-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, IJW6Mp82+EJ4aroLUtFfS4evA9A/ksZotQUU+fW31in4CgPAbCXZ+16eOBFcojyR zW5KChNdALGBUvLNF57ZYg== 0000927016-98-004012.txt : 19981116 0000927016-98-004012.hdr.sgml : 19981116 ACCESSION NUMBER: 0000927016-98-004012 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19980930 FILED AS OF DATE: 19981113 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SIGHT RESOURCE CORP CENTRAL INDEX KEY: 0000895651 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-HEALTH SERVICES [8000] IRS NUMBER: 043181524 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-21068 FILM NUMBER: 98747291 BUSINESS ADDRESS: STREET 1: 100 JEFFREY AVENUE CITY: HOLLISTON STATE: MA ZIP: 01746 BUSINESS PHONE: 5084296916 MAIL ADDRESS: STREET 1: 100 JEFFREY AVENUE CITY: HOLLISTON STATE: MA ZIP: 01746 FORMER COMPANY: FORMER CONFORMED NAME: NEWVISION TECHNOLOGY INC DATE OF NAME CHANGE: 19940224 10-Q 1 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For Quarterly Period Ended September 30, 1998 Commission File Number 0-21068 ------------------ ------- SIGHT RESOURCE CORPORATION - -------------------------------------------------------------------------------- (Exact name of Registrant as specified in its charter) Delaware 04-3181524 - -------------------------------------------------------------------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 100 Jeffrey Avenue Holliston, MA 01746 - -------------------------------------------------------------------------------- (Address of principal executive offices) 508-429-6916 - -------------------------------------------------------------------------------- (Issuer's telephone number) N/A - -------------------------------------------------------------------------------- (Former name, former address and former fiscal year, if changed since the last report) Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12 months (or for such shorter period that the issuer was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ------ ------ APPLICABLE ONLY TO CORPORATE ISSUERS: State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date: On November 6, 1998, 8,905,730 shares of common stock, par value $0.01 per share, were outstanding. TOTAL PAGES 17 EXHIBIT INDEX AT PAGE 16 1 SIGHT RESOURCE CORPORATION INDEX
PAGE ---- PART I. FINANCIAL INFORMATION Item 1 Financial Statements Consolidated Balance Sheets as of September 30, 1998 and December 31, 1997 3 Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 1998 and 1997 4 Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 1998 and 1997 5 Notes to Consolidated Financial Statements 6 Item 2 Management's Discussion and Analysis of Financial Condition and Results of Operations 11 PART II. OTHER INFORMATION Item 2 Changes in Securities and Use of Proceeds 16 Item 6 Exhibits and Reports on Form 8-K 16 Signatures 17
2 PART I. FINANCIAL INFORMATION Item 1. Financial Statements SIGHT RESOURCE CORPORATION Consolidated Balance Sheets (In thousands, except share and per share data)
September 30, December 31, 1998 1997 ------------- -------------- ASSETS (unaudited) Current assets: Cash and cash equivalents $ 1,570 $ 6,076 Accounts receivable, net of allowance of $410 and $478, respectively 3,320 1,781 Inventories 4,478 4,434 Prepaid expenses and other current assets 170 377 ------------- -------------- Total current assets 9,538 12,668 ------------- -------------- Property and equipment 12,830 10,070 Less accumulated depreciation (6,610) (4,406) ------------- -------------- Net property and equipment 6,220 5,664 ------------- -------------- Other assets: Intangible assets, net 16,954 14,898 Other assets 1,181 1,277 ------------- -------------- Total other assets 18,135 16,175 ------------- -------------- $33,893 $ 34,507 ============= ============== LIABILITIES & STOCKHOLDERS' EQUITY Current liabilities: Current portion of long term debt $ 117 $ 1,000 Accounts payable 2,178 1,797 Accrued expenses 4,635 5,628 ------------- -------------- Total current liabilities 6,930 8,425 ------------- -------------- Non-current liabilities: Long term debt, less current 175 --- maturities Other liabilities 94 101 ------------- -------------- Total non-current liabilities 269 101 ------------- -------------- Redeemable convertible preferred stock 1,452,119 shares issued 6,535 6,535 Stockholders' equity: Preferred Stock, $.01 par value. Authorized 5,000,000 shares; no shares issued and outstanding. --- --- Common Stock, $.01 par value. Authorized 20,000,000 shares; issued 8,905,730 at September 30, 1998 and 8,756,500 at December 31, 1997. 90 88 Additional paid-in capital 36,807 36,329 Common stock issuable, 71,181 shares at September 30, 1998 and December 31, 1997 432 432 Treasury stock at cost (30,600 shares in 1998 and 1997) (137) (137) Accumulated deficit (17,033) (17,266) ------------- -------------- Total stockholders' equity 20,159 19,446 ------------- -------------- $33,893 $ 34,507 ============= ==============
See accompanying notes to consolidated financial statements. 3 SIGHT RESOURCE CORPORATION Consolidated Statements of Operations (In thousands, except share and per share data)
Three Months Ended Nine Months Ended -------------------------------------------------------------------------- September 30, September 30, September 30, September 30, 1998 1997 1998 1997 -------------------------------------------------------------------------- (unaudited) Net revenue $ 14,299 $ 12,674 $ 42,377 $ 33,141 Cost of revenue 4,877 4,463 14,700 12,058 ------------- ------------- ------------- ------------- Gross profit 9,422 8,211 27,677 21,083 Selling, general and administrative expenses 9,265 8,364 27,471 22,102 ------------- ------------- ------------- ------------- Income (loss) from operations 157 (153) 206 (1,019) ------------- ------------- ------------- ------------- Other income (expense) Interest income 34 69 162 292 Interest expense (45) (89) (141) (261) Gain on sale of assets - 251 69 474 ------------- ------------- ------------- ------------- Total other income (11) 231 90 505 ------------- ------------- ------------- ------------- Income (loss) before income tax expense 146 78 296 (514) Income tax expense 3 - 63 - ------------- ------------- ------------- ------------- Net income (loss) $ 143 $ 78 $ 233 ($514) ============= ============= ============= ============= Net earnings (loss) per common share: Basic $ 0.02 $ 0.01 $ 0.03 ($0.06) ============= ============= ============= ============= Diluted $ 0.01 $ 0.01 $ 0.02 ($0.06) ============= ============= ============= ============= Number of shares used to compute net earnings per common share: Basic 8,890,000 8,782,000 8,853,000 8,639,000 ============= ============= ============= ============= Diluted 10,380,000 8,782,000 10,352,000 8,639,000 ============= ============= ============= =============
See accompanying notes to consolidated financial statements. 4 SIGHT RESOURCE CORPORATION Consolidated Statements of Cash Flows (In thousands)
Nine Months Ended September 30, September 30, 1998 1997 -------------------------------------------- (unaudited) Operating activities: Net income (loss) $ 233 ($514) Adjustments to reconcile net income (loss) to net cash used in operating activities: Depreciation and amortization 1,952 1,482 Gain on sale of assets (69) (474) Changes in operating assets and liabilities: Accounts receivable (1,408) (590) Inventories 270 (727) Prepaid expenses and other current assets 176 (530) Accounts payable and accrued expenses (1,350) (527) ------------- ------------- Net cash used in operating activities (196) (1,880) ------------- ------------- Investing activities: Purchases of property and equipment (1,183) (1,284) Payments for acquisitions (2,351) (2,075) Proceeds from sale of assets 112 1,005 Other assets 48 (430) ------------- ------------- Net cash used in investing activities (3,374) (2,784) ------------- ------------- Financing activities: Principal payments on long term debt (1,058) (1,279) Other liabilities (7) 39 Proceeds from issuance of stock 129 --- Purchase of common stock for treasury --- (137) ------------- ------------- Net cash used in financing activities (936) (1,377) ------------- ------------- Net decrease in cash and cash equivalents (4,506) (6,041) Cash and cash equivalents, beginning of period 6,076 9,924 ------------- ------------- Cash and cash equivalents, end of period $ 1,570 $ 3,883 ============= =============
See accompanying notes to consolidated financial statements. 5 SIGHT RESOURCE CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA) (1) THE COMPANY (a) Nature of Business Sight Resource Corporation (the "Company") manufactures, distributes and sells eyewear and related products and services. (b) Acquisitions Effective July 1, 1997, the Company acquired one hundred percent of the outstanding shares of stock of Vision Holdings, Ltd. (formerly known as Dr. Greenberg, an Optometry Corporation d/b/a Vision Plaza) ("Vision Plaza")). The purchase price paid in connection with this acquisition was $2,000 in cash and the assumption and repayment of notes payable outstanding as of July 1, 1997 of approximately $800. As of December 31, 1997, Vision Plaza operated 17 eye care centers in southeast Louisiana and Mississippi. The acquisition was accounted for using the purchase method of accounting. Effective April 1, 1998, the Company acquired one hundred percent of the outstanding shares of stock of Eye Glass Emporium, Inc. ("Eyeglass Emporium"). The purchase price paid in connection with this acquisition was $2,309 of cash on hand, $350 in notes payable in twelve equal quarterly installments commencing June 30, 1998, and 87,940 shares of common stock. As of April 1, 1998, Eyeglass Emporium operated nine eye care centers in Indiana. The acquisition was accounted for using the purchase method of accounting. The results of operations of the acquisitions have been included in the consolidated financial statements from their respective dates of acquisition. The excess of the purchase price and expenses associated with each acquisition over the estimated fair value of the net assets acquired has been recorded as goodwill. As a result of the acquisition, the Company has also recorded adjustments to increase liabilities and establish reserves for the closing of stores and related restructuring costs, including lease commitments and severance costs. Total acquisition related reserves at September 30, 1998 and December 31, 1997 were $1,350 and $1,420, respectively. 6 SIGHT RESOURCE CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA) (2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (a) Basis of Presentation The accompanying consolidated financial statements have been prepared by the Company without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. In the opinion of the Company, these consolidated financial statements contain all adjustments (consisting of only normal, recurring adjustments) necessary to present fairly the financial position of Sight Resource Corporation as of September 30, 1998 and the results of its operations and cash flows for the periods presented. The accompanying consolidated financial statements and related notes should be read in conjunction with the audited consolidated financial statements which are contained in the Company's Annual Report on Form 10-K for the year ended December 31, 1997. (b) Principles of Consolidation The accompanying consolidated financial statements include the accounts of the Company, its wholly-owned subsidiaries and three professional corporations ("PC's") in which the Company's subsidiaries assume the financial risks and rewards of such entities through a management contract and a stock agreement. The Company has no direct equity ownership in the PC's. All significant intercompany balances and transactions have been eliminated. In preparation of these consolidated financial statements in conformity with generally accepted accounting principles, management of the Company has made estimates and assumptions that affect the reported amounts of assets and liabilities, such as accounts receivable, inventory, impairment of property and equipment, and intangibles. Actual results could differ from those estimates. (c) Revenue Recognition Revenue and the related costs from the sale of eyewear are recognized at the time an order is complete. Revenue from eye care services is recognized when the service is performed. The Company has fee for service arrangements with all of its third party payors. Revenue is reported net of contractual allowances. 7 SIGHT RESOURCE CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA) Contractual allowances are estimated in the period the related services are rendered and adjusted in future periods as final settlements are determined. The provision and related allowance are adjusted periodically, based upon an evaluation of historical collection experience, industry reimbursement trends and other relevant factors. The Company has not had any material settlements with third-party payors nor is it aware of any material claims, disputes or unsettled matters with any third-party payor. Under revenue sharing arrangements for refractive surgery where the Company is not responsible for patient billing, the Company receives a specified payment from the hospital or center for each refractive surgical procedure performed. Accordingly, the Company recognizes revenue on a per procedure basis at the time procedures are performed. Under existing revenue-sharing arrangements for refractive surgery where the Company is responsible for the collection from the patient and payment to the ophthalmologist and other operating costs, the total patient charge is recorded as revenue with the corresponding expenses recorded in cost of revenue. (d)Inventories Inventories primarily consist of the costs of eyeglass frames, contact lenses, ophthalmic lenses, sunglasses and other optical products and are valued at the lower of cost (using the first-in, first-out method) or market. (e)Property and Equipment Property and equipment is stated at cost. The Company provides for depreciation at the time the property and equipment is placed in service. The straight-line method is used over the estimated useful life of the assets. The Company assesses the recoverability of the undepreciated property and equipment on an ongoing basis by comparing anticipated profits and future, undiscounted cash flows to net book value. In performing this analysis, management considers such factors as current results, trends, and future prospects, in addition to other economic factors. (f) Intangible Assets Intangible assets resulting from the business acquisitions consist of patient lists, trademarks, non-compete agreements and the excess cost of the acquisition over the fair value of the net assets acquired (goodwill). Certain values assigned are based upon independent appraisals and are amortized on a straight- line basis over a period of 5 to 25 years. The Company assesses the recoverability of unamortized intangible assets on an ongoing basis by comparing anticipated operating profits and future, undiscounted cash flows to net book value. If anticipated operating profits and future, undiscounted cash flows are less than net book value, then an impairment charge is recorded to reduce the carrying value of the assets to fair value. In performing this analysis, management considers such factors as current results, trends, and future prospects, in addition to other economic factors. (g) Deferred Revenue The Company offers a contact lens purchasing program in which, for a set fee, customers may purchase contacts at discounted rates for a 12 month period. The 8 SIGHT RESOURCE CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA) Company recognizes revenue from the sales of its contact lens purchasing program on a monthly basis over the life of the program. (h) Net Earnings (Loss) Per Share Earnings per share are computed based on Statement of Financial Accounting Standards No. 128 "Earnings per Share" ("SFAS 128"). SFAS 128 requires presentation of basic earnings per share ("Basic EPS") and diluted earnings per share ("Diluted EPS") by all entities that have publicly traded common stock or potential common stock (options, warrants, convertible securities or contingent stock arrangements). Basic EPS is computed by dividing income available to common stockholders by the weighted average number of common shares outstanding during the period. The computation of Diluted EPS does not assume conversion, exercise or contingent exercise of securities that would have an antidilutive effect on earnings. The following table provides a reconciliation of the numerators and denominators of the basic and diluted earnings (loss) per share computations for the three and nine months ended September 30, 1998 and 1997:
Three Months Ended Nine Months Ended September 30, September 30, 1998 1997 1998 1997 ------------- ---------- ----------- --------- BASIC INCOME (LOSS) PER SHARE Net income (loss) 143 78 233 (514) ------------- ---------- ----------- --------- Net income (loss) available to common shareholders 143 78 233 (514) ============= ========== =========== ========= Weighted average common shares outstanding 8,890,000 8,782,000 8,853,000 8,639,000 Net income (loss) per share $ 0.02 $ 0.01 $ 0.03 ($0.06) ============= ========== =========== ========= DILUTED INCOME PER SHARE Net income 143 78 233 (514) ------------- ---------- ----------- --------- Net income available to common shareholders 143 78 233 (514) ============= ========== =========== ========= Weighted average common shares outstanding 8,890,000 8,782,000 8,853,000 8,639,000 Convertible preferred stock 1,452,000 - 1,452,000 - Options 38,000 - 47,000 - ------------- ---------- ----------- --------- Weighted average common shares outstanding and potential shares 10,380,000 8,782,000 10,352,000 8,639,000 ============= ========== =========== ========= Net income per share $ 0.01 $ 0.01 $ 0.02 ($0.06) ============= ========== =========== =========
9 SIGHT RESOURCE CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA) (3) DEBT Debt consists of the following:
SEPTEMBER 30, DECEMBER 31, 1998 1997 ------------- ------------ Unsecured note payable, 7% interest rate, payable in equal quarterly installments of $29 principal plus accrued interest $ 292 $ - Unsecured notes payable, 7% interest rate, $1,000 paid on March 18, 1998; due on demand if the Company's cash balance is less than $2,800 - 1,000 ------------- ------------ 292 1,000 Less current maturities 117 1,000 ------------- ------------ Long term debt, less current maturities $ 175 $ - ============= ============
On February 20, 1997, the Company entered into a Credit Agreement (the "Agreement") with a bank pursuant to which the Company can borrow $5,000 on a term loan basis and $5,000 on a revolving credit basis, subject to certain performance criteria. The performance criteria include, among others, financial condition covenants such as rolling EBITDA levels, indebtedness to EBITDA ratios, current ratio of 1:1 and minimum net worth requirements. The term loan facility bears interest at the bank's prime rate plus 1.5% or LIBOR plus 3% at the Company's election and the revolving credit facility bears interest at the bank's prime rate plus 1.25% or LIBOR plus 2.75% at the Company's election. These loans are secured by all assets of the Company and its wholly owned subsidiaries. As of September 30, 1998, there were no borrowings under the term loan and revolving note. Amounts borrowed under the agreement will be used to finance future acquisitions, provide ongoing working capital and for other general corporate purposes. As part of the Agreement, the Company issued to the bank warrants to purchase 150,000 shares of the common stock at a purchase price of $4.625 per share. The warrants expire December 31, 2003. The warrants were accounted for as additional paid in capital based upon the fair value of the securities. Fair market value was determined by using the relationship of the interest rate charged with the warrants versus the rate to be charged without the warrants. This value approximated that obtained using the Black Scholes Method. 10 PART I: ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS "SAFE HARBOR" STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 Statements contained in this document which are not historical fact are forward-looking statements based upon management's current expectations that are subject to risks and uncertainties that could cause actual results to differ materially from those set forth in or implied by forward-looking statements. These risks are described in the Company's Form 10-K for the fiscal year ended December 31, 1997 filed with the Securities and Exchange Commission. OVERVIEW Sight Resource Corporation (the "Company") manufactures, distributes and sells eyewear and related products and services. The Company's operations currently consist of 94 eye care centers, with three regional optical laboratories and distribution centers, and is one of the seventeen largest providers in the United States' primary eye care industry based upon sales. The Company's eye care centers operate primarily under the brand names Cambridge Eye Doctors, E.B. Brown Opticians, Eyeglass Emporium, Vision Plaza, and Vision World. The Company also provides, or where necessary to comply with applicable law administers the business functions of optometrists, ophthalmologists and professional corporations that provide, vision related professional services. In addition, as of September 30, 1998 the Company operated three laser vision correction ("LVC") centers. The Company operates three regional optical laboratories and distribution centers. The regional optical laboratories provide complete laboratory services to the Company's eye care centers, including polishing, cutting and edging, tempering, tinting and coating of ophthalmic lenses. The distribution centers provide and maintain an inventory of all accessories and supplies necessary to operate the primary eye care centers in their regions, as well as "ready made" eye care products, including contact lenses and related supplies. The inventory of eyeglass lenses, frames, contact lenses, accessories and supplies is acquired through a number of sources, domestic and foreign. Management believes that the regional optical laboratories and distribution centers have the capacity to accommodate additional multi-site eye care centers. RESULTS OF OPERATIONS THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997 NET REVENUE. The Company generated net revenue of approximately $14.3 million and $42.4 million during the three and nine months ended September 30, 1998, respectively, from the operation of its 94 eye care centers and three LVC centers as compared to net revenue of approximately $12.7 million and $33.1 million from its 88 eye care centers and six LVC centers for the same period in 1997. The $1.6 million, or 12.8%, increase in net revenue for the three months ended September 30, 1998 as compared to the three months ended September 30, 1997, primarily relates to the additional nine eye care centers acquired effective April 1, 1998. The $9.2 million, or 27.9%, increase in net 11 revenue for the nine months ended September 30, 1998 as compared to the nine months ended September 30, 1997, relates primarily to the additional seventeen eye care centers acquired effective July 1, 1997 and the nine eye care centers acquired effective April 1, 1998. COST OF REVENUE. Cost of revenue increased from approximately $4.5 million for the three months ended September 30, 1997 to approximately $4.9 million for the three months ended September 30, 1998. Cost of revenue as a percentage of net revenue decreased from 35.2% for the three months ended September 30, 1997 to 34.1% for the three months ended September 30, 1998. Cost of revenue increased from approximately $12.1 million for the nine months ended September 30, 1997 to approximately $14.7 million for the nine months ended September 30, 1998. Cost of revenue as a percentage of net revenue decreased from 36.4% for the nine months ended September 30, 1997 to 34.7% for the nine months ended September 30, 1998. The improvement as a percentage of net revenue is primarily due to the improved profit margin resulting from sales from both the additional seventeen eye care centers acquired effective July 1, 1997 and the nine eye care centers acquired effective April 1, 1998. Cost of revenue principally consisted of (i) the cost of manufacturing, purchasing and distributing optical products to its customers and (ii) the cost of delivering LVC services, including depreciation and maintenance on excimer lasers. SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and administrative expenses were approximately $9.3 million and $27.5 million for the three and nine months ended September 30, 1998 as compared to approximately $8.4 million and $22.1 million for the three and nine months ended September 30, 1997. The increase primarily relates to payroll and facility costs incurred in operating additional eye care centers for the three and nine months ended September 30, 1998. Selling, general and administrative expenses, as a percentage of net revenue, declined from 66.7% for the nine months ended September 30, 1997 to 64.8% for the nine months ended September 30, 1998. This decrease is primarily a result of (i) the nine eye care centers acquired effective April 1, 1998, which operate with a level of selling, general and administrative expenses as a percentage of net revenue that is lower than that of the Company and its other subsidiaries, and (ii) the Company's ability to better leverage its fixed expenses in connection with the acquisition of multi- site eye care centers. OTHER INCOME AND EXPENSE. Interest income totaled $34,000 and $162,000 for the three and nine months ended September 30, 1998, respectively, as compared to $69,000 and $292,000 for the three and nine months ended September 30, 1997, respectively. This decrease resulted from the investment of a lower average cash balance during the first three quarters of 1998 as compared to the same periods in 1997. Interest expense totaled $45,000 and $141,000 for the three and nine months ended September 30, 1998, respectively, as compared to $89,000 and $261,000 for the three and nine months ended September 30, 1997, respectively. The decrease is associated with a higher average balance of debt outstanding during the first three quarters of 1997 as compared to the same periods in 1998. The sale of certain ophthalmic equipment during the nine months ended September 30, 1998 generated a gain of approximately $69,000. The sale of certain ophthalmic equipment during the three and nine months ended September 30, 1997 generated a gain of approximately $251,000 and $474,000, respectively. 12 NET INCOME (LOSS). The Company realized net income of $143,000, or $0.02 per share, and $233,000 or $0.03 per share, on a basic weighted average diluted basis, for the three and nine months ended September 30, 1998, respectively, as compared to net income of $78,000, or $0.01 per share, and a loss of ($514,000), or ($0.06) per share for the three and nine months ended September 30, 1997, respectively. LIQUIDITY AND CAPITAL RESOURCES At September 30, 1998, the Company had approximately $1.6 million in cash and cash equivalents included in working capital of approximately $2.6 million, in comparison to approximately $6.0 million in cash and cash equivalents included in working capital of approximately $4.2 million as of December 31, 1997. The decrease in working capital is primarily due to the purchase of the nine eye care centers on April 1, 1998, the payment in March 1998 of the $1.0 million note payable, and an increase in accounts receivable due to the acquisitions. As of September 30, 1998, the Company had securities outstanding which provide it with potential sources of financing as outlined below: Securities Potential proceeds - ------------------------------------ ------------------ Warrants 2,472,100 $14,800,000 Class A Warrants 85,000 500,000 Class II Warrants 290,424 2,032,968 Creditanstalt Warrants 150,000 694,000 Representative Warrants 170,000 1,400,000 ------------------ $19,426,968 ================== The Company also has outstanding 842,294 Class I Warrants. The Class I Warrants entitle the holder to purchase an amount of shares of the Company's common stock equal to an aggregate of up to 19.9% of the shares of common stock purchasable under the Company's outstanding warrants and options on the same terms and conditions of existing warrant and option holders. The purchaser is obligated to exercise these warrants at the same time the options and warrants of existing holders are exercised, subject to certain limitations. The amount of proceeds from the exercise of these warrants cannot be estimated at this time. There can be no assurance that the Company will obtain any such proceeds from the exercise of the above securities. In connection with the acquisition of Eyeglass Emporium, the Company issued an unsecured note payable for $350,000. The note bears interest at 7% and is payable in twelve equal quarterly installments of $29,000 principal plus accrued interest. On February 20, 1997, the Company entered into a Credit Agreement (the "Agreement") with a bank pursuant to which the Company can borrow up to $5.0 million on a term loan basis and up to $5.0 million on a revolving credit basis, subject to certain performance criteria. Such performance criteria include, among others, financial condition covenants such as rolling EBITDA levels, indebtedness to EBITDA ratios, current ratio of 1:1 and minimum net worth ratios. The term loan facility bears interest at the bank's prime rate 13 plus 1.5% or LIBOR plus 3% at the Company's election, and the revolving credit facility bears interest at the bank's prime rate plus 1.25% or LIBOR plus 2.75% at the Company's election. These loans are secured by all assets of the Company and its wholly owned subsidiaries. Amounts borrowed under the Agreement have been and will continue to be used to refinance existing debt, finance future acquisitions, provide ongoing working capital and for other general corporate purposes. As part of the Agreement, the Company issued to the bank warrants to purchase 150,000 shares of the common stock at a purchase price of $4.625 per share. The warrants expire December 31, 2003. The Company anticipates that its working capital and sources of capital, such as the existing credit facility, will be adequate to fund the Company's currently proposed activities for at least the next twelve months. The Company anticipates using financing vehicles such as bank debt and other sources of funding, such as additional equity offerings, to achieve its business plan, including the acquisition of eye care centers. The Company has an acquisition strategy to acquire and integrate the assets of multi-site eye care centers and the practices of eye care professionals and to employ or enter into management services contracts with these professionals. This strategy includes both expanding existing regional markets and entering new regional markets. The Company will also target acquisitions in strategic markets that will serve as platforms from which the Company can consolidate a given service area by making and integrating additional "in-market" acquisitions. The Company is currently evaluating potential acquisition candidates. Without additional funding, the Company's rate of acquisition and size of acquisition could be limited. NEW PRONOUNCEMENTS In June 1997, the Financial Accounting Standards Board issued SFAS 131, "Disclosures about Segments of an Enterprise and Related Information," which established standards for the way that public business enterprises report selected information about operating segments in annual financial statements and requires that those enterprises report selected information about operating segments in interim financial reports to stockholders. It also establishes standards for related disclosures about products and services, geographic areas and major customers. SFAS 131, which becomes effective for the Company in its year ending December 31, 1998, is not expected to have a material impact on the Company's results of operations. The Company is in the process of determining the impact of SFAS 131 on its footnote disclosures. In June 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards ("SFAS") No. 133, Accounting for Derivative Instruments and Hedging Activities, which establishes accounting standards for derivative instruments, including certain derivative instruments embedded in other contracts (collectively referred to as "derivatives") and for hedging activities. This statement requires that an entity recognize all derivatives as either assets or liabilities in the balance sheet and measure those instruments at fair value. The statement also sets forth the criteria for determining whether a derivative may be specifically designated as a hedge of a particular exposure with the intent of measuring the effectiveness of that hedge in the statement of operations. SFAS No. 133 is effective for all fiscal quarters of fiscal years beginning after June 15, 1999. Management does not believe that the adoption of this statement will have a material 14 impact on the Company's consolidated financial position, results of operations or cash flows as the Company does not utilize derivative instruments. YEAR 2000 ISSUE The "Year 2000" issue refers to the inability of certain computer systems, as well as certain hardware and equipment containing embedded microprocessors with date sensitive data, to recognize accurate dates commencing on or after January 1, 2000. This has the potential to affect the operation of these systems adversely and materially. The Company has identified four phases in its Year 2000 compliance efforts: discovery, assessment, remediation and applicable testing and verification. The Company has substantially completed the discovery and assessment phases for its own systems and applications and believes that by modifying and upgrading existing software it can prevent the Year 2000 transition from posing significant internal operational problems. To date the costs related to the discovery and assessment phase have not been material to the Company's financial position or results of operation. The Company plans to complete the remediation phase by the second quarter of 1999 and complete the applicable testing and verification phase by the end of the third quarter of fiscal year 1999. The Company is currently evaluating total incremental costs related to the Year 2000 issue. The Company does not anticipate that the costs of these modifications and conversions will be material to its financial position or results of operations in any given year. The Company is surveying its vendors, customers and others on whom it relies to assure that their systems will be Year 2000 compliant and that they will be able to continue their business with the Company without interruption. However, there can be no assurance that the systems of other parties on which the Company's systems rely will also be compliant or that any failure to be compliant in this area by another party would not have an adverse effect on the Company's systems. Furthermore, no assurance can be given that any or all of the Company's systems are or will be Year 2000 compliant, that the ultimate costs required to address the Year 2000 issue will not exceed the amounts indicated above, or that the impact of any failure to achieve substantial Year 2000 compliance will not have a material adverse effect on the Company's financial condition. The Company has not yet developed a contingency plan in the event that it is unable to successfully address the Year 2000 issue. The Company plans to develop a contingency plan by the end of the third quarter of 1999. 15 PART II. OTHER INFORMATION Item 2. CHANGES IN SECURITIES AND USE OF PROCEEDS (a) Not applicable (b) Not applicable (c) (1) Securities sold. On September 9, 1998, the Company issued a total of 20,000 shares (the "Option Shares") of its Common Stock. (2) Underwriter and other purchasers. No underwriters were involved in the transaction. The Company issued the Option Shares pursuant to the exercise of a stock option held by a former employee. (3) Consideration. The Option Shares were issued at an exercise price of $.43 per share for an aggregate exercise price of $8,600. (4) Exemption from registration claimed. The Option Shares were issued in reliance upon Section 4(2) of the Securities Act of 1933, as amended, because the transaction did not involve any public offering by the Company. (5) Terms of conversion or exercise. Not applicable. (6) Use of Proceeds. Not applicable (d) Not applicable. Item 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits Exhibit No Title ------- ----- +10a Employment Agreement between the Company and James Norton, dated as of August 17, 1998. +10b Letter Agreement regarding employment between the Company and William McLendon, dated as of July 27, 1998. +10c Letter Agreement regarding employment between the Company and Stephen M. Blinn, dated as of August 3, 1998. 27 Financial Data Schedule ------------- + - Management contract or compensatory plan, contract or arrangement. (b) Reports on Form 8-K. No reports on Form 8-K were filed during the quarter covered by this report. 16 SIGNATURES Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Sight Resource Corporation Date: November 12, 1998 ----------------- By: /s/ WILLIAM T. SULLIVAN --------------------------- William T. Sullivan President and Chief Executive Officer (principal executive officer) Date: November 12, 1998 ----------------- By: /s/ JAMES NORTON -------------------- James Norton Chief Financial Officer (principal financial officer) 17 EX-10.A 2 EMPLOYMENT AGREEMENT EXHIBIT 10a ----------- SIGHT RESOURCE CORPORATION 100 JEFFREY AVENUE HOLLISTON, MA 01746 As of August 17, 1998 James W. Norton 36 Liberty Road Marshfield, MA 02050 Dear Mr. Norton: This letter is to confirm our understanding with respect to (i) your employment by Sight Resource Corporation, a Delaware corporation (the "Company"), (ii) your agreement not to compete with the Company and (iii) your agreement to protect and preserve information and property which is confidential and proprietary to the Company, subject to your agreement with the terms hereof as indicated by your execution of this letter on the final page (the terms and conditions agreed to in this letter shall hereinafter be referred to as the "Agreement"). In consideration of the mutual promises and covenants contained in this Agreement, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, we have agreed as follows: 1. Employment. The Company will employ you, and you agree to work for the ---------- Company, as its Vice President-Finance and Chief Financial Officer, to have such responsibilities, duties and authority as are customary to such positions. You will also have such other responsibilities, duties and authority as may from time to time be assigned to you by the Chief Executive Officer or the Board of Directors (the "Board") that are consistent with your status as Vice President- Finance and Chief Financial Officer of the Company. You agree to devote your full business time and energies to the business and affairs of the Company and its subsidiaries, if any, as is necessary from time to time for your fulfillment of your obligations to the Company hereunder; however, nothing contained in this Paragraph 1 shall be deemed to prevent or limit your right to: (a) make passive investments in the securities of any publicly-owned corporation, (b) make any other passive investments with respect to which you are not obligated or required to, and which you do not in fact, devote any substantial managerial efforts which interfere with your fulfillment of your duties hereunder or (c) serve as member of the board of directors of other for-profit or not-for-profit corporations or entities, so long as such service (i) does not interfere with the performance of your obligations hereunder or (ii) does not constitute a violation of Section 10. 2. Term of Employment. (a) Your retention hereunder shall commence as of ------------------ the date above and will continue until the third anniversary thereof (the "Initial Term"); provided that the Initial Term, and any succeeding one-year period thereafter, shall automatically be renewed for a one-year period, and for successive one-year periods, unless, not later than 3 months prior to the expiration of the Initial Term or any such successor one-year term (or such shorter period as may mutually be agreed by you and the Company), either you or the Company delivers written notice to the other stating that such term shall not be so extended or renewed Notwithstanding the foregoing, your employment hereunder shall be terminated by the first to occur of the following: (i) Immediately upon your death; (ii) Upon notice from the Company following your inability, due to illness, accident or any other physical or mental incapacity, to perform the services provided for hereunder for an aggregate of 180 business days within any one year period during the term hereof; (iii) By the Company upon notice, for Cause, as defined herein, and as set forth below; (iv) By the Company, upon notice subject to Section 3 hereof, without Cause; or (v) By you, upon notice to the Company, provided, that if you do not give -------- at least 30 days' prior written notice of your intention to terminate your employment hereunder, you will forfeit all unused vacation, prepaid benefits, any unused but unpaid incentive compensation, and any stock options which have not vested as of the date such notice is given. The right of the Company to terminate your employment hereunder to which you hereby agree, shall be exercisable by written notice sent to you by the Company and shall be effective as of the date of such notice. (b) The Company may, immediately and unilaterally, terminate your employment hereunder for Cause at any time upon ten (10) days' advance written notice to you. Termination of your employment by the Company shall constitute a termination for Cause if such termination is for one or more of the following reasons: (i) your willful misconduct or gross negligence; (ii) you are convicted of a felony, either in connection with the performance of your obligations to the Company or which conviction materially adversely affects your ability to perform such obligations, or materially adversely affects the business activities, reputation, good will or image of the Company; (iii) willful disloyalty, deliberate dishonesty, breach of fiduciary duty or breach of the terms of this Agreement; (iv) the commission by you of an act of fraud, embezzlement or deliberate disregard of the rules or policies of the Company which results in significant loss, damage or injury to the Company; (v) your willful unauthorized disclosure of any trade secret or confidential information of the Company; or (vi) your willful commission of an act which constitutes unfair competition with the Company or which induces any employee or customer of the Company to break a contract with the Company. In making any determination under this Section, the Chief Executive Officer and the Board of Directors shall act fairly and in utmost good faith and shall give you an opportunity to appear and be heard at a meeting of the Board of Directors or any committee thereof and present evidence on your behalf. For purposes of this Section, no act, or failure to act, on your part shall be considered "willful" unless done, or admitted to be done, by you in bad faith and without reasonable belief that such action of omission was in the best interest of the Company. -2- In the event you are terminated for Cause, you shall be entitled to no severance or other termination benefits, or any other benefits (except for any health insurance benefits required by applicable law). 3. Compensation. (a) In consideration for your services under this ------------ Agreement, you shall be paid at the annual rate of One Hundred Sixty Thousand Dollars ($160,000), subject to increase from time to time by action of the Chief Executive Officer and the Board in accordance with your performance and the Company's performance ("Base Salary"), and payable at such intervals as may be agreed upon by the Company and you, less any amounts required to be withheld under applicable law. Such compensation will be reduced by any disability payments which you receive, after taking into account the tax benefits (if any) of such payments. In addition, upon commencement of your employment you will be granted options to purchase an aggregate of 99,999 shares of the Company's Common Stock, at fair market value on the date of grant, vesting 1/3 after one year and the remaining 2/3 in two equal annual installments thereafter, pursuant to the Company's standard form of stock option agreement. (b) In the event that (i) your employment shall be terminated by the Company without Cause at any time, (ii) you terminate your employment hereunder by reason of a material change in your duties imposed by the Chief Executive Officer or Board of Directors of the Company or by reason of any material breach by the Company of its obligations to you or (iii) the Company elects not to renew the term of your employment hereunder at the end of the Initial Term or any succeeding one-year period, then, in any such case, the Company shall continue to pay you your Base Salary then in effect and the cost of your health insurance for a period (the "Severance Period") of one year. (c) In the event your employment shall be terminated by the Company for Cause, no further compensation or benefits of any kind shall be payable to you hereunder (except for any health insurance benefits required by applicable law); provided, however, that you shall continue to be bound by the provisions of this Agreement, other than Section 1. (d) In consideration for your services under this Agreement, you shall be paid a "signing bonus" of Twelve Thousand Five Hundred Dollars ($12,500) upon the commencement of your employment hereunder. (e) In the event that, during the term of your employment hereunder and on or prior to the second anniversary of the date hereof, you relocate your primary residence from Marshfield, Massachusetts to a location more convenient to the Company's home office in Holliston, Massachusetts, then the Company shall pay to you Twelve Thousand Five Hundred Dollars ($12,500). 4. Bonuses. Following the commencement of your employment hereunder, for ------- fiscal year 1998 you will be entitled to a bonus based principally on the profitability of the Company, but not to exceed in any event an amount equal to 35% of your base salary base hereunder, determined on a pro rata basis. Thereafter, you will be entitled to such bonuses as are determined pursuant to bonus policies, procedures and formulae in effect from time to time as determined by the Compensation Committee of the Board or by the Board of directors, but such -3- policies, procedures and formulae will not be any less favorable to you than the 35% of annual base salary maximum bonus plan that will be in effect for the balance of 1998. 5. Expenses. The Company will reimburse you for travel, entertainment and -------- other business expenses reasonably incurred by you in connection with the business of the Company to the extent and in a manner consistent with then Company policy and appropriate to someone in a position of your stature. 6. Benefits. In connection with your employment hereunder, you will be -------- entitled during your employment to the following additional benefits: (a) You shall be entitled to no less than the number of vacation days in each calendar year determined in accordance with the Company's vacation policy as in effect from time to time, but not less than three (3) weeks in any calendar year (prorated in any calendar year during which you are employed hereunder for less than the entire such year in accordance with the number of days in such calendar year in which you are so employed). You shall also be entitled to all paid holidays and personal days given by the Company to its executives. (b) The Company shall furnish you with office space, stenographic assistance and such other facilities and services as shall be suitable to and appropriate for your position and for the performance of your duties as set forth herein. (c) In addition to the foregoing, you shall also be entitled to participate in any employee benefit plans which the Company provides or may establish for the benefit of its executive employees generally. 7. Termination upon Death or Disability. Your employment by the Company ------------------------------------ shall terminate upon your death, or if, by virtue of total and permanent disability, you are unable to perform your duties hereunder. The determination that, by virtue of total and permanent disability, you are unable to perform your duties hereunder shall be made by a physician chosen by the Company and reasonably satisfactory to you (or your legal representative). The cost of such examination shall be borne by the Company. Without limiting the generality of the foregoing, unless otherwise agreed, you shall be conclusively presumed to be totally and permanently disabled hereunder if for reasons involving mental or physical illness or physical injury you fail to perform your duties hereunder for a period aggregating one hundred eighty (180) days or more in any twelve (12) consecutive month period. For purposes of this Paragraph 7, the termination date in the event of death shall be the date of death and in the event of such total and permanent disability shall be the earlier of the date of such physician's examination pursuant to which such determination is made or the first business day after which such 180 days has expired. In the event of such a termination of employment as a result of your death or total and permanent disability, the Company shall have no further obligations hereunder except as provided in Paragraphs 3 and 9 hereof and except as provided below in this Paragraph 7: -4- (a) In the event of death, the Company shall pay to your estate amounts, at the Base Salary rate in effect on the termination date, in monthly payments, for a period of twelve (12) months following the termination date; and (b) In the event of total and permanent disability, the Company shall pay to you (or your estate) amounts, at the Base Salary rate in effect on the termination date, payable in monthly payments, for a period of twelve (12) months following the termination date. Amounts to which you would otherwise be entitled under this subparagraph (b) shall be reduced by the amount of any disability insurance proceeds actually paid to you or paid for your benefit (or to your estate or legal representatives) with respect to such twelve (12) months following the termination date under any disability policy provided by the Company. 8. Change of Control. (a) In the event you, the Company, or a successor to ----------------- the Company elect to terminate your employment upon a Change of Control (as defined in Section 8(b) below), provided that such notice of termination is given within twelve (12) months of a Change of Control (a "Change of Control Notice"), then upon such termination pursuant to this paragraph, you (or your estate, if you die prior to receiving the payments hereinafter set forth in this sentence) shall be entitled to receive within thirty (30) days of such termination a lump sum payment equal to your Base Salary in effect on the date of such termination. For the purposes of this Section 8(a), the time when a termination occurs shall be the effective date of your termination. In addition, in the event of such a termination pursuant to a Change of Control Notice, the Company or a successor to the Company shall provide, and you shall continue to be entitled to receive, such benefits you have been receiving pursuant to Section 6(a) as of the date of your Change of Control Notice until the earlier of (i) your full-time employment by a third-party who offers you at least comparable benefits in the particular benefit category or (ii) two (2) years following such date of termination. Any compensation payable under this Section 8(a) shall be paid notwithstanding your total and permanent disability or death occurring after termination of your employment hereunder. In addition, the stock option agreements described in Section 3(a) above shall provide for the automatic vesting of any unvested stock options upon the occurrence of a Change of Control. (b) As used herein a "Change of Control" shall be deemed to have occurred if (i) any "person" (as such term is used in sections 13(d) and 14(d)(2) of the Securities Exchange Act of 1934, as amended), is or becomes the beneficial owner, directly or indirectly, of securities of the Company representing twenty- five percent (25%) or more of the outstanding Common Stock of the Company, or (ii) ten (10) days following the commencement of, or announcement of an intention to make, a tender offer or exchange offer the consummation of which would result in the beneficial ownership by any "person" of twenty-five percent (25%) or more of the outstanding Common Stock of the Company, provided, however, that at the conclusion of such ten (10) day period such person has not discontinued or rescinded his intention to make a tender or exchange offer or (iii) if during any consecutive twelve (12) month period beginning on or after the date on which this Agreement is executed individuals who at the beginning of such period were directors of the Company cease, for any reason, to constitute at least a majority of the Board of Directors of the Company; or (iv) if a merger of, or consolidation involving, the Company in which the Company's stock is converted into securities of another corporation or into cash shall be consummated, or a plan of complete liquidation of the Company (whether or not in connection with a sale of all or substantially all of the Company's assets) shall be adopted -5- and consummated, or substantially all of the Company's operating assets are sold (whether or not a plan of liquidation shall be adopted or a liquidation occurs), excluding in each case a transaction solely for the purpose of reincorporating the Company in a different jurisdiction or recapitalizing the Company's stock. 9. Accrued Compensation. In the event of any termination of your -------------------- employment for any reason, you (or your estate) shall be paid such portion of your Base Salary and bonuses as has accrued by virtue of your employment during the period prior to termination and has not yet been paid, together with any amounts for expense reimbursement and similar items which have been properly incurred in accordance with the provisions hereof prior to termination and have not yet been paid. Such amounts shall be paid within ten (10) days of the termination date. The amount due to you (or your estate) under this Paragraph 9 in payment of any bonus shall be a proportionate amount of the bonus that would otherwise have been due to you as if such termination had not occurred. 10. Prohibited Competition. You agree and covenant that, with respect to ---------------------- the business of the Company, until your termination of employment, whether or not such termination is voluntary or involuntary, and, subject to the last sentence of this paragraph 10, for a period of one (1) year following such termination, you shall not, without the prior written consent of the Company, for yourself or on behalf of any other, directly or indirectly, either as principal, agent, stockholder, employee, consultant, representative or in any other capacity, own, manage, operate or control, or be concerned, connected or employed by, or otherwise associate in any manner with, engage in or have a financial interest in any business which is directly or indirectly competitive with the retailing of optical goods and services business of the Company; provided, however, that nothing contained herein shall preclude you from - -------- ------- purchasing or owning stock in any such business if such stock is publicly traded, and provided that your holdings do not exceed three percent (3%) of the issued and outstanding capital stock of such business. Notwithstanding anything in this Agreement to the contrary, the provisions of this Section 10 shall not apply to the one (1) year period following termination of your employment in the event that such termination is caused by or related in any manner to (i) a change (without your consent) by the Board of Directors in your title of Vice President-Finance and Chief Financial Officer to any lesser office or (ii) a relocation (without your consent) of the position of Vice President-Finance or Chief Financial Officer to a location outside of the Commonwealth of Massachusetts and the States of Rhode Island and New Hampshire. 11. Protected Information. You shall not, without the prior written --------------------- consent of the Company, use, except in the course of performance of your duties for the Company, disclose or give to others any fact or information which was disclosed to or developed by you during the course of performing services for or receiving training from, the Company, and is not generally available to the public, including but not limited to information and facts concerning business plans, customers, prospects, client lists, or any other scientific, technical, trade or business secret or confidential or proprietary information of the Company. 12. Ownership of Ideas, Copyrights and Patents. You agree that all ideas, ------------------------------------------ discoveries, creations, manuscripts and properties, innovations, improvements, know-how, inventions, developments, apparatus, techniques, methods, and formulae (all of the foregoing being hereinafter referred to as "the inventions") which may be used in the business of the Company, whether patentable, copyrightable or not, which you may conceive or develop during -6- your term of employment with the Company, alone or in conjunction with another, or others, whether during or out of regular business hours, and whether at the request, or upon the suggestion of the Company, or otherwise, shall be the sole and exclusive property of the Company, and that you shall not publish any of the inventions without the prior consent of the Company. You hereby assign to the Company all of your right, title and interest in and to all of the foregoing. You further represent and agree that to the best of your knowledge and belief none of the inventions will violate or infringe upon any right, patent, copyright, trademark or right of privacy, or constitute libel or slander against or violate any other rights of any person, firm or corporation, and that you will use your best efforts to prevent any such violation. At any time during or after your term of employment with the Company, you agree that you will fully cooperate with the Company, its attorneys and agents, in the preparation and filing of all papers and other documents as may be required to perfect the Company's rights in and to any of such inventions, including, but not limited to, joining in any proceeding to obtain letters patent, copyrights, trademarks or other legal rights of the United States and of any and all other countries on such inventions, provided that the Company will bear the expense of such proceedings, and that any patent or other legal right so issued to you, personally, shall be assigned by you to the Company without charge by you. 13. Parties. This Agreement is personal and shall in no way be subject to ------- assignment by you except as contemplated hereby. This Agreement shall be binding upon and shall inure to the benefit of the Company and its successors and assigns either by merger, operation of law, consolidation, assignment, purchase or otherwise of a controlling interest in the business of the Company and shall be binding upon and shall inure to the benefit of you, your heirs, executors, administrators, personal and legal representatives, distributees, devisees, legatees, successors and permitted assigns. If you should die while any amounts would still be payable to you hereunder if you had continued to live (other than amounts to which you would be entitled by reason of continued employment), all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to your devisees, legatees or other designees or, if there be no such designee, to your estate. The Company agrees that a successor in interest by merger, operation of law, consolidation, assignment, purchase or otherwise of a controlling interest in the business of the Company will be informed prior to such event of the existence of this Agreement. The Company will require any successor (whether direct or indirect, by purchase, merger, operation of law, consolidation, assignment or otherwise of a controlling interest in the business, stock or other assets of the Company) to assume expressly and agree to perform this Agreement. As used in this Agreement, "the Company" shall mean the Company as hereinbefore defined and any successor as aforesaid. 14. Invalidity. We intend this Agreement to be enforced as written. ---------- However, if any term or provision of this Agreement shall to any extent be declared illegal or unenforceable by a duly authorized court of competent jurisdiction, then the remainder of this Agreement, or the application of such term or provision in circumstances other than those as to which it is so declared illegal or unenforceable, shall not be affected thereby, each term and provision of this Agreement shall be valid and be enforceable to the fullest extent permitted by law and the illegal or unenforceable term or provision shall be deemed replaced by a term or provision that is valid and enforceable and that comes closest to expressing the intention of the invalid or unenforceable term or provision. -7- 15. Notices. All notices and communications required or permitted to be ------- given hereunder shall be duly given by delivering the same in hand or by depositing such notice or communication in the mail, sent by certified or registered mail, return receipt requested, postage prepaid, or by delivery by overnight courier, with a receipt obtained therefor, as follows: If sent to the Company: Sight Resource Corporation 100 Jeffrey Avenue Holliston, MA 01747 If sent to you: James W. Norton 36 Liberty Road Marshfield, MA 02050 or such other address as either party furnishes to the other by like notice, provided, however, that any notice of a change of address shall be effective only upon receipt. 16. Entire Agreement. This Agreement embodies the entire agreement and ---------------- understanding between us in relation to the subject matter hereof and there are no promises, representations, conditions, provisions or terms related thereto other than those set forth or referred to in this Agreement and the exhibits hereto. This Agreement supersedes all previous understandings, agreements and representations between the Company and you regarding your employment by the Company, whether written or oral. 17. Headings. All captions in this Agreement are intended solely for the -------- convenience of the parties, and none shall be deemed to affect the meaning or construction of any provision hereof. 18. Waiver. No failure of the Company or you to exercise any power ------ reserved to it or you, respectively, by this Agreement, or to insist upon strict compliance by you or the Company, respectively, with any obligation or condition hereunder, and no custom or practice of the parties at variance with the terms hereof, shall constitute a waiver of the Company's or your right, as the case may be, to demand exact compliance with any of the terms hereof. Waiver by either party of any particular default by the other party hereto shall not affect or impair the waiving party's rights with respect to any subsequent default of the same, similar or different nature, nor shall any delay, forbearance or omission of either party to exercise any power or right arising out of any breach or default by the other party of any of the terms, provisions or covenants hereof, affect or impair our or your right to exercise the same, nor shall such constitute a waiver by the Company or you, as the case may be, of any right hereunder, or the right to declare any subsequent breach or default and to terminate this Agreement prior to the expiration of its term. 19. Subsidiaries. As used herein, the term "Subsidiaries" shall mean all ------------ corporations a majority of the capital stock of which entitling the holder thereof to vote is owned by the Company or a Subsidiary. 20. Governing Law. This Agreement shall be construed under and be ------------- governed in all respects by the law of the Commonwealth of Massachusetts. -8- 21. Excise Tax. In the event you are subject to any excise tax ("Excise ---------- Tax") on your compensation by the Company or any of its Affiliates (including but not limited to excise taxes imposed under Section 4999 of the Internal Revenue Code), the Company agrees that it will then "gross-up" your compensation by making an additional payment to you in an amount which, after reduction for any income or excise taxes payable as a result of receiving such additional payment, is equal to the Excise Tax. 22. Mitigation. You shall not be required to mitigate the amount of any ---------- payment provided for in this Agreement by seeking other employment or otherwise, nor, other than as provided in Section 7(a) hereof, shall the amount of any payment or benefit provided for herein be reduced by any compensation or benefits earned by you as the result of employment by another employer after the date of your termination by the Company. 23. Amendment. No amendment or modification to this Agreement shall be --------- effective unless in writing and signed by both parties hereto. 24. Counterparts. This Agreement may be executed in any number of ------------ counterparts, each executed counterpart constituting an original and such counterparts together constituting one agreement. -9- If you agree with the terms of your employment as set forth in this Agreement, please execute the duplicate copy hereof in the space provided below. SIGHT RESOURCE CORPORATION By: /s/ William T. Sullivan ------------------------------------- Name: William T. Sullivan Title: President & CEO ACCEPTED AND AGREED as of the date above: /s/ James W. Norton - ---------------------------------- James W. Norton -10- EX-10.B 3 EMPLOYMENT AGREEMENT [LOGO APPEARS HERE] Sight Resource Corp. INTER-OFFICE MEMORANDUM Date: July 27, 1998 To: Bill McLendon From: Bill Sullivan - -------------------------------------------------------------------------------- Outlined below are the terms that we have agreed upon with regard to your ongoing employment role with Sight Resource Corporation. Base Salary - ----------- Effective August 1, 1998, base salary will be $3,500 per pay period, ending February 25, 2000. Bonus - ----- 1998 - Determined by CEO and Compensation Committee 1999 - 0 Automobile - ---------- Effective August 1, 1998, the company will pay $850 toward the lease of automobile ending 12/99. The company will pay phone, gas, and maintenance through 2/99 and taxes and insurance through 12/99. At 3/1/99, you will assume the phone, gas, and maintenance expenses through 12/99. Health Benefits - --------------- Effective August 1, 1998, the company will pay $131 monthly toward health benefits until February 25, 2000. After that time and at your expense, you may continue to remain on the health plans under COBRA by paying the total cost. You will receive eyewear in accordance with our current (or future) policy. Other - ----- I want your active involvement in the indoctrination of our new CFO. Effective August 1, 1998, you will also remain available, as requested, to work on projects, assignments, or other activities. Bill McLendon Page 2 2. You will be excluded from the company's 40l (k) plan effective August 1, 1998. Current year-to-date contributions will remain in the plan, and the 1998 match, if any, will be in accordance with the policy. 3. The key man life insurance policy will be canceled effective 8/1/98. If you desire to convert this policy, the company will assist you. 4. Office space will be provided for you at the Washington Street store until April, 2000. 5. Reinforce the non-compete to expire February, 2001, which is one (1) year from February, 2000. 6. Continue current indemnification and D & O insurance as appropriate. 7. Stock options to remain in place until June, 2000, ninety days after employment ceases or, if you remain a Director, ninety days after Directorship ends. 8. Effective August 1, 1998, any expenses being direct billed to the company (cell phone, credit card, gas card) will cease except for the auto phone (508-325-2807) which will be converted 3/1/99. Convert these to individual name. 9. Business expenses will be reimbursed with advance approval. William G. McLendon_______________________ EX-10.C 4 EMPLOYMENT AGREEMENT [LOGO APPEARS HERE] Sight Resource Corp. INTER-OFFICE MEMORANDUM Date: 8/3/98 To: Steve Blinn From: Bill Sullivan - -------------------------------------------------------------------------------- Outlined below are the terms that we have agreed upon with regard to your employment role with Sight Resource Corporation. Base Salary - ----------- Effective August 1, 1998, base salary will be $3,750 per pay period ending April 28, 2000. Bonus - ----- 1998 - Determined by CEO and Compensation Committee. 1999 - 0 Automobile - ---------- Your current auto and associated expenses will remain as is until April 24, 1999, at which time the auto will return to the company. Health Benefits - --------------- Your current benefit plans and participating payments will remain in place until April 24, 1999. After that time, and at your expense, you may continue to remain on the health plans under COBRA by paying the total costs. Other - ----- 1. I want your active involvement with Bill Mancini until we are comfortable with his indoctrination period. Effective August 1, 1998, you will also remain available, as requested, to work on projects, assignments, or other activities. 2. You will be excluded from 40l (k) plan effective August 1, 1998. Steve Blinn Page 2 3. The key man life insurance policy will be cancelled effective August 1, 1998. If you desire to convert this policy, the Company will assist you. 4. Office space will be provided for you at the Washington Street store until April, 2000. 5. Reinforce the non-compete to expire April, 2001, which is one (1) year from April, 2000. 6. Continue current indemnification and D & O insurance as appropriate. 7. Stock options remain in place until July, 2000, ninety days after employment ceases. 8. Effective August 1, 1998, any expenses being direct billed to the Company will cease (cell phone, credit card, gas card). Convert these to individual name. 9. Business expenses will be reimbursed with advance approval. Stephen M. Blinn______________________ EX-27 5 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM * AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 3-MOS 9-MOS DEC-31-1998 DEC-31-1998 JUL-01-1998 JAN-01-1998 SEP-30-1998 SEP-30-1998 1,570 1,570 0 0 3,730 3,730 410 410 4,478 4,478 9,538 9,538 12,830 12,830 6,610 6,610 33,893 33,893 6,930 6,930 0 0 0 0 0 0 0 0 20,159 20,159 33,893 33,893 14,299 42,377 14,299 42,377 4,877 14,700 4,877 14,700 9,265 27,471 0 0 45 141 146 296 3 63 143 233 0 0 0 0 0 0 143 233 0.02 0.03 0.01 0.02
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