<PAGE>
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934
Filed by the Registrant /x/
Filed by a Party other than the Registrant / /
Check the appropriate box:
<TABLE>
<S> <C>
/x/ Preliminary Proxy Statement / / Confidential, For Use of the
/ / Definitive Proxy Statement Commission Only (as permitted by
/ / Definitive Additional Materials Rule 14a-6(e)(2))
/ / Soliciting Material Pursuant to Rule 14a-11(c) or
Rule 14a-12
</TABLE>
STERLING VISION, INC.
------------------------
(Name of Registrant as Specified in its Charter)
------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/x/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee
is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
/ / Fee paid previously with preliminary materials
/ / Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the form or schedule and the date of its filing.
(1) Amount previously paid:
(2) Form, Schedule or Registration Statement no.:
(3) Filing Party:
(4) Date Filed:
<PAGE>
STERLING VISION, INC.
1500 HEMPSTEAD TURNPIKE
EAST MEADOW, NEW YORK 11554
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD APRIL 7, 2000
A Special Meeting (the "Special Meeting") of the Shareholders of Sterling
Vision, Inc. (the "Company") will be held at 1500 Hempstead Turnpike, East
Meadow, New York 11554, on Friday, the 7th day of April, 2000, at 9:00 a.m.
(local time), for the following purposes:
(1) To consider and act upon an amendment to the Company's Amended and
Restated Certificate of Incorporation increasing its authorized number
of shares of Common Stock to 50,000,000;
(2) To consider and act upon an amendment to the Company's 1995 Stock
Incentive Plan to increase the number of shares authorized for issuance
thereunder from 3,500,000 to 7,000,000; and
(3) To transact such other business as may properly come before the Special
Meeting or any adjournment or adjournments thereof.
The Board of Directors has fixed the close of business on February 18, 2000
as the record date for the determination of the shareholders of the Company
entitled to notice of, and to vote at, the Special Meeting. Holders of the
Company's Common Stock, Senior Convertible Preferred Stock and Series B
Convertible Preferred Stock on that date will be entitled to vote on all matters
presented at the Special Meeting.
ALL HOLDERS OF THE COMPANY'S COMMON STOCK, SENIOR CONVERTIBLE PREFERRED
STOCK AND SERIES B CONVERTIBLE PREFERRED STOCK (WHETHER THEY EXPECT TO ATTEND
THE SPECIAL MEETING OR NOT) ARE REQUESTED TO COMPLETE, SIGN, DATE AND RETURN
PROMPTLY THE PROXY CARD ENCLOSED WITH THIS NOTICE.
By Order of the Board of Directors
By: /s/ JOSEPH SILVER
------------------------------
Joseph Silver,
Secretary
February 28, 2000
<PAGE>
STERLING VISION, INC.
PROXY STATEMENT
SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD APRIL 7, 2000
INTRODUCTION
This Proxy Statement is being furnished to shareholders of record of
Sterling Vision, Inc. ("Sterling" or the "Company") as of February 18, 2000 in
connection with the solicitation, by the Board of Directors of Sterling, of
proxies for the Special Meeting of Shareholders to be held at 1500 Hempstead
Turnpike, East Meadow, New York 11554 on Friday, April 7, 2000, at 9:00 a.m.
(local time), or at any and all adjournments thereof (the "Special Meeting" or
"Meeting"), for the purposes stated in the Notice of Special Meeting of
Shareholders to which this Proxy Statement is annexed. The approximate date of
mailing to shareholders of this Proxy Statement and enclosed form of Proxy is
February 25, 2000.
OUTSTANDING STOCK AND VOTING RIGHTS
The Board of Directors has fixed the close of business on February 18, 2000
as the record date for the determination of shareholders entitled to notice of
the Special Meeting; and holders of record of the Common Stock, par value $.01
per share (the "Common Stock"), the Senior Convertible Preferred Stock, par
value $.01 per share (the "Senior Preferred Stock"), and the Series B
Convertible Preferred Stock, par value $.01 per share (the "Series B Preferred
Stock") of the Company on that date will be entitled to notice of, and to vote
at, the Special Meeting. As of the record date, the Company had outstanding
[16,686,630] shares of Common Stock, approximately 21 shares of Senior Preferred
Stock and shares of Series B Preferred Stock. Each share of Common Stock
is entitled to one vote on all matters presented at the Special Meeting, each
share of Senior Preferred Stock is entitled to 133,333 votes (i.e., the number
of shares of Common Stock into which each share of Senior Preferred Stock is
convertible) on all matters presented at the Special Meeting and each share of
Series B Preferred Stock is entitled to two votes (i.e., the number of shares of
Common Stock into which each share of Series B Preferred Stock is convertible)
on all matters presented at the Special Meeting. The Common Stock, Senior
Preferred Stock and Series B Preferred Stock shall vote together as one class on
all matters presented at the Special Meeting.
The presence, in person or by proxy, of the holders of shares which
represent a majority of the votes entitled to be cast at the Special Meeting is
necessary to constitute a quorum at the Special Meeting. Abstentions and broker
non-votes will be counted to determine whether a quorum is present. Proposal No.
1 (to increase the authorized number of shares of Common Stock under the
Company's Amended and Restated Certificate of Incorporation) requires the
affirmative vote of not less than a majority of all votes which are entitled to
be cast on the proposal at the Special Meeting by holders of all outstanding
shares of Common Stock, Senior Preferred Stock and Series B Preferred Stock,
voting together as one class. Accordingly, broker non-votes and abstentions will
have the same effect as a negative vote on this proposal. Proposal No. 2 (to
increase the number of shares of Common Stock available for issuance under the
Company's 1995 Stock Incentive Plan) requires the affirmative vote of a majority
of all votes cast on the proposal at the Special Meeting by holders of shares of
Common Stock, Senior Preferred Stock and Series B Preferred Stock, voting
together as one class. Broker non-votes and abstentions will not be counted for
purposes of determining the number of votes cast with respect to Proposal
No. 2. The directors and officers of the Company have each indicated their
intention to vote "FOR" Proposals No. 1 and 2
If the enclosed Proxy is signed and returned, it may, nevertheless, be
revoked at any time prior to the voting thereof at the pleasure of the
shareholder signing it, either by delivering written notice of revocation to the
Secretary of the Company, or by voting the shares covered thereby in person or
by another Proxy dated subsequent to the date thereof.
2
<PAGE>
Shares represented by duly executed Proxies in the accompanying form will
be voted in accordance with the instructions indicated on such Proxies, and if
no such instructions are indicated thereon, will be voted in favor of Proposals
No. 1 and No. 2. In their discretion, the proxies are authorized to consider and
vote upon such matters incident to the conduct of the Special Meeting and upon
such other business matters or proposals as may properly come before the Meeting
that the Board of Directors of the Company did not know, within a reasonable
time prior to this solicitation, would be presented at the Meeting.
SECURITY OWNERSHIP OF MANAGEMENT
AND CERTAIN BENEFICIAL OWNERS
BENEFICIAL OWNERSHIP OF THE BOARD OF DIRECTORS AND NAMED EXECUTIVE OFFICERS
The following table sets forth certain information, as of February 18,
2000, regarding the beneficial ownership of the Company's Common Stock by: (i)
each Director of the Company; (ii) each executive officer of the Company who is
not a Director whose compensation for 1999 exceeded $100,000 (the "Named
Executive Officers"); and (iii) all Directors and Named Executive Officers as a
group. Unless otherwise indicated, the Company believes that the beneficial
owners of the Common Stock listed below, based on information provided by such
owners, have sole investment and voting power with respect to such shares.
<TABLE>
<CAPTION>
PERCENT OF TOTAL
NAME BENEFICIAL OWNERSHIP PERCENT OF CLASS VOTING POWER
- ----------------------------------------------------------- -------------------- ---------------- ----------------
<S> <C> <C> <C>
Dr. Robert Cohen*.......................................... 1,214,657(1) 5.8%
Dr. Alan Cohen*............................................ 1,327,824(2)(3) 8.0%
Dr. Edward Cohen*.......................................... 381,295(4) 2.3%
Joel Gold*................................................. 88,664(5) ***
Edward Celano*............................................. 20,000(6) ***
Jerry G. Lewis*............................................ 83,333(7) ***
Joseph Silver**............................................ 243,569(8) 1.4%
Jerry Darnell**............................................ 193,569(9) 1.1%
William J. Young**......................................... 15,000(10) ***
Dr. Nicholas Shashati**.................................... 10,000(11) ***
All Directors and Named Executive Officers as a group (10
persons)................................................. 3,577,917(12) 19.6%
</TABLE>
- ------------------
* A Director
** A Named Executive Officer
*** less than 1%.
(1) This number includes: (i) the right to acquire 316,667 shares of Common
Stock upon the exercise of presently exercisable, outstanding options; and
(ii) 125,000 presently exercisable, outstanding options granted to
Dr. Robert Cohen, as the designee of Meadows Management, LLC, a limited
liability company owned by Drs. Robert and Alan Cohen ("Meadows"). Excludes
an additional 25,000 options granted to Dr. Robert Cohen which are subject
to certain vesting requirements.
(2) This number includes (i) the right to acquire 233,334 shares of Common
Stock upon the exercise of presently exercisable, outstanding options; and
(ii) 125,000 presently exercisable outstanding options granted to Dr. Alan
Cohen, as the designee of Meadows. Excludes an additional 108,333 options
which are subject to certain vesting requirements.
(3) This number excludes 2,331,978 shares of Common Stock beneficially owned by
Meryl Cohen, the wife of Dr. Alan Cohen, as custodian for their children,
Gabrielle, Jaclyn, Nicole and Erica Cohen, of which shares Dr. Cohen
disclaims beneficial ownership.
(Footnotes continued on next page)
3
<PAGE>
(Footnotes continued from previous page)
(4) This number includes the right to acquire 76,667 shares of Common Stock
upon the exercise of presently exercisable, outstanding options.
(5) This number includes 1,500 shares of Common Stock owned by Mr. Gold's
children, the right to acquire 20,000 shares of Common Stock upon the
exercise of presently exercisable, outstanding options and warrants to
purchase 67,164 shares of Common Stock at $2.01 per share, which warrants
were part of the warrants originally granted to the underwriters of the
Company's initial public offering (consummated in December, 1995) and were
transferred to Mr. Gold on March 27, 1996. Such warrants are exercisable at
any time prior to December 26, 2000. At the time the warrants were
transferred to Mr. Gold, Mr. Gold was a Managing Director of Fechtor,
Detwiler & Co., Inc. ("Fechtor"), which acted as an underwriter in
connection with the Company's initial public offering.
(6) This number represents the right to acquire 20,000 shares of Common Stock
upon the exercise of presently exercisable, outstanding options.
(7) This number represents the right to acquire 83,333 shares of Common Stock
upon the exercise of presently exercisable, outstanding options.
(8) This number represents the right to acquire 243,569 shares of Common Stock
upon the exercise of presently exercisable, outstanding options.
(9) This number represents the right to acquire 193,569 shares of Common Stock
upon the exercise of presently exercisable, outstanding options, but
excludes an additional 50,000 options which are subject to certain vesting
requirements.
(10) This number represents the right to acquire 15,000 shares of Common Stock
upon the exercise of presently exercisable, outstanding options, but
excludes an additional 80,000 options which are subject to certain vesting
requirements.
(11) This number represents the right to acquire 10,000 shares of Common Stock
upon the exercise of presently exercisable, outstanding options, but
excludes an additional 30,000 options which are subject to certain vesting
requirements.
(12) This number includes the right to acquire 1,529,303 shares of Common Stock
upon the exercise of presently exercisable, outstanding options and
warrants. In accordance with Rule 13d-3(d)(1) under the Securities Exchange
Act of 1934, as amended, the 1,529,303 shares of Common Stock for which the
Company's Directors and Named Executive Officers, as a group, hold
currently exercisable options or warrants, have been added to the total
number of issued and outstanding shares of Common Stock solely for the
purpose of calculating the percentage of such total number of issued and
outstanding shares of Common Stock beneficially owned by such Directors and
Named Executive Officers as a group.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
Set forth below is the name, address, stock ownership and voting power of
each person or group of persons (other than those persons identified in the
immediately preceding chart) known by the Company to own beneficially more than
5% of the outstanding shares of the Company's Common Stock, Senior Preferred
Stock or
4
<PAGE>
Series B Preferred Stock and, unless otherwise indicated, is based on
information provided to the Company as of February 18, 2000 by the beneficial
owners thereof:
<TABLE>
<CAPTION>
PERCENT OF
BENEFICIAL PERCENT OF TOTAL
NAME OWNERSHIP CLASS VOTING POWER
- ------------------------------------------------------------ --------- ---------- ------------
<S> <C> <C> <C>
Common Stock
Meryl Cohen a/c/f Gabrielle Cohen, ....................... 2,331,978(1) 13.4%
Jaclyn Cohen, Erica Cohen and
Nicole Cohen
Three Surrey Lane
Old Westbury, NY 11568
Lancer Group ............................................. 970,877(2) 5.8%
375 Park Avenue
New York, NY 10152
MY 2000, LLC ............................................. 2,500,000(3) 15.0%
565 Fifth Avenue
New York, NY 10017
Senior Preferred Stock
Huberfeld/Bodner Family Foundation ....................... 6.3(4) 29.8%
152 West 57th Street
New York, NY 10019
Huberfeld/Bodner Partnership ............................. 6.6(5) 31.6%
152 West 57th Street
New York, NY 10019
Ace Foundation, Inc. ..................................... 7.4(6) 35.1%
1650 49th Street
Brooklyn, NY 11204
Series B Preferred Stock
</TABLE>
- ------------------
(1) Meryl Cohen is deemed to be the beneficial owner of the shares of Common
Stock held by her as custodian for her children, Gabrielle Cohen, (1,115,989
shares), Jaclyn Cohen (1,115,989 shares), Erica Cohen (50,0000 shares) and
Nicole Cohen (50,000 shares).
(2) This number includes: (i) 550,172 shares of Common Stock owned by Lancer
Partners, L.P., together with warrants to purchase an additional 68,200
shares of Common Stock; (ii) 320,705 shares of Common Stock owned by Lancer
Offshore, Inc., together with warrants to purchase an additional 15,600
shares of Common Stock; (iii) the right of Lancer Voyager Fund to acquire
6,500 shares of Common Stock upon the exercise of warrants; and (iv) the
right of Michael Lauer to acquire 9,700 shares of Common Stock upon the
exercise of warrants. Excludes the right to acquire up to an additional
50,000 shares of Common Stock upon the exercise of additional warrants
issuable (on a pro-rata basis) to each of the above entities and individual
upon the exercise of the above described warrants within a specified period
of time.
(3) This number represents the right to acquire 2,500,000 shares of Common Stock
upon the exercise of presently exercisable, outstanding warrants.
(Footnotes continued on next page)
5
<PAGE>
(Footnotes continued from previous page)
(4) These shares are convertible into an aggregate of 835,833 shares of Common
Stock and the holder thereof will be entitled to cast that number of votes
at the Special Meeting.
(5) These shares are convertible into an aggregate of 885,000 shares of Common
Stock and the holder thereof will be entitled to cast that number of votes
at the Special Meeting.
(6) These shares are convertible into an aggregate of 983,334 shares of Common
Stock and the holder thereof will be entitled to cast that number of votes
at the Special Meeting.
PROPOSAL NO. 1
APPROVAL OF INCREASE IN NUMBER OF AUTHORIZED SHARES OF COMMON STOCK
The Board of Directors has authorized, subject to shareholder approval, an
amendment to the Company's Amended and Restated Certificate of Incorporation to
increase the authorized number of shares of Common Stock from 28,000,000 shares
to 50,000,000 (the "Amendment"). The text of the proposed Amendment is attached
hereto as Exhibit A.
Reasons for the Amendment. Since late 1999, the Company has been
considering various alternatives for raising additional funds, principally to
develop its e-commerce capabilities. On February 4, 2000, it entered into an
agreement with KSH Investment Group, Inc. ("KSH"), an investment banking firm,
pursuant to which KSH agreed to act as placement agent in connection with the
Company's proposed offering of up to $14 million of the Company's securities in
a private placement to qualified investors. Although it was initially
contemplated that the private placement would be for units that would consist of
a combination of shares of Common Stock and warrants to purchase shares of
Common Stock, because the number of shares of Common Stock currently available
for issuance was significantly less than the amount contemplated to be offered,
the units to be offered were restructured to consist of shares of a new series
of the Company's preferred stock, designated as Series B Convertible Preferred
Stock (the "Series B Preferred Stock") and warrants to purchase the Series B
Preferred Stock. The Series B Preferred Stock is automatically convertible, by
its terms, into shares of Common Stock upon the filing, with the New York
Department of State, of the Amendment to the Company's Amended and Restated
Certificate of Incorporation increasing the authorized number of shares of
Common Stock to 50,000,000. This is the Amendment which the Board of Directors
has authorized and which the shareholders are being asked to approve by this
proposal. The Company has agreed with KSH to use its best efforts to obtain
shareholder approval of the Amendment.
Since commencement of the private placement, the Company has sold an
aggregate of units at a price of $7.00 per unit, with each unit consisting of
one share of Series B Preferred Stock and a warrant to purchase one-half share
of Series B Preferred at an exercise price per whole share of Series B Preferred
Stock of $7.5875 (the "Exercise Price"), which was $.10 above the average of the
composite closing sale prices of the Common Stock for the five trading days
immediately preceding February 14, 2000 (i.e., the date of the initial closing
of the sale of units). Each share of Series B Preferred Stock included in the
units is convertible into two shares of Common Stock (subject to adjustment in
the event of stock splits or similar transactions prior to the date of
conversion), and each warrant, upon conversion of the Series B Preferred Stock,
will automatically become exercisable for one whole share of Common Stock at the
Exercise Price. The warrants will be exercisable commencing on August 14, 2000
and will expire on February 13, 2005. The Company is offering a total of
1,500,000 units in the private placement, and has the right to sell up to an
additional 500,000 units to satisfy over-subscriptions, if any. The Company
currently estimates that, if 1,500,000 units are sold in the private placement,
it will realize net proceeds (after deduction of placement agency and investment
banking fees payable to KSH and Mueller & Co., Inc., which is acting as
co-placement agent in the private placement, and other expenses of the offering)
of approximately $9,375,000. It is anticipated that the proceeds raised from the
offering will be used in connection with all phases and/or aspects in any way
related to the expansion and/or transformation of the Company's existing
business into a predominantly web-based, optical portal business. The offering
will terminate on March 31, 2000, unless extended by agreement of the Company
and KSH. Pursuant to the placement agent agreement with KSH, the Company has
also agreed to issue to the placement agents, as further compensation,
6
<PAGE>
warrants (the "Placement Agent Warrants") to purchase, at the Exercise Price, an
aggregate of 500,000 shares of Common Stock, assuming 1,500,000 units are sold
in the private placement; if less than 1,500,000 units are sold in the private
placement, the number of Placement Agent Warrants will be proportionately
reduced. The Placement Agent Warrants will be exercisable commencing on
August 14, 2000 and will expire on February 13, 2005.
The Company has agreed with each purchaser of the units in the private
placement to file with the Securities and Exchange Commission ("SEC"), by no
later than the earlier of the 75th day after the date of the last closing of the
sale of the units or the 45th day after the date on which the Company files,
with the SEC, its Annual Report on Form 10-K for the year ended December 31,
1999, a registration statement for the purpose of registering the resale of the
shares of Common Stock issuable upon conversion of the shares of Series B
Preferred Stock included in the units sold in the offering, and the shares of
Series B Preferred Stock issuable upon exercise of the warrants included in the
units (or the Common Stock issuable upon conversion of any Series B Preferred
Stock issued upon exercise of any such warrants, if exercised prior to the date
of conversion of the Series B Preferred Stock). The Company has also agreed to
include in such registration statement the shares of Common Stock subject to the
Placement Agent Warrants. Notwithstanding the filing of the registration
statement, each purchaser of units has agreed not to sell or otherwise dispose
of any Common Stock issuable upon conversion of the Series B Preferred Stock or
upon the exercise of the warrants included in the units until the earliest of
(i) the expiration of the six (6) month period following the date of the
Company's filing of the registration statement; (ii) the date on which the
composite closing price of the Common Stock, as reported on Nasdaq-NMS (or the
principal, registered national securities exchange on which the Common Stock may
then be trading; hereinafter, an "Alternate Exchange") is $12.00 or greater for
a period of ten (10) consecutive trading days; or (iii) the date on which the
Common Stock is no longer traded on the Nasdaq-NMS or any Alternate Exchange.
If the Amendment is not approved by the shareholders and/or not filed with
the New York Department of State prior to August 1, 2000, dividends at the rate
of 12% per annum will accrue on all issued and outstanding shares of Series B
Preferred Stock from and after August 1, 2000, which dividends will be payable
quarterly in arrears commencing on November 1, 2000. In addition, each share of
Series B Preferred Stock has a liquidation preference of $7.00 (plus accrued and
unpaid dividends), which is payable on a pari passu basis with the liquidation
preference of the Senior Preferred Stock. Until converted, holders of the Series
B Preferred Stock are entitled to vote, together as one class with the holders
of the Common Stock and Senior Preferred Stock, on all matters presented to the
holders of Common Stock for approval, with each share having the number of votes
equal to the number of shares of Common Stock into which such share is
convertible.
As of February 18, 2000, of the 28,000,000 shares of Common Stock presently
authorized, shares were issued and outstanding, shares were reserved
for issuance upon conversion of the Senior Preferred Stock and shares were
reserved for issuance upon exercise of the Company's outstanding options and
warrants. Assuming the sale of a maximum of 2,000,000 units in the private
placement, an additional 4,000,000 shares of Common Stock would be issued and
outstanding upon conversion of the shares of Series B Preferred Stock included
in the units, and an additional 2,000,000 shares would be reserved for issuance
upon exercise of the warrants included in the units.
Principal Effects of the Amendment. In addition to shares that would be
issued upon conversion of the Series B Preferred Stock, the additional shares
that would be available as a result of the Amendment may be used, without
further shareholder approval, for various purposes including, without
limitation, expanding the Company's business through the acquisition of other
businesses or products, raising capital, stock splits, providing equity
incentives to employees, consultants, officers or directors, and establishing
strategic relationships with other companies. The Company does not, at this
time, have any agreement or other understanding with respect to a specific use
of the shares that would authorized by the Amendment (other than for issuance
upon conversion of the Series B Preferred Stock), but the Amendment would give
the Company's Board of Directors the broad latitude to authorize the issuance of
the additional shares of Common Stock for these purposes without stockholder
approval.
The additional Common Stock that would be authorized as a result of
approval of the Amendment would have rights identical to the currently
outstanding Common Stock of the Company. Approval of the Amendment and issuance
of the Common Stock would not affect the rights of the holders of the currently
outstanding
7
<PAGE>
Common Stock of the Company, except for effects incidental to increasing the
number of shares of Common Stock outstanding, such as dilution of earnings per
share and voting rights of current holders of Common Stock. If the Amendment is
approved by the shareholders, it will become effective upon the filing of the
Amendment with the New York Department of State, which is expected to occur
immediately following the conclusion of the Special Meeting.
The additional shares of Common Stock that would become available for
issuance if the Amendment is approved could also be used by the Company to
oppose a hostile takeover attempt or delay or prevent changes in control or
management of the Company. For example, without further shareholder approval,
the Board could strategically sell shares of Common Stock in a private
transaction to purchasers who would oppose a takeover or favor the current
Board. Although the Amendment has been prompted by business and financial
considerations and not by the threat of any hostile takeover attempt (nor is the
Board currently aware of any such attempts directed at the Company),
nevertheless, shareholders should be aware that approval of the Amendment could
facilitate future efforts by the Company to deter or prevent changes in control
of the Company, including transactions in which the shareholders might otherwise
receive a premium for their shares over the current market price.
The Company does not contemplate seeking shareholder approval for any
future issuance of capital stock unless required to do so by an obligation
imposed by applicable law, a regulatory authority or a third party. Under the
Company's Amended and Restated Certificate of Incorporation, no shareholder is
entitled to preemptive rights with respect to any future issuances of capital
stock. The Board of Directors believes the proposed increase in the authorized
Common Stock will make a sufficient number of shares available, taking into
account the shares issuable upon conversion of Series B Preferred Stock, should
the Company decide to use its shares of capital stock for one or more of such
previously mentioned purposes or otherwise. The Company reserves the right to
seek a further increase in its authorized shares of capital stock from time to
time in the future, as considered appropriate by its Board of Directors.
The affirmative vote of a majority of all votes entitled to be cast at the
Special Meeting by the holders of the Common Stock, Senior Preferred Stock and
Series B Preferred Stock, voting together as one class, will be required to
approve the Amendment.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" PROPOSAL NO. 1
PROPOSAL NO. 2
APPROVAL OF INCREASE IN SHARES AVAILABLE FOR ISSUANCE
UNDER THE COMPANY'S 1995 STOCK INCENTIVE PLAN
On February 3, 2000, the Board of Directors authorized, subject to
shareholder approval, Amendment No. 4 to the Company's 1995 Stock Incentive Plan
increasing the number of shares authorized for issuance thereunder from
3,500,000 to 7,000,000. The text of the proposed Amendment No. 4 to the 1995
Stock Incentive Plan is attached hereto as Exhibit B.
The Board of Directors believes that it is in the best interests of the
Company and its shareholders to approve Amendment No. 4, which will allow the
Company to continue to grant options under the 1995 Stock Incentive Plan in
order to help the Company secure and retain the services of key employees and
consultants. Effectiveness of approval of Amendment No. 4 will be subject to
approval by a majority of the shareholders entitled to vote on the Amendment to
the Company's Amended and Restated Certificate of Incorporation, which is being
submitted to shareholders pursuant to Proposal No. 1 of this Proxy Statement.
DESCRIPTION OF THE 1995 STOCK INCENTIVE PLAN AND AMENDMENT NO. 4
The Company adopted the 1995 Stock Incentive Plan in order to motivate
qualified employees of, and certain consultants to, the Company and its
affiliates, as well as to assist the Company and its affiliates in attracting
employees and to align the interests of such persons with those of the
shareholders of the Company. As of February 18, 2000, 42 individuals and/or
entities held options under the 1995 Stock Incentive Plan.
8
<PAGE>
The major features of the 1995 Stock Incentive Plan are summarized below.
The description provided below is qualified in its entirety by reference to the
actual 1995 Stock Incentive Plan, a copy of which was filed as an Exhibit to the
Company's Registration Statement on Form S-1 filed with the SEC on December 20,
1995, as well as to Amendment No. 1 thereto, a copy of which was filed as an
Exhibit to the Company's Proxy Statement dated May 1, 1996, and Amendments
No. 2 and No. 3, copies of which were filed as Exhibits to the Company's Proxy
Statement dated May 1, 1997.
The 1995 Stock Incentive Plan provides for the grant of "incentive stock
options" ("Incentive Stock Options") within the meaning of Section 422 of the
Internal Revenue Code of 1986, as amended (the "Code"), and nonqualified stock
options ("Nonqualified Options") to officers and key employees of, and
consultants to, the Company and its affiliates. The 1995 Stock Incentive Plan is
administered by the Company's Compensation Committee.
The 1995 Stock Incentive Plan currently authorizes the issuance of options
to purchase a maximum of 3,500,000 shares of Common Stock. The 1995 Stock
Incentive Plan contains customary provisions with respect to adjustments for
stock splits and similar transactions. If any stock option granted under the
1995 Stock Incentive Plan terminates, expires unexercised, or is cancelled, the
shares of Common Stock that would otherwise have been issuable pursuant thereto
will be available for issuance pursuant to the grant of new stock options.
All officers and key employees of, and consultants and independent
contractors to, the Company and its affiliates are eligible to participate in
the 1995 Stock Incentive Plan. The Compensation Committee has exclusive
discretion (except as may be designated or permitted in the 1995 Stock Incentive
Plan or by the Amended and Restated By-Laws of the Company, and except for stock
options granted to Drs. Robert, Alan, and Edward Cohen and certain members of
their respective immediate families, which are within the exclusive discretion
of the Independent Committee of the Board of Directors) to select to whom stock
options will be granted and to determine the type, size, terms and conditions
under which each stock option may be exercisable, and the expiration date of
each option. The Compensation Committee also has exclusive discretion to make
all other determinations which its members deem necessary or desirable in the
interpretation and/or administration of the 1995 Stock Incentive Plan.
Stock options granted under the 1995 Stock Incentive Plan generally expire
not later than ten years after the date on which they are granted. The exercise
price may not be less than the par value of the underlying Common Stock, except
that, in the case of an Incentive Stock Option, the exercise price may be not
less than 100% of the fair market value of the Common Stock on the date any such
stock option is granted (110% in the case of any optionee who, at the time of
grant, owns, directly or by attribution, more than 10% of the combined voting
power of all classes of capital stock of the Company [a "ten percent owner
optionee"]). In addition, the term of an Incentive Stock Option for a ten
percent owner optionee cannot exceed five years from the date of grant. The
aggregate fair market value (determined at the time the option is granted) of
the Common Stock granted as Incentive Stock Options to an optionee that may
become exercisable for the first time during any calendar year, cannot exceed
$100,000 (or such other limit as may be imposed by the Code). Payment of the
full amount of the exercise price must be made at the time of exercise either in
cash, by tendering to the Company shares of Common Stock previously acquired by
the optionee having a fair market value equal to the aggregate exercise price,
by a combination thereof, or, in certain instances, by a loan from the Company
to the optionee.
The 1995 Stock Incentive Plan provides that the Compensation Committee, in
its sole discretion, may provide, by the express terms of any stock option
agreement, that such option cannot be exercised after the merger or
consolidation of the Company with or into another corporation, the acquisition
by another corporation or person of all or substantially all of the Company's
assets or 80% or more of the Company's then outstanding voting stock, or the
liquidation or dissolution of the Company; and the Compensation Committee may
also provide, either by the terms of any such option or by resolution adopted
prior to the occurrence of such merger, consolidation, acquisition, liquidation
or dissolution, that, for some period of time prior to any such event, such
option shall be exercisable as to all shares covered thereby.
The Board of Directors or the Compensation Committee may amend the 1995
Stock Incentive Plan at any time and from time to time, but any such amendment
is subject to shareholder approval where the absence of such shareholder
approval would adversely affect the compliance of the 1995 Stock Incentive Plan
with Rule 16b-3 promulgated under the Securities Exchange Act of 1934, as
amended, or other applicable laws or
9
<PAGE>
regulations. Accordingly, no action of the Board or the Compensation Committee
may, without shareholder approval, increase the maximum number of shares which
may be issued upon exercise of an option, modify the eligibility requirements of
the 1995 Stock Incentive Plan, reduce the minimum option exercise price
requirements, or extend the limits imposed on the period during which options
may be granted or issued.
FEDERAL INCOME TAX CONSEQUENCES
A. Incentive Stock Options. The following general rules are applicable,
under existing law, to holders of Incentive Stock Options and to the Company for
Federal income tax purposes:
1. Generally, no taxable income results to the optionee upon the grant
of an Incentive Stock Option or upon the issuance of shares to him, her or
it upon exercise of an Incentive Stock Option;
2. No tax deduction is allowed to the Company upon either the grant or
exercise of an Incentive Stock Option under the 1995 Stock Incentive Plan;
3. If shares acquired upon the exercise of an Incentive Stock Option
are not disposed of prior to the later of: (i) two years following the date
the Incentive Stock Option was granted; or (ii) one year following the date
the shares are transferred to the optionee pursuant to the exercise of such
Incentive Stock Option, the difference between the amount realized on any
subsequent disposition of the shares and the exercise price will generally
be treated as long-term capital gain or loss to the optionee;
4. If shares acquired upon the exercise of an Incentive Stock Option
are disposed of before the expiration of one or both of the requisite
holding periods (a "disqualifying disposition"), then, in most cases, the
lesser of: (i) any excess of the fair market value of the shares at the
time of exercise of the Incentive Stock Option over the exercise price; or
(ii) the actual gain on disposition, will be treated as compensation to the
optionee and will be taxed as ordinary income in the year of such
disposition;
5. Any excess of the amount realized by the optionee as the result of
a disqualifying disposition over the sum of: (i) the exercise price; and
(ii) the amount of ordinary income recognized under the above rules, will
be treated as either a long-term or short-term capital gain, depending upon
the time elapsed between receipt and disposition of the shares disposed of;
6. In any year that an optionee recognizes compensation income on a
disqualifying disposition of shares acquired by exercising an Incentive
Stock Option, the Company will generally be entitled to a corresponding
deduction for income tax purposes; and
7. The bargain element at the time of exercise of an Incentive Stock
Option (i.e., the amount by which the fair market value of the Common Stock
acquired upon exercise of the Incentive Stock Option exceeds the exercise
price) may be taxable to the optionee under the "alternative minimum tax"
provisions of the Code.
B. Nonqualified Stock Options. The following general rules are applicable,
under existing law, to holders of Nonqualified Stock Options and to the Company
for Federal income tax purposes:
1. The optionee will not realize any taxable income upon the grant of
a Nonqualified Stock Option, and the Company is not allowed a business
expense deduction by reason of any such grant;
2. The optionee will recognize ordinary compensation income at the
time of the exercise of a Nonqualified Stock Option in an amount equal to
the excess, if any, of the fair market value of the shares on the date of
exercise over the exercise price. Gain or loss upon a subsequent
disposition of the shares underlying a Nonqualified Stock Option will be
either long-term or short-term capital gain or loss, depending on the time
elapsed between receipt and disposition of such shares disposed of; and
3. In general, the Company will be entitled to a tax deduction upon
the exercise of a Nonqualified Stock Option.
10
<PAGE>
OPTIONS OUTSTANDING UNDER THE 1995 STOCK INCENTIVE PLAN
As of February 18, 2000, options to acquire a total of 3,571,624 shares of
Common Stock were issued and outstanding under the 1995 Stock Incentive Plan,
which includes options to the Company's Directors and the Named Executive
Officers as follows:
<TABLE>
<S> <C>
Robert Cohen...................................................... 466,667(1)
Alan Cohen........................................................ 466,667(2)
Edward Cohen...................................................... 76,667(3)
Joel Gold......................................................... 20,000(4)
Edward Celano..................................................... 20,000(4)
Jerry Lewis....................................................... 83,333(5)
Joseph Silver..................................................... 243,569(6)
Jerry Darnell..................................................... 243,569(7)
William J. Young.................................................. 95,000(8)
Nicholas Shashati................................................. 40,000(9)
----------
1,755,472
----------
</TABLE>
- ------------------
(1) This number includes: (i) the right to acquire 316,667 shares of Common
Stock upon the exercise of presently exercisable, outstanding options;
(ii) 125,000 presently exercisable, outstanding options granted to
Dr. Robert Cohen, as the designee of Meadows Management, LLC, a limited
liability company owned by Drs. Robert and Alan Cohen ("Meadows"); and
(iii) 25,000 options which are subject to certain vesting requirements.
(2) This number includes: (i) the right to acquire 2,333,334 shares of Common
Stock upon the exercise of presently exercisable, outstanding options;
(ii) 125,000 presently exercisable, outstanding options granted to Dr. Alan
Cohen, as the designee of Meadows; and (iii) 108,333 options which are
subject to certain vesting requirements.
(3) This number represents the right to acquire 76,667 shares of Common Stock
upon the exercise of presently exercisable, outstanding options.
(4) This number represents the right to acquire 20,000 shares of Common Stock
upon the exercise of presently exercisable, outstanding options.
(5) This number represents the right to acquire 83,333 shares of Common Stock
upon the exercise of presently exercisable, outstanding options.
(6) This number represents the right to acquire 243,569 shares of Common Stock
upon the exercise of presently exercisable outstanding options.
(7) This number includes (i) the right to acquire 193,569 shares of Common Stock
upon the exercise of presently exercisable, outstanding options; and
(ii) 50,000 additional options which are subject to certain vesting
requirements.
(8) This number includes (i) the right to acquire 15,000 shares of Common Stock
upon the exercise of presently exercisable, outstanding options; and
(ii) 80,000 additional options which are subject to certain vesting
requirements.
(9) This number includes (i) the right to acquire 10,000 shares of Common Stock
upon the exercise of presently exercisable, outstanding options; and
(ii) 30,000 additional options which are subject to certain vesting
requirements.
11
<PAGE>
During the year ended December 31, 1999, options were granted under the
1995 Stock Incentive Plan to the Company's Directors and the Named Executive
Officers (at exercise prices ranging from $2.00 to $4.50 per share) as follows:
<TABLE>
<CAPTION>
NUMBER OF SHARES
UNDERLYING
NAME OPTIONS GRANTED
- ---------------------------------------------------------------------------- ----------------
<S> <C>
Robert Cohen................................................................ 250,000(1)
Edward Cohen................................................................ 10,000(1)
Joel Gold................................................................... 10,000(1)
Edward Celano............................................................... 10,000(1)
Joseph Silver............................................................... 25,000(1)
Jerry Darnell............................................................... 25,000(2)
William J. Young............................................................ 65,000(2)
Nicholas Shashati........................................................... 30,000(2)
</TABLE>
- ------------------
(1) All options vest on the date of grant and expire in 2009.
(2) These options are subject to certain vesting requirements.
The number of shares which may be subject to options to be granted under
the 1995 Stock Incentive Plan in the future is entirely within the discretion of
the Compensation Committee and is, therefore, not determinable at this time.
The closing sale price of the Company's Common Stock on February 18, 2000,
as reported on the Nasdaq National Market, was $ per share.
Approval by the holders of a majority of the votes cast at the Special
Meeting by the holders of shares of Common Stock, Senior Preferred Stock and
Series B Preferred Stock entitled to vote thereon, voting together as one class,
will be required for approval of Amendment No. 4 to the 1995 Stock Incentive
Plan.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" PROPOSAL NO. 2
12
<PAGE>
GENERAL
OTHER MATTERS
The Board of Directors does not know of any matters that are to be
presented at the Special Meeting other than those stated in the Notice of
Special Meeting and referred to in this Proxy Statement. If any other matters
should properly come before the Special Meeting, it is intended that the Proxies
in the accompanying form will be voted as the persons named therein may
determine, in their sole discretion.
SOLICITATION OF PROXIES
The cost of solicitation of proxies in the accompanying form will be borne
by the Company, including expenses in connection with preparing and mailing this
Proxy Statement. In addition to solicitation of proxies by mail, Directors,
officers and employees of the Company (who will receive no additional
compensation therefor) may solicit the return of proxies by telephone, telegram
or personal contact. Arrangements have also been made with brokerage houses and
other custodians, nominees and fiduciaries for the forwarding of solicitation
material to the beneficial owners of Common Stock, Senior Preferred Stock and
Series B Preferred Stock held of record by such persons, and the Company will
reimburse them for the reasonable out-of-pocket expenses incurred by them in
connection therewith. Each holder of the Company's Common Stock, Senior
Preferred Stock and Series B Preferred Stock who does not expect to be present
at the Special Meeting or who plans to attend but who does not wish to vote in
person, is urged to fill in, date and sign the enclosed Proxy and return it
promptly in the enclosed return envelope.
By Order of the Board of Directors
By: /s/ JOSEPH SILVER
----------------------------------
Joseph Silver,
Secretary
February 28, 2000
13
<PAGE>
EXHIBIT A
TEXT OF AMENDMENT TO AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
RESOLVED, that the first paragraph of Section 4 of the Amended and Restated
Certificate of Incorporation be amended to read in its entirety as follows:
"The Corporation is authorized to issue two classes of shares to be
designated, respectively, as Preferred Stock and Common Stock. The total number
of shares of capital stock that the Corporation is authorized to issue is
55,000,000. The total number of shares of Common Stock which the Corporation
shall have the authority to issue is 50,000,000, par value $.01 per share. The
total number of shares of Preferred Stock which the Corporation shall have the
authority to issue is 5,000,000, par value $0.01 per share."
<PAGE>
EXHIBIT B
TEXT OF AMENDMENT No. 4 TO 1995 STOCK INCENTIVE PLAN
OF STERLING VISION, INC.
RESOLVED, that the 1995 Stock Incentive Plan of Sterling Vision, Inc., as
amended, be further amended by modifying the second sentence of Section 2.1
thereof to read in its entirety as follows:
"The maximum aggregate number of such shares which may be issued under the
Plan shall be 7,000,000 shares."
<PAGE>
PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
OF STERLING VISION, INC.
SPECIAL MEETING OF SHAREHOLDERS: FRIDAY, APRIL 7, 2000
The undersigned shareholder of Sterling Vision, Inc., a New York
corporation (the "Company"), hereby appoints Dr. Robert Cohen, Mr. William Young
and Mr. Joseph Silver, or any of them, voting singly in the absence of the
others, as his/her/its attorney(s) and proxy(ies), with full power of
substitution and revocation, to vote, as designated on the reverse side, all of
the shares of Common Stock, Senior Convertible Preferred Stock and Series B
Convertible Preferred Stock of Sterling Vision, Inc. that the undersigned is
entitled to vote at the Special Meeting of Shareholders of the Company to be
held at 1500 Hempstead Turnpike, East Meadow, New York 11554 at 9:00 a.m. (local
time), on Friday, April 7, 2000, or any adjournment or adjournments thereof, in
accordance with the instructions on the reverse side hereof.
This Proxy, when properly executed, will be voted in the manner directed
herein by the undersigned shareholder. If no direction is made, this Proxy will
be voted "FOR" Proposal No. 1 and Proposal No. 2. The proxies are authorized to
vote as they may determine, in their discretion, upon such other business as may
properly come before the Meeting.
CONTINUED AND TO BE SIGNED AND DATED ON THE REVERSE SIDE SEE REVERSE SIDE
...............................................................................
FOLD AND DETACH HERE
<PAGE>
[Reverse Side]
PLEASE MARK /x/
YOUR VOTES AS
INDICATED IN
THIS EXAMPLE
<TABLE>
<S> <C>
The Board of Directors recommends a vote "FOR"
Proposals No. 1 and No. 2
Proposal No. 1--AMEND CERTIFICATE OF INCORPORATION Proposal No. 2--AMEND 1995 STOCK INCENTIVE PLAN TO
TO INCREASE AUTHORIZED COMMON STOCK TO 50,000,000 SHARES: INCREASE SHARES OF COMMON STOCK AUTHORIZED FOR
ISSUANCE UNDER THE PLAN TO 7,000,000:
FOR AGAINST ABSTAIN FOR AGAINST ABSTAIN
/ / / / / / / / / / / /
</TABLE>
The proxies are authorized to vote as they may determine, in their
discretion, upon such other business as may properly come before the Meeting.
Signature: Signature:
---------------------------- ----------------------------
Date:
------------------------------
NOTE: Please sign as name appears hereon. Joint owners should each sign. When
signing as attorney, executor, administrator, trustee or guardian, please give
full title as such. If a corporation, please sign in full corporate name by an
authorized officer. If a partnership, please sign in partnership name by an
authorized person.
FOLD AND DETACH HERE
