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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
CURRENT REPORT,
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT - April 14, 1998
(Date of Earliest Event Reported)
STERLING VISION, INC.
(Exact Name of Registrant as Specified in Charter)
New York 1-14128 11-3096941
- ---------------------------- ------------------------ ------------------
(State or Other Jurisdiction (Commission File Number) (I.R.S. Employer
of Incorporation) Identification No.)
1500 Hempstead Turnpike
East Meadow, New York 11554
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(Address of Principal Executive Offices)
(516) 390-2100
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(Registrant's telephone number, including area code)
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Item 5. Other Events:
On February 17, 1998, Sterling Vision, Inc. (the "Company")
entered into Convertible Debentures and Warrants Subscription Agreements
with certain investors in connection with the private placement of units
consisting of an aggregate of $3.5 million principal amount of
convertible debentures (as amended on March 25, 1998, collectively, the
"1998 Debentures") and an aggregate of 700,000 warrants (collectively,
the "1998 Warrants"), which 1998 Warrants entitled the holders thereof to
purchase up to 700,000 shares of the Company's Common Stock, at a price
of $5.00 per share. The Company used the net proceeds (approximately $3.3
million) of the private placement: (i) to repay certain loans previously
made to it ($1,700,000), together with interest thereon; and (ii) the
balance for general corporate purposes.
Subsequent to the date of the Company's issuance and sale of the
1998 Debentures and 1998 Warrants, the Company and the holder thereof
(collectively, the "Original Holders"), determined that the issuance and
sale of such 1998 Debentures and 1998 Warrants was based upon a certain
mutual mistake of the Company and the Original Holders. Accordingly, on
April 14, 1998, the Company and Original Holders entered into an Exchange
Agreement, effective as of February 17, 1998, pursuant to which the 1998
Debentures were exchanged for $3.5 million Stated Value of a series of
the Company's Preferred Stock, par value $.01 per share, (the "Preferred
Stock") and the 1998 Warrants were exchanged for new warrants (the
"Warrants"), entitling the holders thereof to purchase up to 700,000
shares of Common Stock at a price of $5.00 per share (the "Conversion
Price") until February 17, 2001.
The Preferred Stock: (i) requires the Company to pay quarterly
dividends thereon, commencing May 17, 1998, calculated at the rate of ten
(10%) percent per annum; (ii) permits the Company to pay such dividends
in registered shares of its Common Stock; (iii) permits the holders
thereof, at any time prior to redemption by the Company, to convert all
or a portion of the same into shares of Common Stock based upon the
Conversion Price; (iv) requires the Company to redeem, in either cash or
registered shares of its Common Stock, at the Company's option, all (but
not less than all) of the Debentures (at 105% of the then, outstanding
Stated Value thereof, based upon the Conversion Price; hereinafter, the
"Redemption Amount") at any time from and after February 17, 1999 that a
registration statement (pursuant to which the Common Stock [into which
the Preferred Stock may be converted] has been registered) is effective;
(v) permits the Company to redeem all (but not less than all) of the
Debentures, in cash and at the Redemption Amount, at any time from and
after February 17, 1999; and (vi) provides that from and after February
18, 1999, the Company will be required to pay dividends thereon, until
the same are redeemed by the Company, at the rate of twenty-four (24%)
percent per annum.
The Company is required to file with the U.S. Securities and
Exchange Commission a Registration Statement on behalf of the holders of
the Preferred Stock with respect to all of the shares of Common Stock
into which the same may be converted, as well as all of the Common Stock
underlying the Warrants; and the Company has agreed to maintain the
effectiveness of such Registration Statement until the earlier of: (i)
three years; and (ii) the date that all of the shares of
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Common Stock (into which the Preferred Stock may be converted) are sold
and the Warrants have been exercised.
Item 7. Financial Statements and Exhibits.
Exhibit No. Document
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10.78 Form of Exchange Agreement.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, as amended, the Registrant has duly caused this Report to be signed
on its behalf by the undersigned hereunto duly authorized.
STERLING VISION, INC.
By: /s/ Joseph Silver
------------------------------------------
Name: Joseph Silver
Title: Executive Vice President & General Counsel
Date: April 14, 1998
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EXCHANGE AGREEMENT
This Exchange Agreement, is being made and entered into on April
14, 1998, effective as of the 17th day of February, 1998, by and between
Sterling Vision, Inc., a New York corporation having an office at 1500
Hempstead Turnpike, East Meadow, New York 11554 (the "Company"), and each
of the entities and/or individuals whose signature appears below (each
individually referred to as an "Original Holder" and, collectively, as
the "Original Holders").
W I T N E S S E T H:
WHEREAS, on February 17, 1998, the Company issued and delivered
to the Original Holders its Convertible Debentures Due February 17, 1999,
in the original, aggregate principal amount of $3.5 million
(collectively, the "Debentures"), together with its Warrants
(collectively, the "Warrants") entitling the Original Holders to
subscribe for and purchase up to an aggregate of 700,000 shares of the
Company's Common Stock, par value $.01 per share (the "Common Stock");
and
WHEREAS, as of the date of the Company's issuance and delivery,
to the Original Holders, of the Debentures and Warrants, the Company
believed that its sale and issuance of the Debentures and Warrants would
not have a material, adverse effect upon the Company's net income; and
WHEREAS, since the date of the Company's issuance and delivery,
to the Original Holders, of the Debentures and Warrants, the Company's
independent auditors have advised the Company that the Debentures may
have to be classified on the Company's financial statements as debt and,
further, that the same, together with the Warrants, might have a
material, adverse effect upon its net income; and
WHEREAS, the Company and the Original Holders intended (and, as
of the date hereof, continue to intend) that the Debentures and Warrants
not have a material, adverse impact on the Company's net income.
NOW, THEREFOR, in consideration of the mutual covenants herein
contained, and in order to more effectively confirm the Company's and
each of the Original Holder's intention that the Debentures be treated on
the Company's financial statements as equity securities, the parties
hereto, intending to be legally bound, do hereby agree as follows:
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1. Effective as of February 17, 1998, each of those: (i) certain
Convertible Debentures and Warrants Subscription Agreements
(collectively, the "Original Subscription Agreements") entered into
between the Company and the Original Holders on February 17, 1998; (ii)
certain Convertible Debentures Due February 17, 1999 (collectively, the
"Debentures"), issued and delivered by the Company to the Original
Holders on February 17, 1998, in the aggregate principal amount of $3.5
million; and (iii) certain Warrants (collectively, the "Original
Warrants") issued by the Company to the Original Holders on February 17,
1998, and evidencing the Original Holders' right to subscribe for and
purchase, from the Company, an aggregate of 700,000 shares of its Common
Stock, par value $.01, shall each be deemed exchanged for: (x) those
certain Convertible Preferred Stock and Warrants Subscription Agreements
(the form of which is annexed hereto as Exhibit A) being simultaneously
herewith entered into between each of the Original Holders and the
Company; (y) an aggregate of 35 shares of the Company's Senior
Convertible Preferred Stock (the Certificate of Amendment to the
Company's Certificate of Incorporation setting forth the preferences and
relative rights of such Preferred Stock, and the qualifications,
limitations and restrictions thereof, being in the form annexed hereto as
Exhibit B), being issued by the Company to the Original Holders
simultaneously upon the execution hereof; and (z) the Company's Warrants
(the form of which is annexed hereto as Exhibit C) pursuant to which the
Original Holders shall be entitled to subscribe for and purchase an
aggregate of 700,000 shares of the Company's Common Stock, par value $.01
per share, respectively.
Simultaneously upon the execution of this Exchange Agreement and
each of the Exhibits annexed hereto, the Original Subscription
Agreements, the Debentures and the Original Warrants shall automatically
be deemed to be null, void and of no
further force and/or effect, AB INITIO.
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IN WITNESS WHEREOF, the Company and each of the Original Holders
have executed this Exchange Agreement on this 14th day of April, 1998, to
be effective as of the day and year first above written.
STERLING VISION, INC.
By:
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Robert Cohen, Chairman
By:
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By:
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By:
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By:
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CERTIFICATE OF AMENDMENT OF THE
CERTIFICATE OF INCORPORATION OF
STERLING VISION, INC.
Under Section 805 of the Business Corporation Law
FIRST: The name of the corporation is Sterling Vision, Inc. (the
"Company"), and the Company was formed under the name Sterling
Acquisition, Inc.
SECOND: The Certificate of Incorporation of the Company was
filed with the Department of State of the State of New York on January
15, 1992.
THIRD: The Certificate of Incorporation of the Company is hereby
amended to create a series of the Company's Preferred Stock, par value
$.01 per share, designated as Senior Convertible Preferred Stock, which
is authorized pursuant to Article 4 of the Certificate of Incorporation
of the Company, and Article 4 shall be amended to be restated in its
entirety by adding to the end of such Article 4 the following:
"Article 1. Designation, Issuance, Rank, Dividends and
Redemption/Resale.
Section 1.1 Designation, Issuance and Rank. The designation of
the series of Preferred Stock authorized by this Resolution shall be
"Senior Convertible Preferred Stock" (the "Convertible Preferred Stock"
or the "Security"). The maximum number of shares of Convertible Preferred
Stock issuable
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hereunder shall be thirty-five (35), which shares may be issued from time
to time. Subject to compliance with applicable protective voting rights
which have been or may be granted to the Preferred Stock of the Company
or any series thereof in Certificates of Designation or in the Company's
Certificate of Incorporation, as amended and as hereafter may be amended
("Protective Provisions"), but notwithstanding any other rights of the
Preferred Stock of the Company or any series thereof, the rights and
preferences of the Convertible Preferred Stock shall rank pari passu with
(including, without limitation, inclusion in provisions with respect to
liquidation and acquisition preferences, redemption and/or approval of
matters by vote or written consent), or senior to any present or future
class or series of Preferred Stock or common stock of the Company.
Subject to compliance with applicable Protective Provisions, the Board of
Directors is also authorized to decrease the number of shares of
Convertible Preferred Stock, prior or subsequent to the issue of that
series, but not below the number of shares of the Convertible Preferred
Stock then outstanding. In case the number of shares of any series shall
be so decreased, the shares constituting such decrease shall resume the
status that they had prior to the adoption of the resolution originally
fixing the number of shares of such series. The rights, preferences,
privileges and restrictions granted to, and imposed on, the Convertible
Preferred Stock are as set forth below in this Article 1.
Section 1.2 Payment of Dividends.
(a) The holders of the Convertible Preferred Stock or their
registered assigns (each a "Holder") shall be entitled to receive
dividends on the "Stated Value" of each share of Convertible Preferred
Stock, whether or not such dividends are declared by the Board of
Directors. Dividends shall accrue from February 17, 1998 notwithstanding
that the Convertible Preferred Stock was issued after such date, and
shall be payable (including, but not limited to, all accrued and unpaid
dividends on such portion, if any, of the Stated Value of the Convertible
Preferred Stock as may have been previously converted or redeemed
pursuant to the provisions hereof) subject to the provisions of
Subsection 1.2(d) below, in United States Dollars, quarter-annually, in
arrears, on the 17th day of each May, August, November and February,
commencing May 17, 1998 (each a "dividend payment date").
(b) The "Stated Value" of each share of Convertible Preferred
Stock (regardless of its par value), shall be One Hundred Thousand
($100,000) Dollars, which shall be increased or
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decreased proportionately for any stock consolidation or stock split,
respectively, of the outstanding shares of Convertible Preferred Stock.
(c) Dividends on the Convertible Preferred Stock shall be equal
to the sum of: (i) ten (10%) percent of the Stated Value of such share;
plus (ii) ten (10%) percent of the Unpaid Dividend Amount (as defined
below) as of the previous dividend accrual date. The Unpaid Dividend
Amount with respect to each share of Convertible Preferred Stock shall be
equal to the aggregate of all dividends that the Holder of such share
shall have become entitled to receive for such share, but that shall not
have been paid by the Company for any reason whatsoever. Nothing in this
Section shall limit any other rights or remedies of the Holder on account
of the Company's failure to pay any dividends hereunder.
(d) Notwithstanding the provisions of Subsection 1(a) above, the
Company shall have the right, in its sole and absolute discretion, to pay
any dividends then due on the Convertible Preferred Stock in shares of
its Common Stock, par value $.01 per share (the "Common Stock") which may
then be resold pursuant to the Registration Statement (as hereinafter
defined) based upon a price per share equal to the average closing price
of the Company's Common Stock (as reported on the Nasdaq National Market
System or the Nasdaq Small Cap Market) for the five (5) trading days
immediately preceding the date on which any such dividend became due.
(e) In the event the Registration Statement (referred to in
Article 4 of the Agreement, as said term is hereinafter defined) is not
declared effective within one hundred fifty (150) days after the Closing
(as defined in the Agreement), the Security, or any portion thereof
outstanding on and after such date, shall thereafter accrue dividends
(until the date that such Registration Statement shall be declared
effective) at a rate per annum equal to eighteen (18%) percent. Such
dividends shall: (i) include (but not be limited to) all accrued and
unpaid dividends on such portion, if any, of the Stated Value of this
Security as may have been previously converted pursuant to the provisions
hereof; and (ii) be due and payable on each dividend payment date.
(f) From and after February 18, 1999, if the Company shall not
theretofore have paid to the Holder the full amount payable by the
Company to the Holder upon redemption of the Security pursuant to Section
1.3 hereof, the Security, or any portion thereof outstanding on and after
such date, shall accrue
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dividends (until such payment upon redemption) at a rate per annum equal
to twenty-four (24%) percent of the Stated Value. Such dividends shall:
(i) include (but not be limited to) all accrued and unpaid dividends on
such portion, if any, of the Stated Value of the Security as may have
been previously converted or redeemed pursuant to the provisions hereof;
and (ii) be due and payable on each dividend payment date.
Section 1.3 Redemption; Resale.
(a) Subject to Articles 2,3 and 4 hereof, the Company shall, on
the first day from and after February 17, 1999 on which the Registration
Statement (as hereinafter defined) is effective, redeem all shares of
Convertible Preferred Stock at the time outstanding by either: (i) paying
to the Holder, in cash, an amount equal to 105% of the Stated Value of
such portion of the Security not theretofore converted by the Holder,
together with all accrued and unpaid dividends thereon; or (ii) issuing
to the Holder such number of shares of its Common Stock, which may then
be resold pursuant to the Registration Statement (collectively, the
"Converted Shares") as is equal to the quotient obtained by dividing the
sum of 105% of the Stated Value of such portion of the Security not
theretofore converted by the Holder, by Five ($5.00) Dollars (the
"Conversion Price"), together with all accrued and unpaid dividends
thereon. All payments shall be subject to withholding (if any) under
applicable United States Federal Internal Revenue Service Regulations.
With respect to the foregoing, it is understood that nothing contained
herein shall limit the rights and remedies which a Holder might otherwise
have as a result of the Company's failure to comply with its obligations
under Article 4 of the Agreement and/or Subsection 1(e) hereof.
(b) Subject to Articles 2,3 and 4 hereof, the Company, from and
after February 17, 1999, so long as the Registration Statement is not
effective, at the option of its Board of Directors, shall have the right
to redeem, in whole but not in part, all shares of Convertible Preferred
Stock at the time outstanding (upon notice to be given as hereinafter
specified) by paying to the Holder, in cash, an amount equal to 105% of
the Stated Value of such portion of the Security not theretofore
converted by the Holder, together with all accrued and unpaid dividends
thereon. All payments shall be subject to withholding (if any) under
applicable United States Federal Internal Revenue Service Regulations.
With respect to the foregoing, it is understood that nothing contained
herein shall limit the rights and remedies which a Holder might otherwise
have as a result of
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the Company's failure to comply with its obligations under Article 4 of
the Agreement and/or Subsection 1(e) hereof.
(c) Notice of redemption of outstanding shares of Convertible
Preferred Stock pursuant to this Section 1.3 shall be sent by or on
behalf of the Company to the Holders of record of outstanding shares of
Convertible Preferred Stock selected for redemption by first class mail,
postage prepaid, not less than thirty (30) days, nor more than sixty (60)
days, prior to the redemption date, addressed to the Holders of record of
the shares to be redeemed at their respective, last addresses as they
shall appear on the books of the Company; provided, however, that the
failure to give such notice, or any defect thereof, shall not affect the
validity of the redemption of any shares so to be redeemed except as to
the Holder to whom the Company had failed to give such notice or except
as to the Holder to whom such notice was defective. Each such notice
shall state: (i) the redemption date; (ii) that shares of Convertible
Preferred Stock are to be redeemed; (iii) the redemption price; (iv) the
place(s) where certificates for such shares are to be surrendered for
payment of the redemption price; and (v) that dividends on the shares to
be redeemed shall cease to accrue on and after such redemption date.
Provided such notice has been mailed as aforesaid, from and after the
redemption date, dividends on the shares so called for redemption shall
cease to accrue, and said shares shall no longer be deemed to be
outstanding, shall be retired and shall have the status of authorized but
unissued shares of Preferred Stock, unclassified as to series, and shall
not be reissued as shares of Convertible Preferred Stock; and all rights
of the Holders thereof, as shareholders of the Company (except the right
to receive from the Company the redemption price and any accrued and
unpaid dividends) shall cease and terminate. Upon surrender, in
accordance with said notice, of the certificates for any shares so
redeemed (properly endorsed or assigned for transfer, if required by the
Board of Directors and so stated in the notice), such shares shall be
redeemed by the Company at the redemption price aforesaid.
(d) Supplementing the provision of Subsection 1.3(a) above, in
the event the Company, on or after February 17, 1999, shall elect to pay
to the Holder of the Security the amount then due it (pursuant to clause
(ii) of said Subsection 1.3(a) above) in Converted Shares and thereafter
the Holder shall (in its sole and absolute discretion, the Company not
reserving any right to object thereto), at any time and from time to time
within a maximum period of one hundred (180) days following the date of
the Company's issuance, to the Holder, of such Converted Shares,
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sell all or any portion of the Converted Shares on the open market at a
price per Converted Share less than the Conversion Price, the Company
shall, within five (5) business days after its receipt of written notice
of each such sale, together with a copy of the selling broker's
confirmation thereof (which shall be conclusive evidence of any such
sale, the proceeds thereof and the commissions thereon and, accordingly,
binding upon the Company) pay to the Holder, in cash, the difference
between the actual sales price of said Converted Shares (net of all
brokerage commissions payable in respect thereof) and the Conversion
Price, together with interest thereon, to be computed at the rate of ten
(10%) percent per annum, from the date of the Company's receipt of the
aforesaid written notice of such sale(s) to the date of the Company's
payment, to the Holder, of such difference.
2. Liquidation Preference.
2.1 In the event of any liquidation, dissolution or winding up
of the Company, either voluntary or involuntary, the Holders of the
Convertible Preferred Stock shall be entitled to receive, prior or in
preference to any payment or distribution and setting apart (for payment
or distribution) any of the assets or surplus funds of the Company to the
holders of the Common Stock and/or to the holders of any other equity
securities, an amount (the "Liquidation Amount") for each share of
Convertible Preferred Stock then held by them, the sum of $100,000, plus
any declared but unpaid dividends on the Convertible Preferred Stock. If,
upon the occurrence of such event, the assets and funds thus distributed
among the Holders of the entire, aggregate Liquidation Amounts payable to
the Holders of Convertible Preferred Stock pursuant to this Section 2.1,
then the entire assets and funds of the Company legally available for
distribution shall be distributed among the Holders of the Convertible
Preferred Stock pro rata on the basis of the number of shares of
Convertible Preferred Stock then held by each of them.
2.2 All payments for which this Article 2 provides shall be in
cash, property (valued at its fair market value, as determined by an
independent, nationally recognized investment banking firm) or a
combination thereof. After payment of the full amount of the Liquidation
Amount to which each Holder is entitled, such Holders of shares of
Convertible Preferred Stock will not be entitled to any further
participation in any distribution of the assets of the Company.
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Article 3. Conversion.
Section 3.1 Conversion Privilege.
(a) Subject to the terms and conditions of the Security, the
Holder of the Security shall have the right, prior to redemption by the
Company, exercisable at one more times, at its option, to convert all or
a portion of the Security into the Common Stock of the Company at the
times hereafter specified. The number of shares of Common Stock issuable
upon the conversion of the Security shall be determined by dividing the
Stated Value of the shares of Convertible Preferred Stock to be
converted, by the Conversion Price in effect on the conversion date, and
rounding the result to the nearest 1/100th of a share. The effectiveness
of said Registration Statement shall not be a condition precedent to any
such conversion. The "Conversion Price" for each conversion shall be Five
($5.00) Dollars.
(b) Subject to the provisions of Article 4 hereof, less than all
of the Stated Value of the Security may be converted into Common Stock if
the portion converted is $100,000 or a whole multiple of $100,000, it
being understood that the provisions of this Article that apply to the
conversion of the Security also apply to the conversion of a portion of
it.
(c) Notwithstanding anything contained herein to the contrary,
the Security shall not be convertible by a Holder to the extent that, and
so long as, the Common Stock which would be acquired upon such
conversion, when aggregated with any other shares of Common Stock at the
time of conversion beneficially owned by such Holder and not theretofore
sold by the Holder, would aggregate more than 4.9% of the then
outstanding shares of Common Stock of the Company. For this purpose,
"beneficial ownership" shall be calculated in accordance with the
provisions of Section 13(d) of the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder. The
opinion of the Holder's counsel shall be conclusive in calculating the
Holder's beneficial ownership.
Section 3.2 Conversion Procedure.
(a) To convert the Security into Common Stock, the Holder must:
(i) complete, sign and deliver to the Company the Notice of Conversion
attached hereto, together with the Holder's
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representation letter annexed thereto (the "Representation Letter"); and
(ii) surrender such shares of Converted Preferred Stock to the Company
free and clear of any and all claims, liens and/or encumbrances. Except
as otherwise provided herein, the date upon which the Company receives
the completed Notice of Conversion and Representation Letter (by
recognized, overnight courier, hand-delivery or facsimile, followed by
hand-delivery or courier delivery within two (2) business days
thereafter) is the conversion date, provided that the Company shall not
be required to deliver a certificate for shares of Common Stock unless
and until the Company receives the original of the Security. Within seven
(7) business days after its receipt of the Notice of Conversion and
Representation Letter, as aforesaid, provided the Company has then
received the original of the Security from the Holder, the Company shall
deliver a certificate for the number of full shares of Common Stock
issuable upon such conversion, and a check for any fraction of a share.
The person in whose name the certificate representing shares of Common
Stock is to be registered shall be treated as a shareholder of record on
and after the conversion date. Upon surrender of a Security that is to be
converted in part, the Company shall issue to the Holder a new Security,
equal in number to the unconverted portion of the Security surrendered.
(b) Notwithstanding the provisions of Subsection 3.2(a) above,
from and after the date that the Registration Statement (referred to in
Article 4 of the Agreement) shall become and thereafter remain effective,
the Company, if so requested by the Holder, shall, within three (3)
business days after its receipt of the Notice of Conversion and
Representation Letter (as required pursuant to Subsection 3.2(a) above),
and provided the Company has then received the original of the Security
from the Holder, serve written instructions on its transfer agent to
"DWAC" the shares of Common Stock to be issued upon any such conversion
of the Security, it being understood that no further documentation shall
be required of a Holder in connection therewith.
Section 3.3 Fractional Shares. The Company shall not issue a
fractional share of Common Stock upon the conversion of all or any
portion of the Security. Instead, the Company shall pay, in lieu of any
fractional share, the cash value thereof at the Conversion Price of the
Common Stock as determined pursuant to Section 3.1 above.
Section 3.4 Taxes on Conversion. The Company shall pay any
documentary, stamp or similar issue or transfer tax due on
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the issuance of Common Stock upon the conversion of the Security. The
Holder, however, shall pay any such tax which is due because such shares
are issued in a name other than its name.
Section 3.5 Company to Reserve Stock. The Company shall reserve
out of its authorized but unissued Common Stock for issuance as herein
provided, a number of shares of Common Stock into which the Security may
be converted. All shares of Common Stock which may be issued upon the
conversion of the Security shall be fully paid and nonassessable.
Section 3.6 Restrictions on Transfer. The Security and the
Common Stock issuable upon the conversion thereof will not have been
registered under the Securities Act of 1993, as amended (the "Act") and
will be sold pursuant to an exemption under the Act. The Security, and
each certificate evidencing the Security, may not be pledged, transferred
or resold except pursuant to registration under, or an exemption from,
the Act. Each certificate representing shares of Convertible Preferred
Stock, and each certificate representing any shares of Common Stock
issued thereunder, shall bear a restrictive legend similar to the legend
set forth below:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, (THE "ACT"), NOR UNDER ANY STATE
SECURITIES LAW, AND SUCH SECURITIES MAY NOT BE PLEDGED, SOLD, ASSIGNED,
HYPOTHECATED OR OTHERWISE TRANSFERRED UNTIL (1) A REGISTRATION STATEMENT
WITH RESPECT THERETO IS EFFECTIVE UNDER THE ACT AND ANY APPLICABLE STATE
SECURITIES LAW, OR (2) THE COMPANY RECEIVES AN OPINION OF COUNSEL TO THE
COMPANY OR COUNSEL TO THE HOLDER OF SUCH SECURITIES, WHICH COUNSEL AND
OPINION ARE REASONABLY SATISFACTORY TO THE COMPANY, THAT SUCH SECURITIES
MAY BE PLEDGED, SOLD, ASSIGNED, HYPOTHECATED OR TRANSFERRED WITHOUT AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT AND APPLICABLE STATE
SECURITIES LAWS.
Article 4. Recapitalization, Mergers, etc.
Section 4.1 Recapitalization Generally. In case the Company,
prior to February 17, 1999, shall (i) subdivide its outstanding Common
Stock (including by means of a dividend or distribution on the Common
Stock payable in Common Stock); (ii) combine its outstanding Common Stock
into a smaller number of shares; or (iii) issue, by capital
reorganization or reclassification of its Common Stock (other than a
subdivision or combination of its shares as provided for above, a
reorganization, merger, consolidation or sale of assets provided
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for elsewhere in this Article 4, or the issuance of any shares of Common
Stock in connection with the acquisition of assets or the repayment of
debt) the Conversion Price in effect thereafter shall be adjusted so that
it shall be adjusted to reflect such action. In case of any such action,
the $6.00 price set forth in Subsection 3.1(b) hereof shall be adjusted
to reflect such action. An adjustment made pursuant to this subsection
shall become effective, retroactively, immediately after the effective
date in the case of a subdivision, combination or reclassification.
Section 4.2 Mergers. Until the Security is redeemed or has been
converted into Common Stock, the Company shall not consolidate or merge
into, or transfer all or substantially all of its assets to, any person,
unless the terms of such consolidation, merger of transfer include the
preservation of the Convertible Preferred Stock. Any reference herein to
the Company shall refer to such surviving or transferee corporation. If
the Company merges or consolidates with another corporation, or sells or
transfers all or substantially all of its assets to another person, and
the holders of the Common Stock are entitled to receive stock, securities
or property in respect of, or in exchange for, Common Stock, then, as a
condition of such merger, consolidation, sale or transfer, the Company
and any such successor, purchaser or transferee shall amend the Security
to provide that it may thereafter be converted on the terms and subject
to the conditions set forth above into the stock, securities or property
receivable upon such merger, consolidation, sale or transfer by a holder
of shares of Common Stock into which the Security might have been
converted immediately before such merger, consolidation, sale or
transfer, entity in such merger, consolidation, sale or transfer. In any
such case, appropriate adjustment shall be made in the application of the
provisions of this Article 4 with respect to the rights of a Holder upon
and after such merger, consolidation, sale or transfer to the end that
the provisions of this Article 4 (including adjustment of the Conversion
Price then in effect and the number of shares of Common Stock issuable
upon conversion of the Security) shall be applicable after that event as
nearly equivalently as may be practicable. Except as otherwise provided
herein, the Conversion Price shall be the same as the applicable
Conversion Price set forth in Subsection 3.1(b) above, as the same is to
be adjusted pursuant to Subsection 4.1 above.
Article 5. Failure to Perform.
Section 5.1 Failure to Perform Certain Covenants. In the
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event the Company breaches its obligation to deliver certificates for
Common Stock pursuant to Section 3.2 above, the Company shall be required
to make payment to the Holder of the Security, within five (5) business
days after each demand by the Holder, of an amount equal to One Thousand
($1,000) Dollars per day with respect to each One Hundred Thousand
($100,000) Dollars (or the pro-rata portion thereof) Stated Value of the
Security outstanding during such period as such breach continues.
Section 5.2 Rights and Remedies. The rights and remedies
provided to a Holder under Sections 5.1 and 5.2 above shall not limit any
other rights and remedies afforded by law to a Holder.
Article 6. Reports. The Company will mail to each Holder of the Security,
at its address as shown on the Register (as defined in Section 8.2 below)
a copy of any annual, quarterly or current report that it files with the
Securities and Exchange Commission promptly after the filing thereof, and
a copy of any annual, quarterly or other report or proxy statement that
it gives to its shareholders generally, at the time such report or
statement is sent to shareholders.
Article 7. Registered Securities.
Section 7.1 Series. The Securities to be issued hereunder
shall be one of a numbered series of Securities issued to the
Holders and designated as "Senior Convertible Preferred Stock".
Such Securities are collectively referred to herein as the
"Securities."
Section 7.2 Record Ownership. The Company shall maintain a
register of the Holders of the Securities (the "Register") showing their
names and addresses and the serial numbers and the Stated Value of
Securities issued to, or transferred of record by, them from time to
time. The Register may be maintained in electronic, magnetic or other
form. The Company may treat the person named as the Holder of a Security
in the Register as the sole owner of such Security. The Holder of the
Security shall be the person exclusively entitled to receive
notifications with respect to such Security, convert it into Common Stock
and otherwise exercise all of the rights and powers as the absolute owner
thereof.
Section 7.3 Registration of Transfer. Transfers of the
Security may be registered on the books of the Company maintained
for such purpose pursuant to Section 7.2 above (i.e., the
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Register). Transfers shall be registered when the Security is presented
to the Company with a request to register the transfer thereof and the
Security is duly endorsed by the Holder, reasonable assurances are given
that the endorsements are genuine and effective, the Company has received
a certificate from the Holder that it owns the Security free and clear of
all claims, liens and/or encumbrances, and the Company has received
evidence, satisfactory to it, that such transfer is rightful and in
compliance with all applicable laws, including tax laws and State and
Federal securities laws. When the Security is presented for transfer and
duly transferred hereunder, it shall be canceled and one or more new
Securities showing the name(s) of the transferee(s) as the Holder(s)
thereof shall be issued in lieu thereof. When the Security is presented
to the Company with a reasonable request to exchange it for an equal
Stated Value of Securities of other denominations, the Company shall make
such exchange and shall cancel the Security and issue, in lieu thereof,
Securities having a total Stated Value equal to the Stated Value of the
Security, in the denominations requested by the Holder.
Section 7.4 Worn and Lost Securities. If the Security becomes
worn, defaced or mutilated but is still substantially intact and
recognizable, the Company or its agent may issue a new Security in lieu
thereof upon its surrender. Where the Holder of a Security claims that
such Security has been lost, destroyed or wrongfully taken, the Company
shall issue a new Security in place of the original Security if the
Holder so requests by written notice to the Company (provided such notice
is actually received by the Company before it is notified that such
Security has been acquired by a bona fide purchaser) and the Holder has
delivered to the Company an indemnity bond in such amount and issued by
such surety as the Company deems satisfactory, together with an affidavit
of the Holder setting forth the facts concerning such loss, destruction
or wrongful taking and such other information, in such form and with such
proof or verification, as the Company may request.
Article 8. Voting Rights. Except as specifically set forth in the
Business Corporation Act of the State of New York, the Holders of shares
of Convertible Preferred Stock shall not be entitled to any voting rights
with respect to any matters voted upon by shareholders of the Company.
Article 9. Notices. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand delivery, registered
first class mail, overnight courier, or
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<PAGE>
telecopied, initially to the address set forth below, and thereafter at
such other address, notice of which is given in accordance with the
provisions of this Article 9.
All notices to Holders are to be directed to each Holder at such
address as is listed for such Holder in the Register.
All notices to the Company are to be directed to:
Sterling Vision, Inc.
1500 Hempstead Turnpike
East Meadow, NY 11554
Attn: General Counsel
Telephone: 516-390-2100
Telecopier: 516-390-2150
with a copy (which shall not constitute notice) to:
Camhy Karlinsky & Stein LLP
1740 Broadway
16th Floor
New York, NY 10019
Attn: Robert S. Matlin, Esq.
Telephone: 212-977-6600
Telecopier: 212-977-8389
All such notices and communications shall be deemed to have been
duly given: when delivered by hand, if personally delivered; three (3)
business days after being deposited in the mail, postage prepaid, if
mailed; the next business day after being deposited with an overnight
courier, if deposited with a nationally recognized, overnight courier
service; or when receipt is acknowledged, if telecopied.
Article 10. Times. Where this Certificate authorizes or requires the
payment of money or the performance of a condition or obligation on a
Saturday or Sunday or a public holiday, or authorizes or requires the
payment of money or the performance of a condition or obligation within,
before or after a period of time computed from a certain date, and such
period of time ends on a Saturday, a Sunday or a public holiday, such
payment may be made or condition or obligation performed on the next
succeeding business day, and if the period ends at a specific hour, such
payment may be made or condition performed, at or before the same hour of
such next succeeding business day, with the same force and effect as if
made or performed in accordance with the terms of this Certificate.
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<PAGE>
Article 11. Rules of Construction. Herein, unless the context otherwise
requires, words in the singular number include the plural, and in the
plural include the singular, and words of the masculine gender include
the feminine and the neuter, and when the sense so indicates, words of
the neuter gender may refer to any gender. The numbers and titles of
Articles and Sections contained herein are inserted for convenience of
reference only, and they neither form a part of this Certificate, nor are
they to be used in the construction or interpretation hereof. Wherever,
in this Certificate, a determination of the Company is required or
allowed, such determination shall be made by a majority of the Board of
Directors of the Company, and if it is made in good faith, it shall be
conclusive and binding upon the Company and the Holder of the Security."
FOURTH: Thirty-five (35) shares of the unissued Preferred Stock
of the Company, par value $.01, have been designated Senior Convertible
Preferred Stock, the terms of which are stated above in Article THIRD
hereof.
FIFTH: Pursuant to the authority under Article 4 of the
Certificate of Incorporation of the Company and Sections 502 and 805 of
the Business Corporation Law of the State of New York, the Board of
Directors of the Company, by Unanimous Written Consent, dated April 9,
1998, adopted a Resolution creating a series of Preferred Stock of the
Company, designated Senior Convertible Preferred Stock, the terms of
which are stated in Article THIRD hereof.
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<PAGE>
IN WITNESS WHEREOF, the Company has caused this Certificate of
Amendment to the Certificate of Incorporation of the Company to be signed
by the Chairman of the Board and the Secretary of the Company, who affirm
that the statements made herein are true and correct under the penalties
of perjury, on this 9th day of April, 1998.
STERLING VISION, INC.
By:
------------------------------
Name: Dr. Robert Cohen
Title: Chairman of the Board
By:
------------------------------
Name: Joseph Silver
Title: Secretary
22
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NOTICE OF CONVERSION
[To be completed and signed only upon conversion of Security]
The undersigned, the Holder of this Security, hereby irrevocably
elects to exercise the right to convert it into Common Stock, par value
$.01 per share, of Sterling Vision, Inc., as follows:
{Complete if less than all of the Dollars ($ )*
Stated Value is to be converted) --------------------------------------------
($100,000 or integral multiples of $100,000)
(Signature must be guaranteed
if registered holder of stock --------------------------------------------
differs from registered (Name of Holder of Shares if different than
Holder of Security) the registered Holder of the Security)
--------------------------------------------
(Address of Holder of shares if different
than the address of registered Holder of the
Security)
--------------------------------------------
(Social Security of EIN of the Holder of
shares if different than the Holder of the
Security)
* If the Stated Value of the Security to be converted is less than the
Stated Value thereof, a new Security for the balance of the Stated Value
shall be returned to the Holder of the Security. All notices shall be
transmitted by hand delivery, facsimile or overnight courier.
The undersigned requests that the Shares to be issued pursuant to this
Notice of Conversion be issued:
23
<PAGE>
CHECK ONE:
[ ] by issuance of a Certificate therefor to the Holder:
[ ] by DWAC to the entity and address set forth below:
--------------------------------------------------
--------------------------------------------------
--------------------------------------------------
NOTE: IF THE SHARES OF COMMON STOCK (TO BE ISSUED PURSUANT TO THIS NOTICE
OF CONVERSION) ARE TO BE "DWAC'd", THE UNDERSIGNED HEREBY REPRESENTS AND
WARRANTS THAT: (I) HE/SHE/IT HAS PREVIOUSLY RECEIVED A COPY OF THE
REGISTRATION STATEMENT REFERRED TO IN SUBSECTION 1.2(e) OF THE
CERTIFICATE OF DESIGNATION; AND (II) A COPY OF THE PROSPECTUS INCLUDED IN
SAID REGISTRATION STATEMENT WILL BE DELIVERED, PRIOR TO THE UNDERSIGNED'S
SALE AND/OR TRANSFER OF ANY SUCH SHARES, TO THE PROPOSED
PURCHASER/TRANSFEREE THEREOF OR HIS/HER/ITS BROKER OR AUTHORIZED AGENT.
Date: Sign:
------------- ------------------------------------------------
(Signature must conform in all respects
to name of the Holder as shown on the face of
the Security)
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<PAGE>
ASSIGNMENT OF Preferred Stock
The undersigned hereby sell(s) and assign(s) and transfer(s) unto
- --------------------------------------------------------------------------
(name, address and SSN or EIN of assignee)
- --------------------------------------------------------------------------
(Stated Value of Preferred Stock, $100,000 or integral multiples of
$100,000)
Date: Sign:
------------- ---------------------------------------
(Signature must conform in all respects
to the name of the Holder as shown on
the face of the Certificate for the
Preferred Stock)
25
<PAGE>
FORM OF REPRESENTATION LETTER
[NAME/ADDRESS OF HOLDER]
_______________, 199_
VIA FAX: (516)390-2150
Sterling Vision, Inc.
1500 Hempstead Turnpike
East Meadow, New York 11554
Attn.: General Counsel
Re: Convertible Preferred Stock and Warrants Subscription
Agreement
Gentlemen:
Reference is made to: (i) that certain Convertible Preferred Stock and
Warrants Subscription Agreement (the "Subscription Agreement"), dated as
of February 17, 1998, pursuant to which the undersigned subscribed to
purchase from Sterling Vision, Inc. ("SVI" or the "Seller") an aggregate
of $_________ Stated Value of SVI's Convertible Preferred Stock (the
"Securities"); and (ii) the undersigned's Notice of Conversion, dated
_________, 199__, with respect to $_________ Stated Value of the
Securities. All capitalized terms used (but not otherwise defined) herein
shall have the respective, identical meanings ascribed to them in said
Subscription Agreement.
With respect to the foregoing, this letter will serve to confirm and
certify to SVI that the undersigned has not, as of the date hereof,
violated and/or breached the provisions of Subsection 2(v) of the
Subscription Agreement which prohibits the undersigned, for a period of
twelve (12) months from the Closing, from offering, selling, contracting
to sell, granting any options to purchase, or otherwise disposing
(collectively, a "Sale") of any Common Stock that the undersigned does
not own as of such date; provided, however, that no such restriction will
apply to any Shares to be issued to the undersigned upon the conversion
of any Preferred Stock in the event the Seller receives from the
undersigned, within five (5) business days after any such Sale, a Notice
of Conversion with respect to such Preferred Stock.
Very truly yours,
[NAME OF HOLDER]
By:__________________________________
26
<PAGE>
CONVERTIBLE PREFERRED STOCK AND WARRANTS SUBSCRIPTION AGREEMENT
OF STERLING VISION, INC.
THIS CONVERTIBLE PREFERRED STOCK AND WARRANTS SUBSCRIPTION
AGREEMENT (the "Agreement") is made and entered into as of the 17th day
of February, 1998, by and between STERLING VISION, INC., a New York
corporation ("Seller"), and_____________________________________________
_________, a _____________________________________("Buyer"), providing
for the purchase and sale of _____________( ) Units (the "Units"), each
Unitconsisting of one (1) share of the Seller's Senior Convertible Preferred
Stock, par value $.01 per share (collectively, the "Preferred Stock"),
convertible into shares (collectively, the "Equity Shares") of the common
stock, par value $.01 per share (the "Common Stock"), of Seller, and
_________________ (__________) Warrants (collectively, the "Warrants") of
Seller, each Warrant entitling Buyer to purchase one share (collectively,
the "Warrant Shares") of Common Stock (the Equity Shares, Warrant Shares
and the Interest Shares [as said term is hereinafter defined] being
hereinafter collectively referred to as the "Shares"), in connection with
an offering by Seller of an aggregate of 35 Units consisting of an
aggregate of thirty-five (35) shares of Preferred Stock and an aggregate
of Seven Hundred Thousand (700,000) Warrants. Seller and Buyer
(collectively, the "Parties") each hereby represent and agree as follows:
1. AGREEMENT TO SUBSCRIBE; PURCHASE PRICE;
ISSUANCE OF SHARES
(i) Buyer hereby subscribes for _________( ) Units,
consisting of ______ shares of Preferred Stock and ____________ Warrants.
The Preferred Stock shall have such preferences and relative rights, and
shall be subject to such qualifications, limitations and restrictions as
set forth in the Company's "Certificate of Designations, Preferences and
Relative Rights of Preferred Stock and Relative Rights of Preferred Stock
and Qualifications, Limitations and Restrictions Thereof", filed by the
Company with the New York Secretary of State, a copy of which is annexed
hereto as Exhibit B (the "Certificate of Designations").
(ii) Buyer shall pay the aforesaid principal amount as
the purchase price for the Units subscribed for by it by wire transfer of
immediately available, Federal funds in United States dollars against
counter-delivery of Buyer's Units by Seller. The closing of the purchase
and sale of the Units (the "Closing") shall take place on or about
February 17, 1998, at 10:00 a.m., at the offices of Seller's counsel,
Camhy Karlinsky & Stein LLP, 1740 Broadway, 16th Floor, New York, NY
10019, or at such other place as the parties shall agree.
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<PAGE>
2. BUYER'S REPRESENTATIONS AND COVENANTS.
Buyer represents, warrants and covenants to Seller as
follows:
(i) This Agreement has been duly authorized, validly
executed and delivered on behalf of Buyer and is a valid and binding
agreement of Buyer enforceable in accordance with its terms, subject to
general principles of equity and of bankruptcy or other laws affecting
the enforcement of creditors' rights;
(ii) Buyer is purchasing the Unit(s) for its own
account for investment purposes only and not with a view towards
distribution. Buyer understands and agrees that it must bear the economic
risks of its investment for an indefinite period of time. Buyer has
received and carefully reviewed copies of the Public Documents (as
defined in Section 3). Buyer understands that the offer and sale of the
Units are being made only by means of this Agreement. No representations
or warranties have been made to Buyer by Seller, the officers or
directors of Seller, or any agent, employee or affiliate of any of them,
except as specifically set forth herein. Buyer is aware that the purchase
of the Units involves a high degree of risk and that it may sustain, and
has the financial ability to sustain, the loss of its entire investment.
Buyer has had the opportunity to ask questions of, and receive answers
satisfactory to it from, Seller's management regarding Seller. Buyer
understands that no federal or state governmental authority has made any
finding or determination relating to the fairness of an investment in the
Units and that no federal or state governmental authority has recommended
or endorsed, or will recommend or endorse, the investment herein. Buyer,
in making the decision to purchase the Units subscribed for, has relied
upon independent investigation made by it and has not relied on any
information or representations made by third parties. Buyer has
significant assets and upon consummation of the purchase of the Units
will continue to have significant assets exclusive of the Units. Buyer
has not been organized for the sole purpose of acquiring the Units;
(iii) Buyer is an "accredited investor" within the
meaning of Rule 501 promulgated under the Securities Act of 1933, as
amended (the "Securities Act");
(iv) Buyer understands that the Units are being offered
and sold to it in reliance on specific provisions of federal and state
securities laws and that Seller is relying upon the truth and accuracy of
the representations, warranties, agreements, acknowledgments and
understandings of Buyer set forth herein in order to determine the
applicability of such provisions;
28
<PAGE>
(v) Buyer agrees that for a period of twelve (12)
months from the Closing it shall not offer, sell, contract to sell, grant
any option to purchase or otherwise dispose of any Common Stock (any of
the foregoing, a "Sale") that Buyer does not own as of such date;
provided, however, that no such restriction shall apply to any Shares to
be issued to Buyer upon the conversion of any Preferred Stock or the
exercise of any Warrants in the event Seller receives from Buyer, within
five (5) business days after any such Sale, (x) a Notice of Conversion
(as defined in the Certificate of Designations) with respect to such
Preferred Stock or (y) the Election to Exercise with respect to such
Warrants;
(vi) Buyer has not employed any investment banker,
broker or finder or incurred any liability for any brokerage fees,
commissions or finder's fees in connection with the transactions
contemplated by this Agreement; and
(vii) Buyer understands that neither the Units, the
Preferred Stock, the Warrants nor the shares of Common Stock into which
the Preferred Stock is convertible (the "Equity Shares") have been
registered under the Securities Act and therefore it cannot dispose of
any or all of the Units, the Preferred Stock, the Warrants or the Equity
Shares unless and until such Units, Preferred Stock, Warrants or Equity
Shares, as the case may be, are subsequently registered under the
Securities Act or exemptions from such registration are available, it
being understood that subject to certain limitations, only the Equity
Shares and Warrant Shares shall be required to be registered by Seller.
Buyer acknowledges that a legend substantially as follows will be placed
on the certificates representing the Preferred Stock, the Warrants, the
Equity Shares and the Warrant Shares:
THE SECURITIES REPRESENTED HEREBY ARE RESTRICTED SECURITIES WITHIN THE
MEANING OF THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD,
PLEDGED, TRANSFERRED OR OTHERWISE DISPOSED OF EXCEPT IN ACCORDANCE WITH
SUCH ACT AND THE RULES AND REGULATIONS PROMULGATED THEREUNDER AND IN
ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS. THE ISSUER OF THESE
SECURITIES WILL NOT TRANSFER SUCH SECURITIES EXCEPT UPON RECEIPT OF
EVIDENCE SATISFACTORY TO THE ISSUER THAT THE REGISTRATION PROVISIONS OF
SUCH ACT HAVE BEEN COMPLIED WITH OR THAT SUCH REGISTRATION IS NOT
REQUIRED AND THAT SUCH TRANSFER WILL NOT VIOLATE ANY APPLICABLE FEDERAL
OR STATE SECURITIES LAWS.
3. SELLER'S REPRESENTATIONS AND COVENANTS.
Seller represents, warrants and covenants to Buyer as
follows:
(i) Seller has been duly incorporated and is validly
existing and in good standing under the laws of the State of New York,
with full corporate power and authority to own, lease and
29
<PAGE>
operate its properties and to conduct its business as currently
conducted, and is duly registered and qualified to conduct its business
and is in good standing in each jurisdiction or place where the nature of
its properties or the conduct of its business requires such registration
or qualification, except where the failure to register or qualify is not
reasonably anticipated to have a material adverse effect on the condition
(financial or other), business, properties, net worth or results of
operations of Seller and its subsidiaries taken as a whole;
(ii) Seller has registered shares of its Common Stock
pursuant to Section 12 of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), is in full compliance with all reporting
requirements of the Exchange Act, and the Common Stock is quoted on the
Nasdaq National Market (trading symbol ISEE);
(iii) Seller has delivered to Oscar Folger, Esq.,
counsel to the Buyer, with copies of Seller's most recent Annual Report
on Form 10-K filed with the Securities and Exchange Commission (the
"Commission"), all Forms 10-Q and 8-K filed thereafter and all other
filings made with the Commission after the filing of the most recent Form
10-K (collectively, the "Public Documents"). Except for a possible,
required reclassification, on Seller's Consolidated Balance Sheets, of
certain Debentures issued by the Seller on February 25, 1997, and except
for certain possible, non-cash charges to income resulting therefrom, the
Public Documents, at the time of their filing, did not include any untrue
statement of a material fact or omit to state any material fact necessary
in order to make the statements contained therein, in light of the
circumstances under which they were made, not misleading;
(iv) At the Closing, each of the Units, the Preferred
Stock and the Warrants shall be duly authorized and validly issued and
each of them shall be enforceable in accordance with their terms (subject
to general principles of equity and bankruptcy, fraudulent conveyance,
preference and other laws affecting creditors' rights generally). The
Preferred Stock, Warrant Shares and Equity Shares, as well as any shares
of Common Stock to be issued to the Buyer upon exercise of the Warrants
and/or pursuant to Subsection 1.2(d) of the Certificate of Designations
(the "Interest Shares") when issued and delivered, will be duly and
validly authorized and issued, fully paid and nonassessable, free from
all encumbrances and restrictions other than restrictions on transfer
imposed by applicable securities laws and/or this Agreement and/or the
Certificate of Designations, and will not subject the holders thereof to
personal liability by reason of being such holders. Seller has reserved
1,400,000 shares of Common Stock for issuance upon conversion of the
Preferred Stock and exercise of the Warrants. There are no preemptive
rights of any shareholder of Seller with respect to the Preferred Stock,
the Warrants or the Shares;
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<PAGE>
(v) This Agreement has been duly authorized, validly
executed and delivered on behalf of Seller and is a valid and binding
agreement of Seller enforceable in accordance with its terms, subject to
general principles of equity and to bankruptcy or other laws affecting
the enforcement of creditors' rights generally, and Seller has full power
and authority to execute and deliver this Agreement and the other
agreements and documents contemplated hereby and to perform its
obligations hereunder and thereunder;
(vi) The execution and delivery of this Agreement, the
issuance of the Preferred Stock, the Warrants, the Shares (upon
conversion of the Preferred Stock, the exercise of the Warrants and/or
pursuant to Subsection 1.2(d) of the Certificate of Designations) and the
consummation of the transactions contemplated by this Agreement by
Seller, will not conflict with or result in a breach of or a default
under any of the terms or provisions of, Seller's certificate of
incorporation or By-laws, or of any material provision of any indenture,
mortgage, deed of trust or other material agreement or instrument to
which Seller is a party or by which it or any of its properties or assets
is bound, any material provision of any law, statute, rule, regulation,
or any existing applicable decree, judgment or order by any court,
federal or state regulatory body, administrative agency, or other
governmental body having jurisdiction over Seller, or any of its
properties or assets or will result in the creation or imposition of any
material lien, charge or encumbrance upon any property or assets of
Seller or any of its subsidiaries pursuant to the terms of any agreement
or instrument to which any of them is a party or by which any of them may
be bound or to which any of their property or any of them is subject;
(vii) No authorization, approval, filing with or
consent of any governmental body is required for the issuance and sale of
the Preferred Stock, the Warrants or the Shares (upon conversion of the
Preferred Stock, or the exercise of the Warrants and/or pursuant to
Subsection 1.2(d) of the Certificate of Designations) as contemplated by
this Agreement, except as may be required under the securities or blue
sky laws of the various states;
(viii) There is no action, suit or proceeding before or
by any court or governmental agency or body, domestic or foreign, now
pending or, to the actual knowledge of Seller (without inquiry),
threatened, against or affecting Seller, or any of its properties, which
would reasonably be anticipated to result in any material adverse change
in the condition (financial or otherwise) or in the earnings, business
affairs, business prospects, properties or assets of Seller and its
subsidiaries, taken as a whole;
(ix) Seller shall issue the Preferred Stock in the name
of Buyer in the amount specified in Section 1(i) above in denominations
of One Hundred Thousand ($100,000) Dollars Stated Value. Seller shall
issue the Warrants in the name of Buyer in the amount specified
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<PAGE>
in Section 1(i) in denominations of Twenty Thousand (20,000) Warrants.
Upon conversion of the Preferred Stock or the exercise of the Warrants,
or the payment, by the Seller, of any required dividends on the Preferred
Stock in shares of its Common Stock which may then be resold pursuant to
the Registration Statement (as hereinafter defined), Seller will issue
one or more certificates representing the Shares, in the name of Buyer,
with a legend (if applicable) substantially in the form specified by
Section 2(vii) above, and in such denominations to be specified by Buyer
prior to conversion or exercise, as the case may be; and
(x) Seller has not employed any investment banker,
broker or finder or incurred any liability for any brokerage fees,
commissions or finder's fees in connection with the transactions
contemplated by this Agreement except for a fee payable by Seller, at the
Closing, to Mueller & Company, Inc., in an amount equal to five (5%)
percent of the principal amount of this Debenture.
4. REGISTRATION.
Seller hereby agrees to file, within a maximum period
of seventy-five (75) days from the Closing, a registration statement (the
"Registration Statement") under the Securities Act on Form S-3, covering
resales of all of the Equity Shares and Warrant Shares. Seller shall use
its reasonable, good faith efforts to cause the Registration Statement to
become effective within one hundred twenty (120) days after the date of
filing of the Registration Statement. The Registration Statement shall be
a "shelf" registration statement for purposes of Rule 415 under the
Securities Act, and Seller shall maintain its effectiveness until the
earlier of (x) three (3) years from the date the Registration Statement
has been declared effective and (y) the date all of the Equity Shares
and/or Interest Shares have been sold and all of the Warrants have been
exercised. In furtherance of the foregoing, Seller shall, as
expeditiously as possible:
(i) before filing a registration statement or
prospectus or any amendments or supplements thereto (x) furnish to one
counsel selected by Buyer copies of all such documents proposed to be
filed, and (y) notify Buyer and such counsel of any stop order issued or
threatened by the Commission and take all reasonable actions required to
prevent the entry of such stop order or to remove it if entered;
(ii) prepare and file with the Commission such
amendments and supplements to any Registration Statement and the
prospectus included therein as may be necessary to keep such Registration
Statement effective until the earlier of (i) the date the distribution
described in the Registration Statement is completed and (ii) the date
all Shares shall otherwise have been sold (but not before the expiration
of the period referred to in Section 4(3) of the Securities Act and Rule
174 thereunder, if applicable), and
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<PAGE>
comply with the provisions of the Securities Act with respect to the
disposition of all securities covered by such Registration Statement
during such period in accordance with the intended methods of disposition
by the sellers thereof set forth in such Registration Statement;
(iii) furnish to Buyer and any underwriter of the Shares
to be included in the Registration Statement, copies of such Registration
Statement as filed and each amendment and supplement thereto (in each
case including all exhibits thereto), the prospectus included in such
Registration Statement (including each preliminary prospectus) and such
other documents as Buyer may reasonably request in order to facilitate
the disposition of the Shares owned by Buyer;
(iv) use its reasonable, good faith efforts to register
or qualify the Shares under such other securities or blue sky laws of
such jurisdictions as Buyer or any underwriter of the Shares reasonably
requests, and do any and all other acts which may be reasonably necessary
or advisable to enable Buyer to consummate the disposition in such
jurisdictions of the Shares; provided that Seller will not be required to
(x) qualify generally to do business in any jurisdiction where it would
not otherwise be required to qualify but for this Section 4(iv), (y)
subject itself to taxation in any such jurisdiction, or (z) consent to
general service of process in any such jurisdiction;
(v) use its reasonable, good faith efforts to cause the
Shares covered by such Registration Statement to be registered with or
approved by such other governmental agencies or other authorities as may
be necessary by virtue of the business and operations of Seller to enable
Buyer to consummate the disposition of the Shares;
(vi) notify Buyer and any underwriter of the Shares, at
any time when a prospectus relating thereto is required to be delivered
under the Securities Act (even if such time is after the period referred
to in Section 4(ii)), 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 to state any material fact required
to be stated therein or necessary to make the statements therein in light
of the circumstances under which they were made not misleading, and
prepare a supplement or amendment to such prospectus so that, as
thereafter delivered to the purchasers of the Shares, such prospectus
will not contain an untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary to make the
statements therein in light of the circumstances under which they were
made not misleading;
(vii) make available for inspection by Buyer, any
underwriter participating in any disposition pursuant to such
Registration Statement, and any attorney, accountant or other agent
retained by Buyer or any such underwriter (collectively, the
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"Inspectors"), all financial and other pertinent records and pertinent
corporate documents of Seller (collectively, the "Records"), and cause
Seller's officers, directors and employees to supply all information
reasonably requested by any such Inspector, as shall be reasonably
necessary to enable them to exercise their due diligence responsibility,
in connection with such Registration Statement. Records or other
information which Seller determines, in good faith, to be confidential
and which it notifies the Inspectors are confidential shall not be
disclosed by the Inspectors unless (x) the disclosure of such Records or
other information is necessary to avoid or correct a misstatement or
omission in the Registration Statement, or (y) the release of such
Records or other information is ordered pursuant to a subpoena or other
order from a court of competent jurisdiction. Buyer shall, upon learning
that disclosure of such Records or other information is sought in a court
of competent jurisdiction, give notice to Seller and allow Seller, at
Seller's expense, to undertake appropriate action to prevent disclosure
of the Records or other information deemed confidential;
(viii) furnish, at the request of Buyer, on the date
that the Shares are delivered to the underwriters for sale pursuant to
such Registration Statement or, if the Shares are not being sold through
underwriters, on the date that the Registration Statement with respect to
the Shares becomes effective, (i) a signed opinion, dated such date, of
the legal counsel representing Seller for the purposes of such
registration, addressed to the underwriters, if any, or if the Shares are
not being sold through underwriters, then to Buyer, as to such matters as
such underwriters or Buyer, as the case may be, may reasonably request
and as would be customary in such a transaction; and (y) a letter dated
such date, from the independent certified public accountants of Seller,
addressed to the underwriters, if any, or if the Shares are not being
sold through underwriters, then to Buyer and, if such accountants refuse
to deliver such letter to Buyer, then to Seller (xx) stating that they
are independent certified public accountants within the meaning of the
Securities Act and that, in the opinion of such accountants, the
financial statements and other financial data of Seller included in the
registration statement or the prospectus, or any amendment or supplement
thereto, comply as to form in all material respects with the applicable
accounting requirements of the Securities Act, and (yy) covering such
other financial matters (including information as to the period ending
not more than five business days prior to the date of such letter) with
respect to the registration in respect of which such letter is being
given as Buyer may reasonably request and as would be customary in such a
transaction;
(ix) enter into customary agreements (including if the
method of distribution is by means of an underwriting, an underwriting
agreement in customary form) and take such other actions as are
reasonably required in order to expedite or facilitate the disposition of
the Shares to be so included in the Registration
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Statement; and
(x) use its reasonable, good faith efforts to cause all
the Shares to be quoted on the NASDAQ National Market System.
Seller may require Buyer to furnish to Seller such
information regarding the distribution of the Shares as Seller may from
time to time reasonably request in writing. Buyer agrees to timely
cooperate with Seller in connection with the preparation and filing of
the Registration Statement and to promptly furnish to Seller such
information regarding Buyer and the distribution of the Shares as
reasonably requested by Seller. Buyer represents and warrants that no
information furnished in writing to Seller will contain any untrue
statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements contained therein
not misleading.
Buyer agrees that, upon receipt of any notice from
Seller of the happening of any event of the kind described in Section
4(vi) hereof, Buyer will forthwith discontinue disposition of the Shares
pursuant to the Registration Statement until Buyer's receipt of the
copies of the supplemented or amended prospectus contemplated by Section
4(vi) hereof, and, if so directed by Seller, Buyer will deliver to Seller
(at Seller's expense) all copies, other than permanent file copies then
in Buyer's possession, of the prospectus covering the Shares current at
the time of receipt of such notice. In the event Seller shall give any
such notice, Seller shall extend the period during which the Registration
Statement shall be maintained effective pursuant to this Agreement by the
number of days during the period from and including the date of the
giving of such notice pursuant to Section 4(vi) hereof to and including
the date when Buyer shall have received the copies of the supplemented or
amended prospectus contemplated by Section 4(vi) hereof.
Seller further agrees that in the event the holder of a
Warrant shall, after the date such Registration Statement shall be
declared effective, deliver to the Seller written notice of the
transfer/assignment thereof (in the form annexed to the Warrant), the
Seller shall, within ten (10) business days thereafter, file with the SEC
a supplement to said Registration Statement setting forth the name and
address of such transferee/assignee; provided, however, that Seller, as a
condition thereto, may require such transferee/assignee to provide it
with the information otherwise required of Buyer hereunder.
5. EXPENSES OF REGISTRATION.
All expenses incurred in connection with the
registration of the Shares contemplated by this Agreement, excluding
underwriters' discounts and commissions and the fees of Buyer's counsel,
but including, without limitation, all registration, filing and
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qualification fees, word processing, duplicating, printers, and Seller's
accounting fees (including the expenses of any special audits or "cold
comfort" letters required by or incident to such performance and
compliance), exchange listing fees or National Association of Securities
Dealers fees, messenger and delivery expenses, all fees and expenses of
complying with securities or blue sky laws and fees and disbursements of
counsel for Seller shall be paid by Seller. Buyer shall bear and pay any
underwriting commissions and discounts applicable to the Shares offered
for its account and the fees of its counsel in connection with any
registrations, filings and qualifications made pursuant to this
Agreement.
6. INDEMNIFICATION AND CONTRIBUTION
IN CONNECTION WITH REGISTRATION.
(i) Subject to Buyer's obligation to indemnify Seller
as provided in Section 6(ii)hereof, Seller agrees to indemnify, to the
full extent permitted by law, Buyer, its officers, directors, employees,
shareholders, attorneys and agents and each person who controls Buyer
(within the meaning of the Securities Act) against any and all losses,
claims, damages, liabilities and expenses resulting from any untrue or
alleged untrue statement of material fact contained in any Registration
Statement, (including any prospectus or preliminary prospectus
constituting a part thereof) or any amendment thereof or supplement
thereto or any omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements
therein (in case of a prospectus or preliminary prospectus, in the light
of the circumstances under which they were made) not misleading. Seller
will also indemnify any underwriters of the Shares, their officers and
directors and each person who controls such underwriters (within the
meaning of the Securities Act) to the same extent as provided above with
respect to the indemnification of Buyer.
(ii) In connection with any Registration Statement
(pursuant to which the Shares are to be registered), Buyer will furnish
promptly to Seller in writing such information with respect to Buyer as
Seller reasonably requests for use in connection with any such
Registration Statement or amendment thereof or supplement thereto and
agrees to indemnify, to the extent permitted by law, Seller, its
officers, directors, employees, shareholders, attorneys and agents and
each person who controls Seller (within the meaning of the Securities
Act) against any and all losses, claims, damages, liabilities and
expenses resulting from any untrue or alleged untrue statement of
material fact or any omission or alleged omission of a material fact
required to be stated in the Registration Statement, (including the
prospectus or preliminary prospectus constituting a part thereof) or any
amendment thereof or supplement thereto or necessary to make the
statements therein (in the case of a prospectus or preliminary
prospectus, in the light of the circumstances under
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which they were made) not misleading, to the extent, but only to the
extent, that such untrue statement or omission is contained in any
information with respect to Buyer furnished or required to be furnished
by Buyer. Notwithstanding the foregoing, the liability of Buyer under
this Subsection 6(ii) shall be limited to an amount equal to the gross
proceeds of the Shares sold by Buyer under the Registration Statement,
unless such liability arises out of or is based on the gross negligence
and/or willful misconduct of Buyer.
(iii) Any person entitled to indemnification hereunder
agrees to give prompt written notice to the indemnifying party after the
receipt by such person of any written notice of the commencement of any
action, suit, proceeding or investigation for which such person will or
may claim indemnification or contribution pursuant to this Agreement and,
unless in the reasonable judgment of such indemnified party, a conflict
of interest may exist between such indemnified party and the indemnifying
party with respect to such claim, permit the indemnifying party to assume
the defense of such claims with counsel reasonably satisfactory to such
indemnified party. Whether or not such defense is assumed by the
indemnifying party, the indemnifying party will not be subject to any
liability for any settlement made without its consent (but such consent
will not be unreasonably withheld and/or delayed). Failure by such person
to provide said notice to the indemnifying party shall in and of itself
not create liability except to the extent of any injury directly
resulting therefrom. No indemnifying party will consent to entry of any
judgment or enter into any settlement which does not include, as an
unconditional term thereof, the giving by the claimant or plaintiff to
such indemnified party of a release from all liability in respect of such
claim or litigation. If the indemnifying party is not entitled to, or
elects not to, assume the defense of a claim, it will not be obligated to
pay the fees and expenses of more than one counsel with respect to such
claim, unless in the reasonable judgment of any indemnified party a
conflict of interest may exist between such indemnified party and any
other such indemnified parties with respect to such claim, in which event
the indemnifying party shall be obligated to pay the fees and expenses of
such additional counsel or counsels.
(iv) If, for any reason, the indemnity provided for in
this Section 6 is unavailable to, or is insufficient to hold harmless, an
indemnified party, then the indemnifying party shall contribute to the
amount paid or payable by the indemnified party as a result of such
losses, claims, damages, liabilities or expenses (x) in such proportion
as is appropriate to reflect the relative benefits received by the
indemnifying party on the one hand and the indemnified party on the
other, or (y) if the allocation provided by clause (x) above is not
permitted by applicable law, or provides a lesser sum to the indemnified
party than the amount hereinafter calculated, in such proportion as is
appropriate to reflect not only the relative benefits received by the
indemnifying party on the one
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hand and the indemnified party on the other but also the relative fault
of the indemnifying party and the indemnified party as well as any other
relevant equitable considerations. The relative fault of such
indemnifying party and indemnified parties shall be determined by
reference to, among other things, whether any action in question,
including any untrue or alleged untrue statement of a material fact or
omission or alleged omission to state a material fact, has been made by,
or relates to information supplied (or required to be supplied) by, such
indemnifying party or indemnified parties, and the parties' relative
intent, knowledge, access to information and opportunity to correct or
prevent such action. The amount paid or payable by a party as a result of
the losses, claims, damages, liabilities and expenses referred to above
shall be deemed to include, subject to the limitations set forth in
Subsection 6(iv), any legal or other fees or expenses reasonably incurred
by such party in connection with any investigation or proceeding.
The parties hereto agree that it would not be just and
equitable if contribution pursuant to this Subsection 6(iv) were
determined by pro rata allocation or by any other method of allocation
which does not take account of the equitable considerations referred to
in the immediately preceding paragraph. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities
Act) shall be entitled to contribution from any person who was not guilty
of such fraudulent misrepresentation.
(v) If indemnification is available under this Section
6, the indemnifying parties shall indemnify each indemnified party to the
full extent provided in Sections 6(i) and (ii) without regard to the
relative fault of said indemnifying party or indemnified party or any
other equitable consideration provided for in this Section 6.
(vi) The provisions of this Section 6 shall survive any
termination of this Agreement.
7. TRANSFER OF RIGHTS AND OBLIGATIONS.
The rights and obligations of Buyer under this
Agreement (including the registration rights with respect to the Shares)
may be assigned to any person; provided that such transfer may otherwise
be effected in accordance with applicable securities laws; provided
further, that Buyer shall give Seller written notice at or prior to the
time of such transfer stating the name and address of the transferee and
identifying the securities with respect to which the rights under this
Agreement are being transferred; provided further, that such transferee
shall agree in writing, in form and substance satisfactory to Seller, to
be bound by the provisions of this Agreement; and provided further, that
such assignment shall be effective only if immediately following such
transfer the further disposition of such securities by such transferee is
restricted under
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the Securities Act. With respect to the foregoing, in the event of
any such transfer by Buyer, such transferee (of the rights and
obligations of the Buyer hereunder) shall thereafter be deemed to be
Buyer hereunder.
8. ADDITIONAL INDEMNIFICATION PROVISIONS.
(i) In addition to the indemnification provisions
contained in Section 6 hereof, Buyer hereby agrees to indemnify and hold
harmless Seller and its officers, directors, shareholders, employees,
agents and attorneys against any and all losses, claims, damages,
liabilities and expenses incurred by each such person in connection with
defending or investigating any such claims or liabilities, whether or not
resulting in any liability to such person, to which any such indemnified
party may become subject under the Securities Act, or under any other
statute, at common law or otherwise, insofar as such losses, claims,
demands, liabilities and expenses arise out of or are based upon (i) any
untrue statement or alleged untrue statement of a material fact made by
Buyer, (ii) any omission or alleged omission of a material fact with
respect to Buyer or (iii) any breach of any representation, warranty or
agreement made by Buyer in this Agreement.
(ii) In addition to the indemnification provisions
contained in Section 6 hereof, Seller hereby agrees to indemnify and hold
harmless Buyer and its officers, directors, shareholders, employees,
agents and attorneys against any and all losses, claims, damages,
liabilities and expenses incurred by each such person in connection with
defending or investigating any such claims or liabilities, whether or not
resulting in any liability to such person, to which any such indemnified
party may become subject under the Securities Act, or under any other
statute, at common law or otherwise, insofar as such losses, claims,
demands, liabilities and expenses arise of or are based upon: (i) any
untrue statement or alleged untrue statement of a material fact made by
Seller; (ii) any omission or alleged omission of a material fact with
respect to Seller; or (iii) any breach of any representation, warranty or
agreement made by Seller in this Agreement.
9. DELIVERIES AT CLOSING.
(i) Buyer shall make the following deliveries to Seller
at the Closing: (x) payment of the Purchase Price as provided in Section
1(i); and (y) delivery of an investor questionnaire in the form attached
as Exhibit D to this Agreement.
(ii) Seller shall make the following deliveries to
Buyer at the Closing: (x) deliver in the name of Buyer certificates for
the Preferred Stock and the Warrants.
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10. MISCELLANEOUS.
(i) This Agreement shall be governed by, and
interpreted in accordance with, the laws of the State of New York without
giving effect to the rules governing the conflicts of laws.
(ii) This Agreement may be executed by facsimile
signature and in counterparts, each of which shall be deemed an original,
but all of which together shall constitute one and the same instrument.
(iii) Each of the parties agrees to pay its own
expenses incident to this Agreement and the performance of its
obligations hereunder, including, but not limited to, the fees and
expenses of each such party's legal counsel.
(iv) All notices and other communications provided for
or permitted hereunder shall be made in writing by hand delivery, express
overnight courier, registered first class mail, overnight courier, or
telecopied, initially to the address set forth below, and thereafter at
such other address, notice of which is given in accordance with the
provisions of this Section 10.
if to Seller:
Sterling Vision, Inc.
1500 Hempstead Turnpike
East Meadow, NY 11554
Attn: General Counsel
Telephone: 516-390-2144
Telecopier: 516-390-2150
with a copy (which shall not constitute
notice) to:
Camhy Karlinsky & Stein LLP
1740 Broadway, 16th Floor
New York, NY 10019
Attn: Robert S. Matlin, Esq.
Telephone: 212-977-6600
Telecopier: 212-977-8389
if to Buyer, at such address as is listed
for Buyer on the signature page hereto.
All such notices and communications shall be deemed to
have been duly given: when delivered by hand, if personally delivered;
three (3) business days after being deposited in the mail, postage
prepaid, if mailed; the next business day after being deposited with an
overnight courier, if deposited with a nationally recognized, overnight
courier service; when receipt is acknowledged, if telecopied.
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(v) This Agreement together with the Exhibits and
Schedules hereto constitutes the entire agreement of the Parties with
respect to the subject matter hereof and supersedes all prior oral or
written proposals or agreements relating thereto. This Agreement may not
be amended or any provision hereof waived in whole or in part, except by
a written amendment signed by both of the Parties.
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IN WITNESS WHEREOF, this Agreement was duly executed on
the date first written above.
STERLING VISION, INC.
By: ____________________________________
Jerry Lewis, President
Address:
Sterling Vision, Inc.
1500 Hempstead Turnpike
East Meadow, NY 11554
Telephone: 516-390-2100
Fax: 516-390-2150
By: ____________________________________
Name: _____________________________
Title: _____________________________
Address:
________________________________________
________________________________________
Telephone:______________________________
Fax: ___________________________________
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THIS WARRANT AND ANY SHARES ISSUABLE UPON THE EXERCISE OF THIS WARRANT
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "ACT"), NOR UNDER ANY STATE SECURITIES LAW AND SUCH SECURITIES MAY
NOT BE PLEDGED, SOLD, ASSIGNED, HYPOTHECATED, OR OTHERWISE TRANSFERRED
UNTIL (1) A REGISTRATION STATEMENT WITH RESPECT THERETO IS EFFECTIVE
UNDER THE ACT AND ANY APPLICABLE STATE SECURITIES LAW OR (2) THE COMPANY
RECEIVES AN OPINION OF COUNSEL TO THE COMPANY OR COUNSEL TO THE HOLDER OF
SUCH SECURITIES, WHICH COUNSEL AND OPINION ARE REASONABLY SATISFACTORY TO
THE COMPANY, THAT SUCH SECURITIES MAY BE PLEDGED, SOLD, ASSIGNED,
HYPOTHECATED, OR TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE ACT AND APPLICABLE STATE SECURITIES LAWS.
THE TRANSFER OF THIS WARRANT AND THE SHARES ISSUABLE UPON THE EXERCISE
HEREOF IS RESTRICTED AS DESCRIBED HEREIN.
STERLING VISION, INC.
Warrant for the purchase of shares of Common Stock,
$.01 par value per share
No.
THIS CERTIFIES that, for good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged,______________
________________________________ (the "Holder"), is entitled to subscribe
for and purchase from Sterling Vision, Inc., a New York corporation (the
"Company"), upon the terms and conditions set forth herein, at any time or
from time to time, during the period commencing on the date hereof and
expiring at 5:00 p.m. on February 16 , 2001 (the "Exercise Period"), shares
of the Company's common stock, $.01 par value per share (the "Common
Stock"), at a price (the "Exercise Price") per share of Common Stock of
Five ($5.00) Dollars. As used herein, the term "this Warrant" shall mean
and include this Warrant and any Warrant or Warrants hereafter issued as a
consequence of the exercise or transfer of this Warrant in whole or in
part. This Warrant is one of a series of warrants issued to the original
Holder in connection with the sale by the Company of certain Units
consisting of Convertible Preferred Stock (collectively, the "Preferred
Stock") and this Warrant. As used herein, the term "Holder" shall include
any transferee to whom this Warrant has been transferred in accordance with
the terms hereof.
EXHIBIT B
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The number of shares of Common Stock issuable upon
exercise of the Warrants (the "Warrant Shares") may be adjusted from time
to time as hereinafter set forth.
This Warrant may be exercised during the Exercise
Period, as to the whole or any lesser number of whole Warrant Shares, by
transmission to the Company, by telecopy, of the Election to Exercise
attached hereto, together with the Holder's representation letter annexed
thereto (the "Representation Letter") followed within three (3) business
days by the surrender of this Warrant (with the Election to Exercise duly
executed) to the Company at its office at 1500 Hempstead Turnpike, East
Meadow, New York 11554, or at such other place as is designated in
writing by the Company, together with a certified or bank cashier's check
payable to the order of the Company, in an amount equal to the product of
the Exercise Price and the number of Warrant Shares for which this
Warrant is being exercised (the "Aggregate Exercise Price").
Notwithstanding anything to the contrary contained in
this Warrant, this Warrant: (i) shall be exercisable, in whole or in
part, notwithstanding the conversion of all or any part of the Preferred
Stock and/or the payment thereof; and (ii) shall not be exercisable by
the Holder to the extent that and so long as the Common Stock which would
be acquired upon such exercise when aggregated with any other shares of
Common Stock at the time of exercise beneficially owned by the Holder and
not previously sold by the Holder would aggregate more than 4.9% of the
then outstanding shares of Common Stock of the Company. For this purpose,
"beneficial ownership" shall be calculated in accordance with the
provisions of Section 13(d) of the Securities Exchange Act of 1934 and
the rules and regulations promulgated thereunder. The opinion of the
Holder's counsel shall be conclusive in calculating the Holder's
beneficial ownership.
(a) Upon each exercise of the Holder's rights to
purchase Warrant Shares, the Holder shall be deemed to be the holder of
record of the Warrant Shares issuable upon such exercise, notwithstanding
that the transfer books of the Company shall then be closed or
certificates representing such Warrant Shares shall not then have been
actually delivered to the Holder. Within seven (7) business days after
each such exercise of this Warrant and receipt by the Company of this
Warrant, the Election to Exercise, the Representation Letter and the
Aggregate Exercise Price, the Company shall issue and deliver to the
Holder a certificate or certificates for the Warrant Shares issuable upon
such exercise, registered in the name of the Holder or its designee. If
this Warrant should be exercised in part only, the Company shall, upon
surrender of this Warrant for cancellation, execute and deliver a new
Warrant evidencing the right of the Holder to purchase the balance of the
Warrant Shares (or portions thereof) subject to purchase hereunder.
(b) Notwithstanding the provisions of Subsection 3(a)
above, from and after the date that the Registration Statement (referred
to in Article 4 of that certain Convertible Preferred Stock and Warrants
Subscription Agreement, dated the date hereof; hereinafter referred to as
the "Registration Statement") shall become and thereafter remain
effective, the Company, if so requested by the Holder, shall, within
three (3) business days after its receipt of this Warrant, the Election
to Exercise, the Representation Letter and the Aggregate Exercise Price
(as required pursuant to Subsection 3(a) above), serve written
instructions on its Transfer Agent to "DWAC" the shares of Common Stock
to be issued upon any such election, it being understood that no further
documentation shall be required of the Holder in connection therewith.
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Any Warrants issued upon the transfer or exercise in
part of this Warrant shall be numbered and shall be registered in a
warrant register (the "Warrant Register") as they are issued. The Company
shall be entitled to treat the registered holder of any Warrant on the
Warrant Register as the owner in fact thereof for all purposes and shall
not be bound to recognize any equitable or other claim to, or interest
in, such Warrant on the part of any other person, and shall not be liable
for any registration of transfer of Warrants which are registered or to
be registered in the name of a fiduciary or the nominee of a fiduciary
unless made with the actual knowledge of the general counsel of the
Company that a fiduciary or nominee is committing a breach of trust in
requesting such registration of transfer. This Warrant shall be
transferable on the Warrant Register only upon delivery thereof duly
endorsed by the Holder or by his duly authorized attorney or
representative, or accompanied by proper evidence of succession,
assignment, or authority to transfer, subject in all cases to compliance
with the terms and provisions of that certain Convertible Preferred Stock
and Warrants Subscription Agreement, dated as of February 17, 1998 (the
"Subscription Agreement"), between the Company and the Holder. In all
cases of transfer by an attorney, executor, administrator, guardian, or
other legal representative, duly authenticated evidence of his or its
authority shall be produced. Upon any registration of transfer, the
Company shall deliver a new Warrant or Warrants to the person entitled
thereto. This Warrant may be exchanged, at the option of the Holder
thereof, for another Warrant, for other Warrants of different
denominations, of like tenor and representing in the aggregate the right
to purchase a like number of Warrant Shares (or portions thereof), upon
surrender to the Company or its duly authorized agent. Notwithstanding
anything contained herein to the contrary, the Company shall have no
obligation to cause Warrants to be transferred on its books to any person
if, in the opinion of counsel to the Company, such transfer does not
comply with the provisions of the Act, and the rules and regulations
thereunder, and any applicable state securities laws.
5. In the event the Company fails to deliver to the
Holder a certificate or certificates for the Warrant Shares in accordance
with Section 3, the Company shall be required to make payment to the
Holder of this Warrant within five (5) business days after each demand by
the Holder, of an amount equal to One Thousand ($1,000) Dollars per day
with respect to each One Hundred Thousand ($100,000) Dollars (or the
pro-rata portion thereof) of Warrant Shares (based on the Exercise Price)
to be issued to the Holder with respect to the Elect to Exercise
delivered to the Company.
6. The Company shall at all times reserve and keep
available out of its authorized and unissued Common Stock, solely for the
purpose of providing for the exercise of the rights to purchase all
Warrant Shares granted pursuant to the Warrants, such number of shares of
Common Stock equal to the number of Warrants covered hereby. The Company
covenants that all shares of Common Stock issuable upon exercise of this
Warrant, upon receipt by the Company of the full Exercise Price therefor,
shall be validly issued, fully paid, nonassessable, and free of
preemptive rights.
7. The Exercise Price in effect at any time and the
number and kind of securities purchasable upon the exercise of this
Warrant shall be subject to adjustment from time to time upon the
happening of certain events, as follows:
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In case the Company shall (i) declare a dividend or
make a distribution on its outstanding shares of Common Stock, in each
case, in shares of Common Stock, (ii) subdivide or reclassify its
outstanding shares of Common Stock into a greater number of shares, or
(iii) combine or reclassify its outstanding shares of Common Stock into a
smaller number of shares, the Exercise Price in effect at the time of the
record date for such dividend or distribution or of the effective date of
such subdivision, combination or reclassification shall be adjusted so
that it shall equal the price determined by multiplying the Exercise
Price by a fraction, the denominator of which shall be the number of
shares of Common Stock outstanding after giving effect to such action,
and the numerator of which shall be the number of shares of Common Stock
outstanding immediately prior to such action. Such adjustment shall be
made successively whenever any event listed above shall occur.
Upon each adjustment of the Exercise Price pursuant to
the provisions of this Section 6, the number of Warrant Shares issuable
upon the exercise at the adjusted Exercise Price of each Warrant shall be
adjusted to the nearest number of whole shares of Common Stock by
multiplying a number equal to the Exercise Price in effect immediately
prior to such adjustment by the number of Warrant Shares issuable upon
exercise of this Warrant immediately prior to such adjustment and
dividing the product so obtained by the adjusted Exercise Price.
For the purpose of this Agreement, the term "Common
Stock" shall mean (i) the class of stock designated as Common Stock in
the Articles of Incorporation of the Company as amended as of the date
hereof, or (ii) any other class of stock resulting from successive
changes or reclassifications of such Common Stock consisting solely of
changes in par value, or from par value to no par value, or from no par
value to par value.
In case of any consolidation of the Company with, or
merger of the Company into, another corporation (other than a
consolidation or merger which does not result in any reclassification or
change of the outstanding Common Stock), the corporation formed by such
consolidation or merger shall execute and deliver to the Holder a
supplemental warrant agreement providing that the Holder of this Warrant
shall have the right thereafter (until the expiration of such Warrant) to
receive, upon exercise of such Warrant, the kind and amount of shares of
stock and other securities and property receivable upon such
consolidation or merger by a holder of the number of shares of Common
Stock for which such Warrant might have been exercised immediately prior
to such consolidation, merger, sale or transfer. Such supplemental
warrant agreement shall provide for adjustments which shall be identical
to the adjustments provided in this Section.6 7. The above provision of
this subsection shall similarly apply to successive consolidations or
mergers.
No adjustment in the number of Warrant Shares shall be
required if such adjustment is less than one; provided, however, that any
adjustments which by reason of this Subsection 7(f) are not required to
be made shall be carried forward and taken into account in any subsequent
adjustment. All calculations under this Section 7 shall be made to the
nearest one-thousandth of a share.
In any case in which this Section 7 shall require that
an adjustment in the number of Warrant Shares be made effective as of a
record date for a specified event, the Company may elect to defer, until
the occurrence of such event, issuing to the Holder, if the Holder
exercised this
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Warrant after the record date, the Warrant Shares, if any, issuable upon
such exercise over and above the Warrant Shares, if any, issuable upon
such exercise prior to such adjustment; provided, however, that the
Company shall deliver to the Holder a due bill or other appropriate
instrument evidencing the Holder's right to receive such additional
Warrant Shares upon the occurrence of the event requiring such
adjustment.
Whenever there shall be an adjustment as provided in
this Section 7, the Company shall promptly cause written notice thereof
to be sent by certified mail, postage prepaid, to the Holder, at its
address as it shall appear in the Warrant Register, which notice shall be
accompanied by an officer's certificate setting forth the number of
Warrant Shares issuable upon the exercise of this Warrant if such Warrant
were exercisable on the date of such notice, and setting forth a brief
statement of the facts requiring such adjustment and the computation
thereof, which officer's certificate shall be conclusive evidence of the
correctness of any such adjustment absent manifest error.
8. In case at any time the Company shall propose
(a) to pay any dividend or make any distribution on
shares of Common Stock in shares of Common Stock or make any other
distribution (other than regularly scheduled cash dividends which are not
in a greater amount per share than the most recent such cash dividend) to
all holders of Common Stock; or
(b) to issue any rights, warrants, or other
securities to all holders of Common Stock entitling them to purchase any
additional shares of Common Stock or any other rights, warrants, or other
securities; or
(c) to effect any reclassification or change of
outstanding shares of Common Stock, or any consolidation or merger as
described in Section 7; or
(d) to effect any liquidation, dissolution, or
winding-up of the Company, then, and in any one or more of such cases,
the Company shall give written notice thereof, by registered mail,
postage prepaid, to the Holder at the Holder's address as it shall appear
in the Warrant Register, mailed at least 15 days prior to (i) the date as
of which the holders of record of shares of Common Stock to be entitled
to receive any such dividend, distribution, rights, warrants, or other
securities are to be determined, or (ii) the date on which any such
reclassification, change of outstanding shares of Common Stock,
consolidation, merger, liquidation, dissolution, or winding-up is
expected to become effective, and the date as of which it is expected
that holders of record of shares of Common Stock shall be entitled to
exchange their shares for securities or other property, if any,
deliverable upon such reclassification, change of outstanding shares,
consolidation, merger, sale, lease, conveyance of property, liquidation,
dissolution, or winding-up.
9. The issuance of any shares or other securities upon
the exercise of this Warrant, and the delivery of certificates or other
instruments representing such shares or other securities, shall be made
without charge to the Holder for any tax or other charge in respect of
such issuance, other than applicable transfer taxes. The Company shall
not, however, be required to pay any tax which may be payable in respect
of any transfer involved in the issue and delivery of any
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certificate in a name other than that of the Holder, and the Company
shall not be required to issue or deliver any such certificate unless and
until the person or persons requesting the issue thereof shall have paid
to the Company the amount of such tax or shall have established to the
satisfaction of the Company that such tax has been paid.
10. The Company shall file a registration statement
covering the Warrant Shares and otherwise comply with its obligations
with respect to the Warrant Shares, all as set forth in the Subscription
Agreement. All expenses incurred in connection with any such registration
statement shall be paid as provided in the Subscription Agreement.
11. (a) The Company agrees to indemnify and hold
harmless the Holder, its officers, directors, employees, shareholders,
attorneys and agents, and each person, if any, who controls any such
person (within the meaning of the Act) as provided in Sections 6 and 8 of
the Subscription Agreement. The foregoing agreement to indemnify shall be
in addition to any liability the Company may otherwise have, including
liabilities arising under this Warrant.
(b) The Holder agrees to indemnify and hold
harmless the Company, its officers, directors, employees, shareholders,
attorneys and agents and each person who controls the Company (within the
meaning of the Act) as provided in Sections 6 and 8 of the Subscription
Agreement.
12. Unless registered as contemplated by Section 10
hereof, the Warrant Shares issued upon exercise of the Warrants shall be
subject to a stop transfer order and the certificate or certificates
evidencing such Warrant Shares shall bear the following legend:
"THE SHARES REPRESENTED BY THIS CERTIFICATE
HAVE BEEN NOT REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED. SUCH SHARES MAY NOT BE OFFERED
OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER SUCH ACT, OR AN
EXEMPTION FROM REGISTRATION UNDER SUCH ACT. SUCH
SHARES ARE SUBJECT TO CERTAIN RESTRICTIONS ON
TRANSFER CONTAINED IN A WARRANT, DATED FEBRUARY ,
1998, COPIES OF WHICH ARE ON FILE WITH THE
SECRETARY OF THE COMPANY."
13. Upon receipt of evidence satisfactory to the
Company of the loss, theft, destruction, or mutilation of any Warrant
(and upon surrender of any Warrant if mutilated), and upon reimbursement
of the Company's reasonable incidental expenses and, if reasonably
requested, an indemnity reasonably acceptable to the Company, the Company
shall execute and deliver to the Holder thereof a new Warrant of like
date, tenor, and denomination.
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14. The Holder of any Warrant shall not have, solely on
account of such status, any rights of a stockholder of the Company,
either at law or in equity, or to any notice of meetings of stockholders
or of any other proceedings of the Company, except as provided in this
Warrant.
15. This Warrant shall be construed in accordance with
the laws of the State of New York applicable to contracts made and
performed within such State, without regard to principles of conflicts of
law.
Dated: February 17, 1998
STERLING VISION, INC.
By: __________________________
Name: Jerry Lewis
Title: President
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FORM OF ASSIGNMENT
(To be executed by the registered holder if such holder desires to
transfer the attached Warrant.)
FOR VALUE RECEIVED, _________________________________
hereby sells, assigns, and transfers unto __________________ a Warrant to
purchase __________ shares of Common Stock, $.01 par value per share, of
Sterling Vision, Inc. (the "Company"), together with all right, title,
and interest therein, and does hereby irrevocably constitute and appoint
_____________ attorney to transfer such Warrant on the books of the Company,
with full power of substitution.
Dated:___________________
Signature_______________________________
Signature Guaranteed:
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NOTICE
The signature on the foregoing Assignment must
correspond to the name as written upon the face of this Warrant in every
particular, without alteration or enlargement or any change whatsoever.
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To: Sterling Vision, Inc.
1500 Hempstead Turnpike
East Meadow, New York 11554
ELECTION TO EXERCISE
The undersigned hereby exercises his or its rights
to purchase _______ Warrant Shares covered by the within
Warrant and tenders payment herewith in the amount of
$_________ in accordance with the terms thereof; and the
undersigned certifies that this Warrant is owned by the
undersigned free and clear of any and all claims, liens and/or
encumbrances and requests that certificates for such securities
be issued in the name of, and delivered to:
________________________________________
________________________________________
________________________________________
(Print Name, Address and Social Security
or Tax Identification Number)
and, if such number of Warrant Shares shall not be all the
Warrant Shares covered by the within Warrant, that a new
Warrant for the balance of the Warrant Shares covered by the
within Warrant be registered in the name of, and delivered to,
the undersigned at the address stated below.
The undersigned request that the Shares to be issued pursuant to this
Election to Exercise be issued:
CHECK ONE:
[ ] by issuance of a Certificate therefor to the above entity/individual;
[ ] by DWAC to the entity/individual set forth above at the address set
forth below:
__________________________________________________
__________________________________________________
__________________________________________________
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NOTE: IF THE WARRANT SHARES (TO BE ISSUED PURSUANT TO THIS
ELECTION TO EXERCISE) ARE TO BE "DWAC'd", THE UNDERSIGNED HEREBY
REPRESENTS AND WARRANTS THAT: (I) HE/SHE/IT HAS PREVIOUSLY RECEIVED A
COPY OF THE REGISTRATION STATEMENT REFERRED TO IN SUBSECTION 3(B) OF THIS
WARRANT; AND (II) A COPY OF THE PROSPECTUS INCLUDED IN SAID REGISTRATION
STATEMENT WILL BE DELIVERED, PRIOR TO THE UNDERSIGNED'S SALE AND/OR
TRANSFER OF ANY OF SUCH WARRANT SHARES, TO THE PROPOSED
PURCHASER/TRANSFEREE THEREOF OR HIS/HER/ITS AUTHORIZED AGENT.
Dated:________________________ Name:______________________________
(Print)
Address:_________________________________________________________
___________________________________
(Signature)
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