<PAGE>
As filed with the Securities and Exchange Commission on May 9, 1997
Registration No. 333-______
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------------------
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
Sterling Vision, Inc.
(Exact name of Registrant as specified in its charter)
New York 11-3096941
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1500 Hempstead Turnpike
East Meadow, New York 11554
(516) 390-2100
(Address, including zip code, and telephone number, including
area code, of Registrant's principal executive offices)
------------------------
Joseph Silver, Esq.
Executive Vice President, Secretary and General Counsel
1500 Hempstead Turnpike
East Meadow, New York 11554
(516) 390-2100
(Name, address, including zip code,
and telephone number, including area code, of agent for service)
------------------------
Copies to:
Robert S. Matlin, Esq.
Julie K. Horowitz, Esq.
Camhy Karlinsky & Stein LLP
1740 Broadway, 16th Floor
New York, New York 10019-4315
(212) 977-6600
------------------------
Approximate date of commencement of proposed sale to public: As soon as
practicable after this Registration Statement becomes effective.
If the only securities being registered on this Form are being offered pursuant
to dividend or interest reinvestment plans, please check the following box./ /
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. /X/
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering./ /
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering./ /
If delivery of the prospectus is expected to be made pursuant to Rule 434 under
the Securities Act, please check the following box./ /
<PAGE>
<TABLE>
<CAPTION>
================================================================================
CALCULATION OF REGISTRATION FEE
================================================================================
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Title of each Proposed Proposed
class of maximum maximum Amount of
securities Amount to offering price aggregate registration
to be registered be registered (2) Per Share (1) price (1) fee
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<S> <C> <C> <C> <C>
Common Stock,
$0.01 par value 3,213,464 shs. $8,2188 $26,410,817 $8,003.28
================================================================================
</TABLE>
(1) Estimated solely for purpose of calculating the registration fee
pursuant to Rule 457(c) on the basis of the average of the high and low
prices per share of the common stock of Sterling Vision, Inc. (the
"Common Stock") reported on the NASDAQ National Market System on May 2,
1997.
(2) Includes: (i) 2,477,506 shares being registered on behalf of investors
in an $8 million private placement financing (which Sterling Vision,
Inc. (the "Company") completed on February 26, 1997) pursuant to which
the Company issued convertible debentures, in the aggregate principal
amount of $8 million, and an aggregate of 800,000 warrants (the
"Warrants"), each Warrant entitling the holder thereof to purchase one
share of Common Stock and, for each two Warrants exercised within a
specified period of time, an additional warrant (the "Bonus Warrant")
to purchase one share of Common Stock; (ii) 305,747 shares being
registered on behalf of the former shareholders of Singer Specs, Inc.
in connection with the acquisition, by the Company, of all the capital
stock of Singer Specs, Inc., which transaction was completed on April
1, 1997; (iii) 152,211 shares being registered on behalf of BEC Group,
Inc. ("BEC") in connection with the prepayment of the principal amount
due under two (2) promissory notes issued by the Company and held by
BEC; and (iv) 278,000 shares being registered on behalf of certain
holders of options and warrants to purchase shares of Common Stock.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE
OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SUCH SECTION 8(A),
MAY DETERMINE.
<PAGE>
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold, nor may
offers to buy be accepted, prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy, nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.
SUBJECT TO COMPLETION DATED MAY 9, 1997
PROSPECTUS
STERLING VISION, INC.
Common Stock
3,213,464 shares
------------------------
This Prospectus relates to 3,213,464 shares (collectively, the
"Shares") of the common stock, par value $.01 per share (the "Common Stock"), of
Sterling Vision, Inc. ("Sterling Vision" or the "Company"), which may be
offered, from time to time, by one or all of the selling shareholders named
herein (collectively, the "Selling Shareholders"). The Company will receive no
part of the proceeds of such sales, although the Company will receive proceeds
upon the exercise of certain options and warrants previously issued by the
Company, the underlying shares of which are being registered hereby. The Company
has agreed to pay all costs and expenses incurred in connection with the
registration of the Shares offered hereby, except that the Selling Shareholders
shall be responsible for all selling commissions, transfer taxes, fees of
counsel to the Selling Shareholders and related charges in connection with the
offer and sale of the Shares. See "Plan of Distribution."
The Common Stock of the Company is traded on the NASDAQ National Market
System ("NASDAQ-NMS") under the symbol "ISEE". On May 8, 1997, the closing sale
price of the Company's Common Stock on the NASDAQ-NMS was $8.00 per share. The
Selling Shareholders may sell all or a portion of the Shares offered hereby in
private transactions or in the over-the-counter market at prices related to the
prevailing prices of the Common Stock on the NASDAQ-NMS at the time of sale. The
Selling Shareholders may effect such transactions by selling to or through one
or more broker-dealers, and such broker-dealers may receive compensation in the
form of underwriting discounts, concessions or commissions from the Selling
Shareholders. The Selling Shareholders and any broker-dealers that participate
in the distribution may, under certain circumstances, be deemed to be
"underwriters" within the meaning of the Securities Act of 1933, as amended (the
"Securities Act"), and any commissions received by such broker-dealers and any
profits realized on their resale of Shares may be deemed to be underwriting
discounts and commissions under the Securities Act. The Company and the Selling
Shareholders may agree to indemnify such broker-dealers against certain
liabilities, including liabilities under the Securities Act. In addition, the
Company has agreed to indemnify the Selling Shareholders, with respect to the
registration of the Shares, against certain liabilities, including certain
liabilities under the Securities Act. To the extent required, the specified
number of Shares to be sold, the names of the Selling Shareholders, the public
offering price, the names of any such broker-dealers, and any applicable
commissions or discounts with respect to any particular offer will be set forth
in a supplement to this Prospectus. Each of the Selling Shareholders reserves
the right to accept or reject, in whole or in part, any proposed purchase of the
Shares. See "Plan of Distribution." Any securities covered by this Prospectus
which qualify for sale pursuant to Rule 144 under the Securities Act may be sold
under Rule 144 rather than pursuant to this Prospectus.
------------------------
AN INVESTMENT IN THE SHARES INVOLVES A
HIGH DEGREE OF RISK. SEE "RISK FACTORS" COMMENCING ON PAGE 5.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date of this Prospectus is May , 1997.
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and, in
accordance therewith, files reports, proxy statements and other information with
the Securities and Exchange Commission (the "Commission" or "SEC"). Such
reports, proxy statements and other information filed by the Company can be
inspected and copied, at the prescribed rates, at the public reference
facilities of the Commission at Room 1024, Judiciary Plaza, 450 Fifth Street,
N.W., Washington, D.C. 20549, at the Northeast Regional Office of the Commission
located at Seven World Trade Center, Suite 1300, New York, New York 10048 and at
the Midwest Regional Office of the Commission located at Citicorp Center, 500
West Madison Street, Suite 1400, Chicago, Illinois 60661-2511. Copies may be
obtained at prescribed rates from the Public Reference Section of the Commission
at 450 Fifth Street, N.W., Washington, D.C. 20549. The Commission maintains a
Web site that contains reports, proxy and information statements and other
information regarding issuers that file electronically with the Commission. The
address of the Commission's Web Site is http://www.sec.gov.
The Company has filed with the Commission, in Washington, D.C., a
Registration Statement on Form S-3 (together with all amendments thereto, the
"Registration Statement"), under the Securities Act, with respect to the Shares
offered hereby. This Prospectus does not contain all of the information set
forth in the Registration Statement and the exhibits and schedules filed
therewith, certain portions of which have been omitted as permitted by the rules
and regulations of the Commission. For further information with respect to the
Company and the Shares offered hereby, reference is hereby made to the
Registration Statement and to the exhibits and schedules filed therewith.
Statements contained in this Prospectus regarding the contents of any contract
or other document are not necessarily complete and, in each instance, reference
is made to the copy of such contract or other document filed as an exhibit to
the Registration Statement, each such statement being deemed to be qualified in
its entirety by such reference. The Registration Statement, including all
exhibits and schedules thereto, may be inspected, without charge, at the
principal office of the Commission, at Judiciary Plaza, 450 Fifth Street, N.W.,
Room 1024, Washington, D.C. 20549, at the Midwest Regional Office of the
Commission located at Citicorp Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661- 2511, and at the Northeast Regional Office of the
Commission located at Seven World Trade Center, Suite 1300, New York, New York
10048. Copies of such material may be obtained from the Public Reference Section
of the Commission at 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549,
upon the payment of the prescribed fees therefor.
2
<PAGE>
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents have been filed by the Company with the
Commission and are hereby incorporated by reference in this Prospectus: (a)
Annual Report on Form 10-K for the Fiscal Year ended December 31, 1996; (b)
Current Report on Form 8-K, dated February 26, 1997; (c) Current Report on Form
8-K, dated April 7, 1997; and (d) Proxy Statement with respect to the Annual
Meeting of Shareholders to be held on June 20, 1997.
All documents filed by the Company pursuant to Section 13(a), 13(c), 14
or 15(d) of the Exchange Act subsequent to the date of this Prospectus and prior
to the termination of the offering of the Shares offered hereby shall be deemed
to be incorporated by reference in this Prospectus and to be a part hereof from
the respective dates of the filing of such documents. Any statement contained in
a document incorporated by reference herein shall be deemed to be modified or
superseded, for purposes of this Prospectus, to the extent that a statement in
this Prospectus or in any subsequently filed document which also is, or is
deemed to be, incorporated by reference herein, modifies or supersedes such
statement. Any statement so modified or superseded shall not be deemed, except
as so modified or superseded, to constitute a part of this Prospectus.
The Company will provide, without charge, to each person who receives
this Prospectus, upon written or oral request of such person, a copy of any of
the information that was incorporated by reference in this Prospectus (not
including exhibits to the information that is incorporated herein by reference,
unless such exhibits are themselves specifically incorporated by reference
herein). Such requests should be made to Sebastian Giordano, Executive Vice
President-Finance, Chief Financial Officer and Treasurer of Sterling Vision,
Inc., 1500 Hempstead Turnpike, East Meadow, New York 11554, (516) 390-2100.
3
<PAGE>
THE COMPANY
Sterling is one of the largest chains of retail optical stores and the
second largest chain of franchised optical stores in the United States based
upon domestic sales and number of locations of Company-owned and franchised
stores (collectively referred to herein as the "Sterling Stores"). As of April
1, 1997, there were 339 Sterling Stores, consisting of 53 Company-owned stores
and 286 franchised stores. The Company continually seeks to expand both its
Company-owned and franchised store operations. As of April 1, 1997, Sterling was
constructing three additional stores and had received commitments to develop an
additional twelve franchised Sterling Stores. As of April 1, 1997, Sterling
Stores were located in 27 States, the District of Columbia and Ontario, Canada.
Most Sterling Stores offer eyecare products and services such as
prescription and non-prescription eyeglasses, eyeglass frames, ophthalmic
lenses, contact lenses, sunglasses and a broad range of ancillary items. To the
extent permitted by individual state regulations, an optometrist is employed by,
or affiliated with, most Sterling Stores, which optometrist provides
professional eye examinations to the public. The Company fills prescriptions
from these employed or affiliated optometrists, as well as from unaffiliated
optometrists and ophthalmologists. Most Sterling Stores have an inventory of
ophthalmic and contact lenses, as well as on-site lab equipment for cutting and
edging ophthalmic lenses to fit into eyeglass frames, which allows Sterling
Stores to offer same-day service in many cases.
Sterling strategically offers its Company-owned stores for sale to
qualified individuals. By selling Company-owned Sterling Stores to franchisees,
the Company hopes to achieve two goals: to recognize a gain on the conveyance of
the assets of such stores, and to create a stream of royalty payments based upon
a percentage of the future gross revenues of the franchised locations. Sterling
currently derives its revenues principally from the sale of eyecare products and
services at Company-owned stores; on-going royalties based upon a percentage of
the gross revenues of franchised stores; and the conveyance of Company-owned
store assets to existing and new franchisees.
While Sterling Stores presently operate under one of the tradenames
"Sterling Optical," "IPCO Optical," "Site For Sore Eyes," "Singer Specs,"
"Benson Optical," "Superior Optical," " Nevada Optical," "Duling Optical,"
"Monfried Optical" or "Kindly Optical," the Company is presently developing
plans to change the tradename of most Sterling Stores to "Sterling Optical." In
connection therewith, the Company intends to formulate and implement additional
advertising and marketing programs to create increased recognition of the name
and mark, "Sterling Optical," throughout those areas of the United States where
the Company is currently operating under a tradename other than "Sterling
Optical." The Company also operates VisionCare of California ("VCC"), a
specialized healthcare maintenance organization licensed by the California
Department of Corporations. VCC employs licensed optometrists who render
services in offices located immediately adjacent to, or within, most Sterling
Stores located in California.
The Company, through its wholly-owned subsidiary, Insight Laser
Centers, Inc. ("Insight"), also owns and operates an eyecare center, located in
New York City, at which it has installed two excimer lasers and at which it
offers Photo-Refractive Keractectomy ("PRK"), a procedure performed by licensed
ophthalmologists for the correction of certain degrees of myopia
(near-sightedness). In addition, the Company also has entered into arrangements
with other ophthalmologists who perform the PRK procedure utilizing excimer
lasers installed in their offices by Insight, in exchange for their payment, to
Insight, of a fee for each PRK procedure performed with such lasers. As of
December 31, 1996, Insight had leased six (6) excimer lasers, each with a
purchase option for nominal consideration, and had deposits for the purchase of
two additional excimer lasers; and as of the date hereof, Insight had placed
four excimer lasers in ophthalmological offices located in Long Island, New
York, San Francisco, California, Doylestown, Pennsylvania and Wilmington,
Delaware.
The Company was incorporated under the laws of the State of New York in
January 1992. The Company's executive offices are located at 1500 Hempstead
Turnpike, East Meadow, New York 11554, and its telephone number is (516)
390-2100.
4
<PAGE>
RISK FACTORS
Each prospective investor should carefully consider, in addition to the
other information contained in this Prospectus, the following information in
evaluating the Company and its business before making an investment decision.
This Prospectus contains certain forward-looking statements or statements which
may be deemed or construed to be forward-looking statements within the meaning
of the Private Securities Litigation Reform Act of 1996 with respect to the
financial condition and business of the Company. The words "estimate," "plan,"
"intend," "expect" and similar expressions are intended to identify
forward-looking statements. These forward-looking statements involve, and are
subject to, known and unknown risks (including the ones set forth below),
uncertainties and other factors which could cause the Company's actual results,
performance (financial or operating) or achievements to differ from the future
results, performance (financial or operating) or achievements expressed or
implied by such forward-looking statements. Investors are cautioned not to place
undue reliance on these forward-looking statements, which speak only as of the
date hereof. The Company undertakes no obligation to publicly release any
revisions to these forward-looking statements to reflect events or circumstances
after the date hereof or to reflect the occurrence of unanticipated events.
Operating Results; Operating Losses
Sterling was formed in January, 1992 to purchase substantially all of
the assets then comprising the retail optical store business of Sterling Optical
Corp. (f/k/a IPCO Corporation), a New York corporation which, in December 1991,
filed for protection under Chapter 11 of the U.S. Bankruptcy Code, and had
limited operations until July 15, 1992. The Company's future operating results
will depend, in part, on matters over which the Company has no control,
including, without limitation, general economic conditions, competition,
including competition in the managed, vision care and PRK markets, the ability
of the Company to acquire additional retail optical chains at attractive prices,
and the ability of the Company to develop, operate and/or manage successfully
PRK centers or to affiliate with ophthalmologists with regard to PRK. Therefore,
it is not possible to estimate operating expenses, revenues or working capital
requirements based upon historical operating performance.
The Company experienced negative cash flow during the fiscal year ended
December 31, 1996 resulting primarily from the operations of Insight and from
losses attributable to the stores acquired, in November 1995, from Benson
Optical Co., Inc., OCA Acquisition Corp. and Superior Optical Company, Inc.
Although the Company has taken certain measures which management believes will
improve the Company's operations and cash flow in 1997, and although the Company
anticipates a positive cash flow from its retail optical business in 1997, it
nevertheless anticipates that Insight will continue to operate at a loss for the
fiscal year ending December 31, 1997 and, therefore, the Company believes that
such operating cash flow will be insufficient to result in a positive cash flow
for such fiscal year. Accordingly, the Company may be required to obtain
additional financing either through additional borrowings, the sale of franchise
notes receivable and/or additional sales of equity, and there can be no
assurance that the Company would be successful in obtaining such additional
sources of financing.
Franchising
The Company relies, in part, upon its franchisees and the manner in
which they operate their respective Sterling Stores to develop and promote the
Company's business. Although the Company has established criteria to evaluate
and screen prospective franchisees, and has attracted numerous, new
franchisees, there can be no assurance that such franchisees will have the
business acumen or financial resources necessary to operate successfully their
Sterling Stores. The failure by a substantial number of the Company's
franchisees to operate their respective Sterling Stores successfully could have
a material adverse effect upon the Company.
Competition in the Franchise Industry
The Company faces competition from franchisors in other industries
for the sale of franchises to franchisees. Many of these competitors have
substantially greater financial and technical resources and marketing
capabilities than the Company; and many of these competitors also have
significantly greater experience than the Company in marketing and servicing
franchises. There can be no assurance that the Company will be able to compete
successfully against these competitors in securing additional franchisees.
5
<PAGE>
Dependence on New Franchises
The Company's growth and ability to increase revenues and generate
higher levels of profitability depend on increasing the number of franchised
Sterling Stores in operation. There are many major metropolitan markets and
major urban areas that have no Sterling Stores, areas that the Company believes
could support additional Sterling Stores; and there can be no assurance that
the Company will sustain either the current or an increased level of new
franchised stores in the future.
Competition in the Retail Optical Industry
The retail optical business is highly competitive and includes chains
of retail optical stores, superstores, individual retail outlets, and a large
number of individual opticians, optometrists and ophthalmologists who provide
professional services and may, in connection therewith, dispense prescription
eyewear. As retailers of prescription eyewear generally service local markets,
competition varies substantially from one location or geographic area to
another.
The Company believes that the principal competitive factors in its
retail optical business are convenience of location, the on-site availability of
professional eye examinations, quality and consistency of product and service,
price, product warranties and a broad selection of merchandise, and it believes
that it competes favorably in each of these respects.
Dependence on Availability of Attractive Acquisitions
Historically, a large portion of the Company's profitability has
resulted from the Company's ability to acquire non-Sterling retail optical
stores and chains, at attractive prices, for initial operation by the Company
and, possibly, the later strategic sale of such stores to franchisees who
continue operating such stores, generally under the tradename "Sterling
Optical", in exchange for the payment to the Company of the purchase price for
the assets and goodwill therefor, initial franchise fees and ongoing royalties.
Although the Company believes that there currently are many opportunities to
acquire small to mid-sized regional optical chains that have lost market share,
there can be no assurance that any such opportunities will continue to exist or
that any such acquisitions will be consummated. The failure to consummate
acquisitions at attractive prices or effect resales of such acquired stores to
franchisees on favorable terms would have a material adverse effect on the
Company.
Negative Operating Results Resulting from Certain Promotional Incentives Offered
By the Company
From time to time, certain major competitors of the Company offer
promotional incentives to their customers, including "50% Off" on designer
frames and "Buy One-Get One Free" eyecare promotions and, in response thereto,
the Company has, from time to time, offered the same or similar incentives to
its customers. Such action by the Company has resulted in lower profit margins,
and there can be no assurance that these competitive promotional incentives will
not further adversely impact the Company's results of operations. Although the
Company believes that its Sterling Stores provide quality service and products
at competitive prices, several of the larger retail optical chains have greater
financial resources; and there can be no assurance that the Company will be able
to continue to deliver cost-efficient products in the event of aggressive
pricing by its competitors.
Income Recognition on Conveyance of Company-owned Store Assets
A substantial portion of the Company's net income historically has been
derived from the conveyance of Company-owned store assets to franchisees for
which, in most cases, the Company provides purchase money financing for a
substantial portion of the purchase price thereof. The foregoing has two
important consequences to investors. First, because the Company's conveyance of
Company-owned store assets occurs on an irregular basis, the Company's earnings
may fluctuate significantly from fiscal period to fiscal period, depending,
among other things, on the quantity and nature of the store assets conveyed.
Second, because the Company generally finances the majority of the purchase
price upon a conveyance of Company-owned store assets, it will recognize all of
the gain before it receives all of the proceeds from the conveyance.
Historically, the purchasers of these Company-owned store assets have only
occasionally defaulted on their purchase money obligations; and although the
Company, in many instances, has been able to repossess the conveyed
6
<PAGE>
assets and reconvey such assets to another franchisee there can be no assurance
that it will be able to do so in the future. In addition, although the Company
could and would operate such repossessed stores, the failure to reconvey such
assets to other franchisees would, in all likelihood, have a material adverse
effect upon the Company.
Losses Associated with PRK Centers
An integral part of the Company's business strategy of becoming a
full-service eyecare company originally included developing and/or managing a
chain of eyecare centers, to be operated under the tradename "Insight Laser,"
primarily offering PRK. In furtherance of such strategy, Insight, in 1996: (i)
leased six (6) excimer lasers to perform the PRK procedure; (ii) constructed and
opened an Insight Laser Center in New York City; (iii) installed excimer lasers
in three ophthalmological offices (two of which were located in Long Island, New
York, and one of which is located in San Francisco, California) and, in
connection therewith, entered into agreements with such ophthalmologists
pursuant to which they paid to Insight a fee for each PRK procedure performed
with such excimer lasers; (iv) created an internal organization and staff to
administer, market and expand its Insight Laser Center business; and (v)
developed and initiated an advertising campaign to attract additional customers
to its Insight Laser Centers. Notwithstanding these efforts, the Company's
revenues from its Insight Laser Center business grew only modestly; and, during
the latter part of 1996, published reports concluded that consumer acceptance of
PRK, as a vision correction alternative, was below industry expectations,
despite the aggressive marketing and advertising programs conducted by laser
surgery companies, including Insight.
As a result of the limited revenues generated in 1996 by Insight, the
Company revised its business strategy by primarily focusing on its affiliations
with ophthalmologists, as opposed to constructing, opening and operating Insight
Laser Centers. As part of such new business strategy, Insight has installed four
(4) of its excimer lasers in ophthalmological offices located in Long Island,
New York, San Francisco, California, Doylestown, Pennsylvania and Wilmington,
Delaware in exchange for the payment, to it, of a fee computed and based upon
the number of PRK procedures performed by such ophthalmologists using Insight's
excimer lasers. With respect to the foregoing, there can be no assurance that:
(i) any such agreements will be profitable to the Company; (ii) Insight will be
able to enter into similar types of arrangements for its other excimer lasers;
or (iii) Insight otherwise will be successful in implementing this new business
strategy.
Competition in the PRK Market
The Company faces substantial competition in the PRK industry.
Currently, there are other companies who have, or are in the process of,
entering into arrangements with ophthalmologists similar to those entered into
by Insight, as described above. In addition, other existing ophthalmological
offices and hospitals are equipped with excimer lasers which can perform the PRK
procedure; and one manufacturer of excimer lasers has developed and is currently
marketing its own laser centers. As a result of the foregoing, the prices
generally charged for the PRK procedure have declined; it is anticipated that
future competition will lead to the further decline in such prices. The excimer
lasers approved by the United States Food and Drug Administration ("FDA") have
been approved initially only for the correction of certain degrees of myopia
(near-sightedness), although one manufacturer recently received approval for use
of the excimer laser in correcting astigmatisms. In addition, it is anticipated
that, in the future, such lasers will be approved by the FDA for use in treating
other ophthalmic conditions. The PRK procedure also competes with other present
forms of treatment for refractive disorders, including eyeglasses, contact
lenses, refractive surgery (such as radial keratotomy), corneal transplants, and
other technologies under development. Accordingly, there can be no assurance
that the Company will be able to compete successfully in the PRK industry.
Uncertainty of PRK Laser Market Acceptance
The PRK laser procedure has only been tested, from a commercial
perspective, in the United States since October 1995, the date of the FDA's
first approval thereof. Factors that are likely to adversely affect market
acceptance of the PRK procedure include: nonacceptance of laser refractive
procedures as an alternative to existing methods of treating refractive
disorders; the relatively high cost of laser refractive procedures; general
resistance to surgery; the effectiveness of alternative, less intrusive or less
expensive methods of correcting refractive disorders; and the possibility of
known or unknown side effects. In addition, PRK laser surgery is currently
approved only for the correction of
7
<PAGE>
certain degrees of myopia. Accordingly, there can be no assurance that the
Company will be able to achieve market acceptance of the PRK procedure to be
offered through its affiliated health care providers, by the ophthalmological
community or by the general population, and the failure to achieve such
acceptance would, in all likelihood, have a material adverse effect on the
Company.
Rapid Technological Changes
The market for ophthalmic lasers is characterized by rapid
technological changes, including advances in laser and other technologies and
the potential new development of alternative surgical techniques or new
pharmaceutical products. It is possible that newer technologies, techniques or
products could be developed with better performance than the excimer lasers
acquired by the Company, although such new technologies would be subject to the
FDA approval process. The availability of new and better ophthalmic laser
technologies or other technologies that serve the same purpose as PRK would, in
all likelihood, have a material adverse effect on the Company's PRK business.
Possible Long-Term Attrition of Existing Customers from Introduction of PRK
Laser Surgery
If existing vision correction users undergo the PRK procedure or other
vision correction techniques (see "--Rapid Technological Changes"), the demand
for contact lenses and eyeglasses may decrease. A decrease in customer demand
for such products could have a material adverse effect on the operations of the
Company's owned and franchised Sterling Stores.
Government Regulation
The Company and its operations are subject to extensive federal, state
and local laws, rules and regulations affecting the health care industry and the
delivery of health care, including, laws and regulations prohibiting the
practice of medicine or optometry, prohibiting the unlawful rebate or unlawful
division of fees, and limiting the manner in which prospective patients may be
solicited. The regulatory requirements that the Company must satisfy to conduct
its business will vary from state to state. In particular, some states have
enacted laws governing the ability of ophthalmologists and optometrists to enter
into contracts to provide professional services with business corporations or
lay persons, and some states prohibit companies from computing their fee for
management services based upon a percentage of the gross revenues of the
ophthalmological practice being managed. Various federal and state regulations
limit the financial and non-financial terms of agreements with these health care
providers, and the revenues potentially generated by the Company may therefore
differ depending upon the nature of the Company's various health care provider
affiliations.
Ophthalmic excimer lasers are considered medical devices and are
subject to regulation by the FDA. The Company understands that the manufacturers
of the excimer laser systems that the Company leases have received approval from
the FDA for their use to treat certain degrees of near-sightedness and, in the
case of one such laser, to treat astigmatisms. These approvals, however, contain
restrictions on the use, labeling, promotion and advertising of the excimer
laser.
The FDA and other federal, state or local governmental agencies may
amend current, or adopt new, rules and regulations that could affect the use of
excimer lasers for PRK and the Company's operations, thereby adversely affecting
this aspect of the Company's business.
As a franchisor, the Company is subject to various registration and
disclosure requirements imposed by the Federal Trade Commission and by many of
the states in which the Company conducts its franchising operations. The Company
believes that it is in compliance with all such applicable laws and regulations.
The Company is also subject to certain regulations adopted under the
Federal Occupational Safety and Health Act with respect to its in-store
laboratory operations. The Company believes that it is in material compliance
with all such applicable laws and regulations.
8
<PAGE>
Anti-Remuneration Laws
The Medicare and Medicaid anti-kickback statutes prohibit financial
relationships designed to induce the purchase (or arranging for or recommending
the purchase) of items or services, or patient referrals to providers of
services, for which payment may be made under Medicare, Medicaid, or other
federally funded health care programs. The anti-kickback statutes contain
exceptions for, among other things, properly reported discounts and compensation
for bona fide employees. In addition, federal regulations establish certain
"safe harbors" from liability under the anti-kickback statutes, including
further refinements of the exceptions for discounts and employee compensation,
and a safe harbor for personal service contracts. Several states also have
statutes or regulations prohibiting financial relationships with referral
sources that are not limited to services for which Medicare and Medicaid payment
may be made. Sanctions under these federal and state anti-remuneration laws may
include civil monetary penalties, license suspension or revocation, exclusion of
providers or practitioners (but, under current law, not manufacturers) from
participation in Medicare and Medicaid, and criminal fines or imprisonment.
While the Company believes it is presently in compliance with these laws,
because of the breadth of such statutory provisions and the scope of the
possible interpretations thereof, it is possible that some of the Company's
business practices could be subject to challenge under one or more such laws.
However, the Company is not aware of any challenge or potential challenge to its
business practices at this time.
Payments by the Company
Pursuant to the terms of certain agreements entered into between the
Company and BEC Group, Inc., in one instance, and the former shareholders of
Singer Specs, Inc., in the other, under certain circumstances the Company is
obligated to reimburse such entity or persons for the difference between the
actual selling price (net of commissions) of the Shares held by such entity or
persons and the price upon which the issuance of the Shares to such entity or
persons was determined. In the event of a significant decline in the market
price of the Common Stock and the subsequent sale of the Shares held by such
entity or persons, the Company would be obligated to make payment of a material
amount to such holders and, in such event, such payment, in all likelihood,
would have a material adverse effect on the Company.
Potential Conflicts of Interest
Drs. Robert Cohen, Alan Cohen and Edward Cohen are directors and,
together with certain members of their immediate families (collectively, the
"Cohen Family"), are the principal shareholders of the Company. They are also
the executive officers and directors and, together with certain members of the
Cohen Family, are the sole shareholders of Cohen Fashion Optical, Inc. and its
affiliate, Real Optical Purchasing Corp. (collectively, "CFO"), which operates
retail optical stores similar to Sterling Stores. CFO operates stores in the
states of Connecticut, Florida, New Hampshire, Massachusetts, New Jersey, New
York and Pennsylvania and may, in the future, operate in other states as well.
As of April 1, 1997, approximately 28 CFO stores were located in the same
shopping center or mall as, or in close proximity to, Sterling Stores and, in
the future, CFO may open or franchise additional stores which are located in the
same areas as Sterling Stores. In addition, Drs. Robert and Alan Cohen are the
sole members of Meadows Management, LLC, a New York limited liability company
("MML"), which has entered into an agreement with the Company pursuant to which
the Company retained MML, for the period April 14, 1997 through December 31,
1997, to render consulting services to it in exchange for a fee (computed at the
rate of $300,000 per annum) and options to purchase up to 300,000 shares of
Common Stock, the issuance of which options is subject to shareholder approval
at the 1997 Annual Meeting of Shareholders. Furthermore, certain members of the
Cohen Family own minority equity interests in, and have substantial management
positions or consulting agreements with, three of the Company's suppliers: Rapid
Cast, Inc. ("Rapid Cast"); American Calling Systems, Inc. and Dura-Lab, Inc.
("DuraLab"). While the Company currently receives products from Rapid Cast and
DuraLab on a preferred vendor basis, there can be no assurance that, in the
future, the Company will continue to receive products from these companies on
such favorable terms. Furthermore, the Sterling Stores and certain of CFO's
stores jointly participate as providers under certain third party benefit plans
obtained by Sterling, which arrangement is anticipated to continue in the
future.
9
<PAGE>
Control by Principal Shareholders
As of April 1, 1997, the Cohen Family, in the aggregate, beneficially
owned approximately 60% of the Company's outstanding shares of Common Stock,
exclusive of outstanding options to purchase 500,001 shares of Common Stock. As
a result, the Cohen Family is able to direct the Company's affairs and exercise
significant influence over all matters requiring shareholder approval, including
the election of directors and the approval of significant corporate
transactions. Future sales by the Cohen Family of substantial amounts of Common
Stock, or the potential for such sales, could adversely affect the prevailing
market price of the Common Stock.
Dependence on Key Personnel
The Company is currently dependent upon the ability and experience of
certain members of its management, in particular, Mr. Greenberg, the Company's
Chief Executive Officer, Mr. Jerry Lewis, the Company's newly appointed
President and Chief Operating Officer, Mr. Jerry Darnell, the Company's
Executive Vice President-Franchising, Mr. Joseph Silver, the Company's Executive
Vice President and General Counsel, Mr. Sebastian Giordano, the Company's Chief
Financial Officer, Mr. Kevin Cambra, the Company's Executive Vice
President-Company Store Operations and Mr. Ali Akbar, the Company's Vice
President-Managed Care, and there can be no assurance that the Company will be
able to retain such persons. The loss of one or more of such members of
management could have a material adverse effect on the Company's operations.
Shares Eligible for Future Sale
Sales of a substantial number of shares of Common Stock into the public
market following the date of this Prospectus could materially and adversely
affect the prevailing market price for the Common Stock. In addition to the
3,213,464 shares of Common Stock offered hereby, as of the effective date of the
Registration Statement there will be 12,693,282 shares of Common Stock
outstanding (including the 305,747 Shares being registered hereby on behalf of
the former shareholders of Singer Specs, Inc.), excluding the shares reserved
for issuance under the Company's 1995 Stock Option Plan (which amount has been
increased from 2,000,000 shares to 3,500,000 shares subject to shareholder
approval to be obtained at the 1997 Annual Meeting of Shareholders), 10,106,879
of which were issued by the Company in private transactions not involving a
public offering (the "Private Shares"). Of the total number of Private Shares,
5,556,243 are freely tradeable under Rule 144 of the Securities Act and
4,550,636 are subject to the volume limitations on sale set forth in Rule 144.
Anti-takeover Provisions
Sterling's Amended and Restated Certificate of Incorporation (the
"Amended Certificate") and Amended and Restated By-Laws (the "Amended By-Laws")
contain certain provisions that may have the effect of discouraging, delaying or
making more difficult a change of control of Sterling or preventing the removal
of incumbent directors even if some, or even a majority, of Sterling's
shareholders were to deem such an event to be in the best interest of the
Company. The Amended Certificate, among other things, provides for a classified
Board of Directors, authorizes the issuance of 5,000,000 shares of Preferred
Stock and permits the Board of Directors to fix the rights, privileges and
preferences of such shares of Preferred Stock without any further vote or action
by the shareholders. The rights of the holders of Common Stock will be subject
to, and may be adversely affected by, the rights of the holders of any Preferred
Stock that may be issued in the future. In addition, Sterling is subject to the
anti-takeover provisions of Section 912 of the Business Corporation Law of the
State of New York, which could have the effect of delaying or preventing a
change of control of the Company. See "Description of Capital Stock."
Material Limitations of Credit Agreement
The Company is a party to a revolving credit and term loan agreement,
dated as of April 5, 1994, as amended (the "Credit Agreement"), with The Chase
Manhattan Bank (the "Bank"). The Credit Agreement contains restrictive covenants
which limit and, in some cases, prohibit the Company from undertaking certain
business activities without the Bank's consent. The Company is not permitted to
acquire substantially all of the assets or business of another person or entity
without the Bank's consent. In addition, the Company is not permitted to incur
or permit to exist any mortgage,
10
<PAGE>
pledge, assignment, security interest, lien, charge or other encumbrance of any
nature, other than certain permitted liens. The Company is also prohibited from
incurring, creating, assuming or permitting to exist or becoming liable with
respect to any indebtedness for borrowed money except certain specified
indebtedness, including financing up to 100% of the acquisition cost of
capitalized assets and up to 80% of the purchase price of the acquisition of all
or substantially all of the common stock or assets of any entity. The Credit
Agreement currently prohibits the Company from assuming indebtedness in
connection with future acquisitions unless it complies with certain
restrictions. The Company is also prohibited from guaranteeing any indebtedness
or obligation of any person including certain indebtedness of affiliates or
subsidiaries. The Credit Agreement does not allow the Company to sell, lease,
transfer or otherwise dispose of its properties and assets, except for certain
specified transfers in the ordinary course of business. The Company is also
prohibited from selling, transferring or otherwise disposing of notes, accounts
receivables or other obligations owing to the Company or any Corporate Guarantor
(as defined in the Credit Agreement), except for certain limited actions,
including the ability of Sterling Vision of California, Inc. to sell certain
franchisee notes provided that the Company makes a prepayment of its obligations
to the Bank with the proceeds thereof. The Company is also prohibited from
making certain loans, extensions of credit, capital contributions and other
investments with the exception of certain limited loans and advances. The Credit
Agreement also contains a general prohibition on sale and leaseback
transactions. Furthermore, the Company is not permitted to merge or consolidate
with, or sell, assign, discount, lease or otherwise dispose of all or
substantially all of its assets or acquire all or substantially all of the
assets or the business of any entity, with the exception of certain limited
actions by the Company's subsidiaries. The Company may not enter into any
transaction for the purchase, sale or exchange of property or the rendering of
any service by any of its subsidiaries, except in the ordinary course of
business. The Credit Agreement also does not permit the Company to enter into
any joint venture or partnership arrangements without the Bank's prior written
consent.
Compliance with Credit Agreement
In the past, the Company has not been able to comply with various terms
and conditions (including certain financial covenants) of the Credit Agreement,
although the Bank has waived such non-compliance by the Company. The Bank has a
security interest in substantially all of the Company's assets. If the Company
is unable to comply with the Credit Agreement in the future, there can be no
assurance that the Company will be able to obtain appropriate waivers of, or
amendments to, the Credit Agreement, and the failure to do so would have a
material adverse effect on the Company.
Dividend Policy
Pursuant to the Credit Agreement, the Company is restricted from paying
dividends on the Common Stock without the Bank's consent, although the Company
has no intention to pay dividends in the foreseeable future. The Company's
future dividend policy will depend upon the Company's earnings, capital
requirements, financial condition and other relevant factors.
11
<PAGE>
USE OF PROCEEDS
The Company will not receive any of the proceeds from the sale of the
shares of Common Stock offered hereby. The Company, however, may receive an
aggregate of approximately $10,615,000 in the event of the exercise of all of:
(i) the 800,000 warrants (the "Warrants") issued to the holders of the Company's
Convertible Debentures due August 25, 1998 (assuming an exercise price of $6.50
per share of Common Stock); (ii) the 400,000 additional warrants (the "Bonus
Warrants") to be issued to the holders of the Convertible Debentures upon the
exercise of the Warrants within a specified period of time; (iii) the 58,000
options (the "Options") to purchase Common Stock granted to the former President
of the Company; and (iv) the 220,000 warrants (the "Underwriters' Warrants")
issued to the underwriters and their employees in connection with the Company's
initial public offering, all of the proceeds of which the Company intends to use
for general working capital purposes.
12
<PAGE>
SELLING SHAREHOLDERS
The following table sets forth the number of shares of Common Stock
beneficially owned by each of the Selling Shareholders as of April 30, 1997, the
number of Shares covered by this Prospectus with respect to each Selling
Shareholder, and the amount and percentage ownership of each Selling Shareholder
after the offering of the Shares offered hereby, assuming all of the Shares
covered by this Prospectus are sold by the Selling Shareholders. Except as
otherwise indicated by footnote below, none of the Selling Shareholders has had
any position, office or other material relationship with the Company within the
past three years, other than as a result of the ownership of the Shares or other
securities of the Company.
<TABLE>
<CAPTION>
Common Stock Common Stock
Beneficially Owned Number of Beneficially Owned
Prior to the Offering Shares After the Offering
--------------------- Registered ------------------
Number Percent Hereunder Number Percent
------ ------- --------- ------ -------
<S> <C> <C> <C> <C>
Huberfeld/Bodner Family Foundation 154,844(1) 1.2% 154,844 0 *
Dalton Trading, S.A. 216,782(1) 1.7% 216,782 0 *
Newark Sales Corp. 402,595(1) 3.2% 402,595 0 *
Charles Kushner 154,844(1) 1.2% 154,844 0 *
Murray Kushner 92,906(1) * 92,906 0 *
Richard Stadtmauer 61,938(1) * 61,938 0 *
Lancer Partners, L.P. 211,207(1) 1.7% 211,207 0 *
Lancer Offshore, Inc. 28,201(1) * 28,181 0 *
Lancer Voyager Fund 20,130(1) * 20,130 0 *
Lancer Polaris 20,130(1) * 20,130 0 *
Michael Lauer 30,040(1) * 30,040 0 *
Ace Foundation, Inc. 154,844(1) 1.2% 154,844 0 *
Abraham Elias 24,775(1) * 24,775 0 *
Connie Lerner 61,938(1) * 61,938 0 *
Wayne Saker 30,969(1) * 30,969 0 *
Abraham Ziskind 30,969(1) * 30,969 0 *
Jules Nordlicht 340,657(1) 2.7% 340,657 0 *
Mark Nordlicht 123,875(1) * 123,875 0 *
Rita Folger 30,969(1) * 30,969 0 *
Gabriel Bodenheimer 30,969(1) * 30,969 0 *
The Jerusalem Fund, Inc. 30,969(1) * 30,969 0 *
Millenco, L.P. 234,040(2) 1.8% 222,975 11,065 *
Sidney Singer 126,277(3) * 126,277 0 *
Alan Singer 89,735(3) * 89,735 0 *
David Singer 89,735(3) * 89,735 0 *
BEC Group, Inc. 152,211(4) 1.2% 152,211 0 *
Neal Polan 58,000(5) * 58,000 0 *
Burnham Securities, Inc. 50,000(6) * 50,000 0 *
Richard Lewisohn, III 30,000(6) * 30,000 0 *
Theodore Rosen 25,000(6) * 25,000 0 *
John P. Rosenthal 2,000(6) * 2,000 0 *
Randall Stern 2,000(6) * 2,000 0 *
George Koo 1,000(6) * 1,000 0 *
Fechtor Detwiler & Co., Inc. 11,000(6) * 11,000 0 *
Richard Fechtor 28,000(6) * 28,000 0 *
13
<PAGE>
<CAPTION>
Common Stock Common Stock
Beneficially Owned Number of Beneficially Owned
Prior to the Offering Shares After the Offering
--------------------- Registered ------------------
Number Percent Hereunder Number Percent
------ ------- --------- ------ -------
<S> <C> <C> <C> <C>
Sheldon Fechtor 28,000(6) * 28,000 0 *
Robert Detwiler 28,000(6) * 28,000 0 *
Joel L. Gold 16,500(7) * 15,000 1,500 *
</TABLE>
* Less than one percent (1%).
(1) This number represents the aggregate number of shares of Common Stock
to be issued to such person (a) upon the conversion of the Company's
convertible debentures held by such Selling Shareholder, assuming a
conversion price of $6.2622 per share of Common Stock, (b) upon the
exercise of the Warrants held by such person, and (c) upon the exercise
of the Bonus Warrants which may be granted to such person.
(2) This number includes 223,015 shares of Common Stock to be issued to
such person (a) upon the conversion of the Company's convertible
debentures held by such Selling Shareholder, assuming a conversion
price of $6.2622 per share of Common Stock, (b) upon the exercise of
the Warrants held by such person, and (c) upon the exercise of the
Bonus Warrants which may be granted to such person.
(3) This number represents the number of shares of Common Stock issued to
such person on April 1, 1997, in exchange for all of the shares of
Singer Specs, Inc. held by such person.
(4) This number represents the number of shares of Common Stock to be
issued to such person in connection with the prepayment of certain
promissory notes issued by the Company, in connection with its
acquisition of eight retail optical stores from Pembridge Optical
Partners, Inc., and held by such person, assuming an issuance price of
$7.50 per share of Common Stock.
(5) This number represents the number of shares of Common Stock to be
issued to such person, the President of the Company until August 1994,
upon the exercise of the Options.
(6) This number represents the number of shares of Common Stock to be
issued to such person upon the exercise of the Underwriters' Warrants
held by such person which were issued to the underwriters, Burnham
Securities, Inc. and Fechtor Detwiler & Co., Inc., in connection with
the Company's initial public offering.
(7) This number includes shares of Common Stock to be issued to such person
upon the exercise of the Underwriters' Warrants held by such person.
14
<PAGE>
PLAN OF DISTRIBUTION
The sale of all or a portion of the Shares by the Selling Shareholders
may be effected, from time to time, in private transactions or in the
over-the-counter market at prices related to the prevailing prices of the Shares
on the NASDAQ-NMS at the time of the sale, or at negotiated prices. The Selling
Shareholders may effect such transactions by selling to or through one or more
broker-dealers, and such broker-dealers may receive compensation in the form of
underwriting discounts, concessions or commissions from the Selling
Shareholders. The Selling Shareholders and any broker-dealers that participate
in the distribution of the Shares may, under certain circumstances, be deemed to
be "underwriters" within the meaning of the Securities Act, and any commissions
received by such broker-dealers and any profits realized on the resale of Shares
by them may be deemed to be underwriting discounts and commissions under the
Securities Act. The Company and the Selling Shareholders may agree to indemnify
such broker-dealers against certain liabilities, including liabilities under the
Securities Act. In addition, the Company has agreed to indemnify certain of the
Selling Shareholders, with respect to the Shares of Common Stock offered hereby,
against certain liabilities, including certain liabilities under the Securities
Act.
To the extent required under the Securities Act, a supplemental
prospectus will be filed, disclosing (a) the name of any such broker-dealers,
(b) the number of Shares involved, (c) the price at which such Shares are to be
sold, (d) the commissions paid or discounts or concessions allowed to such
broker-dealers, where applicable, (e) that such broker-dealers did not conduct
any investigation to verify the information set out or incorporated by reference
in this Prospectus, as supplemented, and (f) other facts material to the
transaction.
Each Selling Shareholder may be subject to applicable provisions of the
Exchange Act and the rules and regulations promulgated thereunder, including,
without limitation, Regulation M, which provisions may limit the timing of
purchases and sales of any of the Company's securities by the Selling
Shareholders.
There is no assurance that any of the Selling Shareholders will sell
any of the Shares.
The Company has agreed to pay all costs and expenses incurred in
connection with the registration of the Shares offered hereby, except that the
Selling Shareholders shall be responsible for all selling commissions, transfer
taxes and related charges in connection with the offer and sale of such Shares
and the fees of the Selling Shareholders' counsel.
The Company has agreed to keep the Registration Statement relating to
the offering and sale, by the Selling Shareholders, of the Shares, continuously
effective until the later of: (i) April 1, 1999; and (ii) such date as such
Shares may be resold without registration under the provisions of the Securities
Act, under Rule 144 thereof or otherwise.
15
<PAGE>
DESCRIPTION OF CAPITAL STOCK
The authorized capital stock of the Company consists of 28,000,000
shares of Common Stock, $0.01 par value, and 5,000,000 shares of Preferred
Stock, $0.01 par value. As of April 15, 1997, 12,693,282 shares of Common Stock
were outstanding and no shares of Preferred Stock were outstanding.
Common Stock
Subject to the rights of the holders of the Preferred Stock, the
holders of outstanding shares of Common Stock are entitled to receive dividends
out of assets legally available therefor at such times and in such amounts as
the Board of Directors may, from time to time, determine subject, however, to
the approval of the Bank under the Credit Agreement. The shares of Common Stock
are neither redeemable nor convertible, and the holders thereof have no
preemptive or subscription rights to purchase any securities of the Company.
Upon liquidation, dissolution or winding up of the Company, the holders of
Common Stock are entitled to receive, pro rata, the assets of the Company which
are legally available for distribution after payment of all debts and other
liabilities and subject to the prior rights of any holders of Preferred Stock
then outstanding. Each outstanding share of Common Stock is entitled to one vote
on all matters submitted to a vote of shareholders. There is no cumulative
voting in the election of directors.
Preferred Stock
The Company's Amended and Restated Certificate of Incorporation
authorizes the Board of Directors to issue the Preferred Stock in classes or
series and to establish the designations, preferences, qualifications,
limitations and restrictions of any class or series with respect to the rate and
nature of dividends, the price and terms and conditions on which shares may be
redeemed, the terms and conditions for conversion or exchange into any other
class or series of such stock, voting rights and other terms. The Company may,
without approval of the holders of Common Stock, issue Preferred Stock which has
voting, dividend or liquidation rights superior to those of the Common Stock and
which may adversely affect the rights of holders of Common Stock. Pursuant to
the terms of the Credit Agreement, the Company has agreed that, except with the
Bank's prior consent, it will not issue the Preferred Stock except in connection
with the acquisition of retail optical chains and will give the Bank notice
prior to the issuance of Preferred Stock. The issuance of Preferred Stock, while
providing flexibility in connection with possible acquisitions and other
corporate purposes, could, among other things, adversely affect the voting power
of the holders of Common Stock and could have the effect of delaying, deferring
or preventing a change in control of the Company.
Warrants
As of April 1, 1997, the Company had outstanding warrants exercisable
for an aggregate of 1,020,000 shares of Common Stock at a weighted average
exercise price of $7.04 per share.
Registration Rights
After the offering, the holders of approximately 278,000 shares of
Common Stock issuable upon exercise of the Underwriters' Warrants and the
Options, or their permitted transferees, will be entitled to certain rights with
respect to the registration of such Shares under the Securities Act,
notwithstanding the registration of such Shares being effected hereby. Under the
terms of an agreement between the Company and such holders, if the Company
proposes to register any of its securities under the Securities Act, either for
its own account or the account of other security holders exercising registration
rights, such holders are entitled to notice of such registration and are
entitled to include shares of such Common Stock therein at the Company's
expense. In addition, commencing on May 20, 1997, the holders of a majority of
the Underwriters' Warrants, as well as the holder of the Options, will have the
right to require the Company to prepare and file a registration statement with
respect to the shares of Common Stock issuable to such holders upon their
exercise of the Underwriters' Warrants and/or the Options.
Transfer Agent
The transfer agent for the Common Stock is Chase Mellon Shareholder
Services.
16
<PAGE>
LEGAL MATTERS
Certain legal matters in connection with the sale of the Shares offered
hereby will be passed upon for the Company by Camhy Karlinsky & Stein LLP, New
York, New York.
EXPERTS
The consolidated financial statements of the Company as of December 31,
1996 and December 31, 1995 and for each of the two years in the period ended
December 31, 1996 incorporated in this Prospectus by reference to the Company's
Annual Report on Form 10-K for the fiscal year ended December 31, 1996, have
been audited by Deloitte & Touche LLP, independent public accountants, as
indicated in their report with respect thereto, and are incorporated herein in
reliance upon the authority of said firm as experts in accounting and auditing
in giving said report. The consolidated financial statements of the Company as
of December 31, 1994 and for the year ended December 31, 1994 incorporated by
reference to the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1996 have been audited by Janover Rubinroit, LLC, independent
public accountants, as indicated in their report with respect thereto, and are
incorporated herein by reference upon the authority of said firm as experts in
accounting and auditing in giving said report.
DISCLOSURE OF COMMISSION POSITION ON
INDEMNIFICATION FOR SECURITIES ACT LIABILITIES
The Registrant's Certificate of Incorporation provides that a director
shall not be liable to the Company or its shareholders for damages for any
breach of duty in such capacity except for liability in the event a judgment or
other final adjudication adverse to such director establishes that his acts or
omissions were in bad faith or involved intentional misconduct or a knowing
violation of law or that such director personally gained a financial profit or
other advantage to which he was not legally entitled or that such director's
acts violated Section 719 of the Business Corporation Law of the State of New
York. The Registrant's Bylaws provide that the Company shall indemnify directors
and officers, to the fullest extent permitted by applicable law, for all costs
reasonably incurred in connection with any action, suit or proceeding in which
such director or officer is made a party by virtue of his or her being an
officer or director of the Company, if such director or officer acted in good
faith, for a purpose which he reasonable believed to be in the best interests of
the Company, and in criminal actions or proceedings, in addition, had no
reasonable cause to believe that his conduct was unlawful. The Company has not
entered into indemnification agreements with any of its directors.
Insofar as indemnification for liabilities arising under the Securities
Act may be available to directors, officers and controlling persons of the
Company pursuant to the foregoing provisions, or otherwise, the Company has been
advised that, in the opinion of the Commission, such indemnification is against
public policy as expressed in the Securities Act and is, therefore,
unenforceable.
No dealer, salesperson or other person has been authorized to give any
information or to make any representations other than those contained in this
Prospectus and, if given or made, such information or representations must not
be relied upon as having been authorized. Neither the delivery of this
Prospectus nor any sale made hereunder shall, under any circumstances, create
any implication that there has been no change in the affairs of the Company
since the date hereof or that the information contained herein is correct as of
any date subsequent to the date hereof. This Prospectus does not constitute an
offer to sell or a solicitation of an offer to buy any securities offered hereby
by anyone in any jurisdiction in which such offer or solicitation is not
authorized or in which the person making the offer is not qualified to do so or
to anyone to whom it is unlawful to make such offer or solicitation.
17
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
The following table sets forth the costs and expenses, payable in
connection with the sale of the Common Stock being registered hereby. Except for
the SEC registration fee, all expenses are estimated.
Item Amount
----------------------------------------------- ---------------
SEC registration fee........................... $ 8,000
Printing and engraving expenses................ 1,500
Legal fees and expenses........................ 50,000
Auditors' accounting fees and expenses......... 3,500
Total.......................................... $ 63,000
In addition, the holders of the shares of Common Stock being registered
hereby (the "Shares") will be responsible for all selling commissions, transfer
taxes and related charges in connection with the offer and sale of the Shares
offered hereby.
Item 15. Indemnification of Directors and Officers.
The Registrant's Certificate of Incorporation provides that a director
shall not be liable to the Company or its shareholders for damages for any
breach of duty in such capacity except for liability in the event a judgment or
other final adjudication adverse to such director establishes that his acts or
omissions were in bad faith or involved intentional misconduct or a knowing
violation of law or that such director personally gained a financial profit or
other advantage to which he was not legally entitled or that such director's
acts violated Section 719 of the Business Corporation Law of the State of New
York. The Registrant's Bylaws provide that the Company shall indemnify directors
and officers, to the fullest extent permitted by applicable law, for all costs
reasonably incurred in connection with any action, suit or proceeding in which
such director or officer is made a party by virtue of his or her being an
officer or director of the Company if such director or officer acted in good
faith, for a purpose which he reasonable believed to be in the best interests of
the Company, and in criminal actions or proceedings, in addition, had no
reasonable cause to believe that his conduct was unlawful. The Company has not
entered into indemnification agreements with any of its directors.
Item 16. Exhibits.
Exhibit
Number Description of Document
- -------- -----------------------
4.1 Specimen Common Stock Certificate of Registrant(1)
4.2 Form of Convertible Debentures and Warrants Subscription
Agreement, with Exhibits attached thereto, representing the
form of Debenture, Warrant and Bonus Warrant(2)
4.3 Agreement and Plan of Reorganization, dated February 19, 1997, as
amended, among the Company and Messrs. David, Alan and Sidney
Singer(3)
4.4 Note Amendment and Conversion Agreement, dated as of April 21, 1997,
between the Company and BEC Group, Inc.
5.1 Form of Opinion of Camhy Karlinsky & Stein LLP
23.1 Consent of Deloitte & Touche, LLP
ii-1
<PAGE>
Exhibit
Number Description of Document
- -------- -----------------------
23.2 Consent of Janover Rubinroit LLC
23.3 Consent of Camhy Karlinsky & Stein LLP
24.1 Power of Attorney (contained on signature page)
- --------------------
(1) Incorporated by reference to Registrant's Registration Statement on
Form S-1 (Commission File No. 33-98368).
(2) Incorporated by reference to Registrant's Current Report on Form 8-K,
dated February 26, 1997.
(3) Incorporated by reference to Registrant's Current Report on Form 8-K,
dated April 7, 1997.
Item 17. Undertakings.
The undersigned Registrant hereby undertakes:
1. To file, during any period in which offers or sales of the Shares
are being made, a post-effective amendment to this Registration Statement to:
(i) Include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933, as amended (the "Securities Act");
(ii) To reflect in the prospectus any facts or events which,
individually or together, represent a fundamental change in the information in
the registration statement;
(iii) To include any additional or changed material
information on the plan of distribution;
provided, however, that paragraph 1(i) and 1(ii) do not apply if the information
required in a post-effective amendment is contained in a periodic report filed
by the Company pursuant to Section 13 or Section 15(d) of the Securities
Exchange Act of 1934, as amended, and incorporated by reference in this
registration statement.
2. That, for the purpose of determining liability under the Securities
Act, it shall treat each post-effective amendment as a new registration
statement of the securities offered, and treat the offering of the securities at
that time as an initial bona fide offering.
3. To remove from registration by means of a post-effective amendment
any of the securities being registered which remains unsold at the termination
of the offering.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Company pursuant to the provisions described in Item 15, or otherwise, the
Company has been advised that, in the opinion of the Securities and Exchange
Commission, such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable.
In the event a claim for indemnification against such liabilities
(other than the payment by the Company of expenses incurred or paid by a
director, officer of controlling person of the Company in the successful defense
of any action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the Shares being registered hereby, the
Company will, unless, in the opinion of its counsel the matter has been settled
by controlling precedent, submit to a court of appropriate jurisdiction the
question as to whether such indemnification by the Company against public policy
as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
ii-2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the County of Nassau, State of New York, on the 9th day of May,
1997.
STERLING VISION, INC.
By: /S/ ROBERT B. GREENBERG
-------------------------
Robert B. Greenberg
Chief Executive Officer
By: /S/ SEBASTIAN GIORDANO
-------------------------
Sebastian Giordano
Chief Financial Officer
ii-3
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints each of Robert B. Greenberg and Sebastian
Giordano, singly, as his true and lawful attorney-in-fact and agent, with full
power of substitution for him and in his name, place and stead, in any and all
capacities, to sign any and all amendments and post-effective amendments to this
Registration Statement, and to file the same, with all exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission, granting unto each said attorney-in-fact and agent full power and
authority to do and perform each and every act and thing requisite and necessary
to be done in and about the premises, as fully to all intents and purposes as he
might or could do in person, thereby ratifying and confirming all that each said
attorney-in-fact and agent, or his substitutes, may lawfully do or cause to be
done by virtue thereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/S/ ROBERT COHEN Chairman of the Board of Directors May 8, 1997
- --------------------------------------------
Robert Cohen
/S/ ALAN COHEN Vice-Chairman of the Board of Directors May 8, 1997
- --------------------------------------------
Alan Cohen
/S/ ROBERT B. GREENBERG Chief Executive Officer and Director May 8, 1997
- -------------------------------------------- (Principal Executive Officer)
Robert B. Greenberg
/S/ SEBASTIAN GIORDANO Executive Vice President--Finance, May 8, 1997
- -------------------------------------------- Chief Financial Officer and Treasurer,
Sebastian Giordano (Principal Accounting Officer)
/S/ JAY FABRIKANT Director May 8, 1997
- --------------------------------------------
Jay Fabrikant
/S/ JOEL L. GOLD Director May 8, 1997
- --------------------------------------------
Joel L. Gold
</TABLE>
ii-4
<PAGE>
EXHIBIT 4.4
NOTE AMENDMENT AND CONVERSION AGREEMENT
AGREEMENT, made this 21st day of April, 1997, by and between Sterling
Vision, Inc., a New York corporation having an office at 1500 Hempstead
Turnpike, East Meadow, New York 11554 ("SVI"), and BEC Group, Inc., a Delaware
corporation having an office at 555 Theodore Fremd Avenue, Suite B-302, Rye, New
York 10580 ("BEC").
W I T N E S S E T H:
WHEREAS, on August 26, 1994, SVI executed and delivered to Pembridge
Optical Partners, Inc. ("Pembridge") its Non-Negotiable Promissory Notes in the
original principal amounts of $1,050,000 (which note has been adjusted in
accordance with the terms of the parties' agreements) and $200,000, respectively
(collectively, the "Notes"); and
WHEREAS, on May 3, 1996, Pembridge assigned and transferred to BEC all
of its right, title and interest in and to each of said Notes; and
WHEREAS, the parties desire to set forth certain amendments to the
Notes and the terms and conditions pursuant to which the Notes shall be
converted into registered shares of SVI's Common Stock, par value $.01 per share
(the "Common Stock").
NOW, THEREFORE, in consideration of the mutual covenants contained
herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto do hereby agree
as follows:
1. Each of the Notes is hereby amended to provide that all principal
due and outstanding be payable to BEC on the earlier of (a) September 27, 1997,
the maturity date thereof (the "Maturity Date"), or (b) the Offering Date, as
defined in (and, in that case, in the manner provided in) Section 2, below. All
interest accruing under the Notes shall be paid in accordance with the terms of
the Notes; provided, that in the event the Notes are converted and paid in
shares of Common Stock pursuant to Section 2, below, all accrued interest shall
be paid by SVI in cash immediately prior to such Offering Date.
2. Notwithstanding anything contained in the Notes to the contrary, in
the event SVI, at any time hereafter, registers shares of its Common Stock under
the Securities Act of 1933, as amended, (the "Act") for sale or resale
(including, without limitation, any registration of any Common Stock for sale by
SVI for its own account or for sale or resale by any third party shareholders
thereof), then the Notes shall be converted into shares of Common Stock, as
follows:
(a) SVI shall pay to BEC, within two (2) business days after
the effective date (the "Offering Date") of SVI's registration statement seeking
registration of such shares of its Common Stock (the "Registration Statement")
the principal amount of the Notes in shares of Common Stock. All shares of
Common Stock to be issued hereunder shall be fully registered under the Act
pursuant to such Registration Statement and shall be freely tradeable by BEC
without restriction. All such shares shall be issued by SVI to BEC as of a date
which is not more than five (5) business days after the Offering Date; and a
certificate or certificates evidencing such shares shall be delivered to BEC
within such period;
(b) The number of shares of Common Stock to be issued and
delivered to BEC hereunder (collectively, the "Shares") shall be in an amount
equal to the quotient obtained by dividing the amount of principal due thereon
as of the date of the issuance and delivery of the Shares by the average of the
closing bid price (as quoted on the Nasdaq National Market System; hereinafter
"Nasdaq" or such other national securities exchange as the Common
Exhibit 4.4 -1
<PAGE>
Stock may then be listed on) of SVI's Common Stock during the five (5) trading
days immediately preceding the Offering Date; provided, however, that no
fractional shares shall be issued to BEC, and SVI shall simultaneously therewith
pay BEC, in cash, the value of any fractional Shares. Notwithstanding anything
contained in this Agreement to the contrary, in the event that in the period
immediately preceding such Offering Date, SVI's Common Stock is not traded on a
national securities exchange or on the Nasdaq National Market System, then the
Notes (and all accrued and unpaid interest thereon) shall not be converted into
Shares and shall be paid, in cash, according to their terms and conditions;
(c) All Shares issued to BEC hereunder shall be, and SVI
hereby represents and warrants that all such Shares shall be, duly and validly
authorized and issued, shall be fully paid and non-assessable, and shall be free
and clear of any and all liens, encumbrances or other claims of third parties in
connection with such issuance;
(d) SVI hereby agrees to use its best, good faith efforts to
list all such Shares for trading on a national securities exchange or on the
Nasdaq National Market System; and SVI shall take all reasonable and required
actions necessary to maintain such listing for a period of not less than twelve
(12) months following the Offering Date (or such longer period as may be
required pursuant to Subsection 3(b), below); and,
(e) So long as the Notes shall remain outstanding, SVI shall,
at all times, reserve and keep available, free from preemptive rights, out of
its authorized capital stock, for the purpose of issuance upon exchange of the
Notes as contemplated hereby, the full number of Shares then issuable upon
exchange of the Notes.
3. (a) Notwithstanding anything to the contrary contained in Section 2
or elsewhere in this Agreement, in the event BEC shall, within the sixty (60)
day period immediately following the issuance and delivery of the Shares to it,
sell all or a portion of said Shares, in the open market, for less than the
price upon which the number of Shares was calculated (pursuant to Subsection
2(b) hereof, hereinafter the "Closing Price"), then SVI shall, within five (5)
business days after its receipt of notice and reasonable substation thereof, pay
to BEC the difference between the Closing Price and the selling price of such
Shares (net of usual and customary brokerage commissions), multiplied by the
number of Shares so sold by BEC. If SVI fails to pay such amount within five (5)
business days after its receipt of such written demand therefor, interest shall
accrue on the unpaid amount thereof at the lower of: (i) the prime rate plus two
(2) percentage points; or (ii) the highest rate permitted under applicable law.
Notwithstanding the foregoing sentence, but subject to the provisions of
Subsection 3(b) below, any failure by SVI to pay BEC in accordance with the
first sentence of this Subsection 3(a) shall constitute a material breach of
this Agreement. Except as otherwise set forth in Subsection 3(b) below, SVI
hereby expressly waives any and all defenses or objections to any payment
required to be made to BEC in accordance with the terms of this Subsection 3(a)
including, without limitation, any defense based on failure to mitigate, offset
or similar grounds.
(b) Notwithstanding anything to the contrary contained in
Subsection 3(a) above, if, at any time prior to the expiration of said sixty
(60) day period, the closing bid price of SVI's Common Stock (as quoted on
Nasdaq or other national securities exchange, as the case may be) shall, for a
period of at least five (5) consecutive trading days, equal or exceed the
Closing Price, the foregoing provisions of Subsection 3(a) above shall
thereafter be null, void and of no further force and effect; provided, however,
that if and to the extent that BEC shall deliver to SVI reasonable evidence that
it had attempted unsuccessfully to sell any of the Shares at the then market
price on the open market, during such five (5) day period: (i) the sixty (60)
day period set forth in Subsection 3(a) shall be extended for up to an
additional sixty (60) days, but only with respect to such Shares as BEC
unsuccessfully had attempted to sell during the said five (5) day period; and
(ii) during the remainder of the original sixty (60) day period and any
extension thereof the provisions of this Subsection 3(b) shall again apply to
such Shares as BEC unsuccessfully had attempted to sell.
4. Simultaneously upon SVI's issuance and delivery of the Shares to
BEC, BEC shall return each of the Notes to SVI, marked "cancelled."
5. (a) In connection with SVI's filing with the Securities and Exchange
Commission (the "Commission") of the Registration Statement as contemplated
hereinabove, BEC agrees to timely and reasonably cooperate with SVI in
connection with the preparation and filing thereof, as well as in the
preparation of any disclosure statement prepared by SVI for delivery to,
approval by and/or execution by BEC (the "Disclosure Statement"), and to
Exhibit 4.4 -2
<PAGE>
promptly furnish to SVI any information concerning BEC (and its subsidiaries and
affiliates, and each of their respective shareholders, officers and directors)
which SVI and/or counsel to BEC reasonably determines to be required or
otherwise appropriate to be disclosed therein.
(b) With respect to the foregoing, BEC hereby represents,
warrants and agrees that no such information furnished in writing to SVI by BEC
will contain any untrue statement of a material fact or omit to state a fact
required to be stated therein or necessary to make the statements contained
therein not misleading. BEC further agrees that, from time to time prior to the
filing of any such Registration Statement and/or Disclosure Statement it will,
together with its counsel, promptly review the Registration Statement and/or
Disclosure Statement and suggest appropriate additions, deletions or revisions
thereto so as to ensure that the information relating to BEC (and its
subsidiaries and affiliates, and each of their respective officers, directors
and shareholders) presented therein remains true, accurate and complete, in all
material respects, as of the date of review. SVI hereby agrees not to revise,
amend or otherwise change any such written information furnished by BEC for
inclusion in such Registration Statement or Disclosure Statement, in any
material respect, without prior consultation with BEC. BEC shall have no
responsibility to SVI hereunder for: (i) any written information that is
furnished by it pursuant to this Subsection 5(b) or Subsection 5(a) unless such
information is included in the Registration Statement or Disclosure Statement as
submitted by BEC or as modified with the written consent of BEC; or (ii) any
such information unless all additions, deletions or revisions suggested by BEC
with respect thereto are incorporated in the Registration Statement or
Disclosure Statement, as the case may be, in their entirety. In addition, from
time to time after the filing of any said Registration Statement and/or
Disclosure Statement, BEC shall promptly advise SVI, in writing, of any changes
in any such information (previously furnished to SVI hereunder) and/or any
additional information concerning BEC (and/or its subsidiaries and/or
affiliates, and each of their respective officers, directors and shareholders)
that may be required to ensure that the information contained in such
Registration Statement and/or Disclosure Statement is then true and correct in
all material respects and does not omit to state a fact required to be stated
therein or necessary to make the statements contained therein not misleading.
6. In connection with the registration of SVI's Common Stock as
contemplated hereinabove, SVI shall take the following actions as expeditiously
as is reasonably possible:
(a) prepare and file with the Commission the Registration
Statement (as contemplated hereby) and, after filing, use its best efforts to
cause such Registration Statement to become effective (provided, that before
filing any such Registration Statement (and or any preliminary prospectus and/or
prospectus constituting a part thereof) or any amendments or supplements
thereto, SVI will furnish to counsel selected by BEC copies of all such
documents proposed to be filed, which documents will be subject to the timely
review of such counsel);
(b) prepare and file with the Commission such amendments and
supplements to such Registration Statement and the preliminary prospectus and/or
prospectus constituting a part thereof as may be necessary to keep such
Registration Statement effective for not less than twelve (12) months, and
comply with the provisions of the Act with respect to the disposition of all of
the Shares covered by such Registration Statement during such effective period
in accordance with the intended methods of disposition by BEC, all as set forth
in such Registration Statement;
(c) upon request, furnish to BEC such number of copies of such
Registration Statement, each amendment and supplement thereto, the prospectus
included in such Registration Statement (including each preliminary prospectus)
and such other documents as BEC reasonably requests in order to facilitate the
disposition of the Shares;
(d) use its best reasonable, good faith efforts to register or
qualify the Shares under such other securities or blue sky laws of such
jurisdictions as BEC reasonably requests and do any and all other acts and
things which may be reasonably necessary or advisable to enable BEC to
consummate the disposition of the Shares in such jurisdictions; provided, that
SVI will not be required: (i) to qualify generally to do business in any
jurisdiction where it would not otherwise be required to qualify but for this
subsection (d); (ii) to subject itself to taxation in any such jurisdiction; or
(iii) to consent to general service of process in any such jurisdiction;
(e) notify BEC of the happening of any event as a result of
which the prospectus included in such Registration Statement contains an untrue
statement of a material fact or omits any fact necessary to make the statements
contained therein not misleading, and, at the request of BEC, SVI will promptly
prepare (and, when
Exhibit 4.4 -3
<PAGE>
completed, give notice to BEC) a supplement or amendment to such prospectus so
that, as thereafter delivered to any initial purchasers of all or a portion of
the Shares, such prospectus will not contain an untrue statement of a material
fact or omit to state any fact necessary to make the statements therein not
misleading; and,
(f) provide a transfer agent and registrar for the Shares not
later than the effective date of such Registration Statement.
7. BEC agrees that, upon receipt of any notice from SVI of the
happening of any event of the kind described in Subsection 6(e) hereof, BEC will
forthwith discontinue disposition of the Shares pursuant to the Registration
Statement until BEC's receipt of copies of the supplemented or amended
prospectus contemplated by Subsection 6(e) hereof, and, if so directed by SVI,
BEC will deliver to SVI (at SVI's expense) all copies, other than permanent file
copies then in BEC's possession, of the prospectus (current at the time of BEC's
receipt of any such notice) covering such Shares. In the event SVI shall give
any such notice, SVI shall extend the period(s): (i) during which the
Registration Statement shall be maintained effective pursuant to this Agreement;
and (ii) the periods set forth in Subsection 3(a) or Subsection 3(b) if such
notice is given during said periods, in either case by the number of days
elapsed during the period from and including the date of the giving of such
notice pursuant to Subsection 6(e) hereof to and including the date when BEC
shall have received copies of the supplemented or amended prospectus
contemplated by Subsection 6(e) hereof.
8. (a) SVI shall indemnify BEC, its employees, officers, directors and
shareholders, against any and all claims, losses, damages and liabilities (or
actions in respect thereof) arising out of or based on any untrue statement (or
alleged untrue statement) contained in the Registration Statement, the
Disclosure Statement, and/or any prospectus or preliminary prospectus, and/or
any amendment thereof or supplement thereto, or any omission (or alleged
omission) to state therein any material fact required to be stated therein or
necessary to make any fact stated therein (in case of a prospectus or
preliminary prospectus, in light of the circumstances under which they were
made) not misleading, or any violation by SVI of any rule or registration under
the Act or other applicable securities law applicable to SVI and relating to
such Registration Statement, Disclosure Statement or prospectus; and SVI shall
reimburse BEC, its employees, officers, directors and shareholders for all
reasonable out-of-pocket legal or other expenses incurred (by BEC or any of its
employees, officers, directors or shareholders) in connection with defending or
investigating any such claim, loss, damage, liability or action; provided, that
SVI shall not be liable in any such case to the extent that any such claim,
loss, damage, liability or action arises out of, or is based on, any untrue
statement or omission based upon information supplied (or failed to be supplied)
by BEC to SVI for disclosure and/or inclusion in the Registration Statement
and/or Disclosure Statement, pursuant to Subsection 5(a) or Subsection 5(b)
above, and where SVI has fully complied with the terms and conditions of such
Subsection 5(b).
(b) BEC shall indemnify SVI, its employees, officers,
directors and shareholders, against any and all claims, losses, damages and
liabilities (or actions in respect thereof) arising out of, or based on, any
untrue statement (or alleged untrue statement) contained in the Registration
Statement, the Disclosure Statement and/or any prospectus (or preliminary
prospectus) and/or any amendment thereof or supplement thereto, or any omission
(or alleged omission) to state therein any material fact required to be stated
therein or necessary to make any fact stated therein (in case of a prospectus or
preliminary prospectus, in light of the circumstances under which they were
made) not misleading; and BEC shall reimburse SVI, its employees, officers,
directors and shareholders, for its (their) reasonable out-of-pocket legal or
other expenses incurred in connection with defending or investigating any such
claim, loss, damage, liability or action; provided, that BEC shall be liable in
any such case solely to the extent that any such claim, loss, damage, liability
or action arises out of, or is based on, any untrue statement or omission
contained in information supplied (or failed to be supplied) by BEC to SVI for
disclosure and/or inclusion in the Registration Statement and/or Disclosure
Statement pursuant to Subsection 5(a) or Subsection 5(b) above, and provided
that SVI has fully complied with the terms and conditions of said Subsection
5(b).
9. Miscellaneous:
(a) No Inconsistent Agreements. SVI will not, at any time
after the date hereof, enter into any agreement or contract (whether written or
oral) with respect to any of its securities which will prevent SVI from
complying, in any respect, with the rights granted by SVI to BEC hereunder.
Exhibit 4.4 -4
<PAGE>
(b) Amendments and Waivers. The provisions of this Agreement,
including the provisions of this Subsection (b), may not be amended, modified or
supplemented, and any waiver or consent to, or any departure from, any of the
provisions of this Agreement may not be given and shall not become or be
effective unless evidenced by a writing executed by the party to be bound
thereby.
(c) Term. The agreements of the parties as contained in this
Agreement shall continue in full force and effect until the Notes have been paid
in full or have been converted in accordance with the terms and conditions of
this Agreement; and, in the event of any such conversion, the remaining terms
and conditions of this Agreement shall remain in full force and effect for a
period of three (3) years following such conversion.
(d) Notices. All notices provided for or permitted hereunder
shall be made in writing by hand delivery, registered or certified first-class
mail or air courier guaranteeing overnight delivery:
(i) if to BEC, at:
BEC Group, Inc.
555 Theodore Fremd Avenue
Suite B-302
Rye, New York 10580
with a copy to:
Peter H. Trembath
BEC Group, Inc.
Vice President, Secretary and
General Counsel
1601 Valley View Lane
Dallas, Texas 75234
and
(ii) if to SVI., at:
Sterling Vision, Inc.
1500 Hempstead Turnpike
East meadow, New York 11554
with a copy to:
Joseph Silver
Executive Vice President
1500 Hempstead Turnpike
East meadow, New York 11554
and thereafter at such other address, notice of which of which is given in
accordance with the provisions of this Subsection 8(d).
All such notices shall be deemed to have been duly given:
when delivered by hand, if personally delivered; five business days after being
deposited in the mail, postage prepaid, if mailed; and on the next business day,
if timely delivered to an air courier guaranteeing overnight delivery.
(e) Successors and Assigns. This Agreement shall inure to the
benefit of and be binding upon the successors and assigns of each of the parties
hereto.
Exhibit 4.4 -5
<PAGE>
(f) Counterparts. This Agreement may be executed in two or
more counterparts and by the parties hereto in separate counterparts, each of
which, when so executed, shall be deemed to be an original and all of which,
when taken together, shall constitute one and the same instrument.
(g) Headings. The headings of this Agreement are for
convenience of reference only and shall not constitute a part of this Agreement,
nor shall they affect their meaning, construction or effect.
(h) Governing Law. The validity, performance, construction and
effect of this Agreement shall be governed by, and construed in accordance with,
the internal laws of the State of New York, without giving effect to principles
of conflicts of law.
(i) Severability. In the event that any one or more of the
provisions contained herein, or the application thereof in any circumstance, is
held to be invalid, illegal or unenforceable, the validity, legality and
enforceability of any such provision, in every other respect, and of the
remaining provisions contained herein, shall not be affected or impaired
thereby.
(j) Recovery of Litigation Costs. If any legal action is
brought for the enforcement of this Agreement or any provision contained herein,
or because of any alleged dispute, breach ,default or misrepresentation in
connection with any of the provisions of this Agreement, the successful or
prevailing party shall be entitled to recover all costs incurred in connection
therewith, including (without limitation) reasonable attorneys' fees, in
addition to any other relief to which it may be entitled.
(k) Entire Agreement. This Agreement is intended by the
parties as a final expression of their agreement and intended to be a complete
and exclusive statement of the agreement and understanding of the parties hereto
in respect of the subject matter contained herein. This Agreement supersedes all
prior agreements and understandings between the parties with respect to such
subject matter.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date first above written.
STERLING VISION, INC.
By: /S/ ROBERT B. GREENBERG
-------------------------------
Title: President
BEC GROUP, INC.
By: /S/ MARTIN FRANKLIN
-------------------------------
Title: Chief Executive Officer
Exhibit 4.4 -6
<PAGE>
EXHIBIT 5.1
FORM OF LEGAL OPINION
[LETTERHEAD OF CAMHY KARLINSKY & STEIN LLP]
___________, 1997
Board of Directors
Sterling Vision, Inc.
1500 Hempstead Turnpike
East Meadow, New York 11554
Re: Sterling Vision, Inc. - Registration Statement on Form S-3
Dear Sirs:
You have requested our opinion as counsel for Sterling Vision, Inc., a
New York corporation (the "Company"), in connection with the registration
statement (the "Registration Statement") on Form S-3 filed by the Company with
the Securities and Exchange Commission (the "Commission") under the Securities
Act of 1933, as amended (the "Act"), with respect to the issuance by the Company
of 3,213,464 shares (the "Shares") of common stock, par value $.01 per share,
which includes (a) certain shares issued in connection with the acquisition of
Singer Specs, Inc. (the "Singer Shares"), (b) certain shares (the "BEC Shares")
to be issued in connection with the prepayment of two promissory notes of the
Company pursuant to the terms of a Note Amendment and Conversion Agreement dated
as of April 21, 1997 (the "Conversion Agreement"), (c) certain shares (the
"Convertible Debenture Shares") to be issued upon the conversion of certain
outstanding convertible debentures of the Company (the "Convertible
Debentures"), (d) certain shares (the "Warrant Shares") to be issued upon the
exercise of certain outstanding warrants (the "Warrants") of the Company, issued
in connection with the Convertible Debentures, (e) certain shares (the "Bonus
Warrant Shares") to be issued upon the exercise of certain warrants which may be
issued in the future (the "Bonus Warrants") by the Company and (f) certain
shares (the "Option Shares") to be issued upon the exercise of outstanding
options (the "Options") and outstanding warrants (the "Underwriter Warrants") of
the Company.
In rendering the opinions hereafter we have relied upon such documents
and instruments as we have deemed appropriate, including the certificate of the
Secretary of the Company dated as of _________, 1997.
In conducting our examination, we have assumed, without investigation,
the genuineness of all signatures, the correctness of all certificates, the
authenticity of all documents submitted to us as originals, the conformity to
original documents of all documents submitted to us as certified or photostatic
copies and the authenticity of the originals of such copies, and the accuracy
and completeness of all records made available to us by the Company.
The opinions hereafter expressed are subject to the following
qualifications:
(a) Our opinion in paragraph 1 below as to the good standing
of the Company is based solely upon a certificate from public officials.
(b) Our opinions below are limited to the matters expressly
set forth in this opinion letter, and no opinion is to be implied or may be
inferred beyond the matters expressly so stated.
(c) We disclaim any obligation to update this opinion letter
for events occurring after the date of this opinion.
EXH. 5.1-1
<PAGE>
Board of Directors
Sterling Vision, Inc.
__________, 1997
Page 2
(d) We are members of the Bar of the State of New York. Our
opinions below are limited to the effect of the laws of the State of New York
and of the federal laws of the United States.
Based upon and subject to the foregoing, we are of the opinion that:
1. The Company is a corporation duly incorporated, validly
existing and in good standing under the laws of New York.
2. The Singer Shares are duly authorized, legally issued, fully
paid and non-assessable.
3. The BEC Shares are duly authorized and when delivered in
accordance with the terms of the Conversion Agreement will be,
legally issued, fully paid and non-assessable.
4. The Convertible Debenture Shares are duly authorized and when
delivered in accordance with the terms of the Convertible
Debentures will be legally issued, fully paid and
non-assessable.
5. The Warrant Shares and the Bonus Warrant Shares are duly
authorized and when delivered against payment therefor in
accordance with the terms of the Warrants or the Bonus
Warrants, as the case may be, will be legally issued, fully
paid and non-assessable.
6. The Option Shares are duly authorized and when delivered
against payment therefor in accordance with the terms of the
Options or the Underwriter Warrants, as the case may be, will
be legally issued, fully paid and non-assessable.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement. In giving this consent, we do not thereby admit that we
are in the category of persons whose consent is required pursuant to Section 7
of the Act or the rules and regulations of the Commission promulgated
thereunder.
This opinion letter is rendered solely for the benefit of the
addressee. Without our prior written consent, this opinion letter may not be:
(i) relied upon by any other party or for any other purpose; (ii) quoted in
whole or in part or otherwise referred to in any report or document; or (iii)
furnished (the original or copies thereof) to any other party.
Very truly yours,
/s/ CAMHY KARLINSKY & STEIN LLP
CAMHY KARLINSKY & STEIN LLP
EXH. 5.1-2
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
We consent to the incorporation by reference on Form S-3 of our report
dated March 31, 1997, appearing in the Annual Report on Form 10-K of Sterling
Vision, Inc. for the year ended December 31, 1996 and to the reference to us
under the heading "Experts" in the Prospectus, which is part of this
Registration Statement.
New York, New York DELOITTE & TOUCH LLP
May 2, 1997
EXH. 23.1-1
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the
incorporation by reference in this Form S-3 registration statement of our report
dated April 19, 1995 included in the Company's Form 10-K for the year ended
December 31, 1996 and to all references to our Firm included in this Form S-3
registration statement.
New York, New York JANOVER RUBINROIT LLC
April 29, 1997
EXH. 23.2-1
<PAGE>
EXHIBIT 23.3
CONSENT OF CAMHY KARLINSKY & STEIN LLP
We hereby consent to being named in this Form S-3 registration
statement under the caption "Legal Matters" and to all references to our Firm
included in this Form S-3 registration statement.
CAMHY KARLINSKY & STEIN LLP
New York, New York
May 8, 1997
EXH. 23.2-2
