10-K

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

(Mark one)

/x/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 1999

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 No.: 1-8467

BMC INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)

Minnesota (State or other jurisdiction of incorporation or organization)	41-0169210 (I.R.S. Employer Identification No.)
One Meridian Crossings, Suite 850, Minneapolis, MN (Address of principal executive offices) Registrant's telephone number, including area code: (952) 851-6000	55423 (Zip Code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Name of each exchange on which registered
Common Stock	New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act:
None
(Title of class)

   Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes /x/  No / /

   Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. / /

   The aggregate market value of the registrant's common stock (its only voting stock) held by non-affiliates of the registrant, based on the closing sales price for the registrant's common stock as reported on the New York Stock Exchange on March 24, 2000, was approximately $148.7 million. As of March 24, 2000, there were 27,396,505 shares of common stock of the registrant outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

   Parts I, II and IV of this report on Form 10-K incorporate by reference information, to the extent specific pages are referred to herein, from the registrant's annual report to stockholders for the year ended December 31, 1999. Part III of this report on Form 10-K incorporates by reference information, to the extent specific sections are referred to herein, from the registrant's proxy statement for its annual meeting of stockholders to be held May 11, 2000.

PART I

    Certain statements contained in this report are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and are subject to the Safe Harbor provisions created by the statutes. These statements relate to our current views with respect to non-historical information and include, without limitation, any statement that may predict, forecast, indicate or imply future results, performance or achievements. These statements are not guarantees of future performance and are subject to certain risks and uncertainties—such as those discussed in the section entitled "Factors That May Affect Future Results" below—that could cause actual results to differ materially from those expressed or forecasted. You should not rely on these forward-looking statements, which reflect only our opinion as of the date of this 10-K. These factors also should not be considered an exhaustive list. We do not undertake the responsibility to update any forward-looking statement that may be made from time to time by us or on our behalf.

Item 1. Business

(a) General Development of Business.

    BMC Industries, Inc., a Minnesota corporation ("BMC", "we", "our" or "us"), is a multinational manufacturer and distributor of a variety of products that has two reportable segments: Buckbee-Mears, formerly known as Precision Imaged Products ("Buckbee-Mears"), and Optical Products ("Optical Products" or "Vision-Ease"). Buckbee-Mears is comprised of Mask Operations and Buckbee-Mears St. Paul ("BMSP"). Mask Operations produces aperture masks, a critical component of color television and computer monitor picture tubes. BMSP is the leading producer of precision photo-etched metal and electroformed parts. BMSP produces component parts used in the medical, electronic, telecommunication, automotive and filtration market segments. In February 2000, we combined Mask Operations and BMSP into one operating unit to leverage the high volume production capabilities and cost competitiveness of Mask Operations and the market access and value-added processes of BMSP. Optical Products designs, manufactures and distributes polycarbonate, glass and hard-resin plastic ophthalmic lenses. During 1999, Optical Products began establishing a laboratory network in Europe to drive polycarbonate sales.

(b) Financial Information About Industry Segments.

    Financial information about our operating segments for the three most recent fiscal years is contained on pages 30-32 of our annual report to stockholders for the year ended December 31, 1999, and is incorporated herein by reference.

(c) Narrative Description of Business.

Buckbee-Mears

    Products and Marketing.  Buckbee-Mears has manufacturing operations in Cortland, New York, Müllheim, Germany and St. Paul, Minnesota, all of which are ISO 9002 certified, which is a critical prerequisite to supplying a broad base of customers. Buckbee-Mears also operates a mask inspection facility in Tatabanya, Hungary. The Cortland and Müllheim facilities primarily manufacture aperture masks. The St. Paul facility primarily manufactures precision photo-etched metal parts, specialty printed circuits, precision electroformed components and precision etched and filled glass products. Three customers each accounted for more than 10% of Buckbee-Mears' 1999 total revenues, all of which also contributed more than 10% of our total consolidated revenues for 1999. Samsung Display Co., Ltd., of South Korea accounted for approximately 20% of our 1999 total revenues. Philips Components B.V. of the Netherlands accounted for approximately 13% of our 1999 total revenues. Thomson, S.A. of France, including its U.S. based operations, accounted for approximately 13% of our 1999 total revenues. Thomson produces televisions in North America and Europe under various trademarks, including RCA and GE.

    Aperture masks ("masks") are photo-chemically etched fine screen grids found in color television and computer monitor picture tubes and consist of thousands of precise, conically shaped holes designed to focus the electron beam on the proper phosphor color stripe to produce a crisp image. Aperture masks are made from steel or invar, a nickel and iron alloy, and range in size from 6-inch to 40-inch diagonal dimensions. We manufacture aperture masks ranging from 14-inch to 36-inch diagonal dimensions. Our facilities employ an automated continuous photochemical etching process that we originally developed. We sell aperture masks directly to color television and computer monitor tube manufacturers in North America, Europe, India and Asia through an in-house sales staff. Sales of aperture masks comprised 55%, 54% and 61% of our consolidated total revenues in 1999, 1998 and 1997, respectively.

    In 1997, we established a dedicated, low-cost inspection facility in Tatabanya to inspect computer monitor masks manufactured in Müllheim. This facility allows us to provide quick response to the Müllheim facility's Asian and European customers. During 1998 and 1999, the Tatabanya facility also began inspecting entertainment masks manufactured at the Müllheim facility and monitor masks manufactured at the Cortland facility.

    Since the start-up of our first monitor mask manufacturing line at Müllheim in 1995, we have dedicated significant resources to increasing monitor mask sales and obtaining customer qualifications. Following a shutdown of the Cortland monitor mask line during the second half of 1998, we restarted this line in the first quarter of 1999. By the end of the year, both monitor mask lines were operating with significant yield improvements and stable process conditions. Our concerted efforts resulted in a 74% increase in monitor mask sales in 1999 versus 1998, which followed a 79% increase in monitor mask sales in 1998 versus 1997. In addition, we achieved customer qualifications on several additional 14-inch to 19-inch monitor masks in 1999. We continue to dedicate significant resources to the development of automation systems for the back end of our manufacturing process. We also installed automatic inspection equipment on both of our monitor mask production lines.

    BMSP manufactures precision photo-etched metal and electroformed components. We sell these components through in-house sales personnel and manufacturer representatives for use in the medical, electronic, automotive, telecommunication and filtration market segments. BMSP's products currently include switch contacts, ignition components, medical device components, reusable filtration devices and precision sorting sieves. Over the past few years, BMSP has pursued a strategy of leveraging its high-volume precision capabilities to attract large end-product manufacturers for joint research and product development projects. These efforts contributed to an increase in new product sales at BMSP by over 200% in 1999 over 1998.

    In addition to the research and development projects at BMSP, we are engaged in ongoing efforts to develop the manufacturing and technical expertise to produce a variety of new mask products, including high definition television ("HDTV"), multimedia and pure flat mask products. We have made significant process capability gains on advanced mask products, particularly in entertainment masks with success in qualifying masks in the flat and HDTV categories.

    Raw Materials.  Buckbee-Mears procures raw materials from multiple suppliers. Our Cortland facility imports all of its steel and invar requirements from Japan and Germany. Our Müllheim facility obtains a majority of its steel and invar raw material from Germany, but obtains a portion of its raw material from Japan. Importation of steel into the United States is subject to certain restrictions imposed by U.S. federal trade legislation and regulations, but we have successfully challenged these restrictions in the past, including obtaining a separate harmonized tariff classification for the steel used in aperture masks. We do not anticipate difficulty in obtaining steel or any other raw materials. Our inability to obtain these materials, however, could have a material adverse effect on production.

    Intellectual Property.  We have a number of patents which are important to the success of our Buckbee-Mears operations. These patents range in their expiration dates from 2000 to 2018. We believe that the loss of any single patent would not have a material adverse effect on our business as a whole. We believe that improvement of existing products and processes and a reliance on trade secrets and unpatented proprietary know-how are as important as patent protection in establishing and maintaining our competitive position. At the same time, we continue to seek patent protection for our products and processes on a selective basis. There can be no assurance, however, that any issued patents will provide substantial protection or commercial value. We require our consultants and employees to agree in writing to maintain the confidentiality of our information and, within certain limits, to assign to us any inventions, and any patent or other intellectual property rights, relating to our business.

    Seasonality.  Buckbee-Mears revenues and earnings are generally lower in the first and third quarters due to maintenance shutdowns at the Cortland and Müllheim facilities. The seasonality of end products in this segment, televisions and computer monitors, also affects our annual earnings pattern.

    Competition.  The precision etched metal and electroformed parts business is intensely competitive, with no one competitor dominating the market. We are one of five independent mask manufacturers in the world and the only independent mask manufacturer with production facilities in the United States. Our primary mask competitors operate in Japan. In addition, several color picture tube manufacturers operate captive mask production facilities and two state directed ventures operate in China. Independent mask manufacturers supply approximately 85% of the global mask market, with BMC among the largest at an estimated 16% of the combined television and monitor mask market share. We supplied approximately 20% of the worldwide demand for television masks and 7% of the demand for monitor masks in 1999. In addition to competition from other mask manufacturers, Mask Operations competes against rival technologies such as LCD monitors, plasma displays and projection televisions. Products made with rival technologies, however, are expensive and have not captured a significant portion of the relevant market. Many producers compete in the market for other precision photo-etched and electroformed metal parts, including some that manufacture aperture masks. There is no clear market share leader in this fragmented industry. We compete principally on the basis of price, product quality and product availability. We also attempt to build preferred supplier and research and development arrangements with customers to best meet their current and new product requirements. In order to remain competitive on pricing, we engage in ongoing cost reduction measures, including the development of automated processes. There can be no assurance, however, that these efforts will be successful or that our competitors will not attract our customer base through new products or processes that are more effective or less expensive than our products and processes. In addition, there can be no assurance that customers will not vertically integrate to meet their component requirements through captive supply.

    Backlog.  As of December 31, 1999, the firm backlog of Buckbee-Mears sales orders was $18.9 million, compared with $20.0 million as of December 31, 1998. We expect that all of the December 31, 1999 backlog orders will be filled within the current fiscal year.

    Environmental.  The chemical etching of metals, which is performed by all Buckbee-Mears operations, requires the utilization of chemical substances that must be handled in accordance with federal, state, local and foreign environmental and safety laws and regulations. The etching processes also generate wastewater and wastes, some of which are classified as hazardous under applicable environmental laws and regulations. The wastewater is treated using on-site wastewater treatment systems. We employ systems for either disposing of wastes in accordance with applicable laws or regulations or recycling the chemicals we use through the manufacturing process. Environmental and other government agencies monitor the wastes and the wastewater treatment systems to ensure compliance with applicable standards. Environmental regulations place responsibility for waste on the generator even after proper disposal. There can be no assurance, therefore, that we will not incur future liability for waste disposal despite our best efforts to dispose of all wastes properly. As of March 24, 2000, we were involved in a total of seven (7) sites where environmental investigations were occurring and final settlement had not been reached, of which one (1) relates to a discontinued operation, four (4) relate to Buckbee-Mears operations and two (2) relate to Optical Products operations.

    To the extent possible with the amount of information available at this time, we have evaluated our responsibility for costs and related liability with respect to the sites at which an investigation is ongoing or threatened, have recorded accruals for our estimated liability in accordance with generally accepted accounting principles, and are of the opinion that our liability with respect to these sites should not have a material adverse effect on our financial position or the results of our operations. In arriving at this conclusion, we have considered, among other things, the payments that have been made with respect to the sites in the past; the factors, such as volume and relative toxicity, ordinarily applied to allocated defense and remedial costs at such sites; the probable costs to be paid by the other potentially responsible parties; total projected remedial costs for a site, if known; existing technology; and the currently enacted laws and regulations. A portion of the costs and related liability for certain sites has been or will be covered by available insurance.

    We estimate that Buckbee-Mears incurred approximately $5.6 million in 1999 and $7.2 million in 1998 on expenditures, including capital expenditures, related to efforts to comply with applicable laws and regulations regulating the discharge of materials into the environment or otherwise relating to the protection of the environment. In addition, we estimate that Buckbee-Mears will spend approximately $5.4 million in 2000 and $5.5 million in 2001 on capital expenditures for environmental control facilities.

    Employees.  As of December 31, 1999, Buckbee-Mears had approximately 2,056 employees in the United States and Europe. The majority of these employees are not represented by labor unions. Labor relations are considered to be good and there have been no significant labor disputes in the past ten years.

Optical Products

    Products and Marketing.  Optical Products, operating under the Vision-Ease trade name, designs, manufactures and distributes ophthalmic lenses. The group's headquarters is located in Brooklyn Park, Minnesota. Vision-Ease has lens manufacturing operations in Azusa, California; Ramsey, Minnesota; St. Cloud, Minnesota; and Jakarta, Indonesia. Vision-Ease also has two laboratories in Europe and eight lens distribution centers in the U.S., Canada and England. We manufacture ophthalmic lenses from three principal materials: polycarbonate, glass and hard-resin plastic. Within each of these lens materials, we offer single-vision lenses, which have a constant corrective power at all points; multi-focal lenses, which have two or more distinct areas of different corrective power; progressive lenses, which are a type of multi-focal lens with a continuous gradient of different corrective power without the line or "jump" generally associated with other multi-focal lenses; and non-prescription lenses that are used primarily for sun wear. We also produce these lenses with anti-reflective and scratch-resistant coatings to meet increasing demand for value-added products.

    We sell semi-finished lenses to independent wholesale optical laboratories or retail outlets with on-site laboratories, which then finish the lens by grinding and polishing the inside surface of the lens according to the prescription provided by the optometrist or ophthalmologist. After processing, the lens is edged and inserted into a frame by either the wholesale laboratory or a retail optical dispenser. We sell finished single-vision lenses to wholesale and retail laboratories. These finished lenses are ready to be edged and inserted into the frame without laboratory surfacing. We sell non-prescription polarizing lenses to manufacturers of sun lenses. Vision-Ease sells its products through an in-house sales staff.

    Vision-Ease has pursued a strategy of manufacturing and distributing lenses made from polycarbonate, the world's fastest growing lens material. Polycarbonate lenses account for the majority of our lens sales. Polycarbonate lens sales in the United States grew approximately 15% in 1999 and in excess of 15% on a compound basis for the last 15 years. We divide manufacturing responsibility for polycarbonate lenses between the Azusa and the Ramsey facility. Vision-Ease also uses the Ramsey facility for centralized distribution and research and development.

    In 1999, Optical Products began establishing a lens laboratory network in Europe. This network is made up of processing facilities in Müllheim, Germany and Brou, France. These labs specialize in grinding, edging and applying anti-reflective coatings to polycarbonate lenses for sale in the European market. Over the course of the year 2000, we expect to qualify our polycarbonate products and laboratory processing capabilities with a broad cross-section of the retailers in Europe.

    We continue to experience diminishing sales of lenses made from glass as the lens market continues to move toward polycarbonate and hard-resin plastic lenses. We produce semi-finished glass multi-focal and finished and semi-finished single-vision glass lenses at our Jakarta facility, along with specialty glass products at our St. Cloud facility. We manufacture hard-resin plastic lenses in both standard plastic lenses and high-index plastic lenses. We produce a portion of our hard-resin plastic lenses at our Azusa facility. We obtain the remainder of our hard-resin plastic lens requirements through supply agreements with low cost manufacturers in Mexico and Southeast Asia. We have commitments to buy approximately $11.0 million of lenses from the Southeast Asian manufacturer during the year 2000. Under our supply agreement with the Mexican manufacturer, we supply the equipment and materials needed to produce our ongoing product requirements. Our Mexican partner supplies the facility and employees. These sourcing arrangements allow Vision-Ease to focus manufacturing capabilities on higher-margin products while offering a complete line of lens products at cost competitive prices.

    We invest significant resources in process and product research and development, particularly in polycarbonate lens development and other higher margin products. These investments have resulted in the successful introduction of several new products. During 1999, Vision-Ease completed fundamental development activities and proved the commercial viability of our proprietary photochromic polycarbonate lens. Vision-Ease is continuing efforts to develop a lamination system that uses proprietary technology to produce quality, thin, multi-focal lenses equivalent to those produced by a laboratory. We intend to offer the lamination system to retailers and dispensers who want to produce finished multi-focal polycarbonate lenses on a rapid service and on-site basis. We intend to continue making significant investments in product and process design and development for all lens materials and new non-optical markets.

    No single customer accounted for more than 10% of our total revenues on a consolidated basis or 10% of Vision-Ease's total revenues in 1999.

    Intellectual Property.  We have several patents protecting certain products and manufacturing processes of our Vision-Ease operations. These patents have expiration dates ranging from 2000 to 2018. We believe the loss of any single patent would not have a material adverse effect on our business as a whole. We believe that improvement of existing products and processes, the development of new lens products and a reliance on trade secrets and unpatented proprietary know-how are as important as patent protection in establishing and maintaining our competitive position. At the same time, we continue to seek patent protection for our products and processes on a selective basis. There can be no assurance, however, that any issued patents will provide substantial protection or commercial value. We require our consultants and employees to agree in writing to maintain the confidentiality of our information and, within certain limits, to assign to us any inventions, and any patent or other intellectual property rights, relating to our business. We also have several trademarks, including SunRx®, Tegra®, Diamonex®, Vivid®, Outlook™, and SunSport™. As part of our marketing strategy to build sales of branded products, we have increased our use of trademarks. Although there are no assurances as to the strength or scope of our trademarks, we believe that these trademarks have been and will be useful in developing and protecting market recognition for our products.

    Competition.  The ophthalmic lens industry is highly competitive. We compete principally on the basis of product offerings, pricing, product quality and customer service. Vision-Ease is the third largest ophthalmic lens manufacturer and distributor in the United States, with a substantially smaller share of the global lens market. Our largest competitors are Essilor International and Sola International Inc., who have a combined share of approximately 70% of the ophthalmic lens market in the United States and 50% of the world-wide lens market. Many of our competitors, particularly Essilor and Sola, have greater financial resources than Vision-Ease to fund research, development and capital expenditures. Some competitors also have vertically integrated wholesale laboratories. In order to successfully compete in this market, we employ a strategy of combined marketing, product development, customer service and cost reduction efforts. Through the establishment of low-cost operations and sourcing arrangements in Southeast Asia and Mexico, we have maintained competitiveness on low-margin lens products. At the same time, we have increased the breadth of product offerings, including value-added lenses, to meet the total lens requirements of our customers. Building upon our leadership position in polycarbonate lenses, we have dedicated a substantial portion of our process and product development efforts toward product offerings in this fast growing market. In 1999, Vision-Ease also began establishing a laboratory network in Europe to drive polycarbonate sales into the European market. There can be no assurance, however, that we will succeed in developing competitive new products, leveraging our polycarbonate strength into growth in other lens materials and product offerings, maintaining our polycarbonate leadership position or converting brand equity into increased sales.

    In addition to direct competition with other manufacturers of eyeglass lenses, we compete indirectly with manufacturers of contact lenses and providers of medical procedures for the correction of visual impairment. Contact lenses are not, however, perfect substitutes for lenses, because of the difficulty of developing progressive or bifocal contact lenses for presbyopia. In addition, contact lens wearers also tend to own eyeglasses. A number of companies have developed, or are developing, surgical equipment or implants used to correct refractive error, including myopia, hyperopia and astigmatism. These procedures are ineffective at correcting presbyopia, which affects the vast majority of people above the age of 45, and is a major cause of demand for Vision-Ease's progressive and other multifocal lenses. There can be no assurance, however, that current medical procedures, or ones developed in the future, will not materially impact demand for our lenses.

    Supplies.  Vision-Ease procures raw materials from multiple suppliers. We obtain the majority of our hard-resin plastic lenses through sourcing arrangements in Southeast Asia and Mexico. Although we have limited in-house manufacturing capabilities for hard-resin plastic lenses, we do not have alternative sources for large volumes of these lenses. In addition, the importation of raw materials and final products into and out of these foreign territories is subject to certain trade restrictions imposed by foreign and United States trade regulations that could result in the disruption of supply. Although we do not anticipate any disruption to our supply of hard-resin plastic lenses, our inability to obtain these or other materials could have a material adverse effect on Vision-Ease's operations.

    Backlog and Inventory.  Due to the importance in the ophthalmic lens industry of rapid turnaround time from order to shipment, the backlog of sales orders is not material. We maintain a significant amount of inventory, however, in order to satisfy the rapid response time and complete product offerings in glass, hard resin plastic and polycarbonate demanded by our customers.

    Environmental.  As part of our lens manufacturing process, we use hazardous chemical substances that must be handled in accordance with applicable federal, state, local and foreign environmental and safety laws and regulations. The lens manufacturing processes also generate wastewater and wastes, some of which are classified as hazardous under applicable environmental laws and regulations. We employ systems for either disposing of wastes in accordance with applicable laws and regulations or recycling the chemicals we use through the manufacturing process. Environmental and other government agencies monitor the wastes and the wastewater treatment systems to assure compliance with applicable standards. Environmental regulations place responsibility for waste on the generator even after proper disposal. There can be no assurance, therefore, that we will not incur future liability for waste disposal despite our best efforts to dispose of all wastes properly. As of March 24, 1999, we were involved in a total of seven (7) sites where environmental investigations were occurring and final settlement had not been reached, of which one (1) relates to a discontinued operation, four (4) relate to Buckbee-Mears operations and two (2) relate to Optical Products operations.

    To the extent possible with the amount of information available at this time, we have evaluated our responsibility for costs and related liability with respect to the sites at which an investigation is ongoing or threatened, have recorded accruals for our estimated liability in accordance with generally accepted accounting principles, and are of the opinion that our liability with respect to these sites should not have a material adverse effect on the financial position or the results of our operations. In arriving at this conclusion, we have considered, among other things, the payments that have been made with respect to the sites in the past; the factors, such as volume and relative toxicity, ordinarily applied to allocated defense and remedial costs at such sites; the probable costs to be paid by the other potentially responsible parties; total projected remedial costs for a site, if known; existing technology; and the currently enacted laws and regulations. A portion of the costs and related liability for certain sites has been or will be covered by available insurance.

    We estimate that Vision-Ease incurred approximately $0.4 million in 1999 and $0.4 million in 1998 on expenditures, including capital expenditures, related to efforts to comply with applicable laws and regulations regulating the discharge of materials into the environment or otherwise relating to the protection of the environment. In addition, we estimate that Vision-Ease will make approximately $0.2 million in capital expenditures for environmental control facilities during each of 2000 and 2001.

    Seasonality.  Vision-Ease experiences generally lower earnings in the third quarter due to maintenance shutdowns at our lens manufacturing facilities. Earnings are also generally lower in the first quarter due to the seasonality of eyewear, the end product of our lenses.

    Employees.  As of December 31, 1999, Vision-Ease had approximately 1,737 employees in the United States, Europe and Indonesia. None of these employees are represented by labor unions. Labor relations are considered to be good.

(d) Financial Information About Geographic Areas.

    Financial information about our operations in different geographic areas for the three most recent fiscal years is contained on page 32 of our annual report to stockholders for the year ended December 31, 1999, and is incorporated herein by reference.

Factors That May Affect Future Results

    New Product Development and Introduction.  Each of our operations invests significantly in new product development. Vision-Ease has invested substantial resources toward new lens offerings in all lens materials: polycarbonate, glass and hard-resin plastic. These efforts have resulted in many new products that have experienced success to date, including our Tegra® high-performance polycarbonate product line and Outlook™ progressive lenses. At the same time, we encountered a delay on the commercial introduction of our new lamination system due to technical challenges involved in molding thin wafers. We will continue our development efforts in 2000, but there are no assurances that we will overcome the technical difficulties. Through the merger of BMSP and Mask Operations, we expect Buckbee-Mears to develop new high-volume product opportunities, particularly with development efforts underway at BMSP with multiple partners. In addition, Buckbee-Mears will continue to dedicate resources towards development of HDTV and multi-media masks. We must develop these and other new products and technologies at competitive prices and quality in order to compete in each of the markets we serve. There are no assurances, however, that we will succeed in these efforts, that competitors will not develop better quality and less expensive products or that we will develop or introduce new products within our anticipated time schedule.

    Litigation.  We are subject to the normal risks of litigation and other proceedings that affect business operations, including environmental liability for past or present environmental practices, product liability, workers' compensation and personal injury. Although we do not anticipate that any claims will result in liability that could have a materially adverse effect on our financial condition and results of operations there are no assurances that we will not incur such liability in the future.

    Pricing and Margins.  Many market and economic factors have adversely affected, and could continue to affect, our financial performance and projected future results. Since each of our operations supplies components to manufacturers of end products, imbalances in supply and demand at all levels of product distribution could have, and in some instances have had, a significant impact on our pricing and margins. Capacity expansions by aperture mask manufacturers helped create this type of imbalance in the mask market, which resulted in extreme pricing pressures during the past few years. In addition, margins are affected by the need to develop new technology. Our ability to meet the market demand for new products in a timely fashion requires the investment of resources, which, coupled with intense pricing pressures, decreases our margins. To offset these pressures and costs, we have pursued sales of higher margin products and have taken major steps to reduce our fixed and variable costs in all of our operations. There can be no assurance, however, that these efforts will be sufficient to offset further pricing pressures.

    Sources of Supply.  The primary component of a mask is steel. The primary raw materials used to manufacture optical products are glass blanks and polycarbonate and plastic resins. Significant changes in the markets for these materials, including pricing and availability, could have a material adverse impact on our financial results. In addition, since Optical Products obtains the majority of its hard-resin plastic and glass lenses from foreign supply arrangements and operations, factors affecting these suppliers' ability to meet our demand for these products could adversely impact our results of operation.

    Foreign Currency.  We transact business in currencies other than U.S. dollars. The primary currencies used include the German mark, the euro, Japanese yen, British pound, Canadian dollar, Hungarian forint and Indonesian rupiah. Our primary competitors in the mask market are located in Japan. Changes in the currency exchange rates between the U.S. dollar and the German mark compared to the Japanese yen affect Mask Operations' pricing competitiveness. Although we take steps to reduce this risk through cross-currency swaps and other hedging transactions, we are subject to the risk of adverse fluctuations in currency exchange rates, which may result, and have resulted, in pricing pressures and reductions in profitability due to currency conversion or translation.

    International Markets.  Buckbee-Mears has a manufacturing facility located in Müllheim, Germany and an aperture mask inspection facility in Tatabanya, Hungary. Vision-Ease has optical lens laboratories in Europe, supply agreements with hard-resin plastic lens manufacturers in Southeast Asia and Mexico and a joint venture in Indonesia for glass and polycarbonate lens manufacturing. In addition, we have many international customers and are dedicating significant resources to increase business with international customers at all of our operations. Our international operations and sales could be adversely affected by governmental regulations, political instability, economic changes or instability and competitive conditions in other countries in which, and with which, we conduct business. The economic difficulty experienced in Asia during the past few years is an example of international conditions that could adversely affect financial performance. Similar downturns in other areas of the world, such as South America, could affect our operations without advance warning. Further, there are no assurances that our efforts to grow our business, such as penetration of polycarbonate lens sales in Europe through laboratories, will be successful.

Item 2. Properties

    The following table sets forth certain information regarding our principal production facilities:

Location	Principal Use	Approximate Square Feet of Space
Owned:
Ramsey, MN	Optical Products	150,000
	—Manufacturing of polycarbonate lenses, centralized distribution and research and development
St. Cloud, MN	Optical Products	82,000
	—Manufacturing of specialty glass lenses and customer service
Jakarta, Indonesia	Optical Products	66,000
	—Manufacturing of glass lenses
Müllheim, Germany	Buckbee-Mears	170,000
	—Manufacturing of aperture masks and precision photo-etched metal and electroformed products
Cortland, NY	Buckbee-Mears	363,000
	—Manufacturing of aperture masks and precision photo-etched metal and electroformed products
Tatabanya, Hungary	Buckbee-Mears	51,000
	—Inspection of aperture masks
Leased:
St. Paul, MN	Buckbee-Mears	131,000
	—Manufacturing of precision photo-etched metal and electroformed parts
Azusa, CA	Optical Products	120,000
	—Manufacturing of polycarbonate and hard-resin plastic lenses and distribution

    We lease approximately 11,000 square feet in suburban Minneapolis, Minnesota for our corporate headquarters. We lease approximately 10,000 square feet in Brooklyn Park, Minnesota for our Vision-Ease headquarters. Our lease in St. Paul expires in February 2004. We believe our existing facilities are sufficient to meet our current and foreseeable production and other needs.

    In addition to the properties listed above, we operate other smaller domestic and international warehouse, distribution, laboratory and administrative offices. For additional information concerning our leased properties, see Note 9 to Notes to Consolidated Financial Statements on page 24 of our annual report to stockholders for the year ended December 31, 1999.

Item 3. Legal Proceedings

    With regard to certain environmental and other legal matters, see Item 1(c) "Narrative Description of Business—"Buckbee-Mears—Environmental" and "Optical Products—Environmental" and Item 7 "Management's Discussion and Analysis of Financial Condition and Results of Operations."

    Other than as noted above, there are no material pending or threatened legal, governmental, administrative or other proceedings to which we are a party or of which any of our property is subject.

Item 4. Submission of Matters to a Vote of Security Holders

    No matter was submitted to a vote of security holders during the fourth quarter of the fiscal year covered by the report.

Item 4A. Executive Officers of the Registrant

    The names and ages of our executive officers, all of whose terms expire in May 2000, the year first elected or appointed as an executive officer and the offices held as of March 24, 2000 are listed below:

Name (Age)	Date First Elected or Appointed as an Executive Officer	Title
Paul B. Burke (44)	August 1985	Chairman of the Board and Chief Executive Officer
Bradley D. Carlson (35)	September 1999	Treasurer
Jon A. Dobson (33)	December 1997	Vice President of Human Resources, General Counsel and Secretary
Jeffrey J. Hattara (43)	January 1998	Vice President, Finance and Administration and Chief Financial Officer
Benoit Y. Pouliquen (38)	November 1999	President and Chief Operating Officer
Kevin E. Roe (34)	November 1999	Acting Corporate Controller

    There are no family relationships between or among any of the executive officers. Executive officers are elected by the Board of Directors for one-year terms, commencing with their election at the first meeting of the Board of Directors immediately following the annual meeting of stockholders and continuing until the next such meeting of the Board of Directors.

    Except as indicated below, the executive officers have not changed their principal occupations or employment during the past five years.

    Mr. Burke is also a director of BMC. Mr. Burke joined BMC as Associated General Counsel in June 1983, and became Vice President, Secretary and General Counsel in August 1985. In November 1987, he was appointed Vice President, Ft. Lauderdale Operations of the Vision-Ease division and in May 1989, he was appointed President of Vision-Ease. In May 1991, Mr. Burke was elected President and Chief Operating Officer of BMC, and in July 1991, he became President and Chief Executive Officer. Mr. Burke was appointed Chairman of the Board in May 1995. Following the appointment of Mr. Pouliquen as President and Chief Operating Officer in November 1999, Mr. Burke became Chairman and Chief Executive Officer.

    Mr. Carlson joined BMC in September 1999 as Treasurer. From July 1992 to September 1999, Mr. Carlson held various positions with Northwest Airlines, Inc., most recently as Director of Corporate Finance. Mr. Carlson served as an Associate with Kidder Peabody, Inc., an investment banking firm, in 1991 and as a Corporate Finance Analyst with Dain Rauscher Incorporated, an investment banking firm, from 1987 to 1990.

    Mr. Dobson joined BMC in April 1995 as Director of Legal Services. In December 1997, he was appointed General Counsel and Secretary. In November 1999, Mr. Dobson was appointed Vice President of Human Resources, General Counsel and Secretary. Prior to joining BMC, Mr. Dobson was an associate with Lindquist & Vennum PLLP, a Minneapolis law firm, practicing exclusively in corporate and securities law.

    Mr. Hattara joined BMC in January 1998 as Vice President, Finance and Administration and Chief Financial Officer. From September 1978 to January 1998, he served in several management positions at USG Corporation, a manufacturer of building materials, most recently as Director of Finance, USG International, Inc.

    Mr. Pouliquen joined BMC in November 1999. From 1988 to 1999, Mr. Pouliquen held various positions with Johnson Matthey, a specialty chemicals company, most recently as President of Johnson Matthey Electronics. Following the acquisition of Johnson Matthey by Allied Signal in August 1999, Mr. Pouliquen served as Vice President and General Manager of Advanced Circuits, a supplier of high-density interconnect products, until he joined BMC.

    Mr. Roe joined BMC in June 1994 as Corporate Financial Analyst. He served as Finance/Accounting Manager from July 1995 to January 1996 and Assistant Controller from January 1996 to October 1999, at which time he was appointed Acting Corporate Controller. Prior to joining BMC, Mr. Roe served in a variety of financial positions at ADC Telecommunications, Inc., a supplier of transmission and networking systems, from April 1992 to June 1994 and in several audit positions with the accounting firm Deloitte & Touche LLP from January 1988 to April 1992.

Part II

Item 5. Market for Registrant's Common Stock and Related Stockholder Matters

    "Price Range of Common Stock" on page 33 of our annual report to stockholders for the year ended December 31, 1999 is incorporated herein by reference.

    The Company expects to continue its policy of paying regular cash dividends, although there is no assurance as to future dividends because they are dependent on future earnings, capital requirements, financial condition and subject to certain restrictions in the Company's revolving domestic credit facility.

Item 6. Selected Financial Data

    "Historical Financial Summary" on page 9 of our annual report to stockholders for the year ended December 31, 1999 is incorporated herein by reference.

Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations

    "Management's Discussion and Analysis" on Pages 10-16 of our annual report to stockholders for the year ended December 31, 1999 is incorporated herein by reference.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

    "Management's Discussion and Analysis" on pages 14-15 of our annual report to stockholders for the year ended December 31, 1999 is incorporated herein by reference.

Item 8. Financial Statements and Supplementary Data

    Our consolidated financial statements and related notes on pages 17-32 and the Report of our Independent Auditors on page 33 of our annual report to stockholders for the year ended December 31, 1999 are incorporated herein by reference, as is the unaudited information under the caption "Selected Quarterly Data" on page 34.

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

    None.

Part III

Item 10. Directors and Executive Officers of the Registrant

(a)

Directors of the Registrant

    The information under the caption "Election of Directors" on pages 2-5 of our proxy statement for the annual meeting of stockholders to be held May 11, 2000 is incorporated herein by reference.

(b)

Executive Officers of the Registrant

    Information concerning our executive officers is included in this report under Item 4A, "Executive Officers of the Registrant."

(c)

Compliance with Section 16(a) of the Exchange Act

    The information under the caption "Section 16(a) Beneficial Ownership Reporting Compliance" on page 24 of our proxy statement for the annual meeting of stockholders to be held May 11, 2000 is incorporated herein by reference.

Item 11. Executive Compensation

    The information contained under the caption "Executive Compensation" on pages 8-10 and 12-16, and "Election of Directors—Information About the Board and Its Committees" on pages 4-5 of our proxy statement for the annual meeting of stockholders to be held May 11, 2000 is incorporated herein by reference.

Item 12. Security Ownership of Certain Beneficial Owners and Management

    The information contained under the caption "Security Ownership of Certain Beneficial Owners and Management" on pages 6-7 of our proxy statement for the annual meeting of stockholders to be held May 11, 2000 is incorporated herein by reference.

Item 13. Certain Relationships and Related Transactions

    The information contained under the caption "Certain Transactions" on pages 23-24 of our proxy statement for the annual meeting of stockholders to be held May 11, 2000 is incorporated herein by reference.

PART IV.

Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K

(a) 1. Financial Statements

    The following items are incorporated herein by reference from the pages indicated in our annual report to stockholders for the year ended December 31, 1999.

Consolidated Financial Statements:	Page
Consolidated Statements of Operations for the Years Ended December 31, 1999, 1998 and 1997	17
Consolidated Balance Sheets as of December 31, 1999 and 1998	18
Consolidated Statements of Stockholders' Equity for the Years Ended December 31, 1999, 1998 and 1997	19
Consolidated Statements of Cash Flows for the Years Ended December 31, 1999, 1998 and 1997	20
Notes to Consolidated Financial Statements	21-32
Price Range of Common Stock	33
Report of Independent Auditors	33
Selected Quarterly Financial Data (unaudited)	34

2.  Financial Statement Schedule:

    The following financial statement schedule is included herein and should be read in conjunction with the consolidated financial statements referenced above:

	Page
II—Valuation and Qualifying Accounts	16

    Schedules other than the one listed above are omitted because of the absence of the conditions under which they are required or because the information required is included in the consolidated financial statements or the notes thereto.

3. Exhibits:

    Reference is made to the Exhibit Index contained on pages 18-26 of this Form 10-K.

    A copy of any of the exhibits listed or referred to herein will be furnished at a reasonable cost to any person who was a BMC stockholder as of March 24, 2000, upon receipt from any such person of a written request for any exhibit. Requests should be sent to Investor Relations Department, BMC Industries, Inc., One Meridian Crossings, Suite 850, Minneapolis, MN 55423.

    The following is a list of each management contract or compensatory plan or arrangement required to be filed as an exhibit to this Form 10-K pursuant to Item 14(c):

a)

1984 Omnibus Stock Program, as amended effective December 19, 1989 (incorporated by reference to Exhibit 10.1 of the Company's Annual Report on Form 10-K for the year ended December 31, 1989 (File No. 1-8467)).



b)

1999 Management Incentive Bonus Plan Summary (incorporated by reference to Exhibit 10.3 to the Company's Annual Report on Form 10-K for the year ended December 31, 1998 (File No. 1-8467)).



c)

2000 Management Incentive Bonus Plan Summary (filed herewith as Exhibit 10-3).



d)

Revised Executive Perquisite/Flex Policy (effective as of January 1, 1999) (incorporated by reference to Exhibit 10.4 to the Company's Annual Report on Form 10-K for the year ended December 31, 1998 (File No. 1-8467)).



e)

Restated and Amended Directors' Deferred Compensation Plan (incorporated by reference to Exhibit 10.15 to the Company's Annual Report on Form 10-K for the year ended December 31, 1996 (File No. 1-8467)).



f)

Form of Change of Control Agreement entered into between the Company and Mr. Burke (incorporated by reference to exhibit 10.31 to the Company's Annual Report on Form 10-K for the year ended December 31, 1991 (File No 1-8467)).



g)

Form of Change of Control Agreement entered into between the Company and Messrs. Carlson, Dobson, Hattara and Pouliquen (Filed herewith as Exhibit 10.29).



h)

1994 Stock Incentive Plan (incorporated by reference to Exhibit 10.12 to the Company's Annual Report on Form 10-K for the year ended December 31, 1993 (File No. 1-8467)).



i)

Amendment No. 1 to the 1994 Stock Incentive Plan (incorporated by reference to Exhibit 10.3 to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1996 (File No. 1-8467)).



j)

Amendment No. 2 to the 1994 Stock Incentive Plan (incorporated by reference to Exhibit 10.2 to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 1997 (File No. 1-8467)).



k)

BMC Stock Option Exercise Loan Program, as amended June 12, 1998 (incorporated herein by reference to Exhibit 10.4 of the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1998 (File No. 1-8467)).



l)

Employment Severance Agreement by and between the Company and Jeffrey J. Hattara, dated January 26, 1998 (incorporated by reference to Exhibit 10.48 of the Company's Annual Report on Form 10-K for the year ended December 31, 1997 (File No. 1-8467)).



m)

Employment Agreement by and between the Company and Paul B. Burke, dated as of January 1, 1999 (incorporated by reference to Exhibit 10.25 of the company's Annual Report on Form 10-K for the year ended December 31, 1998 (File No. 1-8467)).



n)

BMC Industries, Inc. Executive Benefit Plan, effective January 1, 1993 (incorporated by reference to Exhibit 10.22 of the Company's Annual Report on Form 10-K for the year ended December 31, 1998 (File No. 1-8467)).



o)

First Declaration of Amendment, effective September 1, 1998, to the BMC Industries, Inc. Executive Benefit Plan (incorporated by reference to Exhibit 10.12 to the Company's Annual Report on Form 10-K for the year ended December 31, 1998 (File No. 1-8467)).

(b) Reports on Form 8-K

    The Company did not file any reports on Form 8-K during the quarter ended December 31, 1999.

(c) Exhibits

    The response to this portion of Item 14 is submitted as a separate section of this report.

(d) Financial Statement Schedules

    The response to this portion of Item 14 is submitted as a separate section of this report.

Schedule II

Valuation and Qualifying Accounts

Years Ended December 31

(in thousands)

	Balance Beginning of Year		Additions Charged to Costs and Expenses		Deductions		Translation Adjustment and Other			Balance End of Year
1999
Allowance for doubtful accounts	$	1,266	$	1,132	$	570	$	0		$	1,828
Allowance for merchandise returns		1,358		1,076		474		(414	)		1,546
	$	2,624	$	2,208	$	1,044	$	(414	)	$	3,374
Inventory reserves	$	12,791	$	7,616	$	1,145	$	(429	)	$	18,833
1998
Allowance for doubtful accounts	$	891	$	438	$	69	$	6		$	1,266
Allowance for merchandise returns		1,227		1,856		1,735		10			1,358
	$	2,118	$	2,294	$	1,804	$	16		$	2,624
Inventory reserves	$	7,421	$	9,691	$	4,494	$	173		$	12,791
1997
Allowance for doubtful accounts	$	1,513	$	321	$	933	$	(10	)	$	891
Allowance for merchandise returns		817		1,559		1,088		(61	)		1,227
	$	2,330	$	1,880	$	2,021	$	(71	)	$	2,118
Inventory reserves	$	6,949	$	1,049	$	335	$	(242	)	$	7,421

SIGNATURES

    Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on March 30, 2000, on its behalf by the undersigned, thereunto duly authorized.

BMC INDUSTRIES, INC.
By:	/s/ JEFFREY J. HATTARA Jeffrey J. Hattara Vice President, Finance and Administration and Chief Financial Officer

    Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below on March 30, 2000, by the following persons on behalf of the registrant and in the capacities indicated.

Signature	Title
/s/ PAUL B. BURKE Paul B. Burke	Chairman of the Board, President and Chief Executive Officer (Principal Executive Officer)
/s/ JEFFREY J. HATTARA Jeffrey J. Hattara	Vice President of Finance and Administration and Chief Financial Officer (Principal Financial Officer)
/s/ KEVIN E. ROE Kevin E. Roe	Acting Corporate Controller (Principal Accounting Officer)
/s/ LYLE D. ALTMAN Lyle D. Altman	Director
/s/ JOHN W. CASTRO John W. Castro	Director
/s/ H. TED DAVIS H. Ted Davis	Director
/s/ JOE E. DAVIS Joe E. Davis	Director
/s/ HARRY A. HAMMERLY Harry A. Hammerly	Director

 
 
/s/ JAMES M. RAMICH James M. Ramich  
 
Director

BMC Industries, Inc.
Exhibit Index to Annual Report on Form 10-K
For the Year Ended December 31, 1999

Exhibit No.		Exhibit Method of Filing
2.1	Asset Purchase Agreement, dated as of March 25, 1998, between Monsanto Company and VIS-ORC, Inc.	Incorporated by reference to Exhibit 2.1 to the Company's Current Report on Form 8-K dated March 25, 1998 and filed with the Commission on April 3, 1998 (File No. 1-8467).
2.2	Amendment No. 1 to the Asset Purchase Agreement, dated as of May 15, 1998, between Monsanto Company and Vision-Ease Lens Azusa, Inc., f/k/a VIS-ORC, Inc.	Incorporated by reference to the Company's Current Report on Form 8-K dated May 15, 1998 and filed with the Commission on May 29, 1998 (File No. 1-8467).
3.1	Second Restated Articles of Incorporation of the Company, as amended.	Incorporated by reference to Exhibit 3.1 to the Company's Annual Report on Form 10-K for the year ended December 31, 1994 (File No. 1-8467).
3.2	Amendment to the Second Restated Articles of Incorporation, dated May 8, 1995.	Incorporated by reference to Exhibit 3.2 to the Company's Annual Report on Form 10-K for the year ended December 31, 1994 (File No. 1-8467).
3.3	Amendment to the Second Restated Articles of Incorporation, dated October 30, 1995.	Incorporated by reference to Exhibit 3.1 to the Company's quarterly report on Form 10-Q for the quarter ended September 30, 1995 (File No. 1-8467).
3.4	Amendment to the Second Restated Articles of Incorporation, dated August 7, 1998	Incorporated by reference to Exhibit 3.4 to the Company's Annual Report on Form 10-K for the year ended December 31, 1998 (File No. 1-8467).
3.5	Articles of Correction to the Second Restated Articles of Incorporation, dated November 22, 1999	Filed electronically herewith.
3.6	Restated Bylaws of the Company, as amended.	Incorporated by reference to Exhibit 3.4 to the Company's Annual Report on Form 10-K for the year ended December 31, 1994 (File No. 1-8467).
3.7	Amendment to the Restated Bylaws of the Company.	Incorporated by reference to Exhibit 3.5 to the Company's Annual Report on Form 10-K for the year ended December 31, 1997 (File No. 1-8467).
3.8	Amendment to the Restated Bylaws of the Company, dated February 20, 1998	Incorporated by reference to Exhibit 3.7 to the Company's Annual Report on Form 10-K for the year ended December 31, 1998 (File No. 1-8467)
4.1	Specimen Form of the Company's Common Stock Certificate.	Incorporated by reference to Exhibit 4.3 to the Company's Registration Statement on Form S-2 (File No. 2-83809).

4.2	Form of Share Rights Agreement, dated as of June 30, 1998, between the Company and Norwest Bank, National Association, as Rights Agent.	Incorporated by reference to Exhibit 1 to the Company's Registration Statement on Form 8-A, dated July 14, 1998.
10.1	1984 Omnibus Stock Program, as amended effective December 19, 1989.	Incorporated by reference to Exhibit 10.1 to the Company's Annual Report on Form 10-K for the year ended December 31, 1989 (File No. 1-8467).
10.2	1999 Management Incentive Bonus Plan Summary.	Incorporated by reference to Exhibit 10.3 to the Company's Annual Report on Form 10-K for the year ended December 31, 1998 (File No. 1-8467).
10.3	2000 Management Incentive Bonus Plan.	File electronically herewith.
10.4	Revised Executive Perquisite/Flex Policy (effective as of January 1, 1998).	Incorporated by reference to Exhibit 10.4 to the Company's Annual Report on Form 10-K for the year ended December 31, 1998 (File No. 1-8467).
10.5	BMC Savings and Profit Sharing Plan, restated, effective September 1, 1998.	Incorporated by reference to Exhibit 10.5 to the Company's Annual Report on Form 10-K for the year ended December 31, 1998 (File No. 1-8467).
10.6	First Declaration of Amendment, dated April 26, 1999, to the BMC Industries, Inc. Savings and Profit Sharing Plan.	Incorporated by reference to Exhibit 10.2 to the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 1999 (File No. 1-8467).
10.7	Second Declaration of Amendment, dated April 26, 1999 to the BMC Industries, Inc. Savings and Profit Sharing Plan.	Incorporated by reference to Exhibit 10.3 to the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 1999 (File No. 1-8467).
10.8	Third Declaration of Amendment, dated July 7, 1999, to the BMC Industries, Inc. Savings and Profit Sharing Plan.	Incorporated by reference to Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1999 (File No. 1-8467).
10.9	Restated and Amended Directors' Deferred Compensation Plan.	Incorporated by reference to Exhibit 10.15 to the Company's Annual Report on Form 10-K for the year ended December 31, 1996 (File No. 1-8467).
10.10	1994 Stock Incentive Plan.	Incorporated by reference to Exhibit 10.12 to the Company's Annual Report on Form 10-K for the year ended December 31, 1993 (File No. 1-8467).
10.11	First Declaration of Amendment to the BMC Industries, Inc. 1994 Stock Incentive Plan.	Incorporated by reference to Exhibit 10.3 to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1996 (File No. 1-8467).
10.12	Second Declaration of Amendment, dated August 8, 1997, to the BMC Industries, Inc. 1994 Stock Incentive Plan.	Incorporated by reference to Exhibit 10.2 to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 1997 (File No. 1-8467).

10.13	BMC Stock Option Exercise Loan Program, as amended June 12, 1998.	Incorporated by reference to exhibit 10.4 to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1998 (File No. 1-8467).
10.14	BMC Industries, Inc. Executive Benefit Plan, effective January 1, 1993.	Incorporated by reference to Exhibit 10.11 to the Company's Annual Report on Form 10-K for the year ended December 31, 1998 (File No. 1-8467).
10.15	First Declaration of Amendment to the BMC Industries Executive Benefit Plan, effective September 1, 1998.	Incorporated by reference to Exhibit 10.12 to the Company's Annual Report on Form 10-K for the year ended December 31, 1998 (File No. 1-8467).
10.16	First Amendment, dated April 8, 1999, to the BMC Industries, Inc. Savings Trust.	Incorporated by reference to Exhibit 10.4 to the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 1999 (File No. 1-8467).
10.17	Lease Agreement, dated November 20, 1978, between Control Data Corporation and the Company.	Incorporated by reference to Exhibit 10.9 to the Company's Registration Statement on Form S-2 (File No. 2-79667).
10.18	Amendment to Lease Agreement, dated December 27, 1983, between Control Data Corporation and the Company.	Incorporated by reference to Exhibit 10.24 to the Company's Annual Report on Form 10-K for the year ended December 31, 1983 (File No. 1-8467).
10.19	Amendment to Lease Agreement, dated April 9, 1986, between Control Data Corporation and the Company.	Incorporated by reference to Exhibit 10.15 to the Company's Annual Report on Form 10-K for the year ended December 31, 1987 (File No. 1-8467).
10.20	Amendment to Lease Agreement, dated April 12, 1989, between GMT Corporation (as successor in interest to Control Data Corporation) and the Company.	Incorporated by reference to Exhibit 10.14 to the Company's Annual Report on Form 10-K for the year ended December 31, 1989 (File No. 1-8467).
10.21	Amendment to Lease Agreement, dated March 19, 1990, between GMT Corporation and the Company.	Incorporated by reference to Exhibit 10.15 to the Company's Annual Report on Form 10-K for the year ended December 31, 1989 (File No. 1-8467).
10.22	Amendment to Lease Agreement, dated May 17, 1993, between GMT Corporation and the Company.	Incorporated by reference to Exhibit 10.20 to the Company's Annual Report on Form 10-K for the year ended December 31, 1993 (File No. 1-8467).
10.23	Amendment of Lease, dated April 6, 1994 by and between GMT Corporation and the Company.	Incorporated by reference to Exhibit 10.23 to the Company's Annual Report on Form 10-K for the year ended December 31, 1994 (File No. 1-8467).
10.24	Waiver of Condition Precedent, dated July 29, 1994, by and between GMT Corporation and the Company.	Incorporated by reference to Exhibit 10.24 to the Company's Annual Report on Form 10-K for the year ended December 31, 1994 (File No. 1-8467).

10.25	Amendment of Lease, dated September 25, 1997 by and between GMT Corporation and the Company.	Incorporated by reference to Exhibit 10.34 to the Company's Annual Report on Form 10-K for the year ended December 31, 1997 (File No. 1-8467).
10.26	Amendment of Lease, dated August 1, 1998 by and between GMT Corporation and the Company.	Filed electronically herewith.
10.27	Amendment of Lease, dated August 1, 1998 by and between GMT Corporation and the Company.	Filed electronically herewith.
10.28	Form of Change of Control Agreement entered into between the Company and Mr. Burke.	Incorporated by reference to Exhibit 10.31 to the Company's Annual Report on Form 10-K for the year ended December 31, 1991 (File No. 1-8467).
10.29	Form of Change of Control Agreement entered into between the Company and Messrs. Carlson, Dobson, Hattara and Pouliquen.	Filed electronically herewith.
10.30	Employment Severance Agreement by and between the Company and Jeffrey J. Hattara, dated January 26, 1998.	Incorporated by reference to Exhibit 10.48 to the Company's Annual Report on Form 10-K for the year ended December 31, 1997 (File No. 1-8467).
10.31	Employment Agreement, by and between the Company and Paul B. Burke, dated as of January 1, 1999.	Incorporated by reference to Exhibit 10.25 to the Company's Annual Report on Form 10-K for the year ended December 31, 1998 (File No. 1-8467).
10.32	Commitment letter, dated March 24, 1998, from BT Alex. Brown for an unsecured revolving credit facility totaling $275 million.	Incorporated by reference to Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for the quarter ended March 30, 1998 (File No. 1-8467).
10.33	Credit Agreement, dated as of May 15, 1998, between the Company, Bankers Trust Company as Administrative Agent, NBD Bank as Documentation Agent and Various Lending Institutions.	Incorporated by reference to Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1998 (File No. 1-8467).
10.34	Amended and Restated Credit Agreement, dated as of June 25, 1998, among the Company, Several Banks, Bankers Trust Company as the Agent and a Lender and NBD Bank as Documentation Agent and a Lender.	Incorporated by reference to Exhibit 10.2 to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1998 (File No. 1-8467).
10.35	Amendment No. 1 to Amended and Restated Credit Agreement, dated as of July 23, 1998, among the Company, Several Banks, Bankers Trust Company as Agent and a Lender, NBD Bank as Documentation Agent and a Lender.	Incorporated by reference to Exhibit 10.3 to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1998 (File No. 1-8467).

10.36	Amendment No. 2 to Amended and Restated Credit Agreement, dated as of December 30, 1998, among the Company, Several Banks, Bankers Trust Company as Agent and a Lender, NBD Bank as Documentation Agent and a Lender.	Incorporated by reference to Exhibit 10.30 to the Company's Annual Report on Form 10-K for the year ended December 31, 1998 (File No. 1-8467).
10.37	Amendment No. 3 to Amended and Restated Credit Agreement, Dated April 29, 1999, among the Company, Several Banks, Bankers' Trust Company as Agent and a Lender, NBD Bank as Documentation Agent and a Lender.	Incorporated by reference to Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 1999 (File No. 1-8467).
10.38	Consent, Waiver and Fourth Amendment to Credit Agreement, dated December 21, 1999, among the Company, several banks, Bankers Trust Company as Agent and a Lender, Bank One (as assignee of NBD Bank) as agent and a Lender.	Filed electronically herewith.
10.39	BME Share Pledge Agreement, dated June 24, 1999, among the Company, Buckbee-Mears Europe and several banks.	Incorporated by reference to Exhibit 10.2 to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1999 (File No. 1-8467).
10.40	Amended and Restated Pledge Agreement, dated December 21, 1999, among the Company and Bankers Trust Company as Collateral Agent and a Lender.	Filed electronically herewith.
10.41	Release of Pledge, dated December 21, 1999, among the Company and Bankers Trust Company as Collateral Agent.	Filed electronically herewith.
10.42	Product Manufacturing and Sales Agreement, dated October 17, 1994, between Polycore Optical, PTE. Ltd. and Vision-Ease, a unit of the Company, without exhibits.	Incorporated by reference to Exhibit 10.36 to the Company's Annual Report on Form 10-K for the year ended December 31, 1994 (File No. 1-8467).
10.43	Amendment of the Product Manufacturing and Sales Agreement, dated August 11, 1997, between Polycore Optical, PTE, Ltd. and Vision-Ease Lens, Inc.	Incorporated by reference to Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 1997 (File No. 1-8467).
10.44	Lease, dated October 29, 1997, by and among the Company and Meridian Crossings LLC (d/b/a Told Development Company).	Incorporated by reference to Exhibit 10.3 to the Company's quarterly Report on Form 10-Q for the quarter ended September 30, 1997 (File No. 1-8467).
13.1	Portions of the Company's 1999 Annual Report to Stockholders incorporated herein by reference in this Annual Report on Form 10-K.	Filed electronically herewith.
21.1	Subsidiaries of the Registrant.	Filed electronically herewith.
23.1	Consent of Ernst & Young LLP, Independent Auditors.	Filed electronically herewith.

27.1	Financial Data Schedule	Filed electronically herewith.
99.1	Press Release, dated December 10, 1999, announcing quarterly dividend.	Filed electronically herewith.
99.2	Press Release, dated February 1, 2000, announcing fourth quarter 1999 results.	Filed electronically herewith.
99.3	Press Release, dated March 9, 2000 announcing quarterly dividend.	Filed electronically herewith.
99.4	Press Release, dated March 10, 2000 announcing acquisition of French Laboratory.	Filed electronically herewith.
99.5	Press Release, dated March 10, 2000 announcing reorganization of Precision Imaged Products Group.	Filed electronically herewith.

QuickLinks

PART I

Item 1. Business

Item 2. Properties
Item 3. Legal Proceedings
Item 4. Submission of Matters to a Vote of Security Holders
Item 4A. Executive Officers of the Registrant

Part II

Item 5. Market for Registrant's Common Stock and Related Stockholder Matters
Item 6. Selected Financial Data
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Item 8. Financial Statements and Supplementary Data
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

Part III

Item 10. Directors and Executive Officers of the Registrant
Item 11. Executive Compensation
Item 12. Security Ownership of Certain Beneficial Owners and Management
Item 13. Certain Relationships and Related Transactions

PART IV.

Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K

SIGNATURES
BMC Industries, Inc. Exhibit Index to Annual Report on Form 10-K For the Year Ended December 31, 1999

EX-3.5

                                                                     EXHIBIT 3.5


                             ARTICLES OF CORRECTION
                                       TO
                    SECOND RESTATED ARTICLES OF INCORPORATION
                             OF BMC INDUSTRIES, INC.


         On April 30, 1992 BMC Industries, Inc., a Minnesota corporation filed
Second Restated Articles of Incorporation with the Secretary of State.

         Article VI of the Second Amended Articles of Incorporation as filed
inadvertently omitted a provision. Pursuant to Minnesota Statutes 5.16, Exhibit
A hereto sets forth the correct form of Article VI of the Second Amended
Articles of Incorporation of BMC Industries, Inc.

         I hereby certify that I am authorized to execute these Articles of
Correction and I further certify that I understand that by signing these
Articles of Correction I am subject to the penalties of perjury as set forth in
Minnesota Statutes, Section 609.48, as if I had signed these Articles of
Correction under oath.

         DATED:  November 22, 1999

                                      BMC INDUSTRIES, INC.


                                      By:      /s/Jon A. Dobson
                                         -------------------------------
                                      Title:   General Counsel And Secretary
                                            ------------------------------------




                                    EXHIBIT A


                                   ARTICLE VI

         The number of directors of this Corporation shall be not less than
three (3) nor more than seventeen (17), as determined from time to time by the
Board of Directors. The directors shall be classified with respect to their
terms of office by dividing them into two classes, with each class being as
nearly equal in number as possible. The terms of office of the directors
initially classified as Class A shall expire at the 1991 annual meeting of the
shareholders; and the terms of those classified as Class B shall expire at the
end of the 1992 annual meeting of shareholders. At each annual meeting of
shareholders after such initial classification, directors of the class whose
term is expiring will be elected to hold office until the second succeeding
annual meeting. Except as provided below, directors shall hold office until the
expiration of the terms for which they were elected or until their successors
are elected and qualified. The stockholders or Board of Directors may remove a
director from office at any time for cause. The Board of Directors may remove a
director from office, with or without cause, if the director was named by the
Board to fill a vacancy. The Board of Directors may remove a director at any
time, with or without cause, if the director is or at any time has been an
officer of the Corporation, provided that the vote required for any such removal
shall be the affirmative vote of at least seventy-five percent of the remaining
directors. Upon election or appointment to the Board of Directors, each director
shall offer his or her resignation from the Board of Directors, to be effective
at such time as he or she may change his or her principal occupation or
employment. If the office of any director or directors becomes vacant by reason
of death, resignation, retirement, disqualification, removal from office,
increase in the number of directors, or otherwise, a majority of the remaining
directors, though less than a quorum, at a meeting called for that purpose, may
choose a successor or successors, who shall hold office until the expiration of
the term of the class for which appointed or until a successor shall be elected
or qualified. No shares of this Corporation shall confer upon the holder thereof
any right of cumulative voting.

         The vote required for any amendment to, or repeal of, all or any
portion of this Article VI shall be the affirmative vote of the holders of at
least two-thirds of the voting power of the outstanding shares; provided,
however, that if the then current or a pre-existing Board of Directors of this
Corporation shall by resolution adopted at a meeting of the Board of Directors
have approved the amendment or repeal proposal and have determined to recommend
it for approval by the holders of shares entitled to vote on the matter, then
the vote required shall be the affirmative vote of the holders of at least a
majority of the voting power of the outstanding shares.

EX-10.3

Revised 2/7/00                                                      EXHIBIT 10.3

                              BMC INDUSTRIES, INC.
                         2000 MANAGEMENT INCENTIVE PLAN

                                    CORPORATE

1.       OBJECTIVE

         To focus management attention on division annual profit performance and
         balance sheet management.

2.       GLOSSARY OF TERMS

         "CONSOLIDATED EARNINGS PER SHARE"
                  Consolidated Earnings Per Share as reported publicly.

         "MAXIMUM PERFORMANCE"
                  The level of operating earnings justifying a "maximum"
                  incentive award.

         "PAR PERFORMANCE"
                  The level of operating earnings justifying a "target"
                  incentive award.

         "CUT-IN PERFORMANCE"
                  The level of operating earnings justifying a "minimum"
                  incentive award.

         "TARGET INCENTIVE"
                  The percent (%) of base pay when a 100% incentive award is
                  earned.

         "MINIMUM INCENTIVE"
                  The percent (%) of base pay when a 10% incentive award is
                  earned.

         "MAXIMUM INCENTIVE"
                  The percent (%) of base pay when a 150% incentive award is
                  earned.

         "BMC EARNINGS THRESHOLD"
                  The minimum level of total company net earnings before a
                  division participant in the Plan will be eligible for an
                  incentive award.

         "AVERAGE WORKING CAPITAL TARGET"
                  The monthly level of net receivables, inventories and
                  payables, expressed as a percentage of sales, above which an
                  interest charge will be incurred by the Division and below
                  which the Division will earn interest for purposes of
                  operating earnings.



         "CAPITAL SPENDING IN EXCESS OF BUDGET"

                  The amount by which actual capital spending for the year
                  exceeds capital spending budgeted for the year. The amount of
                  capital spending budgeted for the year may be increased at the
                  discretion of the Corporate office.

III.     ELIGIBLE PARTICIPANTS

         Key management employees.

IV.      2000 PERFORMANCE STANDARDS

         Operating earnings targets are expressed as adjusted DCE and are
         subject to change by management based on events that were not
         contemplated in the 2000 budget, including investments made for an
         acquisition, new facility or significant expansion.

V.       AWARD LEVELS

         Target incentive awards are a percent (%) of base salary, depending on
         the employee's level of responsibility.

VI.      ORGANIZATIONAL WEIGHTING

         There is no organizational weighting. For example, Corporate
         participants earn awards based on Corporate performance and Division
         participants earn awards based on Division performance.

VII.     INCENTIVE OPPORTUNITY

         Individual incentive awards will be prorated and calculated based on
         the following, once the applicable thresholds have been exceeded:

                  -        150% of target incentive is earned when reported
                           operating earnings, as defined earlier, equal or
                           exceed "maximum."

                  -        100% of target incentive is earned when reported
                           operating earnings, as defined earlier, equal or
                           exceed "par."

                  -        10% of target incentive is earned when reported
                           operating earnings, as defined earlier, equal
                           "cut-in."

                  -        No incentive will be paid when reported operating
                           earnings, as defined earlier, fall below "cut-in."

VIII.    PAYMENT FORM

         Cash.

EX-10.26

                                                                   EXHIBIT 10.26

                               AMENDMENT OF LEASE

         This Amendment of Lease ("Amendment") is made as of this 1st day of
August, 1998, by and between GMT Corporation, a Minnesota corporation, whose
address is 245 East Sixth Street, Saint Paul, Minnesota 55101 ("Landlord") and
BMC Industries, Inc., a Minnesota corporation, whose address is 278 East Seventh
Street, Saint Paul, Minnesota 55101 ("Tenant").

                                    RECITALS:

         WHEREAS, Landlord and Tenant are parties to that certain Lease
Agreement originally between Control Data Corporation and Buckbee-Mears Company
dated November 20, 1978, as amended by various amendments and agreements
(collectively "Lease"); and

         WHEREAS, Landlord and Tenant desire to amend the Lease as it related to
the "PS-3 Space" upon the terms and conditions set forth below.

         NOW, THEREFORE, In consideration of the foregoing and other good and
value consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:

         1.       Tenant shall have the option to renew the term of the Lease
                  for the PS-3 Space for the period from March 1, 1999, through
                  February 29, 2000, by written notice to Landlord on or before
                  January 31, 1999.

         2.       Tenant shall have the option on 30 days prior notice to renew
                  the term of the Lease as it relates to the PS-3 Space for four
                  (4) additional, consecutive one (1) year periods. For each
                  option period there shall be an adjustment ("Adjustment') in
                  the basic Rental and Tenant's annual share of "CAM Charges" as
                  defined in Section 5 of the Amendment of Lease dated April 6,
                  1994, as said Adjustment is defined in Section 6 of said
                  Amendment of Lease dated April 6, 1994; provided the "Base
                  Price Index" shall be the Price Index last published prior to
                  the term then in effect.

         3.       For the PS-3 Space Tenant shall pay an annual rate of $9.93
                  per square foot for Basic Rent and CAM Charges as defined in
                  Section 5 of the Amendment of Lease dated April 5, 1994. Real
                  estate taxes shall be billed on a prorate basis.

         4.       Except as specifically provided herein, the terms and
                  conditions of the Lease as it relates to the PS-3 Space shall
                  continue in full force and effect. In the event of any
                  inconsistency between the terms of this Amendment


                  and any other terms of the Lease, the provisions of this
                  Amendment shall control.

         IN WITNESS WHEREOF, This Amendment has been executed as of the date set
forth above.


LANDLORD:  GMT CORPORATION                      TENANT:  BMC INDUSTRIES, INC.

By:  /s/Henry Zaidan                           By:    /s/Benjamin A. Teno
    ---------------------------                     ---------------------------

Its:    President                              Its:   VP/GM
     --------------------------                     ---------------------------

EX-10.27

                                                                   EXHIBIT 10.27
                               AMENDMENT OF LEASE

         This Amendment of Lease ("Amendment") is made as of this 1st day of
August, 1998, by and between GMT Corporation, a Minnesota corporation, whose
address is 245 East Sixth Street, Saint Paul, Minnesota 55101 ("Landlord") and
BMC Industries, Inc., a Minnesota corporation, whose address is 278 East Seventh
Street, Saint Paul, Minnesota 55101 ("Tenant").

                                    RECITALS:

         WHEREAS, Landlord and Tenant are parties to that certain Lease
Agreement originally between Control Data Corporation and Buckbee-Mears Company
dated November 20, 1978, as amended by various amendments and agreements
(collectively "Lease"); and

         WHEREAS, Landlord and Tenant desire to amend the Lease upon the terms
and conditions set forth below.

         NOW, THEREFORE, In consideration of the foregoing and other good and
value consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:

         1.       TERM. The term of the Lease for the entire Demised Premises
                  (except for the "PS-3 Space" covered by the Amendment of Lease
                  dated September 25, 1997) is hereby extended for 5 years
                  through February 29, 2004. The parties agree that the PS-3
                  Space shall be governed by the Amendment of Lease dated
                  September 25, 1997, and any amendment thereto.

         2.       OPTION TO EXTEND. Provided Tenant is not in default under the
                  Lease, Tenant shall have two (2) additional, consecutive five
                  (5) year options to extend the term of the Lease for the
                  Demised Premises. In order to exercise said options, tenant
                  shall notify Landlord in writing of Tenant's intent to so
                  extend the term of the Lease at least one hundred eight (180)
                  days prior to the expiration of the then current term of the
                  Lease. For each option period there shall be an adjustment
                  ("Adjustment") in the Basic Rental and the Tenant's annual
                  share of "CAM Charges" as defined in Section 5 of the
                  Amendment of Lease dated April 6, 1994, as said Adjustment is
                  defined in Section 6 of said Amendment of Lease dated April 6,
                  1994; provided the "Base Price Index" shall be the Price Index
                  last published prior to the end of the term then in effect.

         3.       RENT. Basic Rental and Tenant's share of CAM Charges shall be
                  as follows:




         SPACE             SQ. FT.       ANNUAL RENT/SQ. FT.        ANNUAL CAM/SQ. FT.
         -----             -------       -------------------        ------------------
                                                           
         PS-B               17,377            $2.22                      $1.68
         FB                  9,640             2.83                       1.68
         R-5                29,115             3.88                        .31
         R-6                29,115             3.88                        .31
         PS-1                7,170             3.88                       1.68
         PS-2                2,664             3.88                       1.68
         S-228               1,782             3.88                       1.68
         S-500               8,752             3.88                       1.68
         PS-5B               1,078             2.22                       1.68
         PS-6                3,013             3.88                       1.68
         PS-601              2,586             3.88                       1.68


         4.       Tenant shall have the right, with a 150-day notice to
                  Landlord, to reduce the Demised premises in the Park Square
                  Building as follows: on the 5th floor, by any or all of the
                  9,830 square feet; on the 6th floor, by any or all of the
                  5,599 square feet; and on the 2nd floor, by any or all of the
                  4,446 square feet. The reductions must occur in different
                  calendar years, unless Landlord has already released the
                  previously reduced premises. Each notice to reduce shall cover
                  premises only on a single floor.

         5.       Tenant shall have the right to lease additional space in the
                  Building, if available, at the current rate Tenant is paying
                  for similar space.

         6.       Except as specifically provided herein, the terms and
                  conditions of the Lease shall continue in full force and
                  effect. In the event of any inconsistency between the terms of
                  this Amendment and any other terms of the Lease, the
                  provisions of this Amendment shall control.

         IN WITNESS WHEREOF, This Amendment has been executed as of the date set
forth above.


LANDLORD:  GMT CORPORATION                      TENANT: BMC INDUSTRIES, INC.

By:  /s/ Henry Zaidan                           By:  /s/Benjamin A. Teno
    ---------------------------                     ---------------------------

Its:  President                                 Its: VP/GM
    ---------------------------                     ---------------------------

EX-10.29

                                                                  EXHIBIT 10.29



Date


Name
Street
City, State  Zip

Dear           :

         BMC Industries, Inc. considers the establishment and maintenance of
a sound and vital management to be essential to protecting and enhancing the
best interests of the Company and its stockholders. In this connection, the
Company recognizes that, as is the case with many publicly held corporations,
the possibility of a Change in Control may arise and that such possibility,
and the uncertainty and questions which it may raise among management, may
result in the departure or distraction of management personnel to the
detriment of the Company and its stockholders.

         Accordingly, the Board has determined that appropriate steps should
be taken to minimize the risk that Company management will depart prior to a
Change in Control, thereby leaving the Company without adequate management
personnel during such a critical period, and to reinforce and encourage the
continued attention and dedication of members of the Company's management to
their assigned duties without distraction in circumstances arising from the
possibility of a Change in Control. In particular, the Board believes it
important, should BMC Industries, Inc., or its stockholders receive a
proposal for transfer of control, that you be able to continue your
management responsibilities and assess and advise the Board whether such
proposal would be in the best interests of BMC Industries, Inc. and its
stockholders and to take other action regarding such proposal as the Board
might determine to be appropriate, without being influenced by the
uncertainties of your own personal situation.

         The Board recognizes that continuance of your position with the
Company involves a substantial commitment to the Company in terms of your
personal life and professional career and the possibility of foregoing
present and future career opportunities, for which the Company receives
substantial benefits. Therefore, to induce you to remain in the employ of the
Company, this Agreement, which has been approved by the Board, sets forth the
benefits which the Company agrees will be provided to you in the event your
employment with the Company is terminated in connection with a Change in
Control under the circumstances described below.

         1. DEFINITIONS. The following terms will have the meaning set forth
below unless the context clearly requires otherwise. Terms defined elsewhere
in this Agreement will have the same meaning throughout this Agreement.

         (a) "AGREEMENT" means this letter agreement as amended, extended or
renewed from time to time in accordance with its terms.

         (b) "BOARD" means the board of directors of the Parent Corporation
duly qualified and acting at the time in question.






Name
March 13, 2000
Page 2 of 10


         (c) "CAUSE" means: (i) the willful and continued failure by you to
perform substantially your duties with the Company after a demand for
substantial performance is delivered to you by the President and Chief
Executive Officer which specifically identifies the manner in which such
person believes that you have not substantially performed your duties; or
(ii) your conviction (including a plea of nolo contendere) of willfully
engaging in illegal conduct constituting a felony or gross misdemeanor under
federal or state law which is materially and demonstrably injurious to the
Company. For purposes of this definition, no act, or failure to act, on your
part will be considered "willful" unless done, or omitted to be done, by you
in bad faith and without reasonable belief that your action or omission was
in, or not opposed to, the best interests of the Company. Any act, or failure
to act, based upon authority given pursuant to a resolution duly adopted by
the Board (or a committee thereof) or based upon the advice of counsel for
the Company will be conclusively presumed to be done, or omitted to be done,
by you in good faith and in the best interests of the Company. It is also
expressly understood that your attention to matters not directly related to
the business of the Company will not provide a basis for termination for
Cause so long as the Board did not expressly disapprove in writing of your
engagement in such activities either before or within a reasonable period of
time after the Board knew or could reasonably have known that you engaged in
those activities. Notwithstanding the foregoing, you will not be deemed to
have been terminated for Cause unless and until there has been delivered to
you a copy of a resolution duly adopted by the affirmative vote of not less
than a majority of the entire membership of the Board at a meeting of the
Board called and held for the purpose (after reasonable notice to you and an
opportunity for you, together with your counsel, to be heard before the
Board), finding that in the good faith opinion of the Board you were guilty
of the conduct set forth above in clauses (i) or (ii) of this definition and
specifying the particulars thereof in detail.

         (d) "CHANGE IN CONTROL" means any of the following: (i) the sale,
lease, exchange, or other transfer of all or substantially all of the assets
of the Parent Corporation, in one transaction or in a series of related
transactions, to any Person; (ii) the approval by the stockholders of the
Parent Corporation of any plan or proposal for the liquidation or dissolution
of the Parent Corporation; (iii) any Person is or becomes the "beneficial
owner" (as defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, of fifty percent (50%) or more of the combined voting power of
the Parent Corporation's outstanding securities ordinarily having the right
to vote at elections of directors; (iv) individuals who constitute the Board
on the date of this Agreement (the "Incumbent Board") cease for any reason to
constitute at least a majority thereof, provided that any person becoming a
director subsequent to the date of this Agreement whose election, or
nomination for election, by the Parent Corporation's stockholders, was
approved by a vote of at least a majority of the directors comprising the
Incumbent Board (either by a specific vote or by approval of the proxy
statement of the Parent Corporation in which such person is named as a
nominee for director, without objection to such nomination) will, for
purposes of this clause (iv), be deemed to be a member of the Incumbent
Board; or (v) a change in control of a nature that is determined by
independent legal counsel to the Company to be required to be reported
(assuming such event has not been "previously reported") in response to Item
1(a) of the Current Report on Form 8-K, as in effect on the date hereof,
pursuant to section 13 or 15(d) of the Exchange Act, whether or not the
Parent Corporation is then subject to such reporting requirement.

         (e) "CODE" means the Internal Revenue Code of 1986, as amended.

         (f) "COMPANY" means the Parent Corporation, any Subsidiary and any
Successor.

         (g) "CONFIDENTIAL INFORMATION" means information which is proprietary
to the Company or proprietary to others and entrusted to the Company, whether or
not trade secrets. It includes





Name
March 13, 2000
Page 3 of 10

information relating to business plans and to business as conducted or
anticipated to be conducted, and to past or current or anticipated products or
services. It also includes, without limitation, information concerning research,
development, purchasing, accounting, marketing and selling. All information
which you have a reasonable basis to consider confidential is Confidential
Information, whether or not originated by you and without regard to the manner
in which you obtain access to that and any other proprietary information.

         (h) "DATE OF TERMINATION" following a Change in Control (or prior to
a Change in Control if your termination was either a condition of the Change
in Control or was at the request or insistence of any Person (other than the
Company) related to the Change in Control) means: (i) if your employment is
to be terminated by the Company for Cause or by you for Good Reason, the date
specified in the Notice of Termination; (ii) if your employment is to be
terminated by the Company for any reason other than Cause, Disability, death
or Retirement, the date specified in the Notice of Termination, which in no
event may be a date earlier than sixty (60) calendar days after the date on
which a Notice of Termination is given, unless an earlier date has been
expressly agreed to by you in writing either in advance of, or after,
receiving such Notice of Termination; or (iii) if your employment is
terminated by reason of death or Retirement, the date of death or Retirement,
respectively. In the case of termination by the Company of your employment
for Cause, if you have not previously expressly agreed in writing to the
termination, then within thirty (30) calendar days after receipt by you of
the Notice of Termination with respect thereto, you may notify the Company
that a dispute exists concerning the termination, in which event the Date of
Termination will be the date set either by mutual written agreement of the
parties or by the arbitrators in a proceeding as provided in Section 12 of
this Agreement. During the period beginning on the date you or the Company,
as the case may be, receive Notice of Termination and ending on the Date of
Termination, the Company will continue to pay you your full compensation and
benefits and cause your continued participation in all Plans, in effect
immediately prior to the time the Notice of Termination is given and until
the dispute is resolved in accordance with Section 12 of this Agreement.

         (i) "DISABILITY" means a disability as defined in the Company's
long-term disability plan as in effect immediately prior to the Change in
Control or, in the absence of such a plan, means permanent and total
disability as defined in section 22(e)(3) of the Code.

         (j) "EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.

         (k) "GOOD REASON" means:

                  (i) an adverse change in your status or position(s) as an
         executive of the Company as in effect immediately prior to the Change
         in Control, including, without limitation, any adverse change in you
         status or position(s) as a result of a material diminution in your
         duties or responsibilities (other than, if applicable, any such change
         directly attributable to the fact that the Company is no longer
         publicly owned) or the assignment to you of any duties or
         responsibilities which, in your reasonable judgement, are inconsistent
         with such status of position(s), or any removal of you from or any
         failure to reappoint or reelect you to such position(s) (except in
         connection with the termination of your employment for Cause,
         Disability or Retirement or as a result of your death or by you other
         than for Good Reason);




Name
March 13, 2000
Page 4 of 10


                  (ii) a reduction by the Company in your rate of total
         compensation (including, without limitation, salary and bonuses), or an
         adverse change in the form of timing of the payment thereof, as in
         effect immediately prior to the Change in Control;

                  (iii) the failure by the Company to continue in effect any
         Plan in which you (and/or your family or dependents) are participating
         at any time during the ninety (90)-calendar-day period immediately
         preceding the Change in Control (or Plans providing you (and/or your
         family or dependents) with at least substantially similar benefits)
         other than as a result of the normal expiration of any such Plan in
         accordance with its terms as in effect immediately prior to the ninety
         (90)-calendar-day period immediately preceding the time of the Change
         in Control, or the taking of any action, or the failure to act, by the
         Company which would adversely affect your (and/or your family's or
         dependent's) continued participation in any of such Plans on at least
         as favorable a basis to you (and/or your family or dependents) as is
         the case on the date of the Change in Control or which would materially
         reduce your (and/or your family's or dependent's) benefits in the
         future under any of such Plans or deprive you (and/or your family or
         dependents) of any material benefit enjoyed by you (and/or your family
         or dependents) at the time of the Change in Control;

                  (iv) the Company's requiring you to be based anywhere other
         than where your office is located immediately prior to the Change in
         Control, except for required travel on the Company's business, and then
         only to the extent substantially consistent with the business travel
         obligations which you undertook on behalf of the Company during the
         ninety (90)-calendar-day period immediately preceding the Change in
         Control (without regard to travel related to or in anticipation of the
         Change in Control);

                  (v) the failure by the Company to obtain from any Successor
         the assent to this Agreement contemplated by Section 5 of this
         Agreement;

                  (vi) any purported termination by the Company of your
         employment which is not properly effected pursuant to a Notice of
         Termination and pursuant to any other requirements of this Agreement,
         and for purposes of this Agreement, no such purported termination will
         be effective; or

                  (vii) any refusal by the Company to continue to allow you to
         attend to matters or engage in activities not directly related to the
         business of the Company which, at any time prior to the Change in
         Control, you were not expressly prohibited in writing by the Board from
         attending to or engaging in.

         Notwithstanding anything in the foregoing to the contrary, your
termination of employment with the Company for any reason other than death,
Disability or Retirement within the thirty (30) day period beginning on the one
hundred eighty first (181st) calendar day following a Change in Control and
ending on the two hundred tenth (210th) calendar day following a Change in
Control will be conclusively deemed to be for Good Reason.

         (l) "MONTHLY BASE COMPENSATION" means your monthly base cash salary
from the Company attributable to services rendered as an employee of the Company
at the rate in effect





Name
March 13, 2000
Page 5 of 10

immediately prior to the Change in Control, determined without regard to the
amount of contributions made by the Company with respect to you under any
qualified cash or deferred arrangement or cafeteria plan that is not then
includable in your income by operation of section 402(a)(8) or section 125 of
the Code and without regard to amounts deferred, whether voluntarily or
involuntarily and whether vested or nonvested, pursuant to any Plan.

         (m) "NOTICE OF TERMINATION" means a written notice which indicates the
specific termination provision in this Agreement pursuant to which the notice is
given. Any purported termination by the Company or by you following a Change in
Control (or prior to a Change in Control if your termination was either a
condition of the Change in Control or was at the request or insistence of any
Person (other than the Company) related to the Change in Control) must be
communicated by written Notice of Termination.

         (n) "PARENT CORPORATION" means BMC Industries, Inc. and any Successor.

         (o) "PERSON" means and includes any individual, corporation,
partnership, group, association or other "person," as such term is used in
section 14(d) of the Exchange Act, other than the Parent Corporation, a
wholly-owned subsidiary of the Parent Corporation or any employee benefit
plan(s) sponsored by the Parent Corporation or a wholly-owned subsidiary of the
Parent Corporation.

         (p) "PLAN" means any compensation plan (such as a stock option,
restricted stock plan or other equity-based plan), or any employee benefit plan
(such as a thrift, pension, profit sharing, medical, dental, disability,
accident, life insurance, relocation, salary continuation, expense
reimbursements, vacation, fringe benefits, office and support staff plan or
policy) or any other plan, program, policy or agreement of the Company intended
to benefit employees (and/or their families or dependents) generally, management
employees (and/or their families or dependents) as a group or you (and/or your
family or dependents) in particular.

         (q) "RETIREMENT" means termination of your employment with the Company
on or after the day on which you attain the age of sixty-five (65).

         (r) "SUBSIDIARY" means any corporation at least a majority of whose
securities having ordinary voting power for the election of directors is at the
time owned by the Company and/or one (1) or more Subsidiaries or any operating
division of the Company.

         (s) "SUCCESSOR" means any Person that succeeds to, or has the practical
ability to control (either immediately or with the passage of time), the Parent
Corporation's business directly, by merger, consolidation or other form of
business combination, or indirectly, by purchase of the Parent Corporation's
voting securities, all or substantially all of its assets or otherwise.

         2. BENEFITS UPON A CHANGE IN CONTROL TERMINATION. If your employment
with the Company is terminated for any reason other than death, Cause,
Disability or Retirement, or if you terminate your employment with the Company
for Good Reason either: (a) within the two hundred ten (210) calendar-day-period
immediately following a Change in Control; or (b) prior to a Change in Control
if your termination was either a condition of the Change in Control or was





Name
March 13, 2000
Page 6 of 10


at the request or insistence of a Person (other than the Company) related to the
Change in Control, then:

                  (i) PERIODIC CASH PAYMENTS. On or before the fifth calendar
         day of each of the twelve (12) calendar months following the month
         during which the Date of Termination occurs, the Company will make a
         cash payment to you in an amount equal to your Monthly Base
         Compensation. If you die or attain age sixty-five (65) before the end
         of this twelve (12) month period, such payments will end as of and
         including the month during which you die or attain age sixty-five (65).
         If you obtain employment at any time during such twelve (12) month
         period, any "base salary" that you receive during any given month
         within such period as a result of such employment will be offset
         against the Company's corresponding monthly payment obligation under
         this clause (i). You have no obligation, however, to mitigate damages
         by seeking or accepting alternative employment during such twelve (12)
         month period. For purposes of applying the foregoing, the term "base
         salary" is defined as cash compensation paid at intervals no less
         frequent than monthly which is not incentive based and is not paid in
         lieu of benefits.

                  (ii) LIMITATION ON PAYMENTS AND BENEFITS. Notwithstanding
         anything in this Agreement to the contrary, if any of the payments to
         be made in connection with this Agreement, together with any other
         payments or benefits which you have the right to receive from the
         Company or any corporation which is a member of an "affiliated group"
         (as defined in section 1504(a) of the Code without regard to section
         1504(b) of the Code) of which the Company is a member, constitute an
         "excess parachute payment" (as defined in section 280G(b) of the Code),
         the payments to be made in connection with this Agreement shall be
         reduced to the extent necessary to prevent any portion of such payments
         or benefits from becoming subject to the excise tax imposed under
         section 4999 of the Code; provided, that such reduction shall be made
         only if the aggregate amount of the payments after such reduction
         exceeds the difference between (A) the amount of such payments absent
         such reduction minus (B) the aggregate amount of the excise tax imposed
         under section 4999 of the Code attributable to any such excess
         parachute payments arising in connection with such Change in Control.
         The determination as to whether any such decrease in the payments to be
         made in connection with this Agreement is necessary must be made in
         good faith by legal counsel or a certified public accountant selected
         by you and reasonably acceptable to the Company, and such determination
         will be conclusive and binding upon you and the Company. In the event
         that a reduction is necessary, you will have the right to designate the
         particular payments or benefits that are to be reduced or eliminated so
         that no portion of the payments or benefits to be made or provided to
         you in connection with this Agreement will be excess parachute payments
         subject to the excise tax under Code section 4999. The Company will pay
         or reimburse you on demand for the reasonable fees, costs and expenses
         of the counsel or accountant selected to make the determinations under
         this clause (ii).

For purposes of this Section 2, your employment with the Company will be deemed
to have been terminated on the date on which the Company or you, as the case may
be, receives Notice of Termination notwithstanding that your Date of Termination
occurs following the expiration of the two hundred ten (210) calendar-day-period
referenced in clause (a).




Name
March 13, 2000
Page 7 of 10


         3. INDEMNIFICATION. Following a Change in Control, the Company will
indemnify and advance expenses to you to the full extent permitted by law and
the Company's articles of incorporation and bylaws for damages, costs and
expenses (including, without limitation, judgements, fines, penalties,
settlements and reasonable fees and expenses of your counsel) incurred in
connection with all matters, events and transactions relating to your service to
or status with the Company and any other corporation, employee benefit plan or
other entity with whom you served at the request of the Company.

         4. CONFIDENTIALITY. You will not use, other than in connection with
your employment with the Company, or disclose any Confidential Information to
any person not employed by the Company or not authorized by the Company to
receive such Confidential Information, without the prior written consent of the
Company; and you will use reasonable and prudent care to safeguard and protect
and prevent the unauthorized disclosure of Confidential Information. Nothing in
this Agreement will prevent you from using, disclosing or authorizing the
disclosure of any Confidential Information: (a) which is or hereafter becomes
part of the public domain or otherwise becomes generally available to the public
through no fault of yours; (b) to the extent and upon the terms and conditions
that the Company may have previously made the Confidential Information available
to certain persons; or (c) to the extent that you are required to disclose such
Confidential Information by law or judicial or administrative process.

         5. SUCCESSORS. The Company will seek to have any Successor, by
agreement in form and substance satisfactory to you, assent to the fulfillment
by the Company of the Company=s obligations under this Agreement. Failure of the
Company to obtain such assent at least three (3) business days prior to the time
a Person becomes a Successor (or where the Company does not have at least three
(3) business days= advance notice that a Person may become a Successor, within
one (1) business day after having notice that such Person may become or has
become a Successor) will constitute Good Reason for termination by you of your
employment.

         6. FEES AND EXPENSES. The Company, upon demand, will pay or reimburse
you for all reasonable legal fees, court costs, experts' fees and related costs
and expenses incurred by you in connection with any actual, threatened or
contemplated litigation or legal, administrative, arbitration or other
proceeding relating to this Agreement to which you are or reasonably expect to
become a party, whether or not initiated by you, including, without limitation:
(a) all such fees and expenses, if any, incurred in contesting or disputing any
such termination; or (b) your seeking to obtain or enforce any right or benefit
provided by this Agreement; provided, however, you will be required to repay
(without interest) any such amounts to the Company to the extent that a court
issues a final and non-appealable order setting forth the determination that the
position taken by you was frivolous or advanced by you in bad faith.

         7. BINDING AGREEMENT. This Agreement inures to the benefit of, and is
enforceable by, you, your personal and legal representatives, executors,
administrators, successors, heirs, distributees, devisees and legatees. If you
die after you become entitled to, but before you receive, any amounts payable to
you under this Agreement, all such amounts, unless otherwise provided in this
Agreement, will be paid in accordance with the terms of this Agreement to your
devisee, legatee or other designee or, it there be no such designee, to your
estate.




Name
March 13, 2000
Page 8 of 10

         8. NO MITIGATION. Except as expressly provided in clause (i) of Section
2 of this Agreement, you will not be required to mitigate the amount of any
payments the Company becomes obligated to make to you in connection with this
Agreement by seeking other employment or otherwise and the payments to be made
to you in connection with this Agreement may not be reduced, offset or subject
to recovery by the Company by any payments or benefits you may receive from
other employment or otherwise.

         9. NO SETOFF. Except as provided in Section 10 of this Agreement, the
Company will have no right to setoff payments owed to you under this Agreement
against amounts owed or claimed to be owed by you to the Company under this
Agreement or otherwise.

         10. TAXES. All payments to be made to you in connection with this
Agreement will be subject to required withholding of federal, state and local
income, excise and employment-related taxes which withholding shall be
consistent with the determination described in clause (ii) of Section 2 of this
Agreement.

         11. NOTICES. For the purpose of this Agreement, notices and all other
communications provided for in, or required under, this Agreement must be in
writing and will be deemed to have been duly given when personally delivered or
when mailed by United States registered or certified mail, return receipt
requested, postage prepaid and addressed to each party's respective address set
forth on the first page of this Agreement (provided that all notices to the
Company must be directed to the attention of the President and Chief Executive
Officer), or to such other address as either party may have furnished to the
other in writing in accordance with these provisions, except that notice of
change of address will be effective only upon receipt.

         12. DISPUTES. Any dispute, controversy or claim for damages arising
under or in connection with the Agreement shall be settled exclusively by
arbitration in Minneapolis, Minnesota by three (3) arbitrators in accordance
with the rules of the American Arbitration Association then in effect. Judgement
may by entered on the arbitrators' award in any court having jurisdiction. The
Company will be entitled to seek an injunction or restraining order in a court
of competent jurisdiction (within or without the State of Minnesota) to enforce
the provisions of Section 4 of this Agreement.

         13. JURISDICTION. Except as specifically provided otherwise in the
Agreement, the parties agree that any action or proceeding arising under or in
connection with this Agreement must be brought in a court of competent
jurisdiction in the State of Minnesota, and hereby consent to the exclusive
jurisdiction of said courts for this purpose and agree not to assert that such
courts are an inconvenient forum.

         14. RELATED AGREEMENTS. To the extent that any provision of any other
Plan or agreement between the Company and you limits, qualifies or is
inconsistent with any provision of this Agreement, then for purposes of this
Agreement, while such other Plan or agreement remains in force, the provision of
this Agreement will control and such provision of such other Plan or agreement
will be deemed to have been superseded, and to be of no force or effect, as if
such other agreement had been formally amended to the extent necessary to
accomplish such purpose. Nothing in this Agreement prevents or limits your
continuing or future participation in any Plan provided by the Company and for
which you may qualify, and nothing in this Agreement





Name
March 13, 2000
Page 9 of 10


limits or otherwise affects the rights you may have under any Plans or other
agreements with the Company. Amounts which are vested benefits or which you are
otherwise entitled to receive under any Plan or other agreement with the Company
at or subsequent to the Date of Termination will be payable in accordance with
such Plan or other agreement.

         15. NO EMPLOYMENT OR SERVICE CONTRACT. Nothing in this Agreement is
intended to provide you with any right to continue in the employ of the Company
for any period of specific duration or interfere with or otherwise restrict in
any way your rights or the rights of the Company, which rights are hereby
expressly reserved by each, to terminate your employment at any time for any
reason or no reason whatsoever, with or without cause.

         16. CHANGE OF SUBSIDIARY STATUS. In the event that, prior to a Change
in Control: (a) a Subsidiary is sold, merged, transferred or in any other manner
or for any other reason ceases to be a Subsidiary; (b) your primary employment
duties are with the Subsidiary at the time of the occurrence of such event; and
(c) you do not, in conjunction therewith, transfer employment directly to the
Company or another Subsidiary, then this Agreement will become null and void.

         17. SURVIVAL. The respective obligations of, and benefits afforded
to, the Company and you which by their express terms or clear intent survive
termination of your employment with the Company or termination of this
Agreement, as the case may be, including, without limitation, the provisions
of Sections 2, 3, 4, 5, 6, 9, 10, 11 and 12 of this Agreement, will survive
termination of your employment with the Company or termination of this
Agreement, as the case may be, and will remain in full force and effect
according to their terms.

         18. MISCELLANEOUS. No provision of this Agreement may be modified,
waived or discharged unless such modification, waiver or discharge is agreed
to in a writing signed by you and the President and Chief Executive Officer.
No waiver by any party to this Agreement at any time of any breach by another
party to this Agreement of, or of compliance with, any condition or provision
of this Agreement to be performed by such party will be deemed a waiver of
similar or dissimilar provisions or conditions at the same or at any prior or
subsequent time. No agreements or representations, oral or otherwise, express
or implied, with respect to the subject matter to this Agreement have been
made by any party which are not expressly set forth in this Agreement. This
Agreement and the legal relations among the parties as to all matters,
including, without limitation, matters of validity, interpretation,
construction, performance and remedies, will be governed by and construed
exclusively in accordance with the internal laws of the State of Minnesota
(without regard to the conflict of laws provisions of the State of Minnesota
or of any other jurisdiction), except to the extent that the provisions of
the corporate law of Minnesota may apply to the internal affairs of the
Company. Headings are for purposes of convenience only and do not constitute
a part of this Agreement. The parties to this Agreement agree to perform, or
cause to be performed, such further acts and deeds and to execute and
deliver, or cause to be executed and delivered, such additional or
supplemental documents or instruments as may be reasonably required by the
other party to carry into effect the intent and purpose of this Agreement.
The invalidity or unenforceability of all or any part of any provision of
this Agreement will not affect the validity or enforceability of the
remainder of such provision or of any other provision of this Agreement,
which will remain in full force and effect. This Agreement may be executed in
several counterparts, each of which will be deemed to be an original, but all
of which together will constitute one and the same instrument.




Name
March 13, 2000
Page 10 of 10


         If this letter correctly sets forth our agreement on the subject matter
discussed above, kindly sign and return to the Company the enclosed copy of this
letter which will then constitute our agreement on this subject.

Sincerely,




By: ___________________________
      Paul B. Burke
      Chairman and Chief Executive Officer



Agreed to this___________ day of _____________, 2000.



__________________________________________
(Name)

EX-10.38

                                                                EXHIBIT 10.38

                      CONSENT, WAIVER AND FOURTH AMENDMENT
                               TO CREDIT AGREEMENT


                  This Consent, Waiver and Fourth Amendment to Credit Agreement
(the "FOURTH AMENDMENT") dated as of December 21, 1999 is by and among BMC
Industries Inc., a Minnesota corporation (the "BORROWER"), Bankers Trust
Company, a New York banking corporation, as administrative agent for the Lenders
hereunder (in such capacity individually, the "AGENT") and as a Lender, Bank
One, f/k/a/ The First National Bank of Chicago, (as assignee of NBD Bank) as
documentation agent and as a Lender and the several banks and other financial
institutions signatory below.

                                R E C I T A L S:

                  WHEREAS, the Borrower, the Agents and various lending
institutions (the "LENDERS") are parties to an Amended and Restated Credit
Agreement dated as of June 25, 1998 (as heretofore and hereafter amended,
restated, supplemented or otherwise modified, the "CREDIT AGREEMENT"), pursuant
to which the Lenders have made and may hereafter make loans, advances and other
extensions of credit to the Borrower;

                  WHEREAS, the Borrower has requested pursuant to SECTION 4.1(a)
of the Credit Agreement that $30,000,000 of Revolving Commitments be terminated
on December 30, 1999;

                  WHEREAS, the Borrower desires to restructure its European
operations under one overall ownership within the affiliated group pursuant to
the transactions described on EXHIBIT A attached hereto (the "EUROPEAN
REORGANIZATION") and the Agent and the Majority Lenders are agreeable to the
same, subject to the terms and conditions hereof;

                  WHEREAS, this Fourth Amendment shall constitute a Loan
Document and these Recitals shall be construed as part of this Fourth Amendment;

                  NOW, THEREFORE, in consideration of the foregoing and the
agreements, promises and covenants set forth below, and for other good and
valuable consideration the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:

                  1. DEFINITIONS. Capitalized terms used but not otherwise
defined in this Fourth Amendment shall have the meanings ascribed to them in the
Credit Agreement.

                  2. AMENDMENT TO THE CREDIT AGREEMENT. Subject to the
conditions of this Fourth Amendment, the Credit Agreement is hereby amended as
follows:

                  (a) DEFINITION OF PERMITTED INVESTMENT. The definition of
"Permitted Investment" contained in SECTION 1.1 of the Credit Agreement is
amended by inserting the following new clauses (xii) and (xiii) immediately
following clause (xi) thereof:




                  (xii) Investments by Buckbee-Mears European Holding Company
         B.V. ("BV2") in that certain Note A dated as of December 22, 1999 by
         Buckbee-Mears Deutschland Holding GmbH in favor of the Borrower and
         assigned to BV2 in the original principal amount of 77,000,000 Euro;

                  (xiii) Investments by the Borrower in that certain Note B
         dated as of December 22, 1999 by Buckbee-Mears Holding Company B.V. in
         favor of the Borrower in the original principal amount of 77,000,000
         Euro ("Note B");

                  (b) DEFINITION OF EUROPEAN REORGANIZATION. SECTION 1.1 of the
Credit Agreement is amended by inserting a new defined term "European
Reorganization" in alphabetical order therein, which definition reads as
follows:

                  "EUROPEAN REORGANIZATION" has the meaning assigned to that
         term in that certain Consent, Waiver and Fourth Amendment to Credit
         Agreement dated as of December 21, 1999 by and among the Borrower, the
         Agent and the Lenders signatory thereto.

                  (c) SECTION 7.13. The Credit Agreement is amended by inserting
a new SECTION 7.13 which reads as follows:

                  7.13 PLEDGE OF BV1. Borrower shall, as soon as practicable,
         but in any event not later than January 31, 2000 (subject to extension
         in the reasonable discretion of the Agent), pledge 65% of the issued
         and outstanding Capital Stock of Buckbee-Mears Holding Company B.V., to
         the Collateral Agent for the benefit of the Secured Creditors pursuant
         to documentation reasonably satisfactory to the Agent, including,
         without limitation, an opinion of counsel (if requested by Agent).

                  (d) SECTION 8.4. SECTION 8.4 of the Credit Agreement is
amended by deleting the "." at the conclusion of clause (c) thereof and
inserting in lieu thereof a ";" and by inserting the following clause (d):

                  (d)      Borrower may carry out the European Reorganization.

                  3. WAIVER. The Majority Lenders hereby waive compliance with
the requirements of SECTION 8.7 with respect to determinations of fair market
value as such Section relates to the European Restructuring.

                  4. CONSENT. The Majority Lenders hereby consent to the
execution of the Amended and Restated Pledge Agreement in the form of EXHIBIT B
attached hereto and consent to the release of the pledge of the Pledge
Agreement.

                  5. CONDITIONS PRECEDENT. Notwithstanding any other provision
contained in this Fourth Amendment or any other document, the effectiveness of
this Fourth Amendment is expressly conditioned upon the satisfaction of each
matter set forth in this SECTION 5, all in form and substance acceptable to the
Agent in its sole and absolute discretion:

                  (a) FOURTH AMENDMENT. The Agent shall have received a duly
executed copy of this Fourth Amendment signed by the Borrower, the Agent and the
Majority Lenders.


                                     - 2 -



                  (b) PLEDGE AGREEMENT. The Agent shall have received a duly
executed copy of the Amended and Restated Pledge Agreement in the form of
EXHIBIT B attached hereto signed by the Borrower and the Agent together with the
original Note B endorsed in blank.

                  (c) SECRETARY'S CERTIFICATE. A certificate executed by the
secretary or any assistant secretary of the Borrower certifying to and attaching
resolutions of the Borrower's board of directors authorizing the execution and
delivery of this Fourth Amendment, the other documents contemplated thereby and
the European Restructuring and certifying that the by-laws and articles of
incorporation of the Borrower have not been amended or otherwise modified since
June 25, 1998.

                  (d) WARRANTIES AND REPRESENTATIONS. All of the warranties and
representations of the Borrower contained in the Credit Agreement and in the
other Loan Documents (including, without limitation, in this Fourth Amendment)
shall be true and correct in all material respects on and as of the date first
written above (except those representations and warranties made expressly as of
a different date, which representations and warranties shall have been true and
correct in all material respects as of such prior date). The Borrower hereby
represents and warrants that the execution, delivery and performance of this
Fourth Amendment and the consummation of the transactions contemplated hereby
have been duly authorized by all necessary corporate action and this Fourth
Amendment is a legal, valid and binding obligation of the Borrower enforceable
against the Borrower in accordance with its terms, except as the enforcement
thereof may be subject to (i) the effect of any applicable bankruptcy,
insolvency, reorganization, moratorium, or similar laws affecting creditors'
rights generally and (ii) general principles of equity (regardless of whether
such enforcement is sought in a proceeding in equity or at law). In furtherance
of the foregoing, the Borrower hereby represents and warrants that as of the
date first written above each of the conditions precedent contained in this
SECTION 5 has been fully satisfied in accordance with the express terms thereof.

                  (e) NO EVENT OF DEFAULT. Except as expressly waived herein, no
Event of Default shall have occurred and be continuing as of the date first
written above, or, will occur after giving effect to this Fourth Amendment in
accordance with its terms.

                  (f) NO LITIGATION. No litigation, investigation, proceeding,
injunction, restraint or other action shall be pending or threatened against the
Borrower or any Affiliate of the Borrower, or any officer, director, or
executive of any thereof, which restrains, prevents or imposes adverse
conditions upon, or which otherwise relates to, the execution, delivery or
performance of this Fourth Amendment.

                  (g) AMENDMENT FEE. Borrower shall have paid to Agent, for the
benefit of those Lenders who have delivered a signature page executed by such
Lender to Winston & Strawn by 6:00 p.m. (Chicago time) on Tuesday, December 21,
1999, an amendment fee equal to five basis points of the post-reduction
Revolving Commitment amounts of said Lenders.

                  7. LIMITATION OF FOURTH AMENDMENT. The parties hereto agree
and acknowledge that nothing contained in this Fourth Amendment in any manner or
respect limits or terminates any of the provisions of the Credit Agreement or
any of the other Loan Documents other than as expressly set forth herein and
further agree and acknowledge that the Credit


                                     - 3 -


Agreement (as amended hereby) and each of the other Loan Documents remain and
continue in full force and effect and are hereby ratified and confirmed. Except
to the extent expressly set forth herein, the execution, delivery and
effectiveness of this Agreement shall not operate as a waiver of any rights,
power or remedy of the Lenders or the Agent under the Credit Agreement or any
other Loan Document, nor constitute a waiver of any provision of the Credit
Agreement or any other Loan Document. No delay on the part of any Lender or the
Agent in exercising any of their respective rights, remedies, powers and
privileges under the Credit Agreement or any of the Loan Documents or partial or
single exercise thereof, shall constitute a waiver thereof. None of the terms
and conditions of this Fourth Amendment may be changed, waived, modified or
varied in any manner, whatsoever, except in accordance with SECTION 11.1 of the
Credit Agreement.

                  8. COSTS, EXPENSES AND TAXES. Pursuant to SECTION 11.4 of the
Credit Agreement, the Borrower agrees to pay on demand all costs and expenses of
the Lenders and the Agent in connection with the preparation, execution and
delivery of this Fourth Amendment including the reasonable fees and
out-of-pocket expenses of counsel to the Agent with respect thereto.

                  9. EXECUTION IN COUNTERPARTS. This Fourth Amendment may be
executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed and delivered shall be
deemed to be an original and all of which taken together shall constitute but
one and the same instrument.

                  10. GOVERNING LAW. THIS FOURTH AMENDMENT SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT
REGARD TO THE INTERNAL CONFLICTS OF LAWS PROVISIONS THEREOF.

                  11. HEADINGS. Section headings in this Fourth Amendment are
included herein for convenience of reference only and shall not constitute a
part of this Fourth Amendment for any other purposes.




                                    * * * *
                           [Signature page follows]





                                     - 4 -




                  IN WITNESS WHEREOF, this Fourth Amendment has been duly
executed as of the date first written above.

BMC INDUSTRIES INC.                              HARRIS TRUST AND SAVINGS BANK


By:  /s/Bradley D. Carlson                       By:   /s/Catherine C. Ciolek
    -----------------------                            ------------------------
Name:   Bradley D. Carlson                       Name:   Catherine C. Ciolek
       --------------------                            ------------------------
Title:    Treasurer                              Title:   Vice President
       --------------------                            ------------------------


BANKERS TRUST COMPANY, in its
individual capacity, as Administrative Agent     WACHOVIA BANK, N.A.

By:   /s/Robert R. Telesca                       By:   /s/Walter R. Gillikin
    ---------------------------                        -----------------------
Name:   Robert R. Telesca                        Name:   Walter R. Gillikin
      -------------------------                        -----------------------
Title: Assistant Vice President              Title:    Senior Vice President
       ------------------------                        -----------------------

BANK ONE, in its individual capacity and         UNION BANK OF CALIFORNIA
as Documentation Agent

By:   /s/Jenny A. Gilpin                         By:  /s/Susan D. Biba
      -----------------------                        -----------------------
Name:   Jenny A. Gilpin                          Name:   Susan D. Biba
      -----------------------                          ---------------------
Title:  First Vice President                  Title:  Vice President
       ----------------------                        -----------------------

U.S. BANK NATIONAL ASSOCIATION                   CREDIT AGRICOLE INDOSUEZ

By:   /s/David Shapiro                           By:   /s/Susan Knight
    ------------------------------                   -------------------------
Name:     David Shapiro                          Name:   Susan Knight
      ----------------------------                     -----------------------
Title:    Assistant Vice President               Title:  Vice President
       ---------------------------                      ----------------------
WELLS FARGO BANK, NATIONAL
ASSOCIATION
                                                 By:    /s/David Bouhl
                                                     ------------------------
By:   /s/Robert Carino                           Name:   David Bouhl
    -----------------------                            ----------------------
Name:   Robert Carino                            Title:  First Vice President,
      ---------------------                              Managing Director
Title:   Vice President                                ----------------------
       --------------------

                                     - 5 -




                                    EXHIBIT A

                  The Borrower will form a Dutch holding company,
Buckbee-Mears Holding Company B.V. ("BV 1"). BV 1 will then form a second
Dutch company, Buckbee-Mears European Holding Company B.V. ("BV 2").

                  The Borrower will contribute Vision-Ease France SAS ("VEF")
to BV 1. Vision-Ease Lens, Inc. ("VEL") will sell Vision-Ease Europe Limited
("VEE") to BV 1. BV 1 will contribute VEE and VEF to BV 2.

                  The German ophthalmic laboratory will be established in
Vision-Ease Deutschland GmbH ("VED") as a subsidiary of the Borrower.

                  The Borrower will sell VED and Buckbee-Mears Europe GmbH to
a newly formed German holding company, Buckbee-Mears Deutschland Holding GmbH
("BMDH"), for a combination of additional equity and a note (Note A). The
Borrower will contribute BMDH to BV 1 and will sell Note A to BV 1 in
exchange for a note (Note B). BV 1 will contribute BMDH and Note A to BV 2.








                                     - 6 -

EX-10.40

                                                                   EXHIBIT 10.40



                      AMENDED AND RESTATED PLEDGE AGREEMENT

                  THIS AMENDED AND RESTATED PLEDGE AGREEMENT (as amended,
restated, supplemented or otherwise modified from time to time, this
"AGREEMENT"), dated as of December 21, 1999, is made by BMC INDUSTRIES, INC., a
Minnesota corporation (the "PLEDGOR"), to BANKERS TRUST COMPANY, as Collateral
Agent (the "PLEDGEE") for the benefit of (i) the Lenders and the Agent under the
Credit Agreement hereinafter referred to (such Lenders and the Agent are
hereinafter called the "BANK CREDITORS") and (ii) if one or more Lenders or any
Affiliate of a Lender enters into one or more (A) interest rate protection
agreements (including, without limitation, interest rate swaps, caps, floors,
collars and similar agreements), (B) foreign exchange contracts, currency swap
agreements or other similar agreements or arrangements designed to protect
against the fluctuations in currency values and/or (C) other types of hedging
agreements from time to time (collectively, the "INTEREST RATE PROTECTION OR
OTHER HEDGING AGREEMENTS"), with, or guaranteed by, the Pledgor, any such Lender
or Lenders or Affiliate or Affiliates (even if the respective Lender
subsequently ceases to be a Lender under the Credit Agreement for any reason) so
long as any such Lender or Affiliate participates in the extension of such
Interest Rate Protection or Other Hedging Agreements and their subsequent
assigns, if any (collectively, the "OTHER CREDITORS" and, together with the Bank
Creditors, are hereinafter called the "SECURED CREDITORS"). Except as otherwise
defined herein, terms used herein and defined in the Credit Agreement shall be
used herein as so defined.

                              W I T N E S S E T H:

                  WHEREAS, the Pledgor, the financial institutions from time to
time party thereto, and Bankers Trust Company, as Agent (together with any
successor agent, the "AGENT"), have entered into an Amended and Restated Credit
Agreement, dated as of June 25, 1998, providing for the making of Loans and the
issuance of, and participation in, Letters of Credit as contemplated therein (as
used herein, the term "CREDIT AGREEMENT" means the Credit Agreement described
above in this paragraph, as the same may be amended, modified, extended,
renewed, replaced, restated or supplemented from time to time, and including any
agreement extending the maturity of, or restructuring all or any portion of the
Indebtedness under such agreement or any successor agreements);

                  WHEREAS, the Pledgor may at any time and from time to time
enter into, or guarantee obligations of its Subsidiaries under, one or more
Interest Rate Protection or Other Hedging Agreements with one or more Other
Creditors;

                  WHEREAS, it is a condition to each of the above-described
extensions of credit that the Pledgor shall have executed and delivered this
Agreement;

                  WHEREAS, the Pledgor desires to enter into this Agreement in
order to satisfy the condition described in the preceding paragraph;





                  WHEREAS, the Majority Lenders have consented to the execution
of this Agreement and to the release of the pledge of the Pledge Agreement;

                  NOW, THEREFORE, in consideration of the benefits accruing to
the Pledgor, the receipt and sufficiency of which are hereby acknowledged, the
Pledgor hereby makes the following representations and warranties to the Pledgee
for the benefit of the Secured Creditors and hereby covenants and agrees with
the Pledgee for the benefit of the Secured Creditors as follows:

                  1. SECURITY FOR OBLIGATIONS. This Agreement is made by the
Pledgor for the benefit of the Secured Creditors to secure:

                           (i) the full and prompt payment when due (whether at
         the stated maturity, by acceleration or otherwise) of all obligations
         and indebtedness (including, without limitation, indemnities, Fees and
         interest thereon) of the Pledgor to the Bank Creditors, whether now
         existing or hereafter incurred under, arising out of, or in connection
         with the Credit Agreement and the other Loan Documents and the due
         performance and compliance by the Pledgor with all of the terms,
         conditions and agreements contained in the Credit Agreement and the
         other Loan Documents (all such principal, interest, obligations and
         liabilities described in this clause (i) being herein collectively
         called the "CREDIT AGREEMENT OBLIGATIONS");

                           (ii) the full and prompt payment when due (whether at
         the stated maturity, by acceleration or otherwise) of all obligations
         and liabilities owing by the Pledgor to the Other Creditors under, or
         with respect to, any Interest Rate Protection or Other Hedging
         Agreement, including all obligations of the Pledgor in respect of
         Interest Rate Protection or Other Hedging Agreement, whether such
         Interest Rate Protections or Other Hedging Agreements are now in
         existence or hereafter arising, and the due performance and compliance
         by the Pledgor with all of the terms, conditions and agreements
         contained therein (all such obligations and liabilities described in
         this clause (ii) being herein collectively called the "OTHER
         OBLIGATIONS");

                           (iii) any and all sums advanced by the Pledgee in
         accordance with the Loan Documents in order to preserve the Collateral
         (as hereinafter defined) or preserve its security interest in the
         Collateral;

                           (iv) in the event of any proceeding for the
         collection or enforcement of any indebtedness, obligations, or
         liabilities referred to in clauses (i) , (ii) and (iii) above, after an
         Event of Default (as such term is defined in the Credit Agreement)
         shall have occurred and be continuing, the reasonable expenses of
         retaking, holding, preparing for sale or lease, selling or otherwise
         disposing of or realizing on the Collateral, or of any exercise by the
         Pledgee of its rights hereunder, together with reasonable attorneys'
         fees and court costs; and

                           (v) all amounts paid by any Secured Creditor as to
         which such Secured Creditor has the right to reimbursement under
         Section 11 of this Agreement;


                                     - 2 -



all such obligations, liabilities, sums and expenses set forth in clauses (i)
through (v) of this SECTION 1 being herein collectively called the
"OBLIGATIONS," it being acknowledged and agreed that the "Obligations" shall
include extensions of credit of the types described above, whether outstanding
on the date of this Agreement or extended from time to time after the date of
this Agreement.

                  2. DEFINITION OF STOCK, NOTES, SECURITIES, ETC. As used
herein, the term "STOCK" shall mean (x) all of the issued and outstanding shares
of capital stock at any time owned by the Pledgor of any Material Subsidiary
which is a Domestic Subsidiary and (y) 65% of the issued and outstanding shares
of capital stock at any time owned by the Pledgor of any first tier Foreign
Subsidiary which is a Material Subsidiary, (ii) the term "NOTES" shall mean Note
B and all promissory notes issued in lieu thereof, and (iii) the term
"SECURITIES" shall mean all of the Stock and the Notes. The Pledgor represents
and warrants, as to the stock of Material Subsidiaries owned by the Pledgor and
the Notes, that on the date hereof (a) the Stock consists of the number and type
of shares of the stock of the corporations as described in Part I of ANNEX A
hereto; (b) such Stock constitutes that percentage of the issued and outstanding
capital stock of the issuing corporation as is set forth in Part I of ANNEX A
hereto; (c) the Notes consist of the promissory notes described in Part II of
ANNEX A hereto; and (d) the Pledgor is the holder of record and sole beneficial
owner of the Stock, and there exist no options or preemptive rights in respect
of any of such Stock. If and to the extent that the Pledgee receives or holds
stock certificates representing more than 65% of the total combined voting power
of all classes of capital stock of any first tier Foreign Subsidiary that is a
Material Subsidiary entitled to vote, the Pledgee agrees to act as bailee (and
not as a pledgee, the Pledgee hereby disclaiming any security interest in such
portion except as otherwise provided in the last sentence of this SECTION 2) and
custodian for the benefit of the Pledgor with respect to any portion of such
capital stock representing more than 65% of the total combined voting power of
all classes of capital stock of any such Foreign Subsidiary entitled to vote
except as otherwise provided in the last sentence of this SECTION 2. If
following a change in the relevant sections of the Code or the regulations,
rules, rulings, notices or other official pronouncements issued or promulgated
thereunder which would permit a pledge of 66% or more (or would be adjusted to
permit a pledge of less than 66%) of the total combined voting power of all
classes of capital stock of such Foreign Subsidiary entitled to vote without
causing the undistributed earnings of such Foreign Subsidiary as determined for
Federal income taxes to be treated as a deemed dividend to the Pledgor for
Federal income tax purposes, then the 65% limitation set forth in clause (y) of
the first sentence of this SECTION 2 shall no longer be applicable (or shall be
adjusted as appropriate) and the Pledgor shall duly pledge and deliver to the
Pledgee such of the Stock not theretofore required to be pledged hereunder or
the Pledgee shall return such Stock as applicable.

                  3.  PLEDGE OF SECURITIES, STOCK, ETC.

                  3.1 PLEDGE. To secure the Obligations, and for the purposes
set forth in SECTION 1 hereof, the Pledgor hereby (i) grants to the Pledgee a
security interest in all of the Collateral (as hereinafter defined), (ii)
pledges and deposits with the Pledgee the Securities owned by the Pledgor on the
date hereof, and delivers to the Pledgee certificates or instruments therefor,
duly endorsed in blank in the case of Notes, and accompanied by undated stock
powers duly executed in blank by the Pledgor (and accompanied by any transfer
tax stamps required in connection with the pledge of such Securities), or such
other instruments of transfer as are


                                     - 3 -



acceptable to the Pledgee and (iii) assigns, transfers, hypothecates, mortgages,
charges and sets over to the Pledgee all of the Pledgor's right, title and
interest in and to such Securities (and in and to all certificates or
instruments evidencing such Securities), to be held by the Pledgee as collateral
security for the Obligations, upon the terms and conditions set forth in this
Agreement.

                  3.2 SUBSEQUENTLY ACQUIRED SECURITIES. If the Pledgor shall
acquire (by purchase, stock dividend or otherwise) any additional Securities
at any time or from time to time after the date hereof, the Pledgor will
immediately pledge and deposit such Securities (or certificates or
instruments representing such Securities) as security with the Pledgee and
deliver to the Pledgee certificates or instruments therefor, duly endorsed in
blank in the case of Notes, and accompanied by undated stock powers duly
executed in blank by the Pledgor (and accompanied by any transfer tax stamps
required in connection with the pledge of such Securities) in the case of
Stock, or such other instruments of transfer as are reasonably acceptable to
the Pledgee, and any other foreign security documentation reasonably
requested by Pledgee, and will promptly thereafter deliver to the Pledgee a
certificate executed by a Responsible Officer of the Pledgor describing such
Securities and certifying that the same have been duly pledged with the
Pledgee hereunder. If any Domestic Subsidiary of Pledgor shall hereafter own
capital stock of any Material Subsidiary, then Pledgor shall cause such
Domestic Subsidiary to enter into a pledge agreement in substantially the
form hereof, and shall deliver any other security documentation reasonably
requested by Pledgee, in order to cause the stock of such Material Subsidiary
to be pledged to the Pledgee for the benefit of the Lenders. Subject to the
last sentence of SECTION 2, the Pledgor shall not be required at any time to
pledge hereunder more than 65% of the total combined voting power of all
classes of capital stock of any Foreign Subsidiary entitled to vote.

                  3.3 UNCERTIFICATED SECURITIES. Notwithstanding anything to the
contrary contained in SECTIONS 3.1 AND 3.2 hereof, if any Securities (whether
now owned or hereafter acquired) are uncertificated securities, the Pledgor
shall promptly notify the Pledgee thereof, and shall promptly take all actions
required to perfect the security interest of the Pledgee under applicable law
(including, in any event, under Sections 8-313 and 8-321 of the New York Uniform
Commercial Code if applicable). The Pledgor further agrees to take such actions
as the Pledgee deems necessary or desirable to effect the foregoing and to
permit the Pledgee to exercise any of its rights and remedies hereunder, and
agrees to provide an opinion of counsel reasonably satisfactory to the Pledgee
with respect to any such pledge of uncertificated Stock promptly upon the
reasonable request of the Pledgee. Subject to the last sentence of SECTION 2,
the Pledgor shall not be required, at any time, to pledge hereunder more than
65% of the total combined voting power of all classes of capital stock of any
Foreign Subsidiary entitled to vote.

                  3.4 DEFINITIONS OF PLEDGED STOCK; PLEDGED NOTES; PLEDGED
SECURITIES AND COLLATERAL. All Stock at any time pledged or required to be
pledged hereunder is hereinafter called the "PLEDGED STOCK;" and all Notes at
any time pledged or required to be pledged hereunder are hereinafter called the
"PLEDGED NOTES;" all Pledged Stock and Pledged Notes together are called the
"PLEDGED SECURITIES;" and the Pledged Securities, together with all proceeds
thereof, including any securities and moneys received and at the time held by
the Pledgee hereunder, are hereinafter called the "COLLATERAL."


                                     - 4 -



                  4.  APPOINTMENT OF SUB-AGENTS; ENDORSEMENTS, ETC. The Pledgee
shall have the right to appoint one or more sub-agents for the purpose of
retaining physical possession of the Pledged Securities, which may be held (in
the discretion of the Pledgee) in the name of the Pledgor, endorsed or assigned
in blank or in favor of the Pledgee or any nominee or nominees of the Pledgee or
a sub-agent appointed by the Pledgee.

                  5.  VOTING, ETC., WHILE NO EVENT OF DEFAULT. Unless and until
an Event of Default shall have occurred and be continuing, the Pledgor shall be
entitled to exercise any and all voting and other consensual rights pertaining
to the Pledged Securities owned by it, and to give consents, waivers or
ratifications in respect thereof, PROVIDED that no vote shall be cast or any
consent, waiver or ratification given or any action taken which would violate or
result in breach of any covenant contained in this Agreement, the Credit
Agreement, any other Loan Document or any Interest Rate Protection or Other
Hedging Agreement (collectively, the "SECURED DEBT AGREEMENTS"), or which could
reasonably be expected to have the effect of impairing the value of the
Collateral or any part thereof or the position or interests of the Pledgee or
any Secured Creditor. All such rights of the Pledgor to vote and to give
consents, waivers and ratifications shall cease in case an Event of Default
shall occur and be continuing, and SECTION 7 hereof shall become applicable.

                  6.  DIVIDENDS AND OTHER DISTRIBUTIONS. Unless an Event of
Default shall have occurred and be continuing, all cash dividends and
distributions payable in respect of the Pledged Stock and all payments in
respect of the Pledged Notes shall be paid to the Pledgor which owns such
Pledged Stock or Pledged Notes; PROVIDED, that all cash dividends payable in
respect of the Pledged Stock which are reasonably determined by the Pledgee to
represent in whole or in part an extraordinary, liquidating or other
distribution in return of capital shall be paid, to the extent so determined to
represent an extraordinary, liquidating or other distribution in return of
capital, to the Pledgee and retained by it as part of the Collateral. The
Pledgee also shall be entitled to receive directly, and to retain as part of the
Collateral:

                      (a)  all other or additional stock or other securities or
property (other than cash) paid or distributed by way of dividend or otherwise
in respect of the Pledged Stock;

                      (b)  all other or additional stock or other securities or
property (including cash) paid or distributed in respect of the Pledged Stock by
way of stock-split, spin-off, split-up, reclassification, combination of shares
or similar rearrangement; and

                      (c)  all other or additional stock or other securities or
property (including cash) which may be paid in respect of the Collateral by
reason of any consolidation, merger, exchange of stock, conveyance of assets,
liquidation or similar corporate reorganization.

Subject to the last sentence of SECTION 2, the Pledgor shall not be required at
any time to pledge hereunder more than 65% of the total combined voting power of
all classes of capital stock of any Foreign Subsidiary entitled to vote. Nothing
contained in this SECTION 6 shall limit or restrict in any way the Pledgee's
right to receive proceeds of the Collateral in any form in accordance with
SECTION 3 of this Agreement. All dividends, distributions or other payments
which are received by the Pledgor contrary to the provisions of this SECTION 6
and SECTION 7 shall be received in trust for the benefit of the Pledgee, shall
be segregated from other property or funds


                                     - 5 -



of the Pledgor and shall be forthwith paid over to the Pledgee as Collateral in
the same form as so received (with any necessary endorsement).

                  7.  REMEDIES IN CASE OF EVENTS OF DEFAULT. In case an Event of
Default shall have occurred and be continuing, then and in every such case, the
Pledgee shall be entitled to exercise all of the rights, powers and remedies
(whether vested in it by this Agreement, any other Secured Debt Agreement or by
law) for the protection and enforcement of its rights in respect of the
Collateral, and the Pledgee shall be entitled to exercise all the rights and
remedies of a secured party under the Uniform Commercial Code and also shall be
entitled, without limitation, to exercise the following rights, which the
Pledgor hereby agrees to be commercially reasonable:

                      (a)  to receive all amounts payable in respect of the
Collateral otherwise payable to the Pledgor under SECTION 6 hereof;

                      (b)  to transfer all or any part of the Collateral into
the Pledgee's name or the name of its nominee or nominees;

                      (c)  to accelerate any Pledged Note which may be
accelerated in accordance with its terms, and take any other lawful action to
collect upon any Pledged Note (including, without limitation, to make any
demand for payment thereon);

                      (d)  to vote all or any part of the Pledged Stock
(whether or not transferred into the name of the Pledgee) and give all
consents, waivers and ratifications in respect of the Collateral and
otherwise act with respect thereto as though it were the outright owner
thereof (the Pledgor hereby irrevocably constituting and appointing the
Pledgee the proxy and attorney-in-fact of the Pledgor, with full power of
substitution to do so); and

                      (e)  to sell, assign and deliver, or grant options to
purchase, all or any part of the Collateral, or any interest therein, at any
public or private sale, without demand of performance, advertisement or
notice of intention to sell or of the time or place of sale or adjournment
thereof or to redeem or otherwise (all of which are hereby waived by the
Pledgor), for cash, on credit or for other property, for immediate or future
delivery without any assumption of credit risk, and for such price or prices
and on such terms as the Pledgee in its absolute discretion may determine,
PROVIDED that at least 15 business days' written notice of the time and place
of any such sale shall be given to the Pledgor. Pledgee shall not be
obligated to make any such sale of Collateral regardless of whether any such
notice of sale has theretofore been given. The Pledgor hereby waives and
releases to the fullest extent permitted by law any right or equity of
redemption with respect to the Collateral, whether before or after sale
hereunder, and all rights, if any, of marshalling the Collateral and any
other security for the Obligations or otherwise. At any such sale, unless
prohibited by applicable law, the Pledgee on behalf of the Secured Creditors
may bid for and purchase all or any part of the Collateral so sold free from
any such right or equity of redemption. Neither the Pledgee nor any Secured
Creditor shall be liable for failure to collect or realize upon any or all of
the Collateral or for any delay in so doing nor shall any of them be under
any obligation to take any action whatsoever with regard thereto.


                                     - 6 -



                  8.  REMEDIES, ETC., CUMULATIVE. Each and every right, power
and remedy of the Pledgee provided for in this Agreement or any Secured Debt
Agreement, or now or hereafter existing at law or in equity or by statute
shall be cumulative and concurrent and shall be in addition to every other
such right, power or remedy. The exercise or beginning of the exercise by the
Pledgee or any other Secured Creditor of any one or more of the rights,
powers or remedies provided for in this Agreement, or any other Secured Debt
Agreement or now or hereafter existing at law or in equity or by statute or
otherwise shall not preclude the simultaneous or later exercise by the
Pledgee or any Secured Creditor of all such other rights, powers or remedies,
and no failure or delay on the part of the Pledgee or any Secured Creditor to
exercise any such right, power or remedy shall operate as a waiver thereof.
Unless otherwise required by the Loan Documents, no notice to or demand on
the Pledgor in any case shall entitle it to any other or further notice or
demand in similar or other circumstances or constitute a waiver of any of the
rights of the Pledgee or any Secured Creditor to any other or further action
in any circumstances without notice or demand.

                  9.  APPLICATION OF PROCEEDS.

                      (a)  The cash proceeds actually received from the sale or
other disposition or collection of Collateral, and any other amounts received in
respect of the Collateral, the application of which is not otherwise provided
for herein, shall be applied (after payment of any amounts payable to the
Pledgee or the Agent pursuant to this Agreement or the Credit Agreement) in
whole or in part by the Pledgee against all or any part of the Obligations in
the following order: (i) first, to any fees, costs or other expenses due under
the Loan Documents; (ii) next, to any interest due under the Loan Documents;
(iii) next, to any principal due under the Loan Documents and amount due under
Interest Rate Protection and Other Hedging Agreements; and (iv) last, to any
other Obligations. Any surplus thereof which exists after payment and
performance in full of the Obligations shall be promptly paid over to the
Pledgor or otherwise disposed of in accordance with the UCC or other applicable
law.

                      (b)  It is understood and agreed that the Pledgor shall
remain liable to the extent of any deficiency between the amount of the
proceeds of the Collateral hereunder and the aggregate amount of the
Obligations.

                  10. PURCHASERS OF COLLATERAL. Upon any sale of the Collateral
by the Pledgee hereunder (whether by virtue of the power of sale herein granted,
pursuant to judicial process or otherwise), the receipt of the Pledgee or the
officer making the sale shall be a sufficient discharge to the purchaser or
purchasers of the Collateral so sold, and such purchaser or purchasers shall not
be obligated to see to the application of any part of the purchase money paid
over to the Pledgee or such officer or be answerable in any way for the
misapplication or nonapplication thereof.

                  11. INDEMNITY. The Pledgor agrees to indemnify and hold
harmless the Pledgee and each Secured Creditor and their respective successors,
assigns, employees, agents and servants (individually an "INDEMNITEE," and
collectively the "INDEMNITEES") from and against any and all claims, demands,
losses, judgments and liabilities (including liabilities for penalties) of
whatsoever kind or nature, and to reimburse each Indemnitee for all costs and
expenses, including reasonable attorneys' fees, growing out of or resulting from
this Agreement or the


                                     - 7 -



exercise by any Indemnitee of any right or remedy granted to it hereunder or
under any other Secured Debt Agreement (but excluding any claims, demands,
losses, judgments and liabilities or expenses to the extent incurred by
reason of gross negligence or willful misconduct of such Indemnitee). If and
to the extent that the obligations of the Pledgor under this SECTION 11 are
unenforceable for any reason, the Pledgor hereby agrees to make the maximum
contribution to the payment and satisfaction of such obligations which is
permissible under applicable law.

                  12. FURTHER ASSURANCES; POWER-OF-ATTORNEY.

                      (a)  The Pledgor agrees that it will join with the
Pledgee in executing and, at the Pledgor's own expense, file and
refile under the Uniform Commercial Code or other applicable law such financing
statements, continuation statements and other documents in such offices as the
Pledgee may reasonably deem necessary and wherever required by law in order to
perfect and preserve the Pledgee's security interest in the Collateral and
hereby authorizes the Pledgee to file financing statements and amendments
thereto relative to all or any part of the Collateral without the signature of
the Pledgor where permitted by law, and agrees to do such further acts and
things and to execute and deliver to the Pledgee such additional conveyances,
assignments, agreements and instruments as the Pledgee may reasonably require or
deem necessary to carry into effect the purposes of this Agreement or to further
assure and confirm unto the Pledgee its rights, powers and remedies hereunder.

                      (b)  The Pledgor hereby appoints the Pledgee as the
Pledgor's 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 after the occurrence and during the continuance of an Event of Default, in
the Pledgee's reasonable discretion to take any action and to execute any
instrument required by paragraph (a) if Pledgor has failed to do so after demand
by Pledgee.

                  13. THE PLEDGEE AS AGENT. The Pledgee will hold in accordance
with this Agreement all items of the Collateral at any time received under this
Agreement. It is expressly understood and agreed by the parties hereto and each
Secured Creditor, by accepting the benefits of this Agreement that each
acknowledges and agrees that the obligations of the Pledgee as holder of the
Collateral and interests therein and with respect to the disposition thereof,
and otherwise under this Agreement, are only those expressly set forth in this
Agreement. The Pledgee shall act hereunder on the terms and conditions set forth
herein and in ARTICLE X of the Credit Agreement.

                  14. TRANSFER BY PLEDGOR. The Pledgor will not sell or
otherwise dispose of, grant any option with respect to, or mortgage, pledge or
otherwise encumber any of the Collateral or any interest therein (except as may
be permitted in accordance with the terms of the Credit Agreement).

                  15. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE PLEDGOR.
The Pledgor represents and warrants and covenants that (a) it is, or at the time
when pledged hereunder will be, the legal, record and beneficial owner of, and
has (or will have) good title to, all Securities pledged by it hereunder,
subject to no Lien (except the Lien created by this Agreement); (b) it has full
corporate power, authority and legal right to pledge all the Securities pledged
by it pursuant to this Agreement; (c) this Agreement has been duly authorized,
executed


                                     - 8 -



and delivered by the Pledgor and constitutes a legal, valid and binding
obligation of the Pledgor enforceable in accordance with its terms, except to
the extent that the enforceability hereof may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other similar laws
generally affecting creditors' rights and by equitable principles (regardless
of whether enforcement is sought in equity or at law); (d) except to the
extent already obtained or made, no consent of any other party (including,
without limitation, any stockholder or creditor of the Pledgor or any of its
Subsidiaries) and no consent, license, permit, approval or authorization of,
exemption by, notice or report to, or registration, filing or declaration
with, any governmental authority is required to be obtained by the Pledgor in
connection with (i) the execution, delivery or performance of this Agreement,
(ii) the validity or enforceability of this Agreement, (iii) the perfection
or enforceability of the Pledgee's security interest in the Collateral or
(iv) except for compliance with or as may be required by applicable
securities laws and the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
the exercise by the Pledgee of any of its rights or remedies provided herein;
(e) the execution, delivery and performance of this Agreement by the Pledgor
does not violate any provision of any applicable law or regulation or of any
order, judgment, writ, award or decree of any court, arbitrator or
governmental authority, domestic or foreign or of the certificate of
incorporation or by-laws of the Pledgor, or of any securities issued by the
Pledgor or any of its Subsidiaries, or of any material mortgage, indenture,
lease, deed of trust, loan agreement, credit agreement or other contract,
agreement or instrument or undertaking to which the Pledgor or any of its
Subsidiaries is a party or which purports to be binding upon the Pledgor or
any of its Subsidiaries or upon any of their respective assets and will not
result in the creation or imposition of (or the obligation to create or
impose) any lien or encumbrance on any of the assets of the Pledgor or any of
its Subsidiaries except as contemplated by this Agreement; (f) all the shares
of the Stock have been duly and validly issued, are fully paid and
nonassessable and are subject to no options to purchase or similar rights;
(g) each of the Pledged Notes to the extent issued by the Pledgor or any of
its Subsidiaries constitutes, or when executed by the obligor thereof will
constitute, the legal, valid and binding obligation of such obligor,
enforceable in accordance with its terms, except to the extent that the
enforceability thereof may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws generally affecting
creditors' rights and by equitable principles (regardless of whether
enforcement is sought in equity or at law); and (h) the pledge, collateral
assignment and delivery to the Pledgee of the Securities (other than
uncertificated securities) pursuant to this Agreement creates a valid and
perfected first priority Lien in the Securities, and the proceeds thereof,
subject to no other Lien or to any agreement purporting to grant to any third
party a Lien on the property or assets of the Pledgor which would include the
Stock. The Pledgor covenants and agrees that it will defend the Pledgee's
right, title and security interest in and to the Securities and the proceeds
thereof against the claims and demands of all persons whomsoever; and the
Pledgor covenants and agrees that it will have like title to and right to
pledge any other property at any time hereafter pledged to the Pledgee as
Collateral hereunder and will likewise defend the right thereto and security
interest therein of the Pledgee and the Secured Creditors.

                  16. PLEDGOR'S OBLIGATIONS ABSOLUTE, ETC. The obligations of
the Pledgor under this Agreement shall be absolute and unconditional and (except
as provided in Section 18 hereof) shall remain in full force and effect without
regard to, and shall not be released, suspended, discharged, terminated or
otherwise affected by, any circumstance or occurrence whatsoever, including,
without limitation: (a) any renewal, extension, amendment or modification of or
addition or supplement to or deletion from any Secured Debt Agreement or


                                     - 9 -



any other instrument or agreement referred to therein, or any assignment or
transfer of any thereof; (b) any waiver, consent, extension, indulgence or other
action or inaction under or in respect of any such agreement or instrument
including, without limitation, this Agreement; (c) any furnishing of any
additional security to the Pledgee or its assignee or any acceptance thereof or
any release of any security by the Pledgee or its assignee; (d) any limitation
on any party's liability or obligations under any such instrument or agreement
or any invalidity or unenforceability, in whole or in part, of any such
instrument or agreement or any term thereof; or (e) any bankruptcy, insolvency,
reorganization, composition, adjustment, dissolution, liquidation or other like
proceeding relating to the Pledgor or any Subsidiary of the Pledgor, or any
action taken with respect to this Agreement by any trustee or receiver, or by
any court, in any such proceeding, whether or not the Pledgor shall have notice
or knowledge of any of the foregoing.

                  17. REGISTRATION, ETC.

                      (a)  If there shall have occurred and be continuing an
Event of Default and acceleration of the Notes then, and in every such case,
upon receipt by the Pledgor from the Pledgee of a written request or requests
that the Pledgor cause any registration, qualification or compliance under
any Federal or state securities law or laws to be effected with respect to
all or any part of the Pledged Stock, the Pledgor as soon as practicable and
at its expense will use its commercially reasonable efforts to cause such
registration to be effected (and be kept effective) and will use its
commercially reasonable efforts to cause such qualification and compliance to
be declared effected (and be kept effective) as may be so requested and as
would permit or facilitate the sale and distribution of such Pledged Stock,
including, without limitation, registration under the Securities Act of 1933,
as then in effect (or any similar statute then in effect), appropriate
qualifications under applicable blue sky or other state securities laws and
appropriate compliance with any other government requirements, PROVIDED that
the Pledgee shall furnish to the Pledgor such information regarding the
Pledgee as the Pledgor may request in writing and as shall be required in
connection with any such registration, qualification or compliance. The
Pledgor will cause the Pledgee to be kept advised in writing as to the
progress of each such registration, qualification or compliance and as to the
completion thereof, will furnish to the Pledgee such number of prospectuses,
offering circulars or other documents incident thereto as the Pledgee from
time to time may reasonably request, and will indemnify the Pledgee, each
Secured Creditor and all others participating in the distribution of such
Pledged Stock against all claims, losses, damages and liabilities caused by
any untrue statement (or alleged untrue statement) of a material fact
contained therein (or in any related registration statement, notification or
the like) or by any omission (or alleged omission) to state therein (or in
any related registration statement, notification or the like) a material fact
required to be stated therein or necessary to make the statements therein not
misleading, except insofar as the same may have been caused by an untrue
statement or omission based upon information furnished in writing to the
Pledgor by the Pledgee or such other Secured Creditor expressly for use
therein.

                      (b)  If at any time when the Pledgee shall determine to
exercise its right to sell all or any part of the Pledged Securities pursuant
to SECTION 7 hereof, and such Pledged Securities or the part thereof to be
sold shall not, for any reason whatsoever, be effectively registered under
the Securities Act of 1933, as then in effect, the Pledgee may, in its sole
and absolute discretion, sell such Pledged Securities or part thereof by
private sale in such manner and under such circumstances as the Pledgee may
deem reasonably necessary or advisable in


                                     - 10 -



order that such sale may legally be effected without such registration. Without
limiting the generality of the foregoing, in any such event the Pledgee, in its
sole and absolute discretion (i) may proceed to make such private sale
notwithstanding that a registration statement for the purpose of registering
such Pledged Securities or part thereof shall have been filed under such
Securities Act, (ii) may approach and negotiate with a single possible purchaser
to effect such sale, and (iii) may restrict such sale to a purchaser who will
represent and agree that such purchaser is purchasing for its own account, for
investment, and not with a view to the distribution or sale of such Pledged
Securities or part thereof. In the event of any such sale, the Pledgee shall
incur no responsibility or liability for selling all or any part of the Pledged
Securities at a price which the Pledgee, in its sole and absolute discretion, in
good faith deems reasonable under the circumstances, notwithstanding the
possibility that a substantially higher price might be realized if the sale were
deferred until after registration as aforesaid.

                  18. TERMINATION; RELEASE.

                      (a)  After the Termination Date (as defined below), this
Agreement and the security interest created hereby shall terminate (provided
that all indemnities set forth in SECTION 11 hereof shall survive any such
termination), and the Pledgee, at the request and expense of the Pledgor, will
execute and deliver to the Pledgor all such proper instruments as Pledgor may
reasonably request acknowledging the satisfaction and termination of this
Agreement, and will duly assign, transfer and deliver to the Pledgor (without
recourse and without any representation or warranty) such of the Collateral as
has not theretofore been sold or otherwise applied or released pursuant to this
Agreement, together with any monies at the time held by the Pledgee or any of
its sub-agents hereunder. As used in this Agreement, "TERMINATION DATE" shall
mean the earlier of (i) the first date occurring after December 31, 1998 on
which Borrower's Most Recent Ratio of Consolidated Debt to Consolidated EBITDA
as of the end of any two consecutive fiscal quarters is less than 2.25 to 1.0 or
(ii) the date upon which the Total Revolving Loan Commitment and all Interest
Rate Agreement or Other Hedging Agreements have been terminated, no Note under
the Credit Agreement is outstanding (and all Loans have been repaid in full),
all Letters of Credit have been terminated and all Obligations then owing have
been paid in full.

                      (b)  Notwithstanding anything to the contrary contained
above, upon the presentment of satisfactory evidence to the Pledgee in its
sole discretion that all obligations evidenced by any Pledged Note have been
repaid in full, and that any payments received by the Pledgor were permitted
to be received by the Pledgor pursuant to SECTION 6 hereof, the Pledgee
shall, upon the request and at the expense of the Pledgor, duly assign,
transfer and deliver to the Pledgor (without recourse and without any
representation or warranty) such Pledged Note if same has not theretofore
been sold or otherwise applied or released pursuant to this Agreement.

                      (c)  In the event that any part of the Collateral is
sold in connection with a sale permitted by SECTION 8.4 of the Credit
Agreement or otherwise released at the direction of the Majority Lenders (or
all Lenders if required by SECTION 11.1 of the Credit Agreement) and the
proceeds of such sale or sales or from such release are applied in accordance
with the provisions of SECTION 4.4 of the Credit Agreement, to the extent
required to be so applied, the Pledgee, at the request and expense of the
Pledgor, will duly assign, transfer and deliver to the Pledgor (without
recourse and without any representation or warranty) such of the


                                     - 11 -



Collateral as is then being (or has been) so sold or released and has not
theretofore been released pursuant to this Agreement.

                      (d)  At any time that the Pledgor desires that
Collateral be released as provided in the foregoing sub-section (a), (b) or
(c), as the case may be, it shall deliver to the Pledgee a certificate signed
by a Responsible Officer stating that the release of the respective
Collateral is permitted pursuant to such subsection (a), (b) or (c), as the
case may be.

                      (e)  The Pledgee shall have no liability whatsoever to any
Secured Creditor as the result of any release of Collateral by it in accordance
with this SECTION 18.

                  19. NOTICES ETC. All such notices and communications
hereunder shall be personally delivered, sent by registered or certified
mail, postage prepaid, return receipt requested, or by a reputable courier
delivery service, or by prepaid telex, TWX or telegram (with messenger
delivery specified in the case of a telegram), or by telecopier, and shall be
deemed to be given for purposes of this Agreement on the date received if
deposited in registered or certified mail, postage prepaid, and otherwise on
the day that such writing is delivered or sent to the intended recipient
thereof, or in the case of notice delivered by telecopy, upon completion of
transmission with a copy of such notice also being delivered under any of the
methods provided above. All notices and other communications shall be in
writing and addressed as follows:

                  (a) if to the Pledgor:

                      BMC Industries, Inc.
                      One Meridian Crossings
                      Suite 850
                      Minneapolis, Minnesota 55423
                      Attn: Jeffrey J. Hattara
                      Telephone: (612) 851-6036
                      Telecopy:  (612) 851-6050

                  (b) if to the Pledgee, at:

                      Bankers Trust Company
                      One Bankers Trust Plaza
                      130 Liberty Street
                      14th Floor
                      New York, New York 10006
                      Attn: Douglas Dibella
                      Telephone: (212) 250-3301
                      Telecopy:  (212) 250-7351

                      with copies to:

                      Bankers Trust Company
                      233 South Wacker Drive
                      Suite 8400
                      Chicago, Illinois 60606


                                    - 12 -



                      Attn:  John Anos
                      Telephone:  (312) 993-8141
                      Telecopy:   (312) 993-8162


                      Winston & Strawn
                      35 West Wacker Drive
                      Chicago, Illinois 60601
                      Attn: Charles B. Boehrer, Esq.
                      Telephone:  (312) 558-5600
                      Telecopy:   (312) 558-5700

                      (c)  if to any Bank Creditor, either (x) to the Agent,
at the address of the Agent specified in the Credit Agreement or (y) at such
address as such Bank Creditor shall have specified in the Credit Agreement;

                      (d)  if to any Other Creditor at such address as such
Other Creditor shall have specified in writing to the Pledgor and the Pledgee;

or at such other address as shall have been furnished in writing by any Person
described above to the party required to give notice hereunder.

                  20. WAIVER; AMENDMENT. None of the terms and conditions of
this Agreement may be changed, waived, modified or varied in any manner
whatsoever unless in writing duly signed by the Pledgor and the Pledgee (with
the written consent of the Majority Lenders or, to the extent required by
SECTION 11.1 of the Credit Agreement with the consent of each of the Lenders);
PROVIDED, HOWEVER, that any change, waiver, modification or variance affecting
the rights and benefits of a single Class (as defined below) of Secured
Creditors (and not all Secured Creditors in a like or similar manner) shall
require the written consent of the Requisite Creditors (as defined below) of
such affected Class. For the purpose of this Agreement, the term "CLASS" shall
mean each class of Secured Creditors, I.E., whether (i) the Bank Creditors as
holders of the Credit Agreement Obligations or (ii) the Other Creditors as the
holders of the Other Obligations. For the purpose of this Agreement, the term
"REQUISITE CREDITORS" of any Class shall mean each of (A) with respect to the
Credit Agreement Obligations, the Majority Lenders and (B) with respect to the
Other Obligations, the holders of 51% of all obligations outstanding from time
to time under the Interest Rate Protection Agreements or Other Hedging
Agreements.

                  21. MISCELLANEOUS. This Agreement shall be binding upon the
parties hereto and their respective successors and assigns and shall inure to
the benefit of and be enforceable by each of the parties hereto and its
successors and assigns. THIS AGREEMENT SHALL BE CONSTRUED AND ENFORCED IN
ACCORDANCE WITH AND GOVERNED BY THE LAW OF THE STATE OF NEW YORK. The headings
in this Agreement are for purposes of reference only and shall not limit or
define the meaning hereof. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which shall
constitute one instrument. In the event that any provision of this Agreement
shall prove to be invalid or unenforceable, such provision shall be deemed to be
severable from the other provisions of this Agreement which shall remain binding
on all parties hereto.


                                     - 13 -



                  22. RECOURSE. This Agreement is made with full recourse to the
Pledgor and pursuant to and upon all the representations, warranties, covenants
and agreements on the part of the Pledgor contained herein, in the other Loan
Documents, in the Interest Rate Protection or Other Hedging Agreements and
otherwise in writing in connection herewith or therewith.

                            [signature page follows]


                                     - 14 -


                  IN WITNESS WHEREOF, the Pledgor and the Pledgee have caused
this Agreement to be executed by their duly elected officers duly authorized as
of the date first above written.

                                       BMC INDUSTRIES, INC., as Pledgor


                                       By:   /s/Bradley D. Carlson
                                             ---------------------
                                       Name:   Bradley D. Carlson
                                               ------------------
                                       Title:  Treasurer
                                               ---------


                                       BANKERS TRUST COMPANY, as Pledgee

                                       By:  /s/Robert R. Telesca
                                            ---------------------
                                       Name:    Robert R. Telesca
                                               -----------------
                                       Title:    Assistant Vice President
                                               --------------------------


                                     - 15 -


                                     ANNEX A
                                       TO
                                PLEDGE AGREEMENT

Part I.  PLEDGED STOCK



- ------------------- ---------------- -------------- -------------- ------------------ ------------------- --------------------
                                                                                                             PERCENTAGE OF
                                                                                                          OUTSTANDING SHARES
                        NAME OF         TYPE OF       NUMBER OF    NUMBER OF SHARES   SHARE CERTIFICATE    OF CAPITAL STOCK
 NAME OF PLEDGOR        ISSUING         SHARES         SHARES         OUTSTANDING           NUMBER
                      CORPORATION                    AUTHORIZED
- ------------------- ---------------- -------------- -------------- ------------------ ------------------- --------------------
                                                                                        
BMC Industries,     Vision-Ease         common          1,000             100                 1                  100%
Inc.                Lens, Inc. (US)
- ------------------- ---------------- -------------- -------------- ------------------ ------------------- --------------------
BMC Industries,     Buckbee-Mears       common         100,000          20,000                1                   65%
Inc.                Holding
                    Company B.V.
- ------------------- ---------------- -------------- -------------- ------------------ ------------------- --------------------


Part II. PLEDGED NOTE

1.      Note in a stated face amount of EURO 77,000,000 made by Buckbee-Mears
Holding Company B.V. in favor of BMC Industries, Inc.


                                     - 16 -

EX-10.41

                                                                  EXHIBIT 10.41

                                RELEASE OF PLEDGE



         THIS RELEASE OF PLEDGE (this "RELEASE") is dated as of December 21,
1999, and is made by BANKERS TRUST COMPANY as Collateral Agent under that
certain Pledge Agreement dated as of June 25, 1998 (the "PLEDGE AGREEMENT")
by and between BMC Industries, Inc. ("BMC") and Bankers Trust Company
("COLLATERAL AGENT").

         The pledge made by BMC to Collateral Agent of 65% of the equity of
Buckbee-Mears Europe GmbH under the Pledge Agreement is hereby released.




                                            BANKERS TRUST COMPANY, as
                                            Collateral Agent

                                            By:   /s/Robert R. Telesca
                                               -------------------------------
                                            Name:   Robert R. Telesca
                                                 -----------------------------
                                            Title:   Assistant Vice President
                                                  ----------------------------

EX-13.1

HISTORICAL FINANCIAL SUMMARY
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS, STATISTICS AND RATIOS)




Years Ended December 31                                          1999         1998         1997         1996         1995
- ---------------------------------------------------------------------------------------------------------------------------
                                                                                                  
SUMMARY OF OPERATIONS
Revenues                                                   $  353,854    $ 335,138    $ 312,538     $280,487     $255,355
Cost of products sold                                         305,592      297,995      244,468      213,007      202,595
                                                           ----------------------------------------------------------------
Gross margin                                                   48,262       37,143       68,070       67,480       52,760
Selling and administrative                                     23,352       20,675       16,012       15,033       14,137
Impairment of long-lived assets                                    --       42,800           --           --           --
Acquired in-process research and development                       --        9,500           --           --           --
                                                           ----------------------------------------------------------------
Earnings (loss) before interest, other expense and
  income taxes                                                 24,910      (35,832)      52,058       52,447       38,623
Interest income (expense), net                                (13,099)     (13,374)      (1,065)        (280)         467
Other income (expense)                                          1,036          522          209          236         (146)
Income tax (benefit) expense                                    5,023      (18,049)      15,481       17,302       14,397
                                                           ----------------------------------------------------------------
Net earnings (loss)                                        $    7,824    $ (30,635)   $  35,721     $ 35,101     $ 24,547
                                                           ----------------------------------------------------------------
EARNINGS (LOSS) PER SHARE
Basic                                                      $     0.29    $   (1.13)   $    1.30     $   1.29     $   0.91
Diluted                                                          0.28        (1.13)        1.25         1.24         0.87
                                                           ----------------------------------------------------------------
NUMBER OF SHARES INCLUDED IN PER SHARE COMPUTATION
Basic                                                          27,299       27,014       27,583       27,268       26,896
Diluted                                                        27,710       27,014       28,530       28,363       28,234
                                                           ----------------------------------------------------------------
CASH FLOW
Cash dividends per share                                   $     0.06    $    0.06    $    0.06     $ 0.0525     $ 0.0425
Depreciation and amortization expense                          23,280       21,014       13,349       10,171        8,290
Net cash provided by operating activities                      33,485       26,948       14,667       20,786       45,261
Capital expenditures                                           13,157       21,427       75,110       54,662       39,196
                                                           ----------------------------------------------------------------
FINANCIAL POSITION
Working capital                                            $   89,716    $  94,971    $  74,914     $ 41,354     $ 32,730
Property, plant and equipment, net                            151,238      162,594      182,382      123,845       81,409
Total assets                                                  383,553      399,465      319,407      232,969      182,332
Total debt                                                    168,262      189,195       74,565       17,989           47
Stockholders' equity                                          136,422      133,257      178,752      144,108      108,466
                                                           ----------------------------------------------------------------
STATISTICS AND RATIOS
Current ratio                                                     2.5          2.7          2.6          1.8          1.6
Total debt to equity ratio                                        1.2          1.4          0.4          0.1          0.0
Earnings (loss) before interest, other expense and
  income taxes, as a percentage of revenues                       7.0%       (10.7)%       16.7%        18.7%        15.1%
Return on average equity                                          5.8%       (19.6)%       22.1%        27.8%        25.8%
Book value per share                                       $     4.98    $    4.90    $    6.43     $   5.26     $   4.01
                                                           ----------------------------------------------------------------


                                                    BMC INDUSTRIES, INC. / 9



                      MANAGEMENT'S DISCUSSION AND ANALYSIS

SUMMARY

    BMC Industries, Inc. is a leading producer of polycarbonate, glass and
plastic eyewear lenses. The Company is also one of the world's largest
manufacturers of aperture masks for color picture tubes used in televisions and
computer monitors and a leading producer of precision photo-etched metal and
electroformed parts. The Company segments its business into two business units,
Optical Products (Vision-Ease) and Buckbee-Mears, formerly known as Precision
Imaged Products, made up of mask operations and Buckbee-Mears St. Paul (BMSP).

    Net sales of $353.9 million for 1999 represent a 6% increase over the $335.1
million in 1998. The revenue growth during 1999 was provided by Buckbee-Mears,
primarily through incremental revenue from the computer monitor mask line in
Cortland, New York, that was restarted in January 1999, and higher revenue from
Optical Products due to the acquisition of Orcolite in May 1998. On a pro forma
basis, net sales increased 1% from $349.4 million in 1998 to $353.9 million in
1999.

    Net earnings and diluted earnings per share for 1999 were $7.8 million and
$0.28, respectively, compared to net loss and loss per diluted share of $30.6
million and $1.13, respectively, for 1998.

RESULTS OF OPERATIONS

    The following discussion and analysis examines the operating results of the
Company's two business segments. As used herein, "operating profit" refers to
operating profit before charges for the impairment of long-lived assets and
acquired in-process research and development (IPR&D), corporate allocations,
corporate expense and interest, as shown in Note 13 to the Consolidated
Financial Statements - Segment Information.

OPTICAL PRODUCTS

REVENUES AND OPERATING PROFIT

    COMPARISON OF 1999 AND 1998. Revenues of the Optical Products group were
$136.0 million for 1999, an increase of $12.9 million or 11% from 1998. The
increase was primarily due to the incremental revenue contributed from the
Orcolite acquisition in May 1998, resulting in a 23% increase in sales of
high-end products (polycarbonate, progressive and polarizing sun lenses). Sales
of high-end products accounted for 55% of total Optical Products group revenue
in 1999 compared to 53% in 1998. Optical Products revenue decreased 1% from the
1998 pro forma Vision-Ease. Sales of high-end products increased 3% over the pro
forma Vision-Ease revenues for the same period.

    Sales of mid-range and commodity plastic product decreased 8% due primarily
to the Company's reduced emphasis on plastic lens products and increased price
competition in the plastic lens segment. On a pro forma basis, plastic product
sales declined 16%. Glass product sales declined 7% due to the continued
contraction of the worldwide market for glass lenses.

    Operating profit of Optical Products was $5.7 million for 1999, a decrease
of $13.9 million or 71% from 1998. The rate of operating profit expressed as a
percentage of total revenues was 4% for 1999 compared to 16% in 1998. The 1999
operating profit decline was primarily due to increased polycarbonate product
costs, charges for product discontinuances and phase-outs related to product
line integration, more aggressive product pricing on glass, plastic and low-end
polycarbonate lenses, new lens product development costs and increased
polycarbonate product promotions.

    COMPARISON OF 1998 AND 1997. Revenues of Optical Products were $123.1
million for 1998, an increase of $29.5 million or 32% from 1997. The increase
was primarily due to the acquisition of Orcolite in May 1998 and an 81% increase
in sales of high-end products (polycarbonate, progressive, high index and
polarizing sun lenses). Sales of high-end products accounted for 53% of total
Optical Products group revenue in 1998 compared to 39% in 1997.

    On a pro forma basis, Optical Products revenues, which for 1998 include
sales from Orcolite subsequent to the date of acquisition, increased 8% over the
combined Vision-Ease and Orcolite 1997 revenues for the same period. Sales of
high-end products, on a pro forma basis, increased 25% over the combined
Vision-Ease and Orcolite 1997 revenues for the same period and accounted for 53%
of total Optical Products revenue in 1998 compared to 46% in 1997.

    Sales of mid-range and commodity plastic products increased 33% due
primarily to the acquisition of Orcolite, and increased 8% on a pro forma basis.
Glass product sales


10 / BMC INDUSTRIES, INC.



continued to decline because of the contraction of the worldwide market for
glass lenses.

    Operating profit of Optical Products (excluding the charge related to
acquired in-process research and development -see separate discussion below) was
$19.7 million for 1998, an increase of $4.8 million or 32% over 1997. The rate
of operating profit expressed as a percentage of total revenues was 16% for 1998
and 1997. Operating profit growth in 1998 was in line with revenue growth and
reflects higher earnings resulting from the acquisition of Orcolite and the
increase in sales of high-end products, partially offset by weakening earnings
on glass products, heightened competition in the plastic product segment, lens
product development, and new polycarbonate product promotions.

    In connection with the purchase of Orcolite, and in accordance with
generally accepted accounting principles, the Company allocated $9.5 million of
the $101.0 million purchase price to acquired IPR&D. This amount represented the
independently appraised value based on risk-adjusted cash flows related to the
IPR&D projects and was expensed as of the acquisition date. As of the date of
the acquisition, the development of these projects had not reached technological
feasibility, and these projects had no alternative future uses.

BUCKBEE-MEARS

REVENUES AND OPERATING PROFIT

    COMPARISON OF 1999 AND 1998. Revenues of Buckbee-Mears were $217.9 million
for 1999, an increase of $5.8 million or 3% over 1998. The increase was
primarily attributable to incremental monitor mask revenue generated from the
production line in Cortland that was restarted in January 1999, partially offset
by lower entertainment mask and BMSP revenues. Total year 1999 computer monitor
mask sales were $64.1 million, an increase of 74% over 1998. Sales of invar
entertainment masks were up 14% compared to total year 1998 sales. Offsetting
these increases, AK steel entertainment mask sales were down 20% compared to
1998 sales and other etching and electroformed product revenue declined 17% from
1998 as BMSP redefined their operating plan to focus on higher volume customers
in 1999.

    Operating profit for Buckbee-Mears was $23.9 million for 1999, an increase
of $21.9 million from 1998. The rate of operating profit expressed as a
percentage of revenue was 11% for 1999 compared to 1% for 1998. The increase in
operating profit is primarily due to the increase in monitor mask and invar
entertainment mask revenue, partially offset by lower AK steel entertainment
mask revenue, pricing pressures in the mask business, particularly pricing for
monitor masks and lower sales from etched and electroformed parts.

    COMPARISON OF 1998 AND 1997. Revenues of Buckbee-Mears were $212.1 million
for 1998, a decrease of $6.9 million or 3% from 1997. The decline was primarily
attributable to decreased sales of invar entertainment masks offset by increased
sales of computer monitor masks. Sales of invar entertainment masks were down
40% compared to total year 1997 sales. Total year 1998 computer monitor mask
sales were $36.7 million, an increase of 79% over 1997. Over 75% of the computer
monitor masks sold in 1998 were produced at the Company's Mullheim, Germany
plant. Sales of AK steel entertainment masks were up 2% compared to 1997.

    Operating profit of Buckbee-Mears (excluding the charge for impairment of
long-lived assets) was $2.0 million for 1998, a decrease of $39.5 million or 95%
from 1997. The rate of operating profit expressed as a percentage of revenues
was 1% for 1998 compared to 19% for 1997. The decline in operating profit is
primarily due to the decline in invar entertainment mask revenue; pricing
pressures in the mask business, particularly pricing for monitor masks (and
alleged below-cost pricing of certain AK steel entertainment masks by Japanese
and South Korean mask manufacturers); costs associated with the extended
shutdown of two entertainment and one monitor mask manufacturing lines at the
Company's Cortland plant; mask inventory charges and costs associated with
moving certain mask inspection operations. In addition, significant production
ramp-up and product qualification costs were incurred during the first half of
1998 related to the monitor mask line at the Cortland plant prior to the
shutdown of this line for all of the second half of 1998. The operating profit
reductions as described above were offset slightly by strong earnings from
etched and electroformed parts.

    During the third quarter of 1998, in response to difficult market
conditions, the Company shut down three manufacturing lines (two entertainment
mask and one computer monitor mask) at the Company's Cortland facility for an
extended period of time. One entertainment mask line resumed operation in the
fourth quarter 1998. The

                                                    BMC INDUSTRIES, INC. / 11


Company restarted the computer monitor mask line in late January 1999. The
remaining entertainment mask line continues to be shut down.

    The impairment of long-lived assets write-down of $42.8 million (pre-tax)
reflects the diminished value of certain Buckbee-Mears operating fixed assets,
primarily those related to the production of computer monitor masks. In
accordance with Statement of Financial Accounting Standards (SFAS) No. 121,
"Accounting for the Impairment of Long-Lived Assets," the Company recorded a
charge of $26.7 million after-tax ($42.8 million pre-tax) during the second
quarter of 1998 to write down these fixed assets. After careful assessment of
various factors relevant to these assets, including significant declines in
sales prices within the computer monitor mask market, management determined it
was appropriate to write down the value of these assets to estimated fair value
based on discounted estimated future cash flows in accordance with SFAS No. 121.

SELLING EXPENSES

    Selling expenses were $18.7 million, $15.5 million and $11.7 million or
5.3%, 4.6% and 3.7% of revenues for 1999, 1998 and 1997, respectively. The
increase in 1999 is primarily due to a full year of incremental costs associated
with the Orcolite acquisition and expanded sales and marketing costs related to
the continued promotion of the Optical Products group's branded product lines.
The increase in 1998 over 1997 is primarily due to incremental costs associated
with the Orcolite acquisition and product launch for Outlook-TM- polycarbonate
progressive lens.

ADMINISTRATIVE EXPENSES

    Administrative expenses were $4.7 million, $5.2 million and $4.3 million or
1.3%, 1.5% and 1.4% of revenues for 1999, 1998 and 1997, respectively. The
decrease in administrative expenses from 1998 to 1999 is primarily due to
reduction of administrative positions in 1999. The increase in administrative
expenses from 1997 to 1998 is primarily due to increased salary and recruiting
expenses during 1998.

INTEREST EXPENSE (INCOME)

    Interest expense was $13.4 million, $13.5 million and $1.3 million for 1999,
1998 and 1997, respectively. Interest income was $0.3 million, $0.2 million and
$0.2 million for 1999, 1998 and 1997, respectively. 1999 interest expense was
consistent with 1998 due to flat average debt levels throughout the year
compared to 1998. 1998 interest expense was higher than 1997 because of
increased debt levels to fund the Orcolite acquisition in May 1998 and the
repurchase of outstanding stock in January 1998.

INCOME TAXES

    Expressed as a percentage of earnings before income taxes, the Company's
effective tax rate was 39%, (37)% and 30% in 1999, 1998 and 1997, respectively.
The 1999 tax rate was higher than the 1998 tax rate due principally to positive
pretax earnings and an earnings mix shift to higher taxed foreign based earnings
in 1999. The 1998 tax rate was lower than 1997 due principally to the pretax
loss in 1998.

    Realization of the Company's net deferred tax asset is dependent on future
taxable income. The Company performed a detailed analysis and believes that it
is more likely than not such assets will be realized based on the Company's
estimate of future taxable income and the expected timing of temporary
difference reversals.

SEASONALITY

    The Company's earnings are generally lower in the first and third quarters
due to maintenance shutdowns at the Company's mask production facilities.
Maintenance shutdowns also occur at the Company's lens manufacturing facilities
in the third quarter. Also, the seasonality of end products in several markets
(televisions, computer monitors and ophthalmic lenses) affects the Company's
annual earnings pattern.

ACQUISITIONS

    On May 15, 1998, the Company, through a wholly owned subsidiary, acquired
Orcolite, a division of Monsanto Company, for $101.0 million in cash. This
division produces polycarbonate and plastic ophthalmic lenses. See Note 2 to the
Consolidated Financial Statements -- Business Acquisition.

MASK OPERATIONS EXTENDED SHUTDOWN

    During the third quarter of 1998, the Company shut down three manufacturing
lines (two entertainment mask and one computer monitor mask) at the Company's
Cortland facility for an extended period of time. These shutdowns were done in
conjunction with the Company's normal summer maintenance shutdowns to avoid
additional ramp-up costs. One entertainment mask line resumed operation in the
fourth quarter 1998. The computer monitor mask line was

12 / BMC INDUSTRIES, INC.



restarted in late January 1999. The remaining entertainment mask line continues
to be shut down.

DIVIDENDS

    In 1999, the Company continued payment of cash dividends to shareholders.
Cash dividends of one and one-half cents per share were declared in each quarter
of 1999. The Company currently expects to continue dividend payments in 2000.

SHARE REPURCHASE PLAN

    In January 1998, the Company repurchased one million shares of its common
stock as authorized by the Board of Directors on April 7, 1997. The repurchase
occurred between January 6, 1998 and January 13, 1998, on the open market for
$16.6 million, at an average price of $16.64 per share.

ENVIRONMENTAL

    The Company's operations are subject to federal, state, local and foreign
environmental laws and regulations. Under the Comprehensive Environmental
Response Compensation and Liability Act of 1980, as amended (CERCLA or
Superfund), the Company has been designated as a potentially responsible party
(PRP) by the United States Environmental Protection Agency with respect to
certain waste sites with which the Company may have had direct or indirect
involvement. Similar designations have been made by some state environmental
agencies under applicable state superfund laws. Such designations are made
regardless of the extent of the Company's involvement. Such designations have
been made by the filing of a complaint, the issuance of an administrative
directive or order, or the issuance of a notice or demand letter. These actions
are in various stages of administrative or judicial proceedings. They include
demands for recovery of past governmental costs and/or for future investigative
or remedial actions. In many cases, the dollar amount of site costs or the
Company's portion of site costs is not specified. In most cases, however, the
Company has been designated a de minimis party and claims have been asserted
against a number of other entities for the same recovery or other relief as was
asserted against the Company. The Company is currently participating in site
investigations and/or remedial action at seven sites under federal, state and
local laws.

    To the extent possible with the amount of information available at this
time, the Company has evaluated its responsibility for costs and related
liability with respect to the above sites, has recorded reserves for such
liability in accordance with generally accepted accounting principles, and is of
the opinion that the Company's liability with respect to these sites should not
have a material adverse effect on the financial position or the results of
operations of the Company. In arriving at this conclusion, the Company has
considered, among other things, the payments that have been made with respect to
the sites in the past; the factors, such as volume and relative toxicity,
ordinarily applied to allocated defense and remedial costs at such sites; the
probable costs to be paid by the other potentially responsible parties; total
projected remedial costs for a site, if known; existing technology; and the
currently enacted laws and regulations. A portion of the costs and related
liability for these sites has been or will be covered by available insurance.

FINANCIAL POSITION AND LIQUIDITY

    Working capital was $89.7 million and the current ratio was 2.5 at December
31, 1999, compared to $95.0 million and a current ratio of 2.7 at December 31,
1998. Accounts receivable balances increased $2.9 million compared to 1998
levels, due primarily to incremental monitor mask sales from the production line
restarted in Cortland in January 1999. Inventory balances decreased $0.5 million
compared to 1998. Optical Products inventory declined due to write-offs for
discontinued product lines and lower production volumes, offset by increases in
Buckbee-Mears inventory levels due to the restart of the computer monitor line
in Cortland. Accounts payable and other liabilities increased primarily due to
extended payment terms with vendors and higher inventory levels at
Buckbee-Mears.

    At December 31, 1999, the Company had $168.3 million in debt and the ratio
of total debt to total equity was 1.2. At December 31, 1998, the Company had
$189.2 million in debt and the ratio of total debt to total equity was 1.4. The
$20.9 million reduction in debt was primarily due to improved working capital
utilization and cash generated from operations.

    In 1999 the Company generated $33.5 million of cash flow from operating
activities. The cash generated from operating activities was used primarily for
debt reduction totaling $20.9 million and property, plant and equipment
additions totaling $13.2 million. The Company's cash flow activities in 1998
included generating $26.9 million of cash

                                                    BMC INDUSTRIES, INC. / 13


flow from operating activities and $94.1 million from financing activities,
primarily through incremental debt. The cash generated from operating and
financing activities in 1998 was used primarily for property, plant and
equipment additions totaling $21.4 million and the cash acquisition of Orcolite
for $101.0 million. The Company's primary cash flow activities in 1997 included
generating $14.7 million of cash flow from operating activities and $62.1
million from financing activities with such cash flow principally used for
property, plant and equipment additions.

    Capital spending in 2000 is planned to total $15-$20 million. It is
currently anticipated that 2000 capital expenditures will be financed primarily
with funds from operations.

    As of December 31, 1999, the Company had a $220.0 million domestic secured
credit facility with a syndicate of banks. There was $163.5 million outstanding
under this facility at December 31, 1999. The Company's German subsidiary
maintains short-term and long-term credit facilities totaling $17.9 million.
There were $0.1 million of borrowings under these facilities at December 31,
1999. The Company currently believes that the combination of present capital
resources, internally generated funds and unused financing sources will be
adequate to meet the Company's financing requirements for 2000.

MARKET RISK

FOREIGN CURRENCY

    A portion of the Company's operations consists of manufacturing and sales
activities in foreign jurisdictions. The Company manufactures its products in
the United States, Germany, Hungary and Indonesia and purchases products from
Asian, as well as other suppliers. The Company sells its products in the United
States and into various foreign markets. The Company's sales are typically
denominated in either the U.S. dollar or the German mark (DM/Euro).
Buckbee-Mears also has an indirect exposure to the Japanese yen and the Korean
won because its most significant competitors are Japanese and Korean. As a
result, the Company's financial results could be significantly affected by
factors such as changes in foreign currency exchange rates or weak economic
conditions in foreign markets. In addition, sales of products overseas are
affected by the value of the U.S. dollar relative to other currencies. Long-term
strengthening of the U.S. dollar may have an adverse effect on these sales and
competitive conditions in the Company's markets and may limit the Company's
ability to increase product pricing in times of adverse currency movements.

    To manage the volatility relating to these exposures, the Company utilizes
various derivative instruments, including forward foreign exchange contracts and
cross-currency swaps. The cross-currency swaps are accounted for under
mark-to-market accounting.

    At December 31, 1999, the Company had approximately 11.0 million DM of
outstanding forward foreign currency exchange contracts to exchange U.S. dollars
for German marks at set exchange rates. At December 31, 1998, the Company did
not have any forward foreign exchange contracts.

    In August 1999, the company entered into a cross-currency swap that
provided for the Company to swap a total of $10.0 million of notional debt
for the equivalent amount of Japanese yen-denominated debt. Under this swap,
the Company also effectively swapped a floating U.S. dollar-based interest
rate (6.2% at December 31, 1999) for a floating Japanese yen-based interest
rate (0.2% at December 31, 1999). As of December 31, 1999, the Company has
recorded as Other Expense a foreign exchange loss of $1.2 million related to
this swap agreement under mark-to-market accounting. A hypothetical 10%
adverse effect on the foreign exchange rate would result in an additional
pre-tax loss of $1.1 million related to this $10.0 million swap. A
hypothetical 100 basis point adverse effect on interest rates would result in
an additional pre-tax loss of $0.1 million.

    In January 1999, the Company entered into a cross-currency swap which
provided for the Company to swap a total of $10.0 million of notional debt for
the equivalent amount of Japanese yen-denominated debt. This swap agreement was
closed out in May 1999. The Company recorded as Other Income a foreign exchange
gain of $0.5 million in 1999 related to this swap.

    In October and November 1998, the Company entered into cross-currency swaps
which provided for the Company to swap a total of $20 million of floating
notional debt for the equivalent amount of floating Japanese yen-denominated
debt. These swap contracts were settled in November 1998, resulting in a pre-tax
gain of $0.9 million.

14 / BMC INDUSTRIES, INC.



    The Company experiences foreign currecncy gains and losses, which are
reflected on the Company's Statements of Operations, due to the strengthening
and weakening of the U.S. dollar against the currencies of the Company's
foreign subsidiaries and the resulting effect on the valuation of the
inter-company and other accounts. The net exchange gain or loss arising from
this was not material in 1999 or 1998. The Company anticipates that it will
continue to incur exchange gains and losses from foreign operations in the
future.

    The Company's net investment in foreign subsidiaries was $28.8 million and
$26.2 million at December 31, 1999 and 1998, respectively, translated into U.S.
dollars at year-end exchange rates. The potential loss in value resulting from a
hypothetical 10% change in foreign currency exchange rates is $2.6 million and
$2.5 million in 1999 and 1998, respectively.

    During 1999, the U.S. dollar strengthened against the DM. A weaker dollar
generally has a positive impact on overseas results because foreign
currency-denominated earnings translate into more U.S. dollars; a stronger
dollar generally has a negative translation effect. However, a significant
component of our overseas revenue is U.S. dollar based, thereby significantly
mitigating this effect. Accordingly, for 1999 and 1998, the net effect of the
change in exchange rates was offsetting and, therefore, did not have a material
impact on sales or net earnings.

INTEREST

    Substantially all of the Company's debt and associated interest expense is
sensitive to changes in the level of interest rates. To mitigate the impact of
fluctuations in interest rates, the Company principally enters into interest
rate swaps to hedge the exposure of a portion of its floating-rate debt. The
Company's primary interest rate exposure is U.S., and to a lesser extent DM/Euro
and yen-based interest rates.

    During 1998 and 1999, the Company entered into multiple interest rate swap
agreements totaling $100 million of notional debt that allows the Company to
swap a variable interest rate for fixed interest rates ranging from 5.74% to
6.20%. These swaps expire at various dates ranging from January 2000 to January
2001. A hypothetical 100 basis point increase in interest rates would result in
a $0.8 million and $0.7 million adverse impact on interest expense in 1999 and
1998, respectively.

IMPACT OF YEAR 2000

    In prior years, the Company discussed the nature and progress of its plans
to become Year 2000 ready. In late 1999, the Company completed its remediation
and testing of systems. As a result of those planning and implementation
efforts, the Company experienced no disruptions in mission critical information
technology and non-information technology systems and believes those systems
successfully responded to the Year 2000 date change. The Company expensed
approximately $1.0 million during 1999 and capitalized approximately $2.0
million of costs incurred in connection with remediating its systems. The
majority of these costs relate to new operating systems implemented at our
divisions which would have been incurred regardless of any year 2000 issues and
provide several expanded options that will improve the overall performance of
these divisions. The Company is not aware of any material problems resulting
from Year 2000 issues, either with its products, its internal systems or the
products and services of third parties. The Company will continue to monitor its
mission critical computer applications and those of its suppliers and vendors
throughout the year 2000 to ensure that any latent Year 2000 matters that may
arise are addressed promptly.

NEW ACCOUNTING STANDARDS

    SFAS No. 133, "Accounting for Derivatives and Similar Financial Instruments
and for Hedging Activities," was adopted by the Company in the quarter ended
June 30, 1999. See Note 7 to the Consolidated Financial Statements - Derivative
Instruments and Hedging Activities.

EURO CURRENCY CONVERSION

    On January 1, 1999, 11 of the 15 member countries of the European Union,
including Germany, adopted the euro as their common legal currency. The euro
trades on currency exchanges and is available for non-cash transactions. From
January 1, 1999 through January 1, 2002, each of the participating countries is
scheduled to maintain its national (legacy) currency as legal tender for goods
and services. Beginning January 1, 2002, new euro-denominated bills and coins
will be issued, and legacy currencies will be withdrawn from circulation no
later than July 1, 2002. The Company's foreign operating subsidiaries that will
be affected by the euro conversion have established plans to address the
business issues raised, including the competitive impact of cross-border price
transparency. It is not anticipated

                                                    BMC INDUSTRIES, INC. / 15



that there will be any near-term business ramifications; however, the long-term
implications, including any changes or modifications that will need to be made
to business and financial strategies, are still being reviewed. From an
accounting, treasury and computer system standpoint, the impact from the euro
currency conversion is not expected to have a material impact on the financial
position or results of operations of the Company.

CAUTIONARY STATEMENTS

    Certain statements included in this Management's Discussion and Analysis of
Financial Condition and Results of Operations by the Company or its
representatives, as well as other communications, including its filings with the
Securities and Exchange Commission (SEC), reports to shareholders, news releases
and presentations to securities analysts or investors contain forward-looking
statements made in good faith by the Company pursuant to the "Safe Harbor"
provisions of the Private Securities Litigation Reform Act of 1995. These
statements relate to non-historical information and include, without limitation,
any statement that may predict, forecast, indicate or imply future results,
performance or achievements. The Company wishes to caution the reader not to
place undo reliance on any such forward-looking statements. These statements are
qualified by potential risks and uncertainties detailed from time to time in
reports filed by the Company with the SEC, including Forms 10-Q and 10-K, and
include, among others, ability to implement the Optical Products group's
initiatives in strategic polycarbonate marketing and manufacturing adjustments;
ability to grow European sales through the operation of processing laboratories;
lower demand for televisions, computer monitors and ophthalmic lenses; further
mask and ophthalmic lens price declines and imbalances of supply and demand;
customer product qualifications; liability and other claims asserted against the
Company; continued slowdown at BMSP; ability to partner with new BMSP customers
or transition development relationships into full scale production; new product
development, introduction and acceptance, including the roll out of the
polycarbonate wafer lamination system; cost reduction and reorganization
efforts; continued higher manufacturing costs; adjustments to inventory
valuations; negative foreign currency fluctuations, including adverse
fluctuations affecting cross-currency swaps; adverse fluctuations affecting
nickel prices, a critical component of invar; ability to recruit and retain key
personnel; the impact of Y2K information systems issues; the effect of the
economic uncertainty in Asia; and a potential economic slowdown in other parts
of the world. These factors should not, however, be considered an exhaustive
list. The Company does not undertake the responsibility to update any
forward-looking statement that may be made from time to time by or on behalf of
the Company. Investors should also be aware that while the Company does, from
time to time, communicate with securities analysts, it is against BMC's policy
to disclose to them any material non-public information or other confidential
commercial information. Accordingly, shareholders should not assume that the
Company agrees with any statement or report issued by any analyst irrespective
of the content of the statement or report. In addition, BMC does not issue or
confirm financial forecasts or projections issued by others. Thus, to the extent
that reports issued by securities analysts contain any projections, forecasts or
opinions, such reports are not the responsibility of BMC.

16 / BMC INDUSTRIES, INC.



CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)




Years Ended December 31                                                             1999             1998            1997
- ---------------------------------------------------------------------------------------------------------------------------
                                                                                                      
Revenues                                                                       $ 353,854       $  335,138      $  312,538
Cost of products sold                                                            305,592          297,995         244,468
                                                                               --------------------------------------------
Gross margin                                                                      48,262           37,143          68,070
Selling                                                                           18,650           15,496          11,696
Administrative                                                                     4,702            5,179           4,316
Impairment of long-lived assets                                                       --           42,800              --
Acquired in-process research and development                                          --            9,500              --
                                                                               --------------------------------------------
Income (Loss) from Operations                                                     24,910          (35,832)         52,058
                                                                               --------------------------------------------
Other Income and (Expense)
Interest income                                                                      277              163             233
Interest expense                                                                 (13,376)         (13,537)         (1,298)
Other income                                                                       1,036              522             209
                                                                               --------------------------------------------
Earnings (Loss) before Income Taxes                                               12,847          (48,684)         51,202
Income Tax Expense (Benefit)                                                       5,023          (18,049)         15,481
                                                                               --------------------------------------------
Net Earnings (Loss)                                                            $   7,824       $  (30,635)     $   35,721
                                                                               ============================================
Earnings (Loss) Per Share
   Basic                                                                       $    0.29       $    (1.13)     $     1.30
   Diluted                                                                          0.28            (1.13)           1.25
                                                                               --------------------------------------------
Number of Shares Included in Per Share Computation
  Basic                                                                           27,299           27,014          27,583
  Diluted                                                                         27,710           27,014          28,530
                                                                               --------------------------------------------


SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.


                                                    BMC INDUSTRIES, INC. / 17


CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)




December 31                                                                                          1999            1998
- ---------------------------------------------------------------------------------------------------------------------------
                                                                                                         
ASSETS
Current Assets
  Cash and cash equivalents                                                                    $    1,146      $    1,028
  Trade accounts receivable, less allowances of $3,374 and $2,624                                  42,025          39,163
  Inventories                                                                                      82,312          82,853
  Deferred income taxes                                                                            11,588          14,603
  Other current assets                                                                             12,580          14,347
                                                                                              ---------------------------
      Total Current Assets                                                                        149,651         151,994
                                                                                              ---------------------------
Property, plant and equipment, net                                                                151,238         162,594
Deferred income taxes                                                                               9,221           5,431
Intangible assets, net                                                                             68,232          73,178
Other assets, net                                                                                   5,211           6,268
                                                                                              ---------------------------
      Total Assets                                                                             $  383,553      $  399,465
                                                                                              ===========================
LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities

  Short-term borrowings                                                                        $    2,303      $    1,929
  Accounts payable                                                                                 30,342          28,315
  Accrued compensation and benefits                                                                12,909          10,939
  Income taxes payable                                                                              8,093           3,375
  Other current liabilities                                                                         6,288          12,465
                                                                                              ---------------------------
      Total Current Liabilities                                                                    59,935          57,023
                                                                                              ---------------------------
Long-term debt                                                                                    165,959         187,266
Other liabilities                                                                                  18,522          18,372
Deferred income taxes                                                                               2,715           3,547
Stockholders' Equity
  Common stock (shares issued of 27,370 and 27,173)                                                49,077          47,714
  Retained earnings                                                                                92,620          86,436
  Accumulated other comprehensive income (loss)                                                    (3,495)          1,113
  Other                                                                                            (1,780)         (2,006)
                                                                                              ---------------------------
      Total Stockholders' Equity                                                                  136,422         133,257
                                                                                              ---------------------------
Total Liabilities and Stockholders' Equity                                                     $  383,553      $  399,465
                                                                                              ===========================



SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.

18 / BMC INDUSTRIES, INC.




CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)



                                                                                     ACCUMULATED
                                                                                           OTHER
                                                              COMMON     RETAINED  COMPREHENSIVE
Years Ended December 31, 1999, 1998 and 1997                    STOCK    EARNINGS  INCOME (LOSS)     OTHER         TOTAL
- ---------------------------------------------------------------------------------------------------------------------------
                                                                                                
BALANCE AT DECEMBER 31, 1996                               $   56,551   $  84,629      $  3,974    $ (1,046)   $  144,108
Comprehensive Income:
    Net earnings                                                   --      35,721            --          --        35,721
    Foreign currency translation adjustments                       --          --        (5,191)         --        (5,191)
                                                                                                               ----------
  Total comprehensive income                                                                                       30,530
                                                                                                               ----------
Exercise of options, 428 shares, including tax benefit          5,697          --            --          --         5,697
Restricted stock grants, net of forfeitures
  and including tax benefits                                       15          --            --          --            15
Repayments of employee loans for option exercises,
  net of additional loans                                          --          --            --          59            59
Cash dividends declared -- $0.06 per share                         --      (1,657)           --          --        (1,657)
                                                           ----------------------------------------------------------------
BALANCE AT DECEMBER 31, 1997                                   62,263     118,693        (1,217)       (987)      178,752
Comprehensive Loss:
    Net loss                                                       --     (30,635)           --          --       (30,635)
    Foreign currency translation adjustments                       --          --         2,330          --         2,330
                                                                                                               ----------
  Total comprehensive loss                                                                                        (28,305)
                                                                                                               ----------
Repurchase of 1,000 shares of Company stock                   (16,636)         --            --          --       (16,636)
Exercise of options, 345 shares, including tax benefit          2,048          --            --          --         2,048
Restricted stock grants, net of forfeitures
  and including tax benefits                                       39          --            --          --            39
Employee loans for option exercises, net of repayments             --          --            --      (1,019)       (1,019)
Cash dividends declared -- $0.06 per share                         --      (1,622)           --          --        (1,622)
                                                           ----------------------------------------------------------------
BALANCE AT DECEMBER 31, 1998                                   47,714      86,436         1,113      (2,006)      133,257
Comprehensive Income:
    Net earnings                                                   --       7,824            --          --         7,824
    Foreign currency translation adjustments                       --          --        (4,577)         --        (4,577)
    Loss on derivative instruments                                 --          --           (31)         --           (31)
                                                                                                               ----------
  Total comprehensive income                                                                                        3,216
                                                                                                               ----------
Exercise of options, 150 shares, including tax benefit          1,153          --            --          --         1,153
Restricted stock grants, net of forfeitures
  and including tax benefits                                      210          --            --          --           210
Repayments of employee loans for option exercises,
  net of additional loans                                          --          --            --         226           226
Cash dividends declared-- $0.06 per share                          --      (1,640)           --          --        (1,640)
                                                           ----------------------------------------------------------------
BALANCE AT DECEMBER 31, 1999                               $   49,077   $  92,620      $ (3,495)   $ (1,780)   $  136,422
                                                           ================================================================


COMMON STOCK: 99,000 SHARES OF VOTING COMMON STOCK WITHOUT PAR VALUE AUTHORIZED;
27,370, 27,173 AND 27,811 SHARES ISSUED AND OUTSTANDING AT DECEMBER 31, 1999,
1998 AND 1997, RESPECTIVELY.

UNDESIGNATED STOCK: 500 SHARES AUTHORIZED, OF WHICH 200 SHARES WERE DESIGNATED
AS SERIES A JUNIOR PARTICIPATING PREFERRED SHARES ON JUNE 30, 1998 IN CONNECTION
WITH THE COMPANY'S ADOPTION OF A SHARE RIGHTS PLAN. THE BOARD OF DIRECTORS IS
AUTHORIZED TO DESIGNATE THE NAME OF EACH CLASS OR SERIES OF THE UNDESIGNATED
SHARES AND TO SET THE TERMS THEREOF (INCLUDING, WITHOUT LIMITATION, TERMS WITH
RESPECT TO REDEMPTION, DIVIDEND, LIQUIDATION, CONVERSION AND VOTING RIGHTS AND
PREFERENCES).

SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.

                                                    BMC INDUSTRIES, INC. / 19


CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)




Years Ended December 31                                                             1999             1998            1997
- ---------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES
                                                                                                      
Net Earnings (Loss)                                                            $   7,824       $  (30,635)     $   35,721
ADJUSTMENTS TO RECONCILE NET EARNINGS (LOSS) TO NET CASH PROVIDED BY
  OPERATING ACTIVITIES
Depreciation and amortization                                                     23,280           21,014          13,349
Impairment of long-lived assets                                                       --           42,800              --
Acquired in-process research and development                                          --            9,500              --
Provisions for product returns, uncollectable trade receivables
  and inventory reserves                                                           9,824           11,985           2,322
Deferred income taxes                                                             (1,945)         (11,939)          4,347
Other non-cash income and expense items                                               (4)            (933)           (864)
DECREASE (INCREASE) IN ASSETS
  Trade accounts receivable                                                       (6,683)          (4,915)         (7,308)
  Inventories                                                                     (9,868)         (11,621)        (23,066)
  Other current assets                                                             1,762             (616)         (5,296)
  Other noncurrent assets                                                          2,331            4,782          (3,051)
INCREASE (DECREASE) IN LIABILITIES
  Accounts payable                                                                 3,029             (560)          6,438
  Income taxes payable                                                             4,972              581          (4,248)
  Accrued expenses and other current liabilities                                  (2,685)          (1,995)         (2,568)
  Other noncurrent liabilities                                                     1,648             (500)         (1,109)
                                                                               --------------------------------------------
NET CASH PROVIDED BY OPERATING ACTIVITIES                                         33,485           26,948          14,667
                                                                               --------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to property, plant and equipment                                       (13,157)         (21,427)        (75,110)
Business acquisitions, net of cash acquired                                           --         (101,000)         (1,817)
Proceeds from sale of property and equipment                                          --               --              60
                                                                               --------------------------------------------
NET CASH USED IN INVESTING ACTIVITIES                                            (13,157)        (122,427)        (76,867)
                                                                               --------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Increase (decrease) in short-term borrowings                                         845              723            (130)
Increase (decrease) in long-term debt                                            (20,839)         110,601          58,135
Common stock issued, including tax benefit                                         1,363            2,087           5,712
Common stock repurchased                                                              --          (16,636)             --
Cash dividends paid                                                               (1,636)          (1,632)         (1,650)
Employee (loans) for exercise of stock options, net of repayments                    226           (1,019)             59
                                                                               --------------------------------------------
NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES                              (20,041)          94,124          62,126
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS                        (169)              --             (87)
                                                                               --------------------------------------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                                 118           (1,355)           (161)
Cash and cash equivalents at beginning of year                                     1,028            2,383           2,544
                                                                               --------------------------------------------
CASH AND CASH EQUIVALENTS AT END OF YEAR                                       $   1,146       $    1,028      $    2,383
                                                                               ============================================


                SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.

20 / BMC INDUSTRIES, INC.



                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                    (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

    The Consolidated Financial Statements include the accounts of the Company
and its subsidiaries, all of which are wholly or majority-owned.

    REVENUE RECOGNITION -- Revenue related to the majority of the Company's
products is recognized upon shipment of product to the customer.

    CASH EQUIVALENTS -- Consist of highly-liquid debt instruments with a
maturity of three months or less at the date of purchase. These instruments are
carried at cost which approximates fair market value.

    INVENTORIES -- Stated at the lower of cost or market. Cost is determined
principally on the average cost method. Provision for potentially obsolete or
slow-moving inventory is made based on management's analysis of inventory levels
and future sales forecasts.

    PROPERTY, PLANT AND EQUIPMENT -- Stated at cost. Depreciation is provided on
the straight-line method over estimated useful lives of generally 40 years for
buildings, 20 years for building improvements and infrastructure, and eight
years for machinery and equipment. Depreciation of assets included in
construction in progress does not begin until the construction is complete and
the assets are placed into service. Depreciation expense was $19,827, $18,980
and $13,046 in 1999, 1998 and 1997, respectively.

    Statement of Financial Accounting Standards (SFAS) No. 121 (SFAS 121),
"Accounting for the Impairment of Long-Lived Assets," prescribes that an
impairment loss be recognized in the event that facts and circumstances indicate
that the carrying amount of an asset may not be recoverable, and the estimated
future undiscounted cash flows related to the asset are less than the carrying
amount of the asset. The Company recorded a charge of $26,700 after-tax ($42,800
pre-tax) during the quarter ended June 30, 1998, for the write-down of certain
Buckbee-Mears fixed assets. See Note 6 for further discussion.

    INTANGIBLE ASSETS -- Consist primarily of goodwill and other
acquisition-related intangible assets which are stated at cost or at fair value
as of the date acquired in a business acquisition accounted for as a purchase,
less accumulated amortization. Amortization is computed on a straight-line basis
over estimated useful lives of 7 to 30 years. Management periodically assesses
the amortization period and recoverability of the carrying amount of goodwill
based upon an estimate of future cash flows from related operations.
Amortization expense was $3,453, $2,034 and $303 in 1999, 1998 and 1997,
respectively.

    INCOME TAXES -- A deferred tax liability is recognized for temporary
differences between financial reporting and tax reporting that will result in
taxable income in future years. A deferred tax asset is recognized for temporary
differences that will result in tax deductions in future years.

    COMPREHENSIVE INCOME -- The Company follows SFAS No. 130 (SFAS 130),
"Reporting Comprehensive Income." Comprehensive Income consists of net earnings,
foreign currency translation adjustments and gains/losses on derivative
instruments and is presented in the Consolidated Statements of Stockholders'
Equity. Accumulated Other Comprehensive Income (Loss) consists only of currency
translation adjustments and gains/losses on derivative instruments.

    POST-RETIREMENT BENEFITS OTHER THAN PENSIONS -- The Company accrues the
expected cost of providing post-retirement benefits other than pensions during
the years that eligible employees render service.

    EARNINGS PER SHARE -- The basic earnings per share amounts are determined
based on the weighted average common shares outstanding while the diluted
earnings per share amounts also give effect to the common shares dilutive
potential. For the Company's earnings per share calculations, the basic and
diluted weighted average outstanding share amounts differ only due to the
dilutive impact of stock options.

    STOCK-BASED COMPENSATION -- The Company has elected to follow Accounting
Principles Board Opinion No. 25 (APB 25), "Accounting for Stock Issued to
Employees," and related interpretations in accounting for its employee stock
options. Under APB 25, because the exercise price of employee stock options
equals the market price of the underlying stock on the date of grant, no
compensation expense is recorded. The Company has adopted the disclosure-only
provisions of SFAS No.

123 (SFAS 123), "Accounting for Stock-Based Compensation."

    ESTIMATES -- The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions

                                                    BMC INDUSTRIES, INC. / 21


that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.

    RECLASSIFICATION -- Certain items in the 1998 Consolidated Financial
Statements have been reclassified to conform to the 1999 presentation. These
reclassifications had no impact on net income or stockholders' equity as
previously reported.

2. BUSINESS ACQUISITION

    On May 15, 1998, the Company, through a wholly owned subsidiary, acquired
the Orcolite business unit of the Monsanto Company (Orcolite) for the cash
purchase price of $101,000. For financial statement purposes, the acquisition
has been accounted for under the purchase method of accounting with the excess
of the purchase price over the fair value of the net tangible assets acquired
recorded as intangible assets which are being amortized over periods ranging
from 7 to 30 years.

    In addition, in accordance with generally accepted accounting principles,
the independently appraised value of acquired in-process research and
development (IPR&D) purchased in conjunction with the acquisition, was written
off as a charge of $9,500 (pre-tax) during the second quarter of 1998. The
appraised value represents the estimated fair value of IPR&D based on
risk-adjusted cash flows related to the IPR&D projects. At the date of the
acquisition, the development of these projects had not reached technological
feasibility, and these projects had no alternative future uses. There is no
assurance that the in-process projects will be completed, or that they will meet
either technological or commercial success.

    The consolidated statements of earnings reflect the operations of Orcolite
after May 15, 1998. The following unaudited pro forma information presents a
summary of consolidated results of operations of the Company and the Orcolite
business unit as if the acquisition had occurred at the beginning of fiscal
1997, with pro forma adjustments to give effect to amortization of goodwill and
other intangible assets, depreciation expense on the fair value of property,
plant and equipment and interest expense on acquisition debt, together with the
related income tax effects. The pro forma adjustments do not include the $9,500
write-off of acquired IPR&D discussed above.



                                             UNAUDITED

Years Ended December 31                  1998          1997
- -----------------------------------------------------------
                                           
Revenues                           $  349,356    $  341,911
Net earnings (loss)                   (32,253)       32,198
Diluted earnings (loss) per share       (1.19)         1.13
                                   ========================


    The unaudited pro forma condensed combined financial information above is
not necessarily indicative of what actual results would have been had the
acquisition occurred at the date indicated.

3. INVENTORIES

    The following is a summary of inventories at December 31:




                                          1999         1998
- -----------------------------------------------------------
                                            
Raw materials                        $  24,167    $  24,845
Work in process                         12,564        9,047
Finished goods                          45,581       48,961
                                   ------------------------
Total inventories                    $  82,312    $  82,853
                                   ========================


4. OTHER LIABILITIES

The following is a summary of other current liabilities at
December 31:



                                          1999         1998
- -----------------------------------------------------------
                                            
Accrued acquisition-related expenses $      --    $   4,699
Other                                    6,288        7,766
                                   ------------------------
Total other current liabilities      $   6,288    $  12,465
                                   ========================



5. INTANGIBLE ASSETS

The following is a summary of intangible assets at December 31:



                                          1999         1998
- -----------------------------------------------------------
                                            
Goodwill                             $  61,559    $  64,113
Other                                   12,941       11,877
                                   ------------------------
Total                                   74,500       75,990
Less accumulated amortization           (6,268)      (2,812)
                                   ------------------------
Total intangible assets              $  68,232    $  73,178
                                   ========================



22 / BMC INDUSTRIES, INC.



6. PROPERTY, PLANT AND EQUIPMENT

The following is a summary of property, plant and equipment
at December 31:



                                          1999        1998
- ----------------------------------------------------------
                                           
Land and improvements               $    6,472   $   5,475
Buildings and improvements              97,877      98,423
Machinery and equipment                169,172     165,486
Construction in progress                 5,286       7,246
                                   -----------------------
Total                                  278,807     276,630
Less accumulated depreciation
  and amortization                    (127,569)   (114,036)
                                   -----------------------
Total property, plant and
  equipment, net                    $  151,238   $ 162,594
                                   =======================


    The Company recorded a charge of $26,700 after-tax ($42,800 pre-tax) during
the quarter ended June 30, 1998 for the write-down of certain Buckbee-Mears
fixed assets, primarily those related to the production of computer monitor
masks. After careful assessment of various factors relevant to these assets,
including significant declines in sales prices within the computer monitor mask
market, management determined it was appropriate to write down the value of
these assets and, accordingly, such assets were written down to estimated fair
value based on estimated discounted future cash flows in the second quarter of
1998 in accordance with SFAS 121.

7. DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

    Effective in the quarter ended June 30, 1999, the Company adopted SFAS No.
133 (SFAS 133), "Accounting for Derivative Instruments and Hedging Activities."
In doing so, the Company did not incur any transition adjustments to earnings.
All derivatives are recognized on the balance sheet at their fair value. On the
date a derivative contract is entered into the derivative is designated as a
fair value hedge, cash flow hedge or a foreign-currency net investment hedge.
The Company hedges some selected foreign-currency denominated forecasted
transactions (cash flow hedges), in which changes in the fair value of highly
effective derivatives are recorded in Accumulated Other Comprehensive Income
(Loss). The Company also has multiple interest rate swap agreements (cash flow
hedges), which provide for the Company to swap a variable interest rate for
fixed interest rates. At December 31, 1999, $262 of deferred net gains on the
interest rate swap agreements were included in Accumulated Other Comprehensive
Income (Loss). Accounting for the Company's cross-currency swap agreements
remains unchanged under SFAS 133 as these swaps continue to be accounted for
under mark-to-market accounting.

    The Company formally documents all relations between hedging instruments and
the hedged items, as well as its risk-management objectives and strategy for
undertaking various hedge transactions. The Company formally assesses, both at
the hedge's inception and on an ongoing basis, whether the derivatives that are
used in hedging transactions are highly effective in offsetting changes in cash
flows of the hedged items.

    The Company uses foreign-currency forward-exchange contracts with durations
of less than twelve months to hedge against the effect of exchange rate
fluctuations on certain German mark (DM) denominated steel purchases. During
1999, the Company entered into forward foreign exchange contracts to purchase a
total of 26,000 DM in monthly increments during 1999 and 2000. As of December
31, 1999, contracts to purchase 11,000 DM remained outstanding. For the year
ended December 31, 1999, a loss of $112 was reported in the Consolidated
Statements of Operations for the hedges that been have settled. At December 31,
1999, $293 of deferred net losses on derivative instruments were included in
Accumulated Other Comprehensive Income (Loss) and are expected to be
reclassified to earnings during the next twelve months.

    At various dates during 1998 and 1999, the Company entered into multiple
interest rate swap agreements for a total of $100,000 of notional debt which
provide for the Company to swap a variable interest rate for fixed interest
rates ranging from 5.74% to 6.20%. These swaps expire at various dates ranging
from January 2000 to January 2001. In January 2000, an interest rate swap of
$25,000 of notional debt expired, resulting in $75,000 of interest rate swap
agreements currently outstanding. The notional amount of debt is not a measure
of the Company's exposure to credit or market risks and is not included in the
Consolidated Balance Sheets. Fixing the interest rate minimizes the Company's
exposure to the uncertainty of floating interest rates during this period.
Amounts to be paid or received under the interest rate swap agreement are
accrued and recorded as an adjustment to Interest Expense during

                                                    BMC INDUSTRIES, INC. / 23


the term of the interest rate swap agreement.

    In January 1999, the Company entered into a cross-currency swap which
provided for the Company to swap $10,000 of notional debt for the equivalent
amount of Japanese yen-denominated debt. This swap was subsequently closed out
in May 1999. Under this swap, the Company also effectively swapped a fixed U.S.
dollar-based interest rate of 5.1% for a fixed Japanese yen-based interest rate
of 1.05%. This Japanese yen-based debt derivative was accounted for under
mark-to-market accounting. The Company recorded as Other Income a foreign
exchange gain of $453 in 1999 related to this swap.

    In August 1999, the Company entered into a new cross-currency swap agreement
to swap $10,000 of notional debt for the equivalent amount of Japanese
yen-denominated debt. Under this swap, the Company also effectively swapped a
floating U.S. dollar-based interest rate (6.16% at December 31, 1999) for a
floating Japanese yen-based interest rate (0.23% at December 31, 1999). This
Japanese yen-based derivative is accounted for under mark-to-market accounting.
The Company recorded as Other Expense a foreign exchange loss of $1,173 under
this swap agreement in 1999.

8. DEBT

The following is a summary of long-term debt at December 31:



                                          1999        1998
- ----------------------------------------------------------
                                           
U.S. revolving credit facility      $  163,500   $ 178,700
Japanese yen-denominated
  cross-currency swap                    1,173          --
German credit facility                     966       7,056
Other                                    2,623       3,439
                                     ---------------------
                                       168,262     189,195

Less amounts due within one year        (2,303)     (1,929)
                                     ---------------------
Total long-term debt                $  165,959   $ 187,266
                                    ======================



    In 1998, the Company entered into a five-year revolving domestic credit
agreement (the Agreement) with a syndicate of banks for secured borrowings
totaling up to $250,000. In December 1999, the Company voluntarily reduced the
available borrowing capacity to $220,000. This Agreement is secured by a pledge
of certain shares of common stock of the Company's subsidiaries and a pledge of
an intercompany note from one of the Company's European holding companies.
Borrowings under the Agreement bear interest at the Eurodollar Rate plus a
spread ranging from 0.5% to 1.625% (7.32% at December 31, 1999). The rate spread
is dependent upon the Company's ratio of debt to cash flow, as defined. In
addition, the Company pays a facility fee on unborrowed funds at rates ranging
from 0.225% to 0.475% (0.375% at December 31, 1999), depending on the Company's
debt to cash flow ratio. Under terms of the Agreement, the Company must meet
certain financial covenants, including maintaining a specified consolidated net
worth, leverage ratio (debt to cash flow), interest coverage ratio and level of
capital expenditures. The Company was in compliance with all covenants under the
Agreement and had borrowings of $163,500 under the Agreement at December 31,
1999.

    The Company's German subsidiary maintains short-term credit lines of $400
and long-term credit lines of $17,500. The short-term credit lines are unsecured
and bear interest at either 0.75% over the DM LIBOR rate or approximately 3.0%
over the German Bundesbank Discount rate. The short-term credit lines may be
withdrawn by the lender at any time. There was no debt outstanding at December
31, 1999, under the German short-term credit lines. The weighted average
interest rate on short-term debt outstanding at December 31, 1998 was 5.5%. A
portion of the long-term credit line is secured by land and buildings with a net
book value of $11,694 at December 31, 1999. These long-term credit lines bear
interest at 0.50% to 0.75% over the DM LIBOR rate.

    On December 31, 1999 and 1998, the estimated fair value of the Company's
debt described above approximates the recorded amount.

    Annual maturities of long-term debt for the next five years are $2,303 in
2000, $1,017 in 2001, $1,402 in 2002, $163,510 in 2003, $10 in 2004 and $20
thereafter.

    There were $400 of outstanding letters of credit at December 31, 1999.

    Interest expense paid, net of amounts capitalized of $253, $685 and $2,609,
was $12,964, $11,456 and $660 in 1999, 1998 and 1997, respectively.

9. COMMITMENTS

    The Company leases four manufacturing facilities, 10 sales, distribution or
administrative facilities and the Company headquarters. In addition, the Company
leases certain data processing and other equipment.

24 / BMC INDUSTRIES, INC.



    At December 31, 1999, the approximate future minimum rental commitments
required under non-cancelable operating leases are as follows:


- ----------------------------------------------------------
                                              
2000                                             $   1,225
2001                                                   906
2002                                                   894
2003                                                   627
2004                                                    90
                                                 ---------
Total minimum lease payments                     $   3,742
                                                 =========


    Rent expense was $1,591, $1,079, and $1,892 in 1999, 1998 and 1997,
respectively.

    The Company's Vision-Ease subsidiary has entered into a long-term Product
Manufacturing and Sales Agreement (the Supply Agreement) with a plastic lens
manufacturer located in Southeast Asia. The Supply Agreement provides for the
Southeast Asian manufacturer to supply, and Vision-Ease to purchase, certain
minimum levels of plastic lenses. At December 31, 1999, the Company committed to
purchase approximately $11,000 in the year 2000 under this supply agreement.

    At December 31, 1999, the Company had commitments of approximately $1,700
related to capital projects.

10. STOCK OPTIONS/AWARDS AND STOCK REPURCHASES/OTHER

    The 1994 Stock Incentive Plan (the 1994 Plan) provides for the granting of
either incentive stock options or nonqualified stock options to purchase shares
of the Company's common stock and for other stock-based awards to officers,
directors and key employees responsible for the direction and management of the
Company and to non-employee consultants and independent contractors. At December
31, 1999, 2,789 shares of common stock were reserved for issuance under the 1994
Plan and for outstanding options under the 1984 Omnibus Stock Plan, which
terminated on January 10, 1994. The reserved shares included 255 shares
available for awards under the 1994 Plan.

    Information relating to stock options during 1999, 1998 and 1997 is as
follows:



                                         OPTION PRICE
                                   ------------------------
                         NUMBER    PER SHARE          TOTAL
                      OF SHARES      AVERAGE          PRICE
- -----------------------------------------------------------
                                        
Shares under option at
  December 31, 1996        2,120     $   6.41    $  13,585
1997 Activity:
Granted                      611        23.75       14,513
Exercised                   (428)        3.81       (1,631)
Forfeited                    (78)       15.15       (1,182)
- -----------------------------------------------------------
Shares under option at
  December 31, 1997        2,225        11.36       25,285
1998 Activity:
Granted                      902         9.38        8,465
Exercised                   (345)        4.70       (1,621)
Forfeited                   (201)       13.78       (2,769)
Terminated                  (252)       16.40       (4,134)
- -----------------------------------------------------------
Shares under option at
  December 31, 1998        2,329        10.83       25,226
1999 Activity:
Granted                      798         7.31        5,830
Exercised                   (150)        6.58         (987)
Forfeited                   (443)       12.09       (5,355)
- -----------------------------------------------------------
Shares under option at
  December 31, 1999        2,534     $   9.75    $  24,714
===========================================================
Shares exercisable at
  December 31, 1999        1,052     $   8.19    $   8,617
===========================================================
Shares exercisable at
  December 31, 1998          942     $   7.07    $   6,660
===========================================================
Shares exercisable at
  December 31, 1997          908     $   4.18    $   3,797
===========================================================


     The following table summarizes information concerning currently outstanding
and exercisable options:



                             OPTIONS OUTSTANDING                    OPTIONS EXERCISABLE
                  -------------------------------------------   --------------------------
                                       WEIGHTED
                                        AVERAGE     WEIGHTED                   WEIGHTED
                                      REMAINING      AVERAGE                    AVERAGE
       RANGE OF        NUMBER       CONTRACTUAL     EXERCISE          NUMBER   EXERCISE
EXERCISE PRICES   OUTSTANDING       LIFE (YEARS)       PRICE     EXERCISABLE      PRICE
- --------------------------------------------------------------  --------------------------
                                                               
  $   0 - 5             682             3.0        $  2.74           639         $ 2.76
      5 -10           1,060             8.0           6.42           190           7.46
    10 - 20             410             7.9          14.16            54          17.88
    20 - 31             382             6.5          26.79           169          26.46
                    ------------------------------------------  --------------------------
                      2,534             6.5        $  9.75         1,052         $ 8.19
                    ==========================================  ==========================


                                                    BMC INDUSTRIES, INC. / 25


    All outstanding options are nonqualified options. No compensation expense
related to stock option grants was recorded in 1999, 1998 or 1997, as the option
exercise prices were equal to fair market value on the date of grant.

    At December 31, 1999, there were 69 shares outstanding pursuant to other
stock-based awards under the 1994 Plan.

    Pro forma information regarding net income and earnings per share is
required by SFAS 123 and has been determined as if the Company had accounted
for its employee stock options under the fair value method of that Statement.
The fair value for these options was estimated at the date of grant using a
Black-Scholes option pricing model with the following weighted average
assumptions for 1999, 1998 and 1997:



                                 1999       1998      1997
- ------------------------------------------------------------
                                            
Risk-free interest rate         6.20%      5.50%     5.71%
Dividend yield                  1.23%      0.96%     0.30%
Volatility factor               0.80       0.55      0.47
Weighted average expected life  5 YEARS    5 YEARS   5 YEARS
- ------------------------------------------------------------


    The Black-Scholes option valuation model was developed for use in estimating
the fair value of traded options which have no vesting restrictions and are
fully transferable. In addition, option valuation models require the input of
highly subjective assumptions including the expected stock price volatility.
Because the Company's employee stock options have characteristics significantly
different from those of traded options, and because changes in the subjective
input assumptions can materially affect the fair value estimate, in management's
opinion, the existing models do not necessarily provide a reliable single
measure of the fair value of its employee stock options.

    For purposes of pro forma disclosures, the estimated fair value of the
options using the Black-Scholes option pricing model is amortized to expense
over the options' vesting period. The Company's pro forma net earnings and
earnings per share were as follows:



                               1999       1998        1997
- -----------------------------------------------------------------
                                         
Net earnings (loss) -
  as reported              $   7,824   $ (30,635) $  35,721
Net earnings (loss) -
  pro forma                    6,291     (32,006)    34,926
Basic earnings (loss)
  per share - as reported       0.29       (1.13)      1.30
Basic earnings (loss)
  per share - pro forma         0.23       (1.18)      1.27
Diluted earnings (loss)
  per share - as reported       0.28       (1.13)      1.25
Diluted earnings (loss)
  per share - pro forma         0.23       (1.18)      1.22
Weighted average fair
  value of options granted
  during the year               4.60        4.52      10.98
- -----------------------------------------------------------------


Because SFAS 123 provides for pro forma amounts for options granted beginning in
1995, the pro forma expense will likely increase in future years as the new
option grants become subject to the pricing model.

    STOCK OPTION EXERCISE LOAN PROGRAM. The Company maintains the Stock Option
Exercise Loan Program under which holders of exercisable stock options may
obtain interest-free and interest-bearing loans from the Company to facilitate
their exercise of stock options. Such full recourse loans are evidenced by
demand promissory notes and are secured by shares of stock. The portion of such
loans directly related to the option exercise price is classified as a reduction
of stockholders' equity. The remainder is included in current assets.

    COMMON STOCK REPURCHASES. In January 1998, the Company repurchased 1,000
common shares at a total cost of approximately $16,600. This share repurchase
was financed using the Company's domestic bank credit facility.

    SHARE RIGHTS PLAN. In June 1998, the Company adopted a Share Rights Plan and
declared a dividend of one Preferred Share Purchase Right for each outstanding
share of common stock to stockholders of record on July 20, 1998. The Rights
will become exercisable after any person or group acquires or announces a tender
or exchange offer resulting in the beneficial ownership of 15% or more of the
Company's common stock. Each Right entitles shareholders to buy one five
hundredth of a share of a newly created series of preferred stock at an exercise
price of $75 subject to adjustment upon certain events. If any person or group
acquires 15% or

26 / BMC INDUSTRIES, INC.




more of the Company's common stock, if the Company is acquired in a business
combination, or if the Company sells 50% or more of its assets, each Right
entitles its holder, other than the person or group acquiring the common stock,
to purchase at the Right's then current exercise price, shares of the Company's
common stock having a value of twice the Right's then current exercise price.
The Rights are redeemable at $0.001 per Right and will expire on July 20, 2008
unless extended or earlier redeemed by the Company.

11. EMPLOYEE BENEFIT PLANS

    The Company maintains a savings and profit sharing plan covering
substantially all of its domestic salaried employees and a majority of those
domestic hourly employees not covered by a pension plan or retirement fund
described below. Under the terms of the profit sharing provision of the plan,
the Company makes an annual minimum contribution equal to 3% of participants'
wages, with the potential for an additional discretionary contribution depending
upon the Company's profitability. Provisions of the profit sharing portion of
the plan include 100% vesting after five years of continuous service and payment
of benefits upon retirement, total disability, death or termination. Under the
terms of the savings provision of the plan, the Company makes an annual minimum
contribution, which is invested in Company stock, equal to 25% of participants'
before-tax contributions up to 6% of base salary, with the potential for an
additional discretionary contribution depending upon the Company's
profitability. Provisions of the savings portion of the plan include vesting of
the Company's contributions at the rate of 25% per year of continuous service
and payment of benefits upon retirement, total disability, death or termination.

    One former domestic operation has a noncontributory defined benefit pension
plan for its hourly employees. During 1997, the Company curtailed benefits
payable under the plan. Benefits payable under the plan are based upon various
monthly amounts for each year of credited service. The Company's funding policy
meets or exceeds the funding requirements of federal laws and regulations.

    In 1989, the Company adopted a supplemental defined benefit retirement plan
for corporate and operations management over 45 years of age. In 1992, the
Company curtailed benefits payable under the plan. The Company's funding policy
is to maintain plan assets approximately equal to the vested benefit obligation.

    In addition, the Company's German subsidiary has a noncontributory defined
benefit pension plan covering substantially all of its employees. Benefits
payable under the plan are based upon the participant's base salary prior to
retirement and years of credited service. As allowed under German law, this plan
is not funded. However, under generally accepted accounting principles, the
estimated future liability is accrued in the Company's Consolidated Financial
Statements.

    In addition to the defined benefit plans discussed above, the Company has
two defined benefit post-retirement plans covering certain domestic employees.
One plan provides medical benefits and the other provides life insurance
benefits. Under the medical benefits plan, the Company provides a specific
dollar amount to retired salaried employees or their surviving spouses to
purchase coverage through the BMC Flexible Benefits Plan. Assumed increases or
decreases to health care trend rates do not have an impact on the Company's
post-retirement medical plan as the annual increase in these Company provided
amounts is limited to 5%. The life insurance plan provides term life insurance
coverage to all retired full-time hourly employees at one former domestic
operation. The Company accrues the expected cost of providing benefits under
these two plans during the years that eligible employees render service. Neither
plan is funded.

    The above described defined benefit and post-retirement plans included the
following components:

                                                    BMC INDUSTRIES, INC. / 27




                                                                       PENSION BENEFITS             POST-RETIREMENT BENEFITS
                                                                      --------------------            -------------------
                                                                      1999            1998            1999           1998
- ---------------------------------------------------------------------------------------------------------------------------
CHANGE IN BENEFIT OBLIGATION
                                                                                                      
Benefit obligation at beginning of year                          $  14,321        $ 12,898         $ 1,662        $ 1,542
Service cost                                                           490             497             173             87
Interest cost                                                          824             832             156            108
Foreign currency exchange rate changes                              (1,511)            739              --             --
Actuarial (gain) loss                                                 (494)           (137)            112             --
Benefit payments                                                      (358)           (508)           (155)           (75)
                                                                -----------------------------------------------------------
Benefit obligation at end of year                                   13,272          14,321           1,948          1,662
                                                                -----------------------------------------------------------
CHANGE IN FAIR VALUE OF PLAN ASSETS
Fair value of plan assets at beginning of year                       3,579           4,225              --             --
Actual return on plan assets                                           675            (334)             --             --
Employer contribution                                                   --              --             155             75
Benefit payments                                                      (243)           (312)           (155)           (75)
                                                                -----------------------------------------------------------
Fair value of plan assets at end of year                             4,011           3,579              --             --
                                                                -----------------------------------------------------------
FUNDED STATUS
Funded status of the plan (underfunded)                             (9,261)        (10,742)         (1,948)        (1,662)
Unrecognized transitional amount                                        64              90              --             --
Unrecognized net loss (gain)                                          (165)            778             (41)          (147)
Fourth quarter contribution                                             --              --               7             --
                                                                -----------------------------------------------------------
Accrued pension cost                                             $  (9,362)       $ (9,874)        $(1,982)       $(1,809)
                                                                ===========================================================




                                                                                      1999            1998           1997
- ---------------------------------------------------------------------------------------------------------------------------
                                                                                                         
COMPONENTS OF NET PERIODIC PENSION COST
Pension benefits:
   Service cost                                                                   $    490         $   497        $   469
   Interest cost                                                                       824             832            824
   Expected return on plan assets                                                     (313)           (371)          (248)
   Amortization of transition obligation                                                14              15             18
   Amortization of prior service cost                                                   --              --              7
   Recognized actuarial gain                                                            --              (5)            (8)
   Curtailment loss                                                                     --              --            141
                                                                                -------------------------------------------
Net periodic pension cost                                                         $  1,015         $   968        $ 1,203
                                                                                ===========================================
Post-Retirement benefits:
   Service cost                                                                   $    173         $    87        $    73
   Interest cost                                                                       156             108             91
   Recognized actuarial (gain) loss                                                      7              --            (14)
                                                                                -------------------------------------------
Net periodic pension cost                                                         $    336         $   195        $   150
                                                                                ===========================================


28 / BMC INDUSTRIES, INC.




    Assumptions used in developing the projected benefit obligation and the net
periodic pension cost as of December 31, were as follows:



                                 1999       1998      1997
- -----------------------------------------------------------
                                            
Domestic plans (including
post-retirement plan):
  Discount rate                 7.75%     6.75%      7.50%
  Rate of return on
    plan assets                 9.00%     9.00%      7.00%
Foreign plan:
  Discount rate                 6.00%     6.00%      6.30%
  Rate of increase in
    compensation                2.50%     2.50%      3.00%
                                ===========================


    Under a contract with its union employees, one of the Company's domestic
operations makes, on behalf of each active participant, fixed weekly
contributions to a retirement fund (aggregating $147, $173 and $145 in 1999,
1998 and 1997, respectively). At December 31, 1999, the market value of this
fund's assets of $18,065 exceeded benefit obligations of $17,231 by $834.
Pursuant to the plan, excess funded amounts are not available to the Company.

    The total cost of all profit sharing, savings and pension plans, domestic
and foreign, was $5,469, $2,708 and $3,118 in 1999, 1998 and 1997, respectively.

12. INCOME TAXES

    The provision (benefit) for income taxes was based on earnings (loss) before
income taxes, as follows:




Years Ended December 31     1999          1998         1997
- -----------------------------------------------------------
                                         
Domestic               $  (1,472)    $ (50,756)   $  42,605
Foreign                   14,319         2,072        8,597
                      -------------------------------------
Earnings (loss) before
  income taxes         $  12,847     $ (48,684)   $  51,202
                      =====================================


    The provision (benefit) for income taxes consisted of:




Years Ended December 31     1999          1998         1997
- ----------------------------------------------------------------
                                         
Current
  Federal              $      10     $  (6,223)   $   7,957
  State                      (59)           75          722
  Foreign                  6,811           150        2,455
Deferred
  Federal and state         (610)      (12,722)       2,736
  Foreign                 (1,129)          671        1,611
                      -------------------------------------------
Income tax
  expense (benefit)    $   5,023     $ (18,049)   $  15,481
                      ===========================================


    Significant components of deferred income tax assets and liabilities were as
follows at December 31:



                                          1999         1998
- ----------------------------------------------------------------
                                            
FEDERAL AND STATE NET DEFERRED
INCOME TAXES

Deferred tax asset
  Reserves and accruals              $   5,357    $   6,103
  Depreciation                              --        4,423
  Compensation and benefit-related
    accruals                             5,238        4,151
  Other temporary differences            1,052        3,604
  NOL and tax credit carryovers         12,232        2,535
                                      ---------------------
  Total                                 23,879       20,816
                                      ---------------------
Deferred tax liability
  Depreciation                          (2,634)          --
  Capitalized molds and tooling           (436)        (782)
                                      ---------------------
  Total                                 (3,070)        (782)
                                      ---------------------
Net deferred tax asset               $  20,809    $  20,034
                                      =====================
FOREIGN NET DEFERRED INCOME TAXES

Deferred tax liability
  Depreciation                       $  (3,626)   $  (4,270)
  Inventory                                 --         (165)
  Other temporary differences              (73)        (229)
                                      ---------------------
  Total                                 (3,699)      (4,664)
                                      ---------------------

Deferred tax asset
  Retirement benefits                      741          710
  Inventory                                622           --
  Other temporary differences              504          343
                                      ---------------------
  Total                                  1,867        1,053
                                      ---------------------
Net deferred tax liability           $  (1,832)   $  (3,611)
                                      =====================


                                                    BMC INDUSTRIES, INC. / 29



    The federal and state net deferred tax asset included a current portion of
$11,588 and $14,603 at December 31, 1999 and 1998, respectively, and a long-term
portion of $9,221 and $5,431 at December 31, 1999 and 1998, respectively. The
foreign net deferred tax liability included a current liability of $(883) and
$63 at December 31, 1999 and 1998, respectively, and a long-term liability of
$2,715 and $3,547 at December 31, 1999 and 1998, respectively.

    Net operating loss carryforwards of $18,367 at December 31, 1999 expire in
2020. General business credit carryforwards of $50 expire in 2020. Foreign tax
credit carryforwards of $4,291 expire in 2003 and 2004. Alternative minimum tax
credits of $881 can be carried forward indefinitely to offset regular tax
liabilities.

    The differences between income taxes at the U.S. federal statutory tax rate
and the effective tax rate were as follows:




Years Ended December 31         1999        1998       1997
- -----------------------------------------------------------
                                            
Statutory rate                35.0%      (35.0)%     35.0%
Differences in taxation
  of foreign earnings          4.8         0.1        2.0
Foreign income taxed
  in the U.S.                 (5.3)       (1.9)      (0.5)
Unfavorable settlement
  of tax audit                 4.8         --          --
State income taxes,
  net of federal benefit      (0.7)       (1.4)       1.3
Change in deferred tax
  valuation allowance           --         --        (7.2)
Other items                    0.5         1.1       (0.4)
                            -------------------------------
Effective tax rate            39.1%      (37.1)%     30.2%
                            ===============================


    Differences in taxation of foreign earnings relate primarily to taxation of
foreign earnings at rates in excess of the U.S. statutory rate. Undistributed
earnings of foreign subsidiaries at December 31, 1999 were approximately
$10,262. No U.S. taxes have been provided on these undistributed earnings
because the Company expects to be able to utilize foreign tax credits to offset
any U.S. tax that would result from their distribution.

    Income taxes (refunded) paid were $(2,489), $(8,571), and $17,447 in 1999,
1998 and 1997, respectively.

13. SEGMENT INFORMATION

    The Company has two operating segments which manufacture and sell a variety
of products: Buckbee-Mears and Optical Products. Buckbee-Mears manufactures
principally aperture masks, photochemically etched fine mesh grids used in the
manufacture of color television tubes and computer monitors. Optical Products
manufactures ophthalmic lenses. Net sales of aperture masks comprised 89%, 86%
and 87% of Buckbee-Mears revenues in 1999, 1998 and 1997, respectively, and 55%,
54% and 61% of the Company's consolidated total revenues in 1999, 1998 and 1997,
respectively.

    The following is a summary of certain financial information relating to the
two segments:

30 / BMC INDUSTRIES, INC.






Years Ended December 31                                                       1999               1998                1997
- ---------------------------------------------------------------------------------------------------------------------------
                                                                                                      
TOTAL REVENUES BY SEGMENT
Buckbee-Mears                                                          $   217,868         $   212,083         $  219,007
Optical Products                                                           135,986             123,055             93,531
                                                                       ----------------------------------------------------
Total Revenues                                                         $   353,854         $   335,138         $  312,538
                                                                       ====================================================
OPERATING PROFIT (LOSS) BY SEGMENT
Buckbee-Mears
Before corporate allocation and impairment charge                      $    23,863         $     1,969         $   41,489
Impairment of long-lived assets                                                 --             (42,800)                --
Less corporate allocation1                                                  (2,183)             (2,522)            (2,314)
                                                                       ----------------------------------------------------
Total                                                                       21,680             (43,353)            39,175
                                                                       ----------------------------------------------------
OPTICAL PRODUCTS
Before corporate allocation and acquired research
  and development charge                                                     5,749              19,678             14,885
Acquired in-process research and development                                    --              (9,500)                --
Less corporate allocation(1)                                                (1,362)             (1,464)              (988)
                                                                       ----------------------------------------------------
Total                                                                        4,387               8,714             13,897
                                                                       ----------------------------------------------------
TOTAL SEGMENT OPERATING PROFIT (LOSS)                                       26,067             (34,639)            53,072
Corporate expense                                                           (1,157)             (1,193)            (1,014)
Interest income (expense), net                                             (13,099)            (13,374)            (1,065)
Other income (expense)                                                       1,036                 522                209
                                                                       ----------------------------------------------------
Earnings (loss) before income taxes                                    $    12,847         $   (48,684)        $   51,202
                                                                       ====================================================
IDENTIFIABLE ASSETS BY SEGMENT
Buckbee-Mears                                                          $   159,431         $   168,540         $  218,988
Optical Products                                                           196,074             206,825             81,834
                                                                       ----------------------------------------------------
Total Identifiable Assets                                                  355,505             375,365            300,822
Corporate and other assets                                                  28,048              24,100             18,585
                                                                       ----------------------------------------------------
Total Assets                                                           $   383,553         $   399,465         $  319,407
                                                                       ====================================================
DEPRECIATION AND AMORTIZATION BY SEGMENT
Buckbee-Mears                                                          $    12,883         $    13,582         $   10,457
Optical Products                                                            10,231               7,215              2,670
Corporate and other                                                            166                 217                222
                                                                       ----------------------------------------------------
Total Depreciation and Amortization                                    $    23,280         $    21,014         $   13,349
                                                                       ====================================================
CAPITAL EXPENDITURES BY SEGMENT
Buckbee-Mears                                                          $     5,556         $     9,764         $   60,605
Optical Products                                                             7,469              11,526             14,397
Corporate and other                                                            132                 137                108
                                                                       ----------------------------------------------------
Total Capital Expenditures                                             $    13,157         $    21,427         $   75,110
                                                                       ====================================================


(1) CORPORATE ALLOCATIONS CONSIST OF ESTIMATED ADMINISTRATIVE EXPENSES
    INCURRED AT THE CORPORATE HEADQUARTERS WHICH PROVIDE DIRECT BENEFIT TO THE
    OPERATING DIVISIONS.

                                                    BMC INDUSTRIES, INC. / 31


    The following is a summary of the Company's operations in different
geographic areas:




Years Ended December 31     1999          1998         1997
- -----------------------------------------------------------------
                                        
TOTAL REVENUES FROM
UNAFFILIATED CUSTOMERS
United States          $ 227,390    $  233,142   $  199,825
Germany                  103,788        94,181      104,384
Other                     22,676         7,815        8,329
                       ------------------------------------------
Total                  $ 353,854    $  335,138   $  312,538
                       ==========================================
LONG-LIVED ASSETS
United States          $ 119,190    $  124,543   $  150,576
Germany                   24,155        30,052       27,178
Other                      7,893         7,999        4,628
                       ------------------------------------------
Total                  $ 151,238    $  162,594   $  182,382
                       ==========================================


    The Company evaluates segment performance based on profit or loss from
operations before interest, other income/expense, taxes and charges for
corporate administration. Revenues by geographic area are based upon revenues
generated from each country's operations. Net sales to unaffiliated foreign
customers from domestic operations (export sales) in 1999, 1998 and 1997 were
$56,893, $40,820 and $47,913, or 16%, 12% and 15%, respectively, of total
revenues. Buckbee-Mears had sales to one customer of $71,303, $51,785 and
$48,963; to another customer of $46,078, $33,801 and $33,336; to a third
customer of $45,077, $56,983 and $62,062; and to a fourth customer of $19,980,
$23,266 and $34,101 in 1999, 1998 and 1997, respectively. Optical Products did
not have sales to any individual customer greater than 10% of total revenues.

14. CONCENTRATIONS OF CREDIT RISK

    Approximately 68% of the trade accounts receivable before allowances
(receivables) of Buckbee-Mears at December 31, 1999 were represented by four
customers. Approximately 49% of the receivables of Optical Products at December
31, 1999 were represented by 20 customers. These 24 customers represented
approximately 59% of the Company's consolidated receivables at December 31,
1999, with one customer of Buckbee-Mears representing approximately 23% of
consolidated receivables.

    Buckbee-Mears customer base consists primarily of the largest television and
computer monitor picture tube manufacturers in the world. Accordingly,
Buckbee-Mears generally does not require collateral and its trade receivables
are unsecured. Optical Products' customer base consists of a wide range of
eyewear retailers and optical laboratories. Optical Products performs detailed
credit evaluations of customers and establishes credit limits as necessary.
Collateral or other security for accounts receivable is obtained as considered
necessary for Optical Products' customers.

15. LEGAL MATTERS

    In January 1995, a U.S. District Court in Miami, Florida, awarded the
Company a $5.1 million judgment against Barth Industries ("Barth") of Cleveland,
Ohio and its parent, Nesco Holdings, Inc. ("Nesco"). In November 1998, the U.S.
Court of Appeals for the Eleventh Circuit dismissed the claims against Nesco and
remanded the case against Barth to the District Court. In November 1999, the
company settled all claims associated with this case upon payment of
approximately $1.3 million from Barth.

    BMC is also a defendant in various other suits, claims and investigations
which arise in the normal course of business. In the opinion of the Company's
management, the ultimate disposition of these matters, including those matters
described above, will not have a material adverse effect on the consolidated
financial position, liquidity or results of operations of the Company.

32 / BMC INDUSTRIES, INC.



PRICE RANGE OF COMMON STOCK

    The Company's common stock is traded on the New York Stock Exchange under
the ticker symbol "BMC". The table below sets forth the high and low reported
sales prices of BMC stock by quarter for the years 1999, 1998 and 1997. At March
24, 2000, there were approximately 1,100 stockholders of record.




                    DIVIDENDS                        PRICE
1997                PER SHARE         HIGH            LOW
- -----------------------------------------------------------------
                                        
First Quarter        $  .0150       $ 34 1/4        $27 5/8
Second Quarter          .0150         35 3/8         24
Third Quarter           .0150         35 3/16        29 3/4
Fourth Quarter          .0150         32 15/16       15 15/16
- -----------------------------------------------------------------
1998

First Quarter        $  .0150       $ 21 1/4       $ 15 13/16
Second Quarter          .0150         20 3/4          7 5/16
Third Quarter           .0150          9 3/16        31 5/16
Fourth Quarter          .0150          7 5/16         4 7/16
- -----------------------------------------------------------------
1999

FIRST QUARTER        $  .0150       $  6 7/16      $  4 3/16
SECOND QUARTER          .0150         11 3/16         4 5/16
THIRD QUARTER           .0150         13 1/4         10 3/8
FOURTH QUARTER          .0150         12 11/16        4 1/2
- -----------------------------------------------------------------


REPORT OF INDEPENDENT AUDITORS

The Board of Directors and Stockholders
BMC Industries, Inc.

    We have audited the accompanying consolidated balance sheets of BMC
Industries, Inc. as of December 31, 1999 and 1998, and the related consolidated
statements of operations, stockholders' equity and cash flows for each of the
three years in the period ended December 31, 1999. 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 in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.

    In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of BMC Industries,
Inc. at December 31, 1999 and 1998, and the consolidated results of its
operations and its cash flows for each of the three years in the period ended
December 31, 1999, in conformity with accounting principles generally accepted
in the United States.

                                                      /s/ Ernst & Young LLP

Minneapolis, Minnesota
January 28, 2000

                                                    BMC INDUSTRIES, INC. / 33



NYSE LISTING

The common shares of BMC Industries, Inc. are traded on the New York Stock
Exchange under the symbol BMC.

ANNUAL MEETING

The annual meeting of stockholders will be held at 10:00 a.m. on Thursday, May
11, 2000, in the North Seminar Room of Atrium Center, 3105 E. 80th Street,
Bloomington, Minnesota. Meeting notices and proxy materials were mailed to all
stockholders of record as of March 24, 2000.

STOCKHOLDERS' REQUESTS FOR INFORMATION

Requests to transfer the Company's shares should be addressed to the Company's
transfer agent and registrar:

Norwest Bank Minnesota, N.A.
Stock Transfer
P.O. Box 738
161 N. Concord Exchange
South St. Paul, MN 55075-0738
Telephone (800) 468-9716
Telefax (651) 450-4078

For other information regarding your stock holdings and a copy of the annual
report to the Securities and Exchange Commission on Form 10-K, please write to:

BMC Industries, Inc.
Investor Relations Department
One Meridian Crossings
Suite 850
Minneapolis, MN 55423

In addition, these and similar reports can be accessed through our web site at
www.bmcind.com.

AUDITORS

Ernst & Young LLP
Minneapolis, Minnesota

CORPORATE HEADQUARTERS

BMC Industries, Inc.
One Meridian Crossings
Suite 850
Minneapolis, MN 55423
Telephone: (952) 851-6000
Fax: (952) 851-6050
Web site: www.bmcind.com

34 / BMC INDUSTRIES, INC.

EX-21.1

                                                                    Exhibit 21.1

                                 SUBSIDIARIES
                                      OF
                             BMC INDUSTRIES, INC.



1.    Buckbee-Mears Europe GmbH
2.    BMC Industries Foreign Sales Corporation
3.    Buckbee-Mears Hungary Kft.
4.    Vision-Ease Lens, Inc.
5.    Vision-Ease Lens Azusa, Inc.
6.    Vision-Ease Europe Limited
7.    Vision-Ease Canada, Ltd.
8.    P. T. Vision-Ease Asia, joint venture with P.T. Astron Lensindo Nusa
9.    Buckbee-Mears Holding Company B.V.
10.   Buckbee-Mears European Holding Company B.V.
11.   Buckbee-Mears Deutschland Holding GmbH
12.   Vision-Ease France SAS
13.   Vision-Ease Deutschland GmbH

EX-23.1

                         CONSENT OF INDEPENDENT AUDITORS







We consent to the incorporation by reference in this Annual Report (Form 10-K)
of BMC Industries, Inc. of our report dated January 28, 2000, included in the
1999 Annual Report to Stockholders of BMC Industries, Inc.

Our audits also included the financial statement schedule of BMC Industries,
Inc. listed in Item 14(a). This schedule is the responsibility of the Company's
management. Our responsibility is to express an opinion based on our audits. In
our opinion, the financial statement schedule referred to above, when considered
in relation to the basic financial statements taken as a whole, presents fairly
in all material respects the information set forth therein.

We also consent to the incorporation by reference in the Registration Statements
(Form S-8, No. 33-2613, No. 33-32389 and No. 33-60937) pertaining to the BMC
Industries, Inc. 1984 Omnibus Stock Program and in the Registration Statement
(Form S-8 No. 33-55089) pertaining to the BMC Industries, Inc. 1994 Stock
Incentive Plan and the related Prospectuses of our report dated January 28, 2000
with respect to the consolidated financial statements incorporated herein by
reference, and our report included in the preceding paragraph with respect to
the financial statement schedule included in this Annual Report (Form 10-K) of
BMC Industries, Inc.

                                              /s/ Ernst & Young LLP

Minneapolis, Minnesota
March 30, 2000

EX-27

 


<ARTICLE> 5
<CIK> 0000215310
<NAME> BMC INDUSTRIES, INC.
<MULTIPLIER> 1,000

                             
<PERIOD-TYPE>                   YEAR
<FISCAL-YEAR-END>                          DEC-31-1999
<PERIOD-START>                             JAN-01-1999
<PERIOD-END>                               DEC-31-1999
<CASH>                                           1,145
<SECURITIES>                                         1
<RECEIVABLES>                                   45,399
<ALLOWANCES>                                     3,374
<INVENTORY>                                     82,312
<CURRENT-ASSETS>                               149,651
<PP&E>                                         278,807
<DEPRECIATION>                                 127,569
<TOTAL-ASSETS>                                 383,553
<CURRENT-LIABILITIES>                           59,935
<BONDS>                                              0
<PREFERRED-MANDATORY>                                0
<PREFERRED>                                          0
<COMMON>                                        49,077
<OTHER-SE>                                      87,345
<TOTAL-LIABILITY-AND-EQUITY>                   383,553
<SALES>                                        353,854
<TOTAL-REVENUES>                               353,854
<CGS>                                          305,592
<TOTAL-COSTS>                                   23,352
<OTHER-EXPENSES>                               (1,036)
<LOSS-PROVISION>                                     0
<INTEREST-EXPENSE>                              13,376
<INCOME-PRETAX>                                 12,847
<INCOME-TAX>                                     5,023
<INCOME-CONTINUING>                              7,824
<DISCONTINUED>                                       0
<EXTRAORDINARY>                                      0
<CHANGES>                                            0
<NET-INCOME>                                     7,824
<EPS-BASIC>                                       0.29
<EPS-DILUTED>                                     0.28


 

EX-99.1

                                                                    EXHIBIT 99.1



Contact:  Jeffrey J. Hattara                 (NYSE-BMC)
          (612)851-6030                      FOR IMMEDIATE RELEASE


                        BMC ANNOUNCES QUARTERLY DIVIDEND


December 10, 1999 -- Minneapolis, Minnesota - BMC Industries, Inc. today
announced that its Board of Directors has approved a continuation of its
quarterly cash dividend of $.015 per share.

Shareholders of record as of December 22, 1999 will receive a dividend of $.015
for each share owned on that date, to be paid on January 5, 2000.

BMC Industries, Inc. is one of the world's largest manufacturers of aperture
masks for color picture tubes used in televisions and computer monitors. The
Company is also a leading producer of polycarbonate, glass and plastic eyewear
lenses. BMC's common stock is traded on the New York Stock Exchange under the
symbol BMC.


                                      -30-

EX-99.2

                                                                    EXHIBIT 99.2



CONTACT:  Jeffrey J. Hattara        (NYSE-BMC)
          (612) 851-6030            FOR IMMEDIATE RELEASE


               BMC REPORTS RESULTS FOR THE YEAR AND QUARTER ENDED
                               DECEMBER 31, 1999


February 1, 2000 - Minneapolis, MN - Today, BMC Industries, Inc. reported an
overall increase in annual revenues and net income. For the year ended December
31, 1999, BMC revenues increased $18.7 million to $353.9 million, compared with
$335.1 million in 1998. Net income for the year was $7.8 million, or $0.28 per
diluted share, compared with a loss of $30.6 million, or ($1.13) per diluted
share in 1998.

For the quarter ended December 31, 1999, BMC revenues increased $6.0 million to
$87.5 million, as compared to $81.5 million in fourth quarter 1998. Total fourth
quarter 1999 income from operations was $2.5 million versus $10.9 million in
fourth quarter 1998. BMC reported breakeven performance, or $0.00 per diluted
share, for fourth quarter 1999, compared to net income of $4.7 million, or $0.17
per diluted share, for the fourth quarter of 1998.

Paul B. Burke, BMC's Chairman and Chief Executive Officer, stated: "Our
Precision Imaged Products group continued its solid progress in the fourth
quarter, with a 13% increase in revenues from fourth quarter 1998. PIP finished
the year on a positive note with increased revenues and earnings resulting from
strong manufacturing performance at both mask facilities. In addition, BMC
continued to reduce its debt while furthering its investment in strategic
initiatives intended to optimize operating performance and growth."

Mr. Burke continued: "The costs associated with implementing several initiatives
aimed at renewing Vision-Ease's growth in sales and earnings negatively affected
Vision-Ease's fourth quarter performance. These initiatives included
polycarbonate marketing and manufacturing process improvements, restructuring
the organization and the acceleration of the movement of production to low cost
locations. We expect a favorable impact from these initiatives in 2000."


                                     -more-


For the full year, BMC's Optical Products ("Vision-Ease") sales grew $12.9
million, or 11%, from $123.1 million in 1998 to $136.0 million in 1999.
Operating earnings for 1999 were $5.7 million, as compared to $10.2 million in
1998.

BMC's Optical Products group generated sales of $29.2 million in the fourth
quarter of 1999, down 3%, or $0.8 million, from the prior year quarter.
Continued softness in the retail optical market, product transition issues and
highly competitive promotional practices favoring two-for-one low-end lens
products affected fourth quarter earnings. Sales of high-end products
(polycarbonate, progressive and polarizing sun lenses) increased 2% in fourth
quarter 1999 from the prior year quarter and accounted for 54% of total fourth
quarter 1999 Optical Products revenues, compared to 52% in fourth quarter 1998.
Consistent with management expectations, revenue from glass lenses was flat and
revenue from plastic lenses declined quarter-over-quarter.

Several factors contributed to the unfavorable change in Optical Products
earnings during the quarter. These factors included lower sales during the
quarter, increased unit product costs primarily due to reduced production
volumes, additional inventory write-offs, absorption of abnormally high
year-to-date production cost from inventory sold, and product discontinuances
and phase-outs related to product line integration.

During the quarter, Vision-Ease stepped up its European expansion efforts by
establishing a processing laboratory in Germany intended to serve our growing
European retail customer base. In addition, the progressive lens, Outlook-TM-,
made positive inroads into the higher margin progressive lens market. Major
customer acceptance of Outlook-TM- translated into a 24% increase in sales from
third quarter 1999. Both of these growth initiatives are expected to have a
significant impact on sales and earnings in 2000 and beyond.

Fourth quarter revenues from the Precision Imaged Products group ("PIP", which
includes both the Mask Operations and Buckbee-Mears St. Paul "BMSP") increased
13% to $58.3 million in 1999, as compared to $51.5 million in 1998.

Sales of computer monitor masks increased 38% in fourth quarter 1999 as compared
to fourth quarter 1998. Incremental revenue from the Cortland monitor mask line
(restarted in first quarter 1999) and a continued migration to larger-sized
monitor masks contributed to this increase. Sales of jumbo entertainment masks
in fourth quarter 1999 increased 35% as compared to the prior year quarter. PIP
experienced a slight decrease in sales of other entertainment masks,
particularly sales of AK steel masks and lower revenues from its BMSP operation.

For the full year, PIP sales grew from $212.1 million in 1998 to $217.9 million
in 1999, a 3.0% increase. Operating earnings for the year increased
substantially from a loss of $40.8 million in 1998 to earnings of $23.9 million
in 1999. Improved product mix and strong performances by both mask manufacturing
facilities caused PIP's operating earnings to increase over the prior year
quarter.


                                     -more-


During the fourth quarter, BMC favorably settled a claim against Barth
Industries for approximately $1 million. The benefit of this gain is included as
other income on the consolidated income statement. The Company's higher fourth
quarter tax rate is attributable to an increased percentage of earnings from the
Company's foreign operations, which are taxed at a higher rate than domestically
generated earnings.

This press release contains forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934 that are intended to be covered by the safe harbors created
thereby. Statements made in this press release which are not strictly
historical, including statements regarding future performance, are
forward-looking statements and as such are subject to a number of risks and
uncertainties, including, among others, ability to implement the Optical
Products group's initiatives in strategic polycarbonate marketing and
manufacturing adjustments; ability to grow European sales through the operation
of processing laboratories; lower demand for televisions, computer monitors and
ophthalmic lenses; further mask and ophthalmic lens price declines and
imbalances of supply and demand; customer product qualifications; liability and
other claims asserted against the Company; continued slowdown at BMSP; ability
to partner with new BMSP customers or transition development relationships into
full scale production; new product development, introduction and acceptance,
including the roll out of the polycarbonate wafer lamination system; cost
reduction and reorganization efforts; continued higher manufacturing costs;
adjustments to inventory valuations; negative foreign currency fluctuations,
including adverse fluctuations affecting cross-currency swaps; ability to
recruit and retain key personnel; the impact of Y2K information systems issues;
the effect of the economic uncertainty in Asia; and a potential economic
slowdown in other parts of the world. Certain of these and other risks and
uncertainties are discussed in further detail in BMC's Annual Report and Form
10-K for the year ended December 31, 1998 and other documents filed with the
Securities and Exchange Commission.

BMC Industries, Inc. is a leading producer of polycarbonate, glass and plastic
eyewear lenses. BMC is also one of the world's largest manufacturers of aperture
masks for color picture tubes used in televisions and computer monitors. BMC's
common stock is traded on the New York Stock Exchange under the symbol BMC. For
more information about BMC Industries, Inc., visit the companies website:
www.bmcind.com.


                                     -more-


                              BMC INDUSTRIES, INC.

                  CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
                                   (Unaudited)
                    (in thousands, except per share amounts)



                                                                Three Months Ended                     Year Ended
                                                                    December 31                        December 31
                                                          ---------------------------------------------------------------------
                                                                   1999              1998            1999              1998
- -------------------------------------------------------------------------------------------------------------------------------
                                                                                                   
Revenues                                                    $    87,549       $    81,529    $    353,854      $    335,138
Cost of products sold                                            79,577            65,818         305,592           297,995
- -------------------------------------------------------------------------------------------------------------------------------
Gross Margin                                                      7,972            15,711          48,262            37,143
Selling                                                           4,498             3,748          18,650            15,496
Administrative                                                      990             1,107           4,702             5,179
Impairment of long-lived assets                                       -                 -               -            42,800
Acquired research and development                                     -                 -               -             9,500
- -------------------------------------------------------------------------------------------------------------------------------
Income (Loss) from Operations                                     2,484            10,856          24,910           (35,832)
- -------------------------------------------------------------------------------------------------------------------------------
Other Income and (Expense)
     Interest expense                                            (3,238)           (3,887)        (13,376)          (13,537)
     Interest income                                                122                64             277               163
     Other income (expense)                                       1,466             1,454           1,036               522
- -------------------------------------------------------------------------------------------------------------------------------
Earnings (Loss) Before Income Taxes                                 834             8,487          12,847           (48,684)
Income Taxes                                                        782             3,810           5,023           (18,049)
- -------------------------------------------------------------------------------------------------------------------------------

Net Earnings (Loss)                                         $        52       $     4,677    $      7,824      $    (30,635)
===============================================================================================================================

Net Earnings (Loss) Per Share:
     Basic                                                         0.00              0.17            0.29             (1.13)
     Diluted                                                $      0.00       $      0.17    $       0.28      $      (1.13)
===============================================================================================================================

Number of Shares Included in Per Share Computation:
     Basic                                                       27,370            27,169          27,299             27,014
     Diluted                                                     27,668            27,405          27,710             27,014
===============================================================================================================================



                                               -more-


                              BMC INDUSTRIES, INC.

                      CONDENSED CONSOLIDATED BALANCE SHEETS
                                   (Unaudited)
                                 (in thousands)



- ---------------------------------------------------------------------------------------------------------------------------
                                                                                   DECEMBER 31                DECEMBER 31
                                                                                          1999                        1998
- ---------------------------------------------------------------------------------------------------------------------------
                                                                                               
ASSETS
Cash and cash equivalents                                                    $            1,146      $              1,028
Trade accounts receivable, net                                                           42,025                    39,163
Inventories                                                                              82,312                    82,853
Deferred income taxes                                                                    11,588                    14,603
Other current assets                                                                     12,580                    14,347
- ---------------------------------------------------------------------------------------------------------------------------
     Total Current Assets                                                               149,651                   151,994
- ---------------------------------------------------------------------------------------------------------------------------

Property, plant and equipment                                                           278,807                   276,630
Less accumulated depreciation                                                           127,569                   114,036
- ---------------------------------------------------------------------------------------------------------------------------
     Property, plant and equipment, net                                                 151,238                   162,594
- ---------------------------------------------------------------------------------------------------------------------------
Deferred income taxes                                                                     9,221                     5,431
Intangibles and other assets, net                                                        73,443                    79,446
- ---------------------------------------------------------------------------------------------------------------------------

TOTAL ASSETS                                                                 $          383,553      $            399,465
===========================================================================================================================

LIABILITIES AND STOCKHOLDERS' EQUITY
- ---------------------------------------------------------------------------------------------------------------------------

Short-term borrowings                                                        $            2,303      $              1,929
Accounts payable                                                                         30,342                    28,315
Income taxes payable                                                                      8,093                     3,375
Accrued expenses and other current liabilities                                           19,197                    23,404
- ---------------------------------------------------------------------------------------------------------------------------
     Total Current Liabilities                                                           59,935                    57,023
- ---------------------------------------------------------------------------------------------------------------------------

Long-term debt                                                                          165,959                   187,266
Other liabilities                                                                        18,522                    18,372
Deferred income taxes                                                                     2,715                     3,547

Stockholders' equity
     Common stock                                                                        49,077                    47,714
     Retained earnings                                                                   92,620                    86,436
     Accumulated other comprehensive income                                              (3,495)                    1,113
     Other                                                                               (1,780)                   (2,006)
- ---------------------------------------------------------------------------------------------------------------------------
         TOTAL STOCKHOLDERS' EQUITY                                                     136,422                   133,257
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                                   $          383,553      $            399,465
===========================================================================================================================



                                     -more-


                              BMC INDUSTRIES, INC.

                               SEGMENT INFORMATION
                                   (Unaudited)
                                 (in thousands)



                                                                       Three Months Ended December 31
                           ---------------------------------------------------------------------------------------------------------
                           Precision Imaged Products                   Optical Products                      Consolidated
                           ---------------------------------------------------------------------------------------------------------
                                   1999              1998               1999               1998               1999            1998
- ------------------------------------------------------------------------------------------------------------------------------------
                                                                                                      
Revenues                   $     58,337     $      51,522      $      29,212      $      30,007      $      87,549      $   81,529
Cost of products sold            49,892            44,111             29,685             21,707             79,577          65,818
- ------------------------------------------------------------------------------------------------------------------------------------
Gross margin                      8,445             7,411               (473)             8,300              7,972          15,711
Gross margin %                     14.5%             14.4%              (1.6)%             27.7%               9.1%           19.3%
Selling                           1,176               829              3,322              2,919              4,498           3,748
Unallocated corporate
  administration                      -                 -                  -                  -                990           1,107
- ------------------------------------------------------------------------------------------------------------------------------------
Income (loss) from
  operations               $      7,269     $       6,582      $      (3,795)     $       5,381      $       2,484      $   10,856
====================================================================================================================================

Operating income %                 12.5%             12.8%             (13.0)%             17.9%               2.8%           13.3%

Capital spending                                                                                     $       4,099      $    3,225

Depreciation and
  amortization                                                                                       $       6,334      $    5,249

EBITDA                                                                                               $      10,284      $   17,559*

EBITDA %                                                                                                      11.7%           21.5%


*Includes $2.5 million of non-operating items.


                                      -30-

EX-99.3

                                                                    EXHIBIT 99.3



Contact:  Jeffrey J. Hattara                 (NYSE-BMC)
          (612)851-6030                      FOR IMMEDIATE RELEASE


                        BMC ANNOUNCES QUARTERLY DIVIDEND


March 9, 2000 -- Minneapolis, Minnesota - BMC Industries, Inc. today announced
that its Board of Directors has approved a continuation of its quarterly cash
dividend of $.015 per share.

Shareholders of record as of March 22, 2000 will receive a dividend of $.015 for
each share owned on that date, to be paid on April 5, 2000.

BMC Industries, Inc. is one of the world's largest manufacturers of aperture
masks for color picture tubes used in televisions and computer monitors. The
Company is also a leading producer of polycarbonate, glass and plastic eyewear
lenses. BMC's common stock is traded on the New York Stock Exchange under the
symbol BMC.


                                      -30-

EX-99.4

                                                                    EXHIBIT 99.4



Contact:  Jeffrey J. Hattara                 (NYSE-BMC)
          (612) 851-6030                     FOR IMMEDIATE RELEASE




              BMC INDUSTRIES, INC. ANNOUNCES ACQUISITION OF FRENCH
                                   LABORATORY


March 10, 2000 - Minneapolis, Minnesota - BMC Industries, Inc. through its
Vision-Ease Lens subsidiary today announced its purchase of La Haute Lunette De
Paris SA (HLP), an optical lens laboratory located outside Paris, France. HLP
processes lenses in all materials, but specializes in polycarbonate eyewear
lenses. The lab will operate under the name Vision-Ease France SAS.

Paul B. Burke, BMC's Chairman and Chief Executive Officer said "The addition of
HLP to our existing lab in Germany gives us the basic infrastructure we need to
drive polycarbonate growth in Western Europe. With specialized polycarbonate
lens product processing capabilities, we can support the efforts of major
European optical retailers anxious to introduce or expand sales of polycarbonate
lenses."

BMC Industries, Inc. is a leading producer of polycarbonate, glass and plastic
eyewear lenses. BMC is also one of the world's largest manufacturers of aperture
masks for color picture tubes used in televisions and computer monitors. BMC's
common stock is traded on the New York Stock Exchange under the symbol BMC. The
Company's web site can be accessed at www.bmcind.com.


                                      -30-

EX-99.5

                                                                    EXHIBIT 99.5



Contact:   Jeffrey J. Hattara                (NYSE-BMC)
          (612) 851-6030                     FOR IMMEDIATE RELEASE



              BMC INDUSTRIES, INC. ANNOUNCES REORGANIZATION OF ITS
                        PRECISION IMAGED PRODUCTS GROUP


March 10, 2000 - Minneapolis, Minnesota - BMC Industries, Inc. today announced
the reorganization of its Precision Imaged Products group's two operating units,
Mask Operations and Buckbee-Mears St. Paul. These two business units have been
combined into one integrated leadership and operational team under the name
Buckbee-Mears. This group will be led by Benoit Pouliquen, President and Chief
Operating Officer of BMC.

Paul B. Burke, BMC's Chairman and Chief Executive Officer said, "The mask
business and Buckbee-Mears St. Paul share core technologies that can be
leveraged into new product opportunities. We believe that by combining the high
volume production capabilities derived from the mask business with the market
access and value-added processes of Buckbee-Mears St. Paul, we can dramatically
grow and diversify our revenue and profit stream. This will also allow us to
more rapidly realize the benefits of the significant individual and partnership
development efforts currently underway."

BMC Industries, Inc. is a leading producer of polycarbonate, glass and plastic
eyewear lenses. BMC is also one of the world's largest manufacturers of aperture
masks for color picture tubes used in televisions and computer monitors. BMC's
common stock is traded on the New York Stock Exchange under the symbol BMC. The
Company's web site can be accessed at www.bmcind.com.


                                      -30-