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As filed with the Securities and Exchange Commission on June 22, 1999
Registration No. ________
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SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
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FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
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STERLING VISION, INC.
(Exact Name of Registrant as Specified in Its Charter)
New York 11-3096941
(State of Incorporation) (I.R.S. Employer Identification No.)
1500 Hempstead Turnpike
East Meadow, New York 11554
(516) 390-2100
(Address, Including Zip code, and Telephone Number, Including Area Code,
of Registrant's Principal Executive Offices)
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Joseph Silver, Esq.
Executive Vice President,
Secretary and General Counsel
1500 Hempstead Turnpike
East Meadow, New York 11554
(516) 390-2100
(Name, Address, Including Zip code, and Telephone Number, Including Area Code,
of Agent For Service)
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Copy to:
Robert S. Matlin, Esq.
Christina Chiaramonte, Esq.
Camhy Karlinsky & Stein LLP
1740 Broadway, New York, New York 10019-4315
(212) 977-6600
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Approximate date of commencement of proposed sale to the public: As
soon as practicable after the effective date of this Registration Statement.
If the only securities being registered on this Form are to be offered
pursuant to dividend or interest reinvestment plans, please check the following
box: |_|
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, as amended (the "Securities Act"), other than securities
offered only in connection with dividend or interest reinvestment plans, check
the following box: |x|
---
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earliest
effective registration statement for the same offering: |_|
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the Securities
Act registration number of the earlier effective registration statement for the
same offering: |_|
If delivery of the Prospectus is expected to be made pursuant to Rule
434, please check the following box: |_|
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<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
================================================================================================================
Title of Security Amount to be Offering Price Aggregate Offering Amount of
to be Registered Registered (2) Per Share (1) Price (2) Registration Fee(3)
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock,
$.01 par value 535,605 shares $3.98 $2,131,707.90 $166.27
================================================================================================================
</TABLE>
(1) Estimated solely for purpose of calculating the registration fee
pursuant to Rule 457(c) on the basis of the average of the high and low
prices per share of the Common Stock of Sterling Vision, Inc., par
value $.01 per share (the "Common Stock") as reported on the NASDAQ
National Market System on June 21, 1999.
(2) Represents additional shares being registered on behalf of the
investors in a $3.5 million private placement financing (which we
completed as of February 17, 1998) pursuant to which we issued 35
shares of our senior convertible preferred stock, par value $.01 per
share, having a stated value of $100,000 per share, and an aggregate of
700,000 warrants, each warrant entitling its holder to purchase one
share of Common Stock. However, effective February 11, 1999, we entered
into an agreement with certain holders of our senior convertible
preferred stock whereby the conversion price for the stock and the
exercise price of the warrants were reduced. Such figure also
represents shares of Common Stock being registered on behalf of a
holder who acquired such stock in a private transaction with other
shareholders and also a holder who acquired such stock in satisfaction
of certain indebtedness we owed to such holder.
(3) Pursuant to Rule 429 promulgated under the Securities Act of 1933, as
amended, this Registration Statement relates to an earlier Registration
Statement on Form S-3, Registration No. 333-59827, in which we have
previously paid a filing fee of $2,737.42. An additional fee, in the
amount of $166.27, is due, with respect to which we have sufficient
restricted funds on deposit.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE
OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SECTION 8 (A), MAY DETERMINE.
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The information contained in this Prospectus is not complete and may be changed.
We may not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This Prospectus is not an offer
to sell nor does it seek to solicit an offer to buy these securities in any
state where the offer or sale is not permitted. This investment involves a high
degree of risk.
PROSPECTUS Subject to completion: June ___, 1999
535,605 Shares of
Common Stock
STERLING VISION, INC.
Our common stock, par value $.01 per share (the "Common Stock") is
listed on the Nasdaq National Market System ("NASDAQ-NMS") under the symbol,
"ISEE". On June 21, 1999, the closing price for the shares of our Common Stock
as reported by the NASDAQ-NMS was $3.94 per share.
The selling shareholders may sell all or a portion of the shares of
Common Stock offered hereby (collectively, the "Shares") in private transactions
or in the over-the-counter market at prices related to the prevailing prices of
the Common Stock on the NASDAQ-NMS at the time of sale. The selling shareholders
may effect such transactions by selling to or through one or more
broker-dealers, and such broker-dealers may receive compensation in the form of
underwriting discounts, concessions, or commissions from the selling
shareholders. The selling shareholders and any broker-dealers that participate
in the distribution may, under certain circumstances, be deemed to be
"underwriters" within the meaning of the Securities Act of 1933, as amended (the
"Securities Act"), and any commissions received by such broker-dealers and any
profits realized on their resale of Shares may be deemed to be underwriting
discounts and commissions under the Securities Act. In conjunction with the
selling shareholders, we may agree to indemnify such broker-dealers against
certain liabilities, including liabilities under the Securities Act. In
addition, we have agreed to indemnify the selling shareholders, with respect to
the registration of the Shares, against certain liabilities, including certain
liabilities under the Securities Act. To the extent required, the specified
number of Shares to be sold, the names of the selling shareholders, the public
offering price, the names of any such broker-dealers, and any applicable
commissions or discounts with respect to any particular offer will be set forth
in a supplement to this Prospectus. Each of the selling shareholders reserves
the right to accept or reject, in whole or in part, any proposed purchase of the
Shares . See "Plan of Distribution." Any securities covered by this Prospectus
which qualify for sale pursuant to Rule 144 under the Securities Act may be sold
under Rule 144 rather than pursuant to this Prospectus.
Please see "Risk Factors" beginning on page 8 to read about certain
factors you should consider before buying.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved these securities, or determined if this
Prospectus is truthful or complete.
Any representation to the contrary is a criminal offense.
The date of this prospectus is June __, 1999
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WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly, and current reports, proxy statements, and
other information with the Securities and Exchange Commission ("SEC"). You may
read or copy any document we file at the Public Reference Room maintained by the
SEC at 450 Fifth Street, NW, Judiciary Plaza, Room 1024, Washington, DC 20549,
and at the following Regional Offices of the Commission: Northeast Regional
Office, Seven World Trade Center, Suite 1300, New York, New York 10048; and
Midwest Regional Office, Citicorp Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661. Please call the SEC at 1-800-SEC-0330 for further
information regarding its public reference rooms. Our SEC filings are also
available to the public from the SEC's web site at http://www.sec.gov. Our
Common Stock is listed on the Nasdaq National Market System. Information
concerning us is available from NASDAQ's web site at http://www.nasdaq.com.
If you are a stockholder, you may request a copy of these filings, at
no cost, by writing or telephoning us at the following address:
Sterling Visions, Inc.
1500 Hempstead Turnpike
East Meadow, New York 11554
Attention: William Young, Executive Vice President - Finance
Phone No.: (516) 390-2100
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The SEC allows us to "incorporate by reference" the information we have
filed with it, which means that we can disclose important information to you by
referring you to those documents. The information incorporated by reference is
considered to be part of this Prospectus. This Prospectus is part of
Registration Statement which we filed with the SEC. We incorporate by reference
the documents listed below.
1. Our Annual Report on Form 10-K/A for the year ended December 31,
1998, dated May 28, 1999;
2. Our Form 10-Q for the quarter ended March 31, 1999, dated May 24,
1999;
3. Our Form 10-Q/A for the quarter ended June 30, 1998, dated May 14,
1999;
4. Our Form 10-Q/A for the quarter ended September 30, 1998, dated May
14, 1999;
5. Our Form 10-Q/A for the quarter ended March 31, 1998, dated May 14,
1999;
6. Our Annual Report on Form 10-K for the year ended December 31, 1998,
dated April 16, 1999;
7. Our Form 8-K, dated March 4, 1999;
8. Our Form 8-K, dated January 14, 1999; and
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9. All other reports and other documents filed by us pursuant to
Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (the
"Exchange Act") since December 31, 1998.
Any financial statements and schedules hereafter incorporated in this
Prospectus that have been audited and are the subject of a report by independent
accountants will be incorporated in reliance on such reports and on the
authority of such firm as experts in accounting and auditing to the extent
covered by consents filed with the SEC.
ADDITIONAL INFORMATION
You should rely only on the information provided in this document or
other information that we have referred you to. We have not authorized anyone to
provide you with information that is different. This Prospectus does not
constitute an offer or solicitation by anyone in any jurisdiction in which an
offer or solicitation would be unlawful.
Certain statements in this Prospectus constitute "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995. We believe that the forward looking statements contained in this
Prospectus are within the meaning of the safe harbor provisions afforded by
section 27A of the Securities Act. Forward-looking statements contained in this
prospectus and the other documents incorporated herein by reference, involve
known and unknown risks, uncertainties, and other factors which could cause our
actual results, financial or operating performance, or achievements to differ
from the future results, financial or operating performance, or achievements
expressed or implied by such forward looking statements.
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PROSPECTUS SUMMARY
Because this is a summary of the terms of the registrable securities,
it does not contain all the information that may be important to you. This
Prospectus contains forward-looking statements. You should read the following
summary, and the "Risk Factors" section, along with the more detailed
information and the Financial Statements and the notes to the Financial
Statements appearing elsewhere in this Prospectus or incorporated by reference
in this Prospectus, before you decide whether to participate in this offering.
ABOUT STERLING VISION, INC.
Our Business
We, along with our franchisees, develop and operate retail optical
stores (collectively, "Sterling Stores") principally under one of the trade
names "Sterling Optical," "IPCO Optical," "Site for Sore Eyes," "Benson
Optical," "Southern Optical," "Superior Optical," "Nevada Optical," "Duling
Optical," "Monfried Optical," "Kindy Optical," and "Singer Specs." We are
presently formulating plans to change the trade name of most Sterling Stores
(other than our Site for Sore Eyes stores located in Northern California) to
"Sterling Optical." We also operate Vision Care of California, a specialized
health care maintenance organization licensed by the California Department of
Corporations. Vision Care of California employs licensed optometrists who render
services in offices located immediately adjacent to, or within, most Sterling
Stores located in California.
Based upon domestic sales and number of locations of Company-owned and
franchised stores, we are one of the largest chains of retail optical stores and
the second largest chain of franchised optical stores in the United States. As
of December 31, 1998, there were 292 Sterling Stores in operation, of which 41
were Company-owned stores (including six stores managed by franchises) and 251
were franchised stores (including twelve stores which we manage on behalf of the
franchisees). We continually seek to expand both our Company-owned and
franchised store operations. As of December 31, 1998, we were constructing two
additional Company-owned stores and an additional four franchised stores, and we
had received commitments from existing franchises to develop an additional
seventeen franchised stores. Currently, we are located in 26 states, the
District of Columbia, Ontario, Canada, and the U.S. Virgin Islands.
Most of Sterling Stores offer eyecare products and services such as
prescription and non-prescription eyeglasses, eyeglass frames, ophthalmic
lenses, contact lenses, sunglasses, and a broad range of related items. To the
extent permitted by individual state regulations, most Sterling Stores employ
or affiliate with an optometrist to provide professional eye examinations to the
public and fill the prescriptions written by these employed or affiliated
optometrists, as well as from unaffiliated optometrists and ophthalmologists. In
addition, most Sterling Stores are able to offer same-day service because most
stores have an inventory of ophthalmic and contact lenses, as well as on-site
lab equipment for cutting and edging ophthalmic lenses to fit into eyeglass
frames.
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We view our Company-owned stores as "inventory" to be strategically
sold to qualified franchisees and aim to achieve two goals by selling
Company-owned stores to franchisees:
o to recognize a gain on the conveyance of the assets of such
stores; and
o to create a stream of royalty payments based upon a percentage of
the gross revenues of the franchised locations.
Currently, our revenues are derived from a few main areas:
o the sale of eyecare products and services at our Company-owned
stores;
o on-going royalties based upon a percentage of the gross revenues
of franchised stores; and
o the conveyance of Company-owned store assets to existing and new
franchisees.
In addition to our retail optical business, Insight Laser Centers, Inc.
("Insight"), which is a wholly-owned subsidiary of ours, owns and operates an
eyecare center, located in New York City, at which it has installed an excimer
laser and at which it offers a procedure known as Photo-Refractive Keractectomy.
PRK, as it is known in the medical arena, is a procedure performed by licensed
ophthalmologists for the correction of certain degrees of myopia
(near-sightedness), hyperopia (far-sightedness) and astigmatisms. We have also
entered into arrangements with other ophthalmologists who perform the PRK
procedure utilizing excimer lasers installed in their offices by Insight, in
exchange for their payment, to Insight, of a fee for each PRK procedure
performed with such lasers. As of December 31, 1998, Insight had leased six
excimer lasers, each with a purchase option for nominal consideration, and had
deposits for the purchase of two additional excimer lasers, which deposits were
subsequently applied to our costs in upgrading certain of our lasers. As of the
date hereof, Insight had placed one such laser in its Trump Tower facility and
an additional four of such excimer lasers in ophthalmological offices located in
New York, Pennsylvania, Delaware, and New Jersey.
On May 6, 1998, through another one of our wholly owned subsidiaries,
Insight Laser Centers N.Y. I, Inc., we purchased substantially all of the assets
of an ambulatory surgery center located in Garden City, New York. As part of
that transaction, we settled our legal action against the estate of the former
owner of such center, entered into a long term lease of the premises in which
such center is located, and entered into an agreement pursuant to which we will
manage the operations of the center for the estate of such former owner until
the license for the center is transferred to an affiliate of ours. We currently
manage the operations of this facility, which is a full-service ambulatory
surgery center that contains these surgical operating rooms.
Our History
We were organized under the laws of the State of New York in January
1992. Our executive offices are located at 1500 Hempstead Turnpike, East Meadow,
New York 11554, our telephone number is (516) 390-2100, and fax number is
(516) 390-2150.
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In July 1992, we purchased substantially all of the assets of
Sterling Optical Corp., formerly known as IPCO Corporation, a New York
corporation then a debtor-in-possession under Chapter 11 of the U.S. Bankruptcy
Code. Subsequent to this acquisition, in October 1993, we acquired, through a
merger with one of our wholly-owned subsidiaries, 26 retail optical stores (both
company operated and franchised) operating under the name "Site For Sore Eyes"
and located in Northern California. In connection with this merger, we also
acquired Vision Care of California. In addition, we: (i) in August 1994,
purchased the assets of 8 additional retail optical stores located in New York
and New Jersey from Pembridge Optical Partners, Inc.; (ii) in November 1995,
acquired, through one of our wholly-owned subsidiaries, substantially all of the
retail optical assets of Benson Optical Co., Inc., OCA Acquisition Corp. and
Superior Optical Company, Inc., including the assets located in approximately 78
retail optical store locations, a substantial number of which were subsequently
closed by us; (iii) in May 1996, acquired, through one of our wholly-owned
subsidiaries, substantially all of the retail optical assets of Vision Centers
of America, Ltd., D&K Optical, Inc., Monfried Corporation and Duling Finance
Corporation, including the assets located in approximately 13 company operated
stores and franchise agreements, together with related agreements, with respect
to approximately 75 additional franchised stores; and (iv) in April 1997,
acquired, in exchange for shares of our Common Stock, all of the issued and
outstanding capital stock of Singer Specs, Inc., a chain of approximately 30
franchised retail optical stores.
RISK FACTORS
1. We do not control the management of all of the retail optical stores
that operate under our name.
We rely, in part, on our franchisees for business development. Since we
do not control the management of our franchised stores, we cannot assure that
any franchisee owner will have the business acumen or financial resources to
operate the franchise successfully. If a substantial number of franchises are
not successful, our financial condition and results of operations could be
affected adversely.
2. We compete with franchisors in other industries, as well as in our
industry, for the sale of franchises to prospective franchisees.
Many of these competitors may have greater technical resources
available to them and will be able to attract and retain better skilled
franchisee owners. If we cannot successfully sell our franchises to highly
skilled franchisee owners, our financial condition and results of operations
could be affected adversely.
3. We are highly dependent upon increasing the number of franchises.
Our revenues and profitability levels directly relate to the number of
retail optical stores operating under one or more of our tradenames, "Sterling
Stores". Therefore, our growth and ability to increase our revenues depends on
increasing the number of franchised stores. We believe that there are many major
metropolitan and urban areas where Sterling Stores could be opened; however,
there can be no guarantee that we will be successful in developing franchises in
those areas or that we will maintain or increase the number of franchises in the
future. If we do not increase or maintain the number of franchised Sterling
Stores, our financial condition and results of operations may be adversely
affected.
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4. We compete with many types of eyewear providers.
The retail optical business is highly competitive and includes chains
of retail optical stores, superstores, individual retail outlets, and a large
number of individual opticians, optometrists, and ophthalmologists who provide
professional services and, in connection therewith, dispense prescription
eyewear. We, as retailers of prescription eyewear, generally service local
markets, and thus our competition varies substantially from one location or
geographic area to another. We believe that the principal competitive factors in
our industry are convenience of location, the on-site availability of
professional eye examinations, quality and consistency of products and services,
price, product warranties, and a broad selection of merchandise. We believe that
we compete favorably in each of these respects; however, if another retail
optical provider improves its skills in these areas, we may not be able to
compete successfully.
5. We have depended upon acquiring non-Sterling retail optical stores and
chains to improve our profitability.
In the past, a substantial portion of our profits came from our ability
to acquire non-Sterling retail optical stores and chains, initially operate
them, and then strategically sell the assets of such stores to franchisees who
are thereupon granted a license to use one of our tradenames in exchange for
their payment, to us, of an initial franchise fee, as well as ongoing royalties.
Although we believe that many opportunities to acquire, operate, and resell
optical stores exist, we cannot guarantee that these opportunities will continue
to exist or that any potential acquisition we consummate will be successful. Our
potential inability to resell certain non-Sterling retail optical stores or to
consummate any potential acquisitions could have a material adverse effect on
our financial condition and results of operations.
6. We offer incentives to our customers and experience lower margins
because of it.
At times when our major competitors offer significant promotional
incentives to their customers, we are forced to do the same, including "50% Off"
on designer frames and "Buy One / Get-One Free" promotional offers and, in
response thereto, we have, from time to time, offered the same or similar
incentives to our customers. This practice has resulted in lower margins, and we
cannot guarantee that these competitive promotional incentives will not further
adversely impact our results of operations. Although we believe that our
Sterling Stores provide quality service and products at competitive prices,
several of the large, retail optical chains have greater financial resources.
Therefore, we cannot guarantee that we will be able to continue to deliver
cost-efficient products in the event of aggressive pricing by our competitors.
7. We rely on purchase money financing for a substantial portion of the
purchase price of our store assets that we have sold to franchisees.
Historically, a substantial portion of our net income was from selling
our store assets to franchisees. As we do not convey our store assets on a
regular basis, this practice may have a material adverse effect on our financial
condition and results of operations. Accordingly, our earnings may fluctuate
significantly from fiscal period to fiscal period. Also, in connection with our
conveyance of such store assets to franchisees, we generally finance the
majority of the purchase price and thus recognize all of the gain before we
receive all of the proceeds from such conveyance. In the past, when a franchisee
defaulted on such purchase money obligations, we have, in many instances, been
able
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to repossess such store assets and then reconvey them to another franchisee;
however, we cannot guarantee that we will be able to continue, or be successful,
with this practice in the future.
8. We have experienced substantial losses from the operation of our
Insight Laser Center business.
An integral part of our business strategy of becoming a full-service
eyecare company originally included developing and/or managing a chain of
eyecare centers, to be operated under the tradename "Insight Laser." Insight
Laser Centers were intended to primarily offer Photo Refractive Keratectomy
services which are referred to in the industry as PRK.
Despite significant efforts, our revenues from the operation of our
Insight Laser Center business grew only modestly, as a result of the public's
resistance to accepting PRK as a vision correction alternative. For the year
ended December 31, 1998, we incurred a net loss of $1,100,000 and for the year
ended December 31, 1997, we incurred a net loss of $1,400,000, from operating
our Insight Laser Center business. Although we believe that such loss for the
year ending December 31, 1999 will be substantially reduced or eliminated, we
cannot guarantee that our Insight Laser Center business will generate profits or
that our financial condition and results of operations will not be adversely
affected as a result of the operation thereof.
9. We face substantial competition in the PRK industry.
Many companies are entering into fee agreements with ophthalmologists
under conditions similar to those we have entered into for certain of our
excimer lasers. Hospitals and other ophthamological offices have excimer lasers
which are able to perform the PRK procedure; and a manufacturer of one such
excimer laser has developed, and is operating, its own laser centers. Because
of this competition, the prices generally charged for the PRK procedure have
declined; and it is anticipated that further competition will only lead to a
further decline in the prices charged for PRK.
The PRK procedure also competes with other present forms of treatment
for refractive disorders, including eyeglasses, contact lenses, refractive
surgery known as radial keratotomy, corneal transplants, and other technologies
under development. Although we believe that we will be able to compete
successfully in the PRK industry, an increase in competition or acceptance of
other methods to correct refractive disorders could adversely affect our
financial condition and results of operations.
10. Our success in the PRK industry is dependent upon market acceptance.
Market acceptance of the PRK procedure is affected by many factors,
including:
o nonacceptance of the laser refractive procedure as an alternative
to existing methods of treating refractive disorders;
o the relatively high cost of laser refractive procedure;
o general resistance to surgery;
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o the effectiveness of alternative, less intrusive, or less
expensive methods of correcting refractive disorders; and
o the possibility of known or unknown side effects.
Additionally, our lasers are currently approved only for the
correction of certain degrees of myopia, hyperopia and/or astigmatisms. We
cannot give any assurance that market acceptance of our PRK services will
increase by either the ophthalmological community or the general population;
and the failure to increase such acceptance could have a material adverse
effect on our business, financial condition and results of operations.
11. We run the risk of not being able to remain current with rapid
technological changes.
The market for ophthalmic lasers is characterized by rapid
technological changes, including advances in laser and other technologies and
the potential new development of alternative surgical techniques or new
pharmaceutical products. It is possible that newer technologies, techniques, or
products could be developed with better performance than the excimer lasers that
we have acquired. If new and better ophthalmic laser technologies or other
technologies that correct the same conditions as PRK are developed, the
acceptance of such technologies could have a material adverse effect on our
PRK business.
12. As PRK laser surgery gains market acceptance, we may lose revenue from
traditional eyewear customers.
If traditional eyewear users undergo the PRK procedure or other vision
correction techniques, the demand for contact lenses and eyeglasses may
decrease. As part of our business, we service and market contact lenses and
eyeglasses. A decrease in customer demand for such products could have a
material adverse effect on our, and also our franchised Sterling Stores',
financial condition and results of operations.
13. We have expanded our focus and acquired an interest in an ambulatory
surgery center.
On May 6, 1998, through our wholly owned subsidiary, Insight Laser
Centers N.Y. I., Inc., we purchased substantially all of the tangible assets of
an ambulatory surgery center located in Garden City, New York. As part of this
transaction, we agreed to manage the operations of this center, on behalf of the
estate of the former owner thereof, until the New York State Department of
Health approves of the transfer of the certificate of need therefor to one of
our affiliates, whereupon we will commence managing such operations for such
affiliate. We had no prior experience in managing or operating an ambulatory
surgery center and cannot give any assurance that our financial condition and
results of operations will not be adversely effected thereby.
14. We are subject to a variety of state, local, and federal regulations
which affect the health care industry.
The regulatory requirements that we must satisfy to conduct our
business will vary from state to state. For example, some states have enacted
laws governing the ability of ophthalmologists and optometrists to enter into
contracts with business corporations or lay persons, and some states
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prohibit companies from computing their royalty fees based upon a percentage of
the gross revenues generated by optometrists from exam fees. Various federal and
state regulations also limit the financial and non-financial terms of agreements
with health care providers, and therefore our potential revenues may differ
depending upon the nature of our various health care provider affiliations.
Our excimer lasers are medical devices and are subject to regulation by
the U.S. Foods and Drug Administration ("FDA"). Summit Technologies and VISX,
the manufacturers of the two excimer laser systems that we currently use, have
received approval from the FDA for their use to treat certain refractive
disorders. However, such approval contains restrictions on the use, labeling,
promotion, and advertising of the excimer laser. If the FDA and/or other
federal, state, or local governmental agencies change the rules and regulations
affecting the use of excimer lasers for PRK, our business and results of
operations could be adversely effected.
We are also subject to regulations regarding the operation, in
California, of VisionCare of California, as well as our franchise business and
in-store laboratory operations. As a franchisor, we are also subject to various
registrations and disclosure requirements imposed by the Federal Trade
Commission and by many of the states in which we conduct our franchising
operations. The Federal Occupational Safety and Health Act regulates our
in-store laboratory operations. Although we believe that we are in material
compliance with all such applicable laws and/or regulations, we cannot guarantee
that we will be able to sustain compliance if the laws and regulations change.
15. We are legally prohibited from inducing our customers with financial
rewards in order to contract with us.
The Medicare and Medicaid anti-kickback statutes prohibit financial
relationships that aim to induce, arrange, or recommend the purchase of items or
services, or patient referrals to providers of services, for which payment may
be made under federally funded health care programs. The anti-kickback statutes
contain exceptions for, among other things, properly reported discounts and
compensation for bona fide employees. In addition, federal regulations establish
certain "safe harbors" from liability under the anti-kickback statutes,
including further refinements of the exceptions for discounts and employee
compensation, and a safe harbor for personal service contracts. Several states
also have statutes or regulations prohibiting financial relationships with
referral sources that are not limited to services for which Medicare and
Medicaid payment may be made. If we are sanctioned under these federal or state
anti-remuneration laws, we may be subjected to civil monetary penalties, license
suspension or revocation, exclusion of providers or practitioners from
participation in Medicare and Medicaid, and criminal fines or imprisonment.
While we believe we are presently in compliance with these laws, we cannot
guarantee that some of our business practices would not be subject to challenge
under any of these laws. Currently, we are not aware of any challenge or
potential challenge to our business practices.
16. Potential conflicts of interest may arise as certain of our principal
shareholders and directors are involved with other companies in the
optical industry.
Dr. Alan Cohen is the President and Chief Executive Officer of the
Company, and Drs. Robert Cohen and Edward Cohen are directors and, together with
certain members of their respective immediate families, are our principal
shareholders. Drs. Alan and Robert Cohen are also the executive officers and
directors and, together with certain members of their and Dr. Edward Cohen's
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<PAGE>
respective immediate families, are the sole shareholders of Cohen Fashion
Optical, Inc. and its affiliate, Real Optical Purchasing Corp. These
corporations operate and franchise retail optical stores that are similar to
Sterling Stores. Cohen Fashion Optical and Real Optical operate and/or have
franchised stores in the states of Connecticut, Florida, New Hampshire,
Massachusetts, New Jersey, New York and Pennsylvania and may, in the future,
operate and/or conduct franchising activities in other states as well. As of
June 1, 1999, many Cohen Fashion Optical stores were located in the same
shopping center or mall as, or in close proximity to, Sterling Stores. We cannot
state that, in the future, Cohen Fashion Optical will not open or franchise
additional stores which are located in the same areas as Sterling Stores.
Moreover, certain members of the Cohen family own minority equity
interests in, and have substantial management positions or consulting agreements
with two of our suppliers, Rapid Cast, Inc. and Dura-Lens, Inc. Currently we
receive products from Rapid Cast and DuraLab on a preferred vendor basis,
however we cannot guarantee that we will continue to receive products from these
companies on such favorable terms. Furthermore, Sterling Stores and certain of
Cohen Fashion Optical stores are joint providers under certain of our third
party benefit plans and we anticipate that such arrangement will continue in the
future. Because of the interests that the Cohen family has in certain of our
suppliers and also in other companies in the optical industry, we cannot state
that conflicts of interest will not arise that may cause the Cohen family
shareholders to enter into business relationships that are not favorable to us.
17. A large portion of our stock is held by members of the Cohen family.
Exclusive of the shares of Common Stock held by certain members of
Dr. Edward Cohen's immediate family and the outstanding options to purchase
750,001 shares of Common Stock, as of June 1, 1999, approximately 44% of our
issued and outstanding shares of Common Stock were held by Drs. Robert, Alan and
Edward Cohen and certain members of their respective immediate families.
Therefore, the Cohen family is able to direct our affairs and exercise
significant influence over all matters requiring shareholder approval, including
the election of directors and the approval of significant corporate
transactions. Future sales, by the Cohen family, of substantial amounts of
Common Stock, or the potential for such sales, could adversely affect the
prevailing market price of our Common Stock.
18. We significantly depend on the ability and experience of certain
members of our management.
We rely on the skills of certain members of our management team to
guide our operations. A loss of any of the individuals listed below could have
an adverse effect on our operations:
o Dr. Robert Cohen, Chairman of the Board
o Dr. Alan Cohen, Chief Executive Officer, President and Director
o Mr. Jerry Darnell, Chief Operating Officer - Franchise Division
o Mr. Joseph Silver, Executive Vice President and General Counsel
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o Mr. William Young, Chief Financial Officer
Furthermore, other than as to Mr. Young, we do not have employment
agreements with these individuals and cannot ensure that, in the future, they
will continue to work for us.
19. The prevailing market price of our Common Stock may be adversely
effected by sales of a substantial number of shares into the public
market.
As of June 1, 1999, in addition to the 535,605 Shares of Common Stock
being registered hereby, there were 15,118,524 shares of Common Stock
outstanding, excluding the 3,500,000 shares that were reserved for issuance
under the Company's 1995 Stock Option Plan. Of the outstanding shares, we issued
10,106,879 shares in private transactions not involving a public offering and of
these shares, 5,556,243 are freely tradeable under Rule 144 of the Securities
Act and 4,550,636 are subject to the volume limitations on sale as set forth in
Rule 144.
20. We have created provisions in our governing documents that will make it
difficult for our business to be acquired or our directors to be
removed.
Our Amended and Restated Certificate of Incorporation and Amended and
Restated By-Laws contain certain provisions that are intended to discourage,
delay, or make it more difficult for a change of control of our business to
occur. There are also provisions designed to prevent the removal, by our
shareholders, of directors who serve on our classified Board of Directors, even
if some, or a majority, of them voted for the removal of a director. Currently,
we may issue 5,000,000 shares of Preferred Stock, par value $.01 per share which
includes the 35 shares of Senior Convertible Preferred Stock that we issued on
February 17, 1998. Our Board of Directors has the authority to fix the rights,
privileges and preferences of such shares of Preferred Stock without any further
vote or action by the shareholders. Therefore, the rights of the holders of
Common Stock are and may, in the future, be subject to, and may be adversely
affected by, the rights of the holders of the Senior Convertible Preferred
Stock, as well as the holders of any additional Preferred Stock that may be
issued in the future. In addition, we are subject to the anti-takeover
provisions of Section 912 of the Business Corporation Law of the State of New
York, which could have the effect of delaying or preventing a change of control
of our business.
21. We are have not complied with all the terms of our loan agreement.
On June 30, 1997, we entered into a loan agreement with STI Credit
Corporation that established a credit facility to finance a portion of our then
existing and future franchise promissory notes receivable. As of each of
December 31, 1997 and 1998, we were not in compliance with certain financial
covenants of the loan agreement; however, STI Credit Corporation waived its
right to act upon our non-compliance. If we are unable to comply with the loan
agreement in the future, we cannot guarantee that we will be able to obtain
appropriate waivers of, or amendments to, the loan agreement, and the failure to
do so could have a material adverse effect on our business and financial
conditions.
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<PAGE>
USE OF PROCEEDS
We will not receive any of the proceeds from the sale of the Shares of
Common Stock being offered hereby. All proceeds from the sale of such Shares
will be for the account of the selling shareholders. See "Selling Shareholders
and Plan of Distribution." We may, however, receive an aggregate of $2,800,000
if the holders of the Senior Convertible Preferred Stock exercise their right to
purchase 700,000 shares of our Common Stock pursuant to the warrants issued in
connection with the sale of the Senior Convertible Preferred Stock. We intend
to use all of the proceeds we may receive, as a result of such exercise, for
general working capital purposes.
SELLING SHAREHOLDERS
The selling shareholders under this Prospectus are Huberfeld/Bodner
Family Foundation, Huberfeld/Bodner Partnership, Ace Foundation, Inc., Rita
Folger, Congregation Ahavas Tsedoka V'Chesed, Thomas DePetrillo and Marchon
Eyewear, Inc.
The table below sets forth certain information with respect to the
ownership before and after this offering, as of June 1, 1999, the number of
Shares covered by this Prospectus with respect to each selling shareholder, and
the amount and percentage ownership of each selling shareholder after the
offering of the Shares offered hereby, assuming all of the Shares covered by
this Prospectus are sold by the selling shareholders. Except as otherwise
indicated by the footnotes below, none of the selling shareholders has had any
position, office, or other material relationship with us within the past three
years, other than as a result of the ownership of the Shares or other securities
of ours.
<TABLE>
<CAPTION>
Number of
Shares
Name of Beneficial Owner Common Stock Beneficially Registered Common Stock Beneficially
Owned Prior to the Offering Hereunder Owned After the Offering(5)
- ---------------------------------------- ------------------------------- ------------- ----------------------------
Number Percent Number Percent
--------------- ------------- ------------- ------------- ------------
<S> <C> <C> <C> <C> <C>
Huberfeld/Bodner Family Foundation 508,333(1)(2) 3.3% 133,333 375,000 2.4%
Huberfeld/Bodner Partnership 480,000(1) 3.1% 120,000 360,000 2.3%
Ace Foundation, Inc. 583,333(1)(2) 3.7% 133,333 450,000 2.9%
Rita Folger 70,333(1)(2) * 13,333 15,000 *
Congregation Ahavas Tsedoka V'Chesed 235,000(1) * 25,000 0 *
Thomas L. DePetrillo 180,000(3) 1.2% 50,000 0 *
Marchon Eyewear, Inc.(4) 65,606 * 60,606 5,000 *
</TABLE>
- ----------------------------
* Less than one percent.
(1) This number represents the aggregate number of shares of Common Stock to be
issued to such person (a) upon the conversion of our Senior Convertible
Preferred Stock held by such selling shareholder at the conversion price of
$3.00 per share, and (b) upon the exercise of the Warrants held by such
selling shareholder.
(2) Includes Warrants that were issued in connection with a prior private
placement of our securities and are immediately exercisable.
(3) Includes 30,000 shares of Common Stock and an option to purchase 100,000
shares of Common Stock at an exercise price of $6.00 per share.
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<PAGE>
(4) Marchon Eyewear, Inc. is one of the Company's suppliers for eyeglass frames
and related business transactions.
(5) It is unknown if, when, or in what amounts the selling shareholders may
offer Shares pursuant to this Prospectus. Because the selling shareholders
may offer all or some of the Shares covered hereby, no estimate can be
given as to the amount of Shares offered hereby that the selling
shareholders will continue to hold after this offering is declared
effective and thereafter considered complete. However, for purposes of this
table, we have assumed that, after completion of this offering, the selling
shareholders will have sold all of the Shares covered hereby and all other
previously registered shares.
PLAN OF DISTRIBUTION
In February 1998, we entered into Convertible Debentures and Warrants
Subscription Agreements with Huberfeld/Bodner Family Foundation,
Huberfeld/Bodner Partnership, Ace Foundation, Inc., Rita Folger and Congregation
Ahavas Tsedoka V'Chesed in connection with our private placement of units
consisting of an aggregate of $3,500,000 principal amount of convertible
debentures (collectively, the "Debentures") and an aggregate of 700,000 warrants
(collectively, the "Warrants"), which Warrants entitled the holders thereof to
purchase up to 700,000 shares of our Common Stock at a price of $5.00 per share.
Subsequent to the date of our issuance and sale of the Debentures and
Warrants, we and the selling shareholders determined that the issuance and sale
of the Debentures and Warrants should be rescinded based upon a certain mutual
mistake. Accordingly, on April 14, 1998, we and the selling shareholders entered
into an Exchange Agreement, effective as of February 17, 1998, whereby the
Debentures were rescinded and declared null and void from inception and were
exchanged for $3,500,000 stated value (approximately $4,025,000 fair value) of a
series of our Preferred Stock, par value $.01 per share (the "Preferred Stock"),
and the Warrants were exchanged for new warrants (the "New Warrants"), entitling
the selling shareholders to purchase up to 700,000 shares of Common Stock at a
price of $5.00 per share until February 17, 2001.
The Preferred Stock originally required us to pay quarterly dividends
(in cash or Common Stock) calculated at the rate of 10% per annum, commencing
May 17, 1998. Additionally we were required to redeem, either in cash or Common
Stock, all of the Preferred Stock, at 105% of the then outstanding stated value,
based on a conversion price of $5.00, from and after February 17, 1999. After
February 18, 1999, we, however, were required to pay dividends at the rate of
24% per annum. Finally, there was a price-protection guarantee provision,
whereby under certain circumstances, we would be required to pay the holders the
difference between the $5.00 conversion price and the selling price (net of
commissions) of any such shares sold.
On January 14, 1999, we and the selling shareholders entered into an
Amendment Agreement to reduce the conversion price, from $5.00 to $4.00, of all
shares of Preferred Stock converted on or prior to February 10, 1999, and to
eliminate the price protection guaranty provision contained in the Agreement
with respect to any such shares so converted prior to such date.
On March 4, 1999, effective as of February 11, 1999, we and each of the
four remaining holders of the Preferred Stock entered into a further amendment
to the original agreement to reduce
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<PAGE>
the conversion price of all outstanding shares of Preferred Stock, from $5.00 to
$3.00, to extend the date by which we are required to redeem all outstanding
Preferred Stock, from February 17, 1999 to February 17, 2000, to eliminate the
requirement that we pay dividends on the Preferred Stock from and after February
17, 1999, and to reduce the exercise price of the outstanding New Warrants from
$5.00 to $4.00. We are required to register the Shares being registered hereby
as a result of the decreases in such conversion price of the Preferred Stock and
exercise price of the New Warrants explained above.
Mr. DePetrillo acquired his Shares of Common Stock in a private
transaction from certain of our shareholders. Marchon Eyewear, Inc., which is a
supplier of eyeglass frames to the Company, was owed approximately $340,000 by
us and has agreed to accept 250,000 Shares of Common Stock to satisfy $250,000
of such indebtedness. In connection with such transaction, we agreed to
register the Shares.
The sale of all or a portion of the Shares by the selling shareholders
may be effected, from time to time, in private transactions or over-the-counter
market transactions at prices related to the prevailing prices of the shares on
the NASDAQ-NMS at the time of sale, or at negotiated prices. The selling
shareholders may effect such transactions by selling to or through one or more
broker-dealers, and such broker-dealers may receive compensation in the form of
underwriting discounts, concessions, or commissions from the selling
shareholders. The selling shareholders and any broker-dealers that participate
in the distribution of the Shares may, under certain circumstances, be deemed to
be "underwriters" within the meaning of the Securities Act, and any commissions
received by such broker-dealers and any profits realized on their resale of
Shares may be deemed to be underwriting discounts and commissions under the
Securities Act. We may agree with the selling shareholders to indemnify such
broker-dealers against certain liabilities, including liabilities under the
Securities Act. In addition, we have agreed to indemnify certain of the selling
shareholders, with respect to the Shares of Common Stock being offered hereby,
against certain liabilities, including certain liabilities under the
Securities Act.
To the extent required under the Securities Act, a supplemental
prospectus will be filed, disclosing (a) the name of any such broker-dealers,
(b) the number of Shares involved, (c) the price at which such Shares are to be
sold, (d) the commissions paid or discounts or concessions allowed to such
broker-dealers, where applicable, (e) whether or not such broker-dealers
conducted any investigation to verify the information set out or incorporated by
reference in this Prospectus, as supplemented, and (f) other facts material to
the transaction.
Each selling shareholder may be subject to applicable provisions of the
Securities Exchange, and the rules and regulations promulgated thereunder,
including, without limitation, Regulation M, which provisions may limit the
timing of purchases and sales of any of our securities by the selling
shareholders.
There is no assurance that any of the selling shareholders will sell
any of the Shares.
We have agreed to pay all costs and expenses incurred in connection
with the registration of the Shares offered hereby, except that the selling
shareholders shall be responsible for all selling commissions, transfer taxes,
and related charges in connection with the offer and sale of such Shares and the
fees of the selling shareholders' counsel.
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<PAGE>
We have agreed to keep the Registration Statement, to which this
Prospectus forms a part, relating to the offering and sale, by the selling
shareholders, of the Shares, continuously effective until the earlier of (i)
February 17, 2001; and (ii) the date that all of the shares have been sold and
the New Warrants have been exercised.
DESCRIPTION OF OUR CAPITAL STOCK
The following general summary of our capital stock is qualified in its
entirety by reference to our Amended and Restated Certificate of Incorporation,
a copy of which is on file with the SEC. See "Where You Can Find More
Information" for a description of the documents incorporated by reference in
this Prospectus.
General
We are authorized to issue 28,000,000 shares of Common Stock, $.01 par
value, and 5,000,000 shares of Preferred Stock, $.01 par value. As of June 1,
1999, we had 15,118,524 shares of Common Stock issued and outstanding and 29
issued and outstanding shares of Senior Convertible Preferred Stock.
Our Common Stock
As holders of shares of our Common Stock, you are entitled to dividends
when and as declared by the Board of Directors from legally available funds
therefore and, upon liquidation, you are entitled to share pro rata in any
stockholder distribution. However, we have no intention to pay dividends on
shares of our Common Stock in the foreseeable future as our Board of Directors
has decided to retain earnings to finance our operations and expansion. You have
one non-cumulative vote for each share held. There are no pre-emptive or
subscription rights to purchase our securities. We have reserved the Shares
being registered hereby for issuance upon conversion of the Senior Convertible
Preferred Stock and upon exercise of the New Warrants.
Preferred Stock
We have designated 35 shares of our Preferred Stock as Senior
Convertible Preferred Stock, of which 29 shares were issued and outstanding as
of June 1, 1999. The holders of the Senior Convertible Preferred Stock were
entitled to receive quarterly dividends at a rate of 10% per annum from May 17,
1998 up until February 17, 1999. The Senior Convertible Preferred Stock is
redeemable, at our option, at 105% of its stated value. The holders of the
Senior Convertible Preferred Stock vote as a single class with the Common Stock
on an as-converted basis on all matters on which the holders of the Common Stock
are entitled to vote. Each outstanding share of Senior Convertible Preferred
Stock may be converted into Common Stock at the conversion price of $3.00 per
share.
Until the Senior Convertible Preferred Stock is redeemed or has been
converted into Common Stock, we cannot consolidate, merge or transfer all or
substantially all of our assets to any person unless the terms of such
consolidation, merger, or transfer include the preservation of the Senior
Convertible Preferred Stock. There is a liquidation preference of $100,000 per
share of Senior Convertible Preferred Stock.
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<PAGE>
Warrants
As of June 1, 1999, we had outstanding warrants (including the New
Warrants) exercisable for an aggregate of 1,228,000 shares of Common Stock at
an estimated weighted average exercise price of $4.83 per share.
Transfer Agent
The transfer agent for the Common Stock is Chase Mellon Shareholder
Services.
LEGAL MATTERS
Our counsel, Camhy Karlinsky & Stein LLP, New York, New York, has
passed on the legality of the Shares to which this Prospectus relates.
EXPERTS
Arthur Andersen LLP, independent public accountants, have audited our
consolidated financial statements for the year ended December 31, 1998. Deloitte
& Touche LLP, independent public accountants, have audited our consolidated
financial statements for each of the years ended December 31, 1997 and December
31, 1996 and for each of the three years in the period ended December 31, 1997
incorporated by reference to our Annual Report on Form 10-K for the Year Ended
December 31, 1997. The financial statements incorporated by reference in this
Prospectus and elsewhere in the Registration Statement, to the extent and for
the periods indicated in their reports, have been audited by Arthur Anderson
LLP and Deloitte & Touche LLP, independent public accountants, and are included
herein in reliance upon the authority of said firms as experts in accounting and
auditing.
CHANGES IN, AND DISAGREEMENT WITH, CERTIFYING ACCOUNTANTS
On or about April 15, 1998, our Executive and Audit Committees
considered the reappointment of Deloitte & Touche LLP as our principal
accountants. These Committees determined that it was in our best interest to
select another firm of independent public accountants as our auditors for the
1998 fiscal year. In response to such determination, certain members of our
management team commenced their selection process by interviewing a number of
other firms of certified public accounts.
On April 24, 1998, the Audit Committee recommended to the Board of
Directors that it select Arthur Andersen LLP as such auditors. The Board of
Directors accepted this recommendation. Also on April 24, 1998, Deloitte &
Touche LLP notified us, in writing, of its decision to resign as our auditors,
effective immediately.
Deloitte & Touche's reports for the years ended December 31, 1996 and
1997 did not contain an adverse opinion or a disclaimer of opinion, or was
qualified or modified as to uncertainty, audit scope, or accounting principles.
For the year ended December 31, 1997, our management disagreed with
Deloitte & Touche LLP on the treatment, for financial accounting purposes, of
our Convertible Debentures due August
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<PAGE>
25, 1998, which was ultimately resolved to Deloitte's satisfaction; and Deloitte
& Touche advised management of a reportable condition regarding inventory
controls. We are addressing this issue through the installation, in the Sterling
Stores we operate, of a point-of-sale computer system. In addition, Deloitte &
Touche LLP previously advised us that it was in disagreement with our proposed
1998 accounting treatment of our Senior Convertible Preferred Stock.
Our Board of Directors and Audit Committee did not discuss these
disagreements with Deloitte & Touche LLP. We have authorized Deloitte & Touche
LLP to respond fully to the inquiries of Arthur Andersen LLP concerning each of
these disagreements.
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<PAGE>
DISCLOSURE OF COMMISSION POSITION ON
INDEMNIFICATION FOR SECURITIES ACT LIABILITIES
Our Amended and Restated Certificate of Incorporation provides that a
director shall not be liable to us or our shareholders for damages for any
breach of duty in such capacity as a director except for liability in the event
that
o a judgment or other final adjudication adverse to such
director establishes that his/her acts or omissions were in
bad faith or involved intentional misconduct or a knowing
violation of law or that such director personally gained a
financial profit or other advantage to which he/she was not
legally entitled; or
o that such director's acts violated Section 719 of the Business
Corporation Law of the State of New York.
Our Amended and Restated Bylaws provides for our indemnification of
directors and officers, to the fullest extent permitted by applicable law, for
all costs reasonably incurred in connection with any action, suit, or proceeding
in which such director or officer is made a party by virtue of his or her being
an officer or director of our Company, if such director or officer acted in good
faith, for a purpose which he/she reasonably believed to be in the best
interests of our Company, and in criminal actions or proceedings, in addition,
had no reasonable cause to believe that his/her conduct was unlawful. We have
not entered into indemnification agreements with any of our directors.
Insofar as indemnification for liabilities arising under the Securities
Act may be available to directors, officers and controlling persons of our
Company pursuant to the foregoing provisions, or otherwise, we have been advised
that, in the opinion of the SEC, such indemnification is against public policy
as expressed in the Securities Act and is, therefore, unenforceable.
No dealer, salesperson, or other person has been authorized to give any
information or to make any representations other than those contained in this
Prospectus and, if given or made, such information or representations must not
be relied upon as having been authorized. Neither the delivery of this
Prospectus nor any sale made hereunder shall, under any circumstances, create
any implication that there has been no change in our affairs since the date
hereof or that the information contained herein is correct as of any date
subsequent to the date hereof. This Prospectus does not constitute an offer to
sell or a solicitation of an offer to buy any securities offered hereby by
anyone in any jurisdiction in which such offer or solicitation is not authorized
or in which the person making the offer is not qualified to do so, or to anyone
to whom it is unlawful to make such offer or solicitation.
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================================================================================
================================================================================
You may rely only on the information contained in this Prospectus. We have not
authorized anyone to provide information different from that contained in this
Prospectus. Neither the delivery of this Prospectus nor the sale of Common Stock
means that information contained in this Prospectus is correct after the date of
this Prospectus. This Prospectus is not an offer to sell or a solicitation of an
offer to buy these shares of Common Stock in any circumstances under which the
offer or solicitation is unlawful.
---------------
TABLE OF CONTENTS
Page
Where You Can Find More
Information................... 4
Incorporation of Certain Documents
by Reference.................. 4
Additional Information............. 5
Prospectus Summary................. 6
Risk Factors....................... 8
Use of Proceeds.................... 15
Selling Shareholders............... 15
Plan of Distribution............... 16
Description of Our Capital Stock... 18
Legal Matters...................... 19
Experts............................ 19
Changes In, and Disagreement With,
Certifying Accountants........ 19
Disclosure of Commission Position
on Indemnification for
Securities Act Liabilities.... 21
================================================================================
================================================================================
535,605 Shares
Sterling Vision, Inc.
Common Stock
---------------
Prospectus
---------------
June __, 1999
================================================================================
================================================================================
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PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
The following table sets forth the costs and expenses payable in connection with
the sale of the Common Stock being registered hereby. Except for the SEC
registration fee, all expenses are estimated.
Item Amount
- -------------------------------------------------------- -------------
SEC registration fee.................................... $ 166.27
Printing and engraving expenses......................... $ 1,500.00
Legal fees and expenses................................. $10,000.00
Auditors' accounting fees and expenses.................. $ 5,000.00
----------
Total................................................... $16,666.27
The holders of the shares being registered hereby will be responsible for all
selling commissions, transfer taxes, and related charges in connection with the
offer and sale of the shares offered hereby.
Item 15. Indemnification of Directors and Officers.
Our Amended and Restated Certificate of Incorporation provides that a director
shall not be liable to us or our shareholders for damages for any breach of duty
in such capacity except for liability in the event a judgment or other final
adjudication adverse to such director establishes that his/her acts or omissions
were in bad faith or involved intentional misconduct or a knowing violation of
law or that such director personally gained a financial profit or other
advantage to which he/she was not legally entitled or that such director's acts
violated Section 719 of the Business Corporation Law of the State of New York.
Our Amended and Restated Bylaws provides for our indemnification of directors
and officers, to the fullest extent permitted by applicable law, for all costs
reasonably incurred in connection with any action, suit, or proceeding in which
such director or officer is made a party by virtue of his or her being an
officer or director of the Company, if such director or officer acted in good
faith, for a purpose which he/she reasonably believed to be in the best
interests of our business, and in criminal actions or proceedings, in addition,
had no reasonable cause to believe that his/her conduct was unlawful. We have
not entered into indemnification agreements with any of our directors.
Item 16. Exhibits.
Exhibit
Number Description of Document
- --------- --------------------------------------------------------------------
4.1 Specimen Common Stock Certificate of Registrant(1)
4.2 Form of Exchange Agreement, with Exhibits attached thereto,
representing the form of Senior Convertible Preferred Stock and
Warrant(2)
5.1 Opinion of Camhy Karlinsky & Stein LLP(3)
23.1 Consent of Arthur Andersen LLP(3)
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23.2 Consent of Deloitte & Touche LLP(3)
23.3 Consent of Camhy Karlinsky & Stein LLP(4)
---------------
(1) Incorporated by reference to Registrant's Registration Statement
on Form S-1 (Commission File No. 33-98368).
(2) Incorporated by reference to Registrant's Current Report on Form
8-K, dated April 14, 1998.
(3) Filed herewith.
(4) Included as part of Exhibit 5.1.
Item 17. Undertakings.
The undersigned Registrant hereby undertakes:
1. To file, during any period in which offers or sales of the shares
being registered hereby are being made, a post-effective amendment to this
Registration Statement to:
(i) Include any prospectus required by Section 10(a)(3) of the
Securities Act;
(ii) To reflect in such prospectus any facts or events which,
individually or together, represent a fundamental change in
the information in this Registration Statement;
(iii) To include any additional or changed material information on
the plan of distribution;
provided, however, that sub-paragraphs 1(i) and 1(ii) do not apply if the
information required in a post-effective amendment is contained in a periodic
report filed by the Company pursuant to Section 13 or Section 15(d) of the
Exchange Act, and incorporated by reference in this Registration Statement.
2. That, for the purpose of determining liability under the Securities
Act, it shall treat each post-effective amendment as a new registration
statement of the securities offered, and treat the offering of the securities,
at that time, as an initial bona fide offering.
3. To remove from registration, by means of a post-effective amendment,
any of the securities being registered which remains unsold at the termination
of the offering.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Company pursuant to the provisions described in Item 15, or otherwise, the
Company has been advised that, in the opinion of the Securities and Exchange
Commission, such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable.
In the event a claim for indemnification against such liabilities,
other than the payment, by the Company, of expenses incurred or paid by a
director, officer of controlling person of the Company in the successful defense
of any action, suit or proceeding, is asserted by such director, officer or
controlling person in connection with the shares being registered hereby, the
Company will, unless,
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<PAGE>
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question as to
whether such indemnification by the Company is against public policy as
expressed in the Securities Act and will be governed by the final adjudication,
of such issue, by such court.
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
the Registrant has duly caused this Registration Statement on Form S-3 to be
signed on its behalf by the undersigned, thereunto duly authorized, in the
County of Nassau, State of New York, on June 21, 1999.
STERLING VISION, INC.
By: /s/ ALAN COHEN
-------------------------------------
Alan Cohen,
President and Chief Executive Officer
By: /s/ WILLIAM J. YOUNG
-------------------------------------
William J. Young,
Chief Financial Officer
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<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints each of Alan Cohen and William J. Young,
singly, as his true and lawful attorney-in-fact and agent, with full power of
substitution for him and in his name, place and stead, in any and all
capacities, to sign any and all amendments and post-effective amendments to this
Registration Statement, and to file the same, with all exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission, granting unto each said attorney-in-fact and agent full power and
authority to do and perform each and every act and thing requisite and necessary
to be done in and about the premises, as fully to all intents and purposes as he
might or could do in person, thereby ratifying and confirming all that each said
attorney-in-fact and agent, or his substitutes, may lawfully do or cause to be
done by virtue thereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities and on the dates indicated:
Signature Title Date
- ------------------------ ------------------------------------ -------------
/S/ ROBERT COHEN Chairman of the Board of Directors June 21, 1999
- -----------------------
Robert Cohen
/S/ ALAN COHEN Vice Chairman of the Board of June 21, 1999
- ----------------------- Directors,-President-and-Chief
Alan Cohen Executive Officer
/S/ EDWARD CELANO Director June 21, 1999
- -----------------------
Edward Celano
/S/ WILLIAM J. YOUNG Executive Vice President--Finance, June 21, 1999
- ----------------------- Chief-Financial-Officer-and-Treasurer
William J. Young (Principal Accounting Officer)
/S/ JOEL GOLD Director June 21, 1999
- -----------------------
Joel Gold
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<PAGE>
EXHIBIT 5.1
LEGAL OPINION
[LETTERHEAD OF CAMHY KARLINSKY & STEIN LLP]
June 21, 1999
Board of Directors
Sterling Vision, Inc.
1500 Hempstead Turnpike
East Meadow, New York 11554
Re: Sterling Vision, Inc. -- Registration Statement on Form S-3
Gentlemen:
You have requested our opinion in connection with the above-captioned
Registration Statement on Form S-3 (the "Registration Statement") to be filed by
Sterling Vision, Inc., a New York corporation (the "Company"), with the
Securities and Exchange Commission pursuant to the Securities Act of 1933, as
amended (the "Act"), and the rules and regulations promulgated thereunder (the
"Rules"). The Registration Statement relates to the issuance by the Company of
an aggregate of 535,605 shares of its Common Stock, par value $.01 per share
(the "Common Stock"): (i) of which 424,999 shares of Common Stock are to be
issued to the holders of the Company's Senior Convertible Preferred Stock, par
value $.01 per share (the "Senior Preferred"), upon the conversion thereof and
the exercise of related warrants (the "Common Shares"); and (ii) of which
60,606 shares of Common Stock are held by Marchon Eyewear, Inc. and 50,000
shares of Common Stock are held by Thomas L. DePetrillo.
We have examined such records and documents and have made such
examination of law as we considered necessary to form a basis for the opinions
set forth herein. In our examination, we have assumed the genuineness of all
signatures, the authenticity of all documents submitted to us as originals, and
the conformity with the originals of all documents submitted to us as copies
thereof.
Based upon such examination, it is our opinion that when there has been
compliance with the Act and applicable state securities laws that:
1. The Common Shares when issued and delivered in accordance with the
terms of the Senior Preferred and the exercise of the warrants, will be validly
issued, fully paid and non-assessable; and
2. The shares of Common Stock held by Marchon Eyewear, Inc. and Thomas
L. DePetrillo, when issued and delivered in accordance with the terms set
forth in the Registration Statement, will be validly issued, fully paid and
non-assessable.
We hereby consent to the filing of this opinion as an exhibit to this
Registration Statement and to the reference to our Firm under the caption "Legal
Matters" in this Registration Statement.
Very truly yours,
CAMHY KARLINSKY & STEIN LLP
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the
incorporation by reference in this registration statement of our report dated
April 13, 1999 included in Sterling Vision, Inc.'s Form 10-K for the year ended
December 31, 1998 and to all references to our Firm included in this
registration statement.
ARTHUR ANDERSEN LLP
Melville, New York
June 18, 1999
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<PAGE>
EXHIBIT 23.2
CONSENT OF DELOITTE & TOUCHE
We consent to the use in this Registration Statement on Form S-3 being
filed by Sterling Vision, Inc. of our Report, dated April 14, 1999, appearing in
the Prospectus, which is part of this Registration Statement. We also consent to
the reference to us under the heading "Experts" in the Prospectus forming a part
hereof.
DELOITTE & TOUCHE LLP
New York, New York
June 18, 1999
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