreement without compensation in the event Mr. Kiedaisch commits a material breach not cured after receiving notice thereof, is grossly or willfully negligent or commits fraud or a misappropriation. The Company may terminate the employment agreement without cause upon paying Mr. Kiedaisch a severance indemnity equal to one year's base compensation or all remaining base compensation due thereunder for the remainder of the term, whichever is greater, plus the pro rata portion of his bonus for the then current year. In the event of any termination without cause, all options granted to Mr. Kiedaisch which are not then vested will vest automatically. -40- Mr. Bolle and Ms. Bolle Passaquay have entered into employment agreements with Bolle France. See "Certain Relationships and Related Transactions." BOLLE 1998 STOCK INCENTIVE PLAN In January 1998, the Company's Board of Directors adopted the 1998 Stock Incentive Plan (the "Plan"), under which 2,500,000 shares of Bolle Common Stock are reserved for issuance pursuant to the grant of stock based awards under the Plan. Pursuant to the Plan, employees, directors and consultants of the Company and its subsidiaries and affiliates (other than employees subject to a collective bargaining agreement) are eligible to be selected by the Compensation Committee as participants to receive discretionary awards of various forms of equity-based incentive compensation, including stock options, stock appreciation rights, restricted stock awards, performance share unit awards and phantom stock unit awards, and awards consisting of combination of such incentives of stock options as set forth below. The Plan is administered by the full Board of Directors of the Company or a committee thereof, including the Compensation Committee (the entity administering the Plan, hereafter referred to as the "Committee"). The Committee, in its sole discretion, will determine which eligible employees and consultants of the Company and its subsidiaries may participate in the Plan and the type, extent and terms of the equity-based awards to be granted to them. Members of the Committee who are non-employee Directors will receive automatic non-discretionary annual grants of stock options pursuant to the Plan. Each non-employee Director has been granted an option to purchase 3,333 shares of Bolle Common Stock in connection with the Spinoff. On the date that a person first becomes a non-employee Director, he or she will automatically be granted an option to purchase 3,333 shares of Bolle Common Stock. Thereafter, beginning in 1999, on the date of each annual meeting of stockholders of the Company, each non-employee Director will automatically be granted an option to purchase 1,000 shares of Bolle Common Stock. All such automatic grants to non-employee Directors are hereafter called "Director Options." Each Director Option has an exercise price per share equal to the fair market value of one share of Bolle Common Stock on the date of grant and vests and becomes Exercisable over a four year period beginning on the first anniversary of the date of grant at the rate of 25% of each Director Option on each of the four years immediately following the date of grant. All Director Options will be NQSO's (as defined below). Stock options granted by the Committee under the Plan may be "incentive stock options" ("ISOs"), within the meaning of Section 422 of the Internal Revenue Code of 1986, as amended, or "non qualified stock options" ("NQSO's"). The exercise price of the options will be determined by the Committee when the options are granted, subject to a minimum price of the fair market value of the Bolle Common Stock on the date of grant in the case of ISOs and the par value in the case of NQSOs. The option exercise price for all options granted under the Plan may be paid in cash or in shares of Bolle Common Stock having a fair market value on the date of exercise equal to the exercise price or, in the discretion of the Committee, by delivery to the Company of (i) other property having a fair -41- market value on the date of exercise equal to the option exercise price, or (ii) a copy of irrevocable instructions to a stockbroker to deliver promptly to the Company an amount of sale or loan proceeds sufficient to pay the exercise price. A SAR may be granted by the Committee as a supplement to a related stock option or may be granted independent of any option. SARs granted in connection with an option will become exercisable and lapse according to the same vesting schedule and lapse rules that are established for the corresponding option. SARs granted independent of any option will vest and lapse according to the terms and conditions set by the Committee. A SAR will entitle its holder to be paid an amount equal to the excess of the fair market value of the Bolle Common Stock subject to the SAR on the date of exercise over the exercise price of the related stock options, in the case of a SAR granted in connection with an option, or the fair market value of Bolle Common Stock on the date of grant in the case of a SAR granted independent of an option. Shares of Bolle Common Stock covered by a restricted stock award may, in the discretion of the Committee, be issued to the recipient at the time the award is granted or may be deposited with an escrow agent until the end of the restricted period set by the Committee. During the restricted period, restricted stock will be subject to transfer restrictions and forfeiture in the event of termination of employment with the Company or a subsidiary and other restrictions and conditions established by the Committee at the time the award is granted. A phantom stock unit award will provide for the future payment of cash or the issuance of shares Bolle Common Stock to the recipient if continued employment or other conditions established by the Committee at the time of grant are attained. A performance share unit award will provide for the future payment of cash or the issuance of shares of the Bolle Common Stock to the recipient upon the attainment of certain corporate performance goals established by the Committee over performance award periods. At the end of each performance award period, the Committee decides the extent to which the corporate performance goals have been attained and the amount of cash or Bolle Common Stock to be distributed to the participant. OTHER The Company does not maintain a pension plan or other actuarial retirement plan for its named executive officers. The Company does not maintain any long term incentive plans. The Company's named executive officers are eligible to participate in benefit plans maintained by the Company which are generally available to the Company's employees, including a 401(k) savings plan and the health and life insurance programs. -42- ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The following table sets forth certain information with regard to the beneficial ownership of the Common Stock as of March 31, 1998 and as adjusted to reflect the sale of the shares of Common Stock offered hereby, by (i) each person known by the Company to own beneficially more than 5% of the outstanding shares of the Common Stock, (ii) each director and executive officer and (iii) all directors and officers of the Company as a group.
AMOUNT AND NATURE OF PERCENTAGE OF CLASS OWNED NAME AND ADDRESS OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP(1) BEFORE OFFERING/AFTER OFFERING - ----------------------------------------- ---------------------------------------------------------------------------- SERIES A SERIES B SERIES A SERIES B COMMON PREFERRED PREFERRED COMMON PREFERRED PREFERRED STOCK STOCK STOCK STOCK STOCK STOCK ------------- ----------- ----------- ----------- ----------- ----------- Martin E. Franklin 702,704(2) 0 0 10.2/7.1% 0/0% 0/0% 555 Theodore Fremd Avenue Suite B-302 Rye, New York 10580 Gary A. Kiedaisch 0 0 0 0/0 0/0 0/0 Ian G.H. Ashken 147,917 (3) 0 0 2.2/1.5 0/0 0/0 Nora A. Bailey 10,833 0 0 */* 0/0 0/0 Franck Bolle 55,706 12,614 1,975 */* 20/20 20/0 Patricia Bolle Passaquay 55,706 12,614 1,975 */* 20/20 20/0 David L. Moore 5,116 0 0 */* 0/0 0/0 David S. Moross 0 0 0 0/0 0/0 0/0 All Executive Officers and Directors as a 977,982 25,228 3,950 14.0/9.9 40/40 40/0 group (7 persons) Millbrook Partners, L.P. 885,066(4) N/A N/A 13.3/9.0 N/A N/A 2102 Sawgrass Village Drive Ponte Vedra Beach, Florida 32082 Marvin Schwartz(5) 463,157 N/A N/A 7.0/4.7 N/A N/A 605 Third Avenue New York, New York 10158 Palisade Capital(6) 408,771 N/A N/A 6.2/4.1 N/A N/A One Bridge Plaza Suite 695 Fort Lee, New Jersey 07024
- ------------ * Less than 1%. (1) Shares not outstanding but deemed beneficially owned by virtue of the right of an individual to acquire them within sixty (60) days upon the exercise of an option are treated as outstanding for purposes of determining beneficial ownership and the percent beneficially owned by such individual and for the executive officers and directors as a group. (2) Excludes 5,127 shares of Common Stock held in trust for Mr. Franklin's minor children. (3) Excludes 833 shares of Common Stock held in trust for Mr. Ashken's minor children, as to which shares Mr. Ashken disclaims beneficial ownership. (4) Based on a Schedule 13D filing dated March 31, 1997, reporting beneficial ownership of the Lumen shares on which these shares were distributed pursuant to the Spinoff, 859,066 of these shares, or 8.7% of the Common Stock outstanding after the Offering, are beneficially held by Millbrook Partners, L.P. ("Millbrook"), and the remaining 26,000 shares are beneficially held by Millbrook's general partner, Mark M. Mathes. (5) In a Schedule 13D filing dated March 26, 1998, Marvin Schwartz, acting in his personal capacity and not as a principal of Neuberger & Berman, reported beneficial ownership of such shares. (6) Based on a pre-Spinoff Schedule 13G, dated February 1, 1997, in which Palisade Capital reported beneficial ownership of the Lumen shares on which these shares were distributed pursuant to the Spinoff. -43- CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS INDEMNIFICATION AGREEMENTS The Company has entered into indemnification agreements with each of its directors, officers and certain executives, pursuant to which the Company has agreed to indemnify each indemnitee to the fullest extent authorized by law against any and all damages, judgments, settlements and fines ("losses") in connection with any action, suit, arbitration or proceeding or any inquiry or investigation, whether brought by or in the right of the Company or otherwise, whether civil, criminal, administrative, investigative or other, or any appeal therefrom, by reason of an indemnitee's serving as a director of the Company. An indemnitee is not entitled to indemnification for any losses that are (i) based or attributable to the indemnitee gaining in fact any personal profit or advantage to which the indemnitee is not entitled, (ii) for the return by the indemnitee of any remuneration paid to the indemnitee without the previous approval of the Stockholders of the Company which is illegal, (iii) for violations of Section 16 of the Securities Exchange Act of 1934 or similar provisions of state law, (iv) based upon knowingly fraudulent, dishonest or willful misconduct and (v) not permitted to be covered by applicable law. The agreements provide that the indemnification under the agreement is not exclusive of any other rights the indemnitee may have under the Company's Restated Certificate of Incorporation, Restated By-laws, applicable Delaware corporate statutes or any agreement or vote of stockholders. MANAGEMENT SERVICES AGREEMENT The Company has a Management Services Agreement with BEC, pursuant to which certain executives of Lumen will provide certain management services to the Company, including services relating to overall management and strategic planning and direction, banking negotiations, treasury functions, investor relations, securities regulatory compliance, employee and general business insurance programs and asset acquisitions and sales. Pursuant to the Management Services Agreement, Lumen will also make available to the Company the services of Mr. Martin E. Franklin and Mr. Ian G. H. Ashken. As compensation for its services, Lumen will be entitled to receive a monthly fee of $60,000 and reimbursement for its identifiable reasonable out-of-pocket expenses incurred in connection with the performance of services under the Management Services Agreement. The Management Services Agreement, has an initial term of three years, and will automatically renew for successive one-year periods until terminated by either party upon 90 days written notice. CONTRIBUTION AGREEMENT AND INDEMNIFICATION AGREEMENT BEC has assigned to the Company all of BEC's assets other than those related to BEC's ORC Business (as defined in a Bill of Assignment and Assignment Agreement dated as of March 11, 1998, between BEC and the Company) and certain other specified assets retained by BEC, and the Company has assumed all of BEC's liabilities prior to the Spinoff other than those related to the ORC Business. In addition, the Company will be required to indemnify BEC against all of BEC's liabilities prior to the Spinoff other than substantially all liabilities related to the ORC Business. -44- RELATIONSHIPS WITH DIRECTORS Employment Agreements. Each of Mr. Franck Bolle and Ms. Patricia Bolle Passaquay, both directors of the Company, is employed full-time by Bolle France, as Director of International Operations and Director of Export Sales, respectively, pursuant to employment agreements that are unlimited in duration. Under each agreement, the Company is committed to pay basic annual gross base remuneration in the French Francs equivalent of approximately $280,000, to be increased by a minimum of 3% annually after the first year. In addition, each of Mr. Franck Bolle and Ms. Patricia Bolle Passaquay is entitled to bonuses for the years 1997, 1998 and 1999 of 25% to 50% of his or her annual salary if Bolle France meets or exceeds its annual budgetary objectives. If Bolle France terminates either agreement before July 9, 2000 for any reason other than gross or willful misconduct, the employee will be entitled to compensation equal to the salary that he would have received from the date of termination to July 9, 2000. Each agreement provides that if the employee terminates his or her employment, he or she will be restricted from competing against Bolle France for a period of up to three years following such termination and will be entitled to an additional monthly compensation equal to eight to ten percent of his or her last monthly salary during such period. Mr. Kiedaisch, the Chief Executive Officer and a director of the Company, is employed full time pursuant to an employment agreement with the Company. See "Executive Employment Agreement." Ms. Nora Bailey, a member of the Company's Board of Directors since March 1998, is an attorney specializing in federal tax law. In her professional capacity she has rendered legal advice and related services to both the Company and its predecessor, Benson. Ms. Bailey has rendered such services both prior to and subsequent to her appointment to the Company's Board of Directors, and it is anticipated that she from time to time in the future will be engaged to provide similar legal services to the Company. All fees paid to Ms. Bailey in connection with such services have been agreed in arms' length negotiations and are in accordance with Ms. Bailey's usual and customary billing practices. Fees paid to Ms. Bailey by the Company in connection with such services are not paid in consideration of her services as a director. BOLLE PREFERRED STOCK AND WARRANTS. Each of Mr. Franck Bolle and Ms. Patricia Bolle Passaquay holds 12,614 shares of Bolle Series A Preferred Stock, 1,975 shares of Bolle Series B Preferred Stock, and Bolle Warrants for the purchase of up to 132,771 shares of Bolle Common Stock. Mr. Bolle and Ms. Bolle Passaquay may not sell their Bolle Series B Preferred Stock without the prior written consent of at least 90% of the then outstanding shares of the Bolle Series B Preferred Stock until the Company has redeemed all the shares of the Bolle Series B Preferred Stock or the Subordinated Debt (as defined below). CERTAIN TRANSACTIONS On July 10, 1997, BEC acquired and contributed to the Company all of the issued and outstanding share capital of Bolle France, pursuant to the terms of a Share Purchase Agreement. Pursuant to the terms of the Share Purchase Agreement, Bolle acquired from the Sellings shareholders (the "Sellers") all of the issued and outstanding share capital of Bolle France, Bolle Diffusion Sarl and the related land, in exchange for approximately $54,700,000 consisting of the following not including transaction expenses of approximately $3,600,000: (a) $31,000,000 in cash (the "Cash Consideration"); (b) Warrants to the Sellers to purchase an aggregate of up to 2,130,000 shares of BEC common stock at an exercise price of $3.10 per share, subject to certain adjustments; (c) Ten Thousand (10,000) shares of BEC Series A Preferred Stock having an aggregate liquidation preference of approximately $9,300,000 issued pursuant to the terms of the Certificate of Designations of BEC Series A Preferred Stock; (d) One Hundred (100) shares of Bolle Common Stock valued at approximately $3,300,000, being the minimum value of the Bolle Common Stock to be issued to the Sellers pursuant to the Share Purchase Agreement; and (e) Sixty-Four Thousand One Hundred Twenty (64,120) shares of Bolle Series A Preferred Stock having an aggregate liquidation preference of approximately $11,100,000 issued pursuant to the terms of the Certificate of Designations of the Series A Preferred Stock of the Company. The Sellers included Mr. Franck Bolle and Ms. Patricia Bolle Passaquay. On July 10, 1997, BEC borrowed approximately $32,000,000, for the purpose of paying the Cash Consideration and certain transaction expenses in connection with the purchase of Bolle France, pursuant to the terms of the Credit Agreement (as defined below). -45- The Share Purchase Agreement provides that none of the Sellers may dispose of their shares of Bolle common stock until July 9, 2000. If, on that date, the closing market price of the total number of shares then held by the Sellers is less than $3,301,500 (the "Minimum Value"), the Company shall pay on such date in cash or freely tradable stock the difference between the actual value of the shares and the Minimum Value. In addition, pursuant to letters dated July 9, 1997 and December 4, 1997 from Martin Franklin to the Sellers, including Mr. Franck Bolle and Ms. Patricia Bolle Passaquay, Mr. Franklin will refrain from selling any shares of Bolle Common Stock which he received pursuant to the Spinoff for so long as the Bolle Series B Preferred Stock shall not have been redeemed in full by the Company. In connection with the Spinoff, the Sellers, including Mr. Franck Bolle and Ms. Patricia Bolle Passaquay, were issued pursuant to a stock split in the form of a stock dividend an aggregate of 278,430 additional shares of Bolle common stock. Furhtermore, in connection with the Spinoff, the Sellers received Bolle Series B Preferred Stock in exchange for their BEC Series A Preferred Stock and Bolle warrants in exchange for their BEC warrants. All of the shares of Bolle common stock received by the Sellers, including Mr. Franck Bolle and Ms. Patricia Bolle Passaquay, pursuant to the Stock Purchase Agreement and this dividend will bear the rights and obligations described above. Under the Share Purchase Agreement, each of the Sellers on the one hand, and the Company and BEC on the other hand, are liable to fully reimburse and indemnify the other for any expense, damage, loss or liability arising from any breach of the terms of the Share Purchase Agreement by the indemnifying party, subject to certain minimum claim amounts which must be met for the indemnification provisions to take effect. In connection with the Spinoff, the Company agreed to assume all obligations and liabilities of BEC to each Seller, including Mr. Franck Bolle and Ms. Patricia Bolle Passaquay, incurred by BEC in connection with the purchase of Bolle France and BEC was released from all such obligations and liabilities. As a result, the Company became solely responsible for BEC's indemnification obligations for breach of its representations and warranties made to the Sellers, including Mr. Franck Bolle and Ms. Patricia Bolle Passaquay, in the Share Purchase Agreement. During the years ended December 31, 1997, 1996 and 1995, Bolle America was party to a revolving intercompany credit arrangement with BEC whereby interest on outstanding balances was charged to Bolle America at a rate of 8% per annum. Conversely, interest on cash sent to BEC was earned at a rate of 5% per annum. In addition, in July 1997, BEC entered into a $40,000,000 intercompany revolving credit agreement with the Company, for a term of up to three years, pursuant to which the Company will pay interest to BEC at a rate of 5.5% per annum. In conjunction with the Spinoff, the Company entered into a separate credit facility with substantially the same terms as the existing BEC credit facility and there are no intercompany credit arrangements between BEC and the Company. CONSULTING AND NON-COMPETE AGREEMENT The Company has assumed BEC's duties and obligations pursuant to a consulting and non-compete agreement entered into with Steve N. Haber, the former Chairman of the Board, Chief Executive Officer and President of Bolle America in November 1995. The following description refers to the parties' respective duties giving effect to the assignment of the consulting agreement to the Company. Pursuant to the agreement, as of January 1, 1997, Mr. Haber became a consultant to the Company for annual compensation of $155,000 plus health and life insurance benefits for a period ending on December 31, 2000, extendible for an additional five years by mutual agreement of the parties. In addition to employment as a consultant, Mr. Haber agreed, commencing on the effective date of the consulting agreement and continuing through December 31, 2005, not to compete against the Company in the eyewear or optical, opthalmic or optometric businesses in any geographic area in which the Company does business. As compensation for this noncompete agreement, Mr. Haber received an initial payment of $800,000 and will receive a payment of $100,000 per year commencing January 1, 1997 through December 31, 2005. Mr. Haber furthermore agreed not to disclose any of the Company's confidential information. -46- PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K (A) 1. FINANCIAL STATEMENTS:
CONSOLIDATED FINANCIAL STATEMENTS: PAGE: ----- Reports of Independent Accounts................................................ 16 Consolidated Balance Sheets at December 31, 1997 and 1996...................... 17 Consolidated Statements of Operations for the three years ended December 31, 1997, 1996 and 1995...................................... 18 Consolidated Statements of Stockholders' Equity for the three years ended December 31, 1997, 1996 and 1995...................................... 20 Consolidated Statements of Cash Flows for the three years ended December 31, 1997, 1996 and 1995............................................ 21 Notes to Consolidated Financial Statements..................................... 23
2. FINANCIAL STATEMENT SCHEDULES: All other schedules for which provision is made in the applicable accounting regulations of the Securities and Exchange Commission are not required under the related instructions or are inapplicable, and therefore have been omitted. 3. EXHIBITS: The following exhibits are filed herewith:
3.1 Amended and Restated Certificate of Incorporation. Incorporated by reference to Exhibit 1 to the Company's Registration Statement on Form 8-A, Commission File No. 000-23899. 3.2 Certificate of Designations of the Series B Preferred Stock. Incorporated by reference to Exhibit 2 to the Company's Registration Statement on Form 8-A, Commission File No. 000-23899. 3.3 Amended and Restated Bylaws Incorporated by reference to Exhibit 3 to the Company's Registration Statement on Form 8-A, Commission File No. 000-23899. 3.4 Amendment to Bylaws dated March 11, 1998. 4.1 Specimen of Stock Certificate. Incorporated by reference to Exhibit 4 to the Company's Registration Statement on Form 8-A, Commission File No. 000-23899. 4.2 Amended and Restated Share Purchase Agreement dated July 9, 1997 among BEC Group, Inc. ("BEC")(renamed Lumen Technologies, Inc. on March 11, 1998) and Bolle Inc. (the "Company"), on the one hand, and each of Robert Bolle, Maurice Bolle, Franck Bolle, Brigitte Bolle, Patricia Bolle Passaquay and Christelle Roche (collectively, the "Sellers"). Incorporated by reference to Exhibit 10.1 of BEC's Current Report on Form 8-K, dated July 10, 1997 (Commission File No. 1-14360). 4.3 Letter Agreement dated July 9, 1997 by and among Martin E. Franklin and each of the Sellers. Incorporated by reference to Exhibit 4.3 to the Company's Registration Statement on Form S-1 (Registration No. 333-40279). 4.4 Letter Agreement dated December 15, 1997 by and among Martin E. Franklin and each of the Sellers. Incorporated by reference to Exhibit 6 to the Company's Registration Statement on Form 8-A, Commission File No. 000-23899. 4.5 Letter from the Company to the Sellers regarding the Series A Preferred Stock 4.6 Warrant Agreement among the Company and each of the Sellers 4.7 1998 Stock Incentive Plan 10.1 Employment Agreement and Memorandum of Understanding dated July 7, 1997 between the Company and Gary Kiedaisch. Incorporated by reference to Exhibit 10.1 to the Company's Registration Statement on Form S-1 (Registration No. 333-40279). 10.2 Employment Agreement dated July 9, 1997 between Societe Bolle SNC and Franck Bolle (English translation). Incorporated by reference to Exhibit 10.2 to the Company's Registration Statement on Form S-1 (Registration No. 333-40279). 10.3 Employment Agreement dated July 9, 1997 between Societe Bolle SNC and Patricia Bolle Passaquay (English translation). Incorporated by reference to Exhibit 10.3 to the Company's Registration Statement on Form S-1 (Registration No. 333-40279). 10.4 Agreement dated September 20, 1995 between the Company and Steve N. Haber. Incorporated by reference to Exhibit 10.4 to the Company's Registration Statement on Form S-1 (Registration No. 333-40279). 10.5 Management Services Agreement between the Company and BEC. Incorporated by reference to Exhibit 10.6 to BEC's Current Report on Form 8-K, date of event March 11, 1998. 10.6 Bill of Sale and Assignment Agreement between BEC and the Company. Incorporated by reference to Exhibit 10.4 to BEC's Current Report on Form 8-K, date of event March 11, 1998. 10.7 Indemnification Agreement by and among BEC, BILC Acquisition Corp. and the Company. Incorporated by reference to Exhibit 10.5 to BEC's Curent Report on Form 8-K, date of event March 11, 1998. 10.8 Exclusive Customer Agreement dated as of October 23, 1997 by and between the Company and Alyn Corporation. Incorporated by reference to Exhibit 10.8 to the Company's Registration Statement on Form S-1 (Registration No. 333-40279). 10.9 Letter of Intent between the Company and Bill Bass Optical Pty Ltd. dated January 6, 1998. Incorporated by reference to Exhibit 10.9 to the Company's Registration Statement on Form S-1 (Registration No. 333-40279). 10.10 Loan Agreement by and among BEC (as assignee) and First Interstate Bank of Texas, N.A., relating to the real property located in Dallas, Texas. Incorporated by reference to Exhibit 10.24 to Benson Eyecare Corporation's Annual Report on Form 10-K for the year ended December 31, 1995 (Commission File No. 1-9435). 10.11 First Amendment to Loan Agreement (see Exhibit 10.8 above) and Other Loan Documents, dated May 3, 1996, by and among Foster Grant Group, L.P., BEC and First Interstate Bank of Texas, N.A. Incorporated by reference to Exhibit 10.20 to Lumen's Annual Report on Form 10-K for the year ended December 31, 1996 (Commission File No. 1-14360). 10.12 Second Amendment to Loan Agreement (see Exhibit 10.8 above) and Other Loan Documents, dated December 12, 1996, by and among Wells Fargo Bank (Texas), N.A. (as successor to First Interstate Bank of Texas, N.A.), ORC Management Corporation, Foster Grant Group, L.P., and BEC. Incorporated by reference to Exhibit 10.21 to BEC's Annual Report on Form 10-K for the year ended December 31, 1996 (Commission File No. 1-14360). 10.13 Deed of Trust, Security Agreement and Financing Statement, dated March 31, 1995, relating to mortgage of real property located in Dallas, Texas. Incorporated by reference to Exhibit 10.22 of BEC's Annual Report on Form 10-K for the year ended December 31, 1996 (Commission File No. 1-14360). 10.14 Agreement and Plan of Merger, dated as of July 26, 1995, among Benson Eyecare Corporation, Benson Acquisition Corp., and Bolle America, Inc. Incorporated by reference to Exhibit 10.1 to Benson Eyecare Corporation's Current Report on Form 8-K, dated August 3, 1995 (Commission File No. 1-9435). 10.15 Agreement and Plan of Merger, dated as of February 11, 1996, between Essilor International, S.A., Essilor of America, Inc., Essilor Acquisition Corporation, Benson Eyecare Corporation, BEC and Omega Opco, Inc. Incorporated by reference to Exhibit 10.1 to BEC's Registration Statement on Form S-1 (Registration No. 333-3186). 10.16 Indemnification Agreement, dated as of February 11, 1996, by and among Essilor International, S.A., Essilor of America, Inc., Essilor Acquisition Corporation, Benson Eyecare Corporation, and BEC. Incorporated by reference to Exhibit 10.3 to BEC's Registration Statement on Form S-1 (Registration No. 333-3186). 10.17 Asset Purchase Agreement, dated as of February 11, 1996, by and among Benson Eyecare Corporation, BEC and Optical Radiation Corporation and Monsanto Company. Incorporated by reference to Exhibit 10.2 to Benson Eyecare Corporation's Current Report on Form 8-K, dated February 12, 1996. 10.18 Stock Purchase Agreement, dated as of November 13, 1996, by and among BEC, Foster Grant Group, L.P., Foster Grant Holdings, L.P. and Accessories Associates, Inc. Schedules and other attachments to such agreement are not filed herewith, but will be provided supplementally to the Commission upon request. Incorporated by reference to Exhibit 2.1 to BEC's Quarterly Report on Form 10-Q/A for the period ended September 30, 1996. 10.19 Merger Agreement, dated as of June 30, 1994, among BEC (as assignee), Benson Acquisition Company, Inc. and Optical Radiation Corporation. Incorporated by reference to Exhibit 99.1 to Benson Eyecare Corporation's Current Report on Form 8-K, dated of event June 30, 1994 (Commission File No. 1-9435). 10.20 Amendment No. 1 to Merger Agreement, dated as of July 6, 1994, among BEC (as assignee), Benson Acquisition Company, Inc. and Optical Radiation Corporation. Incorporated by reference to Exhibit 99.2 to Benson Eyecare Corporation's Current Report on Form 8-K, date of event June 30, 1994 (Commission File No. 1-9435). 10.21 Amendment No. 2 to Merger Agreement, dated as of August 29, 1994, by and among BEC, Optical Radiation Corporation and Benson Acquisition Corporation. Incorporated by reference to Annex E to Benson Eyecare Corporation's Registration Statement on Form S-4, dated September 12, 1994 (Commission File No. 1-9435). 10.22 Form of Indemnification Agreement between the Company and its officers and directors. Incorporated by reference to Exhibit 10.22 to the Company's Registration Statement on Form S-1 (Registration No. 333-40279). 10.23 Second Amended and Restated Credit Agreement, dated as of March 11, 1998, among the Company, NationsBank, National Association and the other lenders party thereto. Filed together with this Exhibit 10.23 are copies of the following ancillary agreements. (a) Second Amended and Restated Guarantee Agreement, dated March 11, 1998. (b) Second Amended and Restated Stock Pledge Agreement, dated as of March 11, 1998. (c) LC Account Agreement, dated as of March 11, 1998. (d) Cash Collateral Account Agreement, dated as of March 11, 1998. (e) Second Amended and Restated Security Agreement, dated as of March 11, 1998. (f) Second Amended and Restated Intellectual Property Security Agreement, dated as of March 11, 1998. (g) Second Amended and Restated Assignment of Patents, Trademarks, Copyrights and Licenses, dated as of March 11, 1998. 21.1 List of the subsidiaries of the Company. Incorporated by reference to Exhibit 21.1 to the Company's Registration Statement on Form S-1 (Registration No. 333-40279). 27 Financial Data Schedule
(B) REPORTS ON FORM 8-K IN THE FOURTH QUARTER OF 1996: (i) The Company filed no Reports on Form 8-K in the fourth quarter of 1997. -47- BOLLE, INC. 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 on the 15th day of April, 1998. BOLLE, INC. By: /s/ Martin E. Franklin ---------------------------------- Martin E. Franklin Chairman of the Board Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities indicated. /s/ Martin E. Franklin /s/ Gary A. Kiedaisch - ------------------------------------ -------------------------------- Martin E. Franklin Gary A. Kiedaisch Chairman Chief Executive Officer Dated: April 15, 1998 Dated: April 15, 1998 /s/ Ian G. H. Ashken /s/ David L. Moore - ------------------------------------ -------------------------------- Ian G. H. Ashken David L. Moore Chief Financial Officer, Director Executive Vice President of Finance and Administration; Dated April 15, 1998 Dated: April 15, 1998 /s/ Nora A. Bailey /s/ Franck Bolle - ------------------------------------ -------------------------------- Nora A. Bailey Franck Bolle Director Director Dated: April 15, 1998 Dated: April 15, 1998 /s/ Patricia Bolle Passaquay /s/ David S. Moross - ------------------------------------ -------------------------------- Patricia Bolle Passaquay David S. Moross Director Director Dated: April 15, 1998 Dated: April 15, 1998
EXHIBIT INDEX
EXHIBIT NO. EXHIBIT PAGE NO. - ----------- ------- ---------- 3.1 Amended and Restated Certificate of Incorporation. Incorporated by reference to Exhibit 1 to the Company's Registration Statement on Form 8-A, Commission File No. 000-23899. 3.2 Certificate of Designations of the Series B Preferred Stock. Incorporated by reference to Exhibit 2 to the Company's Registration Statement on Form 8-A, Commission File No. 000-23899. 3.3 Amended and Restated Bylaws Incorporated by reference to Exhibit 3 to the Company's Registration Statement on Form 8-A, Commission File No. 000-23899. 3.4 Amendment to Bylaws dated March 11, 1998. 4.1 Specimen of Stock Certificate. Incorporated by reference to Exhibit 4 to the Company's Registration Statement on Form 8-A, Commission File No. 000-23899. 4.2 Amended and Restated Share Purchase Agreement dated July 9, 1997 among BEC Group, Inc. ("BEC")(renamed Lumen Technologies, Inc. on March 11, 1998) and Bolle Inc. (the "Company"), on the one hand, and each of Robert Bolle, Maurice Bolle, Franck Bolle, Brigitte Bolle, Patricia Bolle Passaquay and Christelle Roche (collectively, the "Sellers"). Incorporated by reference to Exhibit 10.1 of BEC's Current Report on Form 8-K, dated July 10, 1997 (Commission File No. 1-14360). 4.3 Letter Agreement dated July 9, 1997 by and among Martin E. Franklin and each of the Sellers. Incorporated by reference to Exhibit 4.3 to the Company's Registration Statement on Form S-1 (Registration No. 333-40279). 4.4 Letter Agreement dated December 15, 1997 by and among Martin E. Franklin and each of the Sellers. Incorporated by reference to Exhibit 6 to the Company's Registration Statement on Form 8-A, Commission File No. 000-23899. 4.5 Letter from the Company to the Sellers regarding the Series A Preferred Stock 4.6 Warrant Agreement among the Company and each of the Sellers 4.7 1998 Stock Incentive Plan 10.1 Employment Agreement and Memorandum of Understanding dated July 7, 1997 between the Company and Gary Kiedaisch. Incorporated by reference to Exhibit 10.1 to the Company's Registration Statement on Form S-1 (Registration No. 333-40279). 10.2 Employment Agreement dated July 9, 1997 between Societe Bolle SNC and Franck Bolle (English translation). Incorporated by reference to Exhibit 10.2 to the Company's Registration Statement on Form S-1 (Registration No. 333-40279). 10.3 Employment Agreement dated July 9, 1997 between Societe Bolle SNC and Patricia Bolle Passaquay (English translation). Incorporated by reference to Exhibit 10.3 to the Company's Registration Statement on Form S-1 (Registration No. 333-40279). 10.4 Agreement dated September 20, 1995 between the Company and Steve N. Haber. Incorporated by reference to Exhibit 10.4 to the Company's Registration Statement on Form S-1 (Registration No. 333-40279). 10.5 Management Services Agreement between the Company and BEC. Incorporated by reference to Exhibit 10.6 to BEC's Current Report on Form 8-K, date of event March 11, 1998. 10.6 Bill of Sale and Assignment Agreement between BEC and the Company. Incorporated by reference to Exhibit 10.4 to BEC's Current Report on Form 8-K, date of event March 11, 1998. 10.7 Indemnification Agreement by and among BEC, BILC Acquisition Corp. and the Company. Incorporated by reference to Exhibit 10.5 to BEC's Curent Report on Form 8-K, date of event March 11, 1998. 10.8 Exclusive Customer Agreement dated as of October 23, 1997 by and between the Company and Alyn Corporation. Incorporated by reference to Exhibit 10.8 to the Company's Registration Statement on Form S-1 (Registration No. 333-40279). 10.9 Letter of Intent between the Company and Bill Bass Optical Pty Ltd. dated January 6, 1998. Incorporated by reference to Exhibit 10.9 to the Company's Registration Statement on Form S-1 (Registration No. 333-40279). 10.10 Loan Agreement by and among BEC (as assignee) and First Interstate Bank of Texas, N.A., relating to the real property located in Dallas, Texas. Incorporated by reference to Exhibit 10.24 to Benson Eyecare Corporation's Annual Report on Form 10-K for the year ended December 31, 1995 (Commission File No. 1-9435). 10.11 First Amendment to Loan Agreement (see Exhibit 10.8 above) and Other Loan Documents, dated May 3, 1996, by and among Foster Grant Group, L.P., BEC and First Interstate Bank of Texas, N.A. Incorporated by reference to Exhibit 10.20 to Lumen's Annual Report on Form 10-K for the year ended December 31, 1996 (Commission File No. 1-14360). 10.12 Second Amendment to Loan Agreement (see Exhibit 10.8 above) and Other Loan Documents, dated December 12, 1996, by and among Wells Fargo Bank (Texas), N.A. (as successor to First Interstate Bank of Texas, N.A.), ORC Management Corporation, Foster Grant Group, L.P., and BEC. Incorporated by reference to Exhibit 10.21 to BEC's Annual Report on Form 10-K for the year ended December 31, 1996 (Commission File No. 1-14360). 10.13 Deed of Trust, Security Agreement and Financing Statement, dated March 31, 1995, relating to mortgage of real property located in Dallas, Texas. Incorporated by reference to Exhibit 10.22 of BEC's Annual Report on Form 10-K for the year ended December 31, 1996 (Commission File No. 1-14360). 10.14 Agreement and Plan of Merger, dated as of July 26, 1995, among Benson Eyecare Corporation, Benson Acquisition Corp., and Bolle America, Inc. Incorporated by reference to Exhibit 10.1 to Benson Eyecare Corporation's Current Report on Form 8-K, dated August 3, 1995 (Commission File No. 1-9435). 10.15 Agreement and Plan of Merger, dated as of February 11, 1996, between Essilor International, S.A., Essilor of America, Inc., Essilor Acquisition Corporation, Benson Eyecare Corporation, BEC and Omega Opco, Inc. Incorporated by reference to Exhibit 10.1 to BEC's Registration Statement on Form S-1 (Registration No. 333-3186). 10.16 Indemnification Agreement, dated as of February 11, 1996, by and among Essilor International, S.A., Essilor of America, Inc., Essilor Acquisition Corporation, Benson Eyecare Corporation, and BEC. Incorporated by reference to Exhibit 10.3 to BEC's Registration Statement on Form S-1 (Registration No. 333-3186). 10.17 Asset Purchase Agreement, dated as of February 11, 1996, by and among Benson Eyecare Corporation, BEC and Optical Radiation Corporation and Monsanto Company. Incorporated by reference to Exhibit 10.2 to Benson Eyecare Corporation's Current Report on Form 8-K, dated February 12, 1996. 10.18 Stock Purchase Agreement, dated as of November 13, 1996, by and among BEC, Foster Grant Group, L.P., Foster Grant Holdings, L.P. and Accessories Associates, Inc. Schedules and other attachments to such agreement are not filed herewith, but will be provided supplementally to the Commission upon request. Incorporated by reference to Exhibit 2.1 to BEC's Quarterly Report on Form 10-Q/A for the period ended September 30, 1996. 10.19 Merger Agreement, dated as of June 30, 1994, among BEC (as assignee), Benson Acquisition Company, Inc. and Optical Radiation Corporation. Incorporated by reference to Exhibit 99.1 to Benson Eyecare Corporation's Current Report on Form 8-K, dated of event June 30, 1994 (Commission File No. 1-9435). 10.20 Amendment No. 1 to Merger Agreement, dated as of July 6, 1994, among BEC (as assignee), Benson Acquisition Company, Inc. and Optical Radiation Corporation. Incorporated by reference to Exhibit 99.2 to Benson Eyecare Corporation's Current Report on Form 8-K, date of event June 30, 1994 (Commission File No. 1-9435). 10.21 Amendment No. 2 to Merger Agreement, dated as of August 29, 1994, by and among BEC, Optical Radiation Corporation and Benson Acquisition Corporation. Incorporated by reference to Annex E to Benson Eyecare Corporation's Registration Statement on Form S-4, dated September 12, 1994 (Commission File No. 1-9435). 10.22 Form of Indemnification Agreement between the Company and its officers and directors. Incorporated by reference to Exhibit 10.22 to the Company's Registration Statement on Form S-1 (Registration No. 333-40279). 10.23 Second Amended and Restated Credit Agreement, dated as of March 11, 1998, among the Company, NationsBank, National Association and the other lenders party thereto. Filed together with this Exhibit 10.23 are copies of the following ancillary agreements. (a) Second Amended and Restated Guarantee Agreement, dated March 11, 1998. (b) Second Amended and Restated Stock Pledge Agreement, dated as of March 11, 1998. (c) LC Account Agreement, dated as of March 11, 1998. (d) Cash Collateral Account Agreement, dated as of March 11, 1998. (e) Second Amended and Restated Security Agreement, dated as of March 11, 1998. (f) Second Amended and Restated Intellectual Property Security Agreement, dated as of March 11, 1998. (g) Second Amended and Restated Assignment of Patents, Trademarks, Copyrights and Licenses, dated as of March 11, 1998. 21.1 List of the subsidiaries of the Company. Incorporated by reference to Exhibit 21.1 to the Company's Registration Statement on Form S-1 (Registration No. 333-40279). 27 Financial Data Schedule
EX-3.4 2 AMENDMENT TO BY LAWS OF BOLLE INC. AMENDMENT TO BY LAWS OF BOLLE INC. Article V, Sections 7, 8 and 9 of the Bylaws of Bolle Inc. (the "Corporation") shall be amended to read as follows: 1. Article V, Section 7 is hereby stricken in its entirety and the following new Article V, Section 7 is substituted in lieu thereof: "SECTION 7. Chairman of the Board. The Chairman of the Board shall be an executive officer of the corporation and shall preside, if present, at all meetings of the stockholders and at all meetings of the Board of Directors and shall perform such other duties and have such other powers as from time to time may be assigned by the Board of Directors or prescribed by these Bylaws." 2. Article V, Section 8 is hereby stricken in its entirety and the following new Article V, Section 8 is substituted in lieu thereof: "SECTION 8. Vice Chairman of the Board. The Vice Chairman of the Board shall, at the request of the Chairman of the Board or in his absence or disability, perform the duties of the Chairman of the Board and when so acting shall, have all the power of, and be subject to all restrictions upon, the Chairman of the Board and shall perform such other duties and have such other powers as from time to time may be assigned to him by the Chairman of the Board or prescribed by these Bylaws. In the event of a vacancy in the office of the Chairman of the Board, the Vice Chairman of the Board shall thereupon serve as the Chairman of the Board until the next annual meeting of stockholders and until a successor is duly elected and qualified." 3. Article V, Section 9 is hereby stricken in its entirety and the following new Article V, Section 9 is substituted in lieu thereof: "SECTION 9. Chief Executive Officer. The Chief Executive Officer shall have general direction of the affairs of the Corporation and general supervision over its several officers, subject, however, to the control of the Board of Directors and the Chairman of the Board, and in general shall perform such duties and, subject to the other provisions of these Bylaws, have such powers incident to the office of Chief Executive Officer and perform such other duties as from time to time may be assigned to him by the Board of Directors or the Chairman of the Board." 4. Except as amended herein, the Bylaws shall remain unmodified and in full force and effect. The undersigned, hereby certifies that the above amendments were duly adopted by the unanimous written consent of the Board of Directors dated March 11, 1998. Signed this 11th day of March, 1998 /s/ Desiree DeStefano ----------------------------------- Name: Desiree DeStefano Title: Vice President EX-4.5 3 CONFIRMATION LETTER BEC GROUP, INC. 555 THEODORE FREUD AVENUE SUITE B-302 RYE, NEW YORK 10580 TEL: (914) 967-9400 FAX: (914) 967-9405/7 E-MAIL: BECGroup.com MARTIN E. FRANKLIN CHAIRMAN OF THE BOARD Mr. Robert Bolle and Bolle Family 1148, Avenue General Andrea Arbent 01100 France Dear Robert and fellow Bolle family members: This letter confirms our agreement that in the event that the Series A preferred stock outstanding in Bolle Inc. is not paid in full by its due date, that the preferred stock will start accruing interest from July, 2000 on the same terms as are outlined in the Series B preferred stock. Yours sincerely, /s/ Martin E. Franklin - ----------------------- Martin E. Franklin EX-4.6 4 WARRANT AGREEMENT EX 4.6 EXECUTION COPY WARRANT AGREEMENT This WARRANT AGREEMENT (the "Agreement") effective as of March 11, 1998 is made by and among Bolle Inc., a Delaware corporation having its executive offices at 555 Theodore Fremd Avenue, Suite B-302, Rye, New York, 10580 USA (the "Company") and Maurice Bolle, Robert Bolle, Franck Bolle, Patricia Bolle Passaquay, Brigitte Bolle and Christelle Roche, each having a business address at Rue Tacon, BP 139, Oyonnax, 01104 France (collectively, the "Warrantholders"). The Company hereby agrees to issue to the Warrantholders, Stock Purchase Warrants, as hereinafter described (the "Warrants"), to purchase an aggregate of 663,845 shares, subject to adjustment as provided for herein (the "Shares") of common stock, par value $.01 per share of the Company (the "Common Stock"). The number of Shares that each Warrantholder's Warrant shall obtain upon exercise in full of such Warrant is set forth in Schedule 1 to this Agreement. The Warrants shall be issued on the date of this Agreement (the "Closing Date"). In consideration of the foregoing and for the purpose of defining the terms and provisions of the Warrants and the respective rights and obligations thereunder, the Company and the Warrantholders, for value received, hereby agree as follows: SECTION 1. TRANSFERABILITY AND FORM OF WARRANTS. 1.1. Registration. The Warrants shall be numbered and shall be registered on the books of the Company when issued. 1.2. Transfer. The Warrants shall be transferable only on the books of the Company maintained at its principal office in Rye, New York, USA or wherever its principal executive offices may then be located upon delivery thereof duly endorsed by the Warrantholder or by its duly authorized attorney or representative, or accompanied by proper evidence of succession, assignment or authority to transfer. Upon any registration of transfer, the Company shall execute and deliver a new Warrant to the person entitled thereto. Subject to the limitations set forth in Section 1.3 below, the Warrants may be sold, transferred or otherwise disposed of by the Warrantholders at any time during the period commencing at 9:00 a.m. New York City Time on July 10, 1999 (the "Exercisability Date") and ending at 5:00 p.m. New York City Time on July 10, 2001 (the "Termination Date"); provided, however, that the Warrants may be pledged at any time after the Closing Date, subject to compliance with all applicable laws. 1.3. Limitations on Transfer of the Warrants. The Warrants may not be sold, transferred, or otherwise disposed of by the Warrantholders in the absence of registration of the Warrant under the Securities Act of 1933, as amended (the "Securities Act"), and state securities laws, or an exemption therefrom. A Warrant shall be divided or combined, upon request to the Company, by the Warrantholder, into a certificate or certificates representing the right to purchase the same, aggregate number of Shares purchasable under the Warrant. Unless the context indicates otherwise, the term "Warrantholder" shall include any transferee or transferees of the Warrants pursuant to this subsection 1.3, and the term "Warrant" shall include any and all warrants outstanding pursuant to this Agreement, including those evidenced by a certificate or certificates issued upon division, exchange, substitution or transfer pursuant to this Agreement. 1.4. Form of Warrants. (a) The text of the Warrants and the form of election to purchase Shares shall be substantially as set forth in Exhibit A attached hereto. The price per Share and the number of Shares issuable upon exercise of the Warrant are subject to adjustment upon the occurrence of certain events, all as hereinafter provided. The Warrants shall be executed on behalf of the Company by its President or a Vice President. (b) A Warrant bearing the signature of an individual who was at any time the proper officer of the Company shall bind the Company, notwithstanding that such individual shall have ceased to hold such office prior to the delivery of such Warrant or did not hold such office on the date of this Agreement. (c) The Warrant shall be dated as of the date of signature thereof by the Company either upon initial issuance or upon division, exchange, substitution or transfer. 1.5. Legend on Warrants and Share Certificates. The Warrants and each certificate for Shares initially issued upon exercise of the Warrants, shall bear the following legend: "THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAW. SUCH SECURITIES MAY NOT BE SOLD, ASSIGNED, TRANSFERRED, EXCHANGED, MORTGAGED, PLEDGED OR OTHERWISE DISPOSED OF OR ENCUMBERED WITHOUT COMPLIANCE WITH THE SECURITIES ACT AND STATE SECURITIES LAWS." Any Warrant or certificate issued at anytime in exchange or substitution for any Warrant or certificate bearing such legend shall also bear the above legend unless, in the opinion of Willkie Farr & Gallagher or such other counsel as shall be reasonably approved by the Company, the securities represented thereby need no longer be subject to such restrictions. SECTION 2. EXCHANGE OF WARRANT CERTIFICATE. Any Warrant certificate may be exchanged without expense to the Warrantholder (other than for the payment of any taxes associated with such exchange) for another Warrant certificate or certificates entitling the Warrantholder to purchase a like aggregate number of Shares as the Warrant certificate or certificates surrendered then entitling such Warrantholder to purchase. Any Warrantholder desiring to exchange a Warrant certificate shall make such request in writing delivered to the Company, and shall surrender, properly endorsed, the certificate evidencing the Warrant to be so exchanged. Thereupon, the Company shall execute and deliver -2- to the person entitled thereto a new Warrant certificate as so requested. SECTION 3. TERM OF WARRANTS; EXERCISE OF WARRANTS. Subject to the terms of this Agreement, a Warrantholder shall have the right, at any time during the period commencing on the Exercisability Date and ending on the Termination Date, to purchase from the Company up to the number of Shares which the Warrantholder may at the time be entitled to purchase pursuant to this Agreement, upon surrender to the Company, at its principal office in Rye, New York, USA, of the certificate evidencing the Warrant to be exercised, together with the purchase form on the reverse thereof duly filled in and signed, and upon payment to the Company of the Warrant Price (as defined in and determined in accordance with the provisions of Sections 7 and 8 hereof), for the number of Shares with respect to which such Warrant is then exercised. Except as otherwise provided in this Agreement, payment of the aggregate Warrant Price shall be made in cash, by cashier's check or by wire transfer. Notwithstanding any other provision of this Agreement to the contrary, no Warrant shall be exercised, in whole or in part, for an amount of Shares that is less than 17,000 or the remaining Shares that such Warrantholder is then able to purchase upon exercise of the Warrant. Upon such surrender of the Warrant and payment of such Warrant Price as aforesaid, the Company shall issue and cause to be delivered with all reasonable dispatch (and, in any event, no later than 10 business days from the date of such surrender and payment) to or upon the written order of the Warrantholder and in such name or names as the Warrantholder may designate certificate or certificates for the number of full Shares so purchased upon the exercise of the Warrant, together with cash, as provided in Section 9 hereof with respect to any fractional Shares otherwise issuable upon such surrender and the cash, property and other securities to which the Warrantholder is entitled pursuant to the provisions of Section 8. Such certificate or certificates shall be deemed to have been issued and any person so designated to be named therein shall be deemed to have become a holder of such Shares as of the close of business on the date of the surrender of the Warrant and payment of the Warrant Price, as aforesaid, notwithstanding that the certificates representing such Shares shall not actually have been delivered or that the stock and warrant transfer books of the Company shall then be closed. A Warrant shall be exercisable, at the election of the Warrantholder, either in full or from time to time in part and, in the event that the certificate evidencing the Warrant is exercised with respect to less than all of the Shares specified therein at any time prior to the Termination Date, a new certificate evidencing the remaining Warrant shall be issued by the Company. Notwithstanding anything herein to the contrary, the Warrantholders may, at their option, at any time during the period commencing on the Exercisability Date and ending on the Termination Date, exchange the Warrants, in whole or in part (a "Warrant Exchange"), into the number of Shares determined in accordance with this paragraph, by surrendering the certificate evidencing the Warrant to be exchanged at the principal executive office of the Company or at the office of its stock transfer agent, accompanied by a notice stating such Warrantholder's intent to effect such exchange, the number of Shares to be exchanged and the date on which the Warrantholder requests that such Warrant Exchange occur (the "Notice of Exchange"). The Warrant Exchange shall take place on the date specified in the Notice of Exchange or, if later, the date the Notice of Exchange is received by the Company (the "Exchange Date"). Certificates for -3- the Shares issuable upon such Warrant Exchange and, if applicable, a new Warrant certificate of like tenor evidencing the balance of the Shares remaining subject to this Agreement, shall be issued as of the Exchange Date and delivered to the Warrantholder within 10 business days following the Exchange Date. In connection with any Warrant Exchange, this Agreement shall represent the right to subscribe for and acquire the number of Shares (rounded to the next highest integer) equal to (i) the number of Shares specified by the Warrantholder in its Notice of Exchange (the "Total Number") less (ii) the number of Shares equal to the quotient obtained by dividing (A) the product of the Total Number and the existing Warrant Price by (B) the Current Market Price (as defined in Section 8.1) of a share of Common Stock as at the Exchange Date. SECTION 4. PAYMENT OF TAXES. The Company shall pay all U.S. documentary stamp taxes, if any, attributable to the initial issuance of the Shares; provided, however, that the Company shall not be required to pay any tax or taxes which may be payable with respect to any secondary transfer of the Warrant or the Shares. SECTION 5. MUTILATED OR MISSING WARRANT. In case the certificate or certificates evidencing a Warrant shall be mutilated, lost, stolen or destroyed, the Company shall, at the request of the Warrantholder, issue and deliver in exchange and substitution for and upon cancellation of the mutilated certificate or certificates, or in lieu of and substitution for the certificate or certificates lost, stolen or destroyed, a new Warrant certificate or certificates of like tenor and representing an equivalent right or interest, but only upon receipt of evidence satisfactory to the Company of such mutilation, loss, theft or destruction of such Warrant and of a bond of indemnity, if requested, also satisfactory in form and amount at the applicant's cost. Applicants for such substitute Warrant certificate shall also comply with such other reasonable regulations and pay such other reasonable charges as the Company may prescribe. SECTION 6. RESERVATION OF SHARES OF CAPITAL STOCK. There has been reserved, and the Company shall at all times keep reserved so long as the Warrants remains outstanding, out of its authorized Common Stock, such number of shares of Common Stock as shall be subject to purchase under the Warrants. Every transfer agent for the Common Stock and other securities of the Company issuable upon the exercise of the Warrants shall be irrevocably authorized and directed at all times to reserve such number of authorized shares and other securities as shall be requisite for such purpose. The Company shall keep a copy of this Agreement on file with every transfer agent for the Common Stock and other securities of the Company issuable upon the exercise of the Warrants. The Company shall supply such transfer agent with duly executed stock and other certificates for such purpose and shall provide or otherwise make available any cash which may be payable as provided in Sections 8 and 9 hereof. -4- SECTION 7. WARRANT PRICE. The price per Share (the "Warrant Price") at which Shares shall be purchasable upon the exercise of the Warrants shall be $9.95 per Share, subject to adjustment pursuant to Section 8 hereof. SECTION 8. ADJUSTMENTS. 8.1. Definition of Current Market Price. For purposes of this Section 8, the term "Current Market Price" shall mean, on any date specified herein, (i) if the Common Stock is listed on any national securities exchange or the Nasdaq National Market, the average of the last reported sales price (or the average of the quoted closing bid and asked prices if there shall have been no sales) of the Common Stock on such exchange or the Nasdaq National Market (as the case may be) for a period of 20 trading days prior to such date, or (ii) if the Common Stock is not so listed, on the basis of the average of the mean of the last quoted bid and asked prices for the Common Stock for each day in the 20 trading day period prior to such date, as reported by Nasdaq, or its successor, or (iii) if the Common Stock is not so listed and if there are no such closing bid and asked prices, on the basis of the fair market value per share as reasonably determined in good faith by the Board of Directors of the Company, but not less than the book value thereof as of the most recent fiscal year of the Company. 8.2. Adjustment of Warrant Price and Number of Shares. The number and kind of securities purchasable upon the exercise of the Warrants and the Warrant Price shall be subject to adjustment from time to time upon the happening of certain events, as follows: (a) Adjustments. (i) In case the Company shall (A) pay a dividend in shares of Common Stock or make a distribution in shares of Common Stock, (B) subdivide its outstanding Common Stock, (C) combine its outstanding Common Stock into a smaller number of shares of Common Stock or (D) issue by reclassification of its Common Stock other securities of the Company, the number of Shares purchasable upon exercise of the Warrant immediately prior thereto shall be adjusted so that each Warrantholder shall be entitled to receive, upon exercise of its Warrant, the kind and number of Shares or other securities of the Company which it would have owned or would have been entitled to receive after the happening of any of the events described above had its Warrant been exercised immediately prior to the happening of such event or any record date with respect thereto. Any adjustment made pursuant to this paragraph (i) shall become effective immediately after the effective date of such event and such adjustment shall be retroactive to the record date, if any, for such event. (ii) Except in respect of transactions described in paragraph (i) above, in case the Company shall sell or issue Common Stock or rights, options, warrants or convertible securities (or rights, options or warrants to -5- purchase convertible securities) containing the right to subscribe for or purchase shares of Common Stock (collectively, "Rights"), and the sale or issuance price per share of Common Stock (or in the case of any Rights, the sum of the consideration paid or payable for any such Right entitling the holder thereof to acquire one share of Common Stock and such additional consideration paid or payable upon exercise or conversion of any such Right to acquire one share of Common Stock) is less than the Current Market Price as determined as of the date of such sale or issuance, then the number of Shares purchasable upon exercise of each Warrant shall be increased by dividing such number of Shares by a fraction of which the numerator shall be the number of shares of Common Stock outstanding at the close of business on the date fixed for such determination plus the number of shares which the aggregate of the offering price of the total number of shares so offered for subscription or purchase or subject to such Rights or (or the aggregate conversion price of the convertible securities so offered for subscription or purchase) would purchase at such Current Market Price and the denominator shall be the number of shares of Common Stock outstanding at the close of business on the date fixed for such determination plus the number of shares so offered for subscription or purchase or subject to such Rights or (or into which the convertible securities so offered for subscription or purchase are convertible), such increase to become effective immediately after the opening of business on the day following the date fixed for such determination. For the purposes of such adjustments, the Common Stock which the holders of any such Rights shall be entitled to subscribe for or purchase shall be deemed to be outstanding as of the date of determination of stockholders entitled to receive such Rights or the date of issuance of such Rights. If at the end of the period during which such Rights are exercisable not all such Rights shall have been exercised, the adjusted number of Shares shall be immediately readjusted to what it would have been based on the number of additional shares of Common Stock actually issued. In addition, for purposes of this subsection (ii), the number of shares of Common Stock outstanding shall not include shares of Common Stock held in the treasury of the Company. (iii) Except in respect of transactions described in paragraph (i) above, in case the Company shall declare, order, pay or make a dividend or other distribution (including, without limitation, any distribution of cash, other or additional stock or other securities or property or options), by way of dividend or spin-off, reclassification, recapitalization or similar corporate rearrangement or otherwise, but excluding dividends described in Section 8.2(b) hereof on the Common Stock, then in each case the number of Shares thereafter purchasable upon the exercise of each Warrant shall be determined by multiplying (A) the number of Shares theretofore purchasable upon exercise of the Warrant by (B) a fraction, of which the -6- numerator shall be the then Current Market Price on the record date for the determination of stockholders entitled to receive such dividend or other distribution, and of which the denominator shall be such Current Market Price on such date minus the amount of such dividend or distribution applicable to one share of Common Stock. The Board of Directors of the Company shall determine the amount of such dividend or distribution allocable to one share of Common Stock and such determination, if reasonable and based upon the Board of Directors' good faith business judgment, shall be binding upon the Warrantholders. Such adjustment shall be made whenever any such distribution is made and shall become effective on the date of distribution retroactive to the record date for the determination of stockholders entitled to receive such distribution. (iv) No adjustment in the number of Shares purchasable hereunder shall be required unless (A) such adjustment would require an increase or decrease of at least point seven-five percent (0.75%) in the number of Shares then purchasable upon the exercise of the Warrants, or (B) a notice of a Warrantholder's election to purchase has been received by the Company with respect to the exercise of the balance of the Shares purchasable pursuant to such Warrant (prior to such required adjustment); provided, however, that any adjustments which by reason of this paragraph (iv) are not required to be made immediately shall be carried forward and taken into account in any subsequent adjustment. In calculating any adjustment hereunder, the Warrant Price shall be calculated to the nearest .001 of a cent and the number of Shares purchasable hereunder shall be calculated to the nearest .001 of a share. (v) Whenever the number of Shares purchasable upon the exercise of the Warrant is adjusted as herein provided, the Warrant Price payable upon exercise of the Warrant shall also be adjusted by multiplying such Warrant Price immediately prior to such adjustment by a fraction, of which the numerator shall be the number of Shares purchasable upon the exercise of the Warrant immediately prior to such adjustment, and of which the denominator shall be the number of Shares so purchasable immediately after such adjustment. (vi) For the purpose of this section 8.2(a), the term "Common Stock" shall mean (A) the class of stock designated as the Common Stock of the Company at the date of this Agreement or (B) any other class of stock resulting from successive changes or reclassifications of such Common Stock consisting solely of changes in par value, or from no par value to par value. In the event that at any time, as a result of an adjustment made pursuant to this Section 8 the Warrantholders shall become entitled to purchase any securities of the Company other than Common Stock, the Company shall duly reserve such securities for issuance and thereafter the number of such other securities so purchasable -7- upon exercise of a Warrant and the Warrant Price of such securities shall be subject to the adjustment from time to time in a manner and on terms as nearly equivalent as practicable to the provisions with respect to the Shares contained in this Section 8. If the consideration provided for in any Right or the additional consideration, if any, payable upon the conversion or exchange of any Right shall be reduced, or the rate at which any Right is exercisable or convertible into or exchangeable for shares of Common Stock shall be increased, at any time under or by reason of provisions with respect thereto designed to protect against dilution, then, effective concurrently with each such change, the Warrant Price then in effect shall first be adjusted to eliminate the effects (if any) of the issuance (or deemed issuance) of such Right on the Warrant Price and then readjusted as if such Right had been issued on the date of such change with the terms in effect after such change, but only if as a result of such adjustment the Warrant Price then in effect hereunder is thereby reduced. (b) No Adjustment for Dividends. Except as provided in Section 8.2(a), no adjustment with respect to any ordinary dividends (made out of current earnings) on shares of Common Stock shall be made during the term of the Warrants or upon the exercise of a Warrant. (c) Preservation of Purchase Rights Upon Reclassification, Consolidation, etc. In case of any consolidation or merger of the Company with or into another entity as a result of which the holders of Common Stock become holders of other shares or securities of the Company or of another entity or person, or such holders receive cash or other assets, or in case of any sale or conveyance to another person of the property, assets or business of the Company as an entirety or substantially as an entirety, the Company or such successor or purchasing entity or person, as the case may be, shall execute with the Warrantholders an agreement that the Warrantholders shall have the right thereafter upon payment of the Warrant Price in effect immediately prior to such action to purchase upon exercise of their respective Warrants the kind and amount of Shares and other securities and property which it would have owned or have been entitled to receive after the happening of such consolidation, merger, sale or conveyance had its Warrant been exercised immediately prior to such action and (ii) that the Warrants shall continue in full force and effect notwithstanding the consummation of such transaction and that such person or entity shall assume the obligations of the Company hereunder. The agreements referred to in this Section 8.2(c) shall provide for adjustments which shall be as nearly equivalent as may be practicable to the adjustments provided for in the other provisions in this Section 8. The provisions of this Section 8.2(c) shall similarly apply to successive consolidations, mergers, sales or conveyances. 8.3. Statement on Warrants. Irrespective of any adjustment in the Warrant Price or the number or kind of Shares purchasable upon the exercise of a Warrant, a Warrant certificate or certificates therefore or thereafter issued may continue to express the same price and number and kind of shares as are stated in a Warrant initially issuable pursuant to this Agreement. -8- 8.4. Notice of Adjustment. Whenever the Warrant Price shall be adjusted pursuant to this Section 8, the Company shall forthwith file at each office designated for the exercise of the Warrants, a statement, signed by the Chairman of the Board, the President, any Vice President or Treasurer of the Company, showing in reasonable detail the facts requiring such adjustment and the Warrant Price that will be effective after such adjustment. Each such statement shall be made available at all reasonable times for inspection by any Warrantholder. The Company shall also cause a notice setting forth any such adjustments to be sent by mail, first class, postage prepaid, to each Warrantholder. 8.5. Notice of Certain Events. If at any time after the Closing Date: (a) the Company shall pay any dividend upon its Common Stock or make any distribution to the holders of its Common Stock; (b) the Company shall offer for subscription pro rata to the holders of its Common Stock any additional shares of stock of any class or other Rights; (c) the Company shall offer any other Rights to the holders of its Common Stock; (d) there shall be any capital reorganization, or reclassification of the capital stock of the Company or any of its subsidiaries, or consolidation or merger of the Company with or into any other corporation or entity, or consolidation or merger of any other corporation or entity with or into the Company, or the sale, lease, conveyance, exchange or transfer of all or substantially all of the property or assets of the Company to any other corporation or entity; or (e) there shall be a voluntary or involuntary dissolution, liquidation or winding up of the Company; then, in any one or more of said cases, the Company shall give notice to the Warrantholders of the date on which the books of the Company shall close or a record shall be taken for such dividend, distribution, subscription or other rights, or (y) the date (or, if not then known, a reasonable approximation thereof by the Company) on which such reorganization, reclassification, consolidation, merger, sale, lease, conveyance, exchange, transfer, dissolution, liquidation or winding up shall take place, as the case may be. Such notice shall also specify (or, if not then known, reasonably approximate) the date as of which the holders of Common Stock of record shall be paid or shall receive such dividend, distribution, subscription or other rights, or shall be entitled to exchange their Common Stock for securities or other property deliverable upon such reorganization, reclassification, consolidation, merger, sale, lease, conveyance, exchange, transfer, dissolution, liquidation or winding up, as the case may be. Such notice shall be given at the time notice thereof (if any) is given to the holders of Common Stock and, in any event, not later than 20 days prior to the date specified in clause (x) or (y) of this subparagraph, as the case may be. Such notice shall also state that the action in question or the record date is subject to the effectiveness of a registration statement under the Securities Act of 1933, as amended, or to a favorable vote of stockholders, if either is required. -9- 8.6. Reservation. The Company shall at all times reserve and keep available out of its authorized but unissued Common Stock the full number of shares of Common Stock deliverable upon the exercise of the Warrants and shall take all such action and obtain all such permits or orders as may be necessary to enable the Company lawfully to issue such Common Stock upon the exercise of the Warrants. SECTION 9. FRACTIONAL INTERESTS. The Company shall not be required to issue fractional Shares on the exercise of the Warrants. If any fraction of a Share would, except for the provisions of this Section 9, be issuable on the exercise of the Warrants (or specified portions thereof), the Company shall pay an amount in cash equal to the Current Market Price as determined pursuant to Section 8.1 above of such fractional Share. SECTION 10. NO RIGHTS AS STOCKHOLDERS. Nothing contained in this Agreement or in the Warrants shall be construed as conferring upon the Warrantholders or their transferees any rights as a stockholder of the Company. SECTION 11. NOTICES. All notices and other communications under this Agreement shall be in writing and shall be delivered by hand or mailed by overnight courier or by registered mail or certified mail, postage prepaid: (a) if to the Warrantholders, to each Warrantholder at the address specified on Schedule 1 to this Agreement with respect to that Warrantholder or at such other address as a Warrantholder may have furnished the Company in writing, or (b) if to the Company, at 555 Theodore Fremd Avenue, Suite B-302, Rye, NY 10580, marked for the attention of Martin E. Franklin, Chairman, or at such other address as it may have furnished in writing to the Warrantholders. Any notice so addressed shall be deemed to be given: if delivered by hand, on the date of such delivery; if mailed by courier, on the first business day following the date of such mailing; and if mailed by registered or certified mail, on the third business day after the date of such mailing. SECTION 12. SUCCESSORS. All the covenants and provisions of this Agreement by or for the benefit of the Company or the Warrantholders shall bind and inure to the benefit of their respective successors and assigns hereunder. -10- SECTION 13. MERGER OR CONSOLIDATION OF THE COMPANY. The Company shall not merge or consolidate with or into any other corporation or sell all or substantially all of its property to another corporation, unless the provisions of subsection 8.2(c) are complied with. SECTION 14. REPRESENTATIONS. 14.1. Corporate Organization. The Company is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware and has the corporate power to carry on its business as it is now being conducted or currently proposed to be conducted. The Company is duly qualified as a foreign corporation to do business, and is in good standing, in each jurisdiction where the character of its properties owned or held under lease or the nature of its activities makes such qualification necessary, except where the failure to be so qualified will not have a material adverse effect on the business, properties, assets, condition (financial or otherwise), liabilities or operations of the Company and its subsidiaries taken as a whole. 14.2. Capitalization of the Company; Title to the Shares. (a) The authorized capital stock of the Company consists of shares of Common Stock, par value $.01 per share and shares of preferred stock, $.01 par value per share. As of , 1997, (i) shares of Company Common Stock, (ii) 64,120 shares of Series A preferred stock and (iii) shares of Series B preferred stock were issued and outstanding. As of the date hereof, there are no bonds, debentures, notes or other indebtedness having the right to vote on any matters on which the Company's stockholders may vote issued or outstanding. As of the date hereof, except for the Warrants contemplated by this Agreement, there are no options, warrants, calls or other rights, agreements or commitments presently outstanding obligating the Company to issue, deliver or sell shares of its capital stock or debt securities, or obligating the Company to grant, extend or enter into any such option, warrant, call or other such right, agreement or commitment. (b) The Shares will be duly authorized and validly issued, and will be fully paid and nonassessable and no personal liability will attach to the ownership thereof. Upon exercise of a Warrant, the Company will deliver valid and marketable title to the Shares issuable as a result of such exercise, free and clear of any liens, claims, charges, security interests, legal or equitable encumbrances, limitations or restrictions. Except for this Agreement, there are no contracts, agreements, understandings, arrangements or restrictions related to the ownership or voting of the Warrants or the Shares. SECTION 15. REGISTRATION RIGHTS 15.1. Registration on Demand. (a) During the two-year period commencing on the date that a Warrant is first exercised by any Warrantholder, upon prior written notice (a "Demand Notice") to the -11- Company from holders representing at least a majority of the then outstanding Registrable Securities (as defined in subparagraph (c) below), determined as if the Warrants had been fully exercised, to the effect that the holders of Registrable Securities desire to register any of their Registrable Securities under the Securities Act, the Company shall within 10 business days after receiving any Demand Notice give notice (the "Company's Notice") to the other holders of Registrable Securities stating the identity of the holders requesting registration and the number of Registrable Securities proposed to be sold thereby, and take appropriate action as promptly as practicable after its receipt of the Demand Notice to file with the Securities and Exchange Commission (the "Commission") a registration statement on the appropriate form covering all Registrable Securities specified in the Demand Notice and by such other holders (by notice given to the Company within 15 days after their receipt of the Company's Notice), (ii) use commercially reasonable efforts to cause such registration statement to become effective under the Securities Act and (iii) use commercially reasonable efforts to qualify the Registrable Securities subject to the Demand Notice for sale in such states as reasonably requested by the holders of a majority of Registrable Securities to be included in such registration, if necessary; provided such effort shall not require the Company to qualify as a foreign corporation or subject itself to taxation in any jurisdiction where it is not already so qualified or subject. The Company shall be obligated to effect only one registration pursuant to this Section 15.1. (b) The holders of the Registrable Securities to be included in any registration pursuant to this Section 15.1 shall be obligated to pay all registration expenses (as that term is defined in Section 15.5 hereof) of such registration whether or not such registration is ever deemed effective. The Company agrees to use its best efforts to effect any registration pursuant to this Section 15.1 in a cost effective manner, consistent with prudent business practices for such registrations. (c) For purposes of this Agreement, "Registrable Securities" shall mean, collectively (i) the Shares and (ii) any securities issued or issuable with respect to the Shares by way of stock dividend, stock split, in connection with a combination of shares, recapitalization, merger, consolidation or other reorganization or otherwise. Registrable Securities will cease to be such when (i) a registration statement covering such Registrable Securities has been declared effective, (ii) they shall have been otherwise transferred, and the Company shall have delivered new certificates or other evidences of ownership for them not subject to any stop transfer order or other restriction on transfer and not bearing a legend restricting transfer in the absence of an effective registration or an exemption from the registration requirements of the Securities Act and subsequent disposition of them shall not require registration or qualification of them under the Securities Act or any similar state law then in force, or (iii) they shall have ceased to be outstanding. (d) Any registration initiated by the holders of Registrable Securities as a demand registration pursuant to this Section 15.1 shall count as a demand registration for purposes of this Section 15.1 when such registration shall have been filed with the Commission and becomes effective and in the event such registration statement is withdrawn at the request of the initialing holder(s) of Registrable Securities prior to its becoming effective, unless such holder pays all expenses (as defined in Section 15.5). -12- (e) Notwithstanding the provisions of Section 15.1(a) of this Agreement, the Company shall not be required to register Registrable Securities which, together with any other securities to be included in such registration, are equivalent to less than 17,000 shares of Common Stock, subject to equitable adjustment in case the Company shall (A) pay a dividend in shares of Common Stock or make a distribution in shares of Common Stock, (B) subdivide its outstanding Common Stock, (C) combine its outstanding Common Stock into a smaller number of shares of Common Stock or (D) issue by reclassification of its Common Stock other securities of the Company. (f) The Company shall use its best efforts to maintain the effectiveness of a registration statement filed pursuant to this Section 15.1 for a period of 180 days from its effective date. (g) The managing underwriter, if any, of any offering of Registrable Securities contemplated by this Section 15.1 shall be chosen by the holders of a majority of Registrable Securities included therein, which managing underwriter shall be reasonably acceptable to the Company. 15.2. Incidental Registration. (a) If at any time or times after the Exercisability Date, the Company intends to file a registration statement on Form S-1, S-2 or S-3 (or other appropriate form) for the registration of an offering of equity securities with the Commission, the Company shall notify each of the holders of record of Registrable Securities at least 30 days prior to each such filing of the Company's intention to file such a registration statement, such notice shall state the number of shares of equity securities proposed to be registered thereby. If any holder of Registrable Securities notifies the Company within 30 days after receipt of such notice from the Company of its desire to have included in such registration statement any of its Registrable Securities, then the Company shall cause the Company to include such shares in such registration statement. The Company shall pay all the "expenses" (as defined in Section 15.5 hereof) of such registration, excluding underwriting discounts and commissions. (b) The Company may in its discretion withdraw any registration statement filed pursuant to this Section 15.2 subsequent to its filing without liability to the holders of Registrable Securities. 15.3. Allocations. In the event that any managing underwriter for any offering described in Section 15.2 above notifies the Company that, in good faith, it is able to proceed with the proposed offering only with respect to a smaller number (the "Maximum Number") of securities than the total number of Registrable Securities proposed to be offered by holders thereof, plus the total number of securities proposed to be offered by the Company and all others entitled to registration rights under such registration statement, then the aggregate number of Registrable Securities that may be included in the proposed offering by the holders thereof and the total number of securities that may be included in the proposed offering by all other holders (other than the Company) including shares in such registration statement shall equal the Maximum -13- Number less the number of shares proposed to be offered by the Company, such difference to be allocated first in favor of the holders of Registrable Securities and thereafter pro rata in accordance with the number of shares proposed to be offered by each such party. 15.4. Indemnity. In connection with a registration statement filed with the Commission pursuant to this Section 15, the Company shall provide each holder of Registrable Securities included in such registration statement, and each officer and director of any thereof, and each person who controls such holder within the meaning of Section 15 of the Securities Act, and Section 20 of the Securities Exchange Act of 1934 (the "Exchange Act"), with indemnification against any losses, claims, damages or liabilities, reasonable attorneys fees, costs or expenses and costs and expenses of investigating and defending any such claims, (collectively "Damages"), joint or several, to which any of them may become subject under the federal securities laws, or otherwise, in form and substance as is customarily given to underwriters in an underwritten offering of securities. Each holder including Registrable Securities in any such registration statement agrees that it shall indemnify the Company, and each officer and director thereof, and each person who controls the Company within the meaning of Section 15 of the Securities Act and Section 20 of the Exchange Act, against any Damages, in form and substance as is customarily given by underwriters to a corporation in an underwritten public offering of securities; provided, however, that (i) any such holder shall be liable under this Section 15.4 only to the extent that any such Damages arises out of or are based upon an untrue statement or alleged untrue statement or omission or alleged omission made in such registration statement in reliance upon and in conformity with written information furnished by such holder, specifically for use in the preparation thereof; and (ii) the maximum amount which may be recovered from such holder shall be limited to the amount of the proceeds received by such holder from the sale of his/her Registrable Securities pursuant to such registration statement. 15.5. Expenses. The Company shall bear all expenses, excluding fees and expenses of counsel for any selling stockholders and excluding underwriting discounts and commissions, in connection with a registration of Common Stock pursuant to Section 15.2. As used in this Section 15, "expenses" of a registration shall mean all expenses required to be disclosed in Part II of the Form S-1 registration statement, or in a comparable section of any similar form permitting an underwritten public offering, as well as expenses of underwriters customarily reimbursed by issuers or selling stockholders, excluding transfer taxes. 15.6. Rule 144. The Company agrees that it will file in a timely manner all reports required to be filed by it pursuant to the Securities Act and the Exchange Act and will take further action as and when any holder of Registrable Securities may reasonably request in order that such holder may effect sales of Registrable Securities pursuant to Rule 144 under the Securities Act. SECTION 16. APPLICABLE LAW. THIS AGREEMENT SHALL BE DEEMED TO BE A CONTRACT MADE UNDER THE LAWS OF THE STATE OF NEW YORK AND FOR ALL PURPOSES SHALL BE CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF SAID STATE. -14- SECTION 17. BENEFITS OF THIS AGREEMENT. Except as otherwise provided herein, nothing in this Agreement shall be construed to give to any person or corporation other than the Company and the Warrantholders any legal or equitable right, remedy or claim under this Agreement, and this Agreement shall be for the sole and exclusive benefit of the Company and the Warrantholders. [Signature page follows] -15- IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed, all as of the day and year first above written. BOLLE INC. /s/ Martin E. Franklin ------------------------------ By: Martin E. Franklin Title: Chairman of the Board /s/ Maurice Bolle ------------------------------ Maurice Bolle /s/ Robert Bolle ------------------------------ Robert Bolle /s/ Franck Bolle ------------------------------ Franck Bolle /s/ Patricia Bolle Passaquay ------------------------------ Patricia Bolle Passaquay /s/ Brigitte Bolle ------------------------------ Brigitte Bolle /s/ Christelle Roche ------------------------------ Christelle Roche -16- SCHEDULE 1 Name and Address of Warrantholder No. of Shares - - ---------------- ------------- Mr. Maurice Bolle 13 rue Balland 01100 Oyonnax, France........................................... 66,386 Mr. Robert Bolle 58 route de Marchon 01100 Oyonnax, France........................................... 66,385 Mr. Franck Bolle 4 boulevard Dupuy 01100 Oyonnax, France........................................... 132,771 Mrs. Patricia Bolle Passaquay 6 rue General De Gaulle 01100 Arbant, France............................................ 132,771 Ms. Brigitte Bolle 25 bis boulevard de la Saussaye 92200 Neuilly-sur-Seine, France................................. 132,771 Mrs. Christelle Roche 2 rue Macrete 01100 Arbent, France............................................ 132,771 -17- EXHIBIT A WARRANT No._____ "THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAW. SUCH SECURITIES MAY NOT BE SOLD, ASSIGNED, TRANSFERRED, EXCHANGED, MORTGAGED, PLEDGED OR OTHERWISE DISPOSED OF OR ENCUMBERED WITHOUT COMPLIANCE WITH THE SECURITIES ACT AND STATE SECURITIES LAWS." WARRANT TO PURCHASE UP TO ____________ SHARES OF COMMON STOCK OF BOLLE INC. PAR VALUE $.01 PER SHARE Exercisable commencing July 10, 1999; Void after July 10, 2001. THIS CERTIFIES that, for value received, ("Holder"), or registered assigns, is entitled, subject to the terms and conditions set forth in this Warrant, to purchase from Bolle Inc., a Delaware corporation (the "Company"), up to ____________ shares of Common Stock, $.01 par value, of the Company, at any time commencing 9:00 a.m. New York City time on July ___, 1999 and continuing up to 5 p.m. New York City time on July ___, 2001 at a price per Share of $ , per share, such number of Shares and price per Share being subject to adjustment from time to time as set forth in the Warrant Agreement referred to below. This Warrant is issued pursuant to a Warrant Agreement by and among the Company, the Holder and certain other holders of Warrants, dated as of December ___, 1997 (the "Warrant Agreement"), and is subject to all the terms thereof, including the limitations on transferability set forth therein. This Warrant may be exercised by the holder hereof, in whole or in part (but not, in certain circumstances, as to a fractional share), by the presentation and surrender of this Warrant with the form of Election to Purchase duly executed, at the principal office of the Company (or at such other address as the Company may designate by notice in writing to the holder hereof at the address of such holder appearing on the books of the Company), and upon payment to the Company of the purchase price in cash, by cashier's check or by wire transfer or by any other means permitted under the terms of the Warrant Agreement. Notwithstanding the foregoing, this Warrant may not be exercised for an amount of Shares that is less than 17,000 or the remaining Shares that such Warrantholder is then able to purchase upon exercise of the Warrant. The Shares so purchased shall be deemed to be issued to the holder hereof as the record owner of such Shares as of the close of business on the date on which this Warrant shall have been surrendered A-1 and payment made for such Shares. Certificates for the Shares so purchased shall be delivered or mailed to the holder promptly after this Warrant shall have been so exercised, and, unless this Warrant has expired or has been exercised in full, a new Warrant identical in form but representing the number of Shares with respect to which this Warrant shall not have been exercised shall also be issued to the holder hereof. Nothing contained herein shall be construed to confer upon the holder of this Warrant, as such, any of the rights of a stockholder of the Company. Dated: ______________ BOLLE INC. By: ------------------------------- [Title] A-2 BOLLE INC. ELECTION TO PURCHASE Bolle Inc.: The undersigned hereby irrevocably elects to exercise the right of purchase represented by the within Warrant for, and to purchase thereunder, Shares provided for therein, and requests that certificates for the Shares be issued in the name of: - - ------------------------------------------------------------------------- (Please Print Name, Address and Social Security Number) and, if said number of Shares shall not be the total number of Shares purchasable hereunder, that a new Warrant certificate for the balance of the Shares purchasable under the within Warrant certificate be registered in the name of the undersigned Warrantholder or his/her Assignee as below indicated and delivered to the address stated below: Dated: ____________, 19__ Name of Warrantholder or Assignee (Please Print): ------------------------------------- Address: ----------------------------------------------------- Signature: ---------------------------------- Signature Guaranteed: Note: The above signature must correspond with the name as written upon the face of this Warrant certificate in every particular, without alteration or enlargement or any change whatever, unless this Warrant has been assigned. A-3 (To be signed only upon assignment of Warrant) FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto - - -------------------------------------------------------------------------- (Name and Address of Assignee must be Printed or Typewritten) the within Warrant, hereby irrevocably constituting and appointing Attorney to transfer said Warrant on the books of the Company, with full power of substitution in the premises. Dated:______________________, 19__ ------------------------------------------- Signature of Registered Holder Signature Guaranteed: Note: The signature of this assignment must correspond with the name as it appears upon the face of the within Warrant certificate in every particular, without alteration or enlargement or any change whatever. EX-4.7 5 1998 STOCK INCENTIVE PLAN EX 4.7 BOLLE INC. 1998 STOCK INCENTIVE PLAN PURPOSE The purpose of the Plan is to provide a means through which the Company and its Subsidiaries and Affiliates may attract able persons to enter and remain in the employ of the Company and its Subsidiaries and Affiliates and to provide a means whereby employees, directors and consultants of the Company and its Subsidiaries and Affiliates can acquire and maintain Common Stock ownership, or be paid incentive compensation measured by reference to the value of Common Stock, thereby strengthening their commitment to the welfare of the Company and its Subsidiaries and Affiliates and promoting an identity of interest between stockholders and these employees. So that the appropriate incentive can be provided, the Plan provides for granting Incentive Stock Options, Nonqualified Stock Options, Stock Appreciation Rights, Restricted Stock Awards, Phantom Stock Unit Awards, Performance Share Unit Awards and Stock Bonus Awards, or any combination of the foregoing. The Plan also provides for the automatic formula grant of Restricted Stock to Non-Employee Directors. DEFINITIONS The following definitions shall be applicable throughout the Plan. "Affiliate" means any affiliate of the Company within the meaning of 17 CFR ss. 230.405. "Award" means, individually or collectively, any Incentive Stock Option, Nonqualified Stock Option, Stock Appreciation Right, Restricted Stock Award, Phantom Stock Unit Award, Performance Share Unit Award, Stock Bonus Award or Director Stock Award. "Award Period" means a period of time within which performance is measured for the purpose of determining whether an Award of Performance Share Units has been earned. "BEC" means BEC Group, Inc., a Delaware corporation and former Parent of the Company. "Board" means the Board of Directors of the Company. "Cause" means the Company, a Subsidiary or Affiliate having cause to terminate a Participant's employment or service under any existing employment, consulting or any other agreement between the Participant and the Company or a Subsidiary or Affiliate or, in the absence of such an employment, consulting or other agreement, upon (i) the determination by the Committee that the Participant has ceased to perform his duties to the Company, a Subsidiary or Affiliate (other than as a result of his incapacity due to physical or mental illness or injury), which failure amounts to an intentional and extended neglect of his duties to such party, (ii) the Committee's determination that the Participant has engaged or is about to engage in conduct materially injurious to the Company, a Subsidiary or Affiliate or (iii) the Participant having been convicted of a felony. "Change in Control" shall, unless the Board otherwise directs by resolution adopted prior thereto or, in the case of a particular award, the applicable Award agreement states otherwise, be deemed to occur if (i) any "person" (as that term is used in Sections 13 and 14(d)(2) of the Exchange Act) is or becomes the beneficial owner (as that term is used in Section 13(d) of the Exchange Act), directly or indirectly, of 50% or more of either the outstanding shares of Common Stock or the combined voting power of the Company's then outstanding voting securities entitled to vote generally, (ii) during any period of two consecutive years beginning on the date of the consummation of the Spinoff, individuals who constitute the Board at the beginning of such period cease for any reason to constitute at least a majority thereof, unless the election or the nomination for election by the Company's shareholders of each new director was approved by a vote of at least three-quarters of the directors then still in office who were directors, or approved by directors, at the beginning of the Spinoff period or (iii) the Company undergoes a liquidation or dissolution or a sale of all or substantially all of the -2- assets of the Company. Neither the Spinoff nor any merger, consolidation or corporate reorganization in which the owners of the combined voting power of the Company's then outstanding voting securities entitled to vote generally prior to said combination, own 50% or more of the resulting entity's outstanding voting securities shall, by itself, be considered a Change in Control. "Code" means the Internal Revenue Code of 1986, as amended. Reference in the Plan to any section of the Code shall be deemed to include any amendments or successor provisions to such section and any regulations under such section. "Committee" means the full Board, the Compensation Committee of the Board or such other committee of at least two people as the Board may appoint to administer the Plan. "Common Stock" means the common stock par value $0.01 per share, of the Company. "Company" means Bolle Inc. "Date of Grant" means the date on which the granting of an Award is authorized or such other date as may be specified in such authorization. "Director Stock Option" means the Award of a Nonqualified Stock Option to Non-Employee Directors pursuant to Section 12. "Director Stock Option Agreement" means the agreement entered into with respect to a Director Stock Option pursuant to Section 12. "Disability" means disability as defined in the long-term disability plan of the Company, a Subsidiary or Affiliate, as may be applicable to the Participant in question, or, in the absence of such a plan, the complete and permanent inability by reason of illness or accident to perform the duties of the occupation at which a Participant was employed or served when such disability commenced or, if the Participant was retired when such disability commenced, the inability to engage in any substantial gainful activity, in either case as determined by the Committee based upon medical evidence acceptable to it. "Disinterested Person" means a person who is (i) a "nonemployee director" within the meaning of Rule 16b-3 under the Exchange Act, or any successor rule or regulation and (ii) an "outside director" within the meaning of Section 162(m) of the Code; provided, however, that clause (ii) shall apply only with respect to grants of Awards with respect to which the Company's tax deduction could be limited by Section 162(m) of the Code if such clause did not apply. -3- "Eligible Person" means any (i) person regularly employed by the Company, a Subsidiary or Affiliate who satisfies all of the requirements of Section 6; provided, however, that no such employee covered by a collective bargaining agreement shall be an Eligible Person unless and to the extent that such eligibility is set forth in such collective bargaining agreement or in an agreement or instrument relating thereto; (ii) director of the Company, a Subsidiary or Affiliate; or (iii) consultant to the Company, a Subsidiary or Affiliate. "Exchange Act" means the Securities Exchange Act of 1934. "Fair Market Value" on a given date means (i) if the Stock is listed on a national securities exchange, the mean between the highest and lowest sale prices reported as having occurred on the primary exchange with which the Stock is listed and traded on the date prior to such date, or, if there is no such sale on that date, then on the last preceding date on which such a sale was reported; (ii) if the Stock is not listed on any national securities exchange but is quoted in the National Market System of the National Association of Securities Dealers Automated Quotation System on a last sale basis, the average between the high bid price and low ask price reported on the date prior to such date, or, if there is no such sale on that date, then on the last preceding date on which a sale was reported; (iii) if the Stock is not listed on a national securities exchange nor quoted in the National Market System of the National Association of Securities Dealers Automated Quotation System on a last sale basis, the amount determined by the Committee to be the fair market value based upon a good faith attempt to value the Stock accurately and computed in accordance with applicable regulations of the Internal Revenue Service; or (iv) notwithstanding clauses (i) - (iii) above, with respect to Awards granted as of the consummation of the Spinoff, the initial offering price of the Stock to the public in connection with the Spinoff. "Holder" means a Participant who has been granted an Award. "Incentive Stock Option" means an Option granted by the Committee to a Participant under the Plan which is designated by the Committee as an Incentive Stock Option pursuant to Section 422 of the Code. "Non-Employee Director" means a director of the Company who is not also an employee of the Company. "Nonqualified Stock Option" means an Option granted by the Committee to a Participant under the Plan which is not designated by the Committee as an Incentive Stock Option. "Normal Termination" means termination of employment or service with the Company and all Subsidiaries and Affiliates: -4- Upon retirement pursuant to the retirement plan of the Company, a Subsidiary or Affiliate, as may be applicable at the time to the Participant in question; On account of Disability; With the written approval of the Committee; or By the Company, a Subsidiary or Affiliate without Cause. "Option" means an Award granted under Section 7 of the Plan. "Option Period" means the period described in Section 7(c). "Option Price" means the exercise price set for an Option described in Section 7(a). (ab) "Participant" means an Eligible Person who has been selected by the Committee to participate in the Plan and to receive an Award pursuant to Section 6 and a Non-Employee Director who has received an automatic grant of Options pursuant to Section 12. (ac) "Performance Goals" means the performance objectives of the Company, a Subsidiary or Affiliate during an Award Period or Restricted Period established for the purpose of determining whether, and to what extent, Awards will be earned for an Award Period or Restricted Period. (ad) "Performance Share Unit" means a hypothetical investment equivalent equal to one share of Stock granted in connection with an Award made under Section 9 of the Plan. (ae) "Phantom Stock Unit" means a hypothetical investment equivalent equal to one share of Stock granted in connection with an Award made under Section 10 of the Plan. (af) "Plan" means the Company's 1998 Stock Incentive Plan. (ag) "Restricted Period" means, with respect to any share of Restricted Stock or any Phantom Stock Unit, the period of time determined by the Committee during which such Award is subject to the restrictions set forth in Section 10. (ah) "Restricted Stock" means shares of Stock issued or transferred to a Participant subject to forfeiture and the other restrictions set forth in Section 10. (ai) "Restricted Stock Award" means an Award of Restricted Stock granted under Section 10 of the Plan. -5- (aj) "Securities Act" means the Securities Act of 1933, as amended. (ak) "Spinoff" means the pro rata spinoff to the stockholders of BEC of all of the common stock of the Company held by BEC in connection with a Registration Statement on Form S-1. (al) "Stock" means the Common Stock or such other authorized shares of stock of the Company as the Committee may from time to time authorize for use under the Plan. (am) "Stock Appreciation Right" or "SAR" means an Award granted under Section 8 of the Plan. (an) "Stock Bonus" means an Award granted under Section 11 of the Plan. (ao) "Stock Option Agreement" means the agreement between the Company and a Participant who has been granted an Option pursuant to Section 7 which defines the rights and obligations of the parties as required in Section 7(d). (ap) "Subsidiary" means any subsidiary of the Company as defined in Section 424(f) of the Code. (aq) "Vested Unit" shall have the meaning ascribed thereto in Section 10(e). EFFECTIVE DATE, DURATION The Plan is effective as of January , 1998, the date of adoption of the Plan by the Board. The expiration date of the Plan, after which no Awards may be granted hereunder, shall be January , 2008; provided, however, that the administration of the Plan shall continue in effect until all matters relating to the payment of Awards previously granted have been settled. ADMINISTRATION The Committee shall administer the Plan. Unless otherwise determined by the Board, each member of the Committee shall, at the time he takes any action with respect to an Award under the Plan, be a Disinterested Person. The majority of the members of the Committee shall constitute a quorum. The acts of a majority of the members present at any meeting at which a quorum is present or acts approved in writing by a majority of the Committee shall be deemed the acts of the Committee. Subject to the provisions of the Plan, the Committee shall have exclusive power to: -6- Select the Eligible Persons to participate in the Plan; Determine the nature and extent of the Awards, other than Director Stock Options, to be made to each Participant; Determine the time or times when Awards, other than Director Stock Options, will be made; Determine the duration of each Award Period and Restricted Period, except with respect to a Director Stock Option; Determine the conditions to which the payment of Awards, other than Director Stock Options, may be subject; Establish the Performance Goals for each Award Period; Prescribe the form of Stock Option Agreement or other form or forms evidencing Awards; and Cause records to be established in which there shall be entered, from time to time as Awards are made to Participants, the date of each Award, the number of Incentive Stock Options, Nonqualified Stock Options, SARs, Phantom Stock Units, Performance Share Units, shares of Restricted Stock and Stock Bonuses awarded to each Participant, the expiration date, the Award Period and the duration of any applicable Restricted Period. The Committee shall have the authority, subject to the provisions of the Plan, to establish, adopt, or revise such rules and regulations and to make all such determinations relating to the Plan as it may deem necessary or advisable for the administration of the Plan. The Committee's interpretation of the Plan or any documents evidencing Awards granted pursuant thereto and all decisions and determinations by the Committee with respect to the Plan shall be final, binding, and conclusive on all parties unless otherwise determined by the Board. GRANT OF AWARDS; SHARES SUBJECT TO THE PLAN The Committee may, from time to time, grant Awards of Options, Stock Appreciation Rights, Restricted Stock, Phantom Stock Units, Performance Share Units and/or Stock Bonuses to one or more Eligible Persons; provided, however, that: Subject to Section 14, the aggregate number of shares of Stock available for issuance with respect to all Awards is 2,000,000 shares; Such shares shall be deemed to have been used in payment of Awards whether they are actually delivered or the Fair Market Value equivalent of such shares is paid in cash. In the event any Option, SAR not attached to an Option, Restricted Stock, Phantom Stock Unit or Performance Share Unit shall be -7- surrendered, terminate, expire, or be forfeited, the number of shares of Stock no longer subject thereto shall thereupon be released and shall thereafter be available for new Awards under the Plan; Stock delivered by the Company in settlement of Awards under the Plan may be authorized and unissued Stock or Stock held in the treasury of the Company or may be purchased on the open market or by private purchase; and No person may be granted Options or SARs under the Plan with respect to more than 2,000,000 shares of Stock. ELIGIBILITY Participation shall be limited to Eligible Persons who have received written notification from the Committee, or from a person designated by the Committee, that they have been selected to participate in the Plan and Non-Employee Directors who receive Director Stock Options. DISCRETIONARY GRANT OF STOCK OPTIONS The Committee is authorized to grant one or more Incentive Stock Options or Nonqualified Stock Options to any Eligible Person; provided, however, that no Incentive Stock Options shall be granted to any Eligible Person who is not an employee of the Company or a Subsidiary. Each Option so granted shall be subject to the following conditions, or to such other conditions as may be reflected in the applicable Stock Option Agreement. OPTION PRICE. The exercise price ("Option Price") per share of Stock for each Option shall be set by the Committee at the time of grant but shall not be less than (i) in the case of an Incentive Stock Option, and subject to Section 7(e), the Fair Market Value of a share of Stock at the Date of Grant, and (ii) in the case of a Non-Qualified Stock Option, the par value of a share of Stock; provided, however, that all Options intended to qualify as "performance-based compensation" under Section 162(m) of the Code shall have an Option Price per share of Stock no less than the Fair Market Value of a share of Stock on the Date of Grant. MANNER OF EXERCISE AND FORM OF PAYMENT. Options which have become exercisable may be exercised by delivery of written notice of exercise to the Committee accompanied by payment of the Option Price. The Option Price shall be payable in cash and/or shares of Stock valued at the Fair Market Value at the time the Option is exercised (provided, however, that such shares have either been held for six months or previously acquired on the open market) or, in the discretion of the Committee, either (i) in other property having a fair market value on the date of exercise equal to the Option Price, or (ii) by delivering to the Committee a copy of irrevocable -8- instructions to a stockbroker to deliver promptly to the Company an amount of sale or loan proceeds sufficient to pay the Option Price. OPTION PERIOD AND EXPIRATION. Options shall vest and become exercisable in such manner and on such date or dates determined by the Committee and shall expire after such period, not to exceed ten years, as may be determined by the Committee (the "Option Period"); provided, however, that notwithstanding any vesting dates set by the Committee, the Committee may in its sole discretion accelerate the exercisability of any Option for any reason, which acceleration shall not affect the terms and conditions of any such Option other than with respect to exercisability. If an Option is exercisable in installments, such installments or portions thereof which become exercisable shall remain exercisable until the Option expires. Unless otherwise stated in the applicable Option Agreement, the Option shall expire earlier than the end of the Option Period in the following circumstances: If prior to the end of the Option Period, the Holder shall undergo a Normal Termination, the Option shall expire on the earlier of the last day of the Option Period or the date that is three months after the date of such Normal Termination. In such event, the Option shall remain exercisable by the Holder until its expiration, only to the extent the Option was exercisable at the time of such Normal Termination. If the Holder dies prior to the end of the Option Period and while still in the employ or service of the Company, a Subsidiary or Affiliate, or within three months of Normal Termination, the Option shall expire on the earlier of the last day of the Option Period or the date that is twelve months after the date of death of the Holder. In such event, the Option shall remain exercisable by the person or persons to whom the Holder's rights under the Option pass by will or the applicable laws of descent and distribution until its expiration, only to the extent the Option was exercisable by the Holder at the time of death. If the Holder ceases employment or service with the Company and all Subsidiaries and Affiliates for reasons other than Normal Termination or death, the Option shall expire immediately upon such cessation of employment or service. STOCK OPTION AGREEMENT - OTHER TERMS AND CONDITIONS. Each Option granted under the Plan shall be evidenced by a Stock Option Agreement, which shall contain such provisions as may be determined by the Committee and, except as may be specifically stated otherwise in such Stock Option Agreement, which shall be subject to the following terms and conditions: -9- Each Option or portion thereof that is exercisable shall be exercisable for the full amount or for any part thereof. Each share of Stock purchased through the exercise of an Option shall be paid for in full at the time of the exercise. Each Option shall cease to be exercisable, as to any share of Stock, when the Holder purchases the share or exercises a related SAR or when the Option expires. Subject to Section 13(k), Options shall not be transferable by the Holder except by will or the laws of descent and distribution and shall be exercisable during the Holder's lifetime only by him. Each Option shall vest and become exercisable by the Holder in accordance with the vesting schedule established by the Committee and set forth in the Stock Option Agreement. Each Stock Option Agreement may contain a provision that, upon demand by the Committee for such a representation, the Holder shall deliver to the Committee at the time of any exercise of an Option a written representation that the shares to be acquired upon such exercise are to be acquired for investment and not for resale or with a view to the distribution thereof. Upon such demand, delivery of such representation prior to the delivery of any shares issued upon exercise of an Option shall be a condition precedent to the right of the Holder or such other person to purchase any shares. In the event certificates for Stock are delivered under the Plan with respect to which such investment representation has been obtained, the Committee may cause a legend or legends to be placed on such certificates to make appropriate reference to such representation and to restrict transfer in the absence of compliance with applicable federal or state securities laws. Each Incentive Stock Option Agreement shall contain a provision requiring the Holder to notify the Company in writing immediately after the Holder makes a disqualifying disposition of any Stock acquired pursuant to the exercise of such Incentive Stock Option. A disqualifying disposition is any disposition (including any sale) of such Stock before the later of (a) two years after the Date of Grant of the Incentive Stock Option or (b) one year after the date the Holder acquired the Stock by exercising the Incentive Stock Option. INCENTIVE STOCK OPTION GRANTS TO 10% STOCKHOLDERS. Notwithstanding anything to the contrary in this Section 7, if an Incentive Stock Option is granted to a Holder who owns stock representing more than ten percent of the voting power of all classes of stock of the Company or of a Subsidiary, the Option Period shall not exceed five years from the Date of Grant of such Option and the Option Price shall be at least -10- 110 percent of the Fair Market Value (on the Date of Grant) of the Stock subject to the Option. $100,000 PER YEAR LIMITATION FOR INCENTIVE STOCK OPTIONS. To the extent the aggregate Fair Market Value (determined as of the Date of Grant) of Stock for which Incentive Stock Options are exercisable for the first time by any Participant during any calendar year (under all plans of the Company and its Subsidiaries) exceeds $100,000, such excess Incentive Stock Options shall be treated as Nonqualified Stock Options. VOLUNTARY SURRENDER. The Committee may permit the voluntary surrender of all or any portion of any Nonqualified Stock Option and its corresponding SAR, if any, granted under the Plan to be conditioned upon the granting to the Holder of a new Option for the same or a different number of shares as the Option surrendered or require such voluntary surrender as a condition precedent to a grant of a new Option to such Participant. Such new Option shall be exercisable at an Option Price, during an Option Period, and in accordance with any other terms or conditions specified by the Committee at the time the new Option is granted, all determined in accordance with the provisions of the Plan without regard to the Option Price, Option Period, or any other terms and conditions of the Nonqualified Stock Option surrendered. STOCK APPRECIATION RIGHTS Any Option granted under the Plan may include SARs, either at the Date of Grant or, except in the case of an Incentive Stock Option, by subsequent amendment. The Committee also may award SARs to Eligible Persons independent of any Option. An SAR shall be subject to such terms and conditions not inconsistent with the Plan as the Committee shall impose, including, but not limited to, the following: VESTING. SARs granted in connection with an Option shall become exercisable, be transferable and shall expire according to the same vesting schedule, transferability rules and expiration provisions as the corresponding Option. An SAR granted independent of an Option shall become exercisable, be transferable and shall expire in accordance with a vesting schedule, transferability rules and expiration provisions as established by the Committee and reflected in an Award agreement. AUTOMATIC EXERCISE. If on the last day of the Option Period (or in the case of an SAR independent of an Option, the period established by the Committee after which the SAR shall expire), the Fair Market Value of the Stock exceeds the Option Price (or in the case of an SAR granted independent of an Option, the Fair Market Value of the Stock on the Date of Grant), the Holder has not exercised the SAR or the corresponding Option, and neither the SAR nor the -11- corresponding Option has expired, such SAR shall be deemed to have been exercised by the Holder on such last day and the Company shall make the appropriate payment therefor. PAYMENT. Upon the exercise of an SAR, the Company shall pay to the Holder an amount equal to the number of shares subject to the SAR multiplied by the excess, if any, of the Fair Market Value of one share of Stock on the exercise date over the Option Price, in the case of an SAR granted in connection with an Option, or the Fair Market Value of one share of Stock on the Date of Grant, in the case of an SAR granted independent of an Option. With respect to SARs exercised before the Company has been subject to the reporting requirements of Section 13(a) of the Exchange Act for one year, the Company shall issue or transfer to the Participant shares of Stock with a Fair Market Value at such time equal to 100 percent of any such excess. With respect to SARs exercised after the Company has been subject to such reporting requirements for at least one year, the Company shall pay such excess in cash, in shares of Stock valued at Fair Market Value, or any combination thereof, as determined by the Committee. Fractional shares shall be settled in cash. METHOD OF EXERCISE. A Participant may exercise an SAR at such time or times as may be determined by the Committee at the time of grant by filing an irrevocable written notice with the Committee or its designee, specifying the number of SARs to be exercised, and the date on which such SARs were awarded. EXPIRATION. Except as otherwise provided in the case of SARs granted in connection with Options, an SAR shall expire on a date designated by the Committee which is not later than ten years after the Date of Grant of the SAR. PERFORMANCE SHARES AWARD GRANTS. The Committee is authorized to establish Performance Share programs to be effective over designated Award Periods determined by the Committee. At the beginning of each Award Period, the Committee will establish in writing Performance Goals based upon financial objectives for the Company for such Award Period and a schedule relating the accomplishment of the Performance Goals to the Awards to be earned by Participants. Performance Goals may include absolute or relative growth in earnings per share or rate of return on stockholders' equity or other measurement of corporate performance and may be determined on an individual basis or by categories of Participants. The Committee shall determine the number of Performance Share Units to be awarded, if any, to each Participant who is selected to receive such an Award. The Committee may add new Participants to a Performance Share program after its commencement by making pro rata grants. -12- DETERMINATION OF AWARD. At the completion of a Performance Share Award Period, or at other times as specified by the Committee, the Committee shall calculate the number of shares of Stock earned with respect to each Participant's Performance Share Unit Award by multiplying the number of Performance Share Units granted to the Participant by a performance factor representing the degree of attainment of the Performance Goals. PARTIAL AWARDS. A Participant for less than a full Award Period, whether by reason of commencement or termination of employment or otherwise, shall receive such portion of an Award, if any, for that Award Period as the Committee shall determine. PAYMENT OF PERFORMANCE SHARE UNIT AWARDS. Performance Share Unit Awards shall be payable in that number of shares of Stock determined in accordance with Section 9(b); provided, however, that, at its discretion, the Committee may make payment to any Participant in the form of cash upon the specific request of such Participant. The amount of any payment made in cash shall be based upon the Fair Market Value of the Stock on the day prior to payment. Payments of Performance Share Unit Awards shall be made as soon as practicable after the completion of an Award Period. ADJUSTMENT OF PERFORMANCE GOALS. The Committee may, during the Award Period, make such adjustments to Performance Goals as it may deem appropriate, to compensate for, or reflect, (i) extraordinary or non-recurring events experienced during an Award Period by the Company or by any other corporation whose performance is relevant to the determination of whether Performance Goals have been attained; (ii) any significant changes that may have occurred during such Award Period in applicable accounting rules or principles or changes in the Company's method of accounting or in that of any other corporation whose performance is relevant to the determination of whether an Award has been earned or (iii) any significant changes that may have occurred during such Award Period in tax laws or other laws or regulations that alter or affect the computation of the measures of Performance Goals used for the calculation of Awards; provided, however, that with respect to such Awards intended to qualify as "performance-based compensation" under Section 162(m) of the Code, such adjustment shall be made only to the extent that the Committee determines that such adjustments may be made without a loss of deductibility for such Award under Section 162(m) of the Code. DISCRETIONARY RESTRICTED STOCK AWARDS AND PHANTOM STOCK UNITS AWARD OF RESTRICTED STOCK AND PHANTOM STOCK UNITS. The Committee shall have the authority (1) to grant Restricted Stock and Phantom Stock Unit Awards to Eligible -13- Persons, (2) to issue or transfer Restricted Stock to Participants, and (3) to establish terms, conditions and restrictions applicable to such Restricted Stock and Phantom Stock Units, including the Restricted Period, which may differ with respect to each grantee, the time or times at which Restricted Stock or Phantom Stock Units shall be granted or become vested and the number of shares or units to be covered by each grant. The Holder of a Restricted Stock Award shall execute and deliver to the Company an Award agreement with respect to the Restricted Stock setting forth the restrictions applicable to such Restricted Stock. If the Committee determines that the Restricted Stock shall be held in escrow rather than delivered to the Holder pending the release of the applicable restrictions, the Holder additionally shall execute and deliver to the Company (i) an escrow agreement satisfactory to the Committee, and (ii) the appropriate blank stock powers with respect to the Restricted Stock covered by such agreements. If a Participant shall fail to execute a Restricted Stock agreement and, if applicable, an escrow agreement and stock powers, the Award shall be null and void. Subject to the restrictions set forth in Section 10(b), the Holder shall generally have the rights and privileges of a stockholder as to such Restricted Stock, including the right to vote such Restricted Stock. At the discretion of the Committee, cash dividends and stock dividends with respect to the Restricted Stock may be either currently paid to the Holder or withheld by the Company for the Holder's account, and interest may be paid on the amount of cash dividends withheld at a rate and subject to such terms as determined by the Committee. Cash dividends or stock dividends so withheld by the Committee shall not be subject to forfeiture. Upon the Award of Restricted Stock, the Committee shall cause a stock certificate registered in the name of the Holder to be issued and, if it so determines, deposited together with the stock powers with an escrow agent designated by the Committee. If an escrow arrangement is used, the Committee shall cause the escrow agent to issue to the Holder a receipt evidencing any stock certificate held by it registered in the name of the Holder. The terms and conditions of a grant of Phantom Stock Units shall be reflected in a written Award agreement. No shares of Stock shall be issued at the time a Phantom Stock Unit Award is made, and the Company will not be required to set aside a fund for the payment of any such Award. Holders of Phantom Stock Units shall receive an amount equal to the cash dividends paid by the Company upon one share of Stock for each Phantom Stock Unit then credited to such Holder's account ("Dividend Equivalents"). The Committee shall, in its sole discretion, determine whether to credit to the -14- account of, or to currently pay to, each Holder of an Award of Phantom Stock Units such Dividend Equivalents. Dividend Equivalents credited to a Holder's account shall be subject to forfeiture on the same basis as the related Phantom Stock Units, and may bear interest at a rate and subject to such terms as are determined by the Committee. RESTRICTIONS. Restricted Stock awarded to a Participant shall be subject to the following restrictions until the expiration of the Restricted Period, and to such other terms and conditions as may be set forth in the applicable Award agreement: (1) if an escrow arrangement is used, the Holder shall not be entitled to delivery of the stock certificate; (2) the shares shall be subject to the restrictions on transferability set forth in the Award agreement; (3) the shares shall be subject to forfeiture to the extent provided in subparagraph (d) and the Award Agreement and, to the extent such shares are forfeited, the stock certificates shall be returned to the Company, and all rights of the Holder to such shares and as a shareholder shall terminate without further obligation on the part of the Company. Phantom Stock Units awarded to any Participant shall be subject to (1) forfeiture until the expiration of the Restricted Period, to the extent provided in subparagraph (d) and the Award agreement, and to the extent such Awards are forfeited, all rights of the Holder to such Awards shall terminate without further obligation on the part of the Company and (2) such other terms and conditions as may be set forth in the applicable Award agreement. The Committee shall have the authority to remove any or all of the restrictions on the Restricted Stock and Phantom Stock Units whenever it may determine that, by reason of changes in applicable laws or other changes in circumstances arising after the date of the Restricted Stock Award or Phantom Stock Award, such action is appropriate. RESTRICTED PERIOD. The Restricted Period of Restricted Stock and Phantom Stock Units shall commence on the Date of Grant and shall expire from time to time as to that part of the Restricted Stock and Phantom Stock Units indicated in a schedule established by the Committee. FORFEITURE PROVISIONS. Except to the extent determined by the Committee and reflected in the underlying Award agreement, in the event a Holder terminates employment with the Company and all Subsidiaries and Affiliates during a Restricted Period, that portion of the Award with respect to which restrictions have not expired ("Non-Vested Portion") shall be treated as follows. -15- Upon the voluntary resignation of a Participant or discharge by the Company, a Subsidiary or Affiliate for Cause, the Non-Vested Portion of the Award shall be completely forfeited. Upon Normal Termination, the Non-Vested Portion of the Award shall be prorated for service during the Restricted Period and shall be received as soon as practicable following termination. Upon death, the Non-Vested Portion of the Award shall be prorated for service during the Restricted Period and paid to the Participant's beneficiary as soon as practicable following death. DELIVERY OF RESTRICTED STOCK AND SETTLEMENT OF PHANTOM STOCK UNITS. Upon the expiration of the Restricted Period with respect to any shares of Stock covered by a Restricted Stock Award, the restrictions set forth in Section 10(b) and the Award agreement shall be of no further force or effect with respect to shares of Restricted Stock which have not then been forfeited. If an escrow arrangement is used, upon such expiration, the Company shall deliver to the Holder, or his beneficiary, without charge, the stock certificate evidencing the shares of Restricted Stock which have not then been forfeited and with respect to which the Restricted Period has expired (to the nearest full share) and any cash dividends or stock dividends credited to the Holder's account with respect to such Restricted Stock and the interest thereon, if any. Upon the expiration of the Restricted Period with respect to any Phantom Stock Units covered by a Phantom Stock Unit Award, the Company shall deliver to the Holder, or his beneficiary, without charge, one share of Stock for each Phantom Stock Unit which has not then been forfeited and with respect to which the Restricted Period has expired ("Vested Unit") and cash equal to any Dividend Equivalents credited with respect to each such Vested Unit and the interest thereon, if any; provided, however, that, if so noted in the applicable Award agreement, the Committee may, in its sole discretion, elect to pay cash or part cash and part Stock in lieu of delivering only Stock for Vested Units. If cash payment is made in lieu of delivering Stock, the amount of such payment shall be equal to the Fair Market Value of the Stock as of the date on which the Restricted Period lapsed with respect to such Vested Unit. STOCK RESTRICTIONS. Each certificate representing Restricted Stock awarded under the Plan shall bear the following legend until the lapse of all restrictions with respect to such Stock: "Transfer of this certificate and the shares represented hereby is restricted pursuant to the terms of a Restricted Stock Agreement, dated as of , between -16- Bolle Inc. and . A copy of such Agreement is on file at the offices of the Company at ." Stop transfer orders shall be entered with the Company's transfer agent and registrar against the transfer of legended securities. STOCK BONUS AWARDS The Committee may issue unrestricted Stock under the Plan to Eligible Persons, alone or in tandem with other Awards, in such amounts and subject to such terms and conditions as the Committee shall from time to time in its sole discretion determine. Stock Bonus Awards under the Plan shall be granted as, or in payment of, a bonus, or to provide incentives or recognize special achievements or contributions. AUTOMATIC GRANTS OF STOCK OPTIONS TO NON-EMPLOYEE DIRECTORS Upon the consummation of the Spinoff each Non-Employee Director shall be automatically granted a Nonqualified Stock Option to purchase 3,333 shares of Stock. Thereafter, on the date any person first becomes a Non-Employee Director, such person shall be automatically granted without further action by the Board or the Committee a Nonqualified Stock Option to purchase 3,333 shares of Stock. Thereafter, beginning in 1999, for the remainder of the term of the Plan and provided he remains a Non-Employee Director of the Company, on the date of each of the Company's Annual Meeting of Stockholders, each Non-Employee Director shall be automatically granted without further action by the Board or the Committee a Nonqualified Stock Option to purchase 1,000 shares of Stock. All such Options granted to Non-Employee Directors shall hereinafter be referred to as Director Stock Options. (a) OPTION PRICE; TERM. All Director Stock Options shall have an Option Price per share equal to the Fair Market Value of a share of Stock on the Date of Grant. All Director Stock Options shall vest and become exercisable over a period of four years at the rate of 25% of each grant annually on each of the four consecutive anniversaries of the Date of Grant directly following the Date of Grant provided the Non-Employee Director's services as a director continues through each such anniversary. The term of each Non-Employee Director Option ("Term"), after which each such Option shall expire, shall be ten years from the date of Grant. (b) EXPIRATION. If prior to the expiration of the Term of a Director Stock Option the Non-Employee Director shall cease to be a member of the Board for any reason other than his death, the -17- Director Stock Option shall expire on the earlier of the expiration of the Term or the date that is three months after the date of such cessation. If prior to the expiration of the Term of a Director Stock Option a Non-Employee Director shall cease to be a member of the Board by reason of his death, the Director Stock Option shall expire on the earlier of the expiration of the Term or the date that is one year after the date of such cessation. In the event a Non-Employee Director ceases to be a member of the Board for any reason, any unexpired Director Stock Option shall thereafter be exercisable until its expiration only to the extent that such Option was exercisable at the time of such cessation. (c) DIRECTOR STOCK OPTION AGREEMENT. Each Director Stock Option shall be evidenced by a Director Stock Option Agreement, which shall contain such provisions as may be determined by the Committee. (d) NONTRANSFERABILITY. Subject to Section 13(k), Director Stock Options shall not be transferable except by will or the laws of descent and distribution and shall be exercisable during the Non-Employee Director's lifetime only by him. -18- GENERAL ADDITIONAL PROVISIONS OF AN AWARD. Awards under the Plan also may be subject to such other provisions (whether or not applicable to the benefit awarded to any other Participant) as the Committee determines appropriate including, without limitation, provisions to assist the Participant in financing the purchase of Stock upon the exercise of Options, provisions for the forfeiture of or restrictions on resale or other disposition of shares of Stock acquired under any Award, provisions giving the Company the right to repurchase shares of Stock acquired under any Award in the event the Participant elects to dispose of such shares, and provisions to comply with Federal and state securities laws and Federal and state tax withholding requirements. Any such provisions shall be reflected in the applicable Award agreement. PRIVILEGES OF STOCK OWNERSHIP. Except as otherwise specifically provided in the Plan, no person shall be entitled to the privileges of stock ownership in respect of shares of Stock which are subject to Awards hereunder until such shares have been issued to that person. GOVERNMENT AND OTHER REGULATIONS. The obligation of the Company to make payment of Awards in Stock or otherwise shall be subject to all applicable laws, rules, and regulations, and to such approvals by governmental agencies as may be required. Notwithstanding any terms or conditions of any Award to the contrary, the Company shall be under no obligation to offer to sell or to sell and shall be prohibited from offering to sell or selling any shares of Stock pursuant to an Award unless such shares have been properly registered for sale pursuant to the Securities Act with the Securities and Exchange Commission or unless the Company has received an opinion of counsel, satisfactory to the Company, that such shares may be offered or sold without such registration pursuant to an available exemption therefrom and the terms and conditions of such exemption have been fully complied with. The Company shall be under no obligation to register for sale under the Securities Act any of the shares of Stock to be offered or sold under the Plan. If the shares of Stock offered for sale or sold under the Plan are offered or sold pursuant to an exemption from registration under the Securities Act, the Company may restrict the transfer of such shares and may legend the Stock certificates representing such shares in such manner as it deems advisable to ensure the availability of any such exemption. TAX WITHHOLDING. Notwithstanding any other provision of the Plan, the Company, a Subsidiary or an Affiliate, as appropriate, shall have the right to deduct from all Awards cash and/or Stock, valued at Fair Market Value on the date of payment, in an amount necessary to satisfy all Federal, state or local taxes as required by law to be withheld with respect -19- to such Awards and, in the case of Awards paid in Stock, the Holder or other person receiving such Stock may be required to pay to the Company or a Subsidiary, as appropriate, prior to delivery of such Stock, the amount of any such taxes which the Company or Subsidiary is required to withhold, if any, with respect to such Stock. Subject in particular cases to the disapproval of the Committee, the Company may accept shares of Stock of equivalent Fair Market Value in payment of such withholding tax obligations if the Holder of the Award elects to make payment in such manner. CLAIM TO AWARDS AND EMPLOYMENT RIGHTS. No employee or other person shall have any claim or right to be granted an Award under the Plan or, having been selected for the grant of an Award, to be selected for a grant of any other Award. Neither the Plan nor any action taken hereunder shall be construed as giving any Participant any right to be retained in the employ or service of the Company, a Subsidiary or an Affiliate. DESIGNATION AND CHANGE OF BENEFICIARY. Each Participant shall file with the Committee a written designation of one or more persons as the beneficiary who shall be entitled to receive the amounts payable with respect to an Award of Performance Share Units, Phantom Stock Units or Restricted Stock, if any, due under the Plan upon his death. A Participant may, from time to time, revoke or change his beneficiary designation without the consent of any prior beneficiary by filing a new designation with the Committee. The last such designation received by the Committee shall be controlling; provided, however, that no designation, or change or revocation thereof, shall be effective unless received by the Committee prior to the Participant's death, and in no event shall it be effective as of a date prior to such receipt. If no beneficiary designation is filed by the Participant, the beneficiary shall be deemed to be his or her spouse or, if the Participant is unmarried at the time of death, his or her estate. PAYMENTS TO PERSONS OTHER THAN PARTICIPANTS. If the Committee shall find that any person to whom any amount is payable under the Plan is unable to care for his affairs because of illness or accident, or is a minor, or has died, then any payment due to such person or his estate (unless a prior claim therefor has been made by a duly appointed legal representative) may, if the Committee so directs the Company, be paid to his spouse, child, relative, an institution maintaining or having custody of such person, or any other person deemed by the Committee to be a proper recipient on behalf of such person otherwise entitled to payment. Any such payment shall be a complete discharge of the liability of the Committee and the Company therefor. NO LIABILITY OF COMMITTEE MEMBERS. No member of the Committee shall be personally liable by reason of any contract or other instrument executed by such member or on his behalf in his -20- capacity as a member of the Committee nor for any mistake of judgment made in good faith, and the Company shall indemnify and hold harmless each member of the Committee and each other employee, officer or director of the Company to whom any duty or power relating to the administration or interpretation of the Plan may be allocated or delegated, against any cost or expense (including counsel fees) or liability (including any sum paid in settlement of a claim) arising out of any act or omission to act in connection with the Plan unless arising out of such person's own fraud or willful bad faith; provided, however, that approval of the Board shall be required for the payment of any amount in settlement of a claim against any such person. The foregoing right of indemnification shall not be exclusive of any other rights of indemnification to which such persons may be entitled under the Company's Articles of Incorporation or By-Laws, as a matter of law, or otherwise, or any power that the Company may have to indemnify them or hold them harmless. GOVERNING LAW. The Plan shall be governed by and construed in accordance with the internal laws of the State of New York without regard to the principles of conflicts of law thereof. FUNDING. Except as provided under Section 10, no provision of the Plan shall require the Company, for the purpose of satisfying any obligations under the Plan, to purchase assets or place any assets in a trust or other entity to which contributions are made or otherwise to segregate any assets, nor shall the Company maintain separate bank accounts, books, records or other evidence of the existence of a segregated or separately maintained or administered fund for such purposes. Holders shall have no rights under the Plan other than as unsecured general creditors of the Company, except that insofar as they may have become entitled to payment of additional compensation by performance of services, they shall have the same rights as other employees under general law. NONTRANSFERABILITY. A person's rights and interest under the Plan, including amounts payable, may not be sold, assigned, donated, or transferred or otherwise disposed of, mortgaged, pledged or encumbered except, in the event of a Holder's death, to a designated beneficiary to the extent permitted by the Plan, or in the absence of such designation, by will or the laws of descent and distribution; provided, however, the Committee may, in its sole discretion, allow for transfer of Awards other than Incentive Stock Options to other persons or entities, subject to such conditions or limitations as it may establish. RELIANCE ON REPORTS. Each member of the Committee and each member of the Board shall be fully justified in relying, acting or failing to act, and shall not be liable for having so relied, acted or failed to act in good faith, upon any report made by the independent public accountant of the -21- Company and its Subsidiaries and Affiliates and upon any other information furnished in connection with the Plan by any person or persons other than himself. RELATIONSHIP TO OTHER BENEFITS. No payment under the Plan shall be taken into account in determining any benefits under any pension, retirement, profit sharing, group insurance or other benefit plan of the Company or any Subsidiary except as otherwise specifically provided in such other plan. EXPENSES. The expenses of administering the Plan shall be borne by the Company and its Subsidiaries and Affiliates. PRONOUNS. Masculine pronouns and other words of masculine gender shall refer to both men and women. TITLES AND HEADINGS. The titles and headings of the sections in the Plan are for convenience of reference only, and in the event of any conflict, the text of the Plan, rather than such titles or headings shall control. TERMINATION OF EMPLOYMENT. For all purposes herein, a person who transfers from employment or service with the Company to employment or service with a Subsidiary or Affiliate or vice versa shall not be deemed to have terminated employment or service with the Company, a Subsidiary or Affiliate. CHANGES IN CAPITAL STRUCTURE Awards granted under the Plan and any agreements evidencing such Awards, the maximum number of shares of Stock subject to all Awards and the maximum number of shares of Stock with respect to which any one person may be granted Options or SARs during any year shall be subject to adjustment or substitution, as determined by the Committee in its sole discretion, as to the number, price or kind of a share of Stock or other consideration subject to such Awards or as otherwise determined by the Committee to be equitable (i) in the event of changes in the outstanding Stock or in the capital structure of the Company by reason of stock dividends, stock splits, reverse stock splits, recapitalizations, reorganizations, mergers, consolidations, combinations, exchanges, or other relevant changes in capitalization occurring after the Date of Grant of any such Award or (ii) in the event of any change in applicable laws or any change in circumstances which results in or would result in any substantial dilution or enlargement of the rights granted to, or available for, Participants in the Plan, or which otherwise warrants equitable adjustment because it interferes with the intended operation of the Plan. In addition, in the event of any such adjustments or substitution, the aggregate number of shares of Stock available under the Plan shall be appropriately adjusted by the Committee, whose determination shall be conclusive. Any adjustment in Incentive Stock Options under this Section 14 shall be made only to the extent not constituting a "modification" -22- within the meaning of Section 424(h)(3) of the Code, and any adjustments under this Section 14 shall be made in a manner which does not adversely affect the exemption provided pursuant to Rule 16b-3 under the Exchange Act. Further, with respect to Awards intended to qualify as "performance-based compensation" under Section 162(m) of the Code, such adjustments or substitutions shall be made only to the extent that the Committee determines that such adjustments or substitutions may be made without a loss of deductibility for Awards under Section 162(m) of the Code. The Company shall give each Participant notice of an adjustment hereunder and, upon notice, such adjustment shall be conclusive and binding for all purposes. Notwithstanding the above, in the event of any of the following: A. The Company is merged or consolidated with another corporation or entity and, in connection therewith, consideration is received by shareholders of the Company in a form other than stock or other equity interests of the surviving entity; B. All or substantially all of the assets of the Company are acquired by another person; C. The reorganization or liquidation of the Company; or D. The Company shall enter into a written agreement to undergo an event described in clauses A, B or C above, then the Committee may, in its discretion and upon at least 10 days advance notice to the affected persons, cancel any outstanding Awards and pay to the Holders thereof, in cash or stock, or any combination thereof, the value of such Awards based upon the price per share of Stock received or to be received by other shareholders of the Company in the event. The terms of this Section 14 may be varied by the Committee in any particular Award agreement. EFFECT OF CHANGE IN CONTROL Except to the extent reflected in a particular Award agreement: -23- In the event of a Change in Control, notwithstanding any vesting schedule with respect to an Award of Options (including Director Stock Options), SARs, Phantom Stock Units or Restricted Stock, such Option or SAR shall become immediately exercisable with respect to 100 percent of the shares subject to such Option or SAR, and the Restricted Period shall expire immediately with respect to 100 percent of such Phantom Stock Units or shares of Restricted Stock. In the event of a Change in Control, all incomplete Award Periods in effect on the date the Change in Control occurs shall end on the date of such change, and the Committee shall (i) determine the extent to which Performance Goals with respect to each such Award Period have been met based upon such audited or unaudited financial information then available as it deems relevant, (ii) cause to be paid to each Participant partial or full Awards with respect to Performance Goals for each such Award Period based upon the Committee's determination of the degree of attainment of Performance Goals, and (iii) cause all previously deferred Awards to be settled in full as soon as possible. In addition, in the event of a Change in Control, the Committee may in its discretion and upon at least 10 days' advance notice to the affected persons, cancel any outstanding Awards and pay to the Holders thereof, in cash or stock, or any combination thereof, the value of such Awards based upon the price per share of Stock received or to be received by other shareholders of the Company in the event. The obligations of the Company under the Plan shall be binding upon any successor corporation or organization resulting from the merger, consolidation or other reorganization of the Company, or upon any successor corporation or organization succeeding to substantially all of the assets and business of the Company. The Company agrees that it will make appropriate provisions for the preservation of Participant's rights under the Plan in any agreement or plan which it may enter into or adopt to effect any such merger, consolidation, reorganization or transfer of assets. NONEXCLUSIVITY OF THE PLAN Neither the adoption of this Plan by the Board nor the submission of this Plan to the stockholders of the Company for approval shall be construed as creating any limitations on the power of the Board to adopt such other incentive arrangements as it may deem desirable, including, without limitation, the granting of stock options otherwise than under this Plan, and such arrangements may be either applicable generally or only in specific cases. -24- AMENDMENTS AND TERMINATION The Board may at any time terminate the Plan. Subject to Section 14, with the express written consent of an individual Participant, the Board or the Committee may cancel or reduce or otherwise alter outstanding Awards if, in its judgment, the tax, accounting, or other effects of the Plan or potential payouts thereunder would not be in the best interest of the Company. The Board or the Committee may, at any time, or from time to time, amend or suspend and, if suspended, reinstate, the Plan in whole or in part; provided, however, that without further stockholder approval neither the Board nor the Committee shall make any amendment to the Plan which would materially alter the Plan or which would specifically: Materially increase the maximum number of shares of Stock which may be issued pursuant to Awards, except as provided in Section 14; Change the maximum Option Price; Extend the maximum Option Period; Extend the termination date of the Plan; or Change the class of persons eligible to receive Awards under the Plan; EFFECT OF SECTION 162(M) OF THE CODE Generally, in order for Options and SARs to qualify as "performance-based compensation" (within the meaning of Section 162(m) of the Code), they must be issued under a plan approved by the shareholders of a company, granted by a Disinterested Committee and must have a per share exercise price no less than the Fair Market Value of one share of Stock as of the date of grant. In addition, the plan must state the maximum number of shares that may be granted with respect to Options or SARs to any person during a specified time period. Because the Company was a subsidiary of BEC, a "publicly held corporation" (within the meaning of Section 162(m) of the Code), that became "publicly held" (within the meaning of Section 162(m) of the Code) as a result of a spinoff, the Plan is exempt from the shareholder approval requirements of Section 162(m) of the Code for a period of time pursuant to Treasury Regulation Section 1.167-27(f)(4)(iii). The Company may rely on this exemption only for Options and SARs granted prior to the first regularly scheduled meeting of the shareholders of the Company that occurs more than twelve months after the date that the -25- Company so became a publicly held corporation. Thereafter, in order for Options and SARs to qualify as "performance-based compensation" (within the meaning of Section 162(m) of the Code) the shareholder approval requirements of Section 162(m) of the Code must be satisfied and the Plan must be approved by a vote of the shareholders of the Company. * * * As adopted by the Board of Directors of Bolle Inc. as of January , 1998 -26- RULES OF THE BOLLE INC. STOCK OPTION PLAN FOR FRENCH EMPLOYEES 1. INTRODUCTION Bolle Inc.(the "Company") has established the Bolle Inc. 1998 Stock Incentive Plan (the "US Plan") for the benefit of certain employees of the Company, its subsidiaries and affiliates, including its French Subsidiaries, BOLLE S.N.C. and BOLLE DIFFUSION (the "Subsidiaries") of which the Company holds indirectly 100% of the capital. The Board of Directors of the Company has determined that it is advisable to establish a sub-plan for the purposes of permitting stock options granted under the US Plan to qualify for favorable French tax and social security treatment. The Board of Directors, therefore, intends to establish a sub-plan of the US Plan for the purpose of granting options which qualify for the favorable tax and social security treatment in France applicable to options granted under the Law n(0) 70-1322 of December 31, 1970, as subsequently amended, to qualifying employees who are resident in France for French tax purposes. The terms of the US Plan, as set out in Appendix 1 hereto, shall, subject to the modifications in the following rules, constitute the Bolle Inc. Stock Option Plan for French Employees (the "French Plan"). Under the French Plan, the qualifying employees will be granted only stock options. In no case will they be granted other Awards, as referred to in the US Plan. 2. DEFINITIONS Terms used in the French Plan shall have the same meanings as set forth in the US Plan, except as specifically provided herein. For the purposes of this French Plan, the term "Option" shall have the following meaning: Purchase options, that are rights to acquire shares repurchased by the Company prior to the grant of said options. 3. ENTITLEMENT TO PARTICIPATE Any Employee of the Subsidiaries shall be eligible to receive Options under the French Plan. However, options cannot be issued under the French Plan to employees or executives owning more than ten percent (10%) of the Company's capital shares or to individuals other than employees and corporate executives of the Subsidiaries. Options may not be issued to directors of the Subsidiaries, unless they are employed by the Subsidiaries. 4. OPTION PRICE The Option Price per share of common stock payable pursuant to Options issued hereunder shall be fixed by the Committee on the date the Option is granted, but in no event shall the Option Price per share be less than the greater of: a. with respect to purchase options over the common stock, the higher of either 95% of the average quotation price of such common stock during the 20 days of quotation immediately preceding the grant date or 95% of the average purchase price paid for such common stock by the Company; b. the minimum option exercise price permitted under the US Plan. 5. EXERCISE OF AN OPTION Upon exercise of an Option, the full Option Price will have to be paid either by check or credit transfer. The shares acquired upon exercise of an Option will be recorded in an account in the name of the shareholder. 6. CHANGES IN CAPITALIZATION In compliance with French law, neither the Option Price nor the number of shares subject to an Option issued hereunder, shall be modified during the Options' duration. Adjustments to the Option Price or number of shares subject to an Option issued hereunder shall be made to preclude the dilution or enlargement of benefits under such Option only in the case of one or more of the following transactions by the Company: a. an increase of corporate capital by cash contribution; b. an issuance of convertible or exchangeable bonds; c. a capitalization of retained earnings, profits, or issuance premiums; d. a distribution of retained earnings by payment in cash or shares; and e. a reduction of corporate capital by set off against losses. 7. DEATH In the event of the death of a French Holder, said individual's heirs may exercise the Option within 6 months following the death, but any vested Option which remains -2- unexercised shall expire 6 months following the date of the Holder's death. 8. INTERPRETATION It is intended that Options granted under the French Plan shall qualify for the favorable tax and social security treatment applicable to stock options granted under the Law n(0) 70-1322 of December 31, 1970, as subsequently amended, and in accordance with the relevant provisions set forth by French tax law and the French tax administration. The terms of the French Plan shall be interpreted accordingly. 9. AMENDMENTS Subject to the terms of the US Plan, the Committee reserves the right to amend or terminate the French Plan at any time. 10. ADOPTION The French Plan was adopted by a meeting of the Board of Directors of the Company, held on January __, 1998. -------------------------- For Bolle Inc. -3- EX-10.23 6 SECOND AMENDED AND RESTATED CREDIT AGREEMENT - ------------------------------------------------------------------------------- SECOND AMENDED AND RESTATED CREDIT AGREEMENT Among BOLLE INC., as Borrower and NATIONSBANK, NATIONAL ASSOCIATION, BANKBOSTON, N.A.,, CREDIT AGRICOLE INDOSUEZ, EUROPEAN AMERICAN BANK, IMPERIAL BANK, NATIONAL CITY BANK OF KENTUCKY and THE OTHER FINANCIAL INSTITUTIONS FROM TIME TO TIME PARTIES HERETO, as Lenders, and NATIONSBANK, NATIONAL ASSOCIATION, as Agent. Dated as of March 11, 1998 - ------------------------------------------------------------------------------- NB BOLLE CREDIT AGREEMENT (FINAL) Doc No: 190295 TABLE OF CONTENTS
Page ARTICLE I - DEFINITIONS SECTION 1.1 Amendment and Restatement..............................................................2 SECTION 1.2 Definitions............................................................................3 SECTION 1.3 Rules of Interpretation...............................................................34 ARTICLE II - THE TERM LOAN SECTION 2.1 The Term Loan.........................................................................35 SECTION 2.2 Payment of Principal..................................................................36 SECTION 2.3 Payment of Interest...................................................................36 SECTION 2.4 Manner of Payment.....................................................................37 SECTION 2.5 Optional Prepayments..................................................................38 SECTION 2.6 Mandatory Prepayments.................................................................38 SECTION 2.7 Borrower's Account....................................................................40 SECTION 2.8 Term Notes............................................................................40 SECTION 2.9 Interest Periods......................................................................40 SECTION 2.10 Elections of Subsequent Interest Periods..............................................40 SECTION 2.11 Pro Rata Payments.....................................................................41 SECTION 2.12 Use of Proceeds.......................................................................41 ARTICLE III - REVOLVING LOANS SECTION 3.1 Revolving Loans.......................................................................41 SECTION 3.2 Advances and Rate Selection...........................................................42 SECTION 3.3 Payment of Interest...................................................................44 SECTION 3.4 Payment of Principal..................................................................45 SECTION 3.5 Manner of Payment.....................................................................46 SECTION 3.6 Commitment Reductions.................................................................46 SECTION 3.7 Increase and Decrease in Amounts......................................................48 SECTION 3.8 Borrower's Account...................................................................48 SECTION 3.9 Notes.................................................................................48 SECTION 3.10 Pro Rata Payments.....................................................................48 SECTION 3.11 Conversions and Elections of Subsequent Interest Periods..............................48 SECTION 3.12 Unused Fee............................................................................49 SECTION 3.13 Additional Fees.......................................................................49 SECTION 3.14 Deficiency Advances...................................................................49 SECTION 3.15 Use of Proceeds.......................................................................50 NB BOLLE CREDIT AGREEMENT (FINAL) Doc No: 190295 i Page ARTICLE IV - LETTERS OF CREDIT SECTION 4.1 Letters of Credit.....................................................................50 SECTION 4.2 Reimbursement.........................................................................50 SECTION 4.3 Letter of Credit Fee..................................................................54 SECTION 4.4 Administrative Fees...................................................................54 ARTICLE V - CHANGE IN CIRCUMSTANCES SECTION 5.1 Increased Cost and Reduced Return.....................................................54 SECTION 5.2 Limitation on Types of Loans..........................................................56 SECTION 5.3 Illegality............................................................................56 SECTION 5.4 Treatment of Affected Loans...........................................................56 SECTION 5.5 Compensation..........................................................................57 SECTION 5.6 Taxes.................................................................................57 ARTICLE VI - SECURITY SECTION 6.1 Security Interest.....................................................................59 SECTION 6.2 Stock Pledge..........................................................................60 SECTION 6.3 Guaranty..............................................................................60 SECTION 6.4 Lease Assignments.....................................................................60 SECTION 6.5 Intellectual Property.................................................................60 SECTION 6.6 Deed of Trust.........................................................................61 SECTION 6.7 Intercompany Note Assignment..........................................................61 SECTION 6.8 Information Regarding Collateral......................................................61 SECTION 6.9 Further Assurances....................................................................62 ARTICLE VII - CONDITIONS PRECEDENT SECTION 7.1 Effectiveness; Conditions to Advances and Issuance of Letters of Credit...............................................................................62 SECTION 7.2 Conditions of Permitted Acquisitions and All Advances for Permitted Acquisitions..........................................................................67 SECTION 7.3 Conditions of All Advances and Issuances of Letters of Credit on or after the Closing Date................................................................70 NB BOLLE CREDIT AGREEMENT (FINAL) Doc No: 190295 ii Page ARTICLE VIII - REPRESENTATIONS AND WARRANTIES SECTION 8.1 Organization and Authority............................................................71 SECTION 8.2 Loan Documents........................................................................72 SECTION 8.3 Solvency..............................................................................72 SECTION 8.4 Subsidiaries and Stockholders.........................................................72 SECTION 8.5 Ownership Interests...................................................................72 SECTION 8.6 Financial Condition...................................................................73 SECTION 8.7 Title to Properties...................................................................73 SECTION 8.8 Taxes.................................................................................73 SECTION 8.9 Other Agreements......................................................................74 SECTION 8.10 Litigation............................................................................74 SECTION 8.11 Margin Stock..........................................................................74 SECTION 8.12 Investment Company....................................................................74 SECTION 8.13 Intellectual Property.................................................................75 SECTION 8.14 No Untrue Statement...................................................................75 SECTION 8.15 No Consents, Etc......................................................................75 SECTION 8.16 Employee Benefit Plans................................................................75 SECTION 8.17 No Default............................................................................76 SECTION 8.18 Environmental Matters.................................................................76 SECTION 8.19 Employment Matters....................................................................77 SECTION 8.20 Permitted Acquisition.................................................................77 ARTICLE IX - AFFIRMATIVE COVENANTS SECTION 9.1 Financial Reports, Etc................................................................77 SECTION 9.2 Maintain Properties...................................................................79 SECTION 9.3 Existence, Qualification, Etc.........................................................79 SECTION 9.4 Regulations and Taxes.................................................................79 SECTION 9.5 Insurance.............................................................................79 SECTION 9.6 True Books............................................................................80 SECTION 9.7 Right of Inspection...................................................................80 SECTION 9.8 Observe all Laws......................................................................80 SECTION 9.9 Covenants Extending to Subsidiaries...................................................80 SECTION 9.10 Officer's Knowledge of Default........................................................80 SECTION 9.11 Suits or Other Proceedings............................................................80 SECTION 9.12 Notice of Discharge of Hazardous Material or Environmental Complaint.............................................................................81 SECTION 9.13 Environmental Compliance..............................................................81 SECTION 9.14 Indemnification.......................................................................81 SECTION 9.15 Further Assurances....................................................................81 SECTION 9.16 Employee Benefit Plans................................................................82 SECTION 9.17 Termination Events....................................................................82 SECTION 9.18 ERISA Notices.........................................................................82 SECTION 9.19 Continued Operations..................................................................82 NB BOLLE CREDIT AGREEMENT (FINAL) Doc No: 190295 iii Page SECTION 9.20 Use of Proceeds.......................................................................83 SECTION 9.21 New Subsidiaries......................................................................83 SECTION 9.22 Hedging Obligations...................................................................84 ARTICLE X - NEGATIVE COVENANTS SECTION 10.1 Indebtedness..........................................................................84 SECTION 10.2 Liens.................................................................................85 SECTION 10.3 Investments; Acquisitions.............................................................87 SECTION 10.4 Merger or Transfer of Assets..........................................................87 SECTION 10.5 Transactions with Affiliates..........................................................88 SECTION 10.6 Compliance with ERISA.................................................................88 SECTION 10.7 Fiscal Year...........................................................................89 SECTION 10.8 Dissolution, etc......................................................................89 SECTION 10.9 Hedging Obligations...................................................................89 SECTION 10.10 Dividends, Redemptions and Other Payments.............................................89 SECTION 10.11 Defaults Under Other Agreements.......................................................90 SECTION 10.12 Compensation; Reimbursement of Expenses...............................................90 SECTION 10.13 Change in Accountants.................................................................90 SECTION 10.14 Limitations on Sales and Leasebacks...................................................90 SECTION 10.15 Negative Pledge Clauses...............................................................91 SECTION 10.16 Change of Control.....................................................................91 SECTION 10.17 Intellectual Property.................................................................91 SECTION 10.18 Preferred Stock; Management Services Agreement; Share Purchase Agreements............................................................................91 SECTION 10.19 Licenses..............................................................................91 ARTICLE XI - FINANCIAL COVENANTS SECTION 11.1 Consolidated Fixed Charge Ratio.......................................................92 SECTION 11.2 Consolidated Leverage Ratio...........................................................92 SECTION 11.3 Consolidated Net Worth................................................................92 SECTION 11.4 Capital Expenditures..................................................................92 ARTICLE XII - EVENTS OF DEFAULT SECTION 12.1 Events of Default.....................................................................93 NB BOLLE CREDIT AGREEMENT (FINAL) Doc No: 190295 iv Page SECTION 12.2 Agent to Act..........................................................................96 SECTION 12.3 Cumulative Rights.....................................................................96 SECTION 12.4 No Waiver.............................................................................96 SECTION 12.5 Allocation of Proceeds................................................................96 ARTICLE XIII - THE AGENT SECTION 13.1 Appointment, Powers, and Immunities...................................................97 SECTION 13.2 Reliance by Agent.....................................................................98 SECTION 13.3 Defaults..............................................................................98 SECTION 13.4 Rights as Lender......................................................................99 SECTION 13.5 Indemnification.......................................................................99 SECTION 13.6 Non-Reliance on Agent and Other Lenders...............................................99 SECTION 13.7 Resignation of Agent.................................................................100 SECTION 13.8 Sharing of Payments, etc.............................................................100 SECTION 13.9 Fees.................................................................................100 ARTICLE XIV - ASSIGNMENTS AND PARTICIPATIONS SECTION 14.1 Assignments and Participations. ....................................................101 ARTICLE XV - GENERAL PROVISIONS SECTION 15.1 Notices..............................................................................102 SECTION 15.2 Setoff...............................................................................104 SECTION 15.3 Survival.............................................................................104 SECTION 15.4 Expenses.............................................................................104 SECTION 15.5 Amendments...........................................................................105 SECTION 15.6 Counterparts.........................................................................105 SECTION 15.7 Termination..........................................................................105 SECTION 15.8 Indemnification......................................................................106 SECTION 15.9 Headings and References..............................................................107 SECTION 15.10 Severability.........................................................................107 SECTION 15.11 Entire Agreement.....................................................................107 SECTION 15.12 Agreement Controls...................................................................107 SECTION 15.13 Usury Savings Clause.................................................................107 SECTION 15.14 Governing Law; Waivers...............................................................107 SECTION 15.15 Judgment Currency....................................................................109 SECTION 15.16 Economic and Monetary Union in the European Community................................109 EXHIBIT A Applicable Commitment Percentages....................................................................A-1 EXHIBIT B Form of Assignment and Acceptance....................................................................B-1 EXHIBIT C Form of Notice of Appointment (or Revocation) of Authorized Representative...........................................................................C-1 EXHIBIT D Form of Borrowing Notice.............................................................................D-1 NB BOLLE CREDIT AGREEMENT (FINAL) Doc No: 190295 v Page EXHIBIT E Form of Guaranty Agreement...........................................................................E-1 EXHIBIT F Form of Interest Rate Selection Notice...............................................................F-1 EXHIBIT G Form of Stock Pledge Agreement.......................................................................G-1 EXHIBIT H Form of Mortgage.....................................................................................H-1 EXHIBIT I Form of Term Note..................................................................................I-1-1 EXHIBIT J Form of Revolving Note...............................................................................J-1 EXHIBIT K-1 Form of LC Account Agreement.....................................................................K-1-1 EXHIBIT K-2 Form of Cash Collateral Account..................................................................K-2-1 EXHIBIT L Form of Security Agreement...........................................................................L-1 EXHIBIT M Form of Intellectual Property Security Agreement.....................................................M-1 EXHIBIT N Forms of Opinions of Counsel to the Borrower and the Guarantors......................................N-1 EXHIBIT O Form of Compliance Certificate.......................................................................O-1 EXHIBIT P Form of Landlord Waiver..............................................................................P-1 EXHIBIT Q Form of Lease Assignment.............................................................................Q-1 EXHIBIT R Form of Collateral Assignment of License Agreement...................................................Q-2 EXHIBIT S Form of Intercompany Notes Assignment................................................................S-1 EXHIBIT T Form of Intercompany Note............................................................................T-1 EXHIBIT U Form of Subordination Agreement......................................................................U-1 Schedule 1 Material Leased Facilities.................................................................Schedule 1-1 Schedule 1.1 Existing Indebtedness..................................................................Schedule 1.1-1 Schedule 2 Existing Letters of Credit.................................................................Schedule 2-1 Schedule 6.8 Locations of Borrower and Guarantors...................................................Schedule 6.8-1 Schedule 7.1(c) Material Adverse Effect.........................................................Schedule 7.1(c)-1 Schedule 8.4 Subsidiaries...........................................................................Schedule 8.4-1 Schedule 8.5 Ownership Interests....................................................................Schedule 8.5-1 Schedule 8.6 Contingent Liabilities.................................................................Schedule 8.6-1 Schedule 8.7 Liens..................................................................................Schedule 8.7-1 Schedule 8.10 Litigation...........................................................................Schedule 8.10-1 Schedule 8.13 Intellectual Property................................................................Schedule 8.13-1 Schedule 8.16 Employee Benefit Plans...............................................................Schedule 8.16-1 Schedule 8.18 Environmental Matters................................................................Schedule 8.18-1 Schedule 8.19 Employment Matters...................................................................Schedule 8.19-1 Schedule 9.5 Insurance..............................................................................Schedule 9.5-1 Schedule 10.1 Existing Indebtedness................................................................Schedule 10.1-1 Schedule 10.4 Mergers and Consolidations...........................................................Schedule 10.4-1 Schedule 10.5 Transactions With Affiliates.........................................................Schedule 10.5-1 Schedule 10.19 Licenses...........................................................................Schedule 10.19-1
NB BOLLE CREDIT AGREEMENT (FINAL) Doc No: 190295 vi SECOND AMENDED AND RESTATED CREDIT AGREEMENT THIS SECOND AMENDED AND RESTATED CREDIT AGREEMENT (this "Agreement") made as of this 11th day of March, 1998 by and among BOLLE INC., a Delaware corporation having its chief executive office in Rye, New York (the "Borrower"), EACH LENDER EXECUTING AND DELIVERING A SIGNATURE PAGE HERETO and each other lender which may hereafter execute and deliver an instrument of assignment and assumption with respect to this Agreement pursuant to Section 14.1 hereof (hereinafter such lenders may be referred to individually as a "Lender" or collectively as the "Lenders") and NATIONSBANK, NATIONAL ASSOCIATION, a national banking association organized and existing under the laws of the United States of America ("NationsBank"), in its capacity as agent for the Lenders (in such capacity, and any successor appointed in accordance with the terms of Section 13.7 hereof, the "Agent"). W I T N E S S E T H: WHEREAS, the Lenders, certain other lenders, the Agent and BEC Group, Inc. ("BEC"), of which the Borrower formerly was a direct subsidiary, are parties to that certain Amended and Restated Credit Agreement dated as of July 10, 1997 (the "Existing Credit Agreement"), as amended pursuant to that certain Assignment Agreement and First Amendment to Amended and Restated Credit Agreement of even date herewith, and effective immediately prior to the effectiveness of this Agreement, among all parties to the Existing Credit Agreement (the "Assignment and Amendment"), and certain other Loan Documents, as defined in the Existing Credit Agreement, between the Borrower, certain other subsidiaries of BEC and the Agent; and WHEREAS, pursuant to the Assignment and Amendment Agreement, BEC assigned to the Borrower, and the Borrower assumed from BEC, among other liabilities, certain indebtedness owing by, and obligations of, BEC under the Existing Credit Agreement such that the Borrower became a co-borrower together with BEC under the Existing Credit Agreement; and WHEREAS, pursuant to the Assignment and Amendment, the Lenders hereunder (the "Bolle Lenders") have purchased from certain other lenders party to the Existing Credit Agreement (the "BEC Lenders") a portion of the rights and interests of the BEC Lenders with respect to the obligations and indebtedness of the Borrower under the Existing Credit Agreement as a result of, and after giving effect to, the Assignment and Amendment (the "Bolle Obligations"); and WHEREAS, the Borrower, the Lenders and the Agent desire to enter into this Agreement in order to amend and restate that portion of the Existing Credit Agreement which in any manner governs or evidences the Bolle Obligations and the rights and interests of the Bolle Lenders into a separate and independent agreement among the Agent, the Bolle Lenders and the Borrower and in connection therewith make available to the Borrower credit facilities in the maximum aggregate principal amount at any time outstanding of $28,000,000, which shall include a Term Loan Facility in the principal French Franc Equivalent Amount of $10,000,000 and a Revolving Credit Facility in the maximum aggregate principal amount at any time outstanding of $18,000,000, including a letter of credit subfacility of up to $5,000,000; and NB BOLLE CREDIT AGREEMENT (FINAL) Doc No: 190295 1 WHEREAS, the Lenders are willing to make all such facilities available to the Borrower and amend and restate the portion of the Existing Credit Agreement governing or evidencing the Bolle Obligations in the manner described above upon the terms and conditions set forth herein; NOW, THEREFORE, in consideration of the terms, covenants, provisions and conditions hereinafter set forth, the parties hereto agree as follows: ARTICLE I DEFINITIONS SECTION 1.1 AMENDMENT AND RESTATEMENT. The Borrower, the Agent and the Lenders hereby agree that upon the effectiveness of this Agreement, the terms and provisions of the Existing Credit Agreement which in any manner govern or evidence the Bolle Obligations, the rights and interests of the Bolle Lenders and any terms, conditions or matters related to any thereof, but excluding specifically those terms and conditions applicable to BEC and any lender remaining party to the Existing Credit Agreement (the "Bolle Terms and Provisions of the Existing Credit Agreement"), shall be and hereby are amended and restated in their entirety by the terms and provisions of this Agreement and the Bolle Terms and Provisions of the Existing Credit Agreement shall be superseded by this Agreement, except as expressly provided herein. Notwithstanding the amendment and restatement of the Bolle Terms and Provisions of the Existing Credit Agreement by this Agreement, all of the indebtedness, liabilities and obligations owing by the Borrower under the Existing Credit Agreement, as amended by and giving effect to the Assignment and Amendment (hereinafter in this Agreement all references to the Existing Credit Agreement shall mean the Existing Credit Agreement as amended by the Assignment and Amendment), and after giving effect to the Assignment and Amendment, shall continue to be secured as referred to in Section 4(b) of the Assignment and Amendment and Borrower acknowledges and agrees that the assets of itself and of Bolle America, after giving effect to the assignment to the Borrower of certain assets of BEC pursuant to the Bill of Sale which constitute "Collateral" as defined in the Existing Credit Agreement remain subject to a security interest in favor of the Agent for the ratable benefit of the Lenders and to secure the liabilities of the Borrower re-evidenced by this Agreement and the other Loan Documents. This Agreement is given as a substitution of, and not as a payment of, the obligations of the Borrower under the Existing Credit Agreement and is not intended to constitute a novation of the Existing Credit Agreement. Upon the effectiveness of this Agreement, all amounts owing by the Borrower and outstanding under the Existing Credit Agreement after giving effect to the Assignment and Amendment shall constitute Advances under the Revolving Credit Facility hereunder, in each case accruing interest (a) with respect to Eurodollar Loans under the Existing Credit Agreement, at the Eurodollar Rate hereunder and (b) with respect to Base Rate Loans under the Existing Credit Agreement, at the Base Rate hereunder. The parties hereto agree that all Eurodollar Rate Loans owing by the Borrower and outstanding under the Existing Credit Agreement on the Closing Date after giving effect to the Assignment and Amendment shall continue as Eurodollar Rate Loans hereunder. The parties hereto further agree that all Letters of Credit issued under the Existing NB BOLLE CREDIT AGREEMENT (FINAL) Doc No: 190295 Credit Agreement, as described on Schedule 2 hereto, and outstanding on the Closing Date for which the Borrower has incurred a reimbursement obligation under the Existing Credit Agreement as a result of its assumption of certain liabilities and obligations pursuant to the Assignment and Amendment shall continue as Letters of Credit hereunder and shall constitute Letters of Credit Outstandings hereunder. SECTION 1.2 DEFINITIONS. For the purposes of this Agreement, in addition to the definitions set forth above, the following terms shall have the respective meanings set forth below: "AAi Preferred Stock" means 100 shares of Series A Redeemable Non-Voting Preferred Stock, par value $1.00 per share, of Foster Grant Holdings, Inc. owned by the Borrower and any shares of capital stock into which such stock may be converted or exchanged, including without limitation shares of common stock of Accessories Associates; "AAi Payment" means the cash payment or payments by the Borrower of up to $2,500,000 to BEC in connection with the Bill of Sale; "AAi Prepayment" has the meaning given to such term in Section 2.6(e) hereof; "Accessories Associates" means Accessories Associates, Inc., a Rhode Island corporation; "Accessories Associates IPO" means an initial public offering of the common stock of Accessories Associates; "Acquisition" means the acquisition of (i) a controlling equity interest in another Person (including the purchase of an option, warrant or convertible or similar type security to acquire such a controlling interest at the time it becomes exercisable by the holder thereof), whether by purchase of such equity interest or upon exercise of an option or warrant for, or conversion of securities into, such equity interest, or (ii) in a single or series of related transactions, all or a portion of the assets of another Person constituting a line or lines of business of such Person; "Acquisition Date" has the meaning given to such term in Section 7.2 hereof; "Acquisition Consideration" has the meaning given to such term in Section 7.2(b)(ii) hereof; "Advance" means (a) the advance of the Term Loan and (b) any borrowing under the Revolving Credit Facility consisting of a Base Rate Loan or a Eurodollar Rate Loan, as the case may be; "Affiliate" means a Person (i) which directly or indirectly through one or more intermediaries controls, or is controlled by, or is under common control with, the NB BOLLE CREDIT AGREEMENT (FINAL) Doc No: 190295 3 Borrower; (ii) which beneficially owns or holds 10% or more of any class of the outstanding voting stock of the Borrower; or (iii) 10% or more of any class of the outstanding voting stock (or in the case of a Person which is not a corporation, 10% or more of the equity interest) of which is beneficially owned or held by the Borrower. The term "control" means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through ownership of voting stock, by contract or otherwise; "Applicable Commitment Percentage" means, at any time for each Lender with respect to the Total Credit Commitment (including its Participations and its obligations hereunder to Issuing Bank to acquire Participations), a fraction (expressed as a percentage), (A) the numerator of which shall be the sum of such Lender's Revolving Credit Commitment and Term Loan Commitment at such date of determination (which as of the Closing Date are set forth on Exhibit A attached hereto and incorporated herein by reference), and (B) the denominator of which shall be the Total Credit Commitment at such date of determination; provided that the Applicable Commitment Percentage of each Lender shall be increased or decreased to reflect any assignments to or by such Lender effected in accordance with Section 14.1 hereof; "Applicable Currency" means, as to any particular Loan, Dollars or French Francs, as designated (in the case of Loans and Advances) in the Borrowing Notice applicable to such Loan; "Applicable Lending Office" means, for each Lender and for each Type of Loan, the "Lending Office" of such Lender (or of an affiliate of such Lender) designated for such Type of Loan on the signature pages hereof or such other office of such Lender (or an affiliate of such Lender) as such Lender may from time to time specify to the Agent and the Borrower by written notice in accordance with the terms hereof as the office by which its Loans of such Type are to be made and maintained; "Applicable Margin" and "Applicable Unused Fee" means that percent per annum set forth in the table below, which shall be (A) determined as of each Determination Date based upon the computations set forth in the compliance certificates delivered to the Agent pursuant to Sections 9.1(a)(ii) and 9.1(b)(ii) hereof, subject to review and approval of such computations by the Agent, and delivered to the Agent not later than the time set forth in Sections 9.1(a) and 9.1(b) hereof (the "Compliance Date") and (B) applicable to all Fixed Rate Loans made, renewed or converted, Letters of Credit outstanding and any Unused Fee due and payable, on or after the most recent Compliance Date to occur based upon the Consolidated Leverage Ratio for the Four-Quarter Period then ended, as specified below: NB BOLLE CREDIT AGREEMENT (FINAL) Doc No: 190295 4
Applicable Margin for Fixed Rate Loans and Applicable Margin Applicable Consolidated for Letter of Credit for Base Unused Leverage Ratio Fees Rate Loans Fee Greater than 3.00 to 1.00 2.50% 1.00% .500% Less than or equal to 3.00 to 1.00 but greater than 2.50 to 1.00 2.00% .500% .375% Less than or equal to 2.50 to 1.00 but greater than 2.00 to 1.00 1.25% 0% .250% Less than or equal to 2.00 to 1.00% 0% .250% 1.00
; provided, however, the Applicable Margin for Eurodollar Loans and Letter of Credit Fees shall be 2.50% and the Applicable Unused Fee shall be 0.500% from the Closing Date to the Compliance Date immediately following June 30, 1998; "Applications and Agreements for Letters of Credit" means, collectively, the Applications and Agreements for Letters of Credit executed by the Borrower from time to time and delivered to Issuing Bank to support the issuance of Letters of Credit; "Asset Disposition" means any voluntary disposition, whether by sale, lease or transfer, other than as permitted under Section 10.4 hereof, of (a) any or all of the assets, excluding cash and cash equivalents, of the Borrower or its Subsidiaries, and (b) any of the capital stock, or securities or investments exchangeable, exercisable or convertible for or into, or otherwise entitling the holder to receive, any of the capital stock of any Subsidiary (other than a disposition to a Guarantor; "Assignment and Amendment" has the meaning given to such term in the recitals hereto; "Assignment and Acceptance" shall mean an Assignment and Acceptance in the form of Exhibit B attached hereto and incorporated herein by reference (with blanks appropriately filled in) delivered to the Agent in connection with an assignment of a Lender's interest under this Agreement pursuant to Section 14.1; "A$" mean dollars constituting legal tender for the payment of public and private debts in Australia; NB BOLLE CREDIT AGREEMENT (FINAL) Doc No: 190295 5 "Authorized Representative" means any of the Chairman, President, Executive Vice Presidents, Senior Vice Presidents or Vice Presidents of the Borrower and, with respect to financial matters, the Chief Financial Officer, Vice President-Finance or Controller of the Borrower or any other person expressly designated by the Board of Directors of the Borrower (or the appropriate committee thereof) as an Authorized Representative of the Borrower, as set forth from time to time in a certificate in the form attached hereto as Exhibit C and incorporated herein by reference; "Base Rate" means the per annum rate of interest equal to the sum of (a) the greater of (i) the Prime Rate or (ii) the Federal Funds Rate plus one-half of one percent (0.5%) plus (b) the Applicable Margin. Any change in the Base Rate due to a change in the Prime Rate or the Federal Funds Rate shall be effective on the effective date of such change in the Prime Rate or Federal Funds Rate; "Base Rate Loan" means any Revolving Loan for which the rate of interest is determined by reference to the Base Rate; "BEC" means BEC Group, Inc., a Delaware corporation, and after the date of effectiveness of the amendment to its Certificate of Incorporation changing the name of the corporation, Lumen Technologies, Inc., a Delaware corporation; "Bill Bass" means Bill Bass Optical Pty. Ltd.; "Bill of Sale" means that certain Bill of Sale and Assignment Agreement between the Borrower and BEC dated as of March 11, 1998, substantially in the form attached to the Merger Agreement pursuant to which certain assets and liabilities of BEC were assigned and sold to the Borrower; "Board" means the Board of Governors of the Federal Reserve System (or any successor body); "Bolle America" means Bolle America, Inc., a Delaware corporation; "Bolle Asia" means Bolle Asia Ltd.; "Bolle Australia Acquisition" means the acquisition by the Borrower or a wholly owned Subsidiary of at least seventy-five percent (75%) of the issued and outstanding shares of Bill Bass, all of the issued and outstanding shares of Parkhurst and Bolle Asia and the remaining unowned issued and outstanding shares of Bolle Sunglasses pursuant to the Bolle Australia Share Purchase Agreement for an aggregate purchase price not to exceed A$5,687,500.00 in cash and shares of Common Stock having an aggregate market value of approximately A$3,500,000.00; "Bolle Australia Share Purchase Agreement" means that certain Share Purchase Agreement intended to be entered into on or before June 30, 1998 between the Borrower NB BOLLE CREDIT AGREEMENT (FINAL) Doc No: 190295 6 and certain individual shareholders of Bolle Australia, as amended from time to time, but at all times in form and substance reasonably acceptable to the Agent and the Lenders; "Bolle France" means Holding B.F., a corporation governed by the laws of France; "Bolle SAS" means Etablissements Bolle, a company governed by the law of France; "Bolle Sunglasses" means Bolle Sunglasses Ltd. (UK), a limited liability company governed by the laws of England. "Bolle UK" means Bolle UK Limited, a limited liability company governed by the laws of England; "Bolle UK Acquisition" means the acquisition by Bolle or a wholly owned Subsidiary of all of the issued and outstanding capital shares of Bolle UK pursuant to the Bolle UK Share Purchase Agreement for an aggregate purchase price not to exceed (pound)1,000,000.00 in cash and $125,000 in average closing price (as determined in the Bolle UK Share Purchase Agreement) of shares of Common Stock each year for three years starting on the effective date of the Bolle UK Acquisition; "Bolle UK Share Purchase Agreement" means that certain Share Purchase Agreement intended to be entered into on or before June 30, 1998 between the Borrower and certain individual shareholders of Bolle UK, as amended from time to time, but at all times in form and substance reasonably acceptable to the Agent and the Lenders; "Bolle Warrants" means those warrants to purchase shares of capital stock of the Borrower granted in exchange for the surrender of certain existing warrants to purchase shares of BEC capital stock, each in the form filed as an exhibit to the Borrower's registration statement on Form S-1, registration number 333-40279; "Borrower's Account" means demand deposit account number [__________] with the Agent, or any successor account with the Agent, which may be maintained at one or more offices of the Agent or an agent of the Agent; "Borrowing Notice" means the notice delivered by an Authorized Representative in connection with the Advance of the Term Loan or an Advance under the Revolving Credit Facility, in the form attached hereto as Exhibit D and incorporated herein by reference; "Business Day" means, (i) with respect to any Base Rate Loan, any day which is not a Saturday, Sunday or a day on which banks in the State of New York or State of North Carolina are authorized or obligated by law, executive order or governmental decree to be closed, (ii) with respect to any Eurodollar Rate Loan, any day which is a Business Day, as described in clause (i) above, and on which the relevant international NB BOLLE CREDIT AGREEMENT (FINAL) Doc No: 190295 7 financial markets are open for the transaction of business contemplated by this Agreement in London, England, New York, New York and Charlotte, North Carolina and (iii) with respect to any FF LIBOR Rate Loan, any day which is a Business Day, as described in clause (i) above, and on which the relevant international finance markets are open for the transaction of business contemplated by this Agreement in Paris, France, New York, New York and Charlotte, North Carolina; "Capital Expenditures" means, with respect to the Borrower and its Subsidiaries, for any period the sum of (without duplication) (i) all expenditures (whether paid in cash or accrued as liabilities) by the Borrower or any Subsidiary during such period for items that would be classified as "property, plant or equipment" or comparable items on the consolidated balance sheet of the Borrower and its Subsidiaries, including without limitation all transactional costs incurred in connection with such expenditures provided the same have been capitalized, excluding, however, the amount of any Capital Expenditures paid for with proceeds of casualty insurance as permitted under the Loan Documents as evidenced in writing and submitted to the Agent together with any compliance certificate delivered pursuant to Section 9.1(a) or (b) hereof, and (ii) with respect to any Capital Lease entered into by the Borrower or its Subsidiaries during such period, the present value of the lease payments due under such Capital Lease over the term of such Capital Lease applying a discount rate equal to the interest rate provided in such lease (or in the absence of a stated interest rate, that rate used in the preparation of the financial statements described in Section 9.1(a) hereof), all the foregoing in accordance with Generally Accepted Accounting Principles applied on a Consistent Basis; "Capital Leases" means all leases which have been or should be capitalized in accordance with GAAP, including Statement No. 13 of the Financial Accounting Standards Board and any successor thereof, applied on a Consistent Basis; "Cash Collateral Account Agreement" means a Cash Collateral Account Agreement in the form of Exhibit K-2 between the Borrower and the Agent; "Certificate of Designation" means either or both of the Series A Certificate of Designation and the Series B Certificate of Designation; "Change in Consolidated Working Capital" means, with respect to any determination thereof as at the end of any Fiscal Year of the Borrower, the result obtained, expressed as a positive or negative number as appropriate, by subtracting from Consolidated Working Capital as at such date the amount of Consolidated Working Capital as at the end of the immediately preceding Fiscal Year of the Borrower; "Change of Control" shall have the meaning given to such term in Section 10.16 hereof; NB BOLLE CREDIT AGREEMENT (FINAL) Doc No: 190295 8 "Closing Date" means the date as of which this Agreement is executed by the Borrower, the Lenders and the Agent and on which the conditions set forth in Section 7.1 hereof have been satisfied or waived; "Code" means the Internal Revenue Code of 1986, as amended, any successor provision or provisions and any regulations promulgated thereunder; "Collateral" means the collateral described in the Security Instruments; "Collateral Assignment of Option Agreement" means that certain Collateral Assignment dated as of the Closing Date by the Borrower in favor of the Agent and acknowledged and consented to by The Lantis Corporation, pursuant to which the Borrower has collaterally assigned all of its rights and interests under the Option Agreement to the Agent for the benefit of the Lenders; "Commercial Letter of Credit" means an irrevocable documentary letter of credit issued hereunder for the account of the Borrower; provided that the expiry date of a Commercial Letter of Credit shall not be later than six (6) months subsequent to the date of issuance thereof; "Common Stock" means the common stock, par value $.01 per share, of the Borrower; "Compliance Date" has the meaning assigned to such term in the definition of "Applicable Margin" in this Section 1.1; "Consistent Basis" in reference to the application of Generally Accepted Accounting Principles means the accounting principles observed in the period referred to are comparable in all material respects to those applied in the preparation of the audited financial statements of the Borrower referred to in Section 8.6(a) hereof; "Consolidated Current Assets" means cash and all other assets of the Borrower and its Subsidiaries which would be classified as a current asset as determined on a consolidated basis in accordance with GAAP applied on a Consistent Basis; "Consolidated Current Liabilities" means all liabilities of the Borrower and its Subsidiaries which would be classified as a current liability as determined on a consolidated basis in accordance with GAAP applied on a Consistent Basis. "Consolidated EBITDA" means, with respect to the Borrower and its Subsidiaries for any period of computation thereof, the sum of, without duplication, (i) Consolidated Net Income, (ii) Consolidated Interest Expense, (iii) taxes on income, (iv) amortization, and (v) depreciation less the amount of any change during the immediately preceding Fiscal Year resulting from the evaluation as required by GAAP of the Borrower's investment in Eyecare Products and less up to $3,750,000 in charges related to the change NB BOLLE CREDIT AGREEMENT (FINAL) Doc No: 190295 9 from purchase accounting of certain items previously included in the financial statements of the Borrower under accrued liabilities and long term liabilities, all determined on a consolidated basis in accordance with GAAP applied on a Consistent Basis; "Consolidated Fixed Charge Ratio" means, with respect to the Borrower and its Subsidiaries for the period of computation thereof, the ratio of (i) Consolidated EBITDA for such period less Capital Expenditures for such period to (ii) Consolidated Fixed Charges for such period; provided, however that for each of the first five fiscal quarters ending after the date on which any Permitted Acquisition is effective, the Consolidated Fixed Charge Ratio shall be calculated through the end of and including such fiscal quarter on a pro forma basis giving effect to such Permitted Acquisition for the entire Four-Quarter Period being computed. "Consolidated Fixed Charges" means, with respect to Borrower and its Subsidiaries for any period of computation thereof, the sum of, without duplication, (i) Consolidated Interest Expense, less interest expense incurred with respect to the Subordinated Debt but not payable in cash, during such period, (ii) the principal amount of Consolidated Funded Indebtedness due and payable during such period, (iii) all cash dividends and other cash distributions (other than distributions in the form of any stock (including without limitation capital stock of the Borrower), security, note or other instrument) paid during such period (regardless of when declared) on any shares of capital stock of the Borrower then outstanding, including without limitation its Common Stock and (iv) all payments under Capital Leases made during such period, all determined on a consolidated basis in accordance with GAAP applied on a Consistent Basis; "Consolidated Funded Indebtedness" means, with respect to the Borrower and its Subsidiaries, at any time as of which the amount thereof is to be determined, the sum of (i) Indebtedness for Money Borrowed of the Borrower and its Subsidiaries at such time and (ii) the face amount of all outstanding letters of credit issued for the account of the Borrower or any of its Subsidiaries and all obligations (to the extent not duplicative) arising under such letters of credit, all determined on a consolidated basis in accordance with GAAP applied on a Consistent Basis; "Consolidated Interest Expense" means, with respect to any period of computation thereof, the gross interest expense of the Borrower and its Subsidiaries, including without limitation (i) the current amortized portion of debt discounts to the extent included in gross interest expense, (ii) the current amortized portion of all fees (including, without limitation, fees payable in respect of a Swap Agreement) payable in connection with the incurrence of Indebtedness to the extent included in gross interest expense and (iii) the portion of any payments made in connection with Capital Leases allocable to interest expense, all determined on a consolidated basis in accordance with GAAP applied on a Consistent Basis; "Consolidated Leverage Ratio" means, as of the date of computation thereof, the ratio of (i) Consolidated Funded Indebtedness (as determined as at such date) minus the NB BOLLE CREDIT AGREEMENT (FINAL) Doc No: 190295 10 FG Mortgage Debt (as determined at such date) to (ii) Consolidated EBITDA (for the Four-Quarter Period ending on (or most recently prior to) such date); provided, however that for each of the first five fiscal quarters ending after the date on which any Permitted Acquisition is effective, the Consolidated Leverage Ratio shall be calculated through the end of and including such fiscal quarter on a pro forma basis giving effect to such Permitted Acquisition for the entire Four-Quarter Period being computed. "Consolidated Net Income" means, for any period of computation thereof, the gross revenues from operations of the Borrower and its Subsidiaries (including payments received by the Borrower and its Subsidiaries of (i) interest income, and (ii) dividends and distributions made in the ordinary course of their businesses by Persons in which investment is permitted pursuant to this Agreement and not related to an extraordinary event) less all operating and non-operating expenses (not related to extraordinary events) of the Borrower and its Subsidiaries including taxes on income, all determined on a consolidated basis in accordance with GAAP applied on a Consistent Basis; but (A) excluding (for all purposes other than (x) compliance with Section 11.3 hereof and (y) the computation of Consolidated EBITDA utilized to determine Excess Cash Flow) in such calculation (1) the amount of any material net gains on the sale, conversion or other disposition of capital assets (other than the common stock of Eyecare Products), (2) the amount of any material net gains on the acquisition, retirement, sale or other disposition of capital stock and other securities of the Borrower or its Subsidiaries, (3) the amount of any material net gains on the collection of proceeds of life insurance policies, (4) any write-up of any asset, and (5) any other net gain of an extraordinary nature and (B) excluding (for all purposes other than compliance with Section 11.3 hereof) all proceeds of the sale of the AAi Preferred Stock, all as determined in accordance with GAAP applied on a Consistent Basis; "Consolidated Net Worth" means at any time as of which the amount thereof is to be determined, the sum of the following in respect of the Borrower and its Subsidiaries (determined on a consolidated basis and excluding intercompany items among the Borrower and its Subsidiaries and any upward adjustment after the Closing Date due to revaluation of assets): (i) the amount of issued and outstanding share capital, plus (ii) the amount of additional paid-in capital and retained income (or, in the case of a deficit, minus the amount of such deficit), plus (iii) the amount of any foreign currency translation adjustment (if positive, or, if negative, minus the amount of such translation adjustment) minus (iv) the amount of any treasury stock, all as determined in accordance with GAAP applied on a Consistent Basis; "Consolidated Pretax Income" means, for any period of computation thereof, Consolidated Net Income plus all taxes on income of the Borrower and its domestic Subsidiaries, all determined on a consolidated basis in accordance with GAAP applied on a Consistent Basis; NB BOLLE CREDIT AGREEMENT (FINAL) Doc No: 190295 11 "Consolidated Total Assets" means, as at any time of calculation thereof, the net book value of all assets of the Borrower and its domestic Subsidiaries as determined on a consolidated basis in accordance with GAAP applied on a Consistent Basis; "Consolidated Working Capital" means, as of any date on which the amount thereof is to be determined, the excess of Consolidated Current Assets over Consolidated Current Liabilities. "Contingent Obligation" of any Person means all contingent liabilities (other than obligations of the Borrower and its Subsidiaries with respect to the fulfillment of purchase orders issued in the ordinary course of business) required (or which, upon the creation or incurring thereof, would be required) to be included in the consolidated financial statements (including footnotes) of such Person in accordance with GAAP applied on a Consistent Basis, including Statement No. 5 of the Financial Accounting Standards Board, and except with respect to the calculation of Contingent Obligations as required under the definition of "Solvent," any obligation of such Person guaranteeing or in effect guaranteeing any Indebtedness, dividend or other obligation of any other Person (the "primary obligor") in any manner, whether directly or indirectly, including obligations of such Person however incurred: (i) to purchase such Indebtedness or other obligation or any property or assets constituting security therefor; (ii) to advance or supply funds in any manner (A) for the purchase or payment of such Indebtedness or other obligation, or (B) to maintain a minimum working capital, net worth or other balance sheet condition or any income statement condition of the primary obligor; (iii) to grant or convey any Lien, security interest, pledge, charge or other encumbrance on any property or assets of such Person to secure payment of such Indebtedness or other obligation; (iv) to lease property or to purchase securities or other property or services primarily for the purpose of assuring the owner or holder of such Indebtedness or obligation of the ability of the primary obligor to make payment of such Indebtedness or other obligation; or (v) otherwise to assure the owner of the Indebtedness or such obligation of the primary obligor against loss in respect thereof. ; provided, however, "Contingent Obligation" shall not include any obligation which is required to be disclosed as a liability in the financial statements (or footnotes thereto) of the Borrower pursuant to Statements Nos. 123 or 107 of the Financial Accounting Standards Board. With respect to Contingent Obligations, such liabilities shall be computed at the amount which, in light of all the facts and circumstances existing at the NB BOLLE CREDIT AGREEMENT (FINAL) Doc No: 190295 12 time, represent the present value of the amount which can reasonably be expected to become an actual or matured liability; "Continue", "Continuation", and "Continued" shall refer to the continuation pursuant to Sections 2.11 or 3.11 hereof of a Fixed Rate Loan of one Type as a Fixed Rate Loan of the same Type from one Interest Period to the next Interest Period. "Control Subsidiary" means any entity not constituting a Subsidiary hereunder but which would otherwise be included as a subsidiary of the Borrower for consolidated financial reporting purposes in accordance with GAAP; "Convert", "Conversion", and "Converted" shall refer to a conversion pursuant to Section 2.11 or 3.11 or Article V of one Type of Loan into another Type of Loan. "Core Business" means, with respect to the Borrower and its Subsidiaries, the business of manufacturing, subcontracting, selling, distributing and marketing active lifestyle products, including sunglasses, sport related eyewear, military and industrial protective eyewear and nonprescription eyeglasses (including frames, accessories and other parts thereof); "Deed of Trust" means, collectively (or individually as the context may indicate), each deed of trust or mortgage or similar agreement executed by the Borrower or any Subsidiary (whether of even date herewith or delivered after the Closing Date pursuant to Article VI or Section 9.21 hereof) in favor of the Agent in the form of Exhibit H attached hereto and incorporated herein by reference, each as from time to time amended, supplemented or replaced; "Default" means any event or condition which, with the giving or receipt of notice or lapse of time or both, would constitute an Event of Default hereunder; "Default Rate" means (i) with respect to each Eurodollar Rate Loan, until the end of the Interest Period applicable thereto, a rate of two percent (2%) above the Eurodollar Rate applicable to such Loan, and thereafter at a rate of interest per annum which shall be two percent (2%) above the Base Rate, (ii) with respect to each FF LIBOR Rate Loan, a rate of two percent (2%) above the FF LIBOR Rate applicable to such Loan, (iii) with respect to Base Rate Loans, at a rate of interest per annum which shall be two percent (2%) above the Base Rate, and (iv) in any case, the maximum rate permitted by law, if lower; "Determination Date" means the last day of each fiscal quarter of the Borrower; "Direct Foreign Control Subsidiary" means any direct Foreign Control Subsidiary of the Borrower or a Domestic Subsidiary; NB BOLLE CREDIT AGREEMENT (FINAL) Doc No: 190295 13 "Direct Foreign Subsidiary" means any direct Foreign Subsidiary of the Borrower or a Domestic Subsidiary; "Disbursing Bank" means any banking institution approved by the Agent located within France; "Dollar Equivalent Amount" means, on any date, the amount of Dollars into which a French Franc amount would be converted based on the Spot Rate of Exchange on such date; "Dollar Loan" means any Revolving Loan denominated in Dollars; "Dollar Value" means (a) with respect to any Dollar Loan, the Dollar amount of such Loan, (b) with respect to any FF Revolving Loan and the Term Loan, the Dollar Equivalent Amount of such Loan, and (c) with respect to any Letter of Credit, the Dollar amount of all Letter of Credit Outstandings attributable to such Letter of Credit, all as recorded in the Agent's records pursuant to Section 2.2(b)(iv) and 3.1(b) hereof; "Dollars" and the symbol "$" mean dollars constituting legal tender for the payment of public and private debts in the United States; "Domestic Control Subsidiary" means any Control Subsidiary which is organized under the laws of one of the states comprising the United States of America, any territory thereof or the District of Columbia; "Domestic Subsidiary" means any Subsidiary that is organized under the laws of one of the states comprising the United States of America, any territory thereof or the District of Columbia; "Eligible Assignee" means (i) a Lender; (ii) an affiliate of a Lender; and (iii) any other Person approved by the Agent and, unless an Event of Default has occurred and is continuing at the time any assignment is effected in accordance with Section 12.1 hereof, the Borrower, such approval not to be unreasonably withheld or delayed by the Borrower and such approval to be deemed given by the Borrower within five Business Days after written notice of such proposed assignment has been provided by the assigning Lender to the Borrower; provided, however, that (a) if such Person is a foreign entity, it must have a zero rate of withholding and (b) neither the Borrower nor an affiliate of the Borrower shall qualify as an Eligible Assignee; "Eligible Securities" means the following obligations and any other obligations previously approved in writing by the Agent: (i) Government Securities; NB BOLLE CREDIT AGREEMENT (FINAL) Doc No: 190295 14 (ii) obligations of any corporation organized under the laws of any state of the United States or under the laws of any other nation, payable in the United States, expressed to mature not later than 90 days following the date of issuance thereof and rated in an investment grade rating category by S&P and Moody's; (iii) interest bearing demand or time deposits issued by any Lender or certificates of deposit, bankers acceptances and other "money market instruments" maturing within one hundred eighty (180) days from the date of issuance thereof and issued by a bank or trust company organized under the laws of the United States or of any state thereof having capital surplus and undivided profits aggregating at least $1,000,000; (iv) prime commercial paper of the Agent, each Lender or their respective affiliates, and prime commercial paper rated P-1 by Moody's, or A-1 by S&P; (v) Repurchase Agreements; (vi) Municipal Obligations; "Employee Benefit Plan" means any employee benefit plan within the meaning of Section 3(3) of ERISA which (a) is maintained for employees of the Borrower or is assumed by the Borrower in connection with any Acquisition or any of its ERISA Affiliates or (b) has at any time since November 1, 1995 been maintained for the employees of the Borrower or any current or former ERISA Affiliate; "Environmental Laws" means any federal, state or local statute, law, ordinance, code, rule, regulation, order or decree regulating, relating to, or imposing liability or standards of conduct concerning, any environmental matters or conditions, environmental protection or conservation, including without limitation, the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended; the Superfund Amendments and Reauthorization Act of 1986, as amended; the Resource Conservation and Recovery Act, as amended; the Toxic Substances Control Act, as amended; the Clean Air Act, as amended; the Clean Water Act, as amended; together with all regulations promulgated thereunder, and any other "Superfund" or "Superlien" law; "Equity Offering" means a public or private offering of equity securities (including, without limitation, any security or investment not constituting Indebtedness exchangeable, exercisable or convertible for or into, or otherwise entitling the holder to receive, equity securities) of the Borrower or any Subsidiary (other than securities issued to the Borrower or another Subsidiary); provided, however, the term "Equity Offering" shall not include (i) the portion of any such offering that does not result in any Net Proceeds to the Borrower or any Subsidiary and (ii) any issuance of equity securities in connection with the exercise of stock options or warrants granted to, or purchase of restricted stock by, eligible participants under the Stock Option Plan; NB BOLLE CREDIT AGREEMENT (FINAL) Doc No: 190295 15 "ERISA" means the Employee Retirement Income Security Act of 1974, as amended from time to time, and any successor statute and all rules and regulations promulgated thereunder; "ERISA Affiliate", as applied to the Borrower, means any Person or trade or business which is a member of a group which is under common control with the Borrower, who together with the Borrower, is treated as a single employer within the meaning of Section 414(b) and (c) of the Code; "Eurodollar Rate" means the interest rate per annum determined pursuant to the following formula: Eurodollar Rate = Interbank Offered Rate Applicable ------------------------ + Margin 1 - Reserve Requirement "Eurodollar Rate Loan" means any Revolving Loan that bears interest at the Eurodollar Rate; "Event of Default" means any of the occurrences set forth as such in Section 12.1 hereof; "Excess Cash Flow" means, with respect to the Borrower and its Subsidiaries for any Fiscal Year, the difference of (i) Consolidated EBITDA for such period (including therein any net gain or loss, as applicable, of an extraordinary nature otherwise excluded from the calculation thereof in the definition of "Consolidated Net Income") minus (ii) the sum of (A) the Change in Consolidated Working Capital as at the end of such Fiscal Year, provided any positive Change in Consolidated Working Capital shall not exceed $2,500,000 for any Fiscal Year, plus (B) Capital Expenditures, plus (C) Consolidated Interest Expense, plus (D) required principal payments on Consolidated Funded Indebtedness and optional prepayments of the Term Loan, plus (E) taxes on income accrued during such period, plus (F) all cash paid as part of the cost of any Acquisition plus (G) all amounts included in the calculation of Consolidated EBITDA for the purposes of this definition to the extent such amounts are subject to the mandatory prepayment provisions of Section 2.6(a), (b), (c) or (e) hereof; "Existing Credit Agreement" has the meaning given to such term in the recitals hereto; "Existing Indebtedness" means the Indebtedness for Money Borrowed of the Borrower described on Schedule 10.1 giving effect to the Assignment and Amendment; "Eyecare Products" means Eyecare Products Plc, a public liability company incorporated in England (Registration Number 2158452); NB BOLLE CREDIT AGREEMENT (FINAL) Doc No: 190295 16 "Facilities" means the Term Loan Facility, the Revolving Credit Facility and the Letter of Credit Facility; "Facility Termination Date" means such date as all of the following shall have occurred: (a) the Borrower shall have permanently terminated the Revolving Credit Facility by payment in full of all Revolving Credit Outstandings and Letter of Credit Outstandings, together with all accrued and unpaid interest thereon, except for such issued and undrawn Letters of Credit as have been fully cash collateralized in a manner consistent with the terms of Section 12.1(l)(B), (b) the Borrower shall have paid all Term Loan Outstandings in full, together with all accrued and unpaid interest thereon, (c) all Swap Agreements shall have been terminated, expired or cash collateralized, (d) all Term Loan Commitments, Revolving Credit Commitments and Letter of Credit Commitments shall have terminated or expired and (e) the Borrower shall have fully, finally and irrevocably paid and satisfied in full all Obligations (other than Obligations consisting of continuing indemnities and other contingent Obligations of the Borrower or any Guarantor that may be owing to the Lenders pursuant to the Loan Documents and expressly survive termination of this Agreement); "Federal Funds Rate" means, for any day, the rate per annum (rounded upward to the nearest 1/100th of 1%) equal to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers on such day, as published by the Federal Reserve Bank of New York on the Business Day next succeeding such day, provided that (a) if such day is not a Business Day, the Federal Funds Rate for such day shall be such rate on such transactions on the next preceding Business Day, and (b) if no such rate is so published on such next succeeding Business Day, the Federal Funds Rate for such day shall be the average rate quoted to the Agent on such day on such transactions as determined by the Agent in a commercially reasonable manner; "FF Equivalent Amount" means, on any date, the amount of French Francs into which a Dollar amount would be converted based on the applicable Spot Rate of Exchange on such date. "FF LIBOR Rate" means the interest rate per annum calculated according to the following formula: FF = Interbank Offered Rate Applicable LIBORRate ------------------------ + Margin 1 - Reserve Requirement "FF LIBOR Rate Loans" means any FF LIBOR Rate Revolving Loans and any Segment; "FF LIBOR Rate Revolving Loans" means any Revolving Loan that bears interest at the FF LIBOR Rate; NB BOLLE CREDIT AGREEMENT (FINAL) Doc No: 190295 17 "FF Loan" means the Term Loan and any FF Revolving Loan; "FF Rate Revolving Loan Valuation Date" shall have the meaning ascribed to such term in Section 3.1(b) hereof; "FF Revolving Loan" means any Revolving Loan denominated in French Francs; "FF Revolving Loan Outstandings" means, as of any date of determination, the aggregate principal amount of all FF Revolving Loans then outstanding; "FF Revolving Loan Valuation Date" has the meaning ascribed to such term in Section 3.1(b) hereof; "FG Mortgage Debt" means all Indebtedness of the Borrower assumed thereby pursuant to the Bill of Sale and initially incurred by ORC Management and secured by that certain Deed of Trust and Security Agreement dated as of March 31, 1995 by Foster Grant Group, L.P. in favor of Wells Fargo (Texas), N.A., successor by merger to First Interstate Bank of Texas, N.A., as amended; "Fiscal Year" means the twelve (12) month fiscal period of the Borrower ended December 31 of each calendar year; "Fixed Rate Loan" means any Fixed Rate Revolving Loan and any Segment; "Fixed Rate Revolving Loan" means any Eurodollar Rate Loan and any FF LIBOR Rate Revolving Loan; "Foreign Benefit Law" means any applicable statute, law, ordinance, code, rule, regulation, order or decree of any foreign nation or any province, state, territory, protectorate or other political subdivision thereof regulating, relating to, or imposing liability or standards of conduct concerning, any Employee Benefit Plan; "Foreign Control Subsidiary" means any Control Subsidiary organized under the laws of any jurisdiction other than one of the states comprising the United States of America, any territory thereof or the District of Columbia; "Foreign Subsidiary" means any Subsidiary organized under the laws of any jurisdiction other than one of the states comprising the United States of America, any territory thereof or the District of Columbia; "Four-Quarter Period" means a period of four full consecutive fiscal quarters of the Borrower taken together as one accounting period; NB BOLLE CREDIT AGREEMENT (FINAL) Doc No: 190295 18 "French GAAP" those generally accepted accounting principles which from time to time have substantive authoritative support in France and are applicable in the circumstances as of the date of delivery of any applicable financial statements hereunder; "French Francs" or "FF" means the official currency of France; "GAAP" or "Generally Accepted Accounting Principles" means those generally accepted principles of accounting set forth in pronouncements of the Financial Accounting Standards Board, the Accounting Principles Board, the American Institute of Certified Public Accountants or which have other substantial authoritative support and are applicable in the circumstances as of the date of a report, as such principles are from time to time supplemented and amended, subject to compliance at all times with Section 1.2 hereof; "Government Securities" means direct obligations of, or obligations the timely payment of principal and interest on which are fully and unconditionally guaranteed by, the United States of America; "Governmental Authority" shall mean any Federal, state, municipal, national or other governmental department, commission, board, bureau, agency or instrumentality or political subdivision thereof or any entity or officer exercising executive, legislative or judicial, regulatory or administrative functions of or pertaining to any government or any court, in each case whether a state of the United States, the United States or foreign nation, state, province or other governmental instrumentality; "Guarantor" means Bolle America, ORC Management and any other Domestic Subsidiary now existing or hereafter created or acquired; "Guaranty" means, collectively (or individually as the context may indicate), (i) the Second Amended and Restated Guaranty Agreement executed by Bolle America and ORC Management on the Closing Date and (ii) each Guaranty Agreement executed by a Guarantor (whether of even date herewith or delivered after the Closing Date pursuant to Section 9.21 hereof and whether executed individually or jointly and severally with other Guarantors) in favor of the Agent guaranteeing in whole or in part the payment of the Obligations, substantially in the form of Exhibit E attached hereto and incorporated herein by reference, as from time to time amended, supplemented or replaced; "Hazardous Material" means and includes any pollutant, contaminant, or hazardous, toxic or dangerous waste, substance or material (including without limitation petroleum products, asbestos-containing materials and lead), the generation, handling, storage, transportation, disposal, treatment, release, discharge or emission of which is subject to any Environmental Law; "Hedging Obligations" means any and all obligations of the Borrower, whether absolute or contingent and howsoever and whensoever created, arising, evidenced or NB BOLLE CREDIT AGREEMENT (FINAL) Doc No: 190295 19 acquired (including all renewals, extensions and modifications thereof and substitutions therefor), under (i) any and all agreements, devices or arrangements designed to protect at least one of the parties thereto from the fluctuations of interest rates, currency exchange rates or forward rates applicable to such party's commodities, assets, liabilities or exchange transactions, including, but not limited to, Dollar-denominated or cross-currency interest rate exchange agreements, forward currency exchange agreements, interest rate cap or collar protection agreements, forward rate currency or interest rate options, puts, warrants and those commonly known as interest rate "swap" agreements, and forward commodity price options, puts, warrants and those commonly known as commodity "swap" agreements; and (ii) any and all cancellations, buybacks, reversals, terminations or assignments of any of the foregoing; "Indebtedness" of a Person shall mean, without duplication, (i) all Indebtedness for Money Borrowed, (ii) obligations of such Person arising under acceptance facilities, (iii) the undrawn face amount of, and unpaid reimbursement obligations in respect of, all letters of credit issued for the account of such Person, (iv) all obligations of such Person upon which interest charges are customarily paid, other than trade payables incurred in the ordinary course of business, operating leases and taxes, (v) all obligations of such Person under conditional sale or other title retention agreements relating to property purchased by such Person (even though the rights and remedies of the seller or lender under such agreement in the event of default are limited to repossession or sale of such property), (vi) all executory obligations of such Person in respect of Hedging Obligations and (vii) all Contingent Obligations in respect of Indebtedness of other Persons; "Indebtedness for Money Borrowed" means for any Person all indebtedness in respect of money borrowed, including without limitation all Capital Leases and the deferred purchase price of any property or asset, evidenced by a promissory note, bond, debenture or similar written obligation for the payment of money, other than trade payables incurred in the ordinary course of business (including, but not limited to all conditional sales or similar title retention agreements); "Intellectual Property" has the meaning given to such term in Section 8.13 hereof; "Intellectual Property Assignments" means those certain Assignments of Patents, Trademarks, Copyrights and Licenses in the form attached to the Intellectual Property Security Agreement as Exhibit A, to be filed upon acceleration of the Obligations hereunder, as from time to time amended, supplemented or replaced; "Intellectual Property Security Agreement" means, collectively (or individually as the context may indicate), (i) the Second Amended and Restated Intellectual Property Security Agreement dated as of the Closing Date executed by the Borrower and its Domestic Subsidiaries and (ii) each other Intellectual Property Security Agreement executed by the Borrower or a Domestic Subsidiary (whether of even date herewith or delivered after the Closing Date pursuant to Article VI or Section 9.21 hereof and whether executed individually or jointly and severally with other Subsidiaries) in favor of the Agent NB BOLLE CREDIT AGREEMENT (FINAL) Doc No: 190295 20 to collaterally secure payment and performance of its respective obligations hereunder and under the Guaranty, as applicable, substantially in the form of Exhibit M attached hereto and incorporated herein by reference, as from time to time amended, supplemented or replaced; "Interbank Offered Rate" means, (i) for any Eurodollar Rate Loan for any Interest Period therefor, the rate per annum (rounded upwards, if necessary, to the nearest 1/100 of 1%) appearing on Telerate Page 3750 (or any successor page) as the London interbank offered rate for deposits in Dollars at approximately 11:00 a.m. (London time) two (2) Business Days prior to the first day of such Interest Period for a term comparable to such Interest Period. If for any reason such rate is not available, the term "Interbank Offered Rate" shall mean, for any Eurodollar Rate Loan for any Interest Period therefor, the rate per annum (rounded upwards, if necessary, to the nearest 1/100 of 1%) appearing on Reuters Screen LIBO Page as the London interbank offered rate for deposits in Dollars at approximately 11:00 a.m. (London time) two (2) Business Days prior to the first day of such Interest period for a term comparable to such Interest Period; provided, however, if more than one rate is specified on Reuters Screen LIBO Page, the applicable rate shall be the arithmetic mean of all such rates (rounded upwards, if necessary, to the nearest 1/100 of 1%); and (ii) for any FF LIBOR Rate Loan for any Interest Period therefor, the rate per annum (rounded upwards, if necessary, to the nearest 1/100 of 1%) appearing on Telerate Page 3740 (or any successor page) as the London interbank offered rate for deposits in French Francs at approximately 11:00 a.m. (London time) two (2) Business Days prior to the first day of such Interest Period for a term comparable to such Interest Period. If for any reason such rate is not available, the term "Interbank Offered Rate" shall mean, for any FF LIBOR Rate Loan, the rate determined by the Agent in its reasonable sole discretion; "Intercompany Notes" means those notes from time to time evidencing Indebtedness owed to the Borrower or any Domestic Subsidiary of the Borrower from any foreign Subsidiary in an aggregate amount not in excess of FF 204,171,000, substantially in the form of Exhibit T hereto; "Intercompany Note Assignment" means that certain Amended and Restated Collateral Assignment of Intercompany Notes between the Borrower, certain Subsidiaries and the Agent for the benefit of the Lenders dated as of the date hereof in the form of Exhibit S hereto and incorporated herein by reference; "Interest Period" for each Fixed Rate Loan means a period commencing on the date such Fixed Rate Loan is made or converted and each subsequent period commencing on the last day of the immediately preceding Interest Period for such Fixed Rate Loan, and NB BOLLE CREDIT AGREEMENT (FINAL) Doc No: 190295 21 ending, at the Borrower's option, on the date one, two, three or six months thereafter as notified to the Agent by the Authorized Representative three (3) Business Days prior to the beginning of such Interest Period; provided, that, (A) if the Authorized Representative fails to notify the Agent of the length of an Interest Period three (3) Business Days prior to the first day of such Interest Period, the Interest Period for such Loan shall be deemed to be one month; (B) if an Interest Period for a Fixed Rate Loan would end on a day which is not a Business Day such Interest Period shall be extended to the next Business Day (unless such extension would cause the applicable Interest Period to end in the succeeding calendar month, in which case such Interest Period shall end on the next preceding Business Day); (C) any Interest Period which begins on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall end on the last Business Day of a calendar month; (D) no Interest Period shall extend past the Revolving Credit Termination Date or the Term Loan Termination Date; (E) on any day, with respect to all Loans, there shall be not more than eight (8) Interest Periods in effect; "Interest Rate Selection Notice" means the notice delivered by an Authorized Representative in connection with the election of a subsequent interest period for any Fixed Rate Loan or the conversion of any Eurodollar Rate Loan into a Base Rate Loan or the conversion of any Base Rate Loan into a Eurodollar Rate Loan, in the form of Exhibit F attached hereto and incorporated herein by reference; "Issuing Bank" means NationsBank, or any successor or replacement bank, as issuer of Letters of Credit in accordance with Article 4 hereof; "Landlord Waivers" means, collectively, each of the Landlord Waivers delivered by the landlord of each material facility leased by the Borrower and any Guarantor listed on Schedule 1 hereto or arising after the Closing Date and delivered by the Borrower and the Guarantors, as applicable, pursuant to Article VI or Section 9.21 hereof, substantially in the form of Exhibit P hereto and incorporated herein by reference; "LC Account Agreement" means the LC Account Agreement dated as of the date hereof between the Borrower and the Agent in the form of Exhibit K-1 hereto, as amended, supplemented or replaced from time to time; NB BOLLE CREDIT AGREEMENT (FINAL) Doc No: 190295 22 "Lease Assignments" means, collectively, each Collateral Assignment of Lease assigning to the Agent each material facility lease of the Borrower and any Guarantor listed on Schedule 1 hereto or entered into after the Closing Date and delivered by the Borrower and the Guarantors, as applicable, pursuant to Article VI hereof to collaterally secure the Borrower's Obligations and the Guarantors' Obligations under the Guaranty, substantially in the form of Exhibit Q hereto and incorporated herein by reference; "Letter of Credit" means any Standby Letter of Credit or Commercial Letter of Credit issued by Issuing Bank for the account of the Borrower as described in Article IV hereof; "Letter of Credit Commitment" means with respect to each Lender, the obligation of such Lender to acquire Participations up to an aggregate stated amount at any one time outstanding equal to such Lender's Applicable Commitment Percentage of the Total Letter of Credit Commitment as the same may be increased or decreased from time to time pursuant to this Agreement; "Letter of Credit Facility" means the facilities described in Article IV hereof providing for the issuance by Issuing Bank for the account of the Borrower of Letters of Credit in an aggregate stated amount at any time outstanding not exceeding the Total Letter of Credit Commitment; "Letter of Credit Outstandings" means all undrawn amounts of Letters of Credit plus Reimbursement Obligations; "License Agreement" means, collectively (or individually as the context may indicate), (i) that certain Distributorship Agreement dated December 15, 1992, as amended thereafter and amended as of July 10, 1997 by that certain Amendment to Distributorship Agreement, each between Bolle America and Bolle SNC pursuant to which Bolle America has received a worldwide unrestricted, non-exclusive license to all of the trademarks, copyrights and patents of Bolle France, and (ii) each other similar distributorship or license agreement to which the Borrower or a Subsidiary is a party relating to the trademarks, copyrights or patents of Bolle France, in each case which license agreements shall permit the assignment thereof to the Agent for the benefit of the Lenders and each of its further assignees pursuant to the Intellectual Property Security Agreement and the Intellectual Property Assignments and shall have a scheduled expiration or termination date occurring on or after the Scheduled Maturity Date; "Lien" means any interest in property securing any obligation owed to, or a claim by, a Person other than the owner of the property, whether such interest is based on the common law, statute or contract, and including but not limited to the lien or security interest arising from a mortgage, encumbrance, pledge, security agreement, conditional sale or trust receipt or a lease, consignment or bailment for security purposes. For the purposes of this Agreement, the Borrower and its Subsidiaries shall be deemed to be the owners of any property which either of them have acquired or hold subject to a NB BOLLE CREDIT AGREEMENT (FINAL) Doc No: 190295 23 conditional sale agreement, financing lease, or other arrangement pursuant to which title to the property has been retained by or vested in some other Person for security purposes; "Loan" or "Loans" means any of the Revolving Loans or the Term Loan; "Loan Documents" means this Agreement, the Notes, the Guaranty, the Security Instruments and all other instruments and documents now or hereafter executed or delivered to and in favor of any Lender or the Agent in connection with the Loans or the Letters of Credit made, issued or created under this Agreement, all as from time to time amended, supplemented or replaced; "Management Services Agreement" means that certain Management Services Agreement between the Borrower and BEC substantially in the form attached to the Merger Agreement; "Material Adverse Effect" means a material adverse effect on the business, properties, operations or condition, financial or otherwise, of the Borrower and its Subsidiaries on a consolidated basis; "Material Subsidiary" means any direct or indirect Domestic Subsidiary of the Borrower which (i) has total assets equal to or greater than 5% of Consolidated Total Assets (calculated as of the most recent fiscal period with respect to which the Agent shall have received financial statements required to be delivered pursuant to Sections 9.1(a) or (b) (or if prior to delivery of any financial statements pursuant to such Sections, then calculated with respect to the Fiscal Year end financial statements referenced in Section 8.6 hereof) (the "Required Financial Information")) or (ii) has pretax income equal to or greater than 5% of Consolidated Pretax Income (each calculated for the most recent period for which the Agent has received the Required Financial Information); provided, however, that notwithstanding the foregoing, the term "Material Subsidiaries" shall mean domestic Subsidiaries of the Borrower that together with the Borrower have assets equal to not less than 95% of Consolidated Total Assets (calculated as described above) and net income of not less than 95% of Consolidated Pretax Income (calculated as described above); provided further that if more than one combination of domestic Subsidiaries satisfies such threshold, then those Subsidiaries so determined to be "Material Subsidiaries" shall be specified by the Borrower; "Moody's" means Moody's Investors Service, Inc.; "Mortgages Over Shares" means (i) that certain Mortgage Over Shares of even date herewith by the Borrower in favor of the Agent with respect to the shares of Eyecare Products and (ii) that certain Mortgage Over Shares of even date herewith by the Borrower in favor of the Agent with respect to the shares of Tavister. "Mortgaged Property" means certain real property subject to the FG Mortgage Debt; NB BOLLE CREDIT AGREEMENT (FINAL) Doc No: 190295 24 "Multiemployer Plan" means a "multiemployer plan" as defined in Section 4001(a)(3) of ERISA to which the Borrower or any ERISA Affiliate is making, or is accruing an obligation to make, contributions or has made, or been obligated to make, contributions within the preceding six (6) years; "Municipal Obligations" means general obligations issued by, and supported by the full taxing authority of, any state of the United States of America or of any municipal corporation or other public body organized under the laws of any such state which are rated, in their capacity as issuer of general obligations, in the highest investment rating category by both S&P and Moody's; "NMS" means NationsBanc Montgomery Securities LLC and its successors; "Net Proceeds" (a) from any Equity Offering means cash payments received by the Borrower therefrom as and when received, net of all legal, accounting, banking and underwriting fees and expenses, commissions, discounts and other issuance expenses incurred in connection therewith and all taxes required to be paid or accrued as a consequence of such issuance; and (b) from any Asset Disposition or option exercised under the Option Agreement means cash payments received by the Borrower therefrom (including any cash payments received pursuant to any note or other debt security received in connection with any Asset Disposition) as and when received, net of (i) all legal fees and expenses and other fees and expenses paid to third parties and incurred in connection therewith, (ii) all taxes required to be paid or accrued as a consequence of such sale and (iii) with respect to an Asset Disposition only, amounts applied to repayment of Indebtedness (other than the Obligations) secured by a Lien on the asset or property disposed; "Notes" means, collectively, the Term Notes and the Revolving Notes; "Obligations" means the obligations, liabilities and Indebtedness of the Borrower with respect to (i) the principal and interest on the Loans as evidenced by the Notes, (ii) the Reimbursement Obligations, (iii) all liabilities of Borrower to any Lender which arise under a Swap Agreement, and (iv) the payment and performance of all other obliga tions, liabilities and Indebtedness of the Borrower to the Lenders or the Agent hereunder, under any one or more of the other Loan Documents or otherwise with respect to the Loans; "Operating Documents" means with respect to any corporation, limited liability company, partnership, limited partnership, limited liability partnership or other legally authorized incorporated or unincorporated entity, the bylaws, operating agreement, partnership agreement, limited partnership agreement of such entity; "Option Agreement" means that certain Option Agreement dated November 14, 1996 between the Borrower and The Lantis Corporation, as amended from time to time; NB BOLLE CREDIT AGREEMENT (FINAL) Doc No: 190295 25 "ORC Management" means ORC Management Corporation, a Delaware corporation; "Organizational Documents" means with respect to any corporation, limited liability company, partnership, limited partnership, limited liability partnership or other legally authorized incorporated or unincorporated entity, the articles of incorporation, certificate of incorporation, articles of organization or certificate of limited partnership of such entity; "Outstandings" means, at any time of determination, the sum of the Term Loan Outstandings, the Revolving Credit Outstandings and the Letter of Credit Outstandings; "Parkhurst" means Parkhurst Oaks Ltd.; "Participation" means, with respect to any Lender (other than Issuing Bank), the extension of credit represented by the participation of such Lender hereunder in the liability of Issuing Bank in respect of a Letter of Credit issued by Issuing Bank in accordance with the terms hereof; "PBGC" means the Pension Benefit Guaranty Corporation or any successor thereto; "Pension Plan" means any Employee Benefit Plan, other than a Multiemployer Plan, which is subject to the provisions of Title IV of ERISA or Section 412 of the Code and which is, or was since October 16, 1992, maintained for employees of the Borrower or any ERISA Affiliate; "Permitted Acquisition" means the Bolle Australia Acquisition and the Bolle UK Acquisition if consummated and effective on or prior to June 30, 1998 pursuant to the Share Purchase Agreements and as to which all applicable conditions specified in Section 7.1 and Section 7.2 hereof shall have been satisfied; "Permitted Indebtedness" has the meaning assigned to such term in Section 10.1 hereof; "Permitted Liens" has the meaning assigned to such term in Section 10.2 hereof; "Person" means an individual, partnership, corporation, trust, unincorporated organization, association, joint venture or a government or agency or political subdivision thereof; "Pledged Stock" means (i) all of the capital stock and related rights and interests directly or indirectly owned by the Borrower of each direct and indirect Domestic Subsidiary and Domestic Control Subsidiary, (ii) all of the capital stock and related rights and interests of Eyecare Products Plc owned by the Borrower, (iii) all of the AAi NB BOLLE CREDIT AGREEMENT (FINAL) Doc No: 190295 26 Preferred Stock (iv) 65% of the Voting Stock and 100% of the nonvoting capital stock and related interests and rights directly or indirectly owned by the Borrower of each Direct Foreign Subsidiary and Direct Foreign Control Subsidiary, and (v) 100% of the capital stock and related interests and rights directly or indirectly owned by the Borrower of any Foreign Subsidiary or Foreign Control Subsidiary to the extent such action would not result in any material adverse tax impact on the Borrower in each case now or hereafter pledged by the Borrower and certain Subsidiaries pursuant to the Stock Pledge Agreement; "Preferred Stock" means, collectively, the Series A Preferred Stock and the Series B Preferred Stock; "Prime Rate" means the per annum rate of interest established from time to time by NationsBank as its prime rate, which rate may not be the lowest rate of interest charged by NationsBank to its customers; "Principal Office" means the office of the Agent at NationsBank, National Association, Independence Center, 15th Floor, NC1 001-15-04, Charlotte, North Carolina 28255, Attention: Agency Services, or such other office and address as the Agent may from time to time designate in writing; "Regulation D" means Regulation D of the Board as the same may be amended or supplemented from time to time; "Regulatory Change" means any change in, or the adoption or making of new, United States Federal or state laws or regulations (including Regulation D and capital adequacy regulations) or foreign laws or regulations or the adoption or making after such date of any interpretations, directives or requests applying to a class of banks, which includes any of the Lenders, under any United States Federal or state or foreign laws or regulations (whether or not having the force of law) by any court or governmental or monetary authority charged with the interpretation or administration thereof or compliance by any Lender with any request or directive regarding capital adequacy, whether or not having the force of law, whether or not failure to comply therewith would be unlawful; "Reimbursement Obligation" shall mean at any time, the obligation of the Borrower with respect to any Letter of Credit to reimburse Issuing Bank and the Lenders to the extent of their respective Participations (including by the receipt by Issuing Bank of proceeds of Loans pursuant to Section 4.2 hereof) for amounts theretofore paid by Issuing Bank pursuant to a drawing under such Letter of Credit; "Repurchase Agreement" means a repurchase agreement entered into with (i) any financial institution whose debt obligations are rated "A" by either of S&P or Moody's or whose commercial paper is rated "A-1" by S&P or "P-1" by Moody's, or (ii) any Lender; NB BOLLE CREDIT AGREEMENT (FINAL) Doc No: 190295 27 "Required Lenders" means, as of any date, Lenders on such date having Credit Exposures (as defined below) aggregating in excess of 50% of the aggregate Credit Exposures of all the Lenders on such date. For purposes of the preceding sentence, the amount of the "Credit Exposure" of each Lender shall be equal at all times (a) other than following the occurrence and during the continuance of an Event of Default, to the sum of its Revolving Credit Commitment and Term Loan Commitment, and (b) following the occurrence and during the continuance of an Event of Default, to the sum of (i) the amount of such Lender's Applicable Commitment Percentage of Term Loan Outstandings plus (ii) the aggregate principal amount of such Lender's Applicable Commitment Percentage of Revolving Credit Outstandings plus (iii) the amount of such Lender's Applicable Commitment Percentage of Letter of Credit Outstandings; provided that, for the purpose of this definition only, (x) if any Lender shall have failed to fund its Applicable Commitment Percentage of any Advance, the Term Loan Commitment or Revolving Credit Commitment, as applicable, of such Lender shall be deemed reduced by the amount it so failed to fund for so long as such failure shall continue and such Lender's Credit Exposure attributable to such failure shall be deemed held by any Lender making more than its Applicable Commitment Percentage of such Advance to the extent it covers such failure, and if any Lender shall have failed to pay to the Issuing Bank upon demand its Applicable Commitment Percentage of any drawing under any Letter of Credit resulting in an outstanding Reimbursement Obligation, such Lender's Credit Exposure attributable to such Letter of Credit Outstandings shall be deemed to be held by Issuing Bank; "Reserve Requirement" means, at any time, the maximum rate at which reserves (including without limitation, any marginal, special, supplemental, or emergency reserves) are required to be maintained under regulations issued from time to time by the Board of Governors of the Federal Reserve System (or any successor) by member banks of the Federal Reserve System against, in the case of Fixed Rate Loans, "Eurocurrency liabilities" (as such term is used in Regulation D). Without limiting the effect of the foregoing, the Reserve Requirement shall reflect any other reserves required to be maintained by such member banks with respect to (i) any category of liabilities which includes deposits by reference to which any Fixed Rate is to be determined or (ii) any category of extensions of credit or other assets which include Fixed Rate Loans. Fixed Rate Loans shall be deemed to constitute Eurocurrency liabilities and as such shall be deemed subject to reserve requirements without benefits of credit for proration, exceptions or offsets that may be available from time to time to the Agent. Fixed Rate Loans shall be adjusted automatically on and as of the effective date of any change in the Reserve Requirement. "Revolving Credit Commitment" means with respect to each Lender, the obligation of such Lender to make Revolving Loans to the Borrower and to purchase Participations up to an aggregate principal amount at any time outstanding equal to the amount set forth opposite each Lender's name on Exhibit A hereto as the same may be increased or decreased from time to time pursuant to this Agreement; NB BOLLE CREDIT AGREEMENT (FINAL) Doc No: 190295 28 "Revolving Credit Facility" means the facility described in Article III hereof providing for Revolving Loans to the Borrower by the Lenders in an aggregate principal amount equal to (i) the Revolving Credit Commitment, less (ii) the aggregate principal amount of Letter of Credit Outstandings; "Revolving Credit Outstandings" means, as of any date of determination, the aggregate principal amount of all Revolving Loans then outstanding; "Revolving Credit Termination Date" means the earliest to occur of (i) March 11, 2001, or (ii) such earlier date of termination of the Lenders' obligations pursuant to Section 12.1 hereof upon the occurrence of an Event of Default, or (iii) such date as the Borrower may permanently terminate the Revolving Credit Facility by payment in full of all Obligations thereunder (including the discharge of all obligations of the Issuing Bank and the Lenders with respect to Letters of Credit and Participations) pursuant to Section 3.6 hereof; "Revolving Loan" means a Loan made under the Revolving Credit Facility pursuant to Section 3.1 hereof; "Revolving Loan Rate Adjustment Payment" shall have the meaning ascribed to such term in Section 3.1(b) hereof; "Revolving Notes" means the amended and restated promissory notes of the Borrower evidencing the Revolving Loans executed and delivered to the Lenders as provided in Section 3.9 hereof substantially in the form of Exhibit J hereto, as amended, supplemented, or replaced from time to time; "S&P" means Standard & Poor's Rating Group, a division of the McGraw Hill Company, Inc.; "Scheduled Maturity Date" means March 11, 2003; "Security Agreement" means, collectively (or individually as the context may indicate), (i) the Second Amended and Restated Security Agreement dated as of the date hereof by the Borrower and each Guarantor to the Agent, and (ii) any additional Security Agreement (whether of even date herewith or delivered after the Closing Date pursuant to Article VI or Section 9.21 hereof and whether executed individually or jointly and severally with other Subsidiaries) delivered to the Agent, in each case, substantially in the form attached hereto as Exhibit L, as such Security Agreement may be amended, supplemented or replaced from time to time. "Security Instruments" means the Security Agreement, the Intellectual Property Security Agreement, the Stock Pledge Agreement, the Collateral Assignment of Option Agreement, the Deed of Trust, the Landlord Waivers, the Lease Assignments, the Intellectual Property Assignments, the Intercompany Note Assignment, the Subordination NB BOLLE CREDIT AGREEMENT (FINAL) Doc No: 190295 29 Agreement and all other documents and agreements executed and delivered in connection herewith granting to the Lenders Liens on any assets of the Borrower or any Guarantor collaterally to secure payment and performance of the Obligations and obligations under the Guaranty; "Segment" means a portion of the Term Loan with respect to which a particular interest rate is (or is proposed to be) applicable; "Series A Certificate of Designation" means the designations, rights and preferences of the Series A Preferred Stock as set forth in the Amended and Restated Certificate of Incorporation of the Borrower filed by the Borrower with the Secretary of State of Delaware on or before the Closing Date; "Series A Preferred Stock" means the 64,120 shares of Series A Preferred Stock originally issued on or about July 10, 1997 by the Borrower and containing such terms as are set forth in the Series A Certificate of Designation; "Series B Certificate of Designation" means the Certificate of Designation of the Series B Preferred Stock of the Borrower filed by the Borrower with the Secretary of State of Delaware on or before the Closing Date; "Series B Preferred Stock" means the 10,000 shares of Series B Preferred Stock issued by the Borrower on the Closing Date to each of the former holders of the Series A Preferred Stock issued by BEC on or about July 10, 1997 and containing such terms as are set forth in the Series B Certificate of Designation; "Share Purchase Agreements" means, collectively, the Bolle Australia Share Purchase Agreement and the Bolle UK Share Purchase Agreement; "Single Employer Plan" means any employee pension benefit plan covered by Title IV of ERISA in respect of which the Borrower or any Subsidiary is an "employer" as described in Section 4001(b) of ERISA and which is not a Multi-employer Plan; "Solvent" means, when used with respect to any Person, that at the time of determination: (i) the fair value of its assets (both at fair valuation and at present fair saleable value on an orderly basis) is in excess of the total amount of its liabilities, including, without limitation, Contingent Obligations; and (ii) it is then able and expects to be able to pay its debts as they mature; and (iii) it has capital sufficient to carry on its business as conducted and as proposed to be conducted; NB BOLLE CREDIT AGREEMENT (FINAL) Doc No: 190295 30 "Spot Rate of Exchange" means (i) in determining the Dollar Equivalent Amount of a French Franc amount as of any date, the spot exchange rate determined by the Agent in accordance with its usual procedures for the purchase by the Agent of Dollars with French Francs at approximately 10:00 A.M. on the Business Day that is two (2) Business Days prior to such date, and (ii) in determining the FF Equivalent Amount of a Dollar amount on any date, the spot exchange rate as determined by the Agent in accordance with its usual procedures for the purchase by the Agent of French Francs with Dollars at approximately 10:00 A.M. on the Business Day that is two (2) Business Days prior to such date; "Standby Letter of Credit" means an irrevocable standby letter of credit issued hereunder for the account of the Borrower or any of its Subsidiaries, provided that the expiry date of a Standby Letter of Credit shall not be later than twelve (12) months subsequent to the date of issuance thereof; "Stock Option Plan" means the Bolle Inc. 1998 Stock Incentive Plan; "Stock Pledge Agreement" means, collectively (or individually as the context may indicate), (i) that certain Second Amended and Restated Stock Pledge Agreement dated as of the date hereof between the Borrower, certain Guarantors and the Agent for the benefit of the Agent and the Lenders, (ii) the Mortgages Over Shares, and (iii) any additional Stock Pledge Agreement delivered to the Agent pursuant to Article VI or Section 9.21 hereof, in each case, substantially in the form attached hereto as Exhibit G, as such Stock Pledge Agreement may be amended, supplemented or replaced from time to time; "Subordination Agreement" means that certain Subordination Agreement dated as of the date hereof between the Agent, the Borrower and certain Subsidiaries now or hereafter a party thereto, substantially in the form attached hereto as Exhibit U, as such Subordination Agreement may be amended, supplemented or replaced from time to time; "Subordinated Indebtedness" means all Indebtedness permitted to be incurred under the terms hereof that is subordinated to the Facilities under its own terms or under any separate agreement of subordination, in each case upon terms satisfactory to the Agent, including without limitation any subordinated indebtedness issued in redemption of the Series A Preferred Stock; "Subsidiary" means any corporation or other entity in which more than 50% of its outstanding stock having ordinary voting power or more than 50% of all equity interests is owned or controlled directly or indirectly by the Borrower or by one or more of the Borrower's Subsidiaries, in each case, at or after the Closing Date; provided, however, that, subject to Section 1.3(a) hereof, the term "Subsidiary" shall not include any Control Subsidiary; NB BOLLE CREDIT AGREEMENT (FINAL) Doc No: 190295 31 "Swap Agreement" means one or more agreements between the Borrower and a Lender, on terms mutually acceptable to such Borrower and such Lender with respect to Indebtedness evidenced by the Notes, which agreements create Hedging Obligations; "Tavister" means Tavister Limited, a company incorporated in England and Wales (Reg. No. 3381752); "Term Loan" means the loan made pursuant to the Term Loan Facility in accordance with Article II; "Term Loan Commitment" means, with respect to each Lender, the obligation of such Lender as set forth in Section 2.2 hereof to make the Term Loan to the Borrower in a principal amount equal to such Lender's Applicable Commitment Percentage of the Total Term Loan Commitment as set forth on Exhibit A; "Term Loan Facility" means the facility described in Article II providing for the Term Loan to the Borrower by the Lenders in the principal amount of the Total Term Loan Commitment; "Term Loan Outstandings" means, as of any date of determination, the principal amount of the Term Loan then outstanding; "Term Notes" means, collectively, the amended and restated promissory notes of the Borrower evidencing the Term Loan executed and delivered to the Lenders as provided in Section 2.9 substantially in the form of Exhibit I, with appropriate insertions as to amounts, dates and names of Lenders as the same may be amended, supplemented or replaced from time to time; "Term Loan Rate Adjustment Payment" has the meaning ascribed to such term in Section 2.2(d)(iv) hereof; "Term Loan Termination Date" means (i) March 11, 2003 or (ii) such earlier date of termination of Lenders' obligations pursuant to Section 12.1 upon the occurrence of an Event of Default, or (iii) such date as the Borrower may voluntarily or by mandatory prepayment permanently terminate the Term Loan Facility by payment in full of all Obligations incurred in connection with the Term Loan pursuant to Sections 2.6 or 2.7 hereof; "Term Loan Valuation Date" has the meaning ascribed to such term in Section 2.2(b)(iv) hereof; "Termination Event" means: (a) a "Reportable Event" described in Section 4043 of ERISA and the regulations issued thereunder; or (b) the withdrawal of the Borrower or any ERISA Affiliate from a Pension Plan during a plan year in which it was a "substantial employer" as defined in Section 4001(a)(2) of ERISA or was deemed such under Section NB BOLLE CREDIT AGREEMENT (FINAL) Doc No: 190295 32 4068(f) of ERISA; or (c) the termination of a Pension Plan, the filing of a notice of intent to terminate a Pension Plan or the treatment of a Pension Plan amendment as a termination under Section 4041 of ERISA; or (d) the institution of proceedings to terminate a Pension Plan by the PBGC; or (e) any other event or condition which would constitute grounds under Section 4042(a) of ERISA for the termination of, or the appointment of a trustee to administer, any Pension Plan; or (f) the partial or complete withdrawal of the Borrower or any ERISA Affiliate from a Multiemployer Plan; or (g) the imposition of a Lien pursuant to Section 412 of the Code or Section 302 of ERISA; or (h) any event or condition which results in the reorganization or insolvency of a Multiemployer Plan under Section 4241 or Section 4245 of ERISA, respectively; or (i) any event or condition which results in the termination of a Multiemployer Plan under Section 4041A of ERISA or the institution by the PBGC of proceedings to terminate a Multiemployer Plan under Section 4042 of ERISA; "Texas Property" means certain real property of the Borrower assigned to the Borrower pursuant to the Bill of Sale, and all improvements thereon, located in Dallas, Texas; "Texas Property Purchase Agreement" means that Contract of Sale dated as of January 15, 1998, as amended by the Reinstatement and First Amendment to Contract of Sale dated as of March 3, 1998, by and between ORC Management and MacFarlan Real Estate Series, L.L.C. effecting the sale of the Texas Property by ORC Management in form and substance acceptable to the Agent and the Lenders; "Total Credit Commitment" means the sum of the Total Term Loan Commitment, and the Total Revolving Credit Commitment; "Total FF Loan Commitment" means, at any time, the FF Equivalent Amount of the difference of (a) $28,000,000 less (b) all Revolving Credit Outstandings attributable to Revolving Loans denominated in Dollars. "Total Letter of Credit Commitment" means $5,000,000; "Total Revolving Credit Commitment" means $18,000,000, as reduced from time to time in accordance with Sections 3.6 and 3.7 hereof; "Total Term Loan Commitment" means, with respect to the Lenders as a whole, a principal amount equal to FF61,290,000, such amount being the FF Equivalent Amount on the Closing Date of $10,000,000 available in French Francs; "Type" shall mean any type of Loan or Segment bearing interest at a specified rate (i.e., Base Rate Loan, Base Rate Segment, FF LIBOR Rate Loan, FF LIBOR Rate Segment, Eurodollar Rate Loan or Eurodollar Rate Segment); NB BOLLE CREDIT AGREEMENT (FINAL) Doc No: 190295 33 "UCC" means the Uniform Commercial Code of the State of New York, as amended or supplemented from time to time. "Unused Fee" has the meaning assigned to such term in Section 3.13(a) hereof; "Voting Stock" means shares of capital stock issued by a corporation, or equivalent interests in any other Person, the holders of which are ordinarily, in the absence of contingencies, entitled to vote for the election of directors (or persons performing similar functions) of such Person, even if the right so to vote has been suspended by the happening of such a contingency. SECTION 1.3 RULES OF INTERPRETATION. (a) All accounting terms not specifically defined herein shall have the meanings assigned to such terms and shall be interpreted in accordance with GAAP applied on a Consistent Basis; provided, however, that to the extent any term defined in this Article I refers to "Subsidiaries" and contains a calculation to be made in accordance with GAAP, the term "Subsidiaries" shall be deemed to include Control Subsidiaries for the purpose of the calculation contained within such definition; (b) Each term defined in Article 1 or 9 of the UCC shall have the meaning given therein unless otherwise defined herein, except to the extent that the Uniform Commercial Code of another jurisdiction is controlling, in which case such terms shall have the meaning given in the Uniform Commercial Code of the applicable jurisdiction; (c) The headings, subheadings and table of contents used herein or in any other Loan Document are solely for convenience of reference and shall not constitute a part of any such document or affect the meaning, construction or effect of any provision thereof; (d) Except as otherwise expressly provided, references herein to articles, sections, paragraphs, clauses, annexes, appendices, exhibits and schedules are references to articles, sections, paragraphs, clauses, annexes, appendices, exhibits and schedules in or to this Agreement; (e) All definitions set forth herein or in any other Loan Document shall apply to the singular as well as the plural form of such defined term, and all references to the masculine gender shall include reference to the feminine or neuter gender, and vice versa, as the context may require; (f) When used herein or in any other Loan Document, words such as "hereunder", "hereto", "hereof" and "herein" and other words of like import shall, unless the context clearly indicates to the contrary, refer to the whole of the applicable document and not to any particular article, section, subsection, paragraph or clause thereof; NB BOLLE CREDIT AGREEMENT (FINAL) Doc No: 190295 34 (g) References to "including" means including without limiting the generality of any description preceding such term; (h) All dates and times of day specified herein shall refer to such dates and times at Charlotte, North Carolina. ARTICLE II THE TERM LOAN SECTION 2.1 THE TERM LOAN. (a) Subject to the terms and conditions of this Agreement, each Lender severally agrees to make an Advance of the Term Loan on the Closing Date on a pro rata basis determined by the Term Loan Commitment of each Lender. The Term Loan shall be available in a single draw at Closing. The principal amount of each Segment of the Term Loan outstanding hereunder from time to time shall bear interest at the FF LIBOR Rate; provided, however, that (i) no Segment shall have an Interest Period that extends beyond the Scheduled Maturity Date, (ii) each Segment shall be in the minimum FF Equivalent Amount of $500,000 and, if greater, an integral multiple of the FF Equivalent Amount of $50,000 and (iii) the principal amount of each Segment may, subject to the provisions of Sections 2.3, 2.6 and 2.7 hereof, be repaid only on the last day of the Interest Period with respect thereto. No amount of the Term Loan repaid or prepaid by the Borrower may be reborrowed hereunder, and no Advance of the Term Loan shall be made by any Lender after the Closing Date. (b) As early as practicable on the Closing Date, each Lender shall, pursuant to the terms and subject to the conditions of this Agreement, make the amount of the Term Loan to be made by it, determined in accordance with Section 2.1(a) hereof, available to the Borrower in French Francs at the Disbursing Bank, to the account of the Agent with the Disbursing Bank. The amount so received by the Disbursing Bank shall, subject to the terms and conditions of this Agreement and upon instruction from the Agent to the Disbursing Bank on or before 10:00 A.M. on the date of such Advance, be made available to the Borrower by delivery of the proceeds thereof to the Borrower's Account with the Disbursing Bank or otherwise as shall be directed by the Authorized Representative and reasonably acceptable to the Agent. (c) The principal amount outstanding of the Term Loan shall be recorded by the Agent in French Francs which recorded amount shall be reduced from time to time by the amount of any principal payments with respect to the Term Loan. (d) On the date of any Continuation of a Segment pursuant to Section 2.10 hereof and, with respect to any Segment having an Interest Period longer than three months, at the end of each three-month period following the first day of such Interest Period (each a "Term Loan Valuation Date"), the Agent shall determine and record the NB BOLLE CREDIT AGREEMENT (FINAL) Doc No: 190295 35 amount of Term Loan Outstandings. If the aggregate amount of all Term Loan Outstandings and FF Revolving Loan Outstandings exceeds the Total FF Loan Commitment, the Borrower shall, within two Business Days of written notice thereof from the Agent, repay (a "Term Loan Rate Adjustment Payment") the portion of the Term Loan or FF Revolving Loans, at the Borrower's election, necessary to ensure that the amount of all Term Loan Outstandings and FF Revolving Loan Outstandings does not exceed such Total FF Loan Commitment. Such Term Loan Rate Adjustment Payment shall be accompanied by payment of all amounts due pursuant to Section 5.5 hereof as a result of such Term Loan Rate Adjustment Payment. The Agent shall maintain records sufficient to identify the outstanding principal amount and Dollar Value of each Segment. SECTION 2.2 PAYMENT OF PRINCIPAL. Subject to mandatory and optional prepayments provided for in Sections 2.5 and 2.6 hereof, the principal amount of the Term Loan shall be repaid quarterly, commencing with the quarter ending September 30, 1998, in the French Franc amounts of the Term Loan, and on the dates set forth below; provided, however, that the entire amount of Term Loan Outstandings shall be due and payable in full on the Term Loan Termination Date: Due Date Amount September 30, 1998 FF 1,532,250 December 31, 1998 FF 1,532,250 March 31, 1999 FF 4,596,750 June 30, 1999 FF 4,596,750 September 30, 1999 FF 3,064,500 December 31, 1999 FF 3,064,500 March 31, 2000 FF 3,064,500 June 30, 2000 FF 3,064,500 September 30, 2000 FF 3,064,500 December 31, 2000 FF 3,064,500 March 31, 2001 FF 3,064,500 June 30, 2001 FF 3,064,500 September 30, 2001 FF 3,064,500 December 31, 2001 FF 3,064,500 March 31, 2002 FF 3,064,500 June 30, 2002 FF 3,064,500 September 30, 2002 FF 3,064,500 December 31, 2002 FF 3,064,500 March 11, 2003 All remaining principal amount outstanding SECTION 2.3 PAYMENT OF INTEREST. (a) The Borrower shall pay interest to the Agent at the Principal Office for the account of each Lender on the outstanding and unpaid principal amount of the Term Loan NB BOLLE CREDIT AGREEMENT (FINAL) Doc No: 190295 36 made by such Lender for the period commencing on the date of the Advance of such Term Loan or the commencement of an Interest Period with respect to any Segment of such Term Loan, as applicable, until (but not including) the end of the applicable Interest Period or the date any Segment of the Term Loan shall be Continued or be otherwise due at the applicable FF LIBOR Rate, such payments to be made in French Francs; provided, however, that if any amount shall not be paid when due (at maturity, by acceleration or otherwise) or if any other Event of Default shall have occurred and be continuing hereunder, all amounts outstanding hereunder shall bear interest thereafter at the Default Rate from the date such Event of Default occurred until the date such Event of Default is cured or waived. (b) Interest on the outstanding principal balance of the Term Loan shall be computed on the basis of a year of 360 days and calculated for the actual number of days elapsed. Interest on the Term Loan shall be paid on the last day of the applicable Interest Period for each Segment and, for any Segment having an Interest Period extending beyond three (3) months, also on the date occurring every three (3) months after the commencement of such Interest Period, and (iii) on the Term Loan Termination Date. SECTION 2.4 MANNER OF PAYMENT. (a) Each payment of principal (including any mandatory or optional prepayment), interest and fees, and any other amount required to be paid to the Lenders with respect to the Term Loan, shall be made to the Agent at the Principal Office for the account of each Lender in French Francs in immediately available funds without setoff, deduction or counterclaim on or before 2:30 P.M. on the date such payment is due. The Agent may, but shall not be obligated to, debit the Dollar Value of any such payment which is not made by such time from any one or more ordinary deposit accounts of the Borrower with the Agent. (b) The Agent shall deem any payment made by or on behalf of the Borrower that is not made (i)in French Francs, (ii) in immediately available funds and (iii) prior to 2:30 P.M. on the date such payment is due to be a non-conforming payment. Any such non-conforming payment shall not be deemed to be received by the Agent until the time such funds are paid in French Francs and become available funds. Any non-conforming payment which conforms to clauses (i) and (ii) above shall be deemed received by the Agent on the next Business Day. Any non-conforming payment may constitute or become a Default or Event of Default. The Agent shall give prompt written notice to the Authorized Representative and each of the Lenders (confirmed in writing) if any payment (other than a prepayment) is non-conforming. Interest shall continue to accrue on any principal as to which a non-conforming payment is made until such funds become available funds (but in no event less than the period from the date of such payment to the next succeeding Business Day) at the Default Rate (other than with respect to non-conforming prepayments, with respect to which interest shall continue to accrue on any principal as to which such non-conforming payment is made until such funds become available funds at NB BOLLE CREDIT AGREEMENT (FINAL) Doc No: 190295 37 the one month FF LIBOR Rate) from the date such amount was due and payable until the date such amount is paid in full. (c) In the event that any payment hereunder or under the Term Notes becomes due and payable on a day other than a Business Day, then such due date shall be extended to the next succeeding Business Day unless provided otherwise under clause (B) of the definition of "Interest Period"; provided, however, that interest shall continue to accrue during the period of any such extension; and provided further, however, that in no event shall any such due date be extended beyond the Term Loan Termination Date. SECTION 2.5 OPTIONAL PREPAYMENTS. The Borrower may prepay the Term Loan in whole or in part from time to time on any Business Day, without penalty or premium, upon not less than three (3) Business Days' prior written notice (effective upon receipt) to the Agent, which notice shall be irrevocable. Any prepayment shall be made at a prepayment price equal to (i) the amount of principal to be prepaid, plus (ii) all accrued and unpaid interest on the amount so prepaid, to the date of prepayment. All prepayments under this Section 2.5 shall be made in the minimum principal FF Equivalent Amount of $500,000 or any integral multiple of the FF Equivalent Amount of $50,000 in excess thereof (or in the entire remaining principal balance of the Term Loan), and all such prepayments of principal shall be applied to installments of principal in order of their maturity. No such prepayment shall result in the payment of any Segment other than on the last day of the Interest Period of such Segment unless such prepayment is accompanied by amounts due, if any, under Section 5.5 hereof. SECTION 2.6 MANDATORY PREPAYMENTS. In addition to the required payments of principal of the Term Loan set forth in Section 2.2 hereof and any optional payments of principal of the Term Loan effected under Section 2.5 hereof, the Borrower shall make the following required prepayments, each such payment to be made to the Agent for the benefit of the Lenders within the time period specified below in the FF Equivalent Amount of the amount due: (a) Asset Dispositions. The Borrower shall make, or shall cause each applicable Subsidiary to make, a prepayment from the Net Proceeds of any Asset Disposition resulting in Net Proceeds which (i) exceed $150,000 for any single or series of related transactions or (ii) when aggregated with all other Net Proceeds from Asset Dispositions received during any Fiscal Year exceed $300,000, in each case, in an amount equal to one hundred percent (100%) of such Net Proceeds in excess of such threshold amounts. Each such prepayment shall be made within five (5) Business Days of receipt of such Net Proceeds and upon not less than three (3) Business Days' written notice to the Agent, which notice shall include a certificate of an Authorized Representative setting forth in reasonable detail the calculations utilized in computing the amount of Net Proceeds. Notwithstanding the foregoing, however, there shall be excluded from the calculation of the Net Proceeds for any payment required under this Section 2.6(a) 100% of the Net Proceeds from any disposition of the Texas Property, investments or other assets of the Borrower or any Subsidiary which are subject to Section 2.6(e) below. NB BOLLE CREDIT AGREEMENT (FINAL) Doc No: 190295 38 (b) Equity Offerings. In the event that the Consolidated Leverage Ratio exceeds 2.50 to 1.00 for the most recently ended Four-Quarter Period preceding any Equity Offering, the Borrower shall make a prepayment from the Net Proceeds of such Equity Offering in an amount equal to the lesser of (i) 100% of such Net Proceeds or (ii) the amount of such Net Proceeds which would result in a Consolidated Leverage Ratio equal to 2.50 to 1.00 after giving pro forma effect to such prepayment for such Four-Quarter Period. Each such prepayment shall be made within five (5) Business Days of receipt of such Net Proceeds and upon not less than three (3) Business Days' written notice to the Agent, which notice shall include a certificate of an Authorized Representative setting forth in reasonable detail the calculations utilized in computing the amount of Net Proceeds. Notwithstanding the foregoing, however, any payment required under this Section 2.6(b) shall not be required to the extent that any Net Proceeds of an Equity Offering are used to repay or redeem all or a portion of the Series B Preferred Stock permitted hereunder. (c) Option Proceeds. The Borrower shall make a prepayment from the Net Proceeds of any exercise of an option granted under the Option Agreement in an amount equal to 100% of such Net Proceeds. Each such prepayment shall be made within five (5) Business Days of receipt of such Net Proceeds and upon not less than three (3) Business Days' written notice to the Agent, which notice shall include a certificate of an Authorized Representative setting forth in reasonable detail the calculations utilized in computing the amount of Net Proceeds. (d) Excess Cash Flow. The Borrower shall make a prepayment on April 15 of each year in the amount equal to fifty percent (50%) of the Borrower's Excess Cash Flow for the Fiscal Year ended immediately prior thereto, commencing with the Fiscal Year ending December 31, 1998. Each such prepayment shall include a certificate of an Authorized Representative setting forth in reasonable detail the calculations utilized in computing Excess Cash Flow. (e) Texas Property and Investment Net Proceeds. The Borrower shall make a prepayment of (i) 100% of the Net Proceeds from any disposition of (A) the Texas Property and (B) any capital stock of Eyecare Products, if not sold pursuant to the terms of the Option Agreement, and (ii) (A) 100% of the Net Proceeds from the disposition of shares of Accessories Associates common stock received upon the exchange of the AAi Preferred Stock in connection with or subsequent to the Accessories Associates IPO and (B) 100% of the Net Proceeds from (X) the redemption or any other disposition by the Borrower (except as provided for in (A) immediately above) of the AAi Preferred Stock after application of such Net Proceeds in compliance with the terms of the Bill of Sale and/or (Y) if less than $1,000,000 of such Net Proceeds as set forth in (X) immediately above is available for a prepayment hereunder, the Borrower shall immediately seek an equity or capital investment therein and prepay hereunder on the next Business Day after the receipt of such investment an amount of the gross proceeds of such an equity investment in the Borrower which, together with the Net Proceeds available under (X) immediately available for a prepayment hereunder, equals $1,000,000 (such prepayment NB BOLLE CREDIT AGREEMENT (FINAL) Doc No: 190295 39 pursuant to this Subsection 2.6(e)(ii), the "AAi Prepayment"). Each such prepayment shall be made within five (5) Business Days of receipt of such Net Proceeds and upon not less than three (3) Business Days' written notice to the Agent, which notice shall include a certificate of an Authorized Representative setting forth in reasonable detail the calculations utilized in computing the amount of Net Proceeds. The first $1,500,000 of mandatory prepayments made pursuant to Section 2.6(a) shall be applied to the scheduled installments of principal remaining outstanding under the Term Loan pursuant to Section 2.2 hereof (as adjusted to give effect to any prior payments or prepayments of principal) in sequential order of maturity. All mandatory prepayments made pursuant to Section 2.6(e) shall be applied pro rata to the scheduled installments of principal remaining outstanding under the Term Loan pursuant to Section 2.2 hereof (as adjusted to give effect to any prior payments or prepayments of principal). The remaining amounts of mandatory prepayments made pursuant to Section 2.6(a) and all mandatory prepayments made pursuant to Section 2.6 (b), (c) or (d) hereof shall be applied pro rata to the scheduled installments of principal remaining outstanding under the Term Loan pursuant to Section 2.2 hereof (as adjusted to give effect to any prior payments or prepayments of principal). If as a result of the making of any payment required to be made pursuant to this Section 2.6 the Borrower would incur costs pursuant to Section 5.5 hereof in excess of $5,000, it may deposit the amount of such payment with the Agent, for the benefit of the Lenders, in a cash collateral account with and in the name of the Agent established for such purpose pursuant to the terms of a Cash Collateral Account Agreement, as to which the Agent shall have exclusive control, until the end of the applicable Interest Period at which time such payment shall automatically be made. Any prepayment of the Term Loan pursuant to this Section 2.6 other than on the last day of an Interest Period which is not subject to escrow pursuant to the immediately preceding sentence shall be accompanied by the additional payment, if any, required by Section 5.5 hereof. If at any time all Term Loan Outstandings shall be paid in full, the prepayment requirements of this Section 2.6 shall continue and all such payments shall be applied to permanently reduce the Revolving Credit Commitment pursuant to Section 3.6(b). SECTION 2.7 BORROWER'S ACCOUNT. The Borrower shall, until the Term Loan Termination Date, continuously maintain the Borrower's Account for the purposes herein contemplated. SECTION 2.8 TERM NOTES. The Term Loan shall be evidenced by the Term Notes payable to the order of each Lender in the respective amount of its Term Loan Commitment, which Term Notes shall be dated the Closing Date or a later date pursuant to an Assignment and Acceptance and shall be duly completed, executed and delivered by the Borrower. SECTION 2.9 INTEREST PERIODS. The Term Loan shall be, at the option of the Borrower specified in the applicable Borrowing Notice or an Interest Rate Selection Notice, comprised of Segments with the same or varying Interest Periods; provided, however, there shall not be outstanding at any one time Fixed Rate Loans having more than eight (8) different Interest Periods. If the Agent does not receive an Interest Rate Selection Notice giving notice of election of the duration of an Interest Period by the time prescribed by Section 2.10 hereof, the Borrower NB BOLLE CREDIT AGREEMENT (FINAL) Doc No: 190295 40 shall be deemed to have elected to Continue such Segment with an Interest Period of one month until the Borrower notifies the Agent in accordance with Section 2.10 hereof. SECTION 2.10 ELECTIONS OF SUBSEQUENT INTEREST PERIODS. Provided that no Default or Event of Default shall have occurred and be continuing and subject to the limitations set forth below, the Borrower may, upon irrevocable telephonic request, confirmed by same-day delivery of a properly completed Interest Rate Selection Notice by telefacsimile transmission to the Agent (or by execution and return of a confirmatory writing prepared by the Agent), on or before 10:30 A.M. on the date that is three (3) Business Days prior to the date of such conversion, elect a subsequent Interest Period for any Segment to begin on the last day of the then current Interest Period for such Segment. Each election pursuant to this Section 2.10 shall be subject to the limitations on FF LIBOR Rate Loans set forth in the definition of "Interest Period" herein and in Sections 2.1 and 2.9 and Article V hereof. All such Continuations of Segments shall be effected pro rata based on the Applicable Commitment Percentages of the Lenders. The failure of the Borrower to provide written confirmation of any telephonic notice of election or conversion hereunder shall not affect the validity of such telephonic notice. SECTION 2.11 PRO RATA PAYMENTS. Except as otherwise provided herein, (a) each payment on account of the principal of and interest on the Term Loan shall be made to the Agent for the account of the Lenders pro rata based on their Applicable Commitment Percentages of the Total Term Loan Commitment, (b) all payments to be made by the Borrower for the account of each of the Lenders on account of principal, interest and fees, shall be made without diminution, set-off, recoupment or counterclaim, and (c) the Agent will promptly distribute to the Lenders in immediately available funds payments received in fully collected, immediately available funds from the Borrower. SECTION 2.12 USE OF PROCEEDS. The proceeds of the Term Loan hereunder shall be used by the Borrower (i) for working capital, (ii) to finance capital expenditures permitted hereunder, (iii) to finance the Bolle Australia Acquisition and the Bolle UK Acquisition, (iv) to finance Existing Indebtedness other than the FG Mortgage and (vi) for other lawful corporate purposes. ARTICLE III REVOLVING LOANS SECTION 3.1 REVOLVING LOANS. (a) Commitment. Subject to availability and the terms and conditions of this Agreement, each Lender severally agrees to make Advances of Dollar Loans in Dollars or FF Revolving Loans in French Francs (as specified in the respective Borrowing Notice) to the Borrower under the Revolving Credit Facility from time to time from the Closing Date until the Revolving Credit Termination Date on a pro rata basis as to the total borrowing requested by the Borrower on any day determined by such Lender's Applicable NB BOLLE CREDIT AGREEMENT (FINAL) Doc No: 190295 41 Commitment Percentage up to but not exceeding a Dollar Value equal to the Revolving Credit Commitment of such Lender; provided, however, that the Lenders will not be required and shall have no obligation to make any Advance under the Revolving Credit Facility (i) so long as any condition set forth in Section 7.2 hereof is not satisfied or (ii) if the Agent has accelerated the maturity of any of the Notes as a result of an Event of Default; provided, further, however, that immediately after giving effect to each such Advance, (A) the Dollar Value of all Revolving Credit Outstandings plus the Dollar Value of Letter of Credit Outstandings shall not exceed the Total Revolving Credit Commitment and (B) the Dollar Value of all Outstandings shall not exceed the Total Credit Commitment. Within such limits, the Borrower may borrow, repay and reborrow hereunder, on a Business Day, from the Closing Date until, but (as to borrowings and reborrowings) not including, the Revolving Credit Termination Date; provided, however, that (y) no Fixed Rate Revolving Loan shall be made which has an Interest Period that extends beyond the Revolving Credit Termination Date and (z) each Fixed Rate Revolving Loan may, subject to the provisions of Section 5.5, be repaid only on the last day of the Interest Period with respect thereto. (b) Records and Valuation. The principal amount of any Advance of a Dollar Loan shall be recorded in the Agent's records in Dollars and the principal amount of any Advance of a FF Revolving Loan shall be recorded in the Agent's records in French Francs and such recorded amount shall be reduced from time to time by the amount of any principal payments with respect to such Advance. On the date of any Continuation of a FF LIBOR Rate Loan pursuant to Section 3.11 hereof and, with respect to any FF Revolving Loan having an Interest Period longer than three months, at the end of each three-month period following the first day of such Interest Period (each a "FF Revolving Loan Valuation Date"), the Agent shall determine and record the Dollar Value of all Revolving Credit Outstandings. If (i) the aggregate amount of all FF Revolving Loan Outstandings and Term Loan Outstandings exceeds the Total FF Loan Commitment or (ii) the Dollar Value of all Revolving Credit Outstandings plus the Dollar Value of all Letter of Credit Outstandings exceeds the Total Revolving Credit Commitment, the Borrower shall, within two Business Days of written notice thereof from the Agent, repay (a "Revolving Loan Rate Adjustment Payment") (A) in the case of clause (i) above, the portion of the FF Revolving Loans or, at the election of the Borrower, the Term Loan necessary to ensure that the aggregate amount of all FF Revolving Loans Outstanding and Term Loan Outstandings does not exceed the Total FF Loan Commitment, and (B) in the case of clause (ii) above, the portion of any Loans necessary to ensure that the Dollar Value of all Revolving Credit Outstandings plus the Dollar Value of all Letter of Credit Outstandings does not exceed the Total Revolving Credit Commitment. Such Revolving Loan Rate Adjustment Payment shall be accompanied by payment of all amounts due pursuant to Section 5.5 hereof as a result of such Revolving Loan Rate Adjustment Payment. The Agent shall maintain records sufficient to identify the outstanding principal amount and Dollar Value of all Revolving Credit Outstandings. (c) Amounts. Each Revolving Loan made, Converted or Continued, unless made in accordance with Section 3.2(f) hereof, shall be (i) in the case of Dollar Loans, in a NB BOLLE CREDIT AGREEMENT (FINAL) Doc No: 190295 42 principal amount of at least $500,000, and, if greater, an integral multiple of $50,000, and (ii) in the case of FF Revolving Loans, in a principal amount of the FF Equivalent Amount of at least $500,000, and if greater, the FF Equivalent Amount of an integral multiple of $50,000. SECTION 3.2 ADVANCES AND RATE SELECTION. (a) An Authorized Representative shall give the Agent (a) irrevocable telephonic notice of each Fixed Rate Revolving Loan, whether representing an additional Advance hereunder or the conversion of borrowings hereunder from Base Rate Loans to Eurodollar Rate Loans or the election of a subsequent Interest Period for any Fixed Rate Revolving Loan, prior to 10:30 A.M. at least three (3) Business Days prior to the day such Advance is to be made or such Loan is to be Converted or Continued; and (b) irrevocable telephonic notice of each Base Rate Loan representing an additional Advance hereunder or the conversion of borrowings hereunder from Eurodollar Rate Loans to Base Rate Loans prior to 10:30 A.M. on the day such Advance is to be made or such Loan is to be converted. Each such notice, which shall be effective upon receipt by the Agent, shall specify the amount of the Advance, the Applicable Currency, the type of Loan (Base Rate or Fixed Rate), the date of the Advance and, if a Fixed Rate Revolving Loan, the Interest Period to be used in the computation of interest. The Authorized Representative shall provide the Agent written confirmation of each such telephonic notice no later than 12:00 noon on the same day received by telefacsimile transmission in the form of a Borrowing Notice for additional Advances, or in the form of an Interest Rate Selection Notice (or execution and return of a confirmatory writing prepared by the Agent) for the selection or conversion of interest rates for outstanding Revolving Loans, in each case with appropriate insertions, but failure to provide such confirmation shall not affect the validity of such telephonic notice. (b) Notice of receipt of such Borrowing Notice or Interest Rate Selection Notice, as the case may be, together with the amount of each Lender's portion of an Advance requested thereunder, shall be provided by the Agent to each Lender by telefacsimile transmission with reasonable promptness, but (provided the Agent shall have received such notice by 10:30 A.M.) not later than 12:00 P.M. on the same day as the Agent's receipt of such notice. (c) In the case of Advances of Dollar Loans, not later than 2:00 P.M. on the date specified for each borrowing under this Section 3.2, each Lender shall, pursuant to the terms and subject to the conditions of this Agreement, make the amount of the Advance or Advances to be made by it on such day available by wire transfer to the Agent in the amount of its pro rata share, determined according to such Lender's Applicable Commitment Percentage of each Dollar Loan to be made on such day. Such wire transfer shall be directed to the Agent at the Principal Office and shall be in the form of Dollars constituting immediately available funds. The amount so received by the Agent shall, subject to the terms and conditions of this Agreement, be made available to the Borrower by delivery of the proceeds thereof to the Borrower's Account or otherwise as shall be NB BOLLE CREDIT AGREEMENT (FINAL) Doc No: 190295 43 directed in the applicable Borrowing Notice by the Authorized Representative and reasonably acceptable to the Agent. (d) In the case of Advances of FF Revolving Loans, not later than 10:00 A.M. on the date specified for each Advance, each Lender shall, pursuant to the terms and subject to the conditions of this Agreement, make each FF Revolving Loan to be made by it on such day available to the Borrower in French Francs at the Disbursing Bank, to the account of the Agent with the Disbursing Bank. The amount so received by the Disbursing Bank shall, subject to the terms and conditions of this Agreement and upon instruction from the Agent to the Disbursing Bank on or before 10:00 A.M. on the date of such Advance, be made available to the Borrower by delivery of the proceeds thereof to the Borrower's account with the Disbursing Bank. (e) The Borrower shall have the option to elect the duration of the initial and any subsequent Interest Periods and to convert the Revolving Loans in accordance with Section 3.11 hereof. Fixed Rate Revolving Loans and Base Rate Loans may be outstanding at the same time, provided, however, there shall not be outstanding at any one time Fixed Rate Loans and Segments having more than eight (8) Interest Periods. If the Agent does not receive a notice of election of duration of an Interest Period or to convert by the time prescribed hereby and by Section 3.11 hereof, the Borrower shall be deemed to have elected (i) with respect to any Dollar Loan, to Convert to or Continue such Dollar Loan as a Base Rate Loan or (ii) with respect to any FF Revolving Loan, to Continue such FF Revolving Loan with an Interest Period of one month, in any case until the Borrower otherwise notifies the Agent in accordance herewith and with Section 3.11 hereof. (f) Notwithstanding the foregoing, if a drawing is made under any Letter of Credit prior to the Revolving Credit Termination Date, notice of such drawing and resulting Reimbursement Obligation shall be provided promptly by Issuing Bank to the Agent and the Agent shall provide notice to each Lender and the Borrower by telephone. If such notice to the Lenders of a drawing under any Letter of Credit is given by the Agent at or before 1:00 p.m. on any Business Day, the Borrower shall be deemed to have requested, and each Lender shall, pursuant to the conditions of this Agreement, make, an Advance in Dollars as a Base Rate Loan under the Revolving Credit Facility in the amount of such Lender's Applicable Commitment Percentage of such Reimbursement Obligation and shall pay such amount to the Agent for the account of Issuing Bank at the Principal Office in Dollars and in immediately available funds before 2:30 P.M. on the same Business Day. If notice to the Lenders is given by the Agent after 1:00 P.M. on any Business Day, the Borrower shall be deemed to have requested, and each Lender shall, pursuant to the terms and subject to the conditions of this Agreement, make, an Advance in Dollars as a Base Rate Loan under the Revolving Credit Facility in the amount of such Lender's Applicable Commitment Percentage of such Reimbursement Obligation and shall pay such amount to the Agent for the account of Issuing Bank at the Principal Office in Dollars and in immediately available funds before 12:00 noon on the next following Business Day. Such Base Rate Loan shall continue unless and until the Borrower converts such Base Rate Loan in accordance with the terms of Section 3.11 hereof. NB BOLLE CREDIT AGREEMENT (FINAL) Doc No: 190295 44 SECTION 3.3 PAYMENT OF INTEREST. (a) The Borrower shall pay interest to the Agent at the Principal Office for the account of each Lender on the outstanding and unpaid principal amount of each Revolving Loan made by such Lender for the period commencing on the date of such Revolving Loan until (but not including) the end of the applicable Interest Period or the date such Revolving Loan shall be due (i) in the case of Dollar Loans, at the Eurodollar Rate or the Base Rate, as elected by the Borrower in the applicable Borrowing Notice of Interest Rate Selection notice or as deemed elected by the Borrower or otherwise applicable to such Revolving Loan as provided herein, such payment to be made in Dollars, and (ii) in the case of FF Revolving Loans, at the applicable FF LIBOR Rate, such payments to be made in French Francs; provided, however, that if any amount shall not be paid when due (at maturity, by acceleration or otherwise) or if any other Event of Default shall have occurred and be continuing hereunder, all amounts outstanding hereunder shall bear interest thereafter at the Default Rate from the date such Event of Default occurred until the date such Event of Default is cured or waived. (b) Interest on the outstanding principal balance of each Revolving Loan shall be computed on the basis of a year of 360 days and calculated for the actual number of days elapsed. Interest on each Revolving Loan shall be paid (i) with respect to Base Rate Loans, quarterly in arrears on the last Business Day of each March, June, September and December commencing March 1998, (ii) with respect to Fixed Rate Revolving Loans, on the last day of the applicable Interest Period for each Fixed Rate Revolving Loan and for any Fixed Rate Revolving Loan having an Interest Period extending beyond three (3) months, also on the date occurring every three (3) months after the commencement of such Interest Period, and (iii) upon payment in full of the principal amount of such Revolving Loan. SECTION 3.4 PAYMENT OF PRINCIPAL. (a) The principal amount of all Revolving Credit Outstandings shall be due and payable to the Agent for the benefit of each Lender in full on the Revolving Credit Termination Date, or as otherwise expressly provided herein, in the Applicable Currency in which such amount was borrowed. The principal amount of Base Rate Loans may be prepaid in whole or in part at any time without premium or penalty. The principal amount of Fixed Rate Revolving Loans may only be prepaid at the end of the applicable Interest Period, unless the Borrower shall pay to the Agent for the account of the Lenders the amount, if any, required under Section 5.5 hereof. (b) In the event any payment of principal is made prior to the Revolving Credit Termination Date, an Authorized Representative shall give the Agent irrevocable telephonic notice of any payment of a Fixed Rate Revolving Loan prior to 10:30 A.M. at least three (3) Business Days prior to the date such payment is to be made and of any payment of a Base Rate Loan prior to 10:30 A.M. on the day such payment is to be made. NB BOLLE CREDIT AGREEMENT (FINAL) Doc No: 190295 45 Written confirmation of each notice shall be provided to the Agent in accordance with the terms therefor set forth in Section 3.2(a) hereof with respect to Advances and the selection of interest rates. Such notice shall specify (a) the date the payment will be made, (B) the amount of such repayment and (C) the Loan to which such payment relates. All prepayments made by the Borrower shall be in the minimum amount of $500,000 (or the FF Equivalent Amount with respect to FF Revolving Loans) or an integral multiple of $50,000 (or the FF Equivalent Amount with respect to FF Revolving Loans) in excess thereof, or such other amount as necessary to comply with this Section 3.4 or with the covenants set forth in Article XI hereof or the remaining principal amount outstanding, if less than such amounts. SECTION 3.5 MANNER OF PAYMENT. (a) Each payment of principal (including any mandatory or optional prepayment), interest and fees, and other amounts required to be paid to the Lenders with respect to the Revolving Loans, shall be made to the Agent at the Principal Office, for the account of each Lender's applicable Lending Office, in Dollars in the case of Dollar Loans and in French Francs in the case of FF Revolving Loans, in immediately available funds without setoff, deduction or counterclaim before 2:30 P.M. on the date such payment is due. The Agent may, but shall not be obligated to, debit the Dollar Value of any such payment which is not made by such time from any one or more ordinary deposit accounts, if any, of the Borrower with the Agent. (b) The Agent shall deem any payment by or on behalf of the Borrower hereunder that is not made (i) in Dollars in the case of Dollar Loans and in French Francs in the case of FF Revolving Loans, (ii) in immediately available funds and (iii) prior to 2:30 P.M. on the date payment is due to be a non-conforming payment. Any such non-conforming payment shall not be deemed to be received by the Agent until the time such funds are paid in the Applicable Currency and become available funds. Any non-conforming payment which conforms to clauses (i) and (ii) above shall be deemed received by the Agent on the next Business Day. Any non-conforming payment may constitute or become a Default or Event of Default. The Agent shall give prompt notice to the Authorized Representative and each of the Lenders (confirmed in writing) if any payment (other than a prepayment) is non-conforming. Interest shall continue to accrue on any principal as to which a non-conforming payment is made until such funds become available funds (but in no event less than the period from the date of such payment to the next succeeding Business Day) at the Default Rate after the occurrence and during the continuance of an Event of Default (other than with respect to non-conforming prepayments, with respect to which interest shall continue to accrue on any principal as to which such non-conforming payment is made until such funds become available funds at the Base Rate, the Eurodollar Rate, or the FF LIBOR Rate as applicable) from the date such amount was due and payable until the date such amount is paid in full. (c) In the event that any payment hereunder or under the Revolving Notes becomes due and payable on a day other than a Business Day, then such due date shall be NB BOLLE CREDIT AGREEMENT (FINAL) Doc No: 190295 46 extended to the next succeeding Business Day unless provided otherwise under clause (B) of the definition of "Interest Period;" provided that interest shall continue to accrue during the period of any such extension; and provided further, however, that in no event shall any such due date be extended beyond the Revolving Credit Termination Date. SECTION 3.6 COMMITMENT REDUCTIONS. (a) Voluntary Commitment Reductions. The Borrower shall have the right from time to time (but not more frequently than once during any fiscal quarter of the Borrower), upon not less than five (5) Business Days written notice from an Authorized Representative to the Agent, to reduce the Revolving Credit Commitment. The Agent shall give each Lender, within one (1) Business Day, telephonic notice (confirmed in writing) of any such reduction. Each such reduction shall be in the amount of $2,000,000 (or the FF Equivalent Amount with respect to FF Revolving Loans) or an integral multiple of $500,000 (or the FF Equivalent Amount with respect to FF Revolving Loans) in excess thereof and shall permanently reduce the Total Revolving Credit Commitment and the Revolving Credit Commitment of each Lender pro rata. No such reduction shall be permitted that results in the payment of any Fixed Rate Revolving Loan other than on the last day of the Interest Period of such Loan unless such prepayment is accompanied by amounts due, if any, under Section 5.5 hereof. Each reduction of the Revolving Credit Commitment shall be accompanied by payment of the principal amount of the Revolving Credit Outstandings to the extent that the sum of the Dollar Value all Revolving Credit Outstandings and Letter of Credit Outstandings exceeds the Total Revolving Credit Commitment after giving effect to such reduction, together with accrued and unpaid interest on the amounts prepaid. (b) Mandatory Commitment Reductions. In addition to any optional reduction of the Revolving Credit Commitments effected under Section 3.6(a) hereof, the Borrower shall make the following required reductions,: (i) In the event the Bolle Australia Acquisition has not been consummated on or before June 30, 1998, the Total Revolving Credit Commitment shall be permanently reduced by the Dollar equivalent amount of A$5,687,500 on such date determined by the spot rate of exchange for Australian Dollars as established by the Agent in accordance with its customary practices. (ii) In addition to the foregoing, in the event the Bolle UK Acquisition has not been consummated on or before June 30, 1998, the Total Revolving Credit Commitment shall be permanently reduced by the Dollar equivalent amount of Li.1,000,000 on such date determined by the spot rate of exchange for pounds sterling as established by the Agent in accordance with its customary practices. (iii) In the event that the Term Loan Outstandings are paid in full, any mandatory prepayment required under Section 2.7 shall be applied as a mandatory reduction of the Total Revolving Credit Commitment hereunder. NB BOLLE CREDIT AGREEMENT (FINAL) Doc No: 190295 47 Each of the foregoing reductions shall permanently reduce the Total Revolving Credit Commitment and the Revolving Credit Commitment of each Lender pro rata. No such reduction shall be permitted that results in the payment of any Fixed Rate Revolving Loan other than on the last day of the Interest Period of such Loan unless such prepayment is accompanied by amounts due, if any, under Section 5.5 hereof. Each reduction of the Revolving Credit Commitment shall be accompanied by payment of the principal amount of the Revolving Credit Outstandings to the extent that the sum of the Dollar Value all Revolving Credit Outstandings and Letter of Credit Outstandings exceeds the Total Revolving Credit Commitment after giving effect to such reduction, together with accrued and unpaid interest on the amounts prepaid. (c) Termination by Commitment Reduction. A reduction of the Total Revolving Credit Commitment to zero and payment by the Borrower of all Obligations (including the payment of all Term Loan Outstandings and the discharge of all obligations of Issuing Bank and the Lenders with respect to Letters of Credit and Participations) shall, subject to the terms and conditions of Section 15.7 hereof, be deemed a cancellation and termination of this Agreement (other than with respect to Sections 4.2(g), 9.14, 13.7, 15.4 and 15.8 hereof, which shall survive any such termination). SECTION 3.7 INCREASE AND DECREASE IN AMOUNTS. The amount of the Revolving Credit Commitment which shall be available to the Borrower shall be reduced by the aggregate amount of all Revolving Credit Outstandings and Letter of Credit Outstandings and shall be reinstated (subject to Sections 3.4 and 3.6 hereof) as such Revolving Credit Outstandings and Letter of Credit Outstandings are reduced. SECTION 3.8 BORROWER'S ACCOUNT. The Borrower shall continuously maintain the Borrower's Account until the Revolving Credit Termination Date. SECTION 3.9 NOTES. Revolving Loans made by each Lender shall be evidenced by a Revolving Note payable to the order of such Lender in the amount of its Applicable Commitment Percentage of the Total Revolving Credit Commitment, which Revolving Notes shall be dated the Closing Date or such later date pursuant to an Assignment and Acceptance and shall be duly completed, executed and delivered by the Borrower. SECTION 3.10 PRO RATA PAYMENTS. Except as otherwise provided herein, each payment and prepayment on account of the principal of and interest on the Revolving Loans and the fees described in Section 3.12 hereof shall be made to the Agent for the account of the Lenders in the aggregate amount payable to the Lenders pro rata based on their Applicable Commitment Percentages. All payments to be made by the Borrower for the account of each of the Lenders on account of principal, interest and fees shall be made without set-off or counterclaim. The Agent will promptly distribute such payments received to the Lenders as provided for herein. NB BOLLE CREDIT AGREEMENT (FINAL) Doc No: 190295 48 SECTION 3.11 CONVERSIONS AND ELECTIONS OF SUBSEQUENT INTEREST PERIODS. -------------------------------------------------------- (a) Upon irrevocable telephonic request, confirmed by same-day delivery of a properly completed Interest Rate Selection Notice by telefacsimile transmission to the Agent (or by execution and return of a confirmatory writing prepared by the Agent), on or before 10:30 A.M. on any Business Day, the Borrower may convert all or a part of Eurodollar Rate Loans to Base Rate Loans on the last day of the Interest Period for such Eurodollar Rate Loans; and (b) Provided that no Default or Event of Default shall have occurred and be continuing, the Borrower may upon irrevocable telephonic request, confirmed by same-day delivery of a properly completed Interest Rate Selection Notice by telefacsimile transmission to the Agent (or by execution and return of a confirmatory writing prepared by the Agent), on or before 10:30 A.M. on the date that is three (3) Business Days prior to the date of a conversion: (i) elect a subsequent Interest Period for all or a portion of Fixed Rate Revolving Loans to begin on the last day of the current Interest Period for such Fixed Rate Revolving Loans; or (ii) convert Base Rate Loans to Eurodollar Rate Loans on any Business Day. Each election and conversion pursuant to this Section 3.11 shall be subject to the limitations on Eurodollar Rate Loans and FF LIBOR Rate Loans set forth in the definition of "Interest Period" herein and in Sections 3.1, 3.2 and Article V hereof. All such Continuations or Conversions of Loans shall be effected pro rata based on the Applicable Commitment Percentages of the Lenders. The failure of the Borrower to provide written confirmation of any telephonic notice of election or conversion hereunder shall not affect the validity of such telephonic notice. SECTION 3.12 UNUSED FEE. For the period beginning on the Closing Date and ending on the Revolving Credit Termination Date, the Borrower agrees to pay to the Agent, for the pro rata benefit of the Lenders based on their Applicable Commitment Percentages, a quarterly unused fee (the "Unused Fee") equal in amount to the product of the Applicable Unused Fee multiplied by the average daily amount by which Total Revolving Credit Commitment exceeds the sum of the Dollar Value of all Revolving Credit Outstandings and all Letter of Credit Outstandings for such period. Payments of the Unused Fee shall be due in arrears on the last Business Day of each March, June, September and December for the three month period then ended beginning March 1998 to and on the Revolving Credit Termination Date. Notwithstanding the foregoing, so long as any Lender fails to make available any portion of its Revolving Credit Commitment when requested, such Lender shall not be entitled to receive payment of its pro rata share of the Unused Fee until such Lender shall make available such portion. The Unused Fee shall be calculated on the basis of a year of 360 days for the actual number of days elapsed. NB BOLLE CREDIT AGREEMENT (FINAL) Doc No: 190295 49 SECTION 3.13 ADDITIONAL FEES. In addition to any fees described above, the Borrower agrees to pay to the Agent and Issuing Bank such other fees as may be agreed to in a separate writing or writings. SECTION 3.14 DEFICIENCY ADVANCES. No Lender shall be responsible for any default of any other Lender (a "defaulting Lender") in respect of such other Lender's obligation to make any Loan hereunder nor shall the Revolving Credit Commitment of any Lender hereunder be increased as a result of such default of any other Lender. Without limiting the generality of the foregoing, in the event any Lender shall fail to advance funds to the Borrower as herein provided, any other Lender (an "advancing Lender") may in its discretion, but shall not be obligated to, advance under its Revolving Credit Commitment all or any portion of such amount or amounts (each, a "deficiency advance") and shall thereafter be entitled to payments of principal of and interest on such deficiency advance in the same manner and at the same interest rate or rates to which such defaulting Lender would have been entitled had it made such advance under its applicable Revolving Credit Commitment; provided that, upon payment to the advancing Lender from the defaulting Lender of the entire outstanding amount of each such deficiency advance, together with accrued and unpaid interest thereon, from the most recent date or dates interest was paid to the advancing Lender by the Borrower on each Loan comprising the deficiency advance at the interest rate per annum for overnight borrowing by the advancing Lender from the Federal Reserve Bank, then such payment shall be credited against the applicable Revolving Credit Commitment of the advancing Lender in full payment of such deficiency advance and the Borrower shall be deemed to have borrowed the amount of such deficiency advance from the defaulting Lender as of the most recent date or dates, as the case may be, upon which any payments of interest were made by the Borrower thereon. SECTION 3.15 USE OF PROCEEDS. The Revolving Credit Facility shall be used by the Borrower (i) for working capital, (ii) to finance capital expenditures (excluding Acquisitions) permitted hereunder, (iii) to finance the Bolle Australia Acquisition and the Bolle UK Acquisition, (iv) to refinance Existing Indebtedness other than the FG Mortgage and (v) for other lawful general corporate purposes (excluding Acquisitions). ARTICLE IV LETTERS OF CREDIT SECTION 4.1 LETTERS OF CREDIT. Issuing Bank agrees, subject to the terms and conditions of this Agreement, upon request and for the account of Borrower, to issue from time to time Letters of Credit upon delivery to Issuing Bank of an Application and Agreement for Letter of Credit in form and content reasonably acceptable to Issuing Bank; provided, that the Letter of Credit Outstandings shall not exceed the Total Letter of Credit Commitment. No Letter of Credit shall be issued by Issuing Bank with an expiry date or payment date occurring subsequent to the fifth Business Day preceding the Revolving Credit Termination Date. Issuing Bank shall not be required to issue any Letter of Credit if, immediately after giving effect thereto, the sum of all Revolving Credit Outstandings and Letter of Credit Outstandings would exceed the NB BOLLE CREDIT AGREEMENT (FINAL) Doc No: 190295 50 Total Revolving Credit Commitment; provided that the Letters of Credit previously issued may remain outstanding until their respective expiry dates. SECTION 4.2 REIMBURSEMENT. (a) The Borrower hereby unconditionally agrees immediately to pay to Issuing Bank on demand at the Principal Office all amounts required to pay all drafts drawn and honored under Letters of Credit and all reasonable expenses incurred by Issuing Bank in connection with Letters of Credit and in any event and without demand to place in possession of Issuing Bank sufficient funds to pay all debts and liabilities arising under any Letter of Credit; provided that to the extent permitted by Section 3.2(f) hereof, such amounts shall be paid pursuant to Advances under the Revolving Credit Facility. The Borrower's obligation to pay Issuing Bank under this Section 4.2, and Issuing Bank's right to receive such payment, shall be absolute and unconditional and shall not be affected by any circumstance whatsoever, including without limitation the unavailability of any Advance under the Revolving Credit Facility. Issuing Bank shall give the Borrower prompt written notice of any request for a draw under a Letter of Credit. In the event an Advance under the Revolving Credit Facility is not available, Issuing Bank may charge any account the Borrower may have with it for any and all amounts Issuing Bank pays under a Letter of Credit, plus charges and reasonable expenses as from time to time agreed to by Issuing Bank and the Borrower. The Borrower agrees to pay Issuing Bank interest on any amounts paid by the Issuing Bank in connection with drafts drawn and honored under Letters of Credit when due hereunder, and which is not paid pursuant to Advances under the Revolving Credit Facility as herein contemplated, at the Default Rate from the date of such drawing to the date such amount is paid in full. (b) In accordance with the provisions of Section 3.2 hereof, Issuing Bank shall notify the Agent and the Borrower of any drawing under any Letter of Credit as promptly as practicable following the receipt by Issuing Bank of such drawing. (c) Each Lender (other than Issuing Bank) shall automatically acquire on the date of issuance thereof a Participation in the liability of Issuing Bank in respect of each Letter of Credit in an amount equal to such Lender's Applicable Commitment Percentage of such liability, and to the extent that the Borrower is obligated to pay Issuing Bank under Section 4.2(a) hereof, each Lender (other than Issuing Bank) thereby shall, as hereinafter described, absolutely, unconditionally and irrevocably assume, and shall be unconditionally obligated to pay to Issuing Bank, its Applicable Commitment Percentage of the liability of Issuing Bank under such Letter of Credit. (i) Prior to the Revolving Credit Termination Date, each Lender (other than Issuing Bank) shall, subject to the terms and conditions of Article III, make a Revolving Loan bearing interest at the Base Rate to the Borrower by paying to the Agent for the account of Issuing Bank at the Principal Office in Dollars and in immediately available funds an amount equal to its Applicable NB BOLLE CREDIT AGREEMENT (FINAL) Doc No: 190295 51 Commitment Percentage of any Reimbursement Obligation, all as described in and pursuant to Section 3.2(f). (ii) With respect to drawings under any Letter of Credit for which a Revolving Loan is not made as set forth in clause (i) above, each Lender (other than Issuing Bank) upon receipt from the Agent of notice of a drawing in the manner described in Section 3.2(f), shall promptly pay to the Agent for the account of Issuing Bank, prior to the applicable time set forth in Section 3.2(f) for the making of an Advance by such Lender, its Applicable Commitment Percentage of such drawing. Simultaneously with the making of each such payment by a Lender to the Agent for the account of Issuing Bank, such Lender shall, automatically and without any further action on the part of Issuing Bank or such Lender, acquire a Participation in an amount equal to such payment (excluding the portion thereof constituting interest) in the related Reimbursement Obligation of the Borrower. (iii) Each Lender's obligation to make payment to the Agent for the account of Issuing Bank pursuant to this Section 4.2(c), and the right of Issuing Bank to receive the same, shall be made without any offset, abatement, withholding or reduction whatsoever. If any Lender is obligated to pay but does not pay amounts to the Agent for the account of the Issuing Bank in full upon such request as required by this Section 4.2(c), such Lender shall, on demand, pay to the Agent for the account of Issuing Bank interest on the unpaid amount for each day during the period commencing on the date of notice given to such Lender pursuant to Section 4.2(c) hereof until such Lender pays such amount to the Agent for the account of Issuing Bank in full at the interest rate per annum for overnight borrowings by Issuing Bank from the Federal Reserve Bank. (iv) In the event the Lenders have purchased Participations in any Reimbursement Obligation as set forth in clause (ii) above, then at any time payment of such Reimbursement Obligation, in whole or in part, is received by Issuing Bank from the Borrower, Issuing Bank shall pay to each Lender an amount equal to its Applicable Commitment Percentage of such payment from the Borrower. (d) Promptly following the end of each calendar month, Issuing Bank shall deliver to the Agent, and the Agent shall deliver to each Lender, a notice describing the aggregate undrawn amount of all Letters of Credit at the end of such month. Upon the request of any Lender from time to time, Issuing Bank shall deliver to the Agent, and the Agent shall deliver to such Lender, any other information reasonably requested by such Lender with respect to Letter of Credit Outstandings. (e) The issuance by Issuing Bank of each Letter of Credit shall, in addition to the conditions precedent set forth in Section 7.3 hereof, be subject to the conditions that such Letter of Credit be in such form and contain such terms as shall be reasonably satisfactory to Issuing Bank consistent with the then current practices and procedures of NB BOLLE CREDIT AGREEMENT (FINAL) Doc No: 190295 52 Issuing Bank with respect to similar letters of credit, and the Borrower shall have executed and delivered such other instruments and agreements relating to such Letters of Credit as Issuing Bank shall have reasonably requested consistent with such practices and procedures. All Letters of Credit shall be issued pursuant to and subject to the Uniform Customs and Practice for Documentary Credits, 1993 revision, International Chamber of Commerce Publication No. 500 and all subsequent amendments and revisions thereto. (f) The Borrower agrees that Issuing Bank may, in its sole discretion, accept or pay, as complying with the terms of any Letter of Credit, any drafts or other documents otherwise in order which may be signed or issued by an administrator, executor, trustee in bankruptcy, debtor in possession, assignee for the benefit of creditors, liquidator, receiver, attorney in fact or other legal representative of a party who is authorized under such Letter of Credit to draw or issue any drafts or other documents. (g) Without duplication of Section 15.8 hereof, the Borrower hereby agrees to defend, indemnify and hold harmless Issuing Bank, each other Lender and the Agent from and against any and all claims and damages, losses, liabilities, reasonable costs and expenses which Issuing Bank, such other Lender or the Agent may incur (or which may be claimed against Issuing Bank, such other Lender or the Agent) by any Person by reason of or in connection with the issuance or transfer of or payment or failure to pay under any Letter of Credit; provided that the Borrower shall not be required to indemnify Issuing Bank, any other Lender or the Agent for any claims, damages, losses, liabilities, costs or expenses to the extent, but only to the extent, caused by the willful misconduct or gross negligence of the party to be indemnified. The provisions of this Section 4.2(g) shall survive the Facility Termination Date. (h) Without limiting Borrower's rights as set forth in Section 4.2(g) above, the obligation of the Borrower to immediately reimburse the Agent for drawings made under Letters of Credit shall be absolute, unconditional and irrevocable, and shall be performed strictly in accordance with the terms of this Agreement and such Letters of Credit and the related Applications and Agreements for Letters of Credit, notwithstanding the following circumstances: (i) any lack of validity or enforceability of the Letter of Credit, the obligation supported by the Letter of Credit or any other agreement or instrument relating thereto (collectively, the "Related Documents"); (ii) any amendment or waiver of or any consent to or departure from all or any of the Related Documents; (iii) the existence of any claim, setoff, defense or other rights which the Borrower may have at any time against any beneficiary or any transferee of a Letter of Credit (or any Persons for whom any such beneficiary or any such transferee may be acting), Agent, Lenders or any other Person, whether in NB BOLLE CREDIT AGREEMENT (FINAL) Doc No: 190295 53 connection with the Loan Documents, the Related Documents or any unrelated transaction; (iv) any breach of contract or other dispute between the Borrower and any beneficiary or any transferee of a Letter of Credit (or any persons or entities for whom such beneficiary or any such transferee may be acting), Agent, Lenders or any other Person; (v) any draft, statement or any other document presented under the Letter of Credit proving to be forged, fraudulent or invalid in any respect or any statement therein being untrue or inaccurate in any respect whatsoever; or (vi) any delay, extension of time, renewal, compromise or other indulgence or modification granted or agreed to by Agent, with or without notice to or approval by the Borrower in respect of any of Borrower's Obligations under this Agreement. SECTION 4.3 LETTER OF CREDIT FEE. The Borrower agrees to pay to the Agent, (a) for the pro rata benefit of the Lenders based on their Applicable Commitment Percentages, quarterly in arrears on the last Business Day of each March, June, September and December, beginning March 1998, a fee (i) for each Standby Letter of Credit, equal to the product of the average daily amount available to be drawn on such Letter of Credit during such three month period multiplied by the Applicable Margin and (ii) for each Commercial Letter of Credit, equal to the product of the stated amount of such Commercial Letter of Credit outstanding during any portion of such three month period multiplied by the Applicable Margin, and (b) for the Issuing Bank, 0.125% per annum based on the aggregate amount available to be drawn on each outstanding Letter of Credit. Such fees shall be calculated on the basis of a year of 360 days for the actual number of days during which Letters of Credit are outstanding. SECTION 4.4 ADMINISTRATIVE FEES. The Borrower shall pay to Issuing Bank such administrative fee and other fees, if any, in connection with the Letters of Credit in such amounts and at such times as Issuing Bank and the Borrower shall agree from time to time. ARTICLE V CHANGE IN CIRCUMSTANCES SECTION 5.1 INCREASED COST AND REDUCED RETURN. --------------------------------- (a) If, after the date hereof, any Lender shall have determined in good faith that the adoption of any applicable law, rule, or regulation, or any change in any applicable law, rule, or regulation, or any change in the interpretation or administration thereof by any Governmental Authority, central bank, or comparable agency charged with the interpretation or administration thereof, or compliance by any Lender (or its Applicable Lending Office) with any request or NB BOLLE CREDIT AGREEMENT (FINAL) Doc No: 190295 54 directive (whether or not having the force of law) of any such Governmental Authority, central bank, or comparable agency: (i) shall subject such Lender (or its Applicable Lending Office) to any tax, duty, or other charge with respect to any Fixed Rate Loans, its Note, or its obligation to make Fixed Rate Loans, or change the basis of taxation of any amounts payable to such Lender (or its Applicable Lending Office) under this Agreement or its Note in respect of any Fixed Rate Loans (other than franchise taxes and taxes imposed on the overall income of such Lender by the jurisdiction in which such Lender has its principal office or such Applicable Lending Office); (ii) shall impose, modify, or deem applicable any reserve, special deposit, assessment or similar requirement (other than the Reserve Requirement utilized in the determination of the Eurodollar Rate or the FF LIBOR Rate) relating to any extensions of credit or other assets of, or any deposits with or other liabilities or commitments of, such Lender (or its Applicable Lending Office), including the Revolving Credit Commitment and Term Loan Commitment of such Lender hereunder; or (iii) shall impose on such Lender (or its Applicable Lending Office) or on the London interbank market any other condition affecting this Agreement or its Note or any of such extensions of credit or liabilities or commitments; and the result of any of the foregoing is to increase the cost to such Lender (or its Applicable Lending Office) of making, Converting into, Continuing, or maintaining any Fixed Rate Loans or to reduce any sum received or receivable by such Lender (or its Applicable Lending Office) under this Agreement or its Note with respect to any Fixed Rate Loans, then the Borrower shall pay to such Lender on demand such amount or amounts as will compensate such Lender for such increased cost or reduction. If any Lender requests compensation by the Borrower under this Section 5.1(a) the Borrower may, by notice to such Lender (with a copy to the Agent), suspend the obligation of such Lender to make or Continue Loans of the Type with respect to which such compensation is requested, or to Convert Loans of any other Type into Loans of such Type, until the event or condition giving rise to such request ceases to be in effect (in which case the provisions of Section 5.4 shall be applicable); provided that such suspension shall not affect the right of such Lender to receive the compensation so requested. (b) If, after the date hereof, any Lender shall have determined that the adoption of any applicable law, rule, or regulation regarding capital adequacy or any change therein or in the interpretation or administration thereof by any Governmental Authority, central bank, or comparable agency charged with the interpretation or administration thereof, or any request or directive regarding capital adequacy (whether or not having the force of law) of any such Governmental Authority, central bank, or comparable agency, has or would have the effect of reducing the rate of return on the capital of such Lender or any corporation controlling such Lender as a consequence of such Lender's obligations hereunder to a level below that which such Lender or such corporation could have achieved but for such adoption, change, request, or NB BOLLE CREDIT AGREEMENT (FINAL) Doc No: 190295 55 directive (taking into consideration its policies with respect to capital adequacy), then from time to time upon demand the Borrower shall pay to such Lender such additional amount or amounts as will compensate such Lender on an after-tax basis for such reduction. (c) Each Lender shall promptly notify the Borrower and the Agent in writing of any event of which it has knowledge, occurring after the date hereof, which will entitle such Lender to compensation pursuant to this Section 5.1 and will designate a different Applicable Lending Office if such designation will avoid the need for, or reduce the amount of, such compensation and will not, in the judgment of such Lender, be otherwise disadvantageous to it. Any Lender claiming compensation under this Section 5.1 shall furnish to the Borrower and the Agent a statement setting forth the additional amount or amounts to be paid to it hereunder which shall be conclusive in the absence of manifest error. In determining such amount, such Lender may use any reasonable averaging and attribution methods. SECTION 5.2 LIMITATION ON TYPES OF LOANS. If on or prior to the first day of any Interest Period for any Fixed Rate Loan: (a) the Agent reasonably determines (which determination shall be conclusive) that by reason of circumstances affecting the relevant market, adequate and reasonable means do not exist for ascertaining the Interbank Offered Rate for such Interest Period; or (b) the Required Lenders determine (which determination shall be conclusive) and notify the Agent that the Eurodollar Rate or FF LIBOR Rate will not adequately and fairly reflect the cost to the Lenders of funding such Fixed Rate Loans for such Interest Period; then the Agent shall give the Borrower prompt written notice thereof specifying the relevant Type of Loans and the relevant amounts or periods, and so long as such condition remains in effect, the Lenders shall be under no obligation to make additional Loans of such Type, Continue Loans of such Type, or to Convert Loans of any other Type into Loans of such Type and the Borrower shall, on the last day of the then current Interest Period for each outstanding Loan of the affected Type, (i) with respect to FF LIBOR Rate Loans, repay such Loan and (ii) with respect to Eurodollar Rate Loans, either prepay such Loan or Convert such Loan into another Type of Loan in accordance with the terms of this Agreement. SECTION 5.3 ILLEGALITY. Notwithstanding any other provision of this Agreement, in the event that it becomes unlawful for any Lender or its Applicable Lending Office to make, maintain, or fund any Fixed Rate Loans hereunder, then such Lender shall promptly notify the Borrower thereof and (a) such Lender's obligation to make or Continue Eurodollar Rate Loans and to Convert other Types of Loans into Eurodollar Rate Loans shall be terminated until such time as such Lender may again make, maintain, and fund Eurodollar Rate Loans (in which case the provisions of Section 5.4 shall be applicable) and (b) such Lender's obligation to make or Continue FF LIBOR Rate Loans shall be suspended and the Borrower shall repay to such Lender all outstanding FF LIBOR Rate Loans owed to such Lender, together with interest accrued thereon and amounts required under Section 5.5 hereof, either on the last day of the Interest NB BOLLE CREDIT AGREEMENT (FINAL) Doc No: 190295 56 Period thereof, if such Lender may lawfully continue to maintain such FF LIBOR Rate Loans to such day, or immediately, if such Lender may not lawfully continue to maintain such FF LIBOR Rate Loans. SECTION 5.4 TREATMENT OF AFFECTED LOANS. If the obligation of any Lender to make a Eurodollar Rate Loan or to Continue, or to Convert Loans of any other Type into, Eurodollar Rate Loans shall be suspended pursuant to Section 5.1 or 5.3 hereof (Loans of such Type being herein called "Affected Loans" and such Type being herein called the "Affected Type"), such Lender's Affected Loans shall be automatically Converted into Base Rate Loans on the last day(s) of the then current Interest Period(s) for Affected Loans (or, in the case of a Conversion required by Section 5.3 hereof, on such earlier date as such Lender may specify in writing to the Borrower with a copy to the Agent) and, unless and until such Lender gives written notice as provided below that the circumstances specified in Section 5.1 or 5.3 hereof that gave rise to such Conversion no longer exist: (a) to the extent that such Lender's Affected Loans have been so Converted, all payments and prepayments of principal that would otherwise be applied to such Lender's Affected Loans shall be applied instead to its Base Rate Loans; and (b) all Loans that would otherwise be made or Continued by such Lender as Loans of the Affected Type shall be made or Continued instead as Base Rate Loans, and all Loans of such Lender that would otherwise be Converted into Loans of the Affected Type shall be Converted instead into (or shall remain as) Base Rate Loans. If such Lender gives notice to the Borrower (with a copy to the Agent) that the circumstances specified in Section 5.1 or 5.3 hereof that gave rise to the Conversion of such Lender's Affected Loans pursuant to this Section 5.4 no longer exist (which such Lender agrees to do promptly upon such circumstances ceasing to exist) at a time when Loans of the Affected Type made by other Lenders are outstanding, such Lender's Base Rate Loans shall be automatically Converted, on the first day(s) of the next succeeding Interest Period(s) for such outstanding Loans of the Affected Type, to the extent necessary so that, after giving effect thereto, all Loans held by the Lenders holding Loans of the Affected Type and by such Lender are held pro rata (as to principal amounts, Types, and Interest Periods) in accordance with their respective Revolving Credit Commitments. SECTION 5.5 COMPENSATION. Upon the request of any Lender, the Borrower shall pay to such Lender such amount or amounts as shall be sufficient (in the reasonable opinion of such Lender) to compensate it for any loss, cost, or expense (including loss of anticipated profits) incurred by it as a result of: (a) any payment, prepayment, or Conversion of a Fixed Rate Loan for any reason (including, without limitation, the acceleration of the Loans pursuant to Section 12.1) on a date other than the last day of the Interest Period for such Loan; or NB BOLLE CREDIT AGREEMENT (FINAL) Doc No: 190295 57 (b) any failure by a Borrower for any reason (including, without limitation, the failure of any condition precedent specified in Article VII to be satisfied) to borrow, Convert, Continue, or prepay a Fixed Rate Loan on the date for such borrowing, Conversion, Continuation, or prepayment specified in the relevant notice of borrowing, prepayment, Continuation, or Conversion under this Agreement. SECTION 5.6 TAXES. (a) Any and all payments by the Borrower to or for the account of any Lender or the Agent hereunder or under any other Loan Document shall be made free and clear of and without deduction for any and all present or future taxes, duties, levies, imposts, deductions, charges or withholdings, and all liabilities with respect thereto, excluding, in the case of each Lender and the Agent, taxes imposed on its income, and franchise taxes imposed on it, by the jurisdiction under the laws of which such Lender (or its Applicable Lending Office) or the Agent (as the case may be) is organized or any political subdivision thereof, other than to the extent such income or franchise tax is imposed solely as a result of the activities of the Agent or a Lender pursuant to or in respect of this Agreement or any of the other Loan Documents (all such non-excluded taxes, duties, levies, imposts, deductions, charges, withholdings, and liabilities being hereinafter referred to as "Taxes"). If a Borrower shall be required by law to deduct any Taxes from or in respect of any sum payable under this Agreement or any other Loan Document to any Lender or the Agent, (i) the sum payable shall be increased as necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section 5.6) such Lender or the Agent receives an amount equal to the sum it would have received had no such deductions been made, (ii) such Borrower shall make such deductions, (iii) such Borrower shall pay the full amount deducted to the relevant taxation authority or other authority in accordance with applicable law, and (iv) such Borrower shall furnish to the Agent, at its address referred to in Section 15.1, the original or a certified copy of a receipt evidencing payment thereof. (b) In addition, the Borrower agrees to pay any and all present or future stamp or documentary taxes and any other excise or property taxes or charges or similar levies which arise from any payment made under this Agreement or any other Loan Document or from the execution or delivery of, or otherwise with respect to, this Agreement or any other Loan Document (hereinafter referred to as "Other Taxes"). (c) The Borrower agrees to indemnify each Lender and the Agent for the full amount of Taxes and Other Taxes (including, without limitation, any Taxes or Other Taxes imposed or asserted by any jurisdiction on amounts payable under this Section 5.6) paid by such Lender or the Agent (as the case may be) and any liability (including penalties, interest, and expenses) arising therefrom or with respect thereto. (d) Each Lender organized under the laws of a jurisdiction outside the United States, on or prior to the date of its execution and delivery of this Agreement in the case of each Lender listed on the signature pages hereof and on or prior to the date on which it becomes a Lender in the case of each other Lender, and from time to time thereafter if requested in writing by the Borrower or the Agent (but only so long as such Lender remains lawfully able to do so), shall provide the Borrower and the Agent with (i) Internal Revenue Service Form 1001 or 4224, as NB BOLLE CREDIT AGREEMENT (FINAL) Doc No: 190295 58 appropriate, or any successor form prescribed by the Internal Revenue Service, certifying that such Lender is entitled to benefits under an income tax treaty to which the United States is a party which eliminates withholding tax on payments of interest or certifying that the income receivable pursuant to this Agreement is effectively connected with the conduct of a trade or business in the United States, (ii) Internal Revenue Service Form W-8 or W-9, as appropriate, or any successor form prescribed by the Internal Revenue Service, and (iii) any other form or certificate required by any taxing authority (including any certificate required by Sections 871(h) and 881(c) of the Internal Revenue Code), certifying that such Lender is entitled to an exemption from tax on payments pursuant to this Agreement or any of the other Loan Documents. (e) For any period with respect to which a Lender has failed to provide the Borrower and the Agent with the appropriate form pursuant to Section 5.6(d) (unless such failure is due to a change in treaty, law, or regulation occurring subsequent to the date on which a form originally was required to be provided), such Lender shall not be entitled to indemnification under Section 5.6(a) or 5.6(b) with respect to Taxes imposed by the United States; provided, however, that should a Lender, which is otherwise exempt from or subject to a reduced rate of withholding tax, become subject to Taxes because of its failure to deliver a form required hereunder, the Borrower shall take such steps as such Lender shall reasonably request to assist such Lender to recover such Taxes. (f) If the Borrower is required to pay additional amounts to or for the account of any Lender pursuant to this Section 5.6, then such Lender will agree to use reasonable efforts to change the jurisdiction of its Applicable Lending Office so as to eliminate or reduce any such additional payment which may thereafter accrue if such change, in the judgment of such Lender, is not otherwise disadvantageous to such Lender. (g) Within thirty (30) days after the date of any payment of Taxes, the applicable Borrower shall furnish to the Agent the original or a certified copy of a receipt evidencing such payment. (h) Without prejudice to the survival of any other agreement of the Borrower hereunder, the agreements and obligations of the Borrower contained in this Section 5.6 shall survive the Facility Termination Date. ARTICLE VI SECURITY SECTION 6.1 SECURITY INTEREST. As security for the full and timely payment and performance of all Obligations and as a continuation of the security interests and rights granted under the Existing Credit Agreement and the Security Instruments (as defined therein), the Borrower shall, and shall cause each Domestic Subsidiary to, on or before the Closing Date deliver to the Agent, in form and substance reasonably acceptable to the Agent, the Security Agreement, the Intellectual Property Security Agreements, the Landlord Waivers, the Lease NB BOLLE CREDIT AGREEMENT (FINAL) Doc No: 190295 59 Assignments, the Intellectual Property Assignments, the Collateral Assignment of Option Agreement, the Intercompany Note Assignment, and such duly executed and filed Uniform Commercial Code financing statements sufficient to grant to the Agent a valid, duly perfected security interest in the Collateral described therein, subject to no prior Liens other than Permitted Liens, and do all things necessary in the opinion of the Agent and its counsel to grant and continue to the Agent for the benefit of the Lenders a first priority security interest, duly perfected with respect to Collateral governed by the UCC, in all Collateral subject to no prior Lien or other encumbrance or restriction on transfer (other than restrictions on transfer imposed by applicable securities laws and Permitted Liens). The foregoing security shall continue to ratably secure the Senior Credit Facilities and all Swap Agreements, subject to certain restrictions contained herein. SECTION 6.2 STOCK PLEDGE. (a) As security for the full and timely payment and performance of all Obligations now existing or hereafter arising, and certain Guarantors' obligations under the Guaranty and as a continuation of the security interests and rights granted under the Existing Credit Agreement and the Stock Pledge Agreement (as defined therein), the Borrower and each Domestic Subsidiary owning any Pledged Stock shall on or before the Closing Date deliver to the Agent, in form and substance reasonably acceptable to the Agent, the Stock Pledge Agreement together with certificates representing such Pledged Stock and such stock powers duly executed in blank as may be required by the Agent in accordance with the terms hereof and thereof. In addition to any Stock Pledge Agreement required to be delivered pursuant to Section 9.21 hereof, the Borrower and Subsidiary hereby agree to pledge to the Agent for the benefit of the Lenders (i) 100% of the capital stock and related interests and rights directly or indirectly owned by the Borrower of any Domestic Subsidiary or Domestic Control Subsidiary hereafter acquired or created, (ii) 65% of the Voting Stock and 100% of the non-voting common stock and related interests and rights directly or indirectly owned by the Borrower of any Direct Foreign Subsidiary or Direct Foreign Control Subsidiary hereafter acquired or created and (iii) 100% of the capital stock and related interests and rights directly or indirectly owned by the Borrower of any Foreign Subsidiary or Foreign Control Subsidiary to the extent such action would not result in any material adverse tax impact on the Borrower and, in each case, to deliver to the Agent a Stock Pledge Agreement substantially in the form of Exhibit G hereto within thirty (30) days of the acquisition or creation of such Subsidiary. The foregoing security shall continue to ratably secure the Senior Credit Facilities and all Swap Agreements, subject to certain restrictions contained herein. SECTION 6.3 GUARANTY. To guarantee the full and timely payment and performance of all Obligations now existing or hereafter arising, the Borrower shall cause the Guaranty to be delivered by each Domestic Subsidiary, in form and substance reasonably acceptable to the Agent, on or before the Closing Date. The Borrower hereby agrees to cause a Guaranty to be delivered by any hereafter acquired, created or arising (i) Domestic Subsidiary and (ii) Foreign Subsidiary to the extent such action would not result in any material adverse tax impact on the Borrower. NB BOLLE CREDIT AGREEMENT (FINAL) Doc No: 190295 60 SECTION 6.4 LEASE ASSIGNMENTS. As security for the full and timely payment and performance of (a) all Obligations now existing or hereafter arising, and (b) the Guarantors' obligations under the Guaranty, the Borrower and each Domestic Subsidiary shall deliver to the Agent, in form and substance reasonably acceptable to the Agent, the Lease Assignments. The Lease Assignments shall be delivered on or before the Closing Date and thereafter as any material leased facility arises. SECTION 6.5 INTELLECTUAL PROPERTY. The Borrower and each Domestic Subsidiary owning any material patents, patent applications, trademarks, trademark registrations and applications therefor, copyrights, copyright registrations and applications therefore or any other material intellectual property, shall deliver to the Agent for the benefit of the Lenders the Intellectual Property Security Agreements and the Intellectual Property Assignments and opinions of counsel to the Borrower in France as to the validity and enforceability of the License Agreement and the absence of any material tax, fee or other restriction on the licensing of the intellectual property subject to the License Agreement, in form and substance acceptable to the Agent and the Lenders. In addition to any Intellectual Property Security Agreement required to be delivered pursuant to Section 9.21 hereof, the Borrower hereby agrees to pledge, or cause to be pledged, all intellectual property interests and licenses hereafter acquired or created and owned by the Borrower or any applicable Domestic Subsidiary within thirty (30) days of the acquisition or creation of such intellectual property or license. SECTION 6.6 DEED OF TRUST. As security for the full and timely payment and performance of all Obligations now existing or hereafter arising, upon the request of the Agent after reasonable determination of the need for additional Collateral hereunder, the Borrower shall cause a Deed of Trust to be executed and delivered to the Agent with respect to any material real property now existing or hereafter acquired by the Borrower or any Material Subsidiary, in form and substance reasonably acceptable to the Agent, and accompanied by environmental reports, title insurance and other certificates and documents reasonably requested by the Agent. SECTION 6.7 INTERCOMPANY NOTE ASSIGNMENT. The Borrower shall deliver the Intercompany Note Assignment to the Agent for the benefit of the Lenders. The Borrower hereby agrees to assign, or cause to be assigned, to the Agent for the benefit of the Lenders all Intercompany Notes created or existing on or after the Closing Date pursuant to the Intercompany Note Assignment or a supplement or amendment thereto. SECTION 6.8 INFORMATION REGARDING COLLATERAL. The Borrower represents, warrants and covenants that (a) the chief executive office of the Borrower and each Guarantor at the Closing Date is located at the address or addresses specified on Schedule 6.8, and (b) Schedule 6.8 contains a true and complete list of (i) the legal name and address of the Borrower and each Guarantor and of each other Person that has effected any merger or consolidation with the Borrower or a Guarantor or contributed or transferred to the Borrower or a Guarantor any significant portion of its assets constituting Collateral at any time since January 1, 1993 (excluding Persons making sales in the ordinary course of their businesses to the Borrower or a Guarantor of property constituting inventory in the hands of such seller), (ii) NB BOLLE CREDIT AGREEMENT (FINAL) Doc No: 190295 61 each location at which goods constituting Collateral are now located (together with the name of each owner of the property located at such address if not the Borrower or the applicable Guarantor, and a summary description of the relationship between the Borrower or the applicable Guarantor and such Person), and (iii) each currently used trade style and each trade name used by the Borrower or any Guarantor since January 1, 1993 and the purposes for which it was used. Borrower shall not change, and shall not permit any Guarantor to change, the location of its chief executive office or any location specified in clause (ii) of the immediately preceding sentence, or use or permit any Guarantor to use, any additional trade style, except upon giving not less than thirty (30) days' prior written notice to the Agent and taking or causing to be taken all such action at Borrower's or such Guarantor's expense as may be reasonably requested by the Agent to perfect or maintain the perfection of the Lien of the Agent in Collateral. SECTION 6.9 FURTHER ASSURANCES. At the request of the Agent, the Borrower will, and will cause each Subsidiary to, execute by its duly authorized officers, alone or with the Agent, any certificate, instrument, statement or document and will procure any such certificate, instrument, statement or document (and pay all connected costs) which the Agent reasonably deems necessary to create or preserve the Liens (and the perfection and priority thereof) of the Agent for the benefit of the Lenders contemplated hereby and by the other Loan Documents and specifically including all Collateral acquired by the Borrower or any Guarantor after the Closing Date. ARTICLE VII CONDITIONS PRECEDENT SECTION 7.1 EFFECTIVENESS; CONDITIONS TO ADVANCES AND ISSUANCE OF LETTERS OF CREDIT. The effectiveness of this Agreement and the obligation of the Lenders to make the Term Loan and to make the Advances of the Revolving Loans and of Issuing Bank to issue the Letters of Credit is subject to the satisfaction of the following conditions precedent: (a) the Agent shall have received on or before the Closing Date, in form and substance satisfactory to the Agent and Lenders, the following: (i) executed originals of this Agreement and each of the other Loan Documents, together with all schedules and exhibits thereto; (ii) favorable written opinions of counsel to the Borrower and the Guarantors dated the Closing Date, addressed to the Agent and the Lenders and reasonably satisfactory to Smith Helms Mulliss & Moore, L.L.P., special counsel to the Agent, substantially in the forms set forth in Exhibit N attached hereto and incorporated herein by reference; NB BOLLE CREDIT AGREEMENT (FINAL) Doc No: 190295 62 (iii) resolutions of the board of directors or other appropriate governing body (or of the appropriate committee thereof) of the Borrower, certified by its vice president, secretary or assistant secretary or other appropriate officer as of the Closing Date, appointing the initial Authorized Representative and approving and adopting the Loan Documents to be executed by such Person, and authorizing the execution, delivery and performance thereof; (iv) resolutions of the board of directors or other appropriate governing body (or of the appropriate committee thereof) of each Guarantor, certified by its secretary, assistant secretary, vice president or other appropriate officer as of the Closing Date approving and adopting the Loan Documents to be executed on behalf of such Guarantor and authorizing the execution, delivery and performance thereof; (v) specimen signatures of officers of the Borrower executing the Loan Documents on behalf of the Borrower, certified by the secretary, assistant secretary, vice president or other appropriate officer of the Borrower; (vi) specimen signatures of officers of each Guarantor executing the Loan Documents on behalf of such Guarantor, certified by the secretary, assistant secretary, vice president or other appropriate officer of such Guarantor; (vii) Organizational Documents of the Borrower and each Guarantor certified as of recent date by the Secretary of State of its state of organization; (viii) Operating Documents of the Borrower and each Guarantor certified as of the Closing Date as true and correct by its secretary, assistant secretary, vice president or other appropriate officer of such Person; (ix) with respect to the Borrower and each Guarantor, certificates issued as of a recent date by the Secretary of State or other appropriate Governmental Authority of its jurisdiction of incorporation as to its due existence and good standing therein; (x) with respect to the Borrower and each Guarantor, appropriate certificates of qualification to do business, good standing and, where appropriate, authority to conduct business under assumed name, issued as of a recent date by the Secretary of State or other appropriate Governmental Authority of each jurisdiction in which the failure to be qualified to do business or authorized so to conduct business would reasonably be expected to result in a Material Adverse Effect; (xi) stock certificates representing all of the shares of Pledged Stock with undated stock powers executed in blank for each certificate; NB BOLLE CREDIT AGREEMENT (FINAL) Doc No: 190295 63 (xii) original Intercompany Notes with undated endorsements executed in blank for each Intercompany Note; (xiii) notice of appointment of the initial Authorized Representative of the Borrower in the form of Exhibit C hereto; (xiv) certificate of an Authorized Representative dated the Closing Date demonstrating compliance with the financial covenants contained in Article XI hereof, all as of the immediately preceding Determination Date, substantially in the form of Exhibit O attached hereto; (xv) evidence of insurance required by the Loan Documents other than policies for director and officer indemnification insurance and immaterial policies issued to Subsidiaries; (xvi) Landlord Waivers and Lease Assignments for each of the Borrower's or any Subsidiary's leased facilities; (xvii) a copy of the License Agreement certified as true and correct by an Authorized Representative; (xviii) financial statements of the Borrower and its Subsidiaries required to be delivered pursuant to Section 8.6 hereof, pro forma historical financial statements as at and for the fiscal year ended December 31, 1997 of the Borrower and its Subsidiaries on a consolidated basis and, to the extent any Permitted Acquisition has been consummated, giving effect to such Permitted Acquisition and the transactions contemplated thereby, and, to the extent any Permitted Acquisition has been consummated, consolidated pro forma financial statements and projections of the Borrower and its Subsidiaries on a consolidated basis for the first complete Four-Quarter Period following completion and effectiveness of each of the Bolle Australia Acquisition and the Bolle UK Acquisition; (xix) a Borrowing Notice or Interest Rate Selection Notice; (xx) all fees payable by the Borrower on the Closing Date to the Agent, Issuing Bank and the Lenders; (xxi) UCC-1 Financing Statements, duly executed by the Borrower and each of the Guarantors and in proper form for filing, for all locations required by applicable law to perfect the lien of the Agent and the Lenders under the Security Agreement as a first priority lien as to items of Collateral in which a security interest may be perfected by the filing of financing statements; NB BOLLE CREDIT AGREEMENT (FINAL) Doc No: 190295 64 (xxii) a certificate of an officer of the Borrower reasonably satisfactory to the Agent and the Lenders as to the matters set forth in Section 7.1(b)(ii) through (vi) and 7.1(c)(i) and (v) below; (xxiii) information regarding litigation, taxes, accounting, labor, insurance, pension liabilities (actual or contingent), real estate leases, material contracts, debt agreements, property ownership, and contingent liabilities of the Borrower and its Subsidiaries and, to the extent any Permitted Acquisition has been consummated, of Bolle Australia and Bolle UK as required by the Agent; (xxiv) a copy of the fully executed Texas Property Purchase Agreement for a minimum amount of $5,000,000 to be closed not later than April 30, 1998 and all other related documents, instruments and agreements requested by the Agent certified as true and complete by an Authorized Representative; and (xxv) such other documents, instruments, certificates and opinions as the Agent or any Lender may reasonably request on or prior to the Closing Date in connection with the consummation of the transactions contemplated hereby. (b) Each of the following shall have occurred or be true: (i) The Agent and NMS shall have completed all due diligence with respect to the Borrower and its Subsidiaries, and to the extent any Permitted Acquisition has been consummated on or before the Closing Date, (A) Bolle Australia and/or Bolle UK and their Subsidiaries, as applicable, and (B) the Bolle UK Acquisition and/or the Bolle Australia Acquisition, as applicable, all in scope and determination satisfactory to NationsBank and NMS in their sole discretion; (ii) There shall not be any action, suit, investigation or proceeding pending or threatened in any court or before any arbitrator or governmental instrumentality that (a) purports to affect the Borrower and its Subsidiaries, Bolle UK, Bolle Australia and their respective Subsidiaries or the transactions contemplated hereby (including any Permitted Acquisition), (b) would reasonably be expected to have a material adverse effect on the financings or any other transactions contemplated hereby (including without limitation the redesignation of the Series A Preferred Stock or the issuance and terms of the Series B Preferred Stock), on the Borrower or its Subsidiaries or their business or operations, on Bolle Australia, Bolle UK or any of their Subsidiaries or their business or operations, or on the Permitted Acquisitions or (c) would reasonably be expected to have a material adverse effect on the ability of the parties hereto or thereto to perform their obligations hereunder or under either Share Purchase Agreement; (iii) The Borrower shall be in compliance with all existing financial and material contractual obligations before and immediately after giving effect to the financings and other transactions contemplated hereby; NB BOLLE CREDIT AGREEMENT (FINAL) Doc No: 190295 65 (iv) The Borrower, its Domestic Subsidiaries and any other Guarantor shall have received all government, shareholder and third-party approvals, consents and waivers, and shall have made or given all necessary filings and notices, as shall be required to consummate the transactions contemplated hereby without the occurrence of any default under, conflict with or violation of (A) any applicable law, rule, regulation, order or decree of any court or other Governmental Authority or arbitral authority, (B) any Organizational Document or Operating Documents of the Borrower or any Subsidiary or (C) any agreement, document or instrument to which any of the Borrower or any Domestic Subsidiary or any other Guarantor is a party or by which any of them or their properties is bound, if such default, conflict or violation would reasonably be expected to result in a Material Adverse Effect; and all applicable waiting periods shall have expired without any action being taken or threatened in writing by any authority that could restrain, prevent or impose any material adverse conditions on the making of the Term Loan or the Revolving Loans, or other transactions contemplated hereby, and no law or regulation shall be applicable which would reasonably be expected to have a Material Adverse Effect; (v) The Borrower shall have been granted exclusive, worldwide licenses on terms and conditions acceptable to the Agent for unrestricted use of all trademarks, patents and other intellectual property of any Foreign Subsidiary (now existing or hereafter created or acquired), which licenses shall permit assignment thereof to the Agent and the Lenders and their further assignees; (vi) The maximum principal amount of all Indebtedness for Money Borrowed of the Borrower on the Closing Date, giving effect to the assumption of certain Indebtedness by the Borrower from BEC pursuant to the Bill of Sale and the Assignment and Amendment, the initial advance on such date of the Term Loan and Revolving Credit Loans and repayment of Existing Indebtedness with the proceeds thereof (other than repayment of the FG Mortgage Debt) shall not exceed $24,000,000; provided, however, in the event that the Bolle Australia Acquisition and the Bolle UK Acquisition have not both been consummated on the Closing Date, the Borrower's total Indebtedness for Money Borrowed on the Closing Date, giving effect to the transactions referred to above in this clause (vi) and to any Permitted Acquisition then consummated, does not exceed the product of 3.1 times the Borrower's pro forma Consolidated EBITDA for the Four-Quarter Period most recently ended prior to the Closing Date giving effect to such Permitted Acquisition closed on the Closing Date. (vii) The terms and conditions as well as the form and substance of all documents, instruments and agreements by which BEC assigns to the Borrower, and the Borrower assumes from BEC certain assets and liabilities, including without limitation the Bill of Sale and the Assignment and Amendment, shall be acceptable to the Agent and the Lenders in their discretion. NB BOLLE CREDIT AGREEMENT (FINAL) Doc No: 190295 66 (c) In the good faith judgment of the Agent and the Lenders: (i) Except as set forth in Schedule 7.1(c) hereto, there shall not have occurred a material adverse change in the business, assets, revenues, operations, or condition (financial or otherwise) of the Borrower and its Subsidiaries taken as a whole since December 31, 1996 or in the assumptions, facts or information contained in the financial statements, budgets, projections or pro forma balance sheets most recently delivered to the Agent by the Borrower; (ii) There shall not have occurred and be continuing a material adverse change in the market for syndicated credit facilities similar in nature to the Facilities or a material disruption of, or a material adverse change in, financial, banking or capital market conditions, in each case as determined by the Agent in its reasonable discretion; (iii) All financial reports received by the Agent with respect to the Borrower and the reasonableness and accuracy of all financial projections shall be reasonably satisfactory; (iv) The terms of the Preferred Stock and all other preferred stock and other equity or debt instruments of the Borrower's capital structure, including without limitation any other securities issued or consideration tendered or liability assumed by the Borrower in connection with the Bolle Australia Acquisition and the Bolle UK Acquisition, shall be in form and substance acceptable to NMS, the Agent and the Lenders; and (v) There not having occurred and being continuing a material adverse change in governmental regulation or policy affecting NationsBank, NMS, the Borrower, or, to the extent any Permitted Acquisition has been consummated, Bolle UK and/or Bolle Australia, as applicable, or such Permitted Acquisition, and no litigation or other action is pending or threatened seeking an injunction, damages or relief relating to the Credit Facilities or the related transactions contemplated in conjunction with any Permitted Acquisition. SECTION 7.2 CONDITIONS OF PERMITTED ACQUISITIONS AND ALL ADVANCES FOR PERMITTED ACQUISITIONS. Each Permitted Acquisition and the obligations of the Lenders to make any Advance on any date (each an "Acquisition Date"), whether on or after the Closing Date, to be used to pay or repay amounts previously paid with respect to any portion of the purchase price or costs associated with a Permitted Acquisition are subject to the satisfaction of the following conditions: (a) the Agent shall have received on or before any Acquisition Date, in form and substance satisfactory to the Agent and Lenders, the following: NB BOLLE CREDIT AGREEMENT (FINAL) Doc No: 190295 67 (i) favorable written opinions of counsel to the Borrower (including opinions of local counsel in the United Kingdom or Australia, as applicable) dated the Acquisition Date, addressed to the Agent and the Lenders and reasonably satisfactory to Smith Helms Mulliss & Moore, L.L.P., special counsel to the Agent, substantially in the forms set forth in Exhibit N attached hereto and incorporated herein by reference; (ii) financial statements of Bolle Australia and/or Bolle UK, as applicable, for the fiscal year 1997, including balance sheets, income and cash flow statements prepared in conformity with generally accepted accounting principles of the applicable country and certified by independent public accountants of recognized national standing with an unqualified opinion; (iii) tax returns of Bolle Australia and/or Bolle UK, as applicable, for the two immediately preceding fiscal years; (iv) pro forma historical financial statements as at and for the fiscal year ended December 31, 1997 of the Borrower and its Subsidiaries on a consolidated basis giving effect to such Permitted Acquisition and the transactions contemplated thereby, consolidated pro forma financial statements and projections of the Borrower and its Subsidiaries on a consolidated basis for the first complete Four-Quarter Period following completion and effectiveness of each of the Bolle Australia Acquisition and the Bolle UK Acquisition; (v) information regarding litigation, taxes, accounting, labor, insurance, pension liabilities (actual or contingent), real estate leases, material contracts, debt agreements, property ownership, and contingent liabilities of Bolle Australia and/or Bolle UK, as applicable, as required by the Agent; (vi) a written Price Waterhouse report of the accounts receivable, inventory, accounts payable, controls and systems of Bolle Australia and/or Bolle UK, as applicable, in form and substance acceptable to the Agent; (vii) a certificate of an officer of the Borrower reasonably satisfactory to the Agent and the Lenders as to the matters set forth in Section 7.2(b)(i) through (iii) and 7.2(c)(i) through (iv)below; (b) Each of the following shall have occurred or be true: (i) the total cash consideration shall not be greater than (pound)1,000,000 for the Bolle UK Acquisition and A$5,875,000 for the Bolle Australia Acquisition; (ii) the cash consideration listed in (i) above, the shares of common stock of the Borrower and all other consideration to be tendered or liability NB BOLLE CREDIT AGREEMENT (FINAL) Doc No: 190295 68 assumed in connection with the Permitted Acquisition (the "Acquisition Consideration") shall be acceptable to the Agent and the Lenders; (iii) There shall not be any action, suit, investigation or proceeding pending or threatened in any court or before any arbitrator or governmental instrumentality that (a) would reasonably be expected to have a material adverse effect on Bolle Australia, Bolle UK or any of their Subsidiaries or their business or operations, or on such Permitted Acquisition or (b) would reasonably be expected to have a material adverse effect on the ability of the parties hereto or thereto to perform their obligations under the applicable Share Purchase Agreement; (iv) The Agent and NMS shall have completed all due diligence with respect to (A) Bolle Australia and/or Bolle UK and their Subsidiaries, as applicable, and (B) the Bolle UK Acquisition and/or the Bolle Australia Acquisition, as applicable, all in scope and determination satisfactory to NationsBank and NMS in their sole discretion; (c) In the sole discretion of the Agent and NMS: (i) there shall not have occurred since December 31, 1997 any change in the business, assets, condition (financial or otherwise) or cash flow of Bolle Australia or Bolle UK or in the facts and information relating to Bolle Australia or Bolle UK that would reasonably be expected to have a material adverse effect on the business, properties, operations or conditions, financial or otherwise, of Bolle Australia or Bolle UK; (ii) neither the Bolle Australia Acquisition nor the Bolle UK Acquisition shall have a Material Adverse Effect on the Borrower and its Subsidiaries; (iii) all conditions precedent to the consummation of the Bolle Australia Acquisition and the Bolle UK Acquisition, as applicable, set forth in the Share Purchase Agreements have been satisfied (other than the tender of cash consideration and the issuance of Common Stock) and not waived without the approval of the Agent including all consents and approvals of third parties and upon the tendering of the cash proceeds in the manner set forth in (ix) below and the issuance of Common Stock pursuant to the terms of the Share Purchase Agreements, the Bolle Australia Acquisition and the Bolle UK Acquisition will be effective; (iv) There not having occurred and being continuing a material adverse change in governmental regulation or policy affecting Bolle UK and/or Bolle Australia, as applicable, or any Permitted Acquisition, and no litigation or other action is pending or threatened seeking an injunction, damages or relief relating to any Permitted Acquisition; NB BOLLE CREDIT AGREEMENT (FINAL) Doc No: 190295 69 (v) the Agent and the Lenders shall have been authorized to rely on the opinions of counsel to the Borrower, Bolle Australia and Bolle UK as to all matters contained in such opinions regarding the Bolle Australia Acquisition and the Bolle UK Acquisition; (vi) the Agent shall have received copies of the fully executed Share Purchase Agreements and all other related documents, instruments and agreements requested by the Agent certified as true and complete by an Authorized Representative and the Share Purchase Agreements and all related documents, instruments and agreements shall not have been amended in form or substance not acceptable to the Agent and the Lenders; (vii) the Agent and NMS shall have completed all due diligence deemed necessary with respect to the business, operations, financial conditions and prospects of Bolle Australia and Bolle UK. (viii) the Bolle Australia Acquisition and the Bolle UK Acquisition shall be effective upon tendering of the Acquisition Consideration. SECTION 7.3 CONDITIONS OF ALL ADVANCES AND ISSUANCES OF LETTERS OF CREDIT ON OR AFTER THE CLOSING DATE. The obligations of the Lenders to make any Advance or to Convert or Continue the interest rates thereof pursuant to Sections 2.10 or 3.11 (other than any Conversion required by Sections 5.1, 5.2 or 5.3 hereof), and of Issuing Bank to issue Letters of Credit hereunder, on or subsequent to the Closing Date are subject to the satisfaction of the following conditions: (a) the Agent shall have received a notice of such borrowing or request as required by Section 3.1 hereof; (b) the representations and warranties of the Borrower set forth in Article VIII hereof and in each of the other Loan Documents shall be true and correct in all material respects on and as of the date of such Advance, Conversion, Continuation or issuance of such Letters of Credit, as the case may be, with the same effect as though such represen tations and warranties had been made on and as of such date, except (i) to the extent that such representations and warranties expressly relate to an earlier date, (ii) that the representations and warranties set forth in Section 8.4 and 8.5 shall be deemed to include and take into account any merger or consolidation permitted under Section 10.4 hereof or otherwise permitted in accordance with the terms hereof, and (iii) that the financial statements referred to in Section 8.6(a) shall be deemed to be those financial statements most recently delivered to the Agent and the Lenders pursuant to Section 9.1 hereof; (c) in the case of the issuance of a Letter of Credit, Borrower shall have executed and delivered to Issuing Bank an Application and Agreement for Letter of Credit NB BOLLE CREDIT AGREEMENT (FINAL) Doc No: 190295 70 in form and content reasonably acceptable to Issuing Bank together with such other instruments and documents as it shall reasonably request; (d) at the time of each such Advance, Conversion, Continuation or issuance of each Letter of Credit, as the case may be, no Default or Event of Default shall have occurred and be continuing; (e) immediately after issuing any Letter of Credit, the aggregate Letter of Credit Outstandings shall not exceed the Total Letter of Credit Commitment; and (f) immediately after giving effect to any Revolving Loan or Letter of Credit, the sum of the Dollar Value of all Revolving Credit Outstandings and all Letter of Credit Outstandings shall not exceed the Total Revolving Credit Commitment, the sum of all FF Revolving Credit Outstandings and Term Loan Outstandings shall not exceed the Total FF Loan Commitment, and the Dollar Value of each Lender's Applicable Commitment Percentage of Revolving Loans and Participations shall not exceed its Revolving Credit Commitment. ARTICLE VIII REPRESENTATIONS AND WARRANTIES Except as otherwise indicated below, all Subsidiaries acquired in connection with the Bolle Australia Acquisition and the Bolle UK Acquisition and as to which the representations and warranties referenced in Section 8.20 hereof are applicable shall be deemed excluded from the meaning of the terms "Subsidiary" and "Subsidiaries" for the purposes of making the representations and warranties contained in this Article VIII (other than Section 8.20 hereof) on the Acquisition Date only. Such Subsidiaries shall be included in the meanings of such terms at all times after the Acquisition Date that the representations and warranties contained in this Article VIII are given. The Borrower represents and warrants (which representations and warranties shall survive the delivery of the documents mentioned herein and the making of Loans and issuance of Letters of Credit) with respect to itself and to its Subsidiaries as follows: SECTION 8.1 ORGANIZATION AND AUTHORITY. (a) The Borrower and each Subsidiary is a corporation duly organized and validly existing under the laws of the jurisdiction of its incorporation; (b) the Borrower and each Subsidiary (i) has the requisite power and authority to own its properties and assets and to carry on its business as now being conducted and as contemplated in the Loan Documents, and (ii) is qualified to do business in every NB BOLLE CREDIT AGREEMENT (FINAL) Doc No: 190295 71 jurisdiction in which it conducts business except where the failure so to qualify would not have a Material Adverse Effect; (c) the Borrower has the power and authority to execute, deliver and perform this Agreement and the Notes, and to borrow hereunder, and to execute, deliver and perform each of the other Loan Documents to which it is a party; (d) each Guarantor has the power and authority to execute, deliver and perform the Guaranty and the Security Agreement and to execute, deliver and perform each of the other Loan Documents to which it is a party; and (e) when executed and delivered, and, with respect to the Intellectual Property Assignments, upon filing and satisfaction of the express conditions to effectiveness therein, each of the Loan Documents to which the Borrower or any Guarantor is a party will be the legal, valid and binding obligation or agreement, as the case may be, of the Borrower and such Guarantor, as applicable, enforceable against it in accordance with its respective terms, subject to the effect of any applicable bankruptcy, moratorium, insolvency, reorganization or other similar law affecting the enforceability of creditors' rights generally and to the effect of general principles of equity which may limit the availability of remedies (whether in a proceeding at law or in equity); SECTION 8.2 LOAN DOCUMENTS. The execution, delivery and performance by the Borrower and each Guarantor of each of the Loan Documents to which it is a party: (a) have been duly authorized by all requisite corporate action (including any required shareholder action) of the Borrower or such Guarantor, as applicable, required for the lawful execution, delivery and performance thereof; (b) do not violate any provisions of (i) any law, rule or regulation applicable to the Borrower or such Guarantor which violation would reasonably be expected to have a Material Adverse Effect, (ii) any order of any court or other agency of government binding on the Borrower or such Guarantor, or their respective properties, or (iii) the charter documents, documents of organization or governance or bylaws of the Borrower or such Guarantor; (c) will not be in conflict with, result in a breach of or constitute an event of default, or an event which, with notice or lapse of time, or both, would constitute an event of default, under any indenture, agreement or other instrument to which the Borrower or such Guarantor is a party or by which its properties or assets are bound; and (d) will not result in the creation or imposition of any Lien, charge or encumbrance of any nature whatsoever upon any of the properties or assets of the Borrower or such Guarantor except Permitted Liens and any Liens in favor of the Agent and the Lenders created by the Loan Documents; NB BOLLE CREDIT AGREEMENT (FINAL) Doc No: 190295 72 SECTION 8.3 SOLVENCY. The Borrower and each Guarantor are Solvent after giving effect to the transactions contemplated by this Agreement and the other Loan Documents; SECTION 8.4 SUBSIDIARIES AND STOCKHOLDERS. Borrower has no Subsidiaries other than those Persons listed as Subsidiaries in Schedule 8.4 hereto, as the same may be hereafter amended; Schedule 8.4, as the same may be hereafter amended, states the authorized and issued capitalization of each Subsidiary listed thereon, the number of shares of each class of capital stock issued and outstanding of each such Subsidiary and the number and/or percentage of outstanding shares (including options, warrants and other rights to acquire any interest) of each such class of capital stock owned by the Borrower or by any such Subsidiary; the outstanding shares of each such Subsidiary have been duly authorized and validly issued and are fully paid and nonassessable; and the Borrower and each such Subsidiary owns beneficially and of record all the shares it is listed as owning in Schedule 8.4, free and clear of any Lien other than Permitted Liens; SECTION 8.5 OWNERSHIP INTERESTS. The Borrower owns no interest in any other Person (excluding Subsidiaries) other than the Persons listed in Schedule 8.5 hereto, as the same may be hereafter amended; SECTION 8.6 FINANCIAL CONDITION. (a) The Borrower has heretofore furnished to the Agent (i) the audited consolidated and unaudited consolidating balance sheets of the Borrower and its Subsidiaries as at December 31, 1996, and the notes thereto and the related audited consolidated and unaudited consolidating statements of operations, cash flows, and shareholders' equity for the Fiscal Years then ended as examined and certified by Price Waterhouse, L.L.P., and (ii) unaudited interim consolidated financial statements of the Borrower and its Subsidiaries consisting of a consolidated balance sheet and related consolidated statement of operations and cash flows, without notes, for and as of the nine-month period ended September 30, 1997. Except as set forth therein, such financial statements (including the notes thereto) present fairly the consolidated financial condition of the Borrower and its Subsidiaries, as of the end of such Fiscal Year and nine-month period and results of their operations and the changes in shareholders' equity for such Fiscal Year and nine-month period, all in conformity with GAAP applied on a Consistent Basis; (b) Except as set forth on Schedule 7.1(c), since December 31, 1996, there has not occurred any event which has had or would reasonably be expected to have a Material Adverse Effect, and the businesses, properties and operations of the Borrower and its Subsidiaries, considered as a whole, have not been materially adversely affected as a result of any fire, explosion, earthquake, accident, strike, lockout, combination of workers, flood, embargo or act of God; (c) Since December 31, 1996, except as set forth in Schedule 8.6 or Schedule 8.10 attached hereto, or as permitted under Section 10.1 hereof, neither the Borrower nor any Subsidiary has incurred, other than in the ordinary course of business, any material NB BOLLE CREDIT AGREEMENT (FINAL) Doc No: 190295 73 Indebtedness or material Contingent Obligations that remain outstanding or unsatisfied other than Outstandings hereunder; SECTION 8.7 TITLE TO PROPERTIES. The Borrower and its Subsidiaries have title to all their respective owned real and personal properties, subject to no transfer restrictions or Liens of any kind, except for (i) the transfer restrictions and Liens described in Schedule 8.7 attached hereto, (ii) Permitted Liens, (iii) with respect to any personal property that constitutes a security, transfer restrictions imposed under Federal and state securities laws and regulations, and (iv) the lack of title that could not reasonably be expected to have a Material Adverse Effect; SECTION 8.8 TAXES. The Borrower and its Subsidiaries have filed or caused to be filed all Federal, state, local and foreign tax returns which are required to be filed by them, other than those returns the failure of which to file could not reasonably be expected to have a Material Adverse Effect and, except for those tax matters set forth on Schedule 8.8 hereto and for taxes and assessments being contested in good faith by appropriate proceedings diligently conducted and against which reserves satisfactory to the Borrower's independent certified public accountants have been established, have paid or caused to be paid all taxes as shown on said returns or on any assessment received by them, to the extent that such taxes have become due unless the failure to pay the same could not reasonably be expected to have a Material Adverse Effect; SECTION 8.9 OTHER AGREEMENTS. Neither the Borrower nor any Subsidiary is: ---------------- (a) a party to any judgment, order or decree or subject to restrictions which would reasonably be expected to have a Material Adverse Effect; or (b) in default in the performance, observance or fulfillment of any of the obligations, covenants or conditions contained in any agreement or instrument to which the Borrower or any Subsidiary is a party, which default has, or if not remedied within any applicable grace period would reasonably be expected to have, a Material Adverse Effect; SECTION 8.10 LITIGATION. Except as set forth on Schedule 8.10, there is no action, suit or proceeding at law or in equity or by or before any governmental instrumentality or agency or arbitral body pending, or, to the knowledge of the Borrower, threatened by or against the Borrower or any Subsidiary or affecting the Borrower or any Subsidiary or any properties or rights of the Borrower or any Subsidiary, which would reasonably be expected to have a Material Adverse Effect; SECTION 8.11 MARGIN STOCK. Neither the Borrower nor any Subsidiary owns any "margin stock" as such term is defined in Regulation U, as amended (12 C.F.R. Part 221), of the Board. The proceeds of the borrowings made pursuant to Articles 2 and 3 hereof will be used by the Borrower and its Subsidiaries only for the purposes set forth in Sections 2.13 and 3.15 hereof. None of such proceeds will be used, directly or indirectly, for the purpose of purchasing or carrying any margin stock or for the purpose of reducing or retiring any Indebtedness which was originally incurred to purchase or carry margin stock or for any other purpose which might constitute any of the Loans under this Agreement a "purpose credit" within the meaning of said NB BOLLE CREDIT AGREEMENT (FINAL) Doc No: 190295 74 Regulation U or Regulation X (12 C.F.R. Part 224) of the Board. Neither the Borrower nor any agent acting on its behalf has taken or will take any action which might cause this Agreement or any of the documents or instruments delivered pursuant hereto to violate any regulation of the Board or to violate the Securities Exchange Act of 1934, as amended, or the Securities Act of 1933, as amended, or any state securities laws, in each case as in effect on the date hereof; SECTION 8.12 INVESTMENT COMPANY. Neither the Borrower nor any Subsidiary is an "investment company," or an "affiliated person" of, or "promoter" or "principal underwriter" for, an "investment company," as such terms are defined in the Investment Company Act of 1940, as amended (15 U.S.C. ss. 80a-1, et seq.). The application of the proceeds of the Loans and repayment thereof by the Borrower and the performance by the Borrower of the transactions contemplated by this Agreement will not violate any provision of said Act, or any rule, regulation or order issued by the Securities and Exchange Commission thereunder, in each case as in effect on the date hereof; SECTION 8.13 INTELLECTUAL PROPERTY. The Borrower and its Subsidiaries own or have the right to use, under valid license agreements or otherwise, all material patents, licenses, franchises, trademarks, trademark rights, trade names, trade name rights, trade secrets and copyrights, and all applications for any of the foregoing, necessary to the conduct of their businesses as now conducted (the "Intellectual Property"), all such Intellectual Property being identified on the schedules to the Intellectual Property Security Agreement and, except as set forth on Schedule 8.13 hereto, without known conflict with any patent, license, franchise, trademark, trade secrets and confidential commercial or proprietary information, trade name, copyright, rights to trade secrets or other proprietary rights of any other Person. Each Subsidiary owning any Collateral as defined in the Intellectual Property Security Agreement is a party to the Intellectual Property Security Agreement. All material, patents, licenses, franchises, trademarks, trademark rights, trade names, trade secrets and copyrights of Bolle SNC are subject to the License Agreement. SECTION 8.14 NO UNTRUE STATEMENT. Neither this Agreement nor any other Loan Document or certificate or document executed and delivered by or on behalf of the Borrower or any Guarantor in accordance with or pursuant to any Loan Document contains any misrepresentation or untrue statement of material fact or omits to state a material fact necessary, in light of the circumstances under which such representation or statement was made, in order to make any such representation or statement contained herein or therein not misleading in any material respect; SECTION 8.15 NO CONSENTS, ETC. Neither the respective businesses or properties of the Borrower or any Subsidiary, nor any relationship between the Borrower or any Subsidiary and any other Person, nor the execution, delivery and performance of the Loan Documents and the transactions contemplated hereby is such as to require a consent, approval or authorization of, or filing, registration or qualification with, any Governmental Authority or other authority or any other Person on the part of the Borrower or any Subsidiary as a condition to the execution, delivery and performance of, or consummation of the transactions contemplated by, this Agreement or the other Loan Documents, including, without limitation, the Permitted NB BOLLE CREDIT AGREEMENT (FINAL) Doc No: 190295 75 Acquisitions, or if so, such consent, approval, authorization, filing, registration or qualification has been obtained or effected, or shall have been obtained or effected prior to the Closing Date, as the case may be, or as set forth on Schedule 8.15 hereto; SECTION 8.16 EMPLOYEE BENEFIT PLANS. Except as set forth in Schedule 8.16 hereof: (a) Neither the Borrower nor any ERISA Affiliate maintains or contributes to, or has any obligation under, any Employee Benefit Plans other than those identified on Schedule 8.16 attached hereto; (b) The Borrower and each ERISA Affiliate is in compliance with all applicable provisions of ERISA and the regulations and published interpretations thereunder and in compliance with all Foreign Benefit Laws with respect to all Employee Benefit Plans except where failure to comply would not result in a Material Adverse Effect and except for any required amendments for which the remedial amendment period as defined in Section 401(b) of the Code has not yet expired. Each Employee Benefit Plan that is intended to be qualified under Section 401(a) of the Code has been determined by the Internal Revenue Service to be so qualified, and each trust related to such plan has been determined to be exempt under Section 501(a) of the Code. No material liability has been incurred by the Borrower or any ERISA Affiliate which remains unsatisfied for any taxes or penalties with respect to any Employee Benefit Plan or any Multiemployer Plan; (c) No Pension Plan has been terminated, nor has any accumulated funding deficiency (as defined in Section 412 of the Code) been incurred (without regard to any waiver granted under Section 412 of the Code), nor has any funding waiver from the IRS been received or requested with respect to any Pension Plan, nor has the Borrower or any ERISA Affiliate failed to make any contributions or to pay any amounts due and owing as required by Section 412 of the Code, Section 302 of ERISA or the terms of any Pension Plan prior to the due dates of such contributions under Section 412 of the Code or Section 302 of ERISA, nor has there been any event requiring any disclosure under Section 4041(c)(3)(C), 4063(a) or 4068(f) of ERISA with respect to any Pension Plan; (d) Neither the Borrower nor any ERISA Affiliate has: (A) engaged in a nonexempt prohibited transaction described in Section 406 of ERISA or Section 4975 of the Code, (B) incurred any liability to the PBGC which remains outstanding other than the payment of premiums and there are no premium payments which are due and unpaid, (C) failed to make a required contribution or payment to a Multiemployer Plan or (D) failed to make a required installment or other required payment under Section 412 of the Code; (e) No Termination Event has occurred or is reasonably expected to occur with respect to any Pension Plan or Multiemployer Plan; and NB BOLLE CREDIT AGREEMENT (FINAL) Doc No: 190295 76 (f) No material proceeding, claim, lawsuit and/or investigation exists or, to the best knowledge of the Borrower after due inquiry, is threatened concerning or involving any Employee Benefit Plan. SECTION 8.17 NO DEFAULT. As of the date hereof, there does not exist any Default or Event of Default hereunder. SECTION 8.18 ENVIRONMENTAL MATTERS. Except as listed on Schedule 8.18, the Borrower and each Subsidiary is in compliance in all material respects with all applicable Environmental Laws and has been issued and currently maintains all required federal, state and local permits, licenses, certificates and approvals. Neither the Borrower nor any Subsidiary has been notified of any pending or threatened action, suit, proceeding or investigation, and neither the Borrower nor any Subsidiary is aware of any facts, which (a) calls into question, or would reasonably be expected to call into question, compliance by the Borrower or any Subsidiary with any Environmental Laws, (b) seeks, or would reasonably be expected to form the basis of a meritorious proceeding to seek, to suspend, revoke or terminate any license, permit or approval necessary for the operation of the Borrower's or any Subsidiary's business or facilities, or (c) seeks to cause, or would reasonably be expected to form the basis of a meritorious proceeding to cause, any property of the Borrower or any Subsidiary to be subject to any restrictions on ownership, use, occupancy or transferability under any Environmental Law, any of which would reasonably be expected to have a Material Adverse Effect. SECTION 8.19 EMPLOYMENT MATTERS. Except as set forth on Schedule 8.19, the Borrower and all Subsidiaries are in compliance with all applicable laws, rules and regulations pertaining to labor or employment matters, including without limitation those pertaining to wages, hours, occupational safety and taxation, except where noncompliance could not reasonably be expected to have a Material Adverse Effect, and there is neither pending nor, to the knowledge of the Borrower, any threatened litigation, administrative proceeding or investigation in respect of such matters an adverse ruling or determination in which would reasonably be expected to have a Material Adverse Effect. SECTION 8.20 PERMITTED ACQUISITION. On the date that any Permitted Acquisition is consummated and effective, each of the representations and warranties contained in the Share Purchase Agreements, including all Exhibits referenced therein and all definitions of defined terms referenced therein, are incorporated herein by reference and given by the Borrower as of such date. NB BOLLE CREDIT AGREEMENT (FINAL) Doc No: 190295 77 ARTICLE IX AFFIRMATIVE COVENANTS Until the occurrence of the Facility Termination Date, unless the Required Lenders shall otherwise consent in writing, the Borrower will and will cause each Guarantor, as applicable, to: SECTION 9.1 FINANCIAL REPORTS, ETC. (a) As soon as practical and in any event within 105 days after the end of each Fiscal Year after the Closing Date, deliver or cause to be delivered to the Agent and each Lender (i) the audited consolidated and unaudited consolidating balance sheets of the Borrower and its Subsidiaries, with the notes thereto, and the related audited consolidated and unaudited consolidating statements of earnings, cash flow, and shareholders' equity and the notes thereto, for such Fiscal Year, setting forth in the case of the consolidated statements comparative financial statements for the preceding Fiscal Year, all prepared in accordance with GAAP applied on a Consistent Basis (except for the consolidating unaudited financial statements with respect to Bolle France, Bolle Australia and Bolle UK, as to which generally accepted accounting principles of the applicable country shall apply) and containing, with respect to the audited consolidated financial reports, opinions of Price Waterhouse, or other such independent certified public accountants selected by the Borrower and approved by the Agent, which approval shall not be unreasonably withheld, which are unqualified and without an exception not acceptable to the Agent; and (ii) a certificate of an Authorized Representative as to the absence of any Default or Event of Default and demonstrating compliance with Article XI of this Agreement, which certificate shall be in the form attached hereto as Exhibit O and incorporated herein by reference; (b) as soon as practical and in any event within 60 days after the end of each fiscal quarter beginning with the fiscal quarter ended March 31, 1998, deliver to the Agent and each Lender (i) the consolidated and consolidating balance sheets of the Borrower and its Subsidiaries as of the end of such fiscal quarter, and the related consolidated and consolidating statements of earnings, cash flow, and shareholders' equity for such fiscal quarter and for the period from the beginning of the Fiscal Year through the end of such fiscal quarter, accompanied by a certificate of an Authorized Representative to the effect that such financial statements present fairly the financial position of the Borrower and its Subsidiaries as of the end of such fiscal quarter and the results of their operations and the changes in shareholders equity for such fiscal quarter, in conformity with the standards set forth in Section 8.6(a) with respect to interim financials, and (ii) a certificate of an Authorized Representative as to the absence of any Default or Event of Default and containing computations for such quarter comparable to that required pursuant to Section 9.1(a)(ii); (c) upon the request of the Required Lenders, deliver to the Agent and each Lender a letter from the Borrower's accountants specified in Section 9.1(a)(i) hereof stating that, in performing the audit necessary to render an opinion on the financial NB BOLLE CREDIT AGREEMENT (FINAL) Doc No: 190295 78 statements delivered under Section 9.1(a)(i), they obtained no knowledge of any Default or Event of Default by the Borrower in the fulfillment of the terms and provisions of this Agreement insofar as they relate to financial matters (which at the date of such statement remains uncured); and if the accountants have obtained knowledge of such Default or Event of Default, a statement specifying the nature and period of existence thereof; (d) not later than the last Business Day of each Fiscal Year, deliver to the Agent and each Lender consolidated financial projections for the Borrower and its Subsidiaries for the period from the beginning of the next Fiscal Year to the Scheduled Maturity Date, prepared on an annual basis and in accordance with GAAP applied on a Consistent Basis; provided, however, that projections for the Fiscal Year immediately following delivery of such projections shall be prepared on a quarterly basis; provided further, however, that in no event shall delivery of such projections constitute a representation or warranty of the Borrower that its consolidated financial results for, and consolidated financial condition at the end of, the period for which such projections were prepared shall meet or exceed such projections; (e) promptly upon their becoming available to the Borrower, the Borrower shall deliver to the Agent and each Lender a copy of (i) all regular or special reports or effective registration statements which the Borrower or any Subsidiary shall file from and after the date hereof with the Securities and Exchange Commission (or any successor thereto) or any securities exchange, (ii) any proxy statement distributed by the Borrower to its shareholders, bondholders or the financial community in general, and (iii) any management letter or other report submitted to the Borrower or any of its Subsidiaries by independent accountants in connection with any annual, interim or special audit of the Borrower or any of its Subsidiaries; and (f) promptly, from time to time, deliver or cause to be delivered to the Agent and each Lender such other information regarding Borrower's and each Subsidiary's operations, business affairs and financial condition as the Agent or such Lender may reasonably request. The Agent and the Lenders are hereby authorized to deliver a copy of any such financial information delivered hereunder to the Lenders (or any affiliate of any Lender) or to the Agent to any regulatory authority having jurisdiction over any of the Lenders pursuant to any written request therefor, or, subject to Article XIV hereof, to any other Person who shall acquire or consider the acquisition of a participation interest in or assignment of any Loan or Letter of Credit permitted by this Agreement. SECTION 9.2 MAINTAIN PROPERTIES. Maintain all properties necessary to its operations in good working order and condition (ordinary wear and tear excepted) and make all needed repairs, replacements and renewals as are necessary to conduct its business in accordance with customary business practices. NB BOLLE CREDIT AGREEMENT (FINAL) Doc No: 190295 79 SECTION 9.3 EXISTENCE, QUALIFICATION, ETC. Do or cause to be done all things necessary to preserve and keep in full force and effect its existence and all material rights and franchises, trade names, trademarks and permits, except to the extent conveyed in connection with a transaction permitted under Section 10.4 hereof, and maintain its license or qualification to do business as a foreign corporation and good standing in each jurisdiction in which its ownership or lease of property or the nature of its business makes such license or qualification necessary and in which failure to maintain such license, qualification and good standing would reasonably be expected to result in a Material Adverse Effect. SECTION 9.4 REGULATIONS AND TAXES. Comply with all statutes and governmental regulations if noncompliance therewith would reasonably be expected to have a Material Adverse Effect and pay all taxes, assessments, governmental charges, claims for labor, supplies, rent and any other obligation which, if unpaid, might become a Lien against any of its properties that constitute Collateral or a Lien on any other property, except Permitted Liens and any of the foregoing being contested in good faith by appropriate proceedings diligently conducted and against which adequate reserves have been established. SECTION 9.5 INSURANCE. (a) Keep all of its insurable properties adequately insured at all times with responsible insurance carriers against loss or damage by fire and other hazards as are customarily insured against by similar businesses owning such properties similarly situated, (b) maintain general public liability insurance at all times with responsible insurance carriers against liability on account of damage to persons and property having such limits, deductibles, exclusions and co-insurance and other provisions providing no less coverage than that specified in Schedule 9.5 attached hereto, such insurance policies to be in form reasonably satisfactory to the Agent, (c) maintain insurance under all applicable workers' compensation laws (or in the alternative, maintain required reserves if self-insured for workers' compensation purposes) and against business interruption and (d) maintain all insurance required under the Security Instruments. Each of the policies of insurance described in this Section 9.5 shall provide that the insurer shall give the Agent not less than thirty (30) days' prior written notice before any such policy shall lapse or be terminated, canceled or materially amended. SECTION 9.6 TRUE BOOKS. Keep true books of record and account in which full, true and correct entries shall be made of all of its dealings and transactions in accordance with customary business practices, and set up on its books such reserves as may be required by GAAP with respect to doubtful accounts and all taxes, assessments, charges, levies and claims and with respect to its business in general, and include such reserves in interim as well as year-end financial statements. SECTION 9.7 RIGHT OF INSPECTION. Permit any Person designated by any Lender or the Agent, at the Borrower's expense with respect to any Person designated by the Agent if there has occurred and continues to exist a Default or an Event of Default, and at the requesting Lender's expense in all other circumstances, to visit and inspect any of the properties, corporate books and financial reports of the Borrower and its Subsidiaries, and to discuss their respective affairs, finances and accounts with their principal officers and independent certified public accountants, all at reasonable times, at reasonable intervals and with reasonable prior notice. NB BOLLE CREDIT AGREEMENT (FINAL) Doc No: 190295 80 SECTION 9.8 OBSERVE ALL LAWS. Conform to and duly observe in all material respects all laws, rules and regulations and all other valid requirements of any Governmental Authority the non-observance of which or non-compliance with which would reasonably be expected to have a Material Adverse Effect and obtain and maintain all material licenses, permits, certifications and approvals, as are required for the conduct of the business of the Borrower or any Material Subsidiary. SECTION 9.9 COVENANTS EXTENDING TO SUBSIDIARIES. Without duplication, cause each of its Subsidiaries to do with respect to itself, its business and its assets, each of the things required of the Borrower in Sections 9.2 through 9.8, inclusive. SECTION 9.10 OFFICER'S KNOWLEDGE OF DEFAULT. Upon any Authorized Representative or executive officer of the Borrower obtaining knowledge of any Default or Event of Default hereunder or under any other obligation of the Borrower or any Subsidiary, promptly deliver to the Agent written notice thereof, the period of existence thereof, and what action the Borrower proposes to take with respect thereto. SECTION 9.11 SUITS OR OTHER PROCEEDINGS. Upon any Authorized Representative or executive officer of the Borrower obtaining knowledge of any litigation or other proceedings being instituted against the Borrower or any Subsidiary, or any attachment, levy, execution or other process being instituted against any assets of the Borrower or any Subsidiary, in an aggregate amount in respect of all such proceedings and processes greater than $500,000 not otherwise covered by insurance, promptly deliver to the Agent written notice thereof stating the nature and status of such litigation, dispute, proceeding, levy, execution or other process. SECTION 9.12 NOTICE OF DISCHARGE OF HAZARDOUS MATERIAL OR ENVIRONMENTAL COMPLAINT. Promptly provide to the Agent true, accurate and complete copies of any and all letters, notices, complaints, orders, directives, claims, or citations received by the Borrower or any Subsidiary relating to any (a) violation or alleged violation by the Borrower or any Subsidiary of any applicable Environmental Laws; (b) release or threatened release into the environment by the Borrower or any Subsidiary, or by any Person handling, transporting or disposing of any Hazardous Material on behalf of the Borrower or any Subsidiary, or at any facility or property owned or leased or operated by the Borrower or a Subsidiary, of any Hazardous Material, except where occurring legally; or (c) liability or alleged liability of the Borrower or any Subsidiary for the costs of cleaning up, removing, remediating or responding to a release of Hazardous Materials. SECTION 9.13 ENVIRONMENTAL COMPLIANCE. If the Borrower or any Subsidiary shall receive any letter, notice, complaint, order, directive, claim or citation alleging that the Borrower or any Subsidiary has violated any Environmental Law or is liable for the costs of cleaning up, removing, remediating or responding to a release of Hazardous Materials, the Borrower shall, within the time period permitted and to the extent required by the applicable Environmental Law or the Governmental Authority responsible for enforcing such Environmental Law, remove or remedy, or cause the applicable Subsidiary to remove or remedy, such violation or release or NB BOLLE CREDIT AGREEMENT (FINAL) Doc No: 190295 81 satisfy such liability unless, and only during the period that, the applicability of the Environmental Law, the fact of such violation or liability or what is required to remove or remedy such violation is being contested by the Borrower or the applicable Subsidiary by appropriate proceedings diligently conducted and all reserves with respect thereto as may be required under GAAP, if any, have been made. SECTION 9.14 INDEMNIFICATION. The Borrower hereby agrees to defend, indemnify and hold the Agent and the Lenders, and their respective officers, directors, employees and agents, harmless from and against any and all claims, losses, penalties, liabilities, damages and expenses (including, without limitation, assessment and cleanup costs and reasonable attorneys', consultants' and other experts' fees and disbursements) arising directly or indirectly from, out of or by reason of (a) the violation of any Environmental Law by the Borrower or any Subsidiary or with respect to any property owned, operated or leased by the Borrower or any Subsidiary or (b) the handling, storage, treatment, emission or disposal of any Hazardous Material by or on behalf of the Borrower or any Subsidiary on or with respect to property owned or leased or operated by the Borrower or any Subsidiary. The provisions of this Section 9.14 shall survive repayment of the Obligations, the occurrence of the Facility Termination Date and expiration or termination of this Agreement. SECTION 9.15 FURTHER ASSURANCES. At the Borrower's cost and expense upon request of the Agent, or at the Lenders' cost and expense upon request of the Required Lenders, duly execute and deliver or cause to be duly executed and delivered, to the Agent such further instruments, documents, certificates, agreements, financing and continuation statements, and do and cause to be done such further acts that may be reasonably necessary or advisable in the reasonable opinion of the Agent to carry out more effectively the provisions and purposes of this Agreement and the other Loan Documents. SECTION 9.16 EMPLOYEE BENEFIT PLANS. With reasonable promptness, and in any event within thirty (30) days, the Borrower will give notice of and/or deliver to Agent copies of (a) the establishment of any new Employee Benefit Plan, the commencement of contributions to any plan to which the Borrower or any of its ERISA Affiliates was not previously contributing or any increase in the benefits of any existing Employee Benefit Plan, (B) each funding waiver request filed with respect to any Employee Benefit Plan and all communications received or sent by the Borrower or any ERISA Affiliate with respect to such request and (C) the failure of the Borrower or any ERISA Affiliate to make a required installment or payment under Section 302 of ERISA or Section 412 of the Code by the due date. SECTION 9.17 TERMINATION EVENTS. Promptly and in any event within ten (10) days of becoming aware of the occurrence of or forthcoming occurrence of any (a) Termination Event or (b) "prohibited transaction," as such term is defined in Section 406 of ERISA or Section 4975 of the Code, in connection with any Pension Plan or any trust created thereunder, the Borrower will deliver to Agent a notice specifying the nature thereof, what action the Borrower has taken, is taking or proposes to take with respect thereto and, when known, any action taken or threatened by the Internal Revenue Service, the Department of Labor or the PBGC with respect thereto. NB BOLLE CREDIT AGREEMENT (FINAL) Doc No: 190295 82 SECTION 9.18 ERISA NOTICES. With reasonable promptness but in any event within ten (10) days for purposes of clauses (a), (b) and (c), the Borrower will deliver to the Agent copies of (a) any favorable or unfavorable determination letter from the Internal Revenue Service regarding the qualification of an Employee Benefit Plan under Section 401(a) of the Code, (b) all notices received by the Borrower or any ERISA Affiliate of the PBGC's intent to terminate any Pension Plan or to have a trustee appointed to administer any Pension Plan, (c) each Schedule B (Actuarial Information) to the annual report (Form 5500 Series) filed by the Borrower or any ERISA Affiliate with the Internal Revenue Service with respect to each Pension Plan and (d) all notices received by the Borrower or any ERISA Affiliate from a Multiemployer Plan sponsor concerning the imposition or amount of withdrawal liability pursuant to Section 4202 of ERISA. The Borrower will notify the Agent in writing within two (2) Business Days of the Borrower obtaining knowledge or reason to know that the Borrower or any ERISA Affiliate has filed or intends to file a notice of intent to terminate any Pension Plan under a distress termination within the meaning of Section 4041(c) of ERISA. SECTION 9.19 CONTINUED OPERATIONS. Continue at all times (a) to conduct its business and engage principally in the Core Business or a line or lines of business complimentary to the Core Business and (b) to preserve, protect and maintain free from Liens (other than Permitted Liens) its material patents, copyrights, licenses, trademarks, trademark rights, trade names, trade name rights, trade secrets and know-how necessary or useful in the conduct of its operations. SECTION 9.20 USE OF PROCEEDS. Use the proceeds of the Loans solely for the purposes specified in Section 2.13 or 3.15 hereof. SECTION 9.21 NEW SUBSIDIARIES. In the event of the acquisition or creation of any Subsidiary (a "New Subsidiary") or a Control Subsidiary, cause to be delivered to the Agent for the benefit of the Lenders each of the following indicated to be delivered by such Subsidiary within thirty (30) Business Days of the acquisition or creation of such Subsidiary or Control Subsidiary: (a) a Stock Pledge Agreement with respect to the capital stock of such New Subsidiary or Control Subsidiary owned by the Borrower or any Subsidiary substantially in the form of Exhibit G hereto; provided, however, that if such New Subsidiary or Control Subsidiary is a Foreign Subsidiary or a Foreign Control Subsidiary, such pledge of capital stock shall only be required if it is a Direct Foreign Subsidiary or a Direct Foreign Control Subsidiary or if there would not result therefrom a material adverse tax impact on the Borrower; (b) a Guaranty executed by such New Subsidiary, substantially in the form of Exhibit E attached hereto; provided, however, that such Guaranty shall only be required if such New Subsidiary is a Domestic Subsidiary or such action would not have a material adverse tax impact on the Borrower; NB BOLLE CREDIT AGREEMENT (FINAL) Doc No: 190295 83 (c) a Security Agreement executed by such New Subsidiary, substantially in the form of Exhibit J attached hereto; provided, however, that such Security Agreement shall only be required if such New Subsidiary is a Domestic Subsidiary or such action would not have a material adverse tax impact on the Borrower and is not otherwise prohibited by applicable laws of any foreign jurisdiction; (d) if such New Subsidiary has any material leased locations, Intellectual Property or intercompany advances or borrowings, duly executed copies of a Landlord Waiver, a Lease Assignment, an Intellectual Property Security Agreement, an Intercompany Note Assignment and a Subordination Agreement, as applicable, executed by such New Subsidiary, substantially in the forms of such documents attached hereto as exhibits; provided, however, that each of the foregoing shall be required only if such New Subsidiary is a Domestic Subsidiary or such action would not have a material adverse tax impact on the Borrower and is not otherwise prohibited by applicable laws of any foreign jurisdiction; (e) an opinion of counsel to such New Subsidiary dated as of the date of delivery of the other documents required to be delivered pursuant to this Section 9.21 and addressed to the Agent and the Lenders, in form and substance identical to the opinion of counsel delivered on the Closing Date pursuant to Section 7.1 hereof with respect to any Guarantor and the Pledged Stock; and (f) current copies of the Organizational Documents and Operating Documents of such New Subsidiary, minutes of duly called and conducted meetings (or duly effected consent actions) of the Board of Directors, or appropriate committees thereof (and, if required by such Organizational Documents or Operating Documents, or by applicable laws, of the shareholders), of such New Subsidiary authorizing the actions and the execution and delivery and performance of such Guaranty, Security Agreement, Stock Pledge Agreement, Intellectual Property Security Agreement and each other agreement required under this Section 9.21 and evidence satisfactory to the Agent (confirmation of the receipt of which will be provided by the Agent to the Lenders) that such New Subsidiary is Solvent as of such date after giving effect to such Guaranty, Security Agreement, Stock Pledge Agreement, and, if applicable, Intellectual Property Security Agreement. SECTION 9.22 HEDGING OBLIGATIONS. Enter into Swap Agreements in an aggregate notional amount reasonably agreed to by the Borrower and the Agent provided that such Swap Agreements are available on terms and conditions reasonably acceptable to the Borrower. NB BOLLE CREDIT AGREEMENT (FINAL) Doc No: 190295 84 ARTICLE X NEGATIVE COVENANTS Until the occurrence of the Facility Termination Date, unless the Required Lenders shall otherwise consent in writing, the Borrower will not, nor will it permit any Subsidiary to: SECTION 10.1 INDEBTEDNESS. Incur, create, assume or permit to exist any Indebtedness of the Borrower and its Subsidiaries determined on a consolidated basis, howsoever evidenced, except the following (collectively, the "Permitted Indebtedness"): (a) Indebtedness set forth in Schedule 10.1 attached hereto and incorporated herein by reference and any extension, renewal or refinancing thereof that does not increase the principal amount thereof or (except as provided below) interest rate payable thereon from that existing immediately prior to such extension, renewal or refinancing; provided, none of the instruments and agreements evidencing or governing such Indebtedness shall be amended, modified or supplemented after the Closing Date to change any terms of subordination, repayment or rights of conversion, put, exchange or other rights from such terms and rights as in effect on the Closing Date; provided further, that, notwithstanding the foregoing, the rate of interest payable thereon may change but in no event shall be greater than the interest rate generally available at the date of such amendment, modification or supplement from money center or regional commercial banks to companies of creditworthiness similar to that of the Borrower; (b) Indebtedness owing to the Agent or any Lender in connection with this Agreement, any Note or other Loan Document; (c) Indebtedness consisting of Hedging Obligations permitted under Section 10.9 hereof; (d) the endorsement of negotiable instruments for deposit or collection or similar transactions in the ordinary course of business; (e) (i) purchase money Indebtedness and (ii) Indebtedness incurred with respect to financing of Capital Expenditures, collectively under both clause (i) and (ii) not to exceed an aggregate outstanding amount at any time of $2,500,000; (f) Indebtedness of any Guarantor owing to the Borrower or another Guarantor and Indebtedness of the Borrower owing to any Guarantor; (g) Indebtedness of Subsidiaries acquired after the Closing Date, provided that (i) such Indebtedness (A) is recorded in the financial books and records of such Subsidiary prior to such Acquisition, (B) was not incurred by such Subsidiary in anticipation of such Acquisition, (C) is non-recourse to the Borrower and each Guarantor and not subsequently assumed by the Borrower or any Guarantor, and (D) is incurred upon terms NB BOLLE CREDIT AGREEMENT (FINAL) Doc No: 190295 85 determined by the Borrower in its good faith business judgment to be more economically advantageous to the Borrower than the terms of an Advance hereunder or, if not so determined by the Borrower to be more economically advantageous, replaced by an Advance hereunder within 30 days of such Acquisition, and (ii) immediately after such acquisition, no Default or Event of Default has occurred or is continuing; (h) additional unsecured Indebtedness incurred during any Fiscal Year in an aggregate outstanding principal amount not to exceed $1,000,000; provided, however, any such permitted additional Indebtedness not incurred during any Fiscal Year may not be incurred during any subsequent Fiscal Year; (i) unsecured Indebtedness evidenced by the Intercompany Notes and with respect to which the payee thereunder shall have entered into and be subject to the Subordination Agreement and the Intercompany Note Assignment.; (j) Indebtedness arising under the Bill of Sale with respect to the obligations of the Borrower to BEC. Notwithstanding the foregoing, none of the Indebtedness described in clauses (a), (b), (d), (f), (g) or (i) above shall be permitted to be incurred by Bolle France, Bolle Australia, Bolle UK or Tavister, and in the event that any Indebtedness is incurred by Bolle France, Bolle Australia, Bolle UK or Tavister, such Indebtedness shall not constitute "Permitted Indebtedness" hereunder. SECTION 10.2 LIENS. Incur, create or permit to exist any pledge, Lien, charge or other encumbrance of any nature whatsoever with respect to any property or assets now owned or hereafter acquired by the Borrower or any of its Subsidiaries, including without limitation any capital stock of the Borrower or any of its Subsidiaries, other than any of the following (collectively, the "Permitted Liens"): (a) Liens existing as of the date hereof and as set forth in Schedule 8.7 attached hereto, provided, however, that any such Lien that is released after the date hereof may not thereafter re-attach or otherwise become permitted by this Section 10.2(a); (b) Liens imposed by law for taxes, assessments or charges of any Governmental Authority for claims not yet due or which are being contested in good faith by appropriate proceedings diligently conducted and with respect to which adequate reserves or other appropriate provisions are being maintained in accordance with GAAP; (c) Liens in respect of purchase money Indebtedness permitted to be incurred pursuant to Section 10.1(e)(i) hereof in connection with the acquisition of certain tangible property; provided that (a) the original principal balance of the Indebtedness secured by such Lien constitutes not less than 80% nor more than 100% of the purchase price of the property acquired and (B) such Lien extends only to the property acquired with the proceeds of the Indebtedness so secured; NB BOLLE CREDIT AGREEMENT (FINAL) Doc No: 190295 86 (d) statutory Liens of landlords who are not subject to a Landlord Waiver and Liens of carriers, warehousemen, mechanics, materialmen and other Liens imposed by law or created in the ordinary course of business and in existence less than 90 days from the date of creation thereof for amounts not yet due or which are being contested in good faith by appropriate proceedings diligently conducted and with respect to which adequate reserves or other appropriate provisions are being maintained in accordance with GAAP; (e) Liens incurred or deposits made in the ordinary course of business (including, without limitation, surety bonds and appeal bonds) in connection with workers' compensation, unemployment insurance and other types of social security benefits or to secure the performance of tenders, bids, leases, contracts (other than for the repayment of Indebtedness), statutory obligations and other similar obligations or arising as a result of progress payments under government contracts; (f) easements (including, without limitation, reciprocal easement agreements and utility agreements), rights-of-way, covenants, consents, reservations, encroachments, variations and zoning and other restrictions, charges or encumbrances (whether or not recorded), which do not interfere with the ordinary conduct of the business of the Borrower or any Subsidiary and do not impair the use of the property to which they attach to the extent that such interference or impairment would reasonably be expected to have a Material Adverse Effect; and (g) Liens on real property securing Indebtedness permitted under Section 10.1(a), (b), (e) or (g) hereof (subject to compliance with subsection (c) above in connection with purchase money Indebtedness). Notwithstanding the foregoing, none of the Liens described in clause (a) above shall be permitted to attach or relate to the assets of Bolle France, Bolle Australia, Bolle UK or Tavister and in the event any Liens attach to assets of Bolle France, Bolle Australia, Bolle UK or Tavister, such Liens shall not constitute "Permitted Liens" hereunder. SECTION 10.3 INVESTMENTS; ACQUISITIONS. Make any Acquisition or otherwise purchase, own, invest in or otherwise acquire, directly or indirectly, any stock or other securities, or make or permit to exist any interest whatsoever in any other Person or permit to exist any loans or advances to any Person, except that Borrower and its Subsidiaries may: (a) invest in Eligible Securities; (b) maintain investments existing as of the date hereof and as set forth in Schedules 8.4 and 8.5 attached hereto; (c) accept and maintain accounts receivable arising and trade credit granted in the ordinary course of business and retain any securities received in satisfaction or partial satisfaction thereof in connection with accounts of financially troubled Persons to the extent reasonably necessary in order to prevent or limit loss; NB BOLLE CREDIT AGREEMENT (FINAL) Doc No: 190295 87 (d) make and maintain loans and advances to and investments in Subsidiaries which are Guarantors; (e) consummate Permitted Acquisitions and Mergers permitted under Section 10.4(a) hereof; (f) make and maintain other loans, advances and investments in an aggregate principal amount at any time outstanding not to exceed $1,000,000. SECTION 10.4 MERGER OR TRANSFER OF ASSETS. (a) Consolidate with or merge into any other Person, or permit any other Person to merge into it; provided, however, (i) any Domestic Subsidiary may merge or transfer all or any part of its assets into or consolidate with the Borrower or any Domestic Subsidiary directly or indirectly wholly owned by the Borrower, (ii) any Direct Foreign Subsidiary may merge or transfer all or any part of its assets into or consolidate with the Borrower or any Domestic Subsidiary or Direct Foreign Subsidiary directly or indirectly wholly owned by the Borrower provided the requirements of Article VI and Section 9.21 hereof are complied with, (iii) any Subsidiary which is neither a Domestic Subsidiary nor a Direct Foreign Subsidiary may merge or transfer all or any part of its assets into or consolidate with the Borrower or any Subsidiary directly or indirectly wholly owned by the Borrower provided the requirements of Article VI and Section 9.21 hereof are complied with, (iv) any Subsidiary may merge into another Person that is not a Subsidiary whereby such other Person is the surviving corporation provided that such other Person complies with all the requirements of Article VI and Section 9.21 as if it is a newly acquired Subsidiary and that such merger would be a Permitted Acquisition but for the Subsidiary not being the surviving corporation and (v) the Borrower or any Subsidiary may make a Permitted Acquisition. (b) Sell, lease, transfer or otherwise dispose of any assets other than (i) dispositions of inventory in the ordinary course of business, (ii) dispositions of equipment which, in the aggregate during any Fiscal Year, have a fair market value or book value, whichever is less, of $250,000 or less which is not replaced by equipment having at least equivalent value, (iii) dispositions of equipment which is replaced with equipment of like kind, function and value, provided the replacement equipment shall be acquired prior to or substantially contemporaneously with any disposition of the Equipment that is to be replaced, and the replacement equipment shall be free and clear of Liens other than Permitted Liens, (iv) dispositions of other assets which, in the aggregate during any fiscal year, have a fair market value or book value, whichever is less, of $250,000 or less, (v) sale or disposition for cash of (A) the Texas Property, (B) the AAi Preferred Stock and (C) the shares of capital stock of Eyecare Products, (vi) transfer of up to 35.71% of the shares of the common stock of Accessories Associates received in exchange for the AAi Preferred Stock in connection with or subsequent to the Accessories Associates IPO, and (vii) any Equity Offering of authorized but unissued equity securities the Net Proceeds of which are subject to the terms of Section 2.7(b) hereof except as otherwise provided therein. NB BOLLE CREDIT AGREEMENT (FINAL) Doc No: 190295 88 SECTION 10.5 TRANSACTIONS WITH AFFILIATES. Other than transactions permitted under Sections 10.3 and 10.4 or set forth on Schedule 10.5 hereto, enter into any transaction after the Closing Date, including, without limitation, the purchase, sale, lease or exchange of property, real or personal, or the rendering of any service, with any Affiliate of the Borrower, except (a) that such Persons may render services to the Borrower or its Subsidiaries for compensation at the same rates generally paid by Persons engaged in the same or similar businesses for the same or similar services, (b) that the Borrower or any Subsidiary may render services to such Persons for compensation at the same rates generally charged by the Borrower or such Subsidiary and (c) in the ordinary course of and pursuant to the reasonable requirements of the Borrower's (or any Subsidiary's) business consistent with past practice of the Borrower and its Subsidiaries and upon fair and reasonable terms no less favorable to the Borrower (or any Subsidiary) than would be obtained in a comparable arm's-length transaction with a Person not an Affiliate. SECTION 10.6 COMPLIANCE WITH ERISA. With respect to any Pension Plan, Employee Benefit Plan or Multiemployer Plan: (a) permit the occurrence of any Termination Event which would result in a liability to the Borrower or any ERISA Affiliate in excess of $500,000; (b) permit the present value of all benefit liabilities under all Pension Plans (except as provided below) to exceed the current value of the assets of such Pension Plans allocable to such benefit liabilities (the "Excess Liabilities Value") by more than $500,000; (c) permit any accumulated funding deficiency in excess of $500,000 (as defined in Section 302 of ERISA and Section 412 of the Code) with respect to any Pension Plan, whether or not waived; (d) fail to make any contribution or payment to any Multiemployer Plan which the Borrower or any ERISA Affiliate may be required to make under any agreement relating to such Multiemployer Plan, or any law pertaining thereto which results in or is likely to result in a liability in excess of $500,000; or (e) engage, or permit any Borrower or any ERISA Affiliate to engage, in any prohibited transaction under Section 406 of ERISA or Sections 4975 of the Code for which a civil penalty pursuant to Section 502(i) of ERISA or a tax pursuant to Section 4975 of the Code in excess of $500,000 may be imposed; or (f) permit the establishment of any Employee Benefit Plan providing post-retirement welfare benefits or establish or amend any Employee Benefit Plan which establishment or amendment could result in liability to the Borrower or any ERISA Affiliate or increase the obligation of the Borrower or any ERISA Affiliate to a Multiemployer Plan which liability or increase, individually or together with all similar liabilities and increases, is in excess of $500,000; or NB BOLLE CREDIT AGREEMENT (FINAL) Doc No: 190295 89 (g) fail, or permit the Borrower or any ERISA Affiliate to fail, to establish, maintain and operate each Employee Benefit Plan in compliance in all material respects with the provisions of ERISA, the Code, all applicable Foreign Benefit Law and all other applicable laws and the regulations and interpretations thereof. SECTION 10.7 FISCAL YEAR. Change the Borrower's Fiscal Year. ----------- SECTION 10.8 DISSOLUTION, ETC. Wind up, liquidate or dissolve (voluntarily or involuntarily) or commence or suffer any proceedings seeking any such winding up, liquidation or dissolution, except in connection with the merger or consolidation of Subsidiaries into each other or into a Borrower permitted pursuant to Section 10.4 hereof. SECTION 10.9 HEDGING OBLIGATIONS. Incur any Hedging Obligations or enter into any agreements, arrangements, devices or instruments relating to Hedging Obligations, except for Hedging Obligations (a) related to protection against fluctuations in currency exchange rates in an aggregate notional amount to be agreed upon by the Agent and the Borrower and (b) arising under Swap Agreements agreed to in accordance with Section 9.22 hereof; provided, however, in no event shall Hedging Obligations be incurred for speculative or investment purposes. SECTION 10.10 DIVIDENDS, REDEMPTIONS AND OTHER PAYMENTS. (a) Make the AAi Payment if a Default or Event of Default is continuing on the date of or would result from such AAi Payment, or (b) declare or pay any cash dividends on, or make any other payment or distribution on account of, any capital stock of any class of the Borrower (other than dividends payable in the ordinary course of business solely in Common Stock), including, without limitation, any class or series of the Preferred Stock now or hereafter outstanding, or (c) purchase, redeem (whether mandatory or optional redemption) or otherwise retire any such shares or any option, warrant or similar agreement exercisable for or convertible into such shares (including, without limitation, shares of the Preferred Stock or the Bolle Warrants) or interests in consideration of cash or any debt instrument (whether or not subordinated) ("Restricted Debt") or shares of capital stock issued by any Subsidiary of the Borrower ("Restricted Stock"), or apply or set apart any of their assets therefor or make any other distribution (by redemption of capital or otherwise) in respect of any such shares in consideration of cash or Restricted Debt or Restricted Stock, or agree to do any of the foregoing, other than (i) conversion of any of the Borrower's securities into Common Stock which are so convertible in accordance with their terms and (ii) dividends payable by any Subsidiary to another Subsidiary or to the Borrower. Notwithstanding the foregoing the Series B Preferred Stock may be redeemed in accordance with its terms, provided that (A) at the time of such redemption, or as a result of such redemption, no Default or Event of Default shall have occurred nor would occur, as applicable, (B) if all of the Series B Preferred Stock is to be redeemed, an Advance can be made under the Revolving Credit Facility without the waiver of any condition precedent thereto to finance the entire amount of such redemption and (C) after giving pro forma and actual effect to such Advance, the Total Revolving Credit Commitment shall exceed Revolving Credit Outstandings by not less than $4,000,000. SECTION 10.11 DEFAULTS UNDER OTHER AGREEMENTS. Permit any landlord, mortgagee, trustee under deed of trust or lienholder to lawfully declare a default under any lease, mortgage, NB BOLLE CREDIT AGREEMENT (FINAL) Doc No: 190295 90 deed of trust or lien instrument on real estate owned or leased by the Borrower or any Guarantor or permit any landlord to lawfully terminate, prior to the expiration of its term, any leasehold interest of the Borrower or any Guarantor, and any such default or termination (other than with respect to leasehold interests subject to a Lease Assignment), individually or collectively, would reasonably be expected to result in a Material Adverse Effect. SECTION 10.12 COMPENSATION; REIMBURSEMENT OF EXPENSES. (a) Pay any salary, fees, and other direct and indirect remuneration and compensation to any of its directors and executive officers in an amount in excess of those amounts paid to directors and executive officers of comparable companies engaged in the same general type of business and in similar financial condition. (b) Reimburse any stockholder, officer, director, employee or agent of the Borrower or any Guarantor for any expenses incurred by such Person other than reasonable expenses incurred for or on behalf of the Borrower or any Guarantor in the ordinary course of business. SECTION 10.13 CHANGE IN ACCOUNTANTS. Change its independent public accountants to any Person other than Price Waterhouse, L.L.P., Deloitte & Touche, L.L.P., KPMG Peat Marwick, L.L.P., Arthur Andersen & Co., L.L.P., Coopers & Lybrand, L.L.P. or Ernst & Young, L.L.P. or any successor to any thereof as a result of their combination SECTION 10.14 LIMITATIONS ON SALES AND LEASEBACKS. Enter into any arrangement with any Person providing for the leasing by the Borrower or any Guarantor of real or personal property which has been or is to be sold or transferred by the Borrower or any Guarantor to such Person or to any other Person to whom funds have been or are to be advanced by such Person on the security of such property or rental obligations of the Borrower or any Guarantor, unless such arrangement is with respect to real property on which a Lien is attached as permitted under Section 10.2(a), (c) or (g) prior to such arrangement and such Lien was not attached in a related transaction or series of related transactions or in anticipation of such arrangement. SECTION 10.15 NEGATIVE PLEDGE CLAUSES. Enter into any agreement with any Person other than the Agent and the Lenders pursuant to this Agreement or any other Loan Documents which prohibits or limits the ability of any of the Borrower or any Guarantor to create, incur, assume or suffer to exist any Lien, security interest or encumbrance upon any of its property, assets or revenues, whether now owned or hereafter acquired. SECTION 10.16 CHANGE OF CONTROL. Permit, or become a party to or the subject of any agreement, transaction or related series of transactions pursuant to or as a result of which, (a) any Person or group of Persons, other than Martin E. Franklin, acting in concert, acquires voting control, directly or indirectly, whether by tender offer or in one or more negotiated block or market transactions, of more than twenty-five percent (25%) of the shares of the issued and outstanding Voting Stock of any class of the Borrower having voting rights in the election of directors, or (b) during any period of up to 24 consecutive months, commencing on the Closing NB BOLLE CREDIT AGREEMENT (FINAL) Doc No: 190295 91 Date, individuals who at the beginning of such 24-month period were directors of the Borrower shall cease for any reason (other than the death, disability or retirement as a director of an officer of the Borrower serving as a director during such period) to constitute a majority of the board of directors of the Borrower (any of the foregoing, a "Change of Control"). SECTION 10.17 INTELLECTUAL PROPERTY. Except as set forth in Section 10.19 hereof, cause or permit any of the licenses, trademarks, patents, copyrights, the License Agreement and other intellectual property of the Borrower or its Subsidiaries to be sub-licensed, assigned or transferred or subject to distributorship arrangements, other than to the Agent for the benefit of the Lenders hereunder or, with respect to sub-licenses only, to manufacturers and distributors of Inventory in the ordinary course of business as currently conducted. SECTION 10.18 PREFERRED STOCK; MANAGEMENT SERVICES AGREEMENT; SHARE PURCHASE AGREEMENTS. Amend, supplement, revise, or otherwise alter in any manner (i) any Certificate of Designation in effect on the Closing Date with respect to any class of Preferred Stock, (ii) the economic terms of the Management Services Agreement in effect on the Closing Date or (iii) the Share Purchase Agreements in effect on either the Closing Date or an Acquisition Date, as applicable. SECTION 10.19 LICENSES. Other than as set forth on Schedule 10.19 hereof, grant, establish, create or permit to exist any license of, or distributorship arrangement of, any of the intellectual property now existing or hereafter arising which is subject to the License Agreement or otherwise material to the business of the Borrower or any subsidiary except for (i) such licenses granted for the limited purpose of conducting sales or marketing promotions in the ordinary course of business of existing or new products for a reasonable, limited time period, (ii) such licenses approved by the Required Lenders in writing prior to the granting thereof within 30 days after request therefor, such approval not to be unreasonably withheld, and (iii) such licenses granted to any Domestic Subsidiary party to the Intellectual Property Security Agreement who has delivered an appropriate Intellectual Property Assignment executed in blank with respect to such license. ARTICLE XI FINANCIAL COVENANTS Until the occurrence of the Facility Termination Date, unless the Required Lenders shall otherwise consent in writing, the Borrower and its Subsidiaries on a consolidated basis will not: SECTION 11.1 CONSOLIDATED FIXED CHARGE RATIO. Permit at any time during any Four-Quarter Period of the Borrower ending during the periods set forth below, the Consolidated Fixed Charge Ratio to be less than the ratio set forth opposite such period set forth below: Closing Date through December 31, 1998 1.25 to 1.00 January 1, 1999 and thereafter 1.50 to 1.00 NB BOLLE CREDIT AGREEMENT (FINAL) Doc No: 190295 92 SECTION 11.2 CONSOLIDATED LEVERAGE RATIO. Permit at any time during any Four-Quarter Period of the Borrower ending during the periods set forth below, the Consolidated Leverage Ratio at the end of each Four-Quarter Period during such period to be equal to or less than the ratio set forth opposite such period set forth below: Closing Date through December 31, 1998 3.35 to 1.00 January 1, 1999 through December 30, 1999 3.00 to 1.00 December 31, 1999 and thereafter 2.50 to 1.00 SECTION 11.3 CONSOLIDATED NET WORTH. Permit at any time Consolidated Net Worth to be less than eighty-five percent (85%) of Consolidated Net Worth on the Closing Date, such amount to be increased as at the first day of each Fiscal Year, beginning with the Fiscal Year commencing January 1, 1999, by an amount equal to (a) sixty percent (60%) of Consolidated Net Income during the immediately preceding Fiscal Year, plus (b) one hundred percent (100%) of the Net Proceeds of any Equity Offering consummated during the immediately preceding Fiscal Year; provided, however, in no event shall the Consolidated Net Worth requirement be decreased as a result of a net loss of the Borrower and its Subsidiaries (i.e., negative Consolidated Net Income) for any Fiscal Year. Any increase calculated pursuant hereto shall be determined based upon financial statements delivered in accordance with Section 9.1(a) hereof; provided, however such increase shall be deemed effective as of the first day of the Fiscal Year in which such financial statements are delivered. SECTION 11.4 CAPITAL EXPENDITURES. Make or become committed to make Capital Expenditures which exceed $3,250,000 in the aggregate for any Fiscal Year of the Borrower on a non-cumulative basis, that is, the amount of Capital Expenditures permitted to be made but not made in any Fiscal Year may not be carried over and be permitted to be made in any subsequent Fiscal Year. ARTICLE XII EVENTS OF DEFAULT SECTION 12.1 EVENTS OF DEFAULT. If any one or more of the following events (herein called "Events of Default") shall occur for any reason whatsoever (and whether such occurrence shall be voluntary or involuntary or come about or be effected by operation of law or pursuant to or in compliance with any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body): (a) a default shall be made in the due and punctual payment of the principal of any Loan or Reimbursement Obligation, when and as the same shall be due and payable whether pursuant to any provision of Articles II or III hereof, at maturity, by acceleration or otherwise; or NB BOLLE CREDIT AGREEMENT (FINAL) Doc No: 190295 93 (b) a default shall be made in the due and punctual payment of any amount of interest on any Loan or of any fees or other amounts payable to the Lenders, the Agent or Issuing Bank under the Loan Documents on the date on which the same shall be due and payable; or (c) a default shall be made in the performance or observance of any covenant set forth in Sections 9.10, 9.11, 9.12, 9.18 or Articles X or XI hereof; or (d) if (i) a default shall be made in the performance or observance of, or shall occur under, any covenant, agreement or provision contained in this Agreement or the Notes (other than as described in clauses (a), (b) or (c) above) and such default shall continue for thirty (30) or more days after the earlier of receipt of notice of such default by the Authorized Representative from the Agent or the Borrower becomes aware of such default, or (ii) a default shall be made in the performance or observance of, or shall occur under, any covenant, agreement or provision contained in any of the other Loan Documents (beyond the applicable grace period, if any, contained therein) or in any instrument or document evidencing or creating any obligation, guaranty, or Lien in favor of the Agent or the Lenders or delivered to the Agent or the Lenders in connection with or pursuant to this Agreement or any of the Obligations, or (iii) without the written consent of the Agent, this Agreement or any other Loan Document shall be disaffirmed or shall terminate, be terminable or be terminated or become void, invalid or unenforceable or otherwise cease to be in full force and effect for any reason whatsoever other than the occurrence of the Facility Termination Date; or (iv) the Borrower or any Subsidiary shall assert the invalidity or unenforceability of any of the Loan Documents or (v) any event or condition shall exist which would reasonably be likely to have a material adverse effect on (A) the ability of the Borrower or any Guarantor to pay or perform its obligations, liabilities or indebtedness under any Loan Document or (B) the material rights, powers or remedies of any Lender under any Loan Document or the validity, legality or enforceability thereof; or (e) a default shall occur, which is not waived, (i) in the payment of any principal, interest, premium or other amounts with respect to any Indebtedness (other than the Obligations) of the Borrower or of any Subsidiary, in an amount not less than $1,000,000 in the aggregate outstanding, or (ii) in the performance, observance or fulfillment of any term or covenant contained in any agreement or instrument under or pursuant to which any such Indebtedness may have been issued, created, assumed, guaranteed or secured by the Borrower or any Subsidiary, and such default shall continue for more than the period of grace, if any, therein specified, or if such default shall permit the holder of any such Indebtedness to accelerate the maturity thereof; or (f) if any material representation, warranty or other statement of fact contained herein or any other Loan Document or in any writing, certificate, report or statement at any time furnished to the Agent or any Lender by or on behalf of the Borrower or any Guarantor pursuant to or in connection with this Agreement or the other NB BOLLE CREDIT AGREEMENT (FINAL) Doc No: 190295 94 Loan Documents, or otherwise, shall be false or misleading in any material respect when given or made; or (g) if the Borrower or any Guarantor shall be unable to pay its debts generally as they become due; file a petition to take advantage of any insolvency, reorganization, bankruptcy, receivership or similar law, domestic or foreign; make an assignment for the benefit of its creditors; commence a proceeding for the appointment of a receiver, trustee, liquidator or conservator of itself or of the whole or any substantial part of its property; file a petition or answer seeking reorganization or arrangement or similar relief under the Federal bankruptcy laws or any other applicable law or statute, Federal, state or foreign; or (h) if a court of competent jurisdiction shall enter an order, judgment or decree appointing a custodian, receiver, trustee, liquidator or conservator of the Borrower or any Guarantor or of the whole or any substantial part of its properties and such order, judgment or decree continues unstayed and in effect for a period of sixty (60) days, or approving a petition filed against the Borrower or any Guarantor seeking reorganization or arrangement or similar relief under the Federal bankruptcy laws or any other applicable law or statute of the United States of America or any state or foreign country, province or other political subdivision, which petition is not dismissed within sixty (60) days; or if, under the provisions of any other law for the relief or aid of debtors, a court of competent jurisdiction shall assume custody or control of the Borrower or any Guarantor or of the whole or any substantial part of its properties, which control is not relinquished within sixty (60) days; or if there is commenced against the Borrower or any Guarantor any proceeding or petition seeking reorganization, arrangement or similar relief under the Federal bankruptcy laws or any other applicable law or statute of the United States of America or any state or foreign country, province or other political subdivision which proceeding or petition remains undismissed for a period of sixty (60) days; or if the Borrower or any Guarantor takes any action to indicate its consent to or approval of any such proceeding or petition; or (i) if (i) any judgment where the amount not covered by insurance (or the amount as to which the insurer denies liability) is in excess of $1,000,000 is rendered against the Borrower or any Guarantor, or (ii) there is any attachment, injunction or execution against any of the Borrower's or any Guarantor's properties for any amount in excess of $1,000,000; and such judgment, attachment, injunction or execution remains unpaid, unstayed, undischarged, unbonded or undismissed for a period of sixty (60) days; or (j) if the Borrower or any Guarantor shall suspend all or any part of its operations and such suspension would reasonably be expected to have a Material Adverse Effect; or (k) if the Borrower or any Subsidiary shall default in the payment of principal, interest, premium or other amounts under any Swap Agreement and such breach shall NB BOLLE CREDIT AGREEMENT (FINAL) Doc No: 190295 95 continue beyond any grace period, if any, relating thereto pursuant to its terms, or the Borrower or any Subsidiary shall disaffirm or seek to disaffirm any Swap Agreement or any of its Hedging Obligations thereunder; or (l) if any default permitting the termination thereof shall occur and be continuing under the License Agreement or if there shall be any amendment or modification thereof in any manner materially adverse to the interests of the Agent and the Lenders thereunder or if the License Agreement shall terminate for any reason or the rights of the Borrower thereunder shall be encumbered, assigned or sublicensed (other than sublicenses to Guarantors) or transferred in any manner; or (m) if the Borrower shall not have sold the Texas Property pursuant to the terms of the Texas Property Purchase Agreement on or before April 30, 1998; or (n) if Bolle America shall, as of the date that is one-hundred and eighty (180) days after the Closing Date, continue to occupy or to store or otherwise keep any Inventory (as defined in the Security Agreement) in that certain leased facility located in Denver, Colorado and more particularly described in Schedule 1 hereto or if Bolle America shall fail to comply with Section 28 or Section 29 of the Security Agreement; then, and in any such event and at any time thereafter, if such Event of Default or any other Event of Default shall have not been waived, (A) either or both of the following actions may be taken: (i) the Agent may, and at the direction of the Required Lenders shall, declare any obligation of the Lenders to make further Loans or issue Letters of Credit terminated, whereupon the obligation of each Lender to make further Loans and of Issuing Bank to issue Letters of Credit hereunder shall terminate immediately, and (ii) the Agent shall at the direction of the Required Lenders, at their option, declare by notice to the Borrower any or all of the Obligations to be immediately due and payable, and the same, including all interest accrued thereon and all other Obligations of the Borrower to the Agent and the Lenders, shall forthwith become immediately due and payable without presentment, demand, protest, notice or other formality of any kind, all of which are hereby expressly waived, anything contained herein or in any instrument evidencing the Obligations to the contrary notwithstanding; provided, however, that notwithstanding the above, if there shall occur an Event of Default under clause (g) or (h) above, then the obligation of the Lenders to make Advances and issue Letters of Credit hereunder shall automatically terminate and any and all of the Obligations shall be immediately due and payable without the necessity of any action by the Agent or the Required Lenders or notice to the Agent or the Lenders; NB BOLLE CREDIT AGREEMENT (FINAL) Doc No: 190295 96 (B) The Borrower shall, upon demand of the Agent or the Required Lenders, deposit cash with the Agent in an amount equal to the amount of any Letter of Credit Outstandings, as collateral security for the repayment of any future drawings or payments under such Letters of Credit, and such amounts shall be held by the Agent pursuant to the terms of an LC Account Agreement in the form of Exhibit R hereto; and (C) the Agent and the Lenders shall have all of the rights and remedies available under the Loan Documents or under any applicable law. SECTION 12.2 AGENT TO ACT. In case any one or more Events of Default shall occur and not have been waived, the Agent may, and at the direction of the Required Lenders shall, proceed to protect and enforce their rights or remedies either by suit in equity or by action at law, or both, whether for the specific performance of any covenant, agreement or other provision contained herein or in any other Loan Document, or to enforce the payment of the Obligations or any other legal or equitable right or remedy. SECTION 12.3 CUMULATIVE RIGHTS. No right or remedy herein conferred upon the Lenders or the Agent is intended to be exclusive of any other rights or remedies contained herein or in any other Loan Document, and every such right or remedy shall be cumulative and shall be in addition to every other such right or remedy contained herein and therein or now or hereafter existing at law or in equity or by statute, or otherwise. SECTION 12.4 NO WAIVER. No course of dealing between the Borrower and any Lender or the Agent or any failure or delay on the part of any Lender or the Agent in exercising any rights or remedies under any Loan Document or otherwise available to it shall operate as a waiver of any rights or remedies and no single or partial exercise of any rights or remedies shall operate as a waiver or preclude the exercise of any other rights or remedies hereunder or of the same right or remedy on a future occasion. SECTION 12.5 ALLOCATION OF PROCEEDS. If an Event of Default has occurred and not been waived, and the maturity of the Notes has been accelerated pursuant to this Article 12, all payments received by the Agent hereunder, in respect of any principal of or interest on the Obligations or any other amounts payable by the Borrower hereunder shall be applied by the Agent in the following order: (a) amounts due to Issuing Bank and the Lenders pursuant to Sections 3.13, 4.3, 9.14, 15.4 and 15.8 hereof; (b) amounts due to (A) Issuing Bank pursuant to Section 4.4 hereof, and (B) to Issuing Bank and/or the Agent pursuant to Section 3.14 hereof; (c) payments of interest on Loans and Reimbursement Obligations; (d) payments of principal on Loans and Reimbursement Obligations; NB BOLLE CREDIT AGREEMENT (FINAL) Doc No: 190295 97 (e) payment of cash amounts to the Agent in respect of Letters of Credit Outstandings pursuant to Section 4.2(a) and 12.1(B) hereof; (f) payment of Obligations owed a Lender or Lenders pursuant to Swap Agreements; (g) payments of all other amounts due under this Agreement, if any, to be applied for the ratable benefit of the Lenders; and (h) any surplus remaining after application as provided for herein, to the Borrower or otherwise as may be required by applicable law. ARTICLE XIII THE AGENT SECTION 13.1 APPOINTMENT, POWERS, AND IMMUNITIES. Each Lender hereby irrevocably appoints and authorizes the Agent to act as its agent under this Agreement and the other Loan Documents with such powers and discretion as are specifically delegated to the Agent by the terms of this Agreement and the other Loan Documents, together with such other powers as are reasonably incidental thereto. The Agent (which term as used in this sentence and in Section 13.5 and the first sentence of Section 13.6 hereof shall include its affiliates and its own and its affiliates' officers, directors, employees, and agents): (a) shall not have any duties or responsibilities except those expressly set forth in this Agreement and shall not be a trustee or fiduciary for any Lender; (b) shall not be responsible to the Lenders for any recital, statement, representation, or warranty (whether written or oral) made in or in connection with any Loan Document or any certificate or other document referred to or provided for in, or received by any of them under, any Loan Document, or for the value, validity, effectiveness, genuineness, enforceability, or sufficiency of any Loan Document, or any other document referred to or provided for therein or for any failure by the Borrower or any other Person to perform any of its obligations thereunder; (c) shall not be responsible for or have any duty to ascertain, inquire into, or verify the performance or observance of any covenants or agreements by the Borrower or any of its Subsidiaries or the satisfaction of any condition or to inspect the property (including the books and records) of the Borrower or any of its Subsidiaries or affiliates; (d) shall not be required to initiate or conduct any litigation or collection proceedings under any Loan Document; and NB BOLLE CREDIT AGREEMENT (FINAL) Doc No: 190295 98 (e) shall not be responsible for any action taken or omitted to be taken by it under or in connection with any Loan Document, except for its own gross negligence or willful misconduct. The Agent may employ agents and attorneys-in-fact and shall not be responsible for the negligence or misconduct of any such agents or attorneys-in-fact selected by it with reasonable care. SECTION 13.2 RELIANCE BY AGENT. The Agent shall be entitled to rely upon any certification, notice, instrument, writing, or other communication (including, without limitation, any thereof by telephone or telefacsimile) believed by it to be genuine and correct and to have been signed, sent or made by or on behalf of the proper Person or Persons, and upon advice and statements of legal counsel (including counsel for the Borrower or any of its Subsidiaries), independent accountants, and other experts selected by the Agent. The Agent may deem and treat the payee of any Note as the holder thereof for all purposes hereof unless and until the Agent receives and accepts an Assignment and Acceptance executed in accordance with Section 13.1 hereof. As to any matters not expressly provided for by this Agreement, the Agent shall not be required to exercise any discretion or take any action, but shall be required to act or to refrain from acting (and shall be fully protected in so acting or refraining from acting) upon the instructions of the Required Lenders, and such instructions shall be binding on all of the Lenders; provided, however, that the Agent shall not be required to take any action that exposes the Agent to personal liability or that is contrary to any Loan Document or applicable law or unless it shall first be indemnified to its satisfaction by the Lenders against any and all liability and expense which may be incurred by it by reason of taking any such action. SECTION 13.3 DEFAULTS. The Agent shall not be deemed to have knowledge or notice of the occurrence of a Default or Event of Default unless the Agent has received written notice thereof (i) from the Borrower or (ii) from a Lender specifying such Default or Event of Default and stating that such notice is a "Notice of Default". In the event that the Agent receives such a notice of the occurrence of a Default or Event of Default, the Agent shall give prompt notice thereof to the Lenders. The Agent shall (subject to Section 13.2 hereof) take such action with respect to such Default or Event of Default as shall reasonably be directed by the Required Lenders, provided that, unless and until the Agent shall have received such directions, the Agent may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to such Default or Event of Default as it shall deem advisable in the best interest of the Lenders. SECTION 13.4 RIGHTS AS LENDER. With respect to its Term Loan Commitment and Revolving Credit Commitment and the Loans made by it, NationsBank (and any successor acting as Agent) in its capacity as a Lender hereunder shall have the same rights and powers hereunder as any other Lender and may exercise the same as though it were not acting as the Agent, and the term "Lender" or "Lenders" shall, unless the context otherwise indicates, include the Agent in its individual capacity. NationsBank (and any successor acting as Agent) and its affiliates may (without having to account therefor to any Lender) accept deposits from, lend money to, make investments in, provide services to, and generally engage in any kind of lending, trust, or other NB BOLLE CREDIT AGREEMENT (FINAL) Doc No: 190295 99 business with the Borrower or any of its Subsidiaries or affiliates as if it were not acting as Agent, and NationsBank (and any successor acting as Agent) and its affiliates may accept fees and other consideration from the Borrower or any of its Subsidiaries or affiliates for services in connection with this Agreement or otherwise without having to account for the same to the Lenders. SECTION 13.5 INDEMNIFICATION. The Lenders agree to indemnify the Agent (to the extent not reimbursed under Section 15.8 hereof, but without limiting the obligations of the Borrower under such Section) ratably in accordance with their respective Revolving Credit Commitments and Term Loan Commitments, for any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses (including attorneys' fees), or disbursements of any kind and nature whatsoever that may be imposed on, incurred by or asserted against the Agent (including by any Lender) in any way relating to or arising out of any Loan Document or the transactions contemplated thereby or any action taken or omitted by the Agent under any Loan Document; provided that no Lender shall be liable for any of the foregoing to the extent they arise from the gross negligence or willful misconduct of the Person to be indemnified. Without limitation of the foregoing, each Lender agrees to reimburse the Agent promptly upon demand for its ratable share of any costs or expenses payable by the Borrower under Section 15.8, to the extent that the Agent is not promptly reimbursed for such costs and expenses by the Borrower. The agreements contained in this Section 13.5 shall survive payment in full of the Loans and all other amounts payable under this Agreement. SECTION 13.6 NON-RELIANCE ON AGENT AND OTHER LENDERS. Each Lender agrees that it has, independently and without reliance on the Agent or any other Lender, and based on such documents and information as it has deemed appropriate, made its own credit analysis of the Borrower and its Subsidiaries and decision to enter into this Agreement and that it will, independently and without reliance upon the Agent or any other Lender, and based on such documents and information as it shall deem appropriate at the time, continue to make its own analysis and decisions in taking or not taking action under the Loan Documents. Except for notices, reports, and other documents and information expressly required to be furnished to the Lenders by the Agent hereunder, the Agent shall not have any duty or responsibility to provide any Lender with any credit or other information concerning the affairs, financial condition, or business of the Borrower or any of its Subsidiaries or affiliates that may come into the possession of the Agent or any of its affiliates. SECTION 13.7 RESIGNATION OF AGENT. The Agent may resign at any time by giving notice thereof to the Lenders and the Borrower. Upon any such resignation, the Required Lenders shall have the right to appoint a successor Agent. If no successor Agent shall have been so appointed by the Required Lenders and shall have accepted such appointment within thirty (30) days after the retiring Agent's giving of notice of resignation, then the retiring Agent may, on behalf of the Lenders, appoint a successor Agent which shall be a commercial bank organized under the laws of the United States of America having combined capital and surplus of at least $500,000,000. Upon the acceptance of any appointment as Agent hereunder by a successor, such successor shall thereupon succeed to and become vested with all the rights, powers, discretion, privileges, and duties of the retiring Agent, and the retiring Agent shall be discharged from its duties and obligations hereunder. After any retiring Agent's resignation hereunder as Agent, the NB BOLLE CREDIT AGREEMENT (FINAL) Doc No: 190295 100 provisions of this Article XIII shall continue in effect for its benefit in respect of any actions taken or omitted to be taken by it while it was acting as Agent. SECTION 13.8 SHARING OF PAYMENTS, ETC. Each Lender agrees that if it shall, through the exercise of a right of banker's lien, set-off, counterclaim or otherwise, obtain payment with respect to its Obligations (other than pursuant to Article V) which results in its receiving more than its pro rata share of the aggregate payments with respect to all of the Obligations (other than any payment expressly provided hereunder to be distributed on other than a pro rata basis and payments pursuant to Article V), then (a) such Lender shall be deemed to have simultaneously purchased from the other Lenders a share in their Obligations so that the amount of the Obligations held by each of the Lenders shall be pro rata and (b) such other adjustments shall be made from time to time as shall be equitable to insure that the Lenders share such payments ratably; provided, however, that for purposes of this Section 13.8 the term "pro rata" shall be determined with respect to the Term Loan Commitment and Revolving Credit Commitment of each Lender and with respect to the Total Credit Commitments after subtraction in each case of amounts, if any, by which any such Lender has not funded its share of the outstanding Loans and Obligations. If all or any portion of any such excess payment is thereafter recovered from the Lender which received the same, the purchase provided in this Section 13.8 shall be rescinded to the extent of such recovery, without interest. The Borrowers expressly consents to the foregoing arrangements and agrees that each Lender so purchasing a portion of the other Lenders' Obligations may exercise all rights of payment (including, without limitation, all rights of set-off, banker's lien or counterclaim) with respect to such portion as fully as if such Lender were the direct holder of such portion. SECTION 13.9 FEES. The Borrower agrees to pay to the Agent, for its individual account, an annual Agent's fee as from time to time agreed to by the Borrower and the Agent in writing. ARTICLE XIV ASSIGNMENTS AND PARTICIPATIONS SECTION 14.1 ASSIGNMENTS AND PARTICIPATIONS. (a) Each Lender may assign to one or more Eligible Assignees all or a portion of its rights and obligations under this Agreement (including, without limitation, all or a portion of its Loans, its Notes, and its Term Loan Commitment and Revolving Credit Commitment); provided, however, that (i) each such assignment shall be to an Eligible Assignee; (ii) except in the case of an assignment to another Lender or an assignment of all of a Lender's rights and obligations under this Agreement, any such partial assignment shall be in an amount at least equal to $5,000,000 or an integral multiple of $1,000,000 in excess thereof; NB BOLLE CREDIT AGREEMENT (FINAL) Doc No: 190295 101 (iii) each such assignment by a Lender shall be of a constant, and not varying, percentage of all of its rights and obligations under this Agreement and the Note; (iv) the parties to such assignment shall execute and deliver to the Agent for its acceptance an Assignment and Acceptance, together with any Note subject to such assignment and a processing fee of $3,500; and (v) an assignment (other than an assignment of 100% of its interest) by NationsBank shall not include any portion of the obligation to issue Letters of Credit. Upon execution, delivery, and acceptance of such Assignment and Acceptance, the assignee thereunder shall be a party hereto and, to the extent of such assignment, have the obligations, rights, and benefits of a Lender hereunder and the assigning Lender shall, to the extent of such assignment, relinquish its rights and be released from its obligations under this Agreement. Upon the consummation of any assignment pursuant to this Section, the assignor, the Agent and the Borrower shall make appropriate arrangements so that, if required, new Notes are issued to the assignor and the assignee. If the assignee is not incorporated under the laws of the United States of America or a state thereof, it shall deliver to the Borrower and the Agent certification as to exemption from deduction or withholding of Taxes in accordance with Section 5.6. (b) The Agent shall maintain at its address referred to in Section 15.1 a copy of each Assignment and Acceptance delivered to and accepted by it and a register for the recordation of the names and addresses of the Lenders and the Revolving Credit Commitment and Term Loan Commitment of, and principal amount of the Loans owing to, each Lender from time to time (the "Register"). The entries in the Register shall be conclusive and binding for all purposes, absent manifest error, and the Borrower, the Agent and the Lenders may treat each Person whose name is recorded in the Register as a Lender hereunder for all purposes of this Agreement. The Register shall be available for inspection by the Borrower or any Lender at any reasonable time and from time to time upon reasonable prior notice. (c) Upon its receipt of an Assignment and Acceptance executed by the parties thereto, together with any Note subject to such assignment and payment of the processing fee, the Agent shall, if such Assignment and Acceptance has been completed and is in substantially the form of Exhibit B hereto, (i) accept such Assignment and Acceptance, (ii) record the information contained therein in the Register and (iii) give prompt notice thereof to the parties thereto. (d) Each Lender may sell participations to one or more Persons in all or a portion of its rights and/or obligations under this Agreement (including all or a portion of its Term Loan Commitment and Revolving Credit Commitment or its Loans); provided, however, that (i) such Lender's obligations under this Agreement shall remain unchanged, (ii) such participations shall be in a minimum amount of $2,500,000 and shall include an allocable portion of such Lender's Participations, (iii) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations, (iv) the participant shall be entitled to the benefit of the yield NB BOLLE CREDIT AGREEMENT (FINAL) Doc No: 190295 102 protection provisions contained in Article V and the right of set-off contained in Section 15.2, and (v) the Borrowers shall continue to deal solely and directly with such Lender in connection with such Lender's rights and obligations under this Agreement, and such Lender shall retain the sole right to enforce the obligations of the Borrowers relating to its Loans and its Note and to approve any amendment, modification, or waiver of any provision of this Agreement (other than amendments, modifications, or waivers requiring approval of all the Lenders as set forth in Section 15.5 hereof). (e) Notwithstanding any other provision set forth in this Agreement, any Lender may at any time assign and pledge all or any portion of its Loans and its Note to any Federal Reserve Bank as collateral security pursuant to Regulation A and any operating circular issued by such Federal Reserve Bank. No such assignment shall release the assigning Lender from its obligations hereunder. (f) Any Lender may furnish any information concerning the Borrower or any of its Subsidiaries in the possession of such Lender from time to time to assignees and participants (including prospective assignees and participants). ARTICLE XV GENERAL PROVISIONS SECTION 15.1 NOTICES. All notices shall be in writing, except as to telephonic notices expressly permitted or required herein, and written notices shall be delivered by hand delivery, telefacsimile, overnight courier or certified or registered mail. Any notice shall be conclusively deemed to have been received by any party hereto and be effective on the day on which delivered to such party (against (except as to telephonic or telefacsimile notice) receipt therefor or, in the case of telex, verification by return) at the address set forth below or such other address as such party shall specify to the other parties in writing, or if sent prepaid by certified or registered mail return receipt requested on the third Business Day after the day on which mailed, addressed to such party at said address: (a) if to the Borrower: Bolle Inc. 555 Theodore Fremd Avenue Rye, New York 10580 Attention: Mr. Ian G. H. Ashken Telephone: (914) 967-9400 Telefacsimile: (914) 967-9405 NB BOLLE CREDIT AGREEMENT (FINAL) Doc No: 190295 103 with copies to: Kane Kessler, P.C. 1350 Avenue of the Americas New York, New York 10019 Attention: Robert L. Lawrence, Esq. Telephone: (212) 541-6222 Telefacsimile: (212) 245-3009 (b) if to the Agent: NationsBank, National Association Independence Center, NC1 001-15-04 15th Floor Charlotte, North Carolina 28255 Attention: Dana Weir, Agency Services Telephone: (704) 388-3917 Telefacsimile: (704) 386-9923 with a copy to: NationsBank, National Association Corporate Banking 767 Fifth Avenue, 5th Floor New York, New York 10153-0083 Attention: Ms. Susan Timmerman, Senior Vice President Telephone: (212) 407-5387 Telefacsimile: (212) 751-6909 (c) if to the Lenders: At the addresses set forth on the signature pages hereof and on the signature page of each Assignment and Acceptance. SECTION 15.2 SETOFF. Upon the occurrence and during the continuance of any Event of Default, each Lender (and each of its affiliates) is hereby authorized at any time and from time to time, to the fullest extent permitted by law, to set off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held and other indebtedness at any time owing by such Lender (or any of its affiliates) to or for the credit or the account of the Borrower against any and all of the Obligations of the Borrower now or hereafter existing under this Agreement and the Note held by such Lender, irrespective of whether such Lender shall have made any demand under this Agreement or such Note and although such Obligations may be unmatured. Each Lender agrees promptly to notify the Borrower after any such set-off and application made by such Lender; provided, however, that the failure to give such notice shall not affect the validity of such set-off and application. The rights of each Lender under this Section 15.2 are in addition to other rights and remedies (including, without limitation, other rights of set-off) that such Lender may have. NB BOLLE CREDIT AGREEMENT (FINAL) Doc No: 190295 104 SECTION 15.3 SURVIVAL. All covenants, agreements, representations and warranties made herein shall survive the making by the Lenders of the Loans and the expiration of the Letters of Credit and the execution and delivery to the Lenders of this Agreement and the Notes and shall continue in full force and effect until the Facility Termination Date, unless continuing thereafter in accordance with their terms. Whenever in this Agreement any of the parties hereto is referred to, such reference shall be deemed to include the successors and permitted assigns of such party and all covenants, provisions and agreements by or on behalf of the Borrower which are contained in this Agreement, the Notes and the other Loan Documents shall inure to the benefit of the successors and permitted assigns of the Lenders or any of them. SECTION 15.4 EXPENSES. The Borrower agrees (a) to pay or reimburse the Agent for all its reasonable out-of-pocket costs and expenses incurred in connection with the preparation, negotiation and execution of, and any amendment, supplement or modification to, this Agreement or any of the other Loan Documents, and the consummation of the transactions contemplated hereby and thereby, including, without limitation, the reasonable fees and disbursements of counsel to the Agent, (b) to pay or reimburse the Agent and each of the Lenders for all their reasonable costs and expenses incurred in connection with the enforcement or preservation of any rights under this Agreement and the other Loan Documents, including without limitation, the reasonable fees and disbursements of counsel of the Agent and of each Lender and any payments in indemnification (other than, with respect to any Lender, payments of indemnification arising directly as a result of the gross negligence or willful misconduct of such Lender) or otherwise payable by the Lenders to the Agent pursuant to the Loan Documents and (c) to pay, indemnify and hold the Agent and the Lenders harmless from any and all recording and filing fees and any and all liabilities with respect to, or resulting from any failure to pay or delay in paying, documentary, stamp, excise and other similar taxes, if any, which may be payable or determined to be payable in connection with the execution and delivery of this Agreement or any other Loan Documents, or consummation of any amendment, supplement or modification of, or any waiver or consent under or in respect of, this Agreement or any other Loan Documents. SECTION 15.5 AMENDMENTS. Any provision of this Agreement or any other Loan Document may be amended or waived if, but only if, such amendment or waiver is in writing and is signed by the Borrowers and the Required Lenders (and, if Article XI or the rights or duties of the Agent are affected thereby, by the Agent); provided that no such amendment or waiver shall, unless signed by all the Lenders, (i) increase the Revolving Credit Commitments or Term Loan Commitments of the Lenders, (ii) reduce the principal of or rate of interest on any Loan or any fees or other amounts payable hereunder, (iii) postpone any date fixed for the payment of any scheduled installment of principal of or interest on any Loan or any fees or other amounts payable hereunder or for termination of the Term Loan Commitment or Revolving Credit Commitment, (iv) change the percentage of the Term Loan Commitments or the Revolving Credit Commitments or of the unpaid principal amount of the Notes, or the number of Lenders, which shall be required for the Lenders or any of them to take any action under this Section 15.5 or any other provision of this Agreement, (v) release any Guarantor or any Liens in favor of the Agent or the Lenders covering any material portion of the Collateral or (vi) change the provisions of Section 2.7 hereof and this Section 15.5; and provided, further, that no such amendment or waiver that affects the NB BOLLE CREDIT AGREEMENT (FINAL) Doc No: 190295 105 rights, privileges or obligations of the Issuing Bank as issuer of Letters of Credit, shall be effective unless signed in writing by the Issuing Bank; Notwithstanding any provision of the other Loan Documents to the contrary, as between the Agent and the Lenders, execution by the Agent shall not be deemed conclusive evidence that the Agent has obtained the written consent of the Required Lenders. No notice to or demand on the Borrower in any case shall entitle the Borrower to any other or further notice or demand in similar or other circumstances, except as otherwise expressly provided herein. No delay or omission on any Lender's or the Agent's part in exercising any right, remedy or option shall operate as a waiver of such or any other right, remedy or option or of any Default or Event of Default. SECTION 15.6 COUNTERPARTS. This Agreement may be executed in any number of counterparts, each of which when so executed and delivered shall be deemed an original, and it shall not be necessary in making proof of this Agreement to produce or account for more than one copy of this Agreement containing all original, fully-executed counterpart signature pages. SECTION 15.7 TERMINATION. The termination of this Agreement shall not affect any rights of the Borrower, the Lenders or the Agent or any obligation of the Borrower, the Lenders or the Agent, arising prior to the effective date of such termination, and the provisions hereof shall continue to be fully operative until all transactions entered into or rights created or obligations incurred prior to such termination have been fully disposed of, concluded or liquidated and the Facility Termination Date shall have occurred unless such rights continue thereafter in accordance with their terms. The rights granted to the Agent for the benefit of the Lenders hereunder and under the other Loan Documents shall continue in full force and effect, notwithstanding the termination of this Agreement, until the Facility Termination Date shall have occurred unless such rights continue thereafter in accordance with their terms or the Borrower has furnished the Lenders and the Agent with an indemnification satisfactory to the Agent and each Lender with respect thereto. All representations, warranties, covenants, waivers and agreements contained herein shall survive execution hereof until the Facility Termination Date unless otherwise provided herein. Notwithstanding the foregoing, if after receipt of any payment pursuant to the Loan Documents of all or any part of the Obligations, any Lender is for any reason compelled to surrender such payment to any Person because such payment is determined to be void or voidable as a preference, impermissible setoff, a diversion of trust funds or for any other reason, this Agreement shall continue in full force and the Borrower shall be liable to, and shall indemnify and hold such Lender harmless for, the amount of such payment surrendered until such Lender shall have been finally and irrevocably paid in full. The provisions of the foregoing sentence shall be and remain effective notwithstanding any contrary action which may have been taken by the Lenders in reliance upon such payment, and any such contrary action so taken shall be without prejudice to the Lenders' rights under this Agreement and shall be deemed to have been conditioned upon such payment having become final and irrevocable. SECTION 15.8 INDEMNIFICATION. (a) In consideration of the execution and delivery of this Agreement by the Agent and each Lender and the extension of the Term Loan Commitments, the Revolving Credit NB BOLLE CREDIT AGREEMENT (FINAL) Doc No: 190295 106 Commitments and the Letter of Credit Commitments, the Borrower hereby indemnifies, exonerates and holds the Agent and each Lender and each of their respective officers, directors, employees and agents (collectively, the "Indemnified Parties") free and harmless from and against any and all actions, causes of action, suits, losses, costs, liabilities and damages, and expenses (irrespective of whether any such Indemnified Party is a party to the action for which indemnification hereunder is sought), including reasonable attorneys' fees, settlement costs and disbursements (collectively, the "Indemnified Liabilities"), incurred by the Indemnified Parties or any of them as a result of, or arising out of, any of the Loan Documents or the matters contemplated therein, or relating to any transaction financed or to be financed in whole or in part, directly or indirectly, with the proceeds of any Loan or supported by any Letter of Credit, except for any such Indemnified Liabilities arising for the account of a particular Indemnified Party by reason of the gross negligence or willful misconduct of such Indemnified Party, and if and to the extent that the foregoing undertaking may be unenforceable for any reason, the Borrower hereby agrees to make the maximum contribution to the payment and satisfaction of each of the Indemnified Liabilities which is permissible under applicable law. This Section 15.8 supersedes any prior agreements of the parties as to indemnification or limits on liability and the provisions hereof shall survive repayment of the Obligations, the occurrence of the Facility Termination Date and the expiration or termination of this Agreement. The Borrower agrees that no Indemnified Party shall have any liability (whether direct or indirect, in contract or tort or otherwise) to it, any of its Subsidiaries, any Guarantor, or any security holders or creditors thereof arising out of, related to or in connection with the transactions contemplated herein, except to the extent that such liability is found in a final non-appealable judgment by a court of competent jurisdiction to have resulted from such Indemnified Party's gross negligence or willful misconduct; provided, however, in no event shall any Indemnified Party be liable for punitive, consequential, indirect or special damages, as opposed to direct damages. (b) Without prejudice to the survival of any other agreement of the Borrower hereunder, the agreements and obligations of the Borrower contained in this Section 15.8 shall survive the payment in full of the Loans and all other amounts payable under this Agreement. SECTION 15.9 HEADINGS AND REFERENCES. The headings of the Articles and Sections of this Agreement are inserted for convenience of reference only and are not intended to be a part of, or to affect the meaning or interpretation of this Agreement. Words such as "hereof", "hereunder", "herein" and words of similar import shall refer to this Agreement in its entirety and not to any particular Section or provisions hereof, unless so expressly specified. As used herein, the singular shall include the plural, and the masculine shall include the feminine or a neutral gender, and vice versa, whenever the context requires. SECTION 15.10 SEVERABILITY. If any provision of this Agreement or the other Loan Documents shall be determined to be illegal or invalid as to one or more of the parties hereto, then such provision shall remain in effect with respect to all parties, if any, as to whom such provision is neither illegal nor invalid, and in any event all other provisions hereof shall remain effective and binding on the parties hereto. NB BOLLE CREDIT AGREEMENT (FINAL) Doc No: 190295 107 SECTION 15.11 ENTIRE AGREEMENT. This Agreement, together with the other Loan Documents, constitutes the entire agreement between the parties with respect to the subject matter hereof and supersedes all previous proposals, negotiations, representations, commitments and other communications between or among the parties, both oral and written, with respect thereto. SECTION 15.12 AGREEMENT CONTROLS. In the event that any term of any of the Loan Documents other than this Agreement conflicts with any term of this Agreement, the terms and provisions of this Agreement shall control. SECTION 15.13 USURY SAVINGS CLAUSE. Anything in this Agreement or the Notes to the contrary notwithstanding, the obligation of the Borrower to make payments of interest shall be subject to the limitation that payments of interest shall not be required to be made to the extent that a Lender's receipt thereof would not be permissible under the law or laws applicable to it limiting rates of interest which may be charged or collected by it. Any such amount of interest which is not paid as a result of the limitation referred to in the preceding sentence shall be carried forward and paid by the Borrower to such Lender on the earliest date or dates on which any interest is payable under this Agreement and on which the receipt thereof is permissible under the laws applicable to such Lender limiting rates of interest which may be charged or collected by such Lender. Such payment shall be made as additional interest for the month preceding such interest payment date. Such deferred payments shall not bear interest. SECTION 15.14 GOVERNING LAW; WAIVERS. (A) THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS EXECUTED, AND TO BE FULLY PERFORMED, IN SUCH STATE. (B) EACH PARTY HEREBY EXPRESSLY AND IRREVOCABLY AGREES AND CONSENTS THAT ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT AND THE TRANSACTIONS CONTEMPLATED HEREIN MAY BE INSTITUTED IN ANY STATE OR FEDERAL COURT SITTING IN THE COUNTY OF NEW YORK, STATE OF NEW YORK, UNITED STATES OF AMERICA AND, BY THE EXECUTION AND DELIVERY OF THIS AGREEMENT, EXPRESSLY WAIVES ANY OBJECTION THAT IT MAY HAVE NOW OR HEREAFTER TO THE LAYING OF THE VENUE OR TO THE JURISDICTION OF ANY SUCH SUIT, ACTION OR PROCEEDING, AND IRREVOCABLY SUBMITS GENERALLY AND UNCONDITIONALLY TO THE JURISDICTION OF ANY SUCH COURT IN ANY SUCH SUIT, ACTION OR PROCEEDING. (C) EACH PARTY AGREES THAT SERVICE OF PROCESS MAY BE MADE ON SUCH PARTY BY PERSONAL SERVICE OF A COPY OF THE SUMMONS AND COMPLAINT OR OTHER LEGAL PROCESS IN ANY SUCH NB BOLLE CREDIT AGREEMENT (FINAL) Doc No: 190295 108 SUIT, ACTION OR PROCEEDING, OR BY REGISTERED OR CERTIFIED MAIL (POSTAGE PREPAID) TO THE ADDRESS OF EACH PARTY PROVIDED BY SECTION 15.1 HEREOF, OR BY ANY OTHER METHOD OF SERVICE PROVIDED FOR UNDER THE APPLICABLE LAWS IN EFFECT IN THE STATE OF NEW YORK. (D) NOTHING CONTAINED IN SUBSECTIONS (B) OR (C) HEREOF SHALL PRECLUDE ANY PARTY FROM BRINGING ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS IN THE COURTS OF ANY PLACE WHERE ANY PARTY OR ANY PARTY'S PROPERTY OR ASSETS MAY BE FOUND OR LOCATED. TO THE EXTENT PERMITTED BY THE APPLICABLE LAWS OF ANY SUCH JURISDICTION, EACH PARTY HEREBY IRREVOCABLY SUBMITS TO THE JURISDICTION OF ANY SUCH COURT AND EXPRESSLY WAIVES, IN RESPECT OF ANY SUCH SUIT, ACTION OR PROCEEDING, THE JURISDICTION OF ANY OTHER COURT OR COURTS WHICH NOW OR HEREAFTER, BY REASON OF ITS PRESENT OR FUTURE DOMICILE, OR OTHERWISE, MAY BE AVAILABLE TO IT. (E) IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS OR REMEDIES UNDER OR RELATED TO THIS AGREEMENT OR ANY AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED OR THAT MAY IN THE FUTURE BE DELIVERED IN CONNECTION WITH THE FOREGOING, EACH PARTY HEREBY AGREES, TO THE EXTENT PERMITTED BY APPLICABLE LAW, THAT ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY AND HEREBY WAIVES, TO THE EXTENT PERMITTED BY APPLICABLE LAW, ANY OBJECTION THAT IT MAY HAVE THAT EACH ACTION OR PROCEEDING HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. SECTION 15.15 JUDGMENT CURRENCY. The Borrower, the Agent and each Lender hereby agree that if, in the event that a judgment is given in relation to any sum due to the Agent or any Lender hereunder, and such judgment is given in a currency (the "Judgment Currency") other than that in which such sum was originally denominated (the "Original Currency"), the Borrower agrees to indemnify the Agent or such Lender, as the case may be, to the extent that such amount of the Original Currency which could have been purchased by the Agent in accordance with normal banking procedures on the Business Day following receipt of such sum is less than the sum which could have been so purchased by the Agent had such purchase been made on the day on which such judgment was given or, if such day is not a Business Day, on the Business Day immediately preceding such judgment, and if the amount so purchased exceeds the amount which could have been so purchased had such purchase been made on the day on which such judgment was given, or if such day is not a Business Day, on the Business Day immediately preceding such judgment, the Agent or the applicable Lenders agree to remit such excess to the Borrower. The agreements in this Section 15.15 shall survive payment of the Obligations. NB BOLLE CREDIT AGREEMENT (FINAL) Doc No: 190295 109 SECTION 15.16 ECONOMIC AND MONETARY UNION IN THE EUROPEAN COMMUNITY. The parties confirm that, except as agreed to by all parties hereto in writing, the occurrence or non-occurrence of an event associated with economic and monetary union in the European Community will not have the effect of altering any term of, or discharging or excusing performance under, this Agreement, any other Loan Document, any Security Instrument, any Loan or transaction contemplated by any of the foregoing, nor give a party the right to unilaterally alter or terminate this Agreement, any other Loan Document, any Security Instrument, any Loan or transaction contemplated by any of the foregoing or give rise to an Event of Default or otherwise be the basis for the effective designation of the Revolving Credit Termination Date or the Facility Termination Date. "An event associated with economic and monetary union in the European Community" includes, without limitation, each (and any combination) of the following: (a) the introduction of, changeover to or operation of a single or unified European currency (whether known as the euro or otherwise) ("Eurocurrency"); (b) the fixing of conversion rates between a member state's currency and the Eurocurrency or between the currencies of member states; (c) the introduction of Eurocurrency as lawful currency in a member state; (d) the withdrawal from legal tender of any currency that, before the introduction of Eurocurrency, was lawful currency in one of the member states; and (e) the disappearance or replacement of a relevant price source for the Eurocurrency or the national currency of any member state, or the failure of the agreed sponsor (or a successor sponsor) to publish or display a relevant rate, index, price, page or screen. NB BOLLE CREDIT AGREEMENT (FINAL) Doc No: 190295 110 [SIGNATURES ON FOLLOWING PAGES.] 111 IN WITNESS WHEREOF, the parties hereto have caused this instrument to be made, executed and delivered by their duly authorized officers as of the day and year first above written. BORROWER: BOLLE INC. By: /s/ Desiree DeStefano Name: Title: AGENT: NATIONSBANK, NATIONAL ASSOCIATION, as Agent for the Lenders By: /s/ Susan Timmerman Name: Title: BOLLE CREDIT AGREEMENT Signature Page 1 of 7 LENDERS: NATIONSBANK, NATIONAL ASSOCIATION By: /s/ Susan Timmerman Name: Title: Lending Office: NationsBank, National Association Independence Center NC1 001-15-04, 15th Floor Charlotte, North Carolina 28255 Attention: Agency Services Telephone: (704) 388-3917 Telefacsimile: (704) 386-9923 Wire Transfer Instructions: NationsBank, National Association Charlotte, North Carolina 28255 ABA No.: 053000196 Reference: Bolle Inc. Account No.: 136621-22506 Attention: Corporate Credit Support BOLLE CREDIT AGREEMENT Signature Page 2 of 7 EUROPEAN AMERICAN BANK By: /s/ Mark J. Saeger Name: Mark J. Saeger Title: Vice President Lending Office: European American Bank 335 Madison Avenue, 17th Floor New York, New York 10017 Attention: Angie M. Marrano, Administrative Assistant Telephone: (212) 503-2553 Telefacsimile: (212) 503-2667 Wire Transfer Instructions: European American Bank One EAB Plaza Uniondale, New York 11555 ABA No.: 021 001 486 Reference: Bolle Inc. Account No.: K890222220 Attention: Commercial Loans Dept. BOLLE CREDIT AGREEMENT Signature Page 3 of 7 NATIONAL CITY BANK OF KENTUCKY By: /s/ Don Pullen Name: Don Pullen Title: V.P. Lending Office: 101 South 5th Street Louisville, Kentucky 40202 Attention: Etta Moore Commercial Loan Operations Telephone: (502) 581-6788 Telefacsimile: (502) 581-4079 Wire Transfer Instructions: National City Bank of Kentucky 101 South 5th Street Louisville, Kentucky 40202 ABA No.: 083-000-056 Reference: Bolle Inc. Attention: Etta Moore Commercial Loan Operations BOLLE CREDIT AGREEMENT Signature Page 4 of 7 BANKBOSTON, N.A. By: /s/ Richard J. Klouda Name: Richard J. Klouda Title: Director Lending Office: One Landmark Square Stamford, Connecticut 06901 Attention: Jennifer Edwards Telephone: (203) 973-1940 Telefacsimile: (203) 967-8169 Wire Transfer Instructions: BankBoston, N.A. ABA No.: 011100805 Reference: Bolle Inc. Account No.: 551-74538, Connecticut Zero Balance Account Attention: Joan LaFleur BOLLE CREDIT AGREEMENT Signature Page 5 of 7 CREDIT AGRICOLE INDOSUEZ By: By: Name: Craig Welch Name: Title: First Vice President Title: Lending Office: 520 Madison Avenue New York, New York 10022 Attention: Rene LeBlanc Telephone: (212) 418-7042 Telefacsimile: (212) 418-2228 Wire Transfer Instructions: Citibank N.A. New York, New York ABA No.: 021000089 Swift: Citius33 Reference: Bolle , Inc. Account No.: Credit Agricole Indosuez Account # 36023853 BOLLE CREDIT AGREEMENT Signature Page 6 of 7 IMPERIAL BANK By: Name: Title: Lending Office: 9920 South La Cienega Boulevard, 14th Floor Inglewood, California 90301 Attention: Ms. Jamie Harney Telephone: (310) 417-5721 Telefacsimile: (310) 417-5997 Wire Transfer Instructions: Imperial Bank ABA No.: 122201444 Reference: Bolle Inc. Account No.: 2405-100-540 Attention: LPIG #2405 BOLLE CREDIT AGREEMENT Signature Page 7 of 7 EXHIBIT A APPLICABLE COMMITMENT PERCENTAGES
REVOLVING APPLICABLE TERM LOAN CREDIT TOTAL CREDIT COMMITMENT COMMITMENT COMMITMENT COMMITMENT PERCENTAGE NationsBank, National Association FF $3,214,285.71 $5,000,000.00 17.857142857% National City Bank of Kentucky FF $3,214,285.71 $5,000,000.00 17.857142857% BankBoston, N.A. FF $3.214.285.71 $5,000,000.00 17.857142857% European American Bank FF $3,214,285.71 $5,000,000.00 17.857142857% Credit Agricole Indosuez FF $2,571,428.58 $4,000,000.00 14.285714286% Imperial Bank FF $2,571,428.58 $4,000,000.00 14.285714286% TOTAL OF ALL LENDERS FF $18,000,000.00 $28,000,000.00 100.000000000% == ============== ============== ==============
A-1 EXHIBIT B FORM OF ASSIGNMENT AND ACCEPTANCE DATED , 19 Reference is made to the Second Amended and Restated Credit Agreement dated as of March 11, 1998 (the "Agreement") among Bolle Inc. (the "Borrower"), the Lenders (as defined in the Agreement), and NationsBank, National Association, as Agent for the Lenders ("Agent"), whereby the Lenders have agreed to make certain term loan, revolving credit and letter of credit facilities available to the Borrower (the "Credit Agreement"). Unless otherwise defined herein, terms defined in the Credit Agreement are used herein with the same meanings. (the "Assignor") and (the "Assignee") agree as follows: 1. The Assignor hereby sells and assigns to the Assignee, and the Assignee hereby purchases and assumes from the Assignor, WITHOUT RECOURSE, a _______% 1 interest in and to all of the Assignor's rights and obligations under each of the Agreements as of the Effective Date (as defined below), including, without limitation, such percentage interest in the Loans owing to, and Participations held by, the Assignor on the Effective Date, and the Notes held by the Assignor. 2. The Assignor (i) represents and warrants that, as of the date hereof, the aggregate outstanding principal amounts of the Loans owing to it (without giving effect to assignments thereof which have not yet become effective) are as follows: (A) $_______ of the Term Loan, (B) $______ of Revolving Loans and (C) the aggregate principal amount of Letters of Credit in which it is deemed to have a Participation under the Credit Agreement is $__________; (ii) represents and warrants that it is the legal and beneficial owner of the interests being assigned by it hereunder and that such interests are free and clear of any adverse claim; (iii) makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with the Agreements or any of the Loan Documents or the execution, legality, validity, enforceability, genuineness, sufficiency or value of the Agreements or any of the Loan Documents or any other instrument or document furnished pursuant thereto; (iv) makes no representation or warranty and assumes no responsibility with respect to the financial condition of the Borrower or the performance or observance by the Borrower of any of its obligations under the Agreements or any of the Loan Documents or any other instrument or document furnished pursuant thereto and (v) attaches the Notes referred to in paragraph 1 above and requests that the Agent exchange such Notes for replacement Notes dated _____________, 19__, for the Assignor (if an assignment of less than a 100% of its interest under the Credit Agreement) and the Assignee reflecting the amount of their respective Term Loan - -------- Specify percentage in not less than 9 decimal points. B-1 Commitment and Revolving Credit Commitment after consummation of the assignment hereunder in the principal amount of $________________ payable to the order of the Assignor, and one in the principal amount of $________________ payable to the order of the Assignee. 3. The Assignee (i) confirms that it has received a copy of the Agreements, together with copies of the financial statements referred to in Section 9.1 thereof, and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into this Assignment and Acceptance; (ii) agrees that it will, independently and without reliance upon the Agent, the Assignor, or any other Lender and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under the Agreements; (iii) appoints and authorizes the Agent to take such actions on its behalf and to exercise such powers under the Loan Documents as are delegated to the Agent by the terms thereof, together with such powers as are reasonably incidental thereto; (iv) agrees that it will perform in accordance with their terms all of the obligations which by the terms of the Agreements are required to be performed by the Lender; and (v) specifies as its address for notices the office set forth beneath its name on the signature pages hereof. 4. The effective date for this Assignment and Acceptance shall be _____________________________ (the "Effective Date"). Following the execution of this Assignment and Acceptance, it will be delivered to the Agent for acceptance and recording by the Agent. 5. Upon such acceptance and recording, as of the Effective Date, (i) the Assignee shall be a party to each of the Agreements and, to the extent provided in this Assignment and Acceptance, have the rights and obligations of a Lender thereunder and under the Loan Documents and (ii) the Assignor shall, to the extent provided in this Assignment and Acceptance, relinquish its rights and be released from its obligations under each of the Agreements. 6. Upon such acceptance and recording, from and after the Effective Date, the Agent shall make all payments under the Agreements and Notes in respect of the interest assigned hereby (including, without limitation, all payments of principal, interest, commitment fees and letter of credit fees with respect thereto) to the Assignee. The Assignor and Assignee shall make all appropriate adjustments in payments under the Agreements and the Notes for periods prior to the Effective Date directly between themselves. B-2 7. This Assignment and Acceptance shall be governed by and construed in accordance with, the laws of the State of New York. [NAME OF ASSIGNOR] By: Name: Title: Notice Address: After the Effective Date: Outstanding Term Loan: $______________________ Outstanding Revolving Loans: $______________________ Outstanding Participations in Letter of Credit Outstandings: $______________________ [NAME OF ASSIGNEE] By: Name: Title: Notice Address/Lending Office: Wire transfer Instructions: After the Effective Date: Outstanding Term Loan: $______________________ Outstanding Revolving Loans: $______________________ Outstanding Participations in Letter of Credit Outstandings: $______________________ B-3 Accepted this ____ day of _______, 19___ NationsBank, National Association, as Agent By: Name: Title: Consented to: Bolle Inc. By: Name: Title: B-4 EXHIBIT C FORM OF NOTICE OF APPOINTMENT (OR REVOCATION) OF AUTHORIZED REPRESENTATIVE Reference is hereby made to the Second Amended and Restated Credit Agreement dated as of March 11, 1998 (the "Agreement") among Bolle Inc. (the "Borrower"), the Lenders (as defined in the Agreement), and NationsBank, National Association, as Agent for the Lenders ("Agent"). Capitalized terms used but not defined herein shall have the respective meanings therefor set forth in the Agreement. Appointment. The Borrower hereby nominates, constitutes and appoints each individual named below as an Authorized Representative under the Loan Documents, and hereby represents and warrants that (i) set forth opposite each such individual's name is a true and correct statement of such individual's office (to which such individual has been duly elected or appointed), a genuine specimen signature of such individual and an address for the giving of notice, and (ii) each such individual has been duly authorized by the Borrower to act as Authorized Representative under the Loan Documents: Name and Address Office Specimen Signature - ----------------- ------------------- -------------------- ================= - ----------------- ------------------- -------------------- ================= - ----------------- ------------------- -------------------- ================= Revocation. Borrower hereby revokes (effective upon receipt hereof by the Agent) the prior appointment of ________________ as an Authorized Representative. This the ___ day of __________________, 19__. Bolle Inc. By: Name: Title: C-1 EXHIBIT D FORM OF BORROWING NOTICE To: NationsBank, National Association, as Agent Independence Center, 15th Floor NC1-001-15-04 Charlotte, North Carolina 28255 Telefacsimile: (704) 386-9923 Attention: Dana Weir, Agency Services Reference is hereby made to the Second Amended and Restated Credit Agreement dated as of March 11, 1998 (the "Agreement") among Bolle Inc. (the "Borrower"), the Lenders (as defined in the Agreement), and NationsBank, National Association, as Agent for the Lenders ("Agent"). Capitalized terms used but not defined herein shall have the respective meanings therefor set forth in the Agreement. The Borrower through its Authorized Representative hereby confirms its prior notice of borrowing given to the Agent by telephone at __________ __.m. on ____________, 19__ to the effect that Revolving Loans of the type and amount set forth below be made on the date indicated: Type of Loan Interest Effective (Check One) Period(1) Amount(2) Date(3) TERM LOAN SEGMENT |_| FF LIBOR Rate Loan REVOLVING LOAN |_| Base Rate Loan(4) |_| Eurodollar Rate Loan |_| FF LIBOR Rate Loan (1) For any Eurodollar Rate Loan or FF LIBOR Rate Loan, one, two, three or six months. (2) Must be $500,000 or a multiple of $100,000 in excess thereof for all Revolving Loans. (3) At least three (3) Business Days later if a Eurodollar Rate Loan; may be same Business Day in case of a Base Rate Loan. (4) Specify Dollars or French Francs. The Borrower hereby requests that the proceeds of Revolving Loans described in this Borrowing Notice be made available to the Borrower as follows: [INSERT TRANSMITTAL INSTRUCTIONS]. D-1 The undersigned hereby certifies that: 1. No Default or Event of Default exists either now or after giving effect to the borrowing described herein; and 2. All the representations and warranties set forth in Article 8 of the Agreement and in the Loan Documents (other than those expressly stated to refer to a particular date) are true and correct as of the date hereof except that (a) the representations and warranties set forth in Sections 8.4 and 8.5 of the Agreement shall be deemed to include and take into account any merger or consolidation permitted under Section 10.4 of the Agreement and references therein to Schedules 8.4 and 8.5 shall be deemed to refer to such Schedules as amended by Supplemental Schedules 8.4 and 8.5 attached hereto, and (b) the reference to the financial statements in Section 8.6 of the Agreement are to those financial statements most recently delivered to you pursuant to Section 9.1 of the Agreement; and 3. After giving effect to Loans requested hereby, the sum of all Revolving Credit Outstandings and Letter of Credit Outstandings will not exceed the Total Revolving Credit Commitment. Bolle Inc. BY: Authorized Representative D-2 Supplemental Schedule 8.4 Subsidiaries Schedule 8.4 of the Agreement shall be amended hereby as follows (if no amendment of Schedule 8.4 is necessary, indicate "Not Applicable"): D-3 Supplemental Schedule 8.5 Investments in Other Persons Schedule 8.5 of the Agreement shall be amended hereby as follows (if no amendment of Schedule 8.5 is necessary, indicate "Not Applicable"): D-4 EXHIBIT E FORM OF GUARANTY AGREEMENT E-1 EXHIBIT F FORM OF INTEREST RATE SELECTION NOTICE To: NationsBank, National Association, as Agent Independence Center, 15th Floor NC1-001-15-04 Charlotte, North Carolina 28255 Telefacsimile: (704) 386-9923 Attention: Dana Weir, Agency Services Reference is hereby made to the Second Amended and Restated Credit Agreement dated as of March 11, 1998 (the "Credit Agreement") among Bolle Inc. (the "Borrower"), each of the Lenders (as defined in the Agreement) and NationsBank, National Association, as Agent for the Lenders ("Agent"). Capitalized terms used but not defined herein shall have the respective meanings therefor set forth in the Credit Agreement. The Borrower through its Authorized Representative hereby confirms its prior notice of a selection of a type of Loan and Interest Period given to the Agent by telephone at __________ __.m. on _________________, 199__ to the following effect in respect of Loans: Type of Loan Interest Effective (Check One) Period(1) Amount(2) Date(3) TERM LOAN SEGMENT |_| FF LIBOR Rate Loan B REVOLVING LOAN |_| Base Rate Loan(4) |_| Eurodollar Rate Loan |_| FF LIBOR Rate Loan (1) For any Eurodollar Rate Loan or FF LIBOR Rate Loan, one, two, three or six months. (2) Must be $500,000 or a multiple of $100,000 in excess thereof. (3) At least three (3) Business Days after date of telephonic notice if a Eurodollar Rate Loan; may be same Business Day in case of a Base Rate Loan. (4) Specify Dollars or French Francs. F-1 The undersigned hereby certifies that: 1. No Default or Event of Default exists either now or after giving effect to the borrowing described herein; and 2. All the representations and warranties set forth in Article 8 of the Agreement and in the Loan Documents (other than those expressly stated to refer to a particular date) are true and correct as of the date hereof except that (a) the representations and warranties set forth in Sections 8.4 and 8.5 of the Agreement shall be deemed to include and take into account any merger or consolidation permitted under Section 10.4 of the Agreement and references therein to Schedules 8.4 and 8.5 shall be deemed to refer to such Schedules as amended by Supplemental Schedules 8.4 and 8.5 attached hereto and (b) the reference to the financial statements in Section 8.6 of the Agreement are to those financial statements most recently delivered to you pursuant to Section 9.1 of the Agreement; and 3. After giving effect to Loans requested hereby, the sum of all Revolving Credit Outstandings and Letter of Credit Outstandings will not exceed the Total Revolving Credit Commitment. Bolle Inc. BY: Authorized Representative F-2 Supplemental Schedule 8.4 Subsidiaries Schedule 8.4 of the Agreement shall be amended hereby as follows (if no amendment to Schedule 8.4 is necessary, indicate "Not Applicable"): F-3 Supplemental Schedule 8.5 Investments in Other Persons Schedule 8.5 of the Agreement shall be amended hereby as follows (if no amendment of Schedule 8.5 is necessary, indicate "Not Applicable"): F-4 EXHIBIT G FORM OF STOCK PLEDGE AGREEMENT G-1 EXHIBIT H FORM OF MORTGAGE H-1 EXHIBIT I FORM OF TERM NOTE PROMISSORY NOTE FF_______________1 __________, __________ __________, 1998 FOR VALUE RECEIVED, BOLLE INC., a Delaware corporation having its principal place of business located in Rye, New York (the "Borrower"), hereby promises to pay to the order of _____________________________________________2 (the "Lender"), in its individual capacity, at the office of NationsBank, National Association, as agent for the Lenders (the "Agent"), located at Independence Center, 101 North Tryon Street, Charlotte, North Carolina 28255 (or at such other place or places as the Agent may designate) at the times set forth in the Second Amended and Restated Credit Agreement dated as of March 11, 1997 among the Borrower, the financial institutions party thereto (collectively, the "Lenders") and the Agent (as amended and supplemented and in effect from time to time, the "Credit Agreement"; all capitalized terms not otherwise defined herein shall have the respective meanings set forth in the Credit Agreement), in lawful money of France, in immediately available funds, the principal amount of [_________________________________]3 FRENCH FRANCS (FF__________)1 or, if less than such principal amount, the aggregate unpaid principal amount of the Term Loan made by the Lender to the Borrower pursuant to the Credit Agreement on the Term Loan Termination Date or such earlier date as may be required pursuant to the terms of the Credit Agreement, and to pay interest from the date hereof on the unpaid principal amount hereof, in Dollars, at said office, on the dates and at the rates provided in Article II of the Credit Agreement. All or any portion of the principal amount of such Loans may be prepaid as provided in the Credit Agreement. - ------------------------------- 1 Insert Lender's Term Loan Commitment in Arabic numerals. 2 Insert name of Lender in capital letters. 3 Insert Lender's Term Loan Commitment in words. I-1-1 This Note is one of the Term Notes in the aggregate principal amount of FF_______________ referred to in the Credit Agreement and is issued pursuant to and entitled to the benefits and security of the Credit Agreement to which reference is hereby made for a more complete statement of the terms and conditions upon which the Loans evidenced hereby were or are made and are to be repaid. This Note is subject to certain restrictions on transfer or assignment as provided in the Credit Agreement. The Credit Agreement provides for the acceleration of the maturity of this Note upon the occurrence of certain events and for prepayments of Term Loan upon the terms and conditions specified therein. If payment of all sums due hereunder is accelerated under the terms of the Credit Agreement or under the terms of the other Loan Documents executed in connection with the Credit Agreement, the then remaining principal amount and accrued but unpaid interest shall bear interest which shall be payable on demand at the rates per annum set forth in Article II of the Credit Agreement, or the maximum rate permitted under applicable law, if lower, until such principal and interest have been paid in full. Further, in the event of such acceleration, this Note, and all other indebtedness of the Borrower to the Lender shall become immediately due and payable, without presentation, demand, protest or notice of any kind, all of which are hereby waived by the Borrower. In the event this Note is not paid when due at any stated or accelerated maturity, the Borrower agrees to pay, in addition to the principal and interest, all costs of collection, including reasonable attorneys' fees and disbursements, and interest thereon at the rates set forth above. Interest hereunder shall be computed on the basis of a 360-day year for the actual number of days in the interest period. This Note shall be governed by, and construed in accordance with, the law of the State of New York. All Persons bound on this obligation, whether primarily or secondarily liable as principals, sureties, guarantors, endorsers or otherwise, hereby waive to the full extent permitted by law the benefits of all provisions of law for stay or delay of execution or sale of property or other satisfaction of judgment against any of them on account of liability hereon until judgment be obtained and execution issued against any other of them and returned satisfied or until it can be shown that the maker or any other party hereto had no property available for the satisfaction of the debt evidenced by this instrument, or until any other proceedings can be had against any of them, and also their right, if any, to require the holder hereof to hold as security for this Note any collateral deposited by any of said Persons as security. Protest, notice of protest, notice of dishonor, dishonor, demand or any other formality are hereby waived by all parties bound hereon. I-1-2 IN WITNESS WHEREOF, the Borrower has caused this Note to be made, executed and delivered by its duly authorized representative as of the date and year first above written, all pursuant to authority duly granted. BOLLE INC. ATTEST: By: Name: By: Title: Secretary [SEAL] I-1-3 EXHIBIT J FORM OF REVOLVING NOTE PROMISSORY NOTE (Revolving Loans) _______________1 __________, __________ __________, 1998 FOR VALUE RECEIVED, BOLLE INC., a Delaware corporation having its principal place of business located in Rye, New York (the "Borrower"), hereby promises to pay to the order of ___________________________________________________2 (the "Lender"), in its individual capacity, at the office of NationsBank, National Association, as agent for the Lenders (the "Agent"), located at Independence Center, 101 North Tryon Street, Charlotte, North Carolina 28255 (or at such other place or places as the Agent may designate) at the times set forth in the Second Amended and Restated Credit Agreement dated as of March 11, 1997 among the Borrower, the financial institutions party thereto (collectively, the "Lenders") and the Agent (as amended and supplemented and in effect from time to time, the "Credit Agreement"; all capitalized terms not otherwise defined herein shall have the respective meanings set forth in the Credit Agreement), in lawful money of the United States of America with respect to Dollar Loans or France with respect to FF Revolving Loans, in immediately available funds, the principal amount equal to the Dollar Value of [_________________________________]3 DOLLARS ($__________)1 or, if less than such principal amount, the aggregate unpaid principal amount of all Revolving Loans made by the Lender to the Borrower pursuant to the Credit Agreement on the Revolving Credit Termination Date or such earlier date as may be required pursuant to the terms of the Credit Agreement, and to pay interest from the date hereof on the unpaid principal amount hereof, in Dollars, at said office, on the dates and at the rates provided in Article III of the Credit Agreement. All or any portion of the principal amount of such Loans may be prepaid as provided in the Credit Agreement. - ------------------------------- 1 Insert Lender's Revolving Credit Commitment in Arabic numerals. 2 Insert name of Lender in capital letters. 3 Insert Lender's Revolving Credit Commitment in words. J-1 This Note is one of the Revolving Notes in the aggregate principal amount of $__________ referred to in the Credit Agreement and is issued pursuant to and entitled to the benefits and security of the Credit Agreement to which reference is hereby made for a more complete statement of the terms and conditions upon which the Loans evidenced hereby were or are made and are to be repaid. This Note is subject to certain restrictions on transfer or assignment as provided in the Credit Agreement. The Credit Agreement provides for the acceleration of the maturity of this Note upon the occurrence of certain events and for prepayments of Revolving Loans upon the terms and conditions specified therein. If payment of all sums due hereunder is accelerated under the terms of the Credit Agreement or under the terms of the other Loan Documents executed in connection with the Credit Agreement, the then remaining principal amount and accrued but unpaid interest shall bear interest which shall be payable on demand at the rates per annum set forth in Article III of the Credit Agreement, or the maximum rate permitted under applicable law, if lower, until such principal and interest have been paid in full. Further, in the event of such acceleration, this Note, and all other indebtedness of the Borrower to the Lender shall become immediately due and payable, without presentation, demand, protest or notice of any kind, all of which are hereby waived by the Borrower. In the event this Note is not paid when due at any stated or accelerated maturity, the Borrower agrees to pay, in addition to the principal and interest, all costs of collection, including reasonable attorneys' fees and disbursements, and interest thereon at the rates set forth above. Interest hereunder shall be computed on the basis of a 360-day year for the actual number of days in the interest period. This Note shall be governed by, and construed in accordance with, the law of the State of New York. All Persons bound on this obligation, whether primarily or secondarily liable as principals, sureties, guarantors, endorsers or otherwise, hereby waive to the full extent permitted by law the benefits of all provisions of law for stay or delay of execution or sale of property or other satisfaction of judgment against any of them on account of liability hereon until judgment be obtained and execution issues against any other of them and returned satisfied or until it can be shown that the maker or any other party hereto had no property available for the satisfaction of the debt evidenced by this instrument, or until any other proceedings can be had against any of them, and also their right, if any, to require the holder hereof to hold as security for this Note any collateral deposited by any of said Persons as security. Protest, notice of protest, notice of dishonor, dishonor, demand or any other formality are hereby waived by all parties bound hereon. J-2 IN WITNESS WHEREOF, the Borrower has caused this Note to be made, executed and delivered by its duly authorized representative as of the date and year first above written, all pursuant to authority duly granted. BOLLE INC. ATTEST: By: Name: By: Title: Secretary [SEAL] J-3 EXHIBIT K-1 FORM OF LC ACCOUNT AGREEMENT K-1-1 EXHIBIT K-2 FORM OF CASH COLLATERAL ACCOUNT K-2-1 EXHIBIT L FORM OF SECURITY AGREEMENT L-1 EXHIBIT M FORM OF INTELLECTUAL PROPERTY SECURITY AGREEMENT M-1 EXHIBIT N FORMS OF OPINIONS OF COUNSEL TO THE BORROWER AND THE GUARANTORS N-1 EXHIBIT O FORM OF COMPLIANCE CERTIFICATE As of __________, 19__ NationsBank, National Association, as Agent Independence Center, 15th Floor NC1-001-15-04 Charlotte, North Carolina 28255 Telefacsimile: (704) 386-9923 Attention: Ms. Dana Weir, Agency Services Reference is hereby made to the Second Amended and Restated Credit Agreement dated as of March 11, 1998 (the "Credit Agreement") among Bolle Inc. (the "Borrower"), the Lenders (as defined in the Credit Agreement) and NationsBank, National Association, as Agent for the Lenders ("Agent") under the Credit Agreement. Capitalized terms used but not defined herein shall have the respective meanings therefor set forth in the Credit Agreement. The undersigned, a duly authorized and acting Authorized Representative, hereby certifies to you as of the date set forth above (the "Fiscal Quarter End") as follows: 1. Calculations: A. Compliance with Section 11.1: Consolidated Fixed Charge Ratio 1. Consolidated EBITDA (sum of a, b, c and d minus e and f): $__________ a. Consolidated Net Income $ b. Consolidated Interest Expense $ c. Tax on Income $ d. Depreciation and amortization $ e. Evaluation of Eyecare Products investment $ f. Certain charges related to accounting change $ 2. Capital Expenditures $__________ 3. Item 1 less Item 2 $__________ O-1 4. Consolidated Fixed Charges (sum of a, b, c, d and e) $__________ a. Consolidated Interest Expense $ b. Principal amount of Consoli- dated Funded Indebtedness due and payable during period $ c. Dividends and distributions paid during such period $ d. all payments under Capital Leases made during such period $ 5. Ratio of Item 3 to Item 4 ____ to 1.00 REQUIRED: FOR THE FOUR QUARTER PERIOD ENDING AT THE FISCAL QUARTER END DURING THE PERIODS SET FORTH BELOW, THE CONSOLIDATED FIXED CHARGE RATIO FOR SUCH FOUR-QUARTER PERIOD SHALL NOT BE LESS THAN THE RATIO SET FORTH OPPOSITE SUCH PERIOD: PERIOD RATIO CLOSING DATE THROUGH DECEMBER 31, 1998 1.25 TO 1.00 JANUARY 1, 1999 AND THEREAFTER 1.50 TO 1.00 B. Compliance with Section 11.2: Consolidated Leverage Ratio 1. Consolidated Funded Indebtedness $__________ 2. Subordinated Indebtedness $_________ 3. Item 1 minus Item 2 $_________ 4. Consolidated EBITDA (sum of a, b, c and d): $__________ a. Consolidated Net Income $ b. Consolidated Interest Expense $ c. Tax on Income $ d. Depreciation and amortization $ e. Evaluation of Eyecare Products investment $ f. Certain charges related to accounting change $ O-2 5. Ratio of Item 3 to Item 4 ____ to 1.00 REQUIRED: FOR THE FOUR-QUARTER PERIOD ENDING AT THE FISCAL QUARTER END DURING THE PERIODS SET FORTH BELOW, THE CONSOLIDATED LEVERAGE RATIO FOR SUCH FOUR-QUARTER PERIOD SHALL NOT BE EQUAL TO OR GREATER THAN THE RATIO SET FORTH OPPOSITE SUCH PERIOD: PERIOD RATIO CLOSING DATE THROUGH DECEMBER 31, 1998 3.35 TO 1.00 JANUARY 1, 1999 THROUGH DECEMBER 30, 1999 3.00 TO 1.00 DECEMBER 31, 2000 AND THEREAFTER 2.50 TO 1.00 C. Consolidated Net Worth $__________ REQUIRED: CONSOLIDATED NET WORTH MUST BE AT LEAST AN AMOUNT EQUAL TO $[________], AND WILL BE INCREASED AS OF THE FIRST DAY OF EACH FISCAL YEAR, BEGINNING WITH THE FISCAL YEAR COMMENCING JANUARY 1, 1999 BY AN AMOUNT EQUAL TO ONE HUNDRED PERCENT (100%) OF (A) SIXTY PERCENT (60%) OF CONSOLIDATED NET INCOME FOR THE IMMEDIATELY PRECEDING FISCAL YEAR PLUS (B) ONE HUNDRED PERCENT (100%) OF THE NET PROCEEDS OF ANY EQUITY OFFERING CONSUMMATED DURING THE IMMEDIATELY PRECEDING FISCAL YEAR; PROVIDED HOWEVER, IN NO EVENT SHALL THE CONSOLIDATED NET WORTH REQUIREMENT BE DECREASED AS A RESULT OF A NET LOSS OF THE BORROWER AND ITS SUBSIDIARIES (I.E., NEGATIVE CONSOLIDATED NET INCOME) FOR ANY FISCAL YEAR. a. Initial Consolidated Net Worth $_____________ b. Consolidated Net Income for preceding Fiscal Year (beginning FY 1996) $_____________ c. Multiply Line (b.) by 60% $_____________ d. Add Lines (a.) and (c.) $_____________ e. Consolidated Net Worth Requirement preceding year $_____________ f. New Consolidated Net Worth Requirement (larger of Lines e and f) $_____________ D. Capital Expenditures $_____________
O-3 REQUIRED: CAPITAL EXPENDITURES FOR THE IMMEDIATELY PRECEDING FISCAL YEAR SHALL NOT BE GREATER THAN $3,250,000. 2. No Default A. During the fiscal quarter ended as of the date set forth above, (a) no Default or Event of Default specified in Article 12 of the Credit Agreement has occurred or (b) the following Default or Event of Default has occurred: B. The Borrower proposes to take the following action with respect to any such Default or Event of Default described above: (Note, if no Default or Event of Default has occurred, insert "Not Applicable"). The undersigned Authorized Officer hereby certifies that the information set forth above is true, correct and complete as of the date hereof. IN WITNESS WHEREOF, I have executed this Certificate this _____ day of __________, 19___. BOLLE INC. Authorized Officer O-4 EXHIBIT P FORM OF LANDLORD WAIVER P-1 EXHIBIT Q FORM OF LEASE ASSIGNMENT Q-1 EXHIBIT R FORM OF COLLATERAL ASSIGNMENT OF LICENSE AGREEMENT Q-2 EXHIBIT S FORM OF INTERCOMPANY NOTES ASSIGNMENT S-1 EXHIBIT T FORM OF INTERCOMPANY NOTE T-1 EXHIBIT U FORM OF SUBORDINATION AGREEMENT U-1 SCHEDULE 1 MATERIAL LEASED FACILITIES Schedule 1-1 SCHEDULE 1.1 EXISTING INDEBTEDNESS Schedule 1.1-1 SCHEDULE 2 EXISTING LETTERS OF CREDIT Schedule 2-1 SCHEDULE 6.8 LOCATIONS OF BORROWER AND GUARANTORS Schedule 6.8-1 SCHEDULE 7.1(C) MATERIAL ADVERSE CHANGE Schedule 7.1(c)-1 SCHEDULE 8.4 SUBSIDIARIES Schedule 8.4-1 SCHEDULE 8.5 OWNERSHIP INTERESTS Schedule 8.5-1 SCHEDULE 8.6 CONTINGENT LIABILITIES Schedule 8.6-1 SCHEDULE 8.7 LIENS Schedule 8.7-1 SCHEDULE 8.10 LITIGATION Schedule 8.10-1 SCHEDULE 8.13 INTELLECTUAL PROPERTY Schedule 8.13-1 SCHEDULE 8.16 EMPLOYEE BENEFIT PLANS Schedule 8.16-1 SCHEDULE 8.18 ENVIRONMENTAL MATTERS Schedule 8.18-1 SCHEDULE 8.19 EMPLOYMENT MATTERS Schedule 8.19-1 SCHEDULE 9.5 INSURANCE Schedule 9.5-1 SCHEDULE 10.1 EXISTING INDEBTEDNESS Schedule 10.1-1 SCHEDULE 10.4 MERGERS AND CONSOLIDATIONS Schedule 10.4-1 SCHEDULE 10.5 TRANSACTIONS WITH AFFILIATES Schedule 10.5-1 SCHEDULE 10.19 LICENSES Schedule 10.19-1 (a) SECOND AMENDED AND RESTATED GUARANTY AGREEMENT THIS SECOND AMENDED AND RESTATED GUARANTY AGREEMENT (this "Guaranty Agreement" or this "Guaranty"), dated as of March 11, 1998, is made by EACH OF THE UNDERSIGNED (each a "Guarantor" and collectively the "Guarantors") to NATIONSBANK, NATIONAL ASSOCIATION, a national banking association, as Agent (the "Agent") for each of the lenders now or hereafter party to the Credit Agreement (as defined below) (each a "Lender" and collectively the "Lenders"). W I T N E S S E T H: WHEREAS, the Lenders, the Agent and BEC Group, Inc. ("BEC"), of which Bolle Inc. (the "Borrower") was formerly a direct subsidiary are parties to that certain Amended and Restated Credit Agreement dated as of July 10, 1997, (the "Existing Credit Agreement"); and WHEREAS, pursuant to that certain Assignment Agreement and First Amendment to the Amended and Restated Credit Agreement, dated as of the date hereof and effective immediately prior to the effectiveness of this Guaranty Agreement, between BEC, the Borrower, the Agent and the Lenders (the "Assignment and Amendment"), BEC assigned to the Borrower, and the Borrower assumed from BEC, among other liabilities, certain indebtedness owing by and obligations of BEC under the Existing Credit Agreement such that the Borrower became a co-borrower together with BEC under the Existing Credit Agreement; and WHEREAS, certain of the Guarantors are parties to that certain Amended and Restated Guaranty Agreement dated as of July 10, 1997 with the Agent (as amended, supplemented or otherwise modified as of the date hereof, the "Existing Guaranty") pursuant to which the Borrower guaranteed the payment and performance of BEC's obligations under the Existing Credit Agreement; and WHEREAS, the Guarantors, the Agent and the Lenders desire to amend and restate the Existing Guaranty in its entirety to reflect changes in persons required to be parties thereto and certain changes in the Credit Agreement; and WHEREAS, the Guarantors are Material Subsidiaries and will materially benefit from the loans and advances made and to be made, and the letters of credit issued and to be issued, under the Credit Agreement; NOW, THEREFORE, in order to induce the Lenders and the Agent to enter into the Credit Agreement and to make and continue the loans and advances thereunder, and to issue letters of credit for the account of the Borrower, and in consideration of the mutual covenants and agreements contained herein, each Guarantor, amends and restates the Existing Guaranty in its entirety as follows: 1. DEFINITIONS. All capitalized terms used but not otherwise defined herein shall have the meanings ascribed to such terms in the Credit Agreement. 2. GUARANTY. Each Guarantor hereby jointly and severally, unconditionally, absolutely, continually and irrevocably guarantees to the Agent and the Lenders the payment and performance in full of the Borrower's Liabilities (as defined below). For all purposes of this Guaranty Agreement, "Borrower's Liabilities" means: (a) the Borrower's prompt payment in full, when due or declared due and at all such times, of all Obligations and all other amounts pursuant to the terms of the Credit Agreement, the Notes, and all other Loan Documents executed in connection with the Credit Agreement and all Hedging Obligations heretofore, now or at any time or times hereafter owing, arising, due or payable from the Borrower to the Lenders, including without limitation principal, interest, premium or fee (including, but not limited to, loan fees and attorneys' fees and expenses); and (b) the Borrower's prompt and full performance, observance and discharge of each and every agreement, undertaking, covenant and provision to be performed, observed or discharged by the Borrower under the Credit Agreement and all other Loan Documents executed in connection therewith and all Swap Agreements; provided, however, that the parties hereto, individually and collectively, expressly acknowledge that the Credit Agreement has been given as a substitution of, and not as a payment of, the obligations of the Borrower under the Existing Credit Agreement and is not intended to constitute a novation of the Existing Credit Agreement. Likewise, this Guaranty is given as a substitution of, and not as a payment or satisfaction of, the obligations of the Guarantors under the Existing Guaranty and is not intended to constitute a novation of the Existing Guaranty. The Guarantors' obligations to the Agent and the Lenders under this Guaranty Agreement are hereinafter collectively referred to as the "Guarantors' Obligations"; provided, however, that the liability of each Guarantor individually, with respect to the Guarantor's Obligations shall be limited to an aggregate amount equal to the largest amount that would not render its obligations hereunder subject to avoidance under Section 548 of the United States Bankruptcy Code or any comparable provisions of any applicable state law. Each Guarantor agrees that it is jointly and severally, directly and primarily liable for the Borrower's Liabilities. 3. PAYMENT. If the Borrower shall default in payment or performance of any Borrower's Liabilities, whether principal, interest, premium, fee (including, but not limited to, loan fees and attorneys' fees and expenses), or otherwise, when and as the same shall become due, whether according to the terms of the Credit Agreement, by acceleration, or otherwise, or upon the occurrence of any Default or Event of Default under the Credit Agreement that has not been cured or waived, then any or all of the Guarantors will, upon demand thereof by the Agent or its successors or assigns as of the date of the Agent's demand, fully pay to the Agent, for the benefit of the Lenders, subject to any restriction set forth in Section 2 hereof, an amount equal to all Guarantors' Obligations then due and owing. 2 4. UNCONDITIONAL OBLIGATIONS. This is a guaranty of payment and not of collection. The Guarantors' Obligations under this Guaranty Agreement shall be absolute and unconditional irrespective of the validity, legality or enforceability of the Credit Agreement, the Notes or any other Loan Document or any other guaranty of the Borrower's Liabilities, and shall not be affected by any action taken under the Credit Agreement, the Notes or any other Loan Document, any other guaranty of the Borrower's Liabilities, or any other agreement between the Agent or the Lenders and the Borrower or any other Person, in the exercise of any right or power therein conferred, or by any failure or omission to enforce any right conferred thereby, or by any waiver of any covenant or condition therein provided, or by any acceleration of the maturity of any of the Borrower's Liabilities, or by the release or other disposal of any security for any of the Borrower's Liabilities, or by the dissolution of the Borrower or the combination or consolidation of the Borrower into or with another entity or any transfer or disposition of any assets of the Borrower or by any extension or renewal of the Credit Agreement, any of the Notes or any other Loan Document, in whole or in part, or by any modification, alteration, amendment or addition of or to the Credit Agreement, any of the Notes or any other Loan Document, any other guaranty of the Borrower's Liabilities, or any other agreement between the Agent or the Lenders and the Borrower or any other Person, or by any other circumstance whatsoever (with or without notice to or knowledge of any Guarantor) which may or might in any manner or to any extent vary the risks of such Guarantor, or might otherwise constitute a legal or equitable discharge of a surety or a guarantor; it being the purpose and intent of the parties hereto that this Guaranty Agreement and the Guarantors' Obligations hereunder shall be absolute and unconditional under any and all circumstances and shall not be discharged except by payment as herein provided. 5. CURRENCY AND FUNDS OF PAYMENT. Each Guarantor hereby guarantees that the Guarantors' Obligations will be paid (i) in French Francs in the case of each FF Loan and (ii) in all other cases in lawful currency of the United States of America and in immediately available funds, regardless of any law, regulation or decree now or hereafter in effect that might in any manner affect the Borrower's Liabilities, or the rights of the Agent or any Lender with respect thereto as against the Borrower, or cause or permit to be invoked any alteration in the time, amount or manner of payment by the Borrower of any or all of the Borrower's Liabilities. 6. EVENTS OF DEFAULT. In the event that (a) a Guarantor shall file a petition to take advantage of any insolvency statute; (b) a Guarantor shall commence or suffer to exist a proceeding for the appointment of a receiver, trustee, liquidator or conservator of itself or of the whole or substantially all of its property; (c) a Guarantor shall file a petition or answer seeking reorganization or arrangement or similar relief under the Federal bankruptcy laws or any other applicable law or statute of the United States of America or any state or similar law of any other country; (d) a court of competent jurisdiction shall enter an order, judgment or decree appointing a custodian, receiver, trustee, liquidator or conservator of a Guarantor or of the whole or substantially all of its properties, or approve a petition filed against a Guarantor seeking reorganization or arrangement or similar relief under the Federal bankruptcy laws or any other applicable law or statute of the United States of America or any state or similar law 3 of any other country, or if, under the provisions of any other law for the relief or aid of debtors, a court of competent jurisdiction shall assume custody or control of a Guarantor or of the whole or substantially all of its properties and such order, judgment, decree, approval or assumption remains unstayed or undismissed for a period of sixty (60) consecutive days; (e) there is commenced against a Guarantor any proceeding or petition seeking reorganization, arrangement or similar relief under the Federal bankruptcy laws or any other applicable law or statute of the United States of America or any state, which proceeding or petition remains unstayed or undismissed for a period of sixty (60) consecutive days; (f) there shall occur an Event of Default under the Credit Agreement; or (g) any default shall occur in the payment of amounts due hereunder (each of the foregoing an "Event of Default" hereunder); then notwithstanding any collateral that the Lenders may possess from Borrower, such Guarantor, any other Guarantor or any other guarantor of the Borrower's Liabilities, or any other party, at the Agent's election and without notice thereof or demand therefor, so long as such Event of Default shall be continuing, the Guarantors' Obligations shall immediately become due and payable. 7. SUITS. Each Guarantor from time to time shall pay to the Agent for the benefit of the Lenders, on demand, at the Agent's place of business set forth in the Credit Agreement, the Guarantors' Obligations as they become or are declared due, and in the event such payment is not made forthwith, the Agent or the Lenders or any of them may proceed to suit against such Guarantor. At the Agent's election, one or more and successive or concurrent suits may be brought hereon by the Agent against any Guarantor, whether or not suit has been commenced against the Borrower, any other Guarantor or any other guarantor of the Borrower's Liabilities, or any other Person and whether or not the Agent or any Lender has taken or failed to take any other action to collect all or any portion of the Borrower's Liabilities. 8. SET-OFF AND WAIVER. Each Guarantor waives any right to assert against the Agent and the Lenders as a defense, counterclaim, set-off or cross claim, any defense (legal or equitable) or other claim which each Guarantor may now or at any time hereafter have against the Borrower, the Agent or the Lenders, without waiving any additional defenses, set-offs, counterclaims or other claims otherwise available to such Guarantor. If at any time hereafter the Agent or any Lender employs counsel for advice or other representation to enforce the Guarantors' Obligations that arise out of an Event of Default, then, in any of the foregoing events, all of the reasonable attorneys' fees arising from such services and all expenses, costs and charges in any way or respect arising in connection therewith or relating thereto shall be paid by such Guarantor to the Agent, for the benefit of the Lenders, on demand. 9. WAIVER; SUBROGATION. (a) Each Guarantor hereby waives notice of the following events or occurrences: (i) the Agent's acceptance of this Guaranty Agreement; (ii) the Lenders' heretofore, now or from time to time hereafter loaning monies or giving or extending credit to or for the benefit of the Borrower, whether pursuant to the Credit Agreement or the Notes or any amendments, 4 modifications, or supplements thereto, or replacements or extensions thereof; (iii) the Agent, the Lenders or the Borrower heretofore, now or at any time hereafter, obtaining, amending, substituting for, releasing, waiving or modifying the Credit Agreement, the Notes or any other Loan Documents; (iv) presentment, demand, default, non-payment, partial payment and protest; (v) the Agent or the Lenders heretofore, now or at any time hereafter granting to the Borrower (or any other party liable to the Lenders on account of the Borrower's Liabilities) any indulgence or extensions of time of payment of the Borrower's Liabilities; and (vi) the Agent or the Lenders heretofore, now or at any time hereafter accepting from the Borrower, any other Guarantor, any other guarantor of the Borrower's Liabilities or any other Person, any partial payment or payments on account of the Borrower's Liabilities or any collateral securing the payment thereof or the Agent settling, subordinating, compromising, discharging or releasing the same. Each Guarantor agrees that the Agent and each Lender may heretofore, now or at any time hereafter do any or all of the foregoing in such manner, upon such terms and at such times as the Agent and each Lender, in its sole and absolute discretion, deems advisable, without in any way or respect impairing, affecting, reducing or releasing such Guarantor from the Guarantors' Obligations, and each Guarantor hereby consents to each and all of the foregoing events or occurrences. (b) Each Guarantor hereby agrees that payment or performance by such Guarantor of the Guarantors' Obligations under this Guaranty Agreement may be enforced by the Agent on behalf of the Lenders upon demand by the Agent to such Guarantor without the Agent being required, such Guarantor expressly waiving any right it may have to require the Agent, to (i) prosecute collection or seek to enforce or resort to any remedies against the Borrower or any other Guarantor or any other guarantor of the Borrower's Liabilities, IT BEING EXPRESSLY UNDERSTOOD, ACKNOWLEDGED AND AGREED TO BY SUCH GUARANTOR THAT DEMAND UNDER THIS GUARANTY AGREEMENT MAY BE MADE BY THE AGENT, AND THE PROVISIONS HEREOF ENFORCED BY THE AGENT, EFFECTIVE AS OF THE FIRST DATE ANY EVENT OF DEFAULT OCCURS AND IS CONTINUING UNDER THE CREDIT AGREEMENT, or (ii) seek to enforce or resort to any remedies with respect to any security interests, Liens or encumbrances granted to the Agent by the Borrower, any other Guarantor or any other Person on account of the Borrower's Liabilities or any guaranty thereof. Neither the Agent nor any Lender shall have any obligation to protect, secure or insure any of the foregoing security interests, Liens or encumbrances on the properties or interests in properties subject thereto. The Guarantors' Obligations shall in no way be impaired, affected, reduced, or released by reason of the Agent's or any Lender's failure or delay to do or take any of the acts, actions or things described in this Guaranty including, without limiting the generality of the foregoing, those acts, actions and things described in this Section 9. (c) Each Guarantor further agrees with respect to this Guaranty that such Guarantor shall have no right of subrogation, reimbursement or indemnity, nor any right of recourse to security for the Borrower's Liabilities until the Facility Termination Date. 5 10. EFFECTIVENESS; ENFORCEABILITY. This Guaranty Agreement shall be effective as of the date of the initial Advance under the Credit Agreement and shall continue in full force and effect until the Facility Termination Date. The Agent shall give each Guarantor written notice of such termination in accordance with Section 17 hereof. This Guaranty Agreement shall be binding upon and inure to the benefit of each Guarantor, the Agent and the Lenders and their respective successors and assigns. Notwithstanding the foregoing, no Guarantor may, without the prior written consent of the Agent, assign any rights, powers, duties or obligations hereunder. Any claim or claims that the Agent and the Lenders may at any time hereafter have against a Guarantor under this Guaranty Agreement may be asserted by the Agent or any Lender by written notice directed to such Guarantor. 11. REPRESENTATIONS AND WARRANTIES. Each Guarantor warrants and represents to the Agent for the benefit of the Lenders that it is duly authorized to execute, deliver and perform this Guaranty Agreement, that this Guaranty Agreement is legal, valid, binding and enforceable against such Guarantor in accordance with its terms except as enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors' rights generally and by general equitable principles; and that such Guarantor's execution, delivery and performance of this Guaranty Agreement do not violate or constitute a breach of its certificate of incorporation or other documents of corporate governance or any agreement to which such Guarantor is a party, or any applicable laws, in each case, which violation or breach would reasonably be expected to have a Material Adverse Effect. 12. EXPENSES. Each Guarantor agrees to be liable for the payment of all reasonable fees and expenses, including attorney's fees, incurred by the Agent in connection with the enforcement of this Guaranty Agreement. 13. REINSTATEMENT. Each Guarantor agrees that this Guaranty Agreement shall continue to be effective or be reinstated, as the case may be, at any time payment received by the Agent under the Credit Agreement or this Guaranty Agreement is rescinded or must be restored for any reason. 14. COUNTERPARTS. This Guaranty Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original as against any party whose signature appears thereon, and all of which shall constitute one and the same instrument. 15. RELIANCE. Each Guarantor represents and warrants to the Agent, for the benefit of the Agent and the Lenders, that: (a) such Guarantor has adequate means to obtain from Borrower, on a continuing basis, information concerning Borrower and Borrower's financial condition and affairs and has full and complete access to Borrower's books and records; (b) such Guarantor is not relying on the Agent or any Lender, its or their employees, agents or other representatives, to provide such information, now or in the future; (c) such Guarantor is executing this Guaranty Agreement freely and deliberately, and understands the obligations and financial risk undertaken by providing this Guaranty; (d) such Guarantor has relied solely 6 on the Guarantor's own independent investigation, appraisal and analysis of Borrower and Borrower's financial condition and affairs in deciding to provide this Guaranty and is fully aware of the same; and (e) such Guarantor has not depended or relied on the Agent or any Lender, its or their employees, agents or representatives, for any information whatsoever concerning Borrower or Borrower's financial condition and affairs or other matters material to such Guarantor's decision to provide this Guaranty or for any counselling, guidance, or special consideration or any promise therefor with respect to such decision. Each Guarantor agrees that neither the Agent nor any Lender has any duty or responsibility whatsoever, now or in the future, to provide to such Guarantor any information concerning Borrower or Borrower's financial condition and affairs, other than as expressly provided herein, and that, if such Guarantor receives any such information from the Agent or any Lender, its or their employees, agents or other representatives, such Guarantor will independently verify the information and will not rely on the Agent or any Lender, its or their employees, agents or other representatives, with respect to such information. 16. TERMINATION. This Guaranty Agreement and all obligations of the Guarantors hereunder shall terminate without delivery of any instrument or performance of any act by any party on the Facility Termination Date. 17. NOTICE. Any notice shall be conclusively deemed to have been received by any party hereto and be effective on the day on which delivered to such party (against receipt therefor) at the address set forth below or such other address as such party shall specify to the other parties in writing (or, in the case of telephonic notice or notice by telefacsimile (where the receipt of such message is verified by return) expressly provided for hereunder, when received at such telephone or telefacsimile number as may from time to time be specified in written notice to the other parties hereto or otherwise received), or if sent prepaid by certified or registered mail return receipt requested on the third Business Day after the day on which mailed, or if sent prepaid by a national overnight courier service, on the first Business Day after the day on which delivered to such service against receipt therefor, addressed to such party at said address: (a) if to the Borrower c/o Bolle Inc. or any Guarantor: 555 Theodore Fremd Avenue Rye, New York 10580 Attention: Mr. Ian G.H. Ashken Telephone: (914) 967-9400 Telefacsimile: (914) 967-9405 with a copy to: Kane Kessler, P.C. 1350 Avenue of the Americas New York, New York 10019 Attention: Robert L. Lawrence, Esq. Telephone: (212) 541-6222 Telefacsimile: (212) 245-3009 7 (b) if to the Agent: NationsBank, N.A. Independence Center, 15th Floor NC1-001-15-04 Charlotte, North Carolina 28255 Attention: Dana Weir, Agency Services Telephone: (704) 388-3917 Telefacsimile: (704) 386-9923 with a copy to: NationsBank, National Association Corporate Banking 767 Fifth Avenue, 5th Floor New York, New York 10153-0083 Attention: Ms. Susan Timmerman, Senior Vice President Telephone: (212) 407-5387 Telefacsimile: (212) 593-1083 or to such other address as each party may designate for itself by like notice given in accordance with this Section 17. 18. GOVERNING LAW. (A) THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS EXECUTED, AND TO BE FULLY PERFORMED, IN SUCH STATE. (B) EACH PARTY HEREBY EXPRESSLY AND IRREVOCABLY AGREES AND CONSENTS THAT ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT AND THE TRANSACTIONS CONTEMPLATED HEREIN MAY BE INSTITUTED IN ANY STATE OR FEDERAL COURT SITTING IN THE COUNTY OF NEW YORK, STATE OF NEW YORK, UNITED STATES OF AMERICA AND, BY THE EXECUTION AND DELIVERY OF THIS AGREEMENT, EXPRESSLY WAIVES ANY OBJECTION THAT IT MAY HAVE NOW OR HEREAFTER TO THE LAYING OF THE VENUE OR TO THE JURISDICTION OF ANY SUCH SUIT, ACTION OR PROCEEDING, AND IRREVOCABLY SUBMITS GENERALLY AND UNCONDITIONALLY TO THE JURISDICTION OF ANY SUCH COURT IN ANY SUCH SUIT, ACTION OR PROCEEDING. (C) EACH PARTY AGREES THAT SERVICE OF PROCESS MAY BE MADE BY PERSONAL SERVICE OF A COPY OF THE SUMMONS AND COMPLAINT OR OTHER LEGAL PROCESS IN ANY SUCH SUIT, ACTION OR PROCEEDING, OR BY REGISTERED OR CERTIFIED MAIL (POSTAGE PREPAID) AND IN ACCORDANCE WITH SECTION 17 HEREOF OR BY ANY 8 OTHER METHOD OF SERVICE PROVIDED FOR UNDER THE APPLICABLE LAWS IN EFFECT IN THE STATE OF NEW YORK. (D) NOTHING CONTAINED IN SUBSECTIONS (B) OR (C) HEREOF SHALL PRECLUDE ANY PARTY FROM BRINGING ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS IN THE COURTS OF ANY PLACE WHERE ANY OTHER PARTY OR ANY OF SUCH PARTY'S PROPERTY OR ASSETS MAY BE FOUND OR LOCATED. TO THE EXTENT PERMITTED BY THE APPLICABLE LAWS OF ANY SUCH JURISDICTION, EACH PARTY HEREBY IRREVOCABLY SUBMITS TO THE JURISDICTION OF ANY SUCH COURT AND EXPRESSLY WAIVES, IN RESPECT OF ANY SUCH SUIT, ACTION OR PROCEEDING, THE JURISDICTION OF ANY OTHER COURT OR COURTS WHICH NOW OR HEREAFTER, BY REASON OF ITS PRESENT OR FUTURE DOMICILE, OR OTHERWISE, MAY BE AVAILABLE TO IT. (E) IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS OR REMEDIES UNDER OR RELATED TO THIS AGREEMENT OR ANY AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED OR THAT MAY IN THE FUTURE BE DELIVERED IN CONNECTION WITH THE FOREGOING, EACH PARTY HEREBY AGREES, TO THE EXTENT PERMITTED BY APPLICABLE LAW, THAT ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY AND EACH PARTY HEREBY WAIVES, TO THE EXTENT PERMITTED BY APPLICABLE LAW, ANY OBJECTION THAT IT MAY HAVE THAT EACH ACTION OR PROCEEDING HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. [SIGNATURE PAGE FOLLOWS.] 9 IN WITNESS WHEREOF, the parties have duly executed this Second Amended and Restated Guaranty Agreement on the day and year first written above. GUARANTOR: BOLLE AMERICA, INC. By: /s/ Desiree DeStefano ------------------------------ Name: ----------------------------- Title: ---------------------------- ORC MANAGEMENT CORPORATION By: /s/ Desiree DeStefano ------------------------------ Name: ----------------------------- Title: ---------------------------- AGENT: NATIONSBANK, NATIONAL ASSOCIATION, as Agent for the Lenders By: /s/ Susan Timmerman ------------------------------ Name: ----------------------------- Title: ---------------------------- GUARANTY AGREEMENT Signature Page (b) SECOND AMENDED AND RESTATED STOCK PLEDGE AGREEMENT THIS SECOND AMENDED AND RESTATED STOCK PLEDGE AGREEMENT (this "Agreement") is made and entered into as of this 11th day of March, 1998 by and between BOLLE INC., a Delaware corporation (the "Borrower" or the "Pledgor"), and NATIONSBANK, NATIONAL ASSOCIATION, a national banking association, as Agent (the "Agent") for each of the lenders (the "Lenders" and collectively with the Agent, the "Secured Parties") now or hereafter party to the Credit Agreement (as defined below). All capitalized terms used but not otherwise defined herein shall have the respective meanings assigned thereto in the Credit Agreement. W I T N E S S E T H: WHEREAS, the Lenders, the Agent and BEC Group, Inc. ("BEC"), of which the Borrower was formerly a direct subsidiary are parties to that certain Amended and Restated Credit Agreement dated as of July 10, 1997 (the "Existing Credit Agreement"); and WHEREAS, pursuant to that certain Assignment Agreement and First Amendment to the Amended and Restated Credit Agreement, dated as of the date hereof and effective immediately prior to the effectiveness of this Agreement, between BEC, the Borrower, the Agent and the Lenders (the "Assignment and Amendment"), BEC assigned to the Borrower, and the Borrower assumed from BEC, among other liabilities, certain indebtedness owing by and obligations of BEC under the Existing Credit Agreement such that the Borrower became a co-borrower together with BEC under the Existing Credit Agreement; and WHEREAS, the Pledgor is a party to that certain Amended and Restated Stock Pledge Agreement dated as of July 10, 1997 with the Agent (as amended, supplemented or otherwise modified, the "Existing Stock Pledge Agreement"); and WHEREAS, the Pledgor, the Agent and the Lenders desire to amend and restate the Existing Stock Pledge Agreement in its entirety to reflect changes in the parties required to be parties thereto and certain changes in the Credit Agreement; and WHEREAS, the Pledgor desires to pledge, or continue its pledge, as applicable, to the Secured Parties to secure the payment and performance of the Borrower's Obligations under the Credit Agreement and the Guarantors' obligations under the Guaranty Agreement, as applicable, (a) all of its interest in all of the issued and outstanding shares of common stock of each of the Pledgor's Domestic Subsidiaries and 65% of the issued and outstanding shares of common stock of each of the Pledgor's Direct Foreign Subsidiaries (the "Subsidiary Pledged Stock") and (b) the shares of AAi Preferred Stock owend by it and the shares of capital stock of Eyecare Products plc owned by it (the "Other Pledged Stock" and collectively with the Subsidiary Pledged Stock, the "Pledged Stock"), including without limitation the Pledged Stock in such Subsidiaries and other entities more particularly described on Schedule I hereto (such Subsidiaries, together with all other Subsidiaries and other entities whose capital stock may be required to be subject to a Pledge Agreement from time to time, are hereinafter referred to collectively as the "Pledged Entities"); and Name: NB.BOLLE.STOCK.PLEDGE.AGREEMENT Doc No: 190344 (FINAL) WHEREAS, the Pledgor will materially benefit from the loans and advances made and to be made, and the letters of credit issued and to be issued, under the Credit Agreement; NOW, THEREFORE, in consideration of the premises and the mutual covenants contained herein, the parties hereto agree as follows: 1. PLEDGE OF STOCK; OTHER COLLATERAL. (a) As collateral security for the payment and performance of all debts, obligations or liabilities now or hereafter existing, absolute or contingent, each of the Guarantors under the Guaranty Agreement and of all of the Borrower's Obligations under the Credit Agreement (collectively, the "Secured Obligations"), and subject to Section 10 hereof, (i) the Pledgor hereby reaffirms, regrants and continues the pledge, collateral assignment and grant of security interest pursuant to the Existing Stock Pledge Agreement in the Pledged Stock heretofore pledged under the Existing Pledge Agreement, and (ii) the Pledgor hereby pledges and collaterally assigns to the Agent for the benefit of the Lenders, and grants to the Agent for the benefit of the Lenders pursuant to the New York Uniform Commercial Code (the "UCC") a first priority security interest in the Pledged Stock which was not heretofore pledged under the Existing Pledge Agreement and all of the following: (A) all cash, securities, dividends, rights, and other property at any time and from time to time declared or distributed in respect of or in exchange for any or all of the Pledged Stock, other than dividends permitted to be retained by the Pledgor under the Credit Agreement; and (B) all other property hereafter delivered to the Agent in substitution for or in addition to any of the foregoing, all certificates and instruments representing or evidencing such property and all cash, securities, interest, dividends, rights, and other property at any time and from time to time declared or distributed in respect of or in exchange for any or all of the Pledged Stock. All such Pledged Stock, certificates, instruments, cash, securities, interest, dividends, rights and other property referred to in this Section 1, other than dividends issued in respect of such Pledged Stock that are permitted to be retained by the Pledgor under the Credit Agreement, are herein collectively referred to as the "Collateral." All of the Pledged Stock is currently owned by the Pledgor and represented by the stock certificates listed on Schedule I hereto, which stock certificates, with stock powers duly executed in blank by the Pledgor, have been or are being delivered to the Agent simultaneously herewith. (b) The Pledgor agrees to deliver all the Collateral to the Agent at such location as the Agent shall from time to time designate by written notice pursuant to Section 19 hereof for its custody at all times until termination of this Agreement, together with such instruments of assignment and transfer as requested by the Agent. Name: NB.BOLLE.STOCK.PLEDGE.AGREEMENT Doc No: 190344 (FINAL) 2 (c) All advances, charges, costs and expenses, including reasonable attorneys' fees, incurred or paid by the Agent or any Lender in exercising any right, power or remedy conferred by this Agreement, or in the enforcement thereof, shall become a part of the Secured Obligations secured hereunder and shall be paid to the Agent for the benefit of the Lenders by the Pledgor immediately upon demand therefor, with interest thereon until paid in full at the Base Rate. 2. STATUS OF PLEDGED STOCK. The Pledgor hereby represents and warrants to the Agent for the benefit of the Lenders that (a) all of the shares of the Subsidiary Pledged Stock and, to the best knowledge of the Pledgor, all shares of the Other Pledged Stock are validly issued and outstanding, fully paid and nonassessable, (b) the shares of the Subsidiary Pledged Stock constitute all the issued and outstanding shares of common stock of each of the Pledged Entities which are Domestic Subsidiaries and 65% of the authorized, issued and outstanding shares of common stock of each of the Pledged Entities which are Direct Foreign Subsidiaries, (c) the shares of the Other Pledged Stock constitute all the shares of the stock of such Pledged Entities owned by the Pledgor, but in the case of Eyecare Products plc, not to exceed at any time 65% of the issued and outstanding common stock thereof, (d) the Pledgor is the registered and record and beneficial owner of its Pledged Stock, free and clear of all Liens, charges, equities, encumbrances and restrictions on pledge or transfer (other than the pledge hereunder and under the other Loan Documents, applicable restrictions pursuant to federal and state securities laws and any restrictions set forth in the Option Agreement), (e) it has full corporate power, legal right and lawful authority to execute this Agreement and to pledge, assign and transfer its Pledged Stock in the manner and form hereof, (f) the pledge, assignment and delivery of its Pledged Stock to the Agent for the benefit of the Lenders pursuant to this Agreement creates or continues, as applicable, a valid and perfected first priority security interest in such Pledged Stock, securing the payment of the Secured Obligations, assuming continuous and uninterrupted possession thereof by the Agent and (g) the Pledgor is not a party to and none of the Pledged Stock is subject to any voting agreement or other contract or arrangement affecting the voting right of the Pledgor with respect to the Pledged Shares other than the voting arrangements set forth in the Option Agreement. Except as otherwise expressly provided herein or in the Credit Agreement, none of the Pledged Stock (nor any interest therein or thereto) shall be sold, transferred or assigned without the Agent's prior written consent, which may be withheld for any reason. The Pledgor covenants with the Agent for the benefit of the Lenders that it shall at all times cause its Pledged Stock to be represented by the certificates now and hereafter delivered to the Agent in accordance with Section 1 hereof and that it shall cause each of its Subsidiaries not to issue any capital stock, or securities convertible into capital stock, at any time during the term of this Agreement other than to the Borrower or another Guarantor who shall immediately pledge such additional capital stock to the Agent on substantially identical terms as are contained herein. 3. PRESERVATION AND PROTECTION OF COLLATERAL. (a) The Agent shall be under no duty or liability with respect to the collection, protection or preservation of the Collateral, or otherwise, beyond the use of reasonable care in the custody and preservation thereof while in its possession. (b) The Pledgor agrees to pay when due all taxes, charges, Liens and assessments against the Collateral, unless being contested in good faith by appropriate proceedings diligently conducted Name: NB.BOLLE.STOCK.PLEDGE.AGREEMENT Doc No: 190344 (FINAL) 3 and against which adequate reserves have been established in accordance with GAAP applied on a Consistent Basis. Upon the failure of the Pledgor to so pay or contest such taxes, charges, Liens or assessments, the Agent at its option may pay or contest any of them (the Agent having the sole right to determine the legality or validity and the amount necessary to discharge such taxes, charges, Liens or assessments). 4. DEFAULT. Should the Pledgor fail to pay the Agent all Secured Obligations as of the end of the Business Day on which such Secured Obligations become due and payable and after the expiration of all grace or cure periods, if any, and all extensions or waivers, if any, and should such failure continue, or should any other Event of Default set forth in the Credit Agreement occur and be continuing, or should the Pledgor fail otherwise to comply with the terms hereof (any of the foregoing an "Event of Default"), the Agent is given full power and authority, then or at any time thereafter, to sell, assign and deliver or collect the whole or any part of the Collateral, or any substitute therefor or any addition thereto, in one or more sales, with or without any previous demands or demand of performance or, to the extent permitted by law, notice or advertisement, in such order as the Agent may elect; and any such sale may be made either at public or private sale at the Agent's place of business or elsewhere, either for cash or upon credit or for future delivery, at such price as the Agent may reasonably deem fair; and the Agent may be the purchaser of any or all Collateral so sold and hold the same thereafter in its own right free from any claim of the Pledgor or right of redemption. Demands of performance, advertisements and presence of property and sale and notice of sale are hereby waived to the extent permissible by law; provided, however, that the Agent shall give to the Pledgor five days' notice prior to any sale permitted under this Agreement, and the Pledgor agrees that such notice shall constitute commercially reasonable notice. Any sale hereunder may be conducted by an auctioneer or any officer or agent of the Agent. The Pledgor recognizes that the Agent may be unable to effect a public sale of the Collateral by reason of certain prohibitions contained in the Securities Act of 1933, as amended (the "Securities Act"), and applicable state law, and may be otherwise delayed or adversely affected in effecting any sale by reason of present or future restrictions thereon imposed by governmental authorities, and that as a consequence of such prohibitions and restrictions the Agent may be compelled (i) to resort to one or more private sales to a restricted group of purchasers who will be obliged to agree, among other things, to acquire the stock for their own account, for investment and not with a view to the distribution or resale thereof, or (ii) to seek regulatory approval of any proposed sale or sales, or (iii) to limit the amount of Collateral sold to any Person or group. The Pledgor agrees and acknowledges that private sales so made may be at prices and upon terms less favorable to the Pledgor than if such Collateral was sold either at public sales or at private sales not subject to other regulatory restrictions, and that the Agent has no obligation to delay the sale of any of the Collateral for the period of time necessary to permit the issuer of such Collateral to register or otherwise qualify them, even if such issuer would agree to register or otherwise qualify such Collateral for public sale under the Securities Act or applicable state law. The Pledgor further agrees, to the extent permitted by applicable law, that the use of private sales made under the foregoing circumstances to dispose of the Collateral shall be deemed to be dispositions in a commercially reasonable manner. The Pledgor hereby acknowledges that a ready market may not exist for the Pledged Stock if they are not traded on a national securities exchange or quoted on an automated quotation system and agrees and acknowledges that in such event the Pledged Stock may be sold for an amount less than a pro rata share of the fair market value of the issuer's assets minus its liabilities. In addition to the foregoing, the Secured Parties may exercise such Name: NB.BOLLE.STOCK.PLEDGE.AGREEMENT Doc No: 190344 (FINAL) 4 other rights and remedies as may be available under the Loan Documents, at law (including without limitation the UCC) or in equity. 5. PROCEEDS OF SALE. The proceeds of the sale of any of the Collateral and all sums received or collected from or on account of such Collateral shall be applied to the payment of expenses incurred or paid by the Agent in connection with any sale, transfer or delivery of the Collateral, to the payment of any other costs, charges, reasonable attorneys' fees or expenses mentioned herein, and to the payment of the Secured Obligations or any part thereof, all in such order and manner as the Agent may determine and as permitted by applicable law and regulation. The Agent shall, upon satisfaction in full of all such Secured Obligations, pay any balance to the Pledgor. 6. PRESENTMENTS, ETC. The Agent shall not be under any duty or obligation whatsoever to make or give any presentments, demands for performances, notices of nonperformance, protests, notice of protest or notice of dishonor in connection with any obligations or evidences of indebtedness held thereby as collateral, or in connection with any obligations or evidences of indebtedness which constitute in whole or in part the Secured Obligations secured hereunder. 7. ATTORNEY-IN-FACT. The Pledgor hereby appoints the Agent as its attorney-in-fact for the purposes of carrying out the provisions of this Agreement and taking any action and executing any instrument which the Agent may deem necessary or advisable to accomplish the purposes hereof, which appointment is irrevocable and coupled with an interest; provided, that the Agent shall have and may exercise rights under this power of attorney only upon the occurrence and during the continuance of a Default or an Event of Default. Without limiting the generality of the foregoing, upon the occurrence and during the continuance of a Default or an Event of Default, the Agent shall have the right and power to receive, endorse and collect all checks and other orders for the payment of money made payable to the Pledgor representing any dividend, interest payment, principal payment or other distribution payable or distributable in respect to the Collateral or any part thereof and to give full discharge for the same. 8. ABSOLUTE RIGHTS AND OBLIGATIONS. All rights of the Secured Parties, and all obligations of the Pledgor hereunder, shall be absolute and unconditional irrespective of: (a) any lack of validity or enforceability of the Credit Agreement, the Guaranty, any other Loan Document or any other agreement or instrument relating to any of the Secured Obligations; (b) any change in the time, manner or place of payment of, or in any other term of, all or any of the Obligations, or any other amendment or waiver of or any consent to any departure from the Credit Agreement, the Guaranty, any other Loan Document or any other agreement or instrument relating to any of the Secured Obligations; (c) any exchange, release or non-perfection of any other collateral, or any release or amendment or waiver of or consent to departure from the Guaranty, any guaranty, for all or any of the Secured Obligations; or Name: NB.BOLLE.STOCK.PLEDGE.AGREEMENT Doc No: 190344 (FINAL) 5 (d) any other circumstances which might otherwise constitute a defense available to, or a discharge of, the Pledgor in respect of the Secured Obligations or of this Agreement. 9. WAIVER BY THE PLEDGOR. The Pledgor waives (to the extent permitted by applicable law) any right to require any Secured Party or any other obligee of the Secured Obligations to (a) proceed against the Borrower, any Guarantor or any other Person or entity, (b) proceed against or exhaust any Collateral as defined in the Credit Agreement, or (c) pursue any other remedy in its power; and waives (to the extent permitted by applicable law) any defense arising by reason of any disability or other defense of the Borrower, any Guarantor or any other Person, or by reason of the cessation from any cause whatsoever of the liability of the Borrower, any Guarantor or any other Person or entity. Until the Facility Termination Date, the Pledgor shall not have the right of subrogation, and the Pledgor waives any right to enforce any remedy which any Secured Party or any other obligee of the Secured Obligations now has or may hereafter have against any other Person and waives (to the extent permitted by applicable law) any benefit of and any right to participate in any collateral or security whatsoever now or hereafter held by the Agent for the benefit of the Lenders. The Pledgor authorizes any Secured Party and any other obligee of the Secured Obligations without notice (except notice required by applicable law) or demand and without affecting its liability hereunder or under the Loan Documents from time to time to: (i) take and hold security, other than the Collateral herein described, for the payment of such Secured Obligations or any part thereof, and exchange, enforce, waive and release the Collateral herein described or any part thereof or any such other security; and (ii) apply such Collateral or other security and direct the order or manner of sale thereof as such Secured Party or obligee in its discretion may determine. The Agent may at any time deliver (without representation, recourse or warranty) the Collateral or any part thereof to the Pledgor and the receipt thereof by the Pledgor shall be a complete and full acquittance for the Collateral so delivered, and the Secured Parties shall thereafter be discharged from any liability or responsibility therefor. 10. DIVIDENDS AND VOTING RIGHTS. (a) All dividends and other distributions with respect to any of the Pledged Stock shall be subject to the pledge hereunder except for dividends permitted to be retained by the Pledgor under the Credit Agreement. So long as no Default or Event of Default shall have occurred and be continuing, any such dividends may be retained by the Pledgor free from any Liens hereunder. Following the occurrence and during the continuance of any Default or Event of Default, all dividends shall be promptly delivered to the Agent (together, if the Agent shall request, with stock powers or instruments of assignment duly executed in blank affixed to any capital stock or other negotiable document or instrument so distributed) to be held, released or disposed of by it hereunder or, at the option of the Agent, to be applied to the Secured Obligations hereby secured as they become due. (b) So long as no Default or Event of Default shall have occurred and be continuing, the registration of the Collateral in the name of the Pledgor shall not be changed and the Pledgor shall be entitled to exercise all voting and other rights and powers pertaining to the Collateral for all purposes not inconsistent with the terms hereof. Name: NB.BOLLE.STOCK.PLEDGE.AGREEMENT Doc No: 190344 (FINAL) 6 (c) Upon the occurrence and during the continuance of any Default or Event of Default, at the option of the Agent, all rights of the Pledgor to receive and retain dividends upon the Collateral shall cease and shall thereupon be vested in the Agent for the benefit of the Lenders. (d) Upon the occurrence and during the continuance of any Default or Event of Default, at the option of the Agent, all rights of the Pledgor to exercise the voting or consensual rights and powers which it is authorized to exercise pursuant to subsection (b) above shall cease and the Agent may thereupon (but shall not be obligated to), at its request, cause such Collateral to be registered in the name of the Agent or its nominee or agent for the benefit of the Lenders and exercise such voting or consensual rights and powers as appertain to ownership of such Collateral, and to that end the Pledgor hereby appoints the Agent as its proxy, with full power of substitution, to vote and exercise all other rights as a shareholder with respect to such Pledged Stock hereunder upon the occurrence and during the continuance of any Default or Event of Default, which proxy is coupled with an interest and is irrevocable prior to termination of this Agreement, and the Pledgor hereby agrees to provide such further proxies as the Agent may request; provided, however, that the Agent in its discretion may from time to time refrain from exercising, and shall not be obligated to exercise, any such voting or consensual rights or such proxy. 11. POWER OF SALE. Until the Facility Termination Date, the power of sale and other rights, powers and remedies granted to the Agent for the benefit of the Lenders hereunder shall continue to exist and may be exercised by the Agent at any time and from time to time, upon the occurrence and during the continuance of an Event of Default, irrespective of the fact that any Secured Obligations or any part thereof may have become barred by any statute of limitations or that the liability of the Pledgor may have ceased. 12. OTHER RIGHTS. The rights, powers and remedies given to the Agent for the benefit of the Lenders by this Agreement shall be in addition to all rights, powers and remedies given to any Secured Party by virtue of any statute or rule of law. Any forbearance or failure or delay by the Agent in exercising any right, power or remedy hereunder shall not be deemed to be a waiver of such right, power or remedy, and any single or partial exercise of any right, power or remedy hereunder shall not preclude the further exercise thereof; and every right, power and remedy of the Secured Parties shall continue in full force and effect until such right, power or remedy is specifically waived by the Required Lenders by an instrument in writing. 13. FURTHER ASSURANCES. The Pledgor agrees at its own expense to do such further acts and things, and to execute and deliver such additional conveyances, assignments, financing statements, agreements and instruments, as the Agent may at any time reasonably request in connection with the administration or enforcement of this Agreement or related to the Collateral or any part thereof or in order better to assure and confirm unto the Agent its rights, powers and remedies for the benefit of the Lenders hereunder. The Pledgor hereby consents and agrees that the issuers of or obligors in respect of the Collateral shall be entitled to accept the provisions hereof as conclusive evidence of the right of the Agent, on behalf of the Lenders, to exercise its rights hereunder with respect to the Collateral, notwithstanding any other notice or direction to the contrary heretofore or hereafter given by the Pledgor or any other Person to any of such issuers or obligors. Name: NB.BOLLE.STOCK.PLEDGE.AGREEMENT Doc No: 190344 (FINAL) 7 14. BINDING AGREEMENT; ASSIGNMENT. This Agreement, and the terms, covenants and conditions hereof, shall be binding upon and inure to the benefit of the parties hereto, and to their respective successors and assigns, except that the Pledgor shall not be permitted to assign this Agreement or any interest herein or in the Collateral, or any part thereof, or otherwise pledge, encumber or grant any option with respect to the Collateral, or any part thereof, or any cash or property held by the Agent as Collateral under this Agreement. All references herein to the Agent shall include any successor thereof, each Lender and any other obligees from time to time of the Obligations. 15. SWAP AGREEMENTS. All Hedging Obligations of the Pledgor shall be deemed to be Secured Obligations secured hereby, and each Lender or affiliate of a Lender party to any Swap Agreement shall be deemed to be a Secured Party hereunder. 16. SEVERABILITY. In case any Lien, security interest or other right of any Secured Party or any provision hereof shall be held to be invalid, illegal or unenforceable, such invalidity, illegality or unenforceability shall not affect any other Lien, security interest or other right granted hereby or provision hereof. 17. COUNTERPARTS. This Agreement may be executed in any number of counterparts and all the counterparts taken together shall be deemed to constitute one and the same instrument. 18. TERMINATION. This Agreement and all obligations of the Pledgor hereunder shall terminate without delivery of any instrument or performance of any act by any party on the Facility Termination Date. Upon such termination of this Agreement, the Agent shall, at the sole expense of the Pledgor, deliver to the Pledgor the certificates evidencing their respective shares of Pledged Stock (and any other property received as a dividend or distribution or otherwise in respect of such Pledged Stock), together with any cash then constituting the Collateral, not then sold or otherwise disposed of in accordance with the provisions hereof and take such further actions as may be necessary to effect the same. 19. INDEMNIFICATION. The Pledgor hereby covenants and agrees to pay, indemnify, and hold the Agent and each Lender harmless from and against any and all other out-of-pocket liabilities, costs, expenses or disbursements of any kind or nature whatsoever arising in connection with any claim or litigation by any Person resulting from the execution, delivery, enforcement, performance and administration of this Agreement or the Loan Documents, or the transactions contemplated hereby or thereby, or in any respect relating to the Collateral or any transaction pursuant to which the Pledgor has incurred any Secured Obligation (all the foregoing, collectively, the "Indemnified Liabilities"); provided, however, that the Pledgor shall have no obligation hereunder with respect to Indemnified Liabilities arising from the willful misconduct or gross negligence of the Agent or any Lender. The agreements in this subsection shall survive repayment of all Secured Obligations, termination or expiration of this Agreement and occurrence of the Facility Termination Date. 20. NOTICES. Any notice shall be conclusively deemed to have been received by any party hereto and be effective on the day on which delivered to such party (against receipt therefor) at the address set forth below or such other address as such party shall specify to the other parties in writing Name: NB.BOLLE.STOCK.PLEDGE.AGREEMENT Doc No: 190344 (FINAL) 8 (or, in the case of telephonic notice or notice by telefacsimile (where the receipt of such message is verified by return) expressly provided for hereunder, when received at such telephone or telefacsimile number as may from time to time be specified in written notice to the other parties hereto or otherwise received), or if sent prepaid by certified or registered mail return receipt requested on the third Business Day after the day on which mailed, or if sent prepaid by a national overnight courier service, on the first Business Day after the day on which delivered to such service against receipt therefor, addressed to such party at said address: (a) if to the Pledgor: c/o Bolle Inc. 555 Theodore Fremd Avenue Rye, New York 10580 Attention: Mr. Ian G.H. Ashken Telephone: (914) 967-9400 Telefacsimile: (914) 967-9405 with a copy to: Kane Kessler, P.C. 1350 Avenue of the Americas New York, New York 10019 Attention: Robert L. Lawrence, Esq. Telephone: (212) 541-6222 Telefacsimile: (212) 245-3009 (b) if to the Agent: NationsBank, N.A. Independence Center, 15th Floor NC1-001-15-04 Charlotte, North Carolina 28255 Attention: Dana Weir, Agency Services Telephone: (704) 388-3917 Telefacsimile: (704) 386-9923 with a copy to: NationsBank, N.A. Corporate Banking 767 Fifth Avenue, 5th Floor New York, New York 10153-0083 Attention: Ms. Susan Timmerman, Senior Vice President Telephone: (212) 407-5387 Telefacsimile: (212) 593-1083 Name: NB.BOLLE.STOCK.PLEDGE.AGREEMENT Doc No: 190344 (FINAL) 9 21. GOVERNING LAW; WAIVERS. (A) THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS EXECUTED, AND TO BE FULLY PERFORMED, IN SUCH STATE. (B) EACH PARTY HEREBY EXPRESSLY AND IRREVOCABLY AGREES AND CONSENTS THAT ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT AND THE TRANSACTIONS CONTEMPLATED HEREIN MAY BE INSTITUTED IN ANY STATE OR FEDERAL COURT SITTING IN THE COUNTY OF NEW YORK, STATE OF NEW YORK, UNITED STATES OF AMERICA AND, BY THE EXECUTION AND DELIVERY OF THIS AGREEMENT, EXPRESSLY WAIVES ANY OBJECTION THAT IT MAY HAVE NOW OR HEREAFTER TO THE LAYING OF THE VENUE OR TO THE JURISDICTION OF ANY SUCH SUIT, ACTION OR PROCEEDING, AND IRREVOCABLY SUBMITS GENERALLY AND UNCONDITIONALLY TO THE JURISDICTION OF ANY SUCH COURT IN ANY SUCH SUIT, ACTION OR PROCEEDING. (C) EACH PARTY AGREES THAT SERVICE OF PROCESS MAY BE MADE BY PERSONAL SERVICE OF A COPY OF THE SUMMONS AND COMPLAINT OR OTHER LEGAL PROCESS IN ANY SUCH SUIT, ACTION OR PROCEEDING, OR BY REGISTERED OR CERTIFIED MAIL (POSTAGE PREPAID) TO THE ADDRESS OF SUCH PARTY PROVIDED IN SECTION 15.1 OF THE CREDIT AGREEMENT OR BY ANY OTHER METHOD OF SERVICE PROVIDED FOR UNDER THE APPLICABLE LAWS IN EFFECT IN THE STATE OF NEW YORK. (D) NOTHING CONTAINED IN SUBSECTIONS (B) OR (C) HEREOF SHALL PRECLUDE ANY PARTY FROM BRINGING ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS IN THE COURTS OF ANY PLACE WHERE ANY OTHER PARTY OR ANY OF SUCH PARTY'S PROPERTY OR ASSETS MAY BE FOUND OR LOCATED. TO THE EXTENT PERMITTED BY THE APPLICABLE LAWS OF ANY SUCH JURISDICTION, EACH PARTY HEREBY IRREVOCABLY SUBMITS TO THE JURISDICTION OF ANY SUCH COURT AND EXPRESSLY WAIVES, IN RESPECT OF ANY SUCH SUIT, ACTION OR PROCEEDING, THE JURISDICTION OF ANY OTHER COURT OR COURTS WHICH NOW OR HEREAFTER, BY REASON OF ITS PRESENT OR FUTURE DOMICILE, OR OTHERWISE, MAY BE AVAILABLE TO IT. (E) IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS OR REMEDIES UNDER OR RELATED TO THIS AGREEMENT OR ANY AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT Name: NB.BOLLE.STOCK.PLEDGE.AGREEMENT Doc No: 190344 (FINAL) 10 DELIVERED OR THAT MAY IN THE FUTURE BE DELIVERED IN CONNECTION WITH THE FOREGOING, EACH PARTY HEREBY AGREES, TO THE EXTENT PERMITTED BY APPLICABLE LAW, THAT ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY AND EACH PARTY HEREBY WAIVES, TO THE EXTENT PERMITTED BY APPLICABLE LAW, ANY OBJECTION THAT IT MAY HAVE THAT EACH ACTION OR PROCEEDING HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. [SIGNATURE PAGE FOLLOWS.] Name: NB.BOLLE.STOCK.PLEDGE.AGREEMENT Doc No: 190344 (FINAL) 11 IN WITNESS WHEREOF, the parties have duly executed this Second Amended and Restated Stock Pledge Agreement on the day and year first written above. PLEDGOR: BOLLE INC. By: /s/ Desiree DeStefano Name: Title: AGENT: NATIONSBANK, NATIONAL ASSOCIATION, as Agent for the Secured Parties By: /s/ Susan Timmerman Name: Title: SECOND AMENDED AND RESTATED STOCK PLEDGE AGREEMENT SIGNATURE PAGE 1 OF 1 SCHEDULE I
No. of Shares No. of Shares Name of Subsidiary Name of Pledgor Class of Stock Authorized Issued - ------------------ --------------- -------------- ---------- ------ Bolle America, Inc. Borrower Common Stock 1,500 100 ORC Management Borrower Common Stock 1,500 1,000 Corporation Tavister Limited Borrower Ordinary 200,000 100 Eyecare Products plc Borrower Ordinary ________ ________ Foster Grant Borrower Series A ________ ________ Holdings, Inc. Redeemable Non-Voting Preferred Bolle (Canada) Inc. Borrower Common unlimited 10,000 No. of Shares No. of Certificate Nos. Name of Subsidiary Outstanding Shares Pledged for Pledged Shares - ------------------ ----------- ----------------- ------------------ Bolle America, Inc. 100 100 3 ORC Management 1,000 1,000 [2] Corporation Tavister Limited 100 65 2 Eyecare Products plc _________ 20,696,113 [D02696, L04100, L04101 abd L04102] Foster Grant _________ 100 ___________ Holdings, Inc. Bolle (Canada) Inc. 10,000 10,000 3 and 4
(c) LC ACCOUNT AGREEMENT THIS LC ACCOUNT AGREEMENT (the "Agreement") dated as of this 11th day of March, 1998, and made between BOLLE INC., a Delaware corporation (the "Borrower" or the "Pledgor"), and NATIONSBANK, NATIONAL ASSOCIATION, a national banking association, as Agent (in such capacity herein and together with any successors in such capacity, the "Agent") for each of the lenders (the "Lenders" and together with the Agent, the "Secured Parties") now or hereafter party to the Credit Agreement (as defined below). W I T N E S S E T H: WHEREAS, the Lenders, the Agent and BEC Group, Inc. ("BEC"), of which the Borrower was formerly a direct subsidiary are parties to that certain Credit Agreement dated as of July 10, 1997, (the "Existing Credit Agreement"); and WHEREAS, pursuant to that certain Assignment Agreement and First Amendment to the Amended and Restated Credit Agreement, dated as of the date hereof and effective immediately prior to the effectiveness of this Agreement, between BEC, the Borrower, the Agent and the Lenders (the "Assignment and Amendment"), BEC assigned to the Borrower, and the Borrower assumed from BEC, among other liabilities, certain indebtedness owing by and obligations of BEC under the Existing Credit Agreement such that the Borrower became a co-borrower together with BEC under the Existing Credit Agreement; and WHEREAS, the Pledgor, the Lenders, and the Agent have entered into that certain Second Amended and Restated Credit Agreement dated as of the date hereof among the Pledgor, the Agent and the Lenders (as from time to time amended, supplemented or restated, the "Credit Agreement") pursuant to which the Lenders have agreed to make certain credit facilities available to the Borrower and to issue certain Letters of Credit; and WHEREAS, as a condition precedent to the Lenders' obligations to make the Loans or to issue Letters of Credit, the Pledgor is required to execute and deliver to the Agent a copy of this Agreement on or before the Closing Date; NOW, THEREFORE, in consideration of the foregoing and the agreements, provisions and covenants contained herein, the Pledgor and the Agent hereby agree as follows: 1. DEFINITIONS. The following capitalized terms used in this Agreement shall have the following meanings notwithstanding any definition thereof in the Credit Agreement. Other capitalized terms used but not defined herein shall have the meanings therefor set forth in the Credit Agreement. "Collateral" means (a) all funds from time to time on deposit in the LC Account; (b) all Investments and all certificates and instruments from time to time representing or evidencing such Investments; (c) all notes, certificates of deposit, checks and other instruments from time to time hereafter delivered to or otherwise possessed by the Agent for or on behalf of the Pledgor in Name: NB BOLLE LC ACCOUNT AGREEMENT Doc No: 190346 (FINAL) substitution for or in addition to any or all of the Collateral described in clause (a) or (b) above; (d) all interest, dividends, cash, instruments and other property from time to time received, receivable or otherwise distributed in respect of or in exchange for any or all of the Collateral described in clause (a), (b) or (c) above; and (e) to the extent not covered by clauses (a) through (d) above, all proceeds of any or all of the foregoing Collateral. "Investments" means those investments, if any, made by the Agent pursuant to Section 5 hereof. "LC Account" means the cash collateral account established and maintained pursuant to Section 2 hereof. "Secured Obligations" means (i) all Obligations of the Pledgor now existing or hereafter arising under or in respect of the Credit Agreement or the Notes (including, without limitation, the Pledgor's obligation to pay principal and interest and all other charges, fees, expenses, commissions, reimbursements, indemnities and other payments related to or in respect of the obligations contained in the Credit Agreement or the Notes) or any documents or agreement related to the Credit Agreement or the Notes; and (ii) without duplication, all obligations of the Pledgor now or hereafter existing under or in respect of this Agreement, including, without limitation, with respect to all charges, fees, expenses, commissions, reimbursements, indemnities and other payments related to or in respect of the obligations contained in this Agreement. 2. LC ACCOUNT; CASH COLLATERALIZATION OF LETTERS OF CREDIT. (i) At any time, in the Agent's sole discretion, the Agent shall establish and maintain at its offices at 101 North Tryon Street, Charlotte, North Carolina, in its name and under its sole dominion and control, a cash collateral account designated as Bolle Inc. Cash LC Account (the "LC Account"). (ii) In the event that the Pledgor delivers to the Agent an amount equal to the maximum amount remaining undrawn or unpaid under any Letters of Credit either (A) as required pursuant to Article XII of the Credit Agreement or (B) as otherwise agreed by the parties hereto to provide cash collateral for the undrawn amount of any Letter of Credit, the Agent shall deposit such amount into the LC Account to be held pursuant to the terms of this Agreement. Upon a drawing under the Letters of Credit in respect of which any amounts described above have been deposited in the LC Account, the Agent shall apply such amounts to reimburse NationsBank for the amount of such drawing. In the event the Letters of Credit are canceled or expire or in the event of any reduction in the maximum amount available at any time for drawing under such Letters of Credit (the "Maximum Available Amount"), the Agent shall apply the amount then in the LC Account less the Maximum Available Amount immediately after such cancellation, expiration or reduction, if any, first, to the cash collateralization of the Letters of Credit if the Pledgor has failed to pay all or a portion of the maximum amounts described in the first sentence of this clause (ii) above, second, to the Name: NB BOLLE LC ACCOUNT AGREEMENT Doc No: 190346 (FINAL) 2 payment in full of the outstanding Secured Obligations and third, the balance, if any, to the Pledgor or as otherwise required by law. (iii) Interest and other income received in respect of Investments of any amounts deposited in the LC Account pursuant to clause (ii) of this Section 2 shall be held by the Agent as additional Collateral hereunder. 3. PLEDGE; SECURITY FOR SECURED OBLIGATIONS. The Pledgor hereby grants and pledges to the Agent, for itself and on behalf of the Secured Parties, a first priority lien and security interest in the Collateral now existing or hereafter arising or acquired, as collateral security for the prompt payment in full when due, whether at stated maturity, by acceleration or otherwise (including, without limitation, the payment of interest and other amounts which would accrue and become due but for the filing of a petition in bankruptcy or the operation of the automatic stay under Section 362(a) of the Bankruptcy Code), of all Secured Obligations. 4. DELIVERY OF COLLATERAL. The Collateral shall be delivered to the Agent, for the benefit of the Lenders, in the form of immediately available funds. 5. INVESTING OF AMOUNTS IN THE LC ACCOUNT; AMOUNTS HELD BY THE AGENT. Cash held by the Agent in the LC Account shall not be invested or reinvested except as provided in this Section 5. (i) Subject to the remedies and other rights provided in Section 11 hereof and provided that the lien and security interest in favor of the Agent and Secured Parties remains perfected and so long as no Event of Default shall have occurred and be continuing, any funds on deposit in the LC Account shall be invested by the Agent in cash equivalents. (ii) The Agent shall have no responsibility and the Pledgor hereby agrees to hold the Agent and the Lenders harmless for any loss in the value of the Collateral resulting from a fluctuation in interest rates or otherwise. Any interest on Investments permitted hereunder and the net proceeds of the sale or payment of any such Investments shall constitute part of the Collateral and be held in the LC Account by the Agent. 6. REPRESENTATIONS AND WARRANTIES. In addition to its representations and warranties made pursuant to Article VIII of the Credit Agreement, the Pledgor represents and warrants to the Agent (for itself and as agent on behalf of the Lenders), that the following statements are true, correct and complete: (i) The Pledgor will be the legal and beneficial owner of the Collateral free and clear of any Lien except for the lien and security interest created by this Agreement and the other Loan Documents and Permitted Liens in favor of Government Authorities; Name: NB BOLLE LC ACCOUNT AGREEMENT Doc No: 190346 (FINAL) 3 (ii) The pledge and assignment of the Collateral pursuant to this Agreement creates a valid and perfected first priority security interest in the Collateral, securing the payment of the Secured Obligations. 7. FURTHER ASSURANCES. The Pledgor agrees that at any time and from time to time, at the Pledgor's expense, the Pledgor will promptly execute and deliver to the Agent any further instruments and documents, and take any further actions, that may be necessary or that the Agent may reasonably request in order to perfect and protect any security interest granted or purported to be granted hereby or to enable the Agent to exercise and enforce its rights and remedies hereunder with respect to any Collateral. 8. TRANSFERS AND OTHER LIENS. The Pledgor agrees that it will not (a) sell or otherwise dispose of any of the Collateral, or (b) create or permit to exist any Lien upon or with respect to any of the Collateral, except for the Lien and security interest created by this Agreement and the other Loan Documents and Permitted Liens in favor of Government Authorities. 9. THE AGENT APPOINTED ATTORNEY-IN FACT. Upon the occurrence and during the continuation of an Event of Default, the Pledgor hereby appoints the Agent as its attorney-in-fact, with full authority in the place and stead of the Pledgor and in the name of the Pledgor or otherwise, from time to time in the Agent's reasonable discretion to take any action and to execute any instrument which the Agent may reasonably deem necessary or advisable to accomplish the purposes of the Agreement, including, without limitation, to receive, endorse and collect all instruments made payable to the Pledgor or either of them representing any payment, dividend, or other distribution in respect of the Collateral or any part thereof and to give full discharge for the same. In performing its functions and duties under this Agreement, the Agent shall act solely for the Secured Parties and the Agent has not assumed nor shall be deemed to have assumed any obligation towards or relationship of agency or trust with or for the Pledgor. 10. THE AGENT MAY PERFORM. If Pledgor fails to perform any agreement contained herein, after notice to Pledgor, the Agent may itself perform, or cause performance of, such agreement, and the expenses of the Agent incurred in connection therewith shall be payable by Pledgor under Section 13 hereof. 11. STANDARD OF CARE; NO RESPONSIBILITY FOR CERTAIN MATTERS. In dealing with the Collateral in its possession, the Agent shall exercise the same care which it would exercise in dealing with similar collateral property pledged by others in transactions of a similar nature, but it shall not be responsible for (a) ascertaining or taking action with respect to calls, conversions, exchanges, maturities, tenders or other matters relative to any Collateral, whether or not the Agent has or is deemed to have knowledge of such matters, (b) taking any steps to preserve rights against any parties with respect to any Collateral (other than steps taken in accordance with the standard of care set forth above to maintain possession of the Collateral), (c) the collection of any proceeds, (d) any loss resulting from Investments made pursuant to Section 4 hereof, or (e) determining (x) the correctness of any statement or calculation made by the Pledgor in any written instructions, or (y) whether any deposit in the LC Account is proper. Name: NB BOLLE LC ACCOUNT AGREEMENT Doc No: 190346 (FINAL) 4 12. REMEDIES UPON DEFAULT; APPLICATION OF PROCEEDS. If the Borrower shall fail to perform any action required hereunder or shall otherwise breach any term or provision hereof (a "Default" hereunder) which Default shall not have been waived in accordance with Section 15.5 of the Credit Agreement: (i) The Agent may and shall at the request of the Required Lenders exercise in respect of the Collateral, in addition to other rights and remedies provided for herein otherwise available to it, all the rights and remedies of a secured party on default under the Uniform Commercial Code (the "Code") as in effect in the state in which the Collateral is located at that time, and the Agent may, without notice except as specified below, sell the Collateral or any part thereof in one or more parcels at public or private sale, at any exchange or broker's board or at any of the Agent's offices or elsewhere, for cash, on credit or for future delivery, and at such price or prices, and upon such other terms as the Agent may deem commercially reasonable. Pledgor agrees that, to the extent notice of sale shall be required by law, at least ten (10) days' notice to Pledgor of the time and place of any public sale or the time after which any private sale is to be made shall constitute reasonable notification. The Agent shall not be obligated to make any sale of the Collateral regardless of notice of sale having been given. The Agent may adjourn any public or private sale from time to time by announcement at the time and place fixed therefor, and such sale may, without further notice, be made at the time and place to which it was so adjourned. (ii) In addition to the remedies set forth in part (i) above and subject to the provisions of Section 2(ii) hereof, any cash held by the Agent as Collateral and all cash proceeds received by the Agent in respect of any sale of, collection from, or other realization upon all or part of the Collateral shall be applied (after payment of any amounts payable to the Agent pursuant to Section 12 hereof) by the Agent to pay the Secured Obligations pursuant to Article XII of the Credit Agreement. 13. EXPENSES. In addition to any payments of expenses of the Agent pursuant to the Credit Agreement or the other Loan Documents, the Pledgor agrees to pay promptly to the Agent all the costs and expenses, including reasonable attorneys fees and expenses, which the Agent may incur in connection with (a) the custody or preservation of, or the sale of, collection from, or other realization upon, any of the Collateral, (b) the exercise or enforcement of any of the rights of the Agent hereunder, or (c) the failure by the Pledgor to perform or observe any of the provisions hereof. 14. NO DELAYS; WAIVER, ETC. No delay or failure on the part of the Agent in exercising, and no course of dealing with respect to, any power or right hereunder shall operate as a waiver thereof; nor shall any single or partial exercise by the Agent of any power or right hereunder preclude other or further exercise thereof or the exercise of any other power or right. The remedies herein provided are to the fullest extent permitted by law cumulative and are not exclusive of any remedies provided by law. Name: NB BOLLE LC ACCOUNT AGREEMENT Doc No: 190346 (FINAL) 5 15. AMENDMENTS, ETC. No amendment, modification, termination or waiver of any provision of this Agreement, or consent to any departure by the Pledgor therefrom, shall in any event be effective without the written concurrence of the Agent. 16. NOTICES. Except as otherwise specifically provided herein, all notices which are to be sent to the Pledgor or Agent shall be given in accordance with the Credit Agreement. 17. CONTINUING SECURITY INTEREST; TERMINATION. This Agreement shall create a continuing security interest in the Collateral and shall (a) remain in full force and effect until all Secured Obligations (other than Secured Obligations in the nature of continuing indemnities or expense reimbursement obligations not yet due and payable) shall have been indefeasibly paid in full in cash, the commitments or other obligations of the Agent or any Lender to make any Loan under the Credit Agreement shall have expired, the Letters of Credit shall have expired and the Facility Termination Date shall have occurred, (b) be binding upon Pledgor, its successors and assigns, and (c) inure to the benefit of the Agent, the Secured Parties and their respective successors, transferees and assigns. Without limiting the generality of the foregoing clause (c) and subject to the provisions of the Credit Agreement, any Lender may assign or otherwise transfer any Note held by it to any other person or entity, and such other person or entity shall thereupon become vested with all the benefits in respect thereof granted to such Lender herein or otherwise. Upon the indefeasible payment in full in cash of the Secured Obligations (other than Secured Obligations in the nature of continuing indemnities or expense reimbursement obligations not yet due and payable), and the cancellation or expiration of the Letters of Credit and termination or expiration of all commitments and other obligations of the Agent and any Lender to make any Loan and the occurrence of the Facility Termination Date, Pledgor shall be entitled, subject to the provisions of Section 11 hereof, to the return, upon its request and at its expense, of such of the Collateral as shall not have been sold or otherwise applied pursuant to the terms hereof. 18. SUCCESSORS AND ASSIGNS. Whenever in this Agreement any of the parties hereto is referred to, such reference shall be deemed to include the successors and assigns of such party and all covenants, promises, and agreements by or on behalf of the Pledgor or by and on behalf of the Agent shall bind and inure to the benefit of the successors and assigns of the Pledgor, the Agent and the Lenders. 19. EXECUTION IN COUNTERPARTS. This Agreement may be executed in any number of counterparts and by the different parties on separate counterparts and each such counterpart shall for all purposes be deemed an original, but all such counterparts shall together constitute but one and the same Agreement. The Pledgor and the Agent hereby acknowledge receipt of a true, correct, and complete counterpart of this Agreement. 20. SWAP AGREEMENTS. All Hedging Obligations of any Pledgor shall be deemed to be Secured Obligations secured hereby, and each Lender or affiliate of a Lender party to any Swap Agreement shall be deemed to be a Secured Party hereunder. Name: NB BOLLE LC ACCOUNT AGREEMENT Doc No: 190346 (FINAL) 6 21. SEVERABILITY. Any provision of this Agreement which is prohibited or unenforceable in any jurisdiction shall, as to such provision and such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions of this Agreement or affecting the validity or enforceability of such provision in any other jurisdiction. 22. HEADINGS. The section headings in this Agreement are inserted for convenience of reference and shall not be considered a part of this Agreement or used in its interpretation. 23. GOVERNING LAW; TERMS. (A) THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS EXECUTED, AND TO BE FULLY PERFORMED, IN SUCH STATE. (B) EACH PARTY HEREBY EXPRESSLY AND IRREVOCABLY AGREES AND CONSENTS THAT ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT AND THE TRANSACTIONS CONTEMPLATED HEREIN MAY BE INSTITUTED IN ANY STATE OR FEDERAL COURT SITTING IN THE COUNTY OF NEW YORK, STATE OF NEW YORK, UNITED STATES OF AMERICA AND, BY THE EXECUTION AND DELIVERY OF THIS AGREEMENT, EXPRESSLY WAIVES ANY OBJECTION THAT IT MAY HAVE NOW OR HEREAFTER TO THE LAYING OF THE VENUE OR TO THE JURISDICTION OF ANY SUCH SUIT, ACTION OR PROCEEDING, AND IRREVOCABLY SUBMITS GENERALLY AND UNCONDITIONALLY TO THE JURISDICTION OF ANY SUCH COURT IN ANY SUCH SUIT, ACTION OR PROCEEDING. (C) EACH PARTY AGREES THAT SERVICE OF PROCESS MAY BE MADE BY PERSONAL SERVICE OF A COPY OF THE SUMMONS AND COMPLAINT OR OTHER LEGAL PROCESS IN ANY SUCH SUIT, ACTION OR PROCEEDING, OR BY REGISTERED OR CERTIFIED MAIL (POSTAGE PREPAID) TO THE ADDRESS OF SUCH PARTY PROVIDED IN SECTION 15.1 OF THE CREDIT AGREEMENT OR BY ANY OTHER METHOD OF SERVICE PROVIDED FOR UNDER THE APPLICABLE LAWS IN EFFECT IN THE STATE OF NEW YORK. (D) NOTHING CONTAINED IN SUBSECTIONS (B) OR (C) HEREOF SHALL PRECLUDE ANY PARTY FROM BRINGING ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS IN THE COURTS OF ANY PLACE WHERE ANY OTHER PARTY OR ANY OF SUCH PARTY'S PROPERTY OR ASSETS MAY BE FOUND OR LOCATED. TO THE EXTENT PERMITTED BY THE APPLICABLE LAWS OF ANY SUCH JURISDICTION, EACH PARTY HEREBY Name: NB BOLLE LC ACCOUNT AGREEMENT Doc No: 190346 (FINAL) 7 IRREVOCABLY SUBMITS TO THE JURISDICTION OF ANY SUCH COURT AND EXPRESSLY WAIVES, IN RESPECT OF ANY SUCH SUIT, ACTION OR PROCEEDING, THE JURISDICTION OF ANY OTHER COURT OR COURTS WHICH NOW OR HEREAFTER, BY REASON OF ITS PRESENT OR FUTURE DOMICILE, OR OTHERWISE, MAY BE AVAILABLE TO IT. (E) IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS OR REMEDIES UNDER OR RELATED TO THIS AGREEMENT OR ANY AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED OR THAT MAY IN THE FUTURE BE DELIVERED IN CONNECTION WITH THE FOREGOING, EACH PARTY HEREBY AGREES, TO THE EXTENT PERMITTED BY APPLICABLE LAW, THAT ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY AND EACH PARTY HEREBY WAIVES, TO THE EXTENT PERMITTED BY APPLICABLE LAW, ANY OBJECTION THAT IT MAY HAVE THAT EACH ACTION OR PROCEEDING HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. [SIGNATURE PAGE FOLLOWS.] Name: NB BOLLE LC ACCOUNT AGREEMENT Doc No: 190346 (FINAL) 8 IN WITNESS WHEREOF, the parties hereto have caused this LC Account Agreement to be duly executed and delivered by their respective officers thereunto duly authorized as of the date first above written. BOLLE INC. By: /s/ Desiree DeStefano Name: Title: NATIONSBANK, NATIONAL ASSOCIATION, as Agent for the Lenders By: /s/ Susan Timmerman Name: Title: LC ACCOUNT AGREEMENT SIGNATURE PAGE Name: NB BOLLE LC ACCOUNT AGREEMENT Doc No: 190346 (FINAL) (d) CASH COLLATERAL ACCOUNT AGREEMENT THIS CASH COLLATERAL ACCOUNT AGREEMENT (this "Agreement") is made and entered into as of the 11th day of March, 1998 by BOLLE INC. (the "Borrower" or the "Pledgor") and NATIONSBANK, NATIONAL ASSOCIATION, a national banking association, as Agent (the "Agent") for each of the lenders (the "Lenders" and collectively with the Agent, the "Secured Parties") now or hereafter party to the Credit Agreement (as defined below). W I T N E S S E T H: WHEREAS, the Borrower, the Agent and the Lenders have entered into that certain Amended and Restated Credit Agreement dated as of July 10, 1997 (as amended, supplemented or otherwise modified as of the date hereof, the "Existing Credit Agreement"); and WHEREAS, pursuant to that certain Assignment Agreement, dated as of the date hereof and effective immediately prior to the effectiveness of this Agreement, between BEC and the Borrower (the "Assignment Agreement"), BEC assigned to the Borrower, and the Borrower assumed from BEC, among other liabilities, certain indebtedness owing by and obligations of BEC under the Existing Credit Agreement such that the Borrower became a co-borrower together with BEC under the Existing Credit Agreement; and WHEREAS, the Pledgor, the Agent and the Lenders have entered into that certain Second Amended and Restated Credit Agreement dated as of the date hereof among the Pledgor, the Agent and the Lenders (as from time to time amended, supplemented or restated, the "Credit Agreement") pursuant to which the Lenders have agreed to make certain credit facilities available to the Borrower and to issue certain Letters of Credit; and WHEREAS, Section 2.6 of the Credit Agreement provides that the Borrower may deposit with the Agent the amount of certain mandatory prepayments under the Credit Agreement as cash collateral for the Borrower's Obligations in order to avoid certain prepayment costs associated with the Eurodollar Rate Loans (the "Prepayment Cash Collateral"); and WHEREAS, as a condition precedent to the Lenders' obligations to make Advances and to issue or purchase participations in Letters of Credit under the Credit Agreement, Pledgor is required to execute and deliver to the Agent a copy of this Agreement on or before the Closing Date; NOW, THEREFORE, in consideration of the foregoing and the agreements, provisions and covenants contained herein, Pledgor and the Agent hereby agree as follows: 1. DEFINITIONS. The following capitalized terms used in this Agreement shall have the following meanings notwithstanding any definition thereof in the Credit Agreement. Other capitalized terms used but not defined herein shall have the meanings therefor set forth in the Credit Agreement. Name: BOLLE CASH COLLATERAL ACCT AGRMT Doc No: 190345 (FINAL) "Collateral" means (a) all funds consisting of Prepayment Cash Collateral and Lease Cash Collateral from time to time on deposit in the Cash Collateral Account; (b) all Investments and all certificates and instruments from time to time representing or evidencing such Investments; (c) all notes, certificates of deposit, checks and other instruments from time to time hereafter delivered to or otherwise possessed by the Agent for or on behalf of Pledgor in substitution for or in addition to any or all of the Collateral described in clause (a) or (b) above; (d) all interest, dividends, cash, instruments and other property from time to time received, receivable or otherwise distributed in respect of or in exchange for any or all of the Collateral described in clause (a), (b) or (c) above; and (e) to the extent not covered by clauses (a) through (d) above, all proceeds of any or all of the foregoing Collateral. "Investments" means those investments, if any, of cash held in the Cash Collateral Account made by the Agent pursuant to Section 5 hereof. "Cash Collateral Account" means the cash collateral account established and maintained pursuant to Section 2 hereof. "Secured Obligations" means (a) all Obligations of the Pledgor now existing or hereafter arising under or in respect of the Credit Agreement or the Notes (including, without limitation, the Pledgor's obligation to pay principal and interest and all other charges, fees, expenses, commissions, reimbursements, indemnities and other payments related to or in respect of the obligations contained in the Credit Agreement or the Notes) or any documents or agreement related to the Credit Agreement or the Notes; and (b) without duplication, all obligations of Pledgor now or hereafter existing under or in respect of this Agreement, including, without limitation, with respect to all charges, fees, expenses, commissions, reimbursements, indemnities and other payments related to or in respect of the obligations in this Agreement. 2. CASH COLLATERAL ACCOUNT. (a) Agent has established and shall maintain at the offices of the Agent at 101 North Tryon Street, Charlotte, North Carolina, in the name of the Agent and under the sole dominion and control of the Agent, a cash collateral account designated as Bolle Inc. Cash Collateral Account (the "Cash Collateral Account"). (b) Funds shall be deposited into the Cash Collateral Account with respect to Prepayment Cash Collateral, at the sole election of the Pledgor from time to time on or before the due date of any mandatory prepayment under the Credit Agreement. (c) Interest and other income (but not any principal) received in respect of Investments of any amounts deposited in the Cash Collateral Account pursuant to clause (b) of this Section 2 shall be delivered by the Agent to Pledgor on the date of disbursement of principal under clause (d) of this Section 2; provided, however, that the Agent shall not deliver to Pledgor any such interest or other income if an Event of Default has occurred and is continuing. Name: BOLLE CASH COLLATERAL ACCT AGRMT Doc No: 190345 (FINAL) 2 (d) The principal portion of any Prepayment Cash Collateral shall be paid out of the Cash Collateral Account without notice to or instruction from the Borrower in amounts equal to and at the times corresponding to the end of an Interest Period for each Eurodollar Rate Loan in respect of which such deposit was made occurring after the date of deposit of such Collateral. Such amounts so disbursed from the Cash Collateral Account, shall be automatically applied by the Agent on behalf of the Borrower to repay each applicable Eurodollar Rate Loan having its Interest Period expire on such date. 3. PLEDGE; SECURITY FOR SECURED OBLIGATIONS. Pledgor hereby grants and pledges to the Agent for the benefit of the Lenders a first priority lien and security interest in the Collateral now existing or hereafter arising, as collateral security for the prompt payment in full when due, whether at stated maturity, by acceleration or otherwise (including without limitation, the payment of interest and other amounts which would accrue and become due but for the filing of a petition in bankruptcy or the operation of the automatic stay under Section 362(a) of the Bankruptcy Code), of all Secured Obligations. 4. DELIVERY OF COLLATERAL. The Collateral shall be delivered to the Agent, for the benefit of the Lenders, in the form of immediately available funds. 5. INVESTING OF AMOUNTS IN THE CASH COLLATERAL ACCOUNT; AMOUNTS HELD BY THE AGENT. Cash held by the Agent in the Cash Collateral Account shall be invested only as provided in this Section 5. (a) Except as otherwise provided in Section 12 hereof, any funds on deposit in the Cash Collateral Account shall be invested by the Agent so long as no Event of Default shall have occurred and be continuing, in Eligible Securities, provided that the Agent shall maintain at all times a perfected security interest in such Collateral. (b) The Agent is hereby authorized to sell or otherwise dispose of, and shall sell or otherwise dispose of, all or any designated part of the Collateral if such sale or disposition is necessary to permit the Agent to exercise its rights or perform its duties hereunder or under the Credit Agreement. The Agent shall have no responsibility for any loss in the value of the Collateral resulting from a fluctuation in interest rates or otherwise. Any interest, dividends or other distribution, yield or return received or paid on Investments permitted hereunder and the net proceeds of the sale or payment of any such Investments shall be held in the Cash Collateral Account by the Agent. 6. REPRESENTATION AND WARRANTIES. In addition to its representations and warranties made pursuant to the Credit Agreement, Pledgor represents and warrants to the Agent that the following statements are true, correct and complete: (a) Pledgor will be the legal and beneficial owner of the Collateral free and clear of any Lien except for the lien and security interest created by this Agreement and the other Loan Documents and Permitted Liens in favor of Governmental Authorities; Name: BOLLE CASH COLLATERAL ACCT AGRMT Doc No: 190345 (FINAL) 3 (b) The pledge and assignment of the Collateral pursuant to this Agreement creates a valid and perfected priority security interest in the Collateral, securing the payment of the Secured Obligations. 7. FURTHER ASSURANCES. Pledgor agrees that at any time and from time to time, at its expense, it will promptly execute and deliver to the Agent any further instruments and documents, and take any further actions, that may be necessary or that the Agent may reasonably request in order to perfect and protect any security interest granted or purported to be granted hereby or to enable the Agent to exercise and enforce its rights and remedies hereunder with respect to any Collateral. 8. TRANSFERS AND OTHER LIENS. Pledgor agrees that it will not (a) sell or otherwise dispose of any of the Collateral or any interest therein, or (b) create or permit to exist any Lien upon or with respect to any of the Collateral, except for the Lien and security interest created by this Agreement and the other Loan Documents and Permitted Liens in favor of Governmental Authorities. 9. ATTORNEY-IN-FACT. Upon the occurrence and during the continuation of an Event of Default, Pledgor hereby appoints the Agent as its attorney-in-fact, with full authority in the place and stead of Pledgor and in the name of Pledgor or otherwise, from time to time in the Agent's reasonable discretion to take any action and to execute any instrument which the Agent may reasonably deem necessary or advisable to accomplish the purposes of the Agreement, including, without limitation, to receive, endorse and collect all instruments made payable to Pledgor representing any payment, dividend, or other distribution, yield or return in respect of the Collateral or any part thereof and to give full discharge for the same. In performing its functions and duties under this Agreement, the Agent shall act solely for the Lenders, and the Agent has not assumed nor shall be deemed to have assumed any obligation towards or relationship of agency or trust with or for Pledgor. 10. THE AGENT MAY PERFORM. If Pledgor fails to perform any agreement contained herein, after notice to Pledgor, the Agent may itself perform, or cause performance of, such agreement, and the expenses of the Agent incurred in connection therewith shall be payable by Pledgor under Section 13 hereof. 11. STANDARD OF CARE; NO RESPONSIBILITY FOR CERTAIN MATTERS. In dealing with the Collateral in its possession, the Agent shall exercise the same care which it would exercise in dealing with similar collateral property pledged by others in transactions of a similar nature, but it shall not be responsible for (a) ascertaining or taking action with respect to calls, conversions, exchanges, maturities, tenders or other matters relative to any Collateral, whether or not the Agent has or is deemed to have knowledge of such matters, (b) taking any steps to preserve rights against any parties with respect to any Collateral (other than steps taken in accordance with the standard of care set forth above to maintain possession of the Collateral), (c) the collection of any proceeds, (d) any loss resulting from Investments made pursuant to Section 5 hereof, or (e) determining (x) the correctness of any statement or calculation made by Pledgor in any written or telex instructions, or (y) whether any deposit in the Cash Collateral Account is proper. Name: BOLLE CASH COLLATERAL ACCT AGRMT Doc No: 190345 (FINAL) 4 12. REMEDIES UPON EVENT OF DEFAULT; APPLICATION OF PROCEEDS. If any Event of Default shall have occurred and be continuing: (a) The Agent may and shall at the request of the Required Lenders exercise in respect of the Collateral, in addition to other rights and remedies provided for herein or in the Credit Agreement or otherwise available to it, all the rights and remedies of a secured party on default under the Uniform Commercial Code (the "Code") as in effect in the state in which the Collateral is located at that time, and the Agent may, without notice except as specified below, sell the Collateral or any part thereof in one or more parcels at public or private sale, at any exchange or broker's board or at any of the Agent's offices or elsewhere, for cash, on credit or for future delivery, and at such price or prices, and upon such other terms as the Agent may deem commercially reasonable. Pledgor agrees that, to the extent notice of sale shall be required by law, at least ten (10) days' notice to Pledgor of the time and place of any public sale or the time after which any private sale is to be made shall constitute reasonable notification. The Agent shall not be obligated to make any sale of the Collateral regardless of notice of sale having been given. The Agent may adjourn any public or private sale from time to time by announcement at the time and place fixed therefor, and such sale may, without further notice, be made at the time and place to which it was so adjourned. (b) In addition to the remedies in (a) above, any cash held by the Agent as Collateral and all cash proceeds received by the Agent in respect of any sale of, collection from, or other realization upon all or part of the Collateral shall be applied (after payment of any amounts payable to the Agent pursuant to Section 13 hereof) by the Agent in accordance with the Credit Agreement. 13. EXPENSES. In addition to any payments of expenses of the Agent pursuant to the Credit Agreement or the other Loan Documents, Pledgor agrees to pay promptly to the Agent all the costs and reasonable expenses, including reasonable attorneys fees and expenses, which the Agent may incur in connection with (a) the custody or preservation of, or the sale of, collection from, or other realization upon, any of the Collateral, (b) the exercise or enforcement of any of the rights of the Agent hereunder, or (c) the failure by Pledgor to perform or observe any of the provisions hereof. 14. NO DELAY'S WAIVER, ETC. No delay or failure on the part of the Agent in exercising, and no course of dealing with respect to, any power or right hereunder shall operate as a waiver thereof; nor shall any single or partial exercise by the Agent of any power or right hereunder preclude other or further exercise thereof or the exercise of any other power or right. The remedies herein provided are to the fullest extent permitted by law cumulative and are not exclusive of any remedies provided by law. 15. AMENDMENTS, ETC. No amendment, modification, termination or waiver of any provision of this Agreement, or consent to any departure by Pledgor therefrom, shall in any event be effective without the written concurrence of the Agent. 16. NOTICES. Except as otherwise specifically provided herein, all notices which are to be sent to Pledgor or the Agent shall be given in accordance with the Credit Agreement. Name: BOLLE CASH COLLATERAL ACCT AGRMT Doc No: 190345 (FINAL) 5 17. CONTINUING SECURITY INTEREST; TERMINATION. This Agreement shall create a continuing security interest in the Collateral and shall remain in full force and effect until all Secured Obligations (other than Secured Obligations in the nature of continuing indemnities or expense reimbursement obligations not yet due and payable) shall have been indefeasibly paid in full in cash, and the cancellation or expiration of the Letters of Credit and termination or expiration of all commitments and other obligations of the Agent and any Lender to make any Loan and the occurrence of the Facility Termination Date, Pledgor shall be entitled, subject to the provisions of Section 11 hereof, to the return, upon its request and at its expense, of such of the Collateral as shall not have been sold or otherwise applied pursuant to the terms hereof. Upon the indefeasible payment in full in cash of the Secured Obligations (other than Secured Obligations in the nature of continuing indemnities or expense reimbursement obligations not yet due and payable) and the cancellation or expiration of all Letters of Credit and termination or expiration of all commitments and other obligations of the Issuing Bank to issue any Letters of Credit and the occurrence of the Facility Termination Date, Pledgor shall be entitled, subject to the provisions of Section 12 hereof, to the return, upon its request and at its expense, of such of the Collateral as shall not have been sold or otherwise applied pursuant to the terms hereof. 18. SUCCESSORS AND ASSIGNS. Whenever in this Agreement any of the parties hereto is referred to, such reference shall be deemed to include the successors and assigns of such party and all covenants, promises, and agreements by or on behalf of Pledgor or by and on behalf of the Agent shall bind and inure to the benefit of the successors and assigns of Pledgor and the Agent. 19. EXECUTION IN COUNTERPARTS. This Agreement may be executed in any number of counterparts and by the different parties on separate counterparts and each such counterpart shall for all purposes be deemed an original, but all such counterparts shall together constitute but one and the same Agreement. Pledgor and the Agent hereby acknowledge receipt of a true, correct, and complete counterpart of this Agreement. 20. SWAP AGREEMENTS. All Hedging Obligations of any Pledgor shall be deemed to be Secured Obligations secured hereby, and each Lender or affiliate of a Lender party to any Swap Agreement shall be deemed to be a Secured Party hereunder. 21. SEVERABILITY. Any provision of this Agreement which is prohibited or unenforceable in any jurisdiction shall, as to such provision and such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions of this Agreement or affecting the validity or enforceability of such provision in any other jurisdiction. 22. HEADINGS. The section headings in this Agreement are inserted for convenience of reference and shall not be considered a part of this Agreement or used in its interpretation. 23. GOVERNING LAW; WAIVERS. (A) THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK Name: BOLLE CASH COLLATERAL ACCT AGRMT Doc No: 190345 (FINAL) 6 APPLICABLE TO CONTRACTS EXECUTED, AND TO BE FULLY PERFORMED, IN SUCH STATE. (B) EACH PARTY HEREBY EXPRESSLY AND IRREVOCABLY AGREES AND CONSENTS THAT ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT AND THE TRANSACTIONS CONTEMPLATED HEREIN MAY BE INSTITUTED IN ANY STATE OR FEDERAL COURT SITTING IN THE COUNTY OF NEW YORK, STATE OF NEW YORK, UNITED STATES OF AMERICA AND, BY THE EXECUTION AND DELIVERY OF THIS AGREEMENT, EXPRESSLY WAIVES ANY OBJECTION THAT IT MAY HAVE NOW OR HEREAFTER TO THE LAYING OF THE VENUE OR TO THE JURISDICTION OF ANY SUCH SUIT, ACTION OR PROCEEDING, AND IRREVOCABLY SUBMITS GENERALLY AND UNCONDITIONALLY TO THE JURISDICTION OF ANY SUCH COURT IN ANY SUCH SUIT, ACTION OR PROCEEDING. (C) EACH PARTY AGREES THAT SERVICE OF PROCESS MAY BE MADE BY PERSONAL SERVICE OF A COPY OF THE SUMMONS AND COMPLAINT OR OTHER LEGAL PROCESS IN ANY SUCH SUIT, ACTION OR PROCEEDING, OR BY REGISTERED OR CERTIFIED MAIL (POSTAGE PREPAID) TO THE ADDRESS OF SUCH PARTY PROVIDED IN SECTION 15.1 OF THE CREDIT AGREEMENT OR BY ANY OTHER METHOD OF SERVICE PROVIDED FOR UNDER THE APPLICABLE LAWS IN EFFECT IN THE STATE OF NEW YORK. (D) NOTHING CONTAINED IN SUBSECTIONS (B) OR (C) HEREOF SHALL PRECLUDE ANY PARTY FROM BRINGING ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS IN THE COURTS OF ANY PLACE WHERE ANY OTHER PARTY OR ANY OF SUCH PARTY'S PROPERTY OR ASSETS MAY BE FOUND OR LOCATED. TO THE EXTENT PERMITTED BY THE APPLICABLE LAWS OF ANY SUCH JURISDICTION, EACH PARTY HEREBY IRREVOCABLY SUBMITS TO THE JURISDICTION OF ANY SUCH COURT AND EXPRESSLY WAIVES, IN RESPECT OF ANY SUCH SUIT, ACTION OR PROCEEDING, THE JURISDICTION OF ANY OTHER COURT OR COURTS WHICH NOW OR HEREAFTER, BY REASON OF ITS PRESENT OR FUTURE DOMICILE, OR OTHERWISE, MAY BE AVAILABLE TO IT. (E) IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS OR REMEDIES UNDER OR RELATED TO THIS AGREEMENT OR ANY AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED OR THAT MAY IN THE FUTURE BE DELIVERED IN CONNECTION WITH THE FOREGOING, EACH PARTY HEREBY AGREES, TO THE EXTENT PERMITTED BY APPLICABLE LAW, THAT ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A Name: BOLLE CASH COLLATERAL ACCT AGRMT Doc No: 190345 (FINAL) 7 JURY AND EACH PARTY HEREBY WAIVES, TO THE EXTENT PERMITTED BY APPLICABLE LAW, ANY OBJECTION THAT IT MAY HAVE THAT EACH ACTION OR PROCEEDING HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. [SIGNATURE PAGE FOLLOWS.] Name: BOLLE CASH COLLATERAL ACCT AGRMT Doc No: 190345 (FINAL) IN WITNESS WHEREOF, the parties have duly executed this Cash Collateral Account Agreement on the day and year first written above. BOLLE INC. By: /s/ Desiree DeStefano Name: Title: NATIONSBANK, NATIONAL ASSOCIATION, as Agent for the Secured Parties By: /s/ Susan Timmerman Name: Title: Name: BOLLE CASH COLLATERAL ACCT AGRMT Doc No: 190345 (FINAL) (e) SECOND AMENDED AND RESTATED SECURITY AGREEMENT THIS SECOND AMENDED AND RESTATED SECURITY AGREEMENT (this "Agreement") is made and entered into as of March 11, 1998 by BOLLE INC., a Delaware corporation (the "Borrower), and EACH OF THE UNDERSIGNED SUBSIDIARIES OF THE BORROWER (each a "Guarantor", and collectively with the Borrower, the "Grantors"), and NATIONSBANK, NATIONAL ASSOCIATION, a national banking association, as Agent (the "Agent") for each of the lenders (the "Lenders" and collectively with the Agent, the "Secured Parties") now or hereafter party to the Credit Agreement (as defined below). All capitalized terms used but not otherwise defined herein shall have the respective meanings assigned thereto in the Credit Agreement (as defined below); W I T N E S S E T H: WHEREAS, the Lenders, the Agent and BEC Group, Inc. ("BEC"), of which the Borrower was formerly a direct subsidiary, are parties to that certain Amended and Restated Credit Agreement dated as of July 10, 1997 (the "Existing Credit Agreement"); and WHEREAS, pursuant to that certain Assignment Agreement and First Amendment to the Amended and Restated Credit Agreement, dated as of the date hereof and effective immediately prior to the effectiveness of this Agreement, between BEC, the Borrower, the Agent and the Lenders (the "Assignment and Amendment"), BEC assigned to the Borrower, and the Borrower assumed from BEC, among other liabilities, certain indebtedness owing by, and obligations of, BEC under the Existing Credit Agreement such that the Borrower became a co-borrower together with BEC under the Existing Credit Agreement; and WHEREAS, the Guarantors are parties to that certain Amended and Restated Security Agreement dated as of July 10, 1997, with the Agent (as amended, supplemented or otherwise modified as of the date hereof, the "Existing Security Agreement"); and WHEREAS, the Guarantors are parties to that certain Second Amended and Restated Guaranty Agreement (the "Guaranty") dated as of the date hereof pursuant to which each Guarantor guaranteed, or continued its guaranty of, the obligations of the Borrower under the Credit Agreement; and WHEREAS, the Grantors, the Agent and the Lenders desire to amend and restate the Existing Security Agreement in its entirety to reflect changes in the parties required to be parties thereto and certain changes in the Credit Agreement; and WHEREAS, as collateral security for payment and performance of its obligations under the Credit Agreement, the Borrower is willing to continue its grant to the Agent for the benefit of the Secured Parties of a security interest in certain of its personal property and assets; and WHEREAS, as collateral security for payment and performance of its obligations under the Guaranty, each Guarantor is willing to grant, or to continue its grant, to the Agent for the benefit of the Secured Parties of a security interest in certain of its personal property and assets; NOW, THEREFORE, in order to induce the Secured Parties to enter into the Loan Documents and in consideration of the premises and the mutual covenants contained herein, the parties hereto hereby amend and restate the Existing Security Agreement in its entirety as follows: 1. GRANT OF SECURITY INTEREST. As collateral security for the payment and satisfaction of all obligations and liabilities of the Guarantors under the Guaranty Agreement and all of the Borrower's Obligations under the Credit Agreement (collectively, the "Secured Obligations"), each Grantor hereby affirms, grants, pledges and assigns, or reaffirms, regrants and continues its pledge and collateral assignment, as the case may be, to the Agent for the benefit of the Lenders and continues and grants to the Agent for the benefit of the Lenders a continuing first priority security interest in and to all of the following property of such Grantor, whether now owned or existing or hereafter acquired or arising and wheresoever located: (a) All accounts, accounts receivable, contracts, notes, bills, acceptances, choses in action, chattel paper, instruments, documents and other forms of obligations at any time owing to each Grantor arising out of goods sold or leased or for services rendered by such Grantor, the proceeds thereof and all of such Grantor's rights with respect to any goods represented thereby, whether or not delivered, goods returned by customers and all rights as an unpaid vendor or lienor, including rights of stoppage in transit and of recovering possession by proceedings including replevin and reclamation, together with all customer lists, books and records, ledger and account cards, computer tapes, software, disks, printouts and records, whether now in existence or hereafter created, relating thereto (collectively referred to hereinafter as "Accounts"); (b) All inventory of each Grantor, including without limitation, all goods manufactured or acquired for sale or lease, and any piece goods, raw materials, work in process and finished merchandise, findings or component materials, and all supplies, goods, incidentals, office supplies, packaging materials and any and all items used or consumed in the operation of the business of such Grantor or which may contribute to the finished product or to the sale, promotion and shipment thereof, in which such Grantor now or at any time hereafter may have an interest, whether or not the same is in transit or in the constructive, actual or exclusive occupancy or possession of such Grantor or is held by such Grantor or by others for such Grantor's account (collectively referred to hereinafter as "Inventory"); (c) All goods of each Grantor, including without limitation, all machinery, equipment, parts, supplies, apparatus, appliances, tools, patterns, molds, dies, blueprints, fittings, furniture, furnishings, fixtures and articles of tangible personal property of every description now or hereafter owned by a Grantor or in which such Grantor may have or Name: NB.BOLLE.SECURITY.AGREEMENT Doc No: 190339 (FINAL) 2 may hereafter acquire any interest, at any location (collectively referred to hereinafter as "Equipment"); (d) All general intangibles of each Grantor in which a Grantor now has or hereafter acquires any rights, including but not limited to, causes of action, corporate or business records, inventions, designs, patents, patent applications, trademarks, trademark registrations and applications therefor, goodwill, trade names, trade secrets, trade processes, copyrights, copyright registrations and applications therefor, licenses, permits, franchises, customer lists, computer programs, all claims under guaranties, tax refund claims, rights and claims against carriers and shippers, leases, claims under insurance policies, all rights to indemnification and all other intangible personal property and intellectual property of every kind and nature (collectively referred to hereinafter as "General Intangibles"); (e) All rights now or hereafter accruing to each Grantor under contracts, leases, agreements or other instruments to perform services, to hold and use land and facilities, and to enforce all rights thereunder (collectively referred to hereinafter as "Contract Rights"); (f) All books and records relating to any of the Collateral (as hereinafter defined) (including without limitation, customer data, credit files, computer programs, printouts, and other computer materials and records of each Grantor pertaining to any of the foregoing); and (g) All accessions to, substitutions for and all replacements, products and proceeds of the foregoing, including without limitation proceeds of insurance policies insuring the Collateral (as hereinafter defined). All of the property and interests in property described in subsections (a) through (g) and all other property and interests in personal property which shall, from time to time, secure the Secured Obligations are herein collectively referred to as the "Collateral." 2. FINANCING STATEMENTS. At the time of execution of this Agreement, each Grantor shall have furnished the Agent with properly executed financing statements, amendments and assignments (including amendments of financing statements filed pursuant to the Existing Security Agreement) as prescribed by the Uniform Commercial Code as presently in effect in the states where the Collateral is located, prepared and approved by the Agent in form and number sufficient for filing wherever required with respect to the Collateral, in order that the Agent, for the benefit of the Lenders, shall have a duly perfected security interest of record in the Collateral, to the extent a security interest in such Collateral can be perfected by filing a financing statement, following the filing of such financing statements with the appropriate local and state governmental authorities, subject only to Permitted Liens. Each Grantor shall execute as reasonably required by the Agent any additional financing statements or other documents to effect the same, together with any necessary continuation statements so long as this Agreement remains in effect. Name: NB.BOLLE.SECURITY.AGREEMENT Doc No: 190339 (FINAL) 3 3. MAINTENANCE OF SECURITY INTEREST. Each Grantor will, from time to time, upon the request of the Agent, deliver specific assignments of Collateral, together with such other instruments and documents, financing statements, amendments thereto, assignments or other writings as the Agent may reasonably request to carry out the terms of this Agreement or to protect or enforce the Agent's security interest in the Collateral. With respect to any and all Collateral to be secured and conveyed under this Agreement, each Grantor agrees to do and cause to be done all things necessary to perfect and keep in full force the security interest granted in favor of the Agent for the benefit of the Lenders, including, but not limited to, the prompt payment of all fees and expenses incurred in connection with any filings made to perfect or continue a security interest in the Collateral in favor of the Agent for the benefit of the Lenders. Each Grantor agrees to make appropriate entries upon its financial statements and books and records disclosing the Agent's (for the benefit of the Lenders) security interest granted hereunder. 4. RECEIPT OF PAYMENT. In the event an Event of Default shall occur and be continuing and a Grantor (or any of its affiliates, subsidiaries, stockholders, directors, officers, employees or agents) shall receive any proceeds of Collateral, including without limitation monies, checks, notes, drafts or any other items of payment, each Grantor shall hold all such items of payment in trust for the Agent, for the benefit of the Lenders, and as the property of the Agent, for the benefit of the Lenders, separate from the funds of such Grantor, and no later than the first Business Day following the receipt thereof, such Grantor shall cause the same to be forwarded to the Agent for its custody and possession on behalf of the Lenders as additional Collateral. 5. COLLECTIONS; AGENT'S RIGHT TO NOTIFY ACCOUNT DEBTORS AND TO ENDORSE A GRANTOR'S NAME. Each Grantor hereby authorizes the Agent, on behalf of the Lenders, at all times after the occurrence and during the continuation of an Event of Default (a) to open such Grantor's mail and collect any and all amounts due to such Grantor from Persons obligated on any Accounts ("Account Debtors"); (b) to take over such Grantor's post office boxes or make other arrangements as the Agent, on behalf of the Lenders, deems necessary to receive such Grantor's mail, including notifying the post office authorities to change the address for delivery of such Grantor's mail to such address as the Agent, on behalf of the Lenders, may designate; and (c) to notify any or all Account Debtors that the Accounts have been assigned to the Agent for the benefit of the Lenders and that Agent has a security interest therein for the benefit of the Lenders (provided that the Agent may at any time give such notice to an Account Debtor that is a department, agency or authority of the United States government). Each Grantor at all times after the occurrence and during the continuation of an Acceleration Event (as hereinafter defined) irrevocably makes, constitutes and appoints the Agent, for the benefit of the Lenders, (and all Persons designated by the Agent for that purpose) as such Grantor's true and lawful attorney (and agent-in-fact) to endorse such Grantor's name on any checks, notes, drafts or any other payment relating to or constituting proceeds of the Collateral which comes into the Agent's possession or Agent's control, and deposit the same to the account of the Agent, for the benefit of the Lenders, Name: NB.BOLLE.SECURITY.AGREEMENT Doc No: 190339 (FINAL) 4 on account and for payment of the Secured Obligations. The Agent shall promptly furnish each Grantor with a copy of any such notice sent with respect to Accounts of such Grantor pursuant to clause (c) of this Section 5 and each Grantor hereby agrees that any such notice, in the Agent's sole discretion, may be sent on such Grantor's stationery, in which event such Grantor shall co-sign such notice with the Agent. For purposes of this Agreement, "Acceleration Event" means that (a) an Event of Default has occurred and is continuing and (b) the Secured Obligations have become due and payable (whether by acceleration, at final maturity or otherwise). 6. COVENANTS. Each Grantor covenants with the Agent that from and after the date of this Agreement until termination hereof in accordance with Section 27 hereof: (a) INSPECTION. The Agent (by any of its officers, employees and agents), on behalf of the Lenders, shall have the right upon its reasonable request and reasonable prior notice, and at any reasonable times during such Grantor's usual business hours, to inspect the Collateral, all records related thereto (and to make extracts or copies from such records), and the premises upon which any of the Collateral is located, to discuss such Grantor's affairs and finances with any Person (other than Account Debtors) and to verify with any Person other than Account Debtors the amount, quality, quantity, value and condition of, or any other matter relating to, the Collateral and, if an Event of Default has occurred and is continuing, to discuss such Grantor's affairs and finances with such Grantor's Account Debtors and to verify the amount, quality, value and condition of, or any other matter relating to, the Collateral and such Account Debtors. Upon or after the occurrence and during the continuation of an Acceleration Event, the Agent may at any time and from time to time employ and maintain on such Grantor's premises a custodian selected by the Agent who shall have full authority to do all acts necessary to protect the Agent's (for the benefit of the Lenders) interest. All expenses incurred by the Agent, on behalf of the Lenders, by reason of the employment of such custodian shall be paid by such Grantor, added to the Secured Obligations and secured by the Collateral. (b) ASSIGNMENTS, RECORDS AND SCHEDULES OF ACCOUNTS. Each Grantor shall keep accurate and complete records of its Accounts ("Account Records") and from time to time at intervals designated by the Agent such Grantor shall provide the Agent with a schedule of Accounts in form and substance acceptable to the Agent describing all Accounts created or acquired by such Grantor ("Schedule of Accounts"); provided, however, that such Grantor's failure to execute and deliver any such Schedule of Accounts shall not affect or limit the Agent's security interest or other rights in and to any Accounts for the benefit of the Lenders. If requested by the Agent, each Grantor shall furnish the Agent with copies of proof of delivery and other documents relating to the Accounts so scheduled, including without limitation repayment histories and present status reports (collectively, "Account Documents") and such other matter and information relating to the status of then existing Accounts as the Agent shall request. No Grantor shall remove any Account Records or Account Documents or change its chief executive offices from the locations set forth in Exhibit A hereto without 30 days prior written notice to the Agent as provided in Section 20 hereof and delivery to the Agent by the applicable Grantor prior Name: NB.BOLLE.SECURITY.AGREEMENT Doc No: 190339 (FINAL) 5 to such removal of executed financing statements, amendments and other documents necessary to maintain the security interests granted hereunder. (c) NOTICE REGARDING DISPUTED ACCOUNTS. In the event any amounts due and owing in excess of $250,000 are in dispute between any Account Debtor and a Grantor (which shall include without limitation any dispute in which an offset claim or counterclaim may result), such Grantor shall provide the Agent with written notice thereof as soon as practicable, explaining in detail the reason for the dispute, all claims related thereto and the amount in controversy. (d) VERIFICATION OF ACCOUNTS. If an Event of Default has occurred and is continuing, any of the Agent's officers, employees or agents shall have the right, at any reasonable time or times hereafter, to verify with Account Debtors the validity, amount or any other matter relating to any Accounts and, whether or not a Default or Event of Default has occurred, any of the Agent's officers, employees or agents shall have the right to verify the same with any Grantor. (e) CHANGE OF TRADE STYLES. No Grantor shall change, amend, alter, terminate, or cease using its material trade names or styles under which it sells Inventory as of the date of this Agreement ("Trade Styles"), or use additional Trade Styles, without giving the Agent at least 30 days' prior written notice and delivery to the Agent by the applicable Grantor prior to such removal, change, amendment, alteration, or use, of executed financing statements, amendments and other documents necessary to maintain the security interests granted hereunder. (f) SAFEKEEPING OF INVENTORY. Each Grantor shall be responsible for the safekeeping of its Inventory, and, subject to Section 16 hereof, in no event shall the Agent have any responsibility for: (i) Any loss or damage to Inventory or destruction thereof occurring or arising in any manner or fashion from any cause; (ii) Any diminution in the value of Inventory; or (iii) Any act or default of any carrier, warehouseman, bailee or forwarding agency thereof or other Person in any way dealing with or handling Inventory. (g) LOCATION, RECORDS AND SCHEDULES OF INVENTORY. Each Grantor shall keep correct and accurate records itemizing and describing the kind, type, location and quantity of Inventory, its cost therefor and the selling price of Inventory held for sale, and the daily withdrawals therefrom and additions thereto, and shall furnish to the Agent from time to time at reasonable intervals designated by the Agent, a current schedule of Inventory ("Schedule of Inventory") based upon its most recent physical inventory and its daily Name: NB.BOLLE.SECURITY.AGREEMENT Doc No: 190339 (FINAL) 6 inventory records. Each Grantor shall conduct a physical inventory, no less than annually, and shall furnish to the Agent such other documents and reports thereof as the Agent shall reasonably request with respect to the Inventory. Subject to compliance at all times with Sections 9(c), (d) and (e), no Grantor shall, other than in the ordinary course of business in connection with its sale, remove any material amount of Inventory from the locations set forth on Exhibit B hereto to a location not also set forth on Exhibit B hereto, each of such locations being owned by a Grantor unless otherwise indicated, without 30 days prior written notice to the Agent as provided in Section 20 hereof and delivery to the Agent by the applicable Grantor prior to such removal of executed financing statements, amendments and other documents necessary to maintain the security interests granted hereunder. (h) RETURNS OF INVENTORY. If any Account Debtor returns any Inventory to a Grantor after shipment thereof, and such return generates a credit in excess of $250,000 in the aggregate on any Account or Accounts of such Account Debtor, such Grantor shall notify the Agent of the same as soon as practicable. (i) EVIDENCE OF OWNERSHIP OF EQUIPMENT. The Grantors, as soon as practicable following a request therefor by the Agent, shall deliver to the Agent any and all evidence of ownership of any of the Equipment (including without limitation certificates of title and applications for title). (j) LOCATION, RECORDS AND SCHEDULES OF EQUIPMENT. The Grantors shall maintain accurate, itemized records itemizing and describing the kind, type, quality, quantity and value of its Equipment and shall furnish the Agent upon request with a current schedule containing the foregoing information, but, other than during the continuance of an Event of Default, not more often than once per fiscal quarter. No Grantor shall remove any material portion of the Equipment from the locations set forth in Exhibit C hereto to a location not also set forth on Exhibit C hereto without at least 30 days' prior written notice to the Agent as provided in Section 20 hereof and delivery to the Agent by the applicable Grantor prior to such removal of executed financing statements, amendments and other documents necessary to maintain the security interests granted hereunder. (k) SALE OR MORTGAGE OF EQUIPMENT. Other than in the ordinary course of business with respect to disposition of obsolescent Equipment or replacement of Equipment with other Equipment performing similar functions and having similar or better utility and value, and except as permitted by the Credit Agreement prior to the occurrence and continuance of an Event of Default, no Grantor shall sell, exchange, lease, mortgage, encumber, pledge or otherwise dispose of or transfer any of the Equipment or any part thereof without the prior written consent of the Agent. (l) MAINTENANCE OF EQUIPMENT. Each Grantor shall keep and maintain its Equipment in good operating condition and repair, ordinary wear and tear excepted. No Grantor shall permit any such items to become a fixture to real property (unless such Name: NB.BOLLE.SECURITY.AGREEMENT Doc No: 190339 (FINAL) 7 Grantor has granted the Agent for the benefit of the Lenders a lien on such real property) or accessions to other personal property. 7. WARRANTIES AND REPRESENTATIONS REGARDING COLLATERAL GENERALLY. Each Grantor warrants and represents that it is and, except as permitted by the Credit Agreement, will continue to be the owner of the Collateral hereunder, now owned and upon the acquisition of the same, free and clear of all Liens, claims, encumbrances and security interests other than the security interest in favor of the Agent for the benefit of the Lenders hereunder and Permitted Liens, and that it will defend such Collateral and any products and proceeds thereof against all claims and demands of all Persons (other than holders of Permitted Liens) at any time claiming the same or any interest therein adverse to the Secured Parties. 8. ACCOUNT WARRANTIES AND REPRESENTATIONS. With respect to its Accounts, each Grantor warrants and represents to the Agent for the benefit of the Lenders that the Agent and each Lender may rely on all statements or representations made by such Grantor on or with respect to any Schedule of Accounts prepared and delivered by it and that: (a) All Account Records and Account Documents are located only at such Grantor's locations as set forth on Exhibit A attached hereto and incorporated herein by reference; (b) The Accounts are genuine, are in all respects what they purport to be, are not evidenced by an instrument or document or, if evidenced by an instrument or document, are only evidenced by one original instrument or document; (c) The Accounts cover bona fide sales and deliveries of Inventory usually dealt in by such Grantor, or the rendition by such Grantor of services, to an Account Debtor in the ordinary course of business or as permitted by the Credit Agreement; (d) The amounts of the face value shown on any Schedule of Accounts or invoice statement delivered to the Agent with respect to any Account, are actually owing to such Grantor and are not contingent for any reason; and there are no setoffs, discounts, allowances, claims, counterclaims or disputes of any kind or description in an amount greater than $250,000 in the aggregate, or greater than $50,000 individually, existing or asserted with respect thereto and such Grantor has not made any agreement with any Account Debtor thereunder for any deduction therefrom, except as may be stated in the Schedule of Accounts and reflected in the calculation of the face value of each respective invoice related thereto; (e) Except for conditions generally applicable to such Grantor's industry and markets, there are no facts, events, or occurrences known to such Grantor pertaining particularly to any Accounts which are reasonably expected to materially impair in any way the validity, collectibility or enforcement of Accounts that would reasonably be likely, in the aggregate, to be of material economic value, or in the aggregate materially reduce Name: NB.BOLLE.SECURITY.AGREEMENT Doc No: 190339 (FINAL) 8 the amount payable thereunder from the amount of the invoice face value shown on any Schedule of Accounts, and on all contracts, invoices and statements delivered to the Agent, with respect thereto; (f) The goods or services giving rise thereto are not, and were not at the time of the sale or performance thereof, subject to any Lien, claim, encumbrance or security interest, except those of the Agent for the benefit of the Lenders and those removed or terminated prior to the date hereof and Permitted Liens; (g) The Accounts have not been pledged to any Person other than to the Agent for the benefit of the Lenders under this Agreement and will be owned by such Grantor free and clear of any Liens, claims, encumbrances or security interests except Permitted Liens; (h) The Agent's and the Lenders' security interest therein will not be subject to any offset, deduction, counterclaim, Lien or other adverse condition, other than Permitted Liens; and (i) The location of its chief executive office and any state in which it (i) has a place of business in only one county of such state or (ii) resides in such state (within the meaning of the applicable Uniform Commercial Code) but does not have any place of business in such state, is set forth on Exhibit A attached hereto and incorporated herein by reference and each Grantor shall deliver to the Agent not less than 30 days written notice prior to any change of such location or status of places of business or residency. 9. INVENTORY WARRANTIES AND REPRESENTATIONS. With respect to its Inventory, each Grantor warrants and represents to the Agent for the benefit of the Lenders that the Secured Parties may rely on all statements or representations made by such Grantor on or with respect to any Inventory and that: (a) All Inventory, other than Inventory consisting of samples utilized by salespeople or otherwise having a reasonable value of less than $15,000 in the aggregate for any location, is located only at such Grantor's locations as set forth on Exhibit B attached hereto and incorporated herein by reference; (b) None of its Inventory is or will be subject to any Lien, claim, encumbrance or security interest whatsoever, except for the security interest of the Agent for the benefit of the Lenders hereunder and Permitted Liens; (c) No Inventory of such Grantor that would reasonably be likely, in the aggregate with the Inventory of all Grantors, to be of value in excess of $100,000 is, and shall not at any time or times hereafter be, stored with a bailee, warehouseman, or similar party without the Agent's prior written consent and, if the Agent gives such consent, such Grantor will concurrently therewith cause any such bailee, warehouseman, or similar party Name: NB.BOLLE.SECURITY.AGREEMENT Doc No: 190339 (FINAL) 9 to issue and deliver to the Agent upon its request therefor, in form and substance reasonably acceptable to the Agent, warehouse receipts therefor in the Agent's name and take such other action and be party to such document as deemed necessary or prudent by the Agent to maintain the security interest of the Lenders in such Inventory; (d) No Inventory is, and shall not at any time or times hereafter be, under consignment to any Person, the value of which, when aggregated with all other Inventory under consignment of such Grantor and all other Material Subsidiaries, would exceed $100,000; and (e) No Inventory is at or shall be kept at any location that is leased by such Grantor from any other Person, the value of which, when aggregated with all other Inventory kept at any location which is leased by all Grantors, would exceed $100,000, unless such location and lessor is set forth on Exhibit B hereto and such lessor waives its rights with respect to such Inventory in form and substance acceptable to the Agent and delivered in writing to the Agent prior to such amount of Inventory being at such one or more locations. 10. EQUIPMENT REPRESENTATIONS AND WARRANTIES. With respect to its Equipment, each Grantor warrants and represents to the Agent for the benefit of the Lenders that the Secured Parties may rely on all statements or representations made by such Grantor on or with respect to any Equipment and that: (a) All Equipment is located only at such Grantor's locations set forth in Exhibit C hereto; (b) None of its Equipment is or will be subject to any Lien, claim, encumbrance or security interest whatsoever, except for the security interest of the Agent, for the benefit of the Lenders, hereunder and Permitted Liens; (c) No Equipment of such Grantor is at or shall be kept at any location that is leased by such Grantor from any other Person unless such location and lessor is set forth on Exhibit C hereto and such lessor waives its rights with respect to such Equipment in form and substance acceptable to the Agent. 11. CASUALTY AND LIABILITY INSURANCE REQUIRED. (a) Each Grantor will keep the Collateral continuously insured against such risks as are customarily insured against by businesses of like size and type engaged in the same or similar operations including, without limiting the generality of any other covenant herein contained: (i) casualty insurance on the Inventory and the Equipment in an amount not less than the full insurable value thereof, against loss or damage by theft, fire Name: NB.BOLLE.SECURITY.AGREEMENT Doc No: 190339 (FINAL) 10 and lightning and other hazards ordinarily included under uniform broad form standard extended coverage policies, limited only as may be provided in the standard broad form of extended coverage endorsement at the time in use in the states in which the Collateral is located; (ii) comprehensive general liability insurance against claims for bodily injury, death or property damage occurring with or about such Collateral (such coverage to include provisions waiving subrogation against the Secured Parties), with Agent and Lenders as additional insured parties, in amounts as shall be reasonably satisfactory to Agent; (iii) liability insurance with respect to the operation of its facilities under the workers' compensation laws of the states in which such Collateral is located; and (iv) business interruption insurance. (b) Each insurance policy obtained in satisfaction of the requirements of Section 11(a) hereof: (i) may be provided by blanket policies now or hereafter maintained by each Grantor or the Borrower; (ii) shall be issued by such insurer (or insurers) as shall be financially responsible, of recognized standing and reasonably acceptable to the Agent; (iii) shall be in such form and have such provisions (including without limitation the loss payable clause, the waiver of subrogation clause, the deductible amount, if any, and the standard mortgagee endorsement clause), as are generally considered standard provisions for the type of insurance involved and are reasonably acceptable in all respects to the Agent; (iv) shall prohibit cancellation or substantial modification, termination or lapse in coverage by the insurer without at least 30 days' prior written notice to the Agent, except for non-payment of premium, in which case such policies shall provide ten (10) days' prior written notice; (v) without limiting the generality of the foregoing, all insurance policies where applicable under Section 11(a)(i) carried on the Collateral shall name the Agent, for the benefit of the Lenders, as loss payee and the Agent and Lenders as parties insured thereunder in respect of any claim for payment in excess of $250,000. Name: NB.BOLLE.SECURITY.AGREEMENT Doc No: 190339 (FINAL) 11 (c) Prior to expiration of any such policy, such Grantor shall furnish the Agent with evidence satisfactory to the Agent that the policy or certificate has been renewed or replaced or is no longer required by this Agreement. (d) Each Grantor hereby irrevocably makes, constitutes and appoints the Agent (and all officers, employees or agents designated by the Agent), for the benefit of the Lenders, effective upon the occurrence and during the continuance of an Acceleration Event, as such Grantor's true and lawful attorney (and agent-in-fact) for the purpose of making, settling and adjusting claims under such policies of insurance, endorsing the name of such Grantor on any check, draft, instrument or other item or payment for the proceeds of such policies of insurance and for making all determinations and decisions with respect to such policies of insurance. (e) In the event such Grantor shall fail to maintain, or fail to cause to be maintained, the full insurance coverage required hereunder or shall fail to keep any of its Collateral in good repair and good operating condition, the Agent may (but shall be under no obligation to), without waiving or releasing any Secured Obligation or Event of Default by such Grantor hereunder, contract for the required policies of insurance and pay the premiums on the same or make any required repairs, renewals and replacements; and all sums so disbursed by Agent, including reasonable attorneys' fees, court costs, expenses and other charges related thereto, shall be payable on demand by such Grantor to the Agent and shall be additional Secured Obligations secured by the Collateral. (f) Each Grantor agrees that to the extent that it shall not carry insurance required by Section 11(a) hereof, it shall in the event of any loss or casualty pay promptly to the Agent, for the benefit of the Lenders, for application in accordance with the provisions of Section 11(h) hereof, such amount as would have been received as Net Proceeds (as hereinafter defined) by the Agent, for the benefit of the Lenders, under the provisions of Section 11(h) hereof had such insurance been carried to the extent required. (g) The Net Proceeds of the insurance carried pursuant to the provisions of Sections 11(a)(ii) and 11(a)(iii) hereof shall be applied by such Grantor toward extinguishment of the defect or claim or satisfaction of the liability with respect to which such insurance proceeds may be paid. (h) The Net Proceeds of the insurance carried with respect to the Collateral pursuant to the provisions of Section 11(a)(i) hereof shall be paid to such Grantor and held by such Grantor in a separate account and applied as follows: (i) as long as no Event of Default shall have occurred and be continuing, after any loss under any such insurance and payment of the proceeds of such insurance, each Grantor shall have a period of 30 days after payment of the insurance proceeds with respect to such loss to elect to either (x) repair or replace the Collateral so damaged, (y) deliver such Net Proceeds to the Agent, for the benefit of the Lenders, as additional Collateral or (z) apply such Net Proceeds to the acquisition of tangible assets used or useful in the conduct of the business of such Name: NB.BOLLE.SECURITY.AGREEMENT Doc No: 190339 (FINAL) 12 Grantor, subject to the provisions of this Agreement. If such Grantor elects to repair or replace the Collateral so damaged, such Grantor agrees the Collateral shall be repaired to a condition substantially similar to its condition prior to damage or replaced with Collateral in a condition substantially similar to the condition of the Collateral so replaced prior to damage; and (ii) at all times during which an Event of Default shall have occurred and be continuing, after any loss under such insurance and payment of the proceeds of such insurance, such Grantor shall immediately deliver such Net Proceeds to such Agent, for the benefit of the Lenders, as additional Collateral. (i) "Net Proceeds" when used with respect to any insurance proceeds shall mean the gross proceeds from such proceeds, award or other amount, less all taxes, fees and expenses (including attorneys' fees) incurred in the realization thereof. (j) In case of any material damage to or destruction of all or any part of the Collateral pledged hereunder by a Grantor, such Grantor shall give prompt notice thereof to the Agent. Each such notice shall describe generally the nature and extent of such damage, destruction, taking, loss, proceeding or negotiations. Each Grantor is hereby authorized and empowered to adjust or compromise any loss under any such insurance. 12. EVENTS OF DEFAULT. It is understood and agreed that the occurrence of any one or more of the following shall constitute an "Event of Default" hereunder and shall entitle the Agent, for the benefit of the Lenders, to take such actions as are elsewhere provided in this Agreement in respect of Events of Default: (a) an "Event of Default" as defined in the Credit Agreement shall have occurred and be continuing; or (b) a Grantor shall have failed to pay the Agent, for the benefit of the Lenders, all of the Secured Obligations owed to it in accordance with the Guaranty Agreement or the Credit Agreement, as applicable, on the Business Day on which the Agent has demanded such payment; or (c) any representation or warranty made by a Grantor herein, in the Credit Agreement in the Guaranty Agreement or in any other existing or future agreement with any of the Secured Parties shall prove to have been false in any material respect when made; or (d) any covenant made by a Grantor herein (other than those covenants contained in Sections 6(a) hereof) or in the Guaranty Agreement (other than any covenant contained in Section 3 thereof) is breached, violated, or not complied with and not cured within 30 days after notice thereof from any of the Secured Parties; provided, however, that any breach, violation or non-compliance with any covenant contained in Section 6(a) hereof or Section 3 of the Guaranty Agreement shall immediately result in an Event of Default; or (e) any covenant made by a Grantor in any other Loan Document or any future agreement with any of the Secured Parties is breached, violated, or not complied with and not cured within any grace period applicable thereto, or if no grace period is applicable and default thereunder does not result immediately from such noncompliance, then not cured within 30 days after notice thereof from any of the Secured Parties, and results in a material adverse change to the Collateral taken as a whole or its value taken as a whole; or (f) any material uninsured damage to or loss, theft or destruction of any of the Collateral shall occur. 13. RIGHTS AND REMEDIES UPON ACCELERATION EVENT. Upon and after an Acceleration Event, the Agent shall have the following rights and remedies on behalf of the Lenders in addition Name: NB.BOLLE.SECURITY.AGREEMENT Doc No: 190339 (FINAL) 13 to any rights and remedies set forth elsewhere in this Agreement, all of which may be exercised with or, if allowed by law, without notice to a Grantor: (a) All of the rights and remedies of a secured party under the Uniform Commercial Code of the state where such rights and remedies are asserted, or under other applicable law, all of which rights and remedies shall be cumulative, and none of which shall be exclusive, to the extent permitted by law, in addition to any other rights and remedies contained in this Agreement, the Guaranty Agreement or any other Loan Document; (b) The right to foreclose the Liens and security instruments created under this Agreement by any available judicial procedure or without judicial process; (c) The right to (i) enter upon the premises of a Grantor through self-help and without judicial process, without first obtaining a final judgment or giving such Grantor notice and opportunity for a hearing on the validity of the Agent's claim and without any obligation to pay rent to such Grantor, or any other place or places where any Collateral is located and kept, and remove the Collateral therefrom to the premises of the Agent or any agent of the Agent, for such time as the Agent may desire, in order effectively to collect or liquidate the Collateral, and/or (ii) require such Grantor to assemble the Collateral and make it available to the Agent at a place to be designated by the Agent that is reasonably convenient to both parties; (d) The right to (i) demand payment of the Accounts; (ii) enforce payment of the Accounts, by legal proceedings or otherwise; (iii) exercise all of a Grantor's rights and remedies with respect to the collection of the Accounts; (iv) settle, adjust, compromise, extend or renew the Accounts; (v) settle, adjust or compromise any legal proceedings brought to collect the Accounts; (vi) if permitted by applicable law, sell or assign the Accounts upon such terms, for such amounts and at such time or times as the Agent deems advisable; (vii) discharge and release the Accounts; (viii) take control, in any manner, of any item of payment or proceeds referred to in Section 4 above; (ix) prepare, file and sign a Grantor's name on a Proof of Claim in bankruptcy or similar document against any Account Debtor; (x) prepare, file and sign a Grantor's name on any notice of Lien, assignment or satisfaction of Lien or similar document in connection with the Accounts; (xi) endorse the name of a Grantor upon any chattel paper, document, instrument, invoice, freight bill, bill of lading or similar document or agreement relating to the Accounts or Inventory; (xii) use a Grantor's stationery for verifications of the Accounts and notices thereof to Account Debtors; (xiii) use the information recorded on or contained in any data processing equipment and computer hardware and software relating to any Collateral to which a Grantor has access; and (xiv) do all acts and things and execute all documents necessary, in Agent's sole discretion, to collect the Accounts; and (e) The right to sell, assign, lease or to otherwise dispose of all or any Collateral in its then existing condition, or after any further manufacturing or processing Name: NB.BOLLE.SECURITY.AGREEMENT Doc No: 190339 (FINAL) 14 thereof, at public or private sale or sales, with such notice as may be required by law, in lots or in bulk, for cash or on credit, with or without representations and warranties, all as the Agent, in its sole discretion, may deem advisable. The Agent shall have the right to conduct such sales on a Grantor's premises or elsewhere and shall have the right to use a Grantor's premises without charge for such sales for such time or times as the Agent may see fit. The Agent may, if it deems it reasonable, postpone or adjourn any sale of the Col lateral from time to time by an announcement at the time and place of such postponed or adjourned sale, and such sale may, without further notice, be made at the time and place to which it was so adjourned. Each Grantor agrees that the Agent has no obligation to preserve rights to the Collateral against prior parties or to marshall any Collateral for the benefit of any Person. The Agent is hereby granted a license or other right to use, without charge, each Grantor's labels, patents, copyrights, rights of use of any name, trade secrets, trade names, trademarks and advertising matter, or any property of a similar nature, as it pertains to the Collateral, in completing production of, advertising for sale and selling any Collateral and a Grantor's rights under any license and any franchise agreement shall inure to the Agent's benefit. If any of the Collateral shall require repairs, maintenance, preparation or the like, or is in process or other unfinished state, the Agent shall have the right, but shall not be obligated, to perform such repairs, maintenance, preparation, processing or completion of manufacturing for the purpose of putting the same in such saleable form as the Agent shall deem appropriate, but the Agent shall have the right to sell or dispose of the Collateral without such processing. In addition, each Grantor agrees that in the event notice is necessary under applicable law, written notice mailed to such Grantor in the manner specified herein seven (7) days prior to the date of public sale of any of the Collateral or prior to the date after which any private sale or other disposition of the Collateral will be made shall constitute commercially reasonable notice to such Grantor. All notice is hereby waived with respect to any of the Collateral which threatens to decline speedily in value or is of a type customarily sold on a recognized market. The Agent may purchase all or any part of the Collateral at public or, if permitted by law, private sale, free from any right of redemption which is hereby expressly waived by such Grantor and, in lieu of actual payment of such purchase price, may set off the amount of such price against the Secured Obligations. The net cash proceeds resulting from the collection, liquidation, sale, lease or other disposition of the Collateral shall be applied first to the expenses (including all attorneys' fees) of retaking, holding, storing, processing and preparing for sale, selling, collecting, liquidating and the like, and then to the satisfaction of all Secured Obligations. Any sale or other disposition of the Collateral and the possession thereof by the Agent shall be in compliance with all provisions of applicable law (including applicable provisions of the Uniform Commercial Code). Each Grantor shall be liable to the Agent, for the benefit of the Lenders, and shall pay to the Agent, for the benefit of the Lenders, on demand any deficiency which may remain after such sale, disposition, collection or liquidation of the Collateral. The Agent shall remit to such Grantor or other Person entitled thereto any surplus remaining after this Agreement has been terminated in accordance with Section 27 hereof. Name: NB.BOLLE.SECURITY.AGREEMENT Doc No: 190339 (FINAL) 15 14. ANTI-MARSHALLING PROVISIONS. The right is hereby given by each Grantor to the Agent, for the benefit of the Lenders, to make releases (whether in whole or in part) of all or any part of the Collateral agreeable to the Agent without notice to, or the consent, approval or agreement of other parties and interests, including junior lienors, which releases shall not impair in any manner the validity of or priority of the Liens and security interests in the remaining Collateral conferred under such documents, nor release such Grantor from personal liability for the Secured Obligations hereby secured. Notwithstanding the existence of any other security interest in the Collateral held by the Agent, for the benefit of the Lenders, the Agent shall have the right to determine the order in which any or all of the Collateral shall be subjected to the remedies provided in this Agreement. The proceeds realized upon the exercise of the remedies provided herein shall be applied by the Agent, for the benefit of the Lenders, in the manner herein provided. Each Grantor hereby waives any and all right to require the marshalling of assets in connection with the exercise of any of the remedies permitted by applicable law or provided herein. 15. APPOINTMENT OF AGENT AS A GRANTOR'S LAWFUL ATTORNEY. Without limitation of any other provision of this Agreement, upon and after an Acceleration Event, each Grantor irrevocably designates, makes, constitutes and appoints the Agent (and all Persons designated by the Agent), for the benefit of the Lenders, as such Grantor's true and lawful attorney (and agent-in-fact) to take all actions and to do all things required to be taken or done by such Grantor under this Agreement. All acts of the Agent or its designee taken pursuant to this Section 15 are hereby ratified and confirmed and the Agent or its designee shall not be liable for any acts of omission or commission nor for any error of judgment or mistake of fact or law, other than as a result of its gross negligence or willful misconduct. This power, being coupled with an interest, is irrevocable by such Grantor until this Agreement has been terminated in accordance with Section 27 hereof. 16. RIGHTS AND REMEDIES CUMULATIVE; NON-WAIVER; ETC. The enumeration of the rights and remedies of the Agent, for the benefit of the Lenders, set forth in this Agreement is not intended to be exhaustive and the exercise by any Secured Party of any right or remedy shall not preclude the exercise of any other rights or remedies, all of which shall be cumulative, and shall be in addition to any other right or remedy given hereunder, or under any other agreement between a Grantor and the Secured Parties or which may now or hereafter exist in law or in equity or by suit or otherwise. No delay or failure to take action on the part of any Secured Party in exercising any right, power or privilege shall operate as a waiver thereof, nor shall any single or partial exercise of any such right, power or privilege preclude other or further exercise thereof or the exercise of any other right, power or privilege or shall be construed to be a waiver of any Event of Default. No waiver by a party hereunder shall be effective unless it is in writing and signed by the party making such waiver, and then only to the extent specifically stated in such writing. No course of dealing between a Grantor and the Agent or the Agent's agents or employees shall be effective to change, modify or discharge any provision of this Agreement or to constitute a waiver of any Event of Default. The Agent shall not have any liability for any error, omission or delay of any kind occurring in the handling or liquidation of the Collateral or Name: NB.BOLLE.SECURITY.AGREEMENT Doc No: 190339 (FINAL) 16 for any damages resulting therefrom, other than as a result of its gross negligence or willful misconduct. 17. SUPPLEMENTAL DOCUMENTATION. At the Agent's request, each Grantor shall execute and deliver to the Agent, at any time or times hereafter, all documents, instruments and other written matter that the Agent may request to perfect and maintain perfected the Agent's (for the benefit of the Lenders) security interest in the Collateral, in form and substance acceptable to the Agent, and pay all charges, expenses and fees the Agent may reasonably incur in filing any of such documents, and all taxes relating thereto. Each Grantor agrees that a carbon, photographic, photostatic, or other reproduction of this Agreement or a financing statement is sufficient as a financing statement and may be filed by the Agent in any filing office. 18. WAIVERS. In addition to the other waivers contained herein, each Grantor hereby expressly waives, to the extent permitted by law: presentment for payment, demand, protest, notice of demand, notice of protest, notice of default or dishonor, notice of payments and nonpayments and all other notices and consents to any action taken by the Agent unless expressly required by this Agreement. 19. TRADE NAMES. Each Grantor represents that the only trade name(s) or style(s) used by such Grantor are as set forth on Exhibit D, next to the name of such Grantor. 20. NOTICE. Any notice shall be conclusively deemed to have been received by any party hereto and be effective on the day on which delivered to such party (against receipt therefor) at the address set forth below or such other address as such party shall specify to the other parties in writing (or, in the case of telephonic notice or notice by telecopy (where the receipt of such message is verified by return) expressly provided for hereunder, when received at such telephone or telecopy number as may from time to time be specified in written notice to the other parties hereto or otherwise received), or if sent prepaid by certified or registered mail return receipt requested on the third Business Day after the day on which mailed, or if sent prepaid by a national overnight courier service, on the first Business Day after the day on which delivered to such service against receipt therefor, addressed to such party at said address: (a) if to any Grantor: c/o Bolle Inc. 555 Theodore Fremd Avenue Rye, New York 10580 Attention: Mr. Ian G.H. Ashken Telephone: (914) 967-9400 Telefacsimile: (914) 967-9405 Name: NB.BOLLE.SECURITY.AGREEMENT Doc No: 190339 (FINAL) 17 with a copy to: Kane Kessler, P.C. 1350 Avenue of the Americas New York, New York 10019 Attention: Robert L. Lawrence, Esq. Telephone: (212) 541-6222 Telefacsimile: (212) 245-3009 (b) if to the Agent: NationsBank, N.A. Independence Center, 15th Floor NC1-001-15-04 Charlotte, North Carolina 28255 Attention: Dana Weir, Agency Services Telephone: (704) 388-3917 Telefacsimile: (704) 386-9923 with a copy to: NationsBank, N.A. Corporate Banking 767 Fifth Avenue, 5th Floor New York, New York 10153-0083 Attention: Ms. Susan Timmerman, Senior Vice President Telephone: (212) 407-5387 Telefacsimile: (212) 593-1083 or to such other address as each party may designate for itself by like notice given in accordance with this Section 20. 21. DEFINITIONS. All terms used herein shall be defined in accordance with the appropriate definitions appearing in the Uniform Commercial Code as in effect in New York, and such definitions are hereby incorporated herein by reference and made a part hereof. 22. ENTIRE AGREEMENT. This Agreement, together with the Credit Agreement, the Guaranty Agreement and other Loan Documents, constitutes and expresses the entire understanding between the parties hereto with respect to the subject matter hereof, and supersedes all prior agreements and understandings, inducements, commitments or conditions, express or implied, oral or written, except as herein contained. The express terms hereof control and supersede any course of performance or usage of the trade inconsistent with any of the terms hereof. Neither this Agreement nor any portion or provision hereof may be changed, altered, modified, supplemented, discharged, canceled, terminated, or amended orally or in any manner other than by an agreement, in writing signed by the parties hereto. 23. SWAP AGREEMENTS. All Hedging Obligations of any Grantor shall be deemed to be Secured Obligations secured hereby, and each Lender or affiliate of a Lender party to any Swap Agreement shall be deemed to be a Secured Party hereunder. 24. SEVERABILITY. The provisions of this Agreement are independent of and separable from each other. If any provision hereof shall for any reason be held invalid or unenforceable, Name: NB.BOLLE.SECURITY.AGREEMENT Doc No: 190339 (FINAL) 18 such invalidity or unenforceability shall not affect the validity or enforceability of any other provision hereof, but this Agreement shall be construed as if such invalid or unenforceable provision had never been contained herein. 25. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon the successors and assigns of each Grantor, and the rights, remedies, powers, and privileges of the Agent hereunder shall inure to the benefit of the successors and assigns of the Agent; provided, however, that no Grantor shall make any assignment hereof without the prior written consent of the Agent. 26. COUNTERPARTS. This Agreement may be executed in any number of counterparts and all the counterparts taken together shall be deemed to constitute one and the same instrument. 27. TERMINATION; RELEASE. On the Facility Termination Date, this Agreement and all obligations of each Grantor hereunder shall terminate without delivery of any instrument or performance of any act by any party, and the Collateral shall automatically be released from the Liens created by this Agreement and all rights to such Collateral shall automatically revert to such Grantor. Notwithstanding the immediately preceding sentence, upon such termination of this Agreement, the Agent shall reassign and redeliver such Collateral then held by or for the Agent and execute and deliver to such Grantor such documents as such Grantor shall reasonably request to evidence such termination. 28. BOLLE AMERICA, INC. DENVER LEASE. Each Grantor, individually and collectively, covenants and agrees that Bolle America, Inc. shall, not more than one-hundred and eighty (180) days after the date hereof, enter into a commercial lease of real property for a warehouse and related facilities located in or around Denver, Colorado (the "New Denver Facility"), which New Denver Facility shall be in substitution for Bolle America, Inc.'s existing facility located in Denver, Colorado and identified in Exhibit B hereto (the "Old Denver Facility"). Each Grantor further covenants and agrees that Bolle America, Inc. shall not occupy the Old Denver Facility, nor shall any Inventory be found or located therein, after the date that is one-hundred and eighty (180) days after the date hereof. 29. LEASE ASSIGNMENT AND LANDLORD WAIVER. If at any time any Grantor moves a significant portion of its Inventory from any location identified in Exhibit B hereto to a leased or rented building, warehouse or other facility of whatever description not identified in Exhibit B (each a "New Leased Facility"), including but not limited to the New Denver Facility described in Section 28 hereto, each Grantor hereby agrees that it will execute and deliver to the Agent, for the benefit of the Agent and the Lenders, an assignment of such Grantor's interest in the lease with respect to each such New Leased Facility, as applicable, in form and substance satisfactory to the Agent. Each Grantor further agrees that at such time, and as applicable, it will deliver or cause to be delivered to the Agent, for the benefit of the Agent and the Secured Parties, a landlord's waiver executed by the owner, or any other Person serving as landlord, of such New Leased Facility, in form and substance reasonably satisfactory to the Agent. Name: NB.BOLLE.SECURITY.AGREEMENT Doc No: 190339 (FINAL) 19 30. GOVERNING LAW. (A) THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS EXECUTED, AND TO BE FULLY PERFORMED, IN SUCH STATE. (B) EACH PARTY HEREBY EXPRESSLY AND IRREVOCABLY AGREES AND CONSENTS THAT ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT AND THE TRANSACTIONS CONTEMPLATED HEREIN MAY BE INSTITUTED IN ANY STATE OR FEDERAL COURT SITTING IN THE COUNTY OF NEW YORK, STATE OF NEW YORK, UNITED STATES OF AMERICA AND, BY THE EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH PARTY EXPRESSLY WAIVES ANY OBJECTION THAT IT MAY HAVE NOW OR HEREAFTER TO THE LAYING OF THE VENUE OR TO THE JURISDICTION OF ANY SUCH SUIT, ACTION OR PROCEEDING, AND IRREVOCABLY SUBMITS GENERALLY AND UNCONDITIONALLY TO THE JURISDICTION OF ANY SUCH COURT IN ANY SUCH SUIT, ACTION OR PROCEEDING. (C) EACH PARTY AGREES THAT SERVICE OF PROCESS MAY BE MADE BY PERSONAL SERVICE OF A COPY OF THE SUMMONS AND COMPLAINT OR OTHER LEGAL PROCESS IN ANY SUCH SUIT, ACTION OR PROCEEDING, OR BY REGISTERED OR CERTIFIED MAIL (POSTAGE PREPAID) TO THE ADDRESS OF SUCH PARTY PROVIDED BY SECTION 20 HEREOF, OR BY ANY OTHER METHOD OF SERVICE PROVIDED FOR UNDER THE APPLICABLE LAWS IN EFFECT IN THE STATE OF NEW YORK. (D) NOTHING CONTAINED IN SUBSECTIONS (B) OR (C) HEREOF SHALL PRECLUDE ANY PARTY FROM BRINGING ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS IN THE COURTS OF ANY PLACE WHERE ANY PARTY OR ANY OF SUCH PARTY'S PROPERTY OR ASSETS MAY BE FOUND OR LOCATED. TO THE EXTENT PERMITTED BY THE APPLICABLE LAWS OF ANY SUCH JURISDICTION, EACH PARTY HEREBY IRREVOCABLY SUBMITS TO THE JURISDICTION OF ANY SUCH COURT AND EXPRESSLY WAIVES, IN RESPECT OF ANY SUCH SUIT, ACTION OR PROCEEDING, THE JURISDICTION OF ANY OTHER COURT OR COURTS WHICH NOW OR HEREAFTER, BY REASON OF ITS PRESENT OR FUTURE DOMICILE, OR OTHERWISE, MAY BE AVAILABLE TO IT. (E) IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS OR REMEDIES UNDER OR RELATED TO THIS AGREEMENT OR ANY AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED OR THAT MAY IN THE FUTURE BE DELIVERED IN CONNECTION WITH THE FOREGOING, EACH PARTY HEREBY AGREES, TO Name: NB.BOLLE.SECURITY.AGREEMENT Doc No: 190339 (FINAL) 20 THE EXTENT PERMITTED BY APPLICABLE LAW, THAT ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY AND EACH PARTY HEREBY WAIVES, TO THE EXTENT PERMITTED BY APPLICABLE LAW, ANY OBJECTION THAT IT MAY HAVE THAT EACH ACTION OR PROCEEDING HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. [SIGNATURE PAGES FOLLOW] Name: NB.BOLLE.SECURITY.AGREEMENT Doc No: 190339 (FINAL) 21 IN WITNESS WHEREOF, the parties have duly executed this Second Amended and Restated Security Agreement on the day and year first written above. GRANTORS: BOLLE INC. By: /s/ Desiree DeStefano Name: Title: BOLLE AMERICA, INC. By: /s/ Desiree DeStefano Name: Title: ORC MANAGEMENT CORPORATION By: /s/ Desiree DeStefano Name: Title: AGENT: NATIONSBANK, NATIONAL ASSOCIATION, as Agent for the Lenders By: /s/ Susan Timmerman Name: Title: SECURITY AGREEMENT Signature Page 1 of 1 Name: NB.BOLLE.SECURITY.AGREEMENT Doc No: 190339 (FINAL) EXHIBIT A Location of Accounts BOLLE INC. 3890 Elm Street (Owned or Leased?) Denver, Colorado 80207 BOLLE AMERICA, INC. 3890 Elm Street (Owned or Leased?) Denver, Colorado 80207 ORC MANAGEMENT CORPORATION Name: NB.BOLLE.SECURITY.AGREEMENT Doc No: 190339 (FINAL) EXHIBIT B Location of Inventory BOLLE INC. N/A BOLLE AMERICA, INC. 5140 East 39th Avenue (Leased) Denver, Colorado 80207 5142 East 39th Avenue (Leased) Denver, Colorado 80207 [3890 Elm Street (Owned or Leased?) Denver, Colorado 80207] [3890 Elm Street (Owned or Leased?) Denver, Colorado 80207] ORC MANAGEMENT CORPORATION Name: NB.BOLLE.SECURITY.AGREEMENT Doc No: 190339 (FINAL) EXHIBIT C Location of Equipment BOLLE INC. 3890 Elm Street (Owned or Leased?) Denver, Colorado 80207 BOLLE AMERICA, INC. 5140 East 39th Avenue (Leased) Denver, Colorado 80207 5142 East 39th Avenue (Leased) Denver, Colorado 80207 3890 Elm Street (Owned or Leased?) Denver, Colorado 80207 3890 Elm Street (Owned or Leased?) Denver, Colorado 80207 ORC MANAGEMENT CORPORATION Name: NB.BOLLE.SECURITY.AGREEMENT Doc No: 190339 (FINAL) EXHIBIT D Trade Names and Styles BOLLE INC. None. BOLLE AMERICA, INC. None. ORC MANAGEMENT CORPORATION Name: NB.BOLLE.SECURITY.AGREEMENT Doc No: 190339 (FINAL) (f) SECOND AMENDED AND RESTATED INTELLECTUAL PROPERTY SECURITY AGREEMENT THIS SECOND AMENDED AND RESTATED INTELLECTUAL PROPERTY SECURITY AGREEMENT (this "Agreement") is made as of March 11, 1998 by and among BOLLE INC., a Delaware corporation (the "Borrower"), and CERTAIN SUBSIDIARIES OF THE BORROWER PARTY HERETO (each a "Guarantor" and collectively with the Borrower, the "Grantors"), and NATIONSBANK, NATIONAL ASSOCIATION, a national banking association, as Agent (the "Agent") for each of the lenders (the "Lenders" and collectively with the Agent, the "Secured Parties") now or hereafter party to the Credit Agreement (as defined below). All capitalized terms used but not otherwise defined herein shall have the respective meanings assigned thereto in the Credit Agreement (as defined below); W I T N E S S E T H: WHEREAS, the Lenders, the Agent and BEC Group, Inc. ("BEC"), of which the Borrower was formerly a direct subsidiary, are parties to that certain Amended and Restated Credit Agreement dated as of July 10, 1997 (the "Existing Credit Agreement"); and WHEREAS, pursuant to that certain Assignment Agreement and First Amendment to the Amended and Restated Credit Agreement, dated as of the date hereof and effective immediately prior to the effectiveness of this Agreement, between BEC, the Borrower, the Agent and the Lenders (the "Assignment and Amendment"), BEC assigned to the Borrower, and the Borrower assumed from BEC, among other liabilities, certain indebtedness owing by and obligations of BEC under the Existing Credit Agreement such that the Borrower became a co-borrower together with BEC under the Existing Credit Agreement; and WHEREAS, certain of the Guarantors are parties to that certain Amended and Restated Intellectual Property Security Agreement dated as of July 10, 1997 with the Agent (as amended, supplemented or otherwise modified, the "Existing IP Security Agreement"); and WHEREAS, certain of the Guarantors are parties to that certain Second Amended and Restated Guaranty Agreement (the "Guaranty") dated as of the date hereof pursuant to which each Guarantor guaranteed, or continued its guaranty of, the obligations of the Borrower under the Credit Agreement; and WHEREAS, the Grantors, the Agent, and the Lenders desire to amend and restate that portion of the Existing IP Security Agreement in its entirety to reflect changes in the parties required to be parties thereto and certain changes in the Credit Agreement; and WHEREAS, as collateral security for payment and performance of its obligations under the Credit Agreement, the Borrower is willing to continue its grant to the Agent for the benefit of the Secured Parties of a security interest in certain of its personal property and assets; and WHEREAS, as collateral security for payment and performance of its obligations under the Guaranty, each Guarantor is willing to continue its grant to the Agent for the benefit of the Secured Parties of a security interest in certain of its intangible personal property and assets; NOW, THEREFORE, in order to induce the Secured Parties to enter into the Loan Documents and in consideration of the premises and the mutual covenants contained herein, the parties hereto hereby amend and restate the Existing IP Security Agreement in its entirety as follows: SECTION 1. GRANT OF SECURITY. Each Grantor hereby reaffirms, regrants and continues its grant and collateral assignment, and does hereby grant and collaterally assign, to the Agent for the benefit of the Secured Parties of a security interest in all of the following (collectively, the "Collateral"): (a) all of such Grantor's right, title and interest, whether now owned or hereafter acquired, in and to all United States and foreign patents and patent applications (including without limitation the patents and patent applications identified on Schedule I attached hereto and incorporated herein by reference) and including the right to recover for all past, present and future infringements thereof and all reissues, divisions, continuations, continuations-in-part, substitutes, renewals, and extensions thereof, all improvements thereon, and all other rights of any kind whatsoever of such Grantor accruing thereunder or pertaining thereto (collectively, the "Patents"); (b) all of such Grantor's right, title and interest, whether now owned or hereafter acquired, in and to all United States and foreign trademarks, trade names, trade dress, service marks, trademark and service mark registrations, and applications for trademark or service mark registration and any renewals thereof (including without limitation each trademark, trade name, trade dress, registration and application identified in Schedule II attached hereto and incorporated herein by reference) and including all income, royalties, damages and payments now and hereafter due and/or payable with respect thereto (including without limitation damages for past or future infringements thereof), the right to sue or otherwise recover for all past, present and future infringements thereof, all rights corresponding thereto throughout the world (but only such rights as now exist or may come to exist under applicable local law) and all other rights of any kind whatsoever of each Grantor accruing thereunder or pertaining thereto, together in each case with the goodwill of the business connected with the use of, and symbolized by, each such trademark and service mark (collectively, the "Trademarks"); (c) all of such Grantor's right, title and interest, whether now owned or hereafter acquired, in and to all United States and foreign copyrights and copyright applications (including without limitation the copyrights and copyright applications identified on Schedule III attached hereto and incorporated herein by reference) and including the right to recover for all past, present and future infringements thereof and all reissues, divisions, continuations, continuations-in-part, substitutes, renewals, and extensions thereof, all improvements thereon, and all other rights of any kind whatsoever of such Grantor accruing thereunder or pertaining thereto (collectively, the "Copyrights"); Name: NB.BOLLE.IP.SECURITY.AGREEMENT Doc No: 190342 (FINAL) 2 (d) All license agreements regarding Patents, Trademarks or Copyrights with any other party (including any patent, trademark, copyright and other items described in the definitions of Patents, Trademarks or Copyrights that do not qualify as such only because no Grantor has any right, title or interest therein other than rights pursuant to such license agreements), whether such Grantor is a licensor or licensee under any such license agreement (including without limitation the Distributorship Agreement dated December 15, 1992 by and between Bolle America, Inc. and Etablissements Bolle S.N.C., as amended, most recently by Amendment to the Distributorship Agreement effective of even date herewith between such parties (as so amended, the "Bolle France license") and each of the licenses listed on Schedule IV attached hereto and incorporated herein by reference), and the right to prepare for sale, sell and advertise for sale, all Inventory (as defined in the Security Agreement) now or hereafter owned by such Grantor and now or hereafter covered by such licenses (collectively, the "Licenses")); and (e) all proceeds of any of the foregoing. In addition, each Grantor has executed in blank and delivered to the Agent an assignment of licenses and federally registered patents, trademarks and copyrights (the "IP Assignment") owned by it, if any, in substantially the form of Exhibit A hereto. Each Grantor hereby authorizes the Agent to complete as Assignee and record with the United States Patent and Trademark Office (the "PTO") and United States Copyright Office (the "Copyright Office") each IP Assignment upon the occurrence of an Acceleration Event. For the purposes of this Agreement, "Acceleration Event" means that (a) an Event of Default has occurred and is continuing and (b) the Secured Obligations have become due and payable (whether by acceleration, at final maturity or otherwise). SECTION 2. SECURITY FOR OBLIGATIONS. The security interests and collateral assignments granted under this Agreement (the "Security Interests") by each Grantor secure the payment of all obligations of such Grantor under, in respect of or in connection with this Agreement, the Credit Agreement, the Guaranty and each other Loan Document to which such Grantor is or becomes a party (all such obligations being the "Secured Obligations"). The Security Interests granted by this Agreement are granted in conjunction with, and not in limitation of, the security interests granted to the Agent, for the benefit of the Lenders, in other assets of each Grantor pursuant to the other Loan Documents. SECTION 3. COLLATERAL ASSIGNMENT. In addition to, and not in limitation of, the grant of a security interest in the Patents, Trademarks, Copyrights and Licenses in Section 1 above, each Grantor hereby regrants, reassigns, retransfers and reconveys, and grants, assigns, transfers and conveys, to the Agent, for the benefit of the Lenders, the Assignor's entire right, title and interest in and to the Patents, Trademarks, Copyrights and Licenses; provided, that such grant, assignment, transfer and conveyance shall become effective only at the election of the Agent after the occurrence of an Acceleration Event. The Grantor hereby agrees that after the occurrence of an Acceleration Event the use by the Agent of any of the Patents, Trademarks, Copyrights and Licenses shall be without any liability for royalties or other related charges from the Agent to any Grantor. Name: NB.BOLLE.IP.SECURITY.AGREEMENT Doc No: 190342 (FINAL) 3 SECTION 4. FURTHER ASSURANCES. (a) Each Grantor agrees that from time to time, at the expense of such Grantor, such Grantor will promptly execute and deliver all further instruments and documents and take all further action that may be necessary or desirable, or that the Agent may reasonably request, in order to (i) continue, perfect and protect any Security Interest granted or purported to be granted hereby, (ii) perfect the Agent's (for the benefit of the Lenders) Security Interest in and assign to the Agent, for the benefit of the Lenders, as security for the repayment and satisfaction of the Secured Obligations, all Collateral located in any foreign jurisdiction, and (iii) enable the Agent, for the benefit of the Lenders, to exercise and enforce its rights and remedies hereunder with respect to any part of the Collateral. Without limiting the generality of the foregoing, each Grantor will execute and file (with the appropriate governmental offices, authorities, agencies and regulatory bodies in the United States and any applicable foreign jurisdiction) such supplements to this Agreement and such financing or continuation statements, or amendments thereto, and such other instruments or notices, including an executed IP Assignment, with the PTO and the Copyright Office, as may be necessary or desirable, or as the Agent, on behalf of the Lenders, may reasonably request, in order to perfect and preserve the Security Interests granted or purported to be granted hereby. (b) Each Grantor hereby authorizes the Agent, on behalf of the Lenders, upon the occurrence and during the continuation of an Event of Default, to file, where permitted by law, one or more financing or continuation statements, and amendments thereto, relative to all or any part of the Collateral without the signature of such Grantor. A carbon, photographic or other reproduction of this Agreement or any financing statement covering the Collateral or any part thereof shall be sufficient as a financing statement where permitted by law. (c) Each Grantor will furnish to the Agent, on behalf of the Lenders, from time to time statements and schedules further identifying and describing the Collateral and such other reports in connection with the Collateral as the Agent, on behalf of the Lenders, may reasonably request, all in reasonable detail. (d) Each Grantor agrees that, should it have or obtain an ownership interest in any United States or foreign patent or patent application that is not now identified on Schedule I, any trademark or trademark application that is not now identified on Schedule II or any copyright or copyright application that is not now identified on Schedule III or any license agreement in respect of any patent, trademark or copyright that is not now identified on Schedule IV: (i) the provisions of this Agreement shall automatically apply to such item, and such item shall automatically become part of the Collateral; and (ii) such Grantor shall, within three months after acquiring or becoming aware of such ownership interest, (A) give written notice thereof to the Agent and, (B) with respect to material Trademarks, present such Trademarks for proper registration with the PTO, (C) with respect to material Copyrights, present such Copyrights for proper registration with the Copyright Office and (D) with respect to patents and patent applications and trademarks and trademark applications, Name: NB.BOLLE.IP.SECURITY.AGREEMENT Doc No: 190342 (FINAL) 4 prepare, execute and file in the PTO or if appropriate in the equivalent agencies in any foreign jurisdiction, within the requisite time period, all documents that are known by such Grantor to be necessary or that the Agent, on behalf of the Lenders, reasonably requests in order to perfect the Security Interest of the Agent, on behalf of the Lenders, therein. Each Grantor authorizes the Agent, on behalf of the Lenders, to execute and file such a document in the name of such Grantor if such Grantor fails to do so. (e) Each Grantor agrees that should any of its domestic Subsidiaries (other than a corporation which is a party hereto and whether now or hereafter existing) obtain any ownership interest in any United States or foreign patent or patent application, trademarks or trademark application, trademarks, trade names, trade dress, service marks, trademark and service mark registrations, and applications for trademark or service mark registration and any renewals thereof, such Grantor shall either cause such corporation (i) to become a party to the Guaranty and a party hereto, or (ii) to transfer and assign all such corporation's ownership interests therein to such Grantor, whereupon the provisions of subsection (d) of this Section 4 shall be applicable thereto. (f) To the extent necessary or economically desirable in the conduct of its business, each Grantor agrees: (i) to take all necessary steps in any proceeding before the PTO or any similar office or agency in any other country or any political subdivision thereof or in any court, to maintain and pursue each patent application now or hereafter included in the Collateral and to maintain each patent, trademark or copyright now or hereafter included in the Collateral, including the filing of divisional, continuation, continuation-in-part and substitute applications, the filing of applications for reissue, renewal or extensions, the payment of maintenance fees, and the participation in interference, reexamination, opposition and infringement proceedings; (ii) to take corresponding steps with respect to material unpatented inventions on which such Grantor is now or hereafter becomes entitled to seek protection; (iii) to bear any expenses incurred in connection with such activities; and (iv) not to abandon any right to file a material patent application, or abandon any material pending application with respect to any of the Collateral, without the written consent of the Agent, which consent shall not be unreasonably withheld. (g) No Grantor shall do any act or omit to do any act whereby any of the Collateral may become dedicated or abandoned, except where such dedication or abandonment (i) will not adversely affect the aggregate economic value of the Collateral after giving effect to such dedication or abandonment or materially adversely affect the business, condition (financial or otherwise), operations, performance, or properties of such Grantor individually or of such Grantor and its Subsidiaries taken as a whole, and (ii) is in the ordinary course of such Grantor's business. Each Grantor agrees to notify the Agent promptly and in writing if it learns that any of the Collateral may become abandoned or dedicated or of any adverse determination or any development (including without limitation the institution of any proceeding in the PTO, or in the equivalent agencies in any foreign jurisdiction, or any court) regarding any material part of the Collateral. Name: NB.BOLLE.IP.SECURITY.AGREEMENT Doc No: 190342 (FINAL) 5 (h) In the event that any of the Collateral as to which it has granted the Security Interests is infringed or misappropriated by a third party, such Grantor shall promptly notify the Agent and shall, unless such Grantor shall reasonably determine that such Collateral would not reasonably be likely to, in the aggregate, be of material economic value to such Grantor, take all reasonable steps to terminate the infringement or misappropriation, and take such other actions as such Grantor shall deem appropriate under the circumstances to protect such Collateral. Any expense incurred in connection with such activities shall be borne by such Grantor. (i) Each Grantor agrees (i) to maintain the quality of any and all products in connection with which the Collateral is used, consistent with the quality standards established by such Grantor for said products as of the date of determination, and (ii) to provide the Agent, on behalf of the Lenders, at least quarterly, with a certificate of an officer of such Grantor certifying such Grantor's compliance with the foregoing subsections (a) through (i). (j) Each Grantor agrees that it will promptly correct any defect or error that may be discovered in (i) this Agreement, (ii) any document executed pursuant hereto or (iii) the execution, acknowledgment or recordation thereof. (k) Each Grantor shall continue to mark its products according to applicable law with the numbers of all appropriate Patents. (l) Each Grantor shall cause each of its subsidiaries to do all things reasonably necessary to keep in full force and effect the Bolle France license and shall not, and shall cause each of its subsidiaries not to, take any action, or fail to take any action, which would amend, revise, supplement or otherwise alter the terms of the Bolle France license as in effect on the date hereof or which would result, directly or indirectly, in the Bolle France license not being legally valid and enforceable in accordance with its terms against the licensor thereof or otherwise result in its cancellation or termination. No Grantor shall grant any sublicense with respect to the Bolle France license or grant any other rights or interests therein to any other Person except as permitted in Section 10.19 to the Credit Agreement. SECTION 5. GENERAL REPRESENTATIONS AND WARRANTIES. Each Grantor represents and warrants as follows: (a) It has the unqualified right to enter into this Agreement and to perform its terms. (b) No authorization, consent, approval or other action by, and no notice to or filing with, any governmental authority or regulatory body or any other Person is required either (i) for the grant by such Grantor of the Security Interests granted hereby or for the execution, delivery or performance of this Agreement by such Grantor, or (ii) for the perfection of or the exercise by the Agent, on behalf of the Secured Parties, of its rights and remedies hereunder, except for the filing of this Agreement with the PTO and with the equivalent offices in any foreign jurisdiction with respect to each Patent and Trademark, and Name: NB.BOLLE.IP.SECURITY.AGREEMENT Doc No: 190342 (FINAL) 6 the filings required by the Uniform Commercial Code of the State in which such Grantor maintains its chief executive office, and except to the extent that the exercise of rights and remedies may be limited by any applicable bankruptcy, insolvency, reorganization, moratorium or similar law affecting creditors rights generally or by general principles of equity. (c) Set forth on Schedule IV is a list, which is complete and accurate in all material respects as of the date hereof, of the Bolle France license and all other Licenses of such Grantor necessary for the conduct of its business as currently conducted or utilized and material in such Grantor's operations or materially used in the selling or marketing of such Grantor's products, including the expiration date of such Licenses. (d) Each License of such Grantor identified on Schedule IV is validly subsisting and has not been adjudged invalid or unenforceable, in whole or in part, and is, to such Grantor's knowledge, valid and enforceable. No action or proceeding is pending or threatened (i) seeking to limit, cancel or question the validity of the Bolle France license, or of an aggregate amount of Collateral that would be reasonably likely to be of material economic value or (ii) which, if adversely determined, would have an adverse effect on the Bolle France license, or on the economic value of the Collateral taken as a whole. (e) It has notified the Agent in writing of all uses of any Patent, Trademark or Copyright, prior to such Grantor's use, of which such Grantor is aware, which would in the reasonable judgment of such Grantor lead to such item becoming invalid or unenforceable, including prior unauthorized uses by third parties and uses that were not supported by the goodwill of the business connected with such item. (f) It has not granted any release, covenant not to sue, or non-assertion assurance to any third person, nor allowed any shop right to arise with respect to any third person, with respect to any part of the Collateral that would be reasonably likely, in the aggregate, to be of material economic value. (g) Its products have been marked as required by applicable law with respect to the Collateral. (h) The actions contemplated under or in connection with the Loan Documents will not impair the legal right of such Grantor to use any of the Collateral. (i) Except as disclosed to the Lenders in writing prior to the date of this Agreement, such Grantor has no knowledge of the existence of any right under any patent, trademark, license agreement, trade name, trade secret, know-how, confidential research, development and commercial information, or other proprietary information held by any other Person that would preclude such Grantor from publishing, distributing, marketing, selling, or using any product currently made by it, being made for it or sold or used by it, imported by it or exported by it, as the case may be, or to use any processes currently used by it (except, in each case, to the extent that such Grantor has granted an exclusive license to another Name: NB.BOLLE.IP.SECURITY.AGREEMENT Doc No: 190342 (FINAL) 7 Person), or materially interfere with the ability of such Grantor to carry on its business as currently carried on, and such Grantor has no knowledge of any claim to the contrary that is likely to be made. (j) Such Grantor has used consistent standards of quality in manufacturing, distribution and marketing of each product sold and provision of each service provided under any Collateral, and has taken all steps necessary to ensure that all licensed users of any Collateral use such consistent standards of quality. (k) No Subsidiaries and none of such Grantor's Subsidiaries (except to the extent that such Subsidiaries are also Grantors hereunder) has an ownership interest in any patents, patent applications, copyrights, copyright applications, trademark, trade name, trade dress, service marks, trademark or service mark registrations or any applications for trademark or service mark registration. (l) No claim has been made (and, as to Collateral with respect to which such Grantor is a licensor, to the knowledge of such Grantor, no claim has been made against the third party licensee), and such Grantor has no knowledge of any claim that is likely to be made, that the use by such Grantor of any Collateral does or may violate the rights of any Person. (m) The Bolle France license has been duly authorized, executed and delivered by each of the parties thereto and is legally valid and enforceable against all such parties in accordance with its terms and its execution and performance does not and will not violate any organizational documents or contractual obligations of any party thereto. SECTION 6. PATENT REPRESENTATIONS AND WARRANTIES. Each Grantor represents and warrants as follows: (a) It is the sole legal and beneficial owner of the Patents set forth opposite its name on Schedule I hereto, free and clear of any Lien, security interest, option, charge, pledge, assignment (whether conditional or not), or any other encumbrance except for the security interests created or permitted by this Agreement or the Credit Agreement and certain Licenses and registered user agreements described on Schedule IV and the Permitted Liens or Liens granted to the Agent pursuant to the Existing IP Security Agreement (the "Existing Bank Liens"), which Liens are continued and regranted pursuant to this Agreement, and no effective financing statement or other instrument similar in effect covering all or any part of such Collateral, except in connection with Existing Bank Liens, is on file in any recording office, except such as may have been filed in favor of the Agent, for the benefit of the Lenders. (b) Set forth on Schedule I is a list, which is complete and accurate in all material respects as of the date hereof, of all of the Patents owned by such Grantor necessary for the conduct of its business as currently conducted or utilized and material in such Grantor's operations or materially used in the selling or marketing of such Grantor's products. Name: NB.BOLLE.IP.SECURITY.AGREEMENT Doc No: 190342 (FINAL) 8 (c) Each Patent of such Grantor identified on Schedule I hereto is subsisting and has not been adjudged unpatentable, invalid or unenforceable, in whole or in part and is, to the knowledge of such Grantor, patentable, valid and enforceable and each of such Patent applications has been filed in conformity with applicable rules and procedures of the PTO and of the equivalent agencies in each applicable foreign jurisdiction and will be diligently prosecuted in conformity therewith so as to not improperly become abandoned. SECTION 7. TRADEMARK REPRESENTATIONS AND WARRANTIES. Each Grantor represents and warrants as follows: (a) It is the sole, legal and beneficial owner of the entire right, title and interest in and to the Trademarks purported to be granted by it hereunder, free and clear of any Lien, security interest, option, charge, pledge, registered user agreement, assignment (whether conditional or not), or covenant, or any other encumbrance, except for the Security Interests created or permitted by this Agreement or the Credit Agreement and certain Licenses and registered user agreements described on Schedule IV or Permitted Liens or Existing Bank Liens. No effective financing statement or other instrument similar in effect covering all or any part of the Trademarks purported to be granted by such Grantor hereunder, except in connection with Existing Bank Liens, is on file in any recording office, including, without limitation, the PTO and the equivalent offices in any foreign jurisdiction, except such as may have been filed in favor of the Agent, for the benefit of the Lenders. (b) Set forth on Schedule II is a list, which is complete and accurate in all material respects as of the date hereof, of all of the Trademarks owned by such Grantor necessary for the conduct of its business as currently conducted or utilized and material in such Grantor's operations or materially used in the selling or marketing of such Grantor's products. (c) Each Trademark of such Grantor identified on Schedule II is validly subsisting and has not been abandoned or adjudged invalid, unregistrable or unenforceable, in whole or in part, and is, to such Grantor's knowledge, valid, registrable and enforceable. SECTION 8. COPYRIGHT REPRESENTATIONS AND WARRANTIES. Each Grantor represents and warrants as follows: (a) It is the sole, legal and beneficial owner of the entire right, title and interest in and to the Copyrights purported to be granted by it hereunder, free and clear of any Lien, security interest, option, charge, pledge, registered user agreement, assignment (whether conditional or not), or covenant, or any other encumbrance, except for the Security Interests created or permitted by this Agreement or the Credit Agreement and certain Licenses and registered user agreements described on Schedule IV or Permitted Liens or Existing Bank Liens. No effective financing statement or other instrument similar in effect covering all or any part of the Copyrights purported to be granted by such Grantor hereunder, except in connection with Existing Bank Liens, is on file in any recording office, including, without limitation, the PTO and the equivalent offices in any foreign jurisdiction, except such as may have been filed in favor of the Agent, for the benefit of the Lenders. Name: NB.BOLLE.IP.SECURITY.AGREEMENT Doc No: 190342 (FINAL) 9 (b) Set forth on Schedule III is a list, which is complete and accurate in all material respects as of the date hereof, of all of the Copyrights owned by such Grantor necessary for the conduct of its business as currently conducted or utilized and material in such Grantor's operations or materially used in the selling or marketing of such Grantor's products. (c) Each Copyright of such Grantor identified on Schedule III is validly subsisting and has not been abandoned or adjudged invalid, unregistrable or unenforceable, in whole or in part, and is, to such Grantor's knowledge, valid, registrable and enforceable. SECTION 9. TRANSFERS AND OTHER LIENS. No Grantor shall: (a) sell, assign (by operation of law or otherwise) or otherwise dispose of any of, or grant any option with respect to, the Collateral, except as permitted by the Credit Agreement, except that any Grantor may license the Collateral (i) in the ordinary course of such Grantor's business, provided that such license is necessary or desirable in the conduct of such Grantor's business, or (ii) in connection with a sale of assets in compliance with the Credit Agreement, provided that such license shall be on terms reasonably expected to maximize the gain to such Grantor resulting from the granting of such license. The Agent, for the benefit of the Lenders, shall execute any documents that such Grantor may reasonably request in order to permit the Grantor to exercise its right hereunder to license the Trademarks, provided that the Agent shall not be required to do anything that may, in the sole judgment of the Agent, adversely affect the validity of the Security Interests or the assignment of the Collateral located in any foreign jurisdiction; (b) create or suffer to exist any Lien, security interest or other charge or encumbrance upon or with respect to any of the Collateral except for the Security Interests created by this Agreement or other Permitted Liens; or (c) take any other action in connection with any of the Collateral that would impair the value of the interest or rights of such Grantor in the Collateral taken as a whole or that would impair the interest or rights of the Agent for the benefit of the Lenders. SECTION 10. AGENT APPOINTED ATTORNEY-IN-FACT. Without limiting any other provision of this Agreement, upon the occurrence and during the continuance of an Acceleration Event (as hereinafter defined), each Grantor hereby irrevocably appoints the Agent, for the benefit of the Lenders, as such Grantor's attorney-in-fact, with full authority in the place and stead of such Grantor and in the name of such Grantor or otherwise, from time to time in the Agent's discretion, to take any action and to execute any instrument that the Agent may deem necessary or advisable to accomplish the purposes of this Agreement, including without limitation: (a) to ask, demand, collect, sue for, recover, compromise, receive and give acquittance and receipts for moneys due and to become due under or in respect of any of the Collateral; Name: NB.BOLLE.IP.SECURITY.AGREEMENT Doc No: 190342 (FINAL) 10 (b) to receive, endorse and collect any drafts or other instruments, documents and chattel paper in connection with clause (a) above; (c) to file any claims or take any action or institute any proceedings that the Agent may deem necessary or desirable for the collection of any of the Collateral or otherwise to enforce the rights of the Agent, for the benefit of the Lenders, with respect to any of the Collateral; and (d) to execute, in connection with the sale provided for in Section 14, any endorsement, assignments, or other instruments of conveyance or transfer with respect to the Collateral. For purposes of this Agreement, "Acceleration Event" means that (a) an Event of Default has occurred and is continuing and (b) the Secured Obligations have become due and payable (whether by acceleration, at final maturity or otherwise). SECTION 11. AGENT MAY PERFORM. (a) If any Grantor fails to perform any agreement contained herein, the Agent may itself perform, or cause performance of, such agreement, and the expenses of the Agent incurred in connection therewith shall be payable by such Grantor under Section 15(b) to the fullest extent permitted by applicable law. (b) The Agent or its designated representatives shall have the right to the extent reasonably requested and upon reasonable prior notice, at any reasonable time during normal business hours of such Grantors and from time to time, to inspect the Grantors' premises and to examine the Grantors' books, records and operations relating to the Collateral. SECTION 12. THE AGENT'S DUTIES. The powers conferred on the Agent, for the benefit of the Lenders, hereunder are solely to protect the interest of the Secured Parties in the Collateral and shall not impose any duty upon it to exercise any such powers. Except for the safe custody of any Collateral in its possession and the accounting for moneys actually received by it hereunder, neither the Agent nor any Lender shall have any duty as to any Collateral or as to the taking of any necessary steps to preserve rights against other parties or any other rights pertaining to any Collateral. Each Secured Party shall be deemed to have exercised reasonable care in the custody and preservation of the Collateral in its possession if such Collateral is accorded treatment substantially equal to that which such party accords its own similar property. SECTION 13. EVENTS OF DEFAULT. It is understood and agreed that, with respect to any Grantor, the occurrence of any one or more of the following shall constitute an "Event of Default" hereunder with respect to such Grantor and shall entitle the Agent, for the benefit of the Lenders, to take such actions as are elsewhere provided in this Agreement in respect of Events of Default: (a) an "Event of Default" or "Default" as defined in the Credit Agreement shall have occurred and be continuing with respect to the Borrower; or Name: NB.BOLLE.IP.SECURITY.AGREEMENT Doc No: 190342 (FINAL) 11 (b) an "Event of Default" or "Default" as defined in the Guaranty shall have occurred and be continuing with respect to such Grantor; or (c) such Grantor shall have failed to pay the Agent all of the Guarantors' Obligations in accordance with, and as defined in, the Guaranty on the Business Day on which the Agent has demanded such payment in accordance with the terms of the Guaranty; or (d) any material representation or warranty made by such Grantor herein, in the Credit Agreement or Guaranty or in any other Loan Document shall prove to have been false in any material respect when made; or (e) any covenant made by such Grantor herein, in the Credit Agreement, in the Guaranty or in any other Loan Document is breached, violated, or not complied with and not cured, in the case of this Agreement (other than with respect to any breach or violation of or non-compliance with Sections 4(g), 4(l) and 9 hereof) within 30 days after notice thereof from the Agent and, in the case of the other Loan Documents, within any grace period applicable thereto, or if no grace period is applicable and default thereunder does not result immediately from such noncompliance; then not cured within 30 days after notice thereof from the Agent or the Lenders; provided, however, any breach or violation of or non-compliance with Section 4(g), 4(l) and 9 hereof shall immediately result in an Event of Default. SECTION 14. REMEDIES UPON ACCELERATION EVENT. If an Acceleration Event shall have occurred and be continuing: (a) The Agent, for the benefit of the Lenders, may exercise in respect of the Collateral of any defaulting Grantor, in addition to other rights and remedies provided for herein or otherwise available to it, all the rights and remedies of a secured party upon default under the Uniform Commercial Code (the "UCC") and also may (i) exercise any and all rights and remedies of such Grantor under, in connection with, or otherwise in respect of, such Collateral, including the completion and filing of the IP Assignment, (ii) require such Grantor to, and each Grantor hereby agrees that it will at its expense and upon request of the Agent forthwith, assemble all or part of the documents embodying such Collateral as directed by the Agent and make it available to the Agent, for the benefit of the Lenders, at a place to be designated by the Agent that is reasonably convenient to both the Agent and such Grantor, (iii) occupy any premises owned or leased by such Grantor where documents embodying such Collateral or any part thereof are assembled for a reasonable period in order to effectuate the Agent's rights and remedies hereunder or under applicable law, without obligation to such Grantor in respect of such occupation, (iv) license such Collateral or any part thereof, and (v) without notice except as specified below, sell such Collateral or any part thereof in one or more parcels at public or private sale, at any of the Agent's offices or elsewhere, for cash, on credit or for future delivery, and upon such other terms as the Agent may deem commercially reasonable. Each Grantor agrees that at least ten days' notice to such Grantor of the time and place of any public sale or the time after which any private sale is to be made shall constitute reasonable notification. The Agent shall not be obligated to make any sale of the Collateral regardless of notice of sale having been given. The Agent may adjourn any public or private Name: NB.BOLLE.IP.SECURITY.AGREEMENT Doc No: 190342 (FINAL) 12 sale from time to time by announcement at the time and place fixed therefor, and such sale may, without further notice, be made at the time and place to which it was so adjourned. (b) All payments received by any defaulting Grantor under or in connection with any of such Collateral shall be received in trust for the benefit of the Lenders, shall be segregated from other funds of such Grantor and shall be immediately paid over to the Agent, for the benefit of the Lenders, in the same form as so received (with any necessary endorsement). (c) All payments made under or in connection with or otherwise in respect of the Collateral of any defaulting Grantor, and all cash proceeds received by the Agent in respect of any sale of, collection from, or other realization upon all or any part of such Collateral may, in the discretion of the Agent, be held by the Agent, for the benefit of the Lenders, as collateral for, and then or at any time thereafter applied (after payment of any amounts payable to the Agent pursuant to Section 15) for the ratable benefit of the Secured Parties against all or any part of the Secured Obligations, in such order as the Agent shall elect. Any surplus of such cash or cash proceeds held by the Agent, for the benefit of the Lenders, and remaining after payment in full of all the Secured Obligations shall be paid over to the respective Grantors or to whosoever may be lawfully entitled to receive such surplus. Any sale or other disposition of the Collateral and the possession thereof by the Agent shall be in compliance with all provisions of applicable law (including applicable provisions of the UCC). SECTION 15. INDEMNITY AND EXPENSES. (a) Each Grantor agrees to indemnify the Agent, for the benefit of the Lenders, from and against any and all claims, losses and liabilities growing out of or resulting from this Agreement that are incurred by the Agent (including without limitation enforcement of this Agreement), except claims, losses or liabilities resulting from the Agent's gross negligence or willful misconduct. (b) Each Grantor will upon demand pay to the Agent, for the benefit of the Lenders, the amount of any and all reasonable expenses, including the reasonable fees and disbursements of its counsel and of any experts and agents, that the Agent, for the benefit of the Lenders, may incur in connection with (i) the administration of this Agreement, (ii) the custody, preservation, use or operation of, or the sale of, collection from or other realization upon, any of the Collateral, (iii) the exercise or enforcement of any of the rights of the Secured Parties, or (iv) the failure by any Grantor to perform or observe any of the provisions hereof. SECTION 16. SECURITY INTEREST ABSOLUTE. All rights of the Secured Parties in the Security Interests granted hereunder, and each of the Secured Obligations, shall be absolute and unconditional irrespective of: (a) any lack of validity or enforceability of the Credit Agreement or any other Loan Document, or any other agreement or instrument relating thereto; Name: NB.BOLLE.IP.SECURITY.AGREEMENT Doc No: 190342 (FINAL) 13 (b) any change in the time, manner or place of payment of, or in any other term of, all or any of the Secured Obligations, or any other amendment or waiver of or any consent to departure from, the Credit Agreement or any other Loan Document, including, but not limited to, (i) an increase or decrease in the amount of the Secured Obligations and (ii) an amendment of any Loan Document to permit the Agent or the Lenders or any one or more of them to extend further or additional credit to the Borrower in any form which credit shall thereupon be and become subject to the Credit Agreement and the other Loan Documents as a Secured Obligation; (c) any taking and holding of collateral or guarantees (including without limitation any collateral pledged as security for the Secured Obligations under the Security Instruments) for all or any of the Secured Obligations; or any amendment, alteration, exchange, substitution, transfer, enforcement, waiver, subordination, termination or release of any collateral or such guarantees (including without limitation any collateral pledged as security for the Secured Obligations under the Security Instruments), or any non-perfection of any collateral, or any consent to departure from any such guaranty (including without limitation any collateral pledged as security for the Secured Obligations under the Security Instruments); (d) any manner of application of collateral, or proceeds thereof, to all or any of the Secured Obligations, or the manner of sale of any collateral; (e) any consent by the Secured Parties to the change, restructure or termination of the corporate structure or existence of the Borrower or any Grantor and any corresponding restructure of the Secured Obligations, or any other restructure or refinancing of the Secured Obligations or any portion thereof; (f) any modification, compromise, settlement or release by the Secured Parties, by operation of law or otherwise, collection or other liquidation of the Secured Obligations or the liability of the Borrower, any Grantor or any guarantor of the Secured Obligations (including without limitation any guarantor under the Guaranty, other than the Grantor against which this Agreement is to be enforced), or of any collateral for the Secured Obligation (including without limitation any collateral pledged as security for the Secured Obligations under the Security Instruments), in whole or in part, and any refusal of payment by the Agent or any Lender in whole or in part, from any obligor or guarantor (including without limitation any guarantor under the Guaranty, other than the Grantor against which this Agreement is sought to be enforced) in connection with any of the Secured Obligations, whether or not with notice to, or further assent by, or any reservation of rights against, any Grantor; or (g) any other circumstance (including without limitation any statute of limitations) that might otherwise constitute a defense available to, or a discharge of, the Borrower, any guarantor of the Borrower's liabilities (including without limitation any Guarantor) or a Grantor. Name: NB.BOLLE.IP.SECURITY.AGREEMENT Doc No: 190342 (FINAL) 14 The granting of a Security Interest in the Collateral shall continue to be effective or be reinstated, as the case may be, if at any time any payment of any of the Secured Obligations is rescinded or must otherwise be returned by any Secured Party, upon the insolvency, bankruptcy or reorganization of the Borrower or any Grantor or otherwise, all as though such payment had not been made. SECTION 17. WAIVER. Each Grantor hereby waives promptness, diligence, notice of acceptance and any other notice with respect to any of the Secured Obligations and this Agreement and any requirement that the Secured Parties protect, secure, perfect or insure any Security Interest or any Collateral subject thereto or exhaust any right or take any action against any Grantor or any other Person (including without limitation any guarantor under the Guaranty) or any collateral securing payment of the Secured Obligations (including without limitation any collateral pledged as security for the Secured Obligations under the Security Instruments). SECTION 18. SUBROGATION. Prior to termination of this Agreement in accordance with the provisions of Section 21(c), no Grantor will exercise any rights that it may acquire by way of subrogation under this Agreement. If an amount shall be paid to such Grantor on account of such subrogation rights at any time prior to termination of this Agreement in accordance with the provisions of Section 21(c), such amount shall be held in trust for the benefit of the Lenders and shall forthwith be paid to the Agent, for the benefit of the Lenders, to be credited and applied upon the Secured Obligations, whether matured or unmatured, in accordance with the terms of the Credit Agreement and the Guaranty. SECTION 19. AMENDMENTS, ETC. (a) Except as provided in subsection (b) of this Section 18, no amendment or waiver of any provision of this Agreement nor consent to any departure by any Grantor therefrom shall in any event be effective unless the same shall be in writing and signed by the Agent, and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given. (b) Upon the execution and delivery by any Person of a supplement to this Agreement pursuant to which such Person agrees to become a party hereto (each an "Intellectual Property Security Agreement Supplement"), (i) such Person or entity shall be referred to as an "Additional Grantor" and shall be and become a Grantor and each reference in this Agreement to "Grantor" shall also mean and be a reference to such Additional Grantor, and (ii) the schedules attached to each Intellectual Property Security Agreement Supplement shall be incorporated into and become a part of and supplement Schedules I, II, III and IV hereto, and the Agent may attach such supplements to such Schedules, and each reference to such Schedules shall mean and be a reference to such Schedules as supplemented pursuant hereto. (c) Any person that executes an Intellectual Property Security Agreement Supplement shall also execute and deliver such financing statements and all further instruments and documents and take all further action that may be necessary or desirable or Name: NB.BOLLE.IP.SECURITY.AGREEMENT Doc No: 190342 (FINAL) 15 that the Agent may reasonably request in order to perfect and protect any Security Interest purported to be granted thereby. SECTION 20. ADDRESSES FOR NOTICES. Any notice shall be conclusively deemed to have been received by any party hereto and be effective on the day on which delivered to such party (against receipt therefor) at the address set forth below or such other address as such party shall specify to the other parties in writing, (or, in the case of notice by telefacsimile (where receipt of such notice is verified by return), when received at such telefacsimile number as may from time to time be specified in written notice to the other parties hereto or otherwise received) or, if sent prepaid by certified or registered mail return receipt requested on the third Business Day after the day on which mailed, or, if sent prepaid by a national overnight courier service, on the first Business Day after the day on which delivered to such service against receipt therefor, addressed to such party at said address: (a) if to any Grantor: c/o Bolle Inc. 555 Theodore Fremd Avenue Rye, New York 10580 Attention: Mr. Ian G.H. Ashken Telephone: (914) 967-9400 Telefacsimile: (914) 967-9405 with a copy to: Kane Kessler, P.C. 1350 Avenue of the Americas New York, New York 10019 Attention: Robert L. Lawrence, Esq. Telephone: (212) 541-6222 Telefacsimile: (212) 245-3009 (b) if to the Agent: NationsBank, N.A. Independence Center, 15th Floor NC1-001-15-04 Charlotte, North Carolina 28255 Attention: Dana Weir, Agency Services Telephone: (704) 388-3917 Telefacsimile: (704) 386-9923 with a copy to: NationsBank, N.A. Corporate Banking 767 Fifth Avenue, 5th Floor New York, New York 10153-0083 Attention: Ms. Susan Timmerman, Senior Vice President Telephone: (212) 407-5387 Telefacsimile: (212) 593-1083 Name: NB.BOLLE.IP.SECURITY.AGREEMENT Doc No: 190342 (FINAL) 16 SECTION 21. CONTINUING SECURITY INTEREST; ASSIGNMENTS UNDER THE CREDIT AGREEMENT; RELEASE OF COLLATERAL. (a) This Agreement shall reaffirm a continuing Security Interest in the Collateral and shall (i) remain in full force and effect until terminated in accordance with the provisions of Section 21(c), (ii) be binding upon each Grantor, its successors and assigns, provided, however, no Grantor shall make any assignment hereof without the prior consent of the Agent, and (iii) inure, together with the rights and remedies of the Secured Parties hereunder, to the benefit of the Secured Parties and their respective successors, transferees and assigns. Without limiting the generality of the foregoing clause (iii), any Lender may assign to one or more Persons, or grant to one or more Persons participations in or to, all or any part of its rights and obligations under the Credit Agreement (to the extent permitted by the Credit Agreement); and to the extent of any such assignment or participation such other Person shall, to the fullest extent permitted by law, thereupon become vested with all the benefits in respect thereof granted to such Lender herein or otherwise, subject however, to the provisions of the Credit Agreement, including Article XIII thereof concerning the Agent and Article XIV thereof concerning assignments and participations. (b) Except as permitted by the Credit Agreement, no Grantor shall sell, lease, transfer or otherwise dispose of any item of Collateral during the term of this Agreement without the prior written consent of the Agent to such sale, lease, transfer or other disposition. (c) On the Facility Termination Date, the Collateral shall be automatically released from the Liens created hereby, all rights to the Collateral shall automatically revert to the Grantors, and this Agreement and all obligations of the Grantors hereunder shall terminate without delivery of any instrument or performance of any act by any party. Upon such termination of this Agreement, the Agent shall reassign and redeliver such Collateral then held by or for the Agent and the Lenders and execute and deliver to each Grantor such documents as it shall reasonably request to evidence such termination. SECTION 22. SWAP AGREEMENTS. All Hedging Obligations of any Grantor shall be deemed to be Secured Obligations secured hereby, and each Lender or affiliate of a Lender party to any Swap Agreement shall be deemed to be a Secured Party hereunder. SECTION 23. SEVERABILITY. If any term or provision of this Agreement is or shall become illegal, invalid or unenforceable in any jurisdiction, all other terms and provisions of this Agreement shall remain legal, valid and enforceable in such jurisdiction and such illegal, invalid or unenforceable provision shall be legal, valid and enforceable in any other jurisdiction. SECTION 24. EXECUTION IN COUNTERPARTS. This Agreement may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which when taken together shall constitute one and the same agreement. Name: NB.BOLLE.IP.SECURITY.AGREEMENT Doc No: 190342 (FINAL) 17 SECTION 25. GOVERNING LAW. (A) THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS EXECUTED, AND TO BE FULLY PERFORMED, IN SUCH STATE. (B) EACH PARTY HEREBY EXPRESSLY AND IRREVOCABLY AGREES AND CONSENTS THAT ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT AND THE TRANSACTIONS CONTEMPLATED HEREIN MAY BE INSTITUTED IN ANY STATE OR FEDERAL COURT SITTING IN THE COUNTY OF NEW YORK, STATE OF NEW YORK, UNITED STATES OF AMERICA AND, BY THE EXECUTION AND DELIVERY OF THIS AGREEMENT, EXPRESSLY WAIVES ANY OBJECTION THAT IT MAY HAVE NOW OR HEREAFTER TO THE LAYING OF THE VENUE OR TO THE JURISDICTION OF ANY SUCH SUIT, ACTION OR PROCEEDING, AND IRREVOCABLY SUBMITS GENERALLY AND UNCONDITIONALLY TO THE JURISDICTION OF ANY SUCH COURT IN ANY SUCH SUIT, ACTION OR PROCEEDING. (C) EACH PARTY AGREES THAT SERVICE OF PROCESS MAY BE MADE ON SUCH PARTY BY PERSONAL SERVICE OF A COPY OF THE SUMMONS AND COMPLAINT OR OTHER LEGAL PROCESS IN ANY SUCH SUIT, ACTION OR PROCEEDING, OR BY REGISTERED OR CERTIFIED MAIL (POSTAGE PREPAID) TO THE ADDRESS OF SUCH PARTY PROVIDED BY SECTION 20, OR BY ANY OTHER METHOD OF SERVICE PROVIDED FOR UNDER THE APPLICABLE LAWS IN EFFECT IN THE STATE OF NEW YORK. (D) NOTHING CONTAINED IN SUBSECTIONS (B) OR (C) HEREOF SHALL PRECLUDE ANY PARTY FROM BRINGING ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS IN THE COURTS OF ANY PLACE WHERE ANY PARTY OR ANY PARTY'S PROPERTY OR ASSETS MAY BE FOUND OR LOCATED. TO THE EXTENT PERMITTED BY THE APPLICABLE LAWS OF ANY SUCH JURISDICTION, EACH PARTY HEREBY IRREVOCABLY SUBMITS TO THE JURISDICTION OF ANY SUCH COURT AND EXPRESSLY WAIVES, IN RESPECT OF ANY SUCH SUIT, ACTION OR PROCEEDING, THE JURISDICTION OF ANY OTHER COURT OR COURTS WHICH NOW OR HEREAFTER, BY REASON OF ITS PRESENT OR FUTURE DOMICILE, OR OTHERWISE, MAY BE AVAILABLE TO IT. (E) IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS OR REMEDIES UNDER OR RELATED TO THIS AGREEMENT OR ANY AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED OR THAT MAY IN THE FUTURE BE DELIVERED IN Name: NB.BOLLE.IP.SECURITY.AGREEMENT Doc No: 190342 (FINAL) 18 CONNECTION WITH THE FOREGOING, EACH PARTY HEREBY AGREES, TO THE EXTENT PERMITTED BY APPLICABLE LAW, THAT ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY AND HEREBY WAIVES, TO THE EXTENT PERMITTED BY APPLICABLE LAW, ANY OBJECTION THAT IT MAY HAVE THAT EACH ACTION OR PROCEEDING HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. [SIGNATURE PAGES FOLLOW.] Name: NB.BOLLE.IP.SECURITY.AGREEMENT Doc No: 190342 (FINAL) 19 IN WITNESS WHEREOF, the parties have duly executed this Second Amended and Restated Intellectual Property Security Agreement on the day and year first written above. GRANTORS: BOLLE INC. By: /s/ Desiree DeStefano Name: Title: BOLLE AMERICA, INC. By: /s/ Desiree DeStefano Name: Title: ORC MANAGEMENT CORPORATION By: /s/ Desiree DeStefano Name: Title: SECOND AMENDED AND RESTATED INTELLECTUAL PROPERTY SECURITY AGREEMENT SIGNATURE PAGE 1 OF 2 AGENT: NATIONSBANK, NATIONAL ASSOCIATION, as Agent for the Secured Parties By: /s/ Susan Timmerman Name: Title: SECOND AMENDED AND RESTATED INTELLECTUAL PROPERTY SECURITY AGREEMENT SIGNATURE PAGE 2 OF 2 STATE OF NEW YORK ) ) ss. COUNTY OF _________________________ ) Before me, the undersigned, a Notary Public in and for the county aforesaid, on this ___ day of 1998, personally appeared ______________________________ to me known personally, and who, being by me duly sworn, deposes and says that he is the of __________________________________________, and that foregoing instrument was signed and sealed on behalf of said corporation by authority of its Board of Directors, and said _______________________________ acknowledged said instrument to be the free act and deed of said corporation. Notary Public My commission expires: * SCHEDULE I PATENTS AND PATENT APPLICATIONS See Attached. SCHEDULE II TRADEMARKS AND TRADEMARK APPLICATIONS See Attached. SCHEDULE III COPYRIGHTS See Attached. SCHEDULE IV LICENSE AGREEMENTS See Attached. (g) EXHIBIT A SECOND AMENDED AND RESTATED ASSIGNMENT OF PATENTS, TRADEMARKS, COPYRIGHTS AND LICENSES THIS SECOND AMENDED AND RESTATED ASSIGNMENT OF PATENTS, TRADEMARKS, COPYRIGHTS AND LICENSES (this "Assignment") is made as of this ___ day of _________, 1998 by and among BOLLE INC., a Delaware corporation (the "Borrower"), and EACH OF THE UNDERSIGNED (each a "Guarantor" and collectively with the Borrower, the "Grantors"), to NATIONSBANK, NATIONAL ASSOCIATION, a national banking association, as Agent (the "Agent") for each of the lenders (the "Lenders" and collectively with the Agent, the "Secured Parties") now or hereafter party to the Credit Agreement (as defined below). All capitalized terms used but not otherwise defined herein shall have the respective meanings assigned thereto in the Credit Agreement (as defined below); W I T N E S S E T H: WHEREAS, the Lenders, certain other lenders, the Agent and BEC Group, Inc. ("BEC"), of which the Borrower was formerly a direct subsidiary, are parties to that certain Amended and Restated Credit Agreement dated as of July 10, 1997 (the "Existing Credit Agreement"); and WHEREAS, certain of the Guarantors are parties to that certain Amended and Restated Intellectual Property Security Agreement dated as of July 10, 1997 with the Agent (as amended, supplemented or otherwise modified, the "Existing IP Security Agreement"); and WHEREAS, pursuant to that certain Assignment Agreement and First Amendment to the Amended and Restated Credit Agreement dated as of the date hereof and effective immediately prior to the effectiveness of this Assignment between BEC, the Borrower, the Agent and the Lenders (the "Assignment and Amendment"), BEC assigned to the Borrower, and the Borrower assumed from BEC, among other liabilities, certain indebtedness owing by and obligations of BEC under the Existing Credit Agreement such that the Borrower became a co-borrower together with BEC under the Existing Credit Agreement; and WHEREAS, each Grantor has entered into that certain Second Amended and Restated Intellectual Property Security Agreement (the "IP Security Agreement") dated as of even date herewith pursuant to which each Grantor continues to grant to the Agent for the benefit of the Lenders a security interest in the Marks, Copyrights, Licenses and Patents defined below in order to secure its obligations under the Guaranty Agreement; and WHEREAS, the Grantors, together with certain other grantors which then were subsidiaries of the Borrower, are parties to that certain Amended and Restated Assignment of Patents, Trademarks, Copyrights and Licenses dated as of July 10, 1997 (as amended, supplemented or otherwise modified as of the date hereof, the "Existing IP Assignment"); and WHEREAS, each Guarantor is a Material Subsidiary of the Borrower and will materially benefit from the loans and advances made and to be made, and the letters of credit issued and to be issued, under the Credit Agreement; and WHEREAS, the Grantors and the Agent desire to amend and restate that portion of the Existing IP Assignment in its entirety to reflect changes in the parties required to be parties thereto and certain changes in the Credit Agreement; and WHEREAS, as collateral security for payment and performance of its obligations under the Credit Agreement, the Borrower is willing to grant to the Agent for the benefit of the Secured Parties a security interest in certain of its intangible personal property and assets; and WHEREAS, each Guarantor is a party to that certain Second Amended and Restated Guaranty Agreement (the "Guaranty") dated as of the date hereof pursuant to which each Guarantor has guaranteed the obligations of the Borrower under the Credit Agreement; and WHEREAS, as collateral security for payment and performance of its obligations under the Guaranty Agreement, each Guarantor is willing to grant to the Agent for the benefit of the Secured Parties a security interest in certain of its intangible personal property and assets; and WHEREAS, each Grantor (a) has adopted and used and is using or has a bona fide intention to use the trademarks and service marks (the "Marks") identified on Annex I hereto, and is the owner of the registrations of and pending registration applications for such Marks in the United States Patent and Trademark Office identified on Annex I hereto, (b) is the owner of and uses the copyrights, copyright registrations and pending registration applications set forth on Annex II hereto (the "Copyrights"), (c) is a party to and has rights under the licenses and license agreements listed on Annex III hereto (the "Licenses") and (d) is the owner of and uses the patents, patent registrations and pending registration applications set forth on Annex IV hereto (the "Patents" and together with the Marks, the Copyrights and the Licenses, the "Collateral"); and WHEREAS, the Agent for the benefit of the Lenders desires to acquire the Marks, the Copyrights, the Licenses and the Patents and the registrations thereof and registration applications therefor, as applicable, in connection with the exercise of its remedies after the occurrence of an Event of Default and acceleration of the Obligations under the Credit Agreement; NOW, THEREFORE, for good and valuable consideration, receipt of which is hereby acknowledged, each Grantor does hereby assign, sell and transfer unto the Agent all right, title and interest in and to the Marks, Copyrights, Licenses and Patents, together with (i) the registrations of and registration applications therefor, as applicable, (ii) the goodwill of the business symbolized by and associated with the Collateral and the registrations thereof, (iii) the right to sue and recover for, and the right to profits or damages due or accrued arising out of or in connection with, any and all past, present or future infringements or dilution of or damage or injury to the Collateral or the registrations thereof or such associated goodwill, and (iv) all rights of each Grantor to enforce all Licenses. Each Grantor hereby grants to the Agent, for the benefit of the Lenders, and notice is hereby given that each Grantor has regranted to the Agent, for the benefit of the Lenders, a first priority security interest in the Collateral to secure the payment and performance in full of all of the obligations of each Grantor under the Credit Agreement, the Guaranty and each other Loan Document to which such Grantor is or becomes a party. This Assignment is intended to and shall take effect as a sealed instrument only after the occurrence of an Acceleration Event as defined in the IP Security Agreement whereafter the Agent shall complete this instrument by signing its acceptance of this Assignment below. IN WITNESS WHEREOF, each Grantor, by its duly authorized officer, has executed this Second Amended and Restated Assignment of Patents, Trademarks, Copyrights and Licenses, as an instrument under seal, on the day and year first written above. GRANTORS: BOLLE INC. By: /s/ Desiree DeStefano Name: Title: BOLLE AMERICA, INC. By: /s/ Desiree DeStefano Name: Title: ORC MANAGEMENT CORPORATION By: /s/ Desiree DeStefano Name: Title: SECOND AMENDED AND RESTATED ASSIGNMENT OF PATENTS, TRADEMARKS, COPYRIGHTS AND LICENSES SIGNATURE PAGE 1 OF 2 The foregoing assignment of the Trademarks, Copyrights and Licenses and the registrations thereof and registration applications therefor by the Assignee and the Agent is hereby accepted as of the day and year first written above. NATIONSBANK, NATIONAL ASSOCIATION, as Agent for the Secured Parties By: /s/ Susan Timmerman Name: Title: SECOND AMENDED AND RESTATED ASSIGNMENT OF PATENTS, TRADEMARKS, COPYRIGHTS AND LICENSES SIGNATURE PAGE 2 OF 2 STATE OF NEW YORK ) ) ss. COUNTY OF _________________________ ) Before me, the undersigned, a Notary Public in and for the county aforesaid, on this___ day of 1998, personally appeared ________________________________________ to me known personally, and who, being by me duly sworn, deposes and says that he is the of __________________________________________, and that the foregoing instrument was signed and sealed on behalf of said corporation by authority of its Board of Directors, and said _______________________________ acknowledged said instrument to be the free act and deed of said corporation. Notary Public My commission expires: ANNEX I REGISTRATIONS UNITED STATES PATENT AND TRADEMARK OR TRADEMARK OFFICE SERVICE MARK REGISTRATION NO. REGISTRATION DATE PENDING APPLICATIONS UNITED STATES PATENT AND TRADEMARK OR TRADEMARK OFFICE SERVICE MARK REGISTRATION NO. REGISTRATION DATE TRADEMARKS AND TRADEMARK APPLICATIONS ANNEX II PART I COPYRIGHTS REGISTERED WITH U.S. COPYRIGHT OFFICE COPYRIGHTTITLE AUTHOR(S) COPYRIGHT NUMBER REGISTRATION DATE PART II COPYRIGHTS NOT REGISTERED COPYRIGHTTITLE AUTHOR(S) . ANNEX III LICENSES See attached. ANNEX IV REGISTRATIONS UNITED STATES PATENT AND TRADEMARK OFFICE PATENT REGISTRATION NO. REGISTRATION DATE PENDING APPLICATIONS UNITED STATES PATENT AND TRADEMARK OFFICE PATENT REGISTRATION NO. REGISTRATION DATE SECOND AMENDED AND RESTATED ASSIGNMENT OF PATENTS, TRADEMARKS, COPYRIGHTS AND LICENSES THIS SECOND AMENDED AND RESTATED ASSIGNMENT OF PATENTS, TRADEMARKS, COPYRIGHTS AND LICENSES (this "Assignment") is made as of this 11th day of March, 1998 by and among BOLLE INC., a Delaware corporation (the "Borrower"), and EACH OF THE UNDERSIGNED (each a "Guarantor" and collectively with the Borrower, the "Grantors"), to NATIONSBANK, NATIONAL ASSOCIATION, a national banking association, as Agent (the "Agent") for each of the lenders (the "Lenders" and collectively with the Agent, the "Secured Parties") now or hereafter party to the Credit Agreement (as defined below). All capitalized terms used but not otherwise defined herein shall have the respective meanings assigned thereto in the Credit Agreement (as defined below); W I T N E S S E T H: WHEREAS, the Lenders, the Agent and BEC Group, Inc. ("BEC"), of which the Borrower was formerly a direct subsidiary are parties to that certain Amended and Restated Credit Agreement dated as of July 10, 1997 (the "Existing Credit Agreement"); and WHEREAS, pursuant to that certain Assignment Agreement and First Amendment to the Amended and Restated Credit Agreement, dated as of the date hereof and effective immediately prior to the effectiveness of this Assignment, between BEC, the Borrower, the Agent and the Lenders (the "Assignment and Amendment"), BEC assigned to the Borrower, and the Borrower assumed from BEC, among other liabilities, certain indebtedness owing by and obligations of BEC under the Existing Credit Agreement such that the Borrower became a co-borrower together with BEC under the Existing Credit Agreement; and WHEREAS, certain of the Guarantors are parties to that certain Amended and Restated Intellectual Property Security Agreement dated as of July 10, 1997 with the Agent (as amended, supplemented or otherwise modified, the "Existing IP Security Agreement"); and WHEREAS, each Grantor are parties to that certain Second Amended and Restated Intellectual Property Security Agreement (the "IP Security Agreement") dated as of even date herewith pursuant to which each Grantor continues to grant to the Agent for the benefit of the Lenders a security interest in the Marks, Copyrights, Licenses and Patents defined below in order to secure its obligations under the Guaranty Agreement; and WHEREAS, the Grantors, together with certain other grantors which then were subsidiaries of the Borrower, are parties to that certain Amended and Restated Assignment of Patents, Trademarks, Copyrights and Licenses dated as of July 10, 1997 (as amended, supplemented or otherwise modified as of the date hereof, the "Existing IP Assignment"); and Name: NB.BOLLE.ASSIGNMENT.PATENT.TRADEMARKS.LICENSES Doc No: 190341 (FINAL) 1 WHEREAS, each Guarantor is a party to that certain Amended and Restated Guaranty Agreement (the "Guaranty") dated as of the date hereof pursuant to which each Guarantor has guaranteed the obligations of the Borrower under the Credit Agreement; and WHEREAS, the Grantors, the Agent and the Lenders desire to amend and restate the Existing IP Assignment in its entirety to reflect changes in the parties required to be parties thereto and certain changes in the Credit Agreement; and WHEREAS, as collateral security for payment and performance of its obligations under the Credit Agreement, the Borrower is willing to grant to the Agent for the benefit of the Secured Parties a security interest in certain of its intangible personal property and assets; and WHEREAS, each Guarantor is a Material Subsidiary of the Borrower and will materially benefit from the loans and advances made and to be made, and the letters of credit issued and to be issued, under the Credit Agreement; and WHEREAS, as collateral security for payment and performance of its obligations under the Guaranty Agreement, each Guarantor is willing to grant to the Agent for the benefit of the Secured Parties a security interest in certain of its intangible personal property and assets; and WHEREAS, each Grantor (a) has adopted and used and is using or has a bona fide intention to use the trademarks and service marks (the "Marks") identified on Annex I hereto, and is the owner of the registrations of and pending registration applications for such Marks in the United States Patent and Trademark Office identified on Annex I hereto, (b) is the owner of and uses the copyrights, copyright registrations and pending registration applications set forth on Annex II hereto (the "Copyrights"), (c) is a party to and has rights under the licenses and license agreements listed on Annex III hereto (the "Licenses") and (d) is the owner of and uses the patents, patent registrations and pending registration applications set forth on Annex IV hereto (the "Patents" and together with the Marks, the Copyrights and the Licenses, the "Collateral"); and WHEREAS, the Agent for the benefit of the Lenders desires to acquire the Marks, the Copyrights, the Licenses and the Patents and the registrations thereof and registration applications therefor, as applicable, in connection with the exercise of its remedies after the occurrence of an Event of Default and acceleration of the Obligations under the Credit Agreement; NOW, THEREFORE, for good and valuable consideration, receipt of which is hereby acknowledged, each Grantor does hereby assign, sell and transfer unto the Agent all right, title and interest in and to the Marks, Copyrights, Licenses and Patents, together with (i) the registrations of and registration applications therefor, as applicable, (ii) the goodwill of the business symbolized by and associated with the Collateral and the registrations thereof, (iii) the Name: NB.BOLLE.ASSIGNMENT.PATENT.TRADEMARKS.LICENSES Doc No: 190341 (FINAL) 2 right to sue and recover for, and the right to profits or damages due or accrued arising out of or in connection with, any and all past, present or future infringements or dilution of or damage or injury to the Collateral or the registrations thereof or such associated goodwill, and (iv) all rights of each Grantor to enforce all Licenses. Each Grantor hereby grants to the Agent, for the benefit of the Lenders, and notice is hereby given that each Grantor has regranted to the Agent, for the benefit of the Lenders, a first priority security interest in the Collateral to secure the payment and performance in full of all of the obligations of each Grantor under the Credit Agreement, the Guaranty and each other Loan Document to which such Grantor is or becomes a party. This Assignment is intended to and shall take effect as a sealed instrument only after the occurrence of an Acceleration Event as defined in the IP Security Agreement whereafter the Agent shall complete this instrument by signing its acceptance of this Assignment below. [SIGNATURE PAGES FOLLOW.] Name: NB.BOLLE.ASSIGNMENT.PATENT.TRADEMARKS.LICENSES Doc No: 190341 (FINAL) 3 IN WITNESS WHEREOF, each Grantor, by its duly authorized officer, has executed this assignment, as an instrument under seal, on the day and year first written above. GRANTORS: BOLLE INC. By: /s/ Desiree DeStefano Name: Title: BOLLE AMERICA, INC. By: /s/ Desiree DeStefano Name: Title: ORC MANAGEMENT CORPORATION By: /s/ Desiree DeStefano Name: Title: ASSIGNMENT OF TRADEMARKS, COPYRIGHTS AND LICENSES Signature Page 1 of 2 The foregoing assignment of the Trademarks, Copyrights and Licenses and the registrations thereof and registration applications therefor by the Assignee and the Agent is hereby accepted as of the day and year first written above. NATIONSBANK, NATIONAL ASSOCIATION, as Agent for the Secured Parties By: /s/ Susan Timmerman Name: Title: ASSIGNMENT OF TRADEMARKS, COPYRIGHTS AND LICENSES Signature Page 2 of 2 STATE OF NEW YORK ) ) ss. COUNTY OF _________________________ ) Before me, the undersigned, a Notary Public in and for the county aforesaid, on this___ day of 1998, personally appeared ______________________________________________________ to me known personally, and who, being by me duly sworn, deposes and says that he is the of __________________________________________, and that the foregoing instrument was signed and sealed on behalf of said corporation by authority of its Board of Directors, and said _______________________________ acknowledged said instrument to be the free act and deed of said corporation. Notary Public My commission expires: ANNEX I REGISTRATIONS UNITED STATES PATENT AND TRADEMARK OR TRADEMARK OFFICE SERVICE MARK REGISTRATION NO. REGISTRATION DATE See attached. PENDING APPLICATIONS UNITED STATES PATENT AND TRADEMARK OR TRADEMARK OFFICE SERVICE MARK REGISTRATION NO. REGISTRATION DATE See attached. TRADEMARKS AND TRADEMARK APPLICATIONS TRADEMARK TITLE SERIAL NUMBER =========== =============================================================== ========================================= . Proforma Pending . Tactical 1,837,768 . Tiger Snake 1,869,358 . Avant Edge 1,699,667 . Maurice Bolle 1,480,563 . Put 'em On Your Face (clothing) 1,504,060 . Chronoshield 1,501,116 . bf 1,512,392 . Bolle (eyewear) 1,093,117 . Bolle (clothing) 1,323,357 . Carbo Gas 910,144 . Geometric 1,779,399 . bolle PC 1,491,987 . Eyezone Design 1,968,477 . Aquashield 1,664,574 . Acrylex 1,504,694 . bolle (bags) 1,867,002 . Put em on your face (eyewear) 1,485,106 . Eaglevision and design (clothing) 1,895,179 . Bolle Eyezone 1,889,723 . Northern Lights 1,935,810 . Sunspender 1,879,628 . Snake (design) 1,883,401 . Horizon 1,608,948 TRADEMARK TITLE SERIAL NUMBER =========== =============================================================== ========================================= . Eaglevision (word only) 1,998,951 . Eaglevision and design (eyewear) 2,053,027 . Contour 1,545,222 . Vermillion 1,561,863 . Microedge (stylized) 1,633,050 . Alien 1,709,393 . American Blues Pending . B (Capital B design with triangle) Pending . Bolle Carbonex Pending . Bolle Attack (and design) Pending . Bolle Escape (and design) Pending . Breakaway Pending . Madness Pending . See Better, Play Better Pending . Sliver Pending . TIGER Pending . True Rebels Pending . Vapor Trail Pending . - ----------- --------------------------------------------------------------- ----------------------------------------- ANNEX II PART I COPYRIGHTS REGISTERED WITH U.S. COPYRIGHT OFFICE COPYRIGHTTITLE AUTHOR(S) COPYRIGHT NUMBER REGISTRATION DATE None. PART II COPYRIGHTS NOT REGISTERED COPYRIGHTTITLE AUTHOR(S) None. ANNEX III LICENSES [1. REFERENCE IS MADE TO THE DISCLOSURE SCHEDULES TO THE SHARE PURCHASE AGREEMENT. 2. LICENSE AGREEMENT DATED OCTOBER 13, 1994 BETWEEN MENTOR CORPORATION AND BEC GROUP, INC. AS AMENDED BY THE ASSIGNMENT AND ASSUMPTION AGREEMENT DATED OCTOBER 31, 1996, BETWEEN BEC GROUP, INC. AND BEC DISTRIBUTION.] ANNEX IV REGISTRATIONS UNITED STATES PATENT AND TRADEMARK OFFICE PATENT REGISTRATION NO. REGISTRATION DATE None. PENDING APPLICATIONS UNITED STATES PATENT AND TRADEMARK OFFICE PATENT REGISTRATION NO. REGISTRATION DATE None.
EX-27 7 FDS
5 1,000 YEAR DEC-31-1997 JAN-01-1997 DEC-31-1997 1,204 0 12,462 0 11,734 1,617 4,687 0 94,697 47,943 0 11,055 0 0 18,843 94,697 32,160 32,160 15,354 15,354 19,399 1,099 963 (3,556) 1,099 0 0 0 0 (4,655) 0.00 (2,586.11)
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