As filed with the Securities and Exchange Commission on February 10, 2003
Registration No. 333-100697
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT NO. 2 TO
FORM S-3
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
EMERGING VISION, INC.
(Exact name of registrant as specified in its charter)
New York 11-3096941
------------------------------- ------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
100 Quentin Roosevelt Boulevard
Garden City, New York 11530
(516) 390-2100
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
Christopher G. Payan
Chief Financial Officer
100 Quentin Roosevelt Boulevard
Garden City, New York 11530
(516) 390-2134
(Name, address, including zip code, and telephone number, including
area code, of agent for service)
Copy to:
Michael Hirschberg, Esq.
Piper Rudnick LLP
1251 Avenue of the Americas
New York, New York 10020
(212) 835-6270
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 being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. |_|
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. |X|
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. |_|
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration number of the earlier effective registration statement for the same
offering. |_|
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
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. |_|
Calculation of Registration Fee
=========================================== ==================== =================== ====================== ===================
Amount Proposed maximum Proposed maximum Amount of
Title of each class of securities to be offering price aggregate offering registration
to be registered registered Per unit price fee
------------------------------------------- -------------------- ------------------- ---------------------- -------------------
rights to purchase units 50,000,000 $-- $-- $--
------------------------------------------- -------------------- ------------------- ---------------------- -------------------
units(1) 50,000,000 $0.04(2) $2,000,000 $184(2)
------------------------------------------- -------------------- ------------------- ---------------------- -------------------
common stock, par value $0.01 per share 50,000,000 shares $-- $-- $--
------------------------------------------- -------------------- ------------------- ---------------------- -------------------
Warrants 50,000,000 $-- $-- $--
------------------------------------------- -------------------- ------------------- ---------------------- -------------------
common stock, par value $0.01 per share, 50,000,000 shares $0.07(4) $3,500,000 $322(4)
underlying the warrants(3)
------------------------------------------- -------------------- ------------------- ---------------------- -------------------
Total $506(5)
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(1) An aggregate of 50,000,000 units, each consisting of one share of
common stock and a warrant to purchase one additional share of common stock, are
issuable upon the exercise of the rights.
(2) Represents the offering price of the common stock to be issued upon the
exercise of the rights pursuant to Rule 457(g).
(3) Issuable upon exercise of the warrants. Pursuant to Rule 416, this
registration statement also covers such indeterminable additional shares as may
become issuable as a result of any future adjustments in accordance with the
terms of the warrants, as described in this registration statement.
(4) Estimated solely for purposes of calculating the registration fee
pursuant to Rule 457(g) on the basis of the highest price at which the warrants
may exercised.
(5) $368 of such amount has been previously paid.
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 an 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 Commission, acting pursuant to said Section 8(a),
may determine.
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PROSPECTUS Subject to Completion, February 10, 2003
50,000,000 UNITS
EMERGING VISION, INC.
RIGHTS OFFERING
Each unit consisting of one share of common stock
and a warrant to purchase one additional share of common stock
We are offering up to 50,000,000 units, each unit consisting of one share
of our common stock and one warrant. We are offering these units in a rights
offering. You will receive 1.67 subscription rights for each share of common
stock that you owned on February 25, 2003, the record date. You will not receive
any fractional rights. Each subscription right entitles you to purchase one unit
for a subscription price of $0.04. Each warrant may be exercised for one share
of common stock at an exercise price equal to $0.05, unless the average of the
last reported sales price of our common stock, as quoted on the OTC Bulletin
Board, during the fifteen (15) trading days immediately preceding, and
including, April 7, 2003 is $0.125 or more and the average number of shares
traded during each of those fifteen (15) trading days is 50,000 or more, in
which case the exercise price will be equal to $0.06, or if the same volume
conditions are met but the average of the last reported sales prices is $0.195
or more, in which case the exercise price will be equal to $0.07. Each warrant
expires twelve months from the date of issuance. If you fully exercise your
rights, you may elect to purchase additional units, on a pro rata basis, with
all other oversubscribing shareholders provided other shareholders do not fully
exercise their rights. This is your oversubscription privilege.
Our common stock is quoted on the OTC Bulletin Board under the symbol
"ISEE.OB". On February 6, 2003, the last reported sales price of our common
stock, as reported on the OTC Bulletin Board, was $0.09 per share.
The rights are exercisable beginning on the date of this prospectus and
continuing until 5:00 p.m., New York City time, on April 14, 2003, although we
have the option of extending the expiration date.
Neither the rights nor the warrants may be sold or transferred. Neither the
rights nor the warrants will be listed for trading on any stock exchange.
We urge you to read carefully the "Risk Factors" section beginning on page
7, where we describe specific risks associated with an investment in our company
and these securities, before you make your investment decision.
Neither the Securities and Exchange Commission, or SEC, nor any state
securities commission has approved or disapproved of these securities or passed
upon the accuracy or adequacy of this prospectus. Any representation to the
contrary is a criminal offense.
The date of this prospectus is February __, 2003
PROSPECTUS SUMMARY
This summary highlights selected information from this prospectus. We urge
you to read this entire prospectus carefully. We also encourage you to review
the financial statements and other information provided in reports and other
documents that we file with the Securities and Exchange Commission, which are
incorporated by reference in this prospectus, as described under the caption
"Where You Can Find More Information" on the inside back cover of this
prospectus.
ABOUT EMERGING VISION, INC.
Based upon statistics published in certain trade magazines, we believe that
we are one of the largest chains of retail optical stores and one of the largest
franchise optical chains in the United States based upon our domestic sales and
the number of locations of company-owned and franchised stores. We, along with
our franchisees, operate retail optical stores principally under the trade names
"Sterling Optical" and "Site for Sore Eyes," which we refer to herein as
"Sterling Stores." We also operate VisionCare of California, a specialized
health care maintenance organization licensed by the State of California
Department of Managed Health Care. VisionCare of California employs licensed
optometrists who render services in offices generally located immediately
adjacent to most Sterling Stores located in California.
As of September 30, 2002, we had 186 Sterling Stores in operation, 31 of
which were company-owned stores (including 13 company-owned stores being managed
by franchisees) and 155 of which were franchised stores. Currently, Sterling
Stores are located in 23 States, the District of Columbia, Ontario, Canada and
the U.S. Virgin Islands.
Most Sterling Stores offer eyecare products and services, including
prescription and non-prescription eyeglasses, eyeglass frames, ophthalmic
lenses, contact lenses, sunglasses and a broad range of ancillary items. To the
extent permitted by individual state regulations, most Sterling Stores employ or
affiliate with an optometrist to provide professional eye examinations to the
public, and we fill the prescriptions from these employed or affiliated
optometrists, as well as from unaffiliated optometrists and ophthalmologists.
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.
We were organized under the laws of the State of New York in January 1992,
and we changed our name to "Emerging Vision, Inc." effective April 17, 2000. Our
principal executive offices are located at 100 Quentin Roosevelt Boulevard,
Suite 508, Garden City, New York 11530. Our telephone number is (516) 390-2100
and our fax number is (516) 390-2150.
QUESTIONS AND ANSWERS ABOUT THIS OFFERING
What is a right?
You will receive, at no charge, 1.67 rights for every share of common stock
that you own as of February 25, 2003, the record date. Each right enables you to
purchase, for $0.04, one unit consisting of one share of our common stock and a
warrant to purchase one additional share of common stock at an exercise
price equal to $0.05, unless the average of the last reported sales price of our
common stock, as quoted on the OTC Bulletin Board, during the fifteen (15)
trading days immediately preceding, and including, April 7, 2003 is $0.125 or
more and the average number of shares traded during each of those fifteen (15)
trading days is 50,000 or more, in which case the exercise price will be equal
to $0.06, or if the same volume conditions are met but the average of the last
reported sales prices is $0.195 or more, in which case the exercise price will
be equal to $0.07. For example, if you owned 100 shares of common stock on the
record date, and receive 167 rights, you would have the right to purchase, for a
price of $0.04 per unit, 167 units consisting of 167 shares of common stock and
warrants to purchase an additional 167 shares of common stock at an exercise
price equal to $0.05, unless the average of the last reported sales price of our
common stock, as quoted on the OTC Bulletin Board, during the fifteen (15)
trading days immediately preceding, and including, April 7, 2003 is $0.125 or
more and the average number of shares traded during each of those fifteen (15)
trading days is 50,000 or more, in which case the exercise price will be equal
to $0.06, or if the same volume conditions are met but the average of the last
reported sales prices is $0.195 or more, in which case the exercise price will
be equal to $0.07. This is your basic subscription privilege.
Although we intend to distribute the rights to all shareholders, we reserve
the right to reject any exercise of rights by shareholders that reside in a
state, country or other jurisdiction whose laws require a material change to
this offering, or where we cannot, at reasonable expense, determine that this
offering complies with any such state's, country's or other jurisdiction's
applicable local laws.
What is the record date?
February 25, 2003 at 5:00 p.m., New York City time. Only our shareholders
as of the record date will receive subscription rights.
Why are we offering the rights?
We are seeking additional equity. Our board of directors has chosen to give
each shareholder the opportunity to buy more shares of our common stock at the
same price and on the same terms and conditions as each other shareholder.
Has the board of directors made a recommendation regarding this offering?
Our board of directors makes no recommendation to you about whether you
should exercise any rights in this offering.
How soon must you act?
The rights expire on April 14, 2003 at 5:00 p.m., New York City time.
Accordingly, the subscription agent must actually receive all required documents
and payments before that date and time.
May I sell or give away my rights?
No. The rights may not be sold or otherwise transferred.
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What is the oversubscription privilege?
If you fully exercise your basic subscription privilege, the
oversubscription privilege entitles you to subscribe for additional units at the
same subscription price of $0.04 per unit that applies to your basic
subscription privilege.
What are the limitations on the oversubscription privilege?
We will be able to satisfy all or a portion of your exercise of the
oversubscription privilege only if our other shareholders receiving rights do
not elect to purchase all of the units offered under their basic subscription
privilege.
Am I required to subscribe in this offering?
No. You are not required to exercise any rights, purchase any units or
otherwise take any action in response to this offering.
What will happen if I do not exercise my rights?
You will retain your current number of shares of our common stock, even if
you do not exercise your rights. However, if you do not exercise your rights and
other shareholders do, the percentage of shares of our common stock that you own
after the offering, will be reduced.
Will my country or state of residence affect my ability to participate in the
rights offering?
Yes. In order to comply with state blue sky laws or the laws of the country
in which you reside, we may not be able to accept subscriptions from those of
our shareholders that reside in certain states or countries.
Have other shareholders indicated to us that they intend to participate in the
rights offering?
Yes. Dr. Alan Cohen, Dr. Robert Cohen, Mr. Benito R. Fernandez and Mr. Joel
L. Gold, our directors, and Mr. Christopher G. Payan, who is one of our co-chief
operating officers and is also our senior vice president, chief financial
officer, secretary and treasurer, all intend to participate in the rights
offering, at least with respect to their basic subscription privilege.
May I change or cancel my exercise of rights after I send in the required forms
and payment?
No. Once you send in your subscription certificate and payment, you cannot
revoke the exercise of your rights.
Will my money be returned if this offering is amended, withdrawn or terminated?
If we terminate or cancel this offering, or any submitted subscriptions no
longer comply with the amended terms of this offering, we will promptly return
your subscription price, but without any payment of interest.
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What are the U.S. federal income tax consequences of exercising my rights?
The receipt and exercise of your rights are intended to be nontaxable under
U.S. federal income tax law.
How did we arrive at the offering price?
We determined the offering price of $0.04 per unit based on the current
market price of our common stock, the amount of capital we are seeking to raise,
our other alternatives for raising capital and other factors we deemed relevant.
When will I receive my new shares and warrants?
If you purchase units through this offering, you will receive stock
certificates representing the shares of common stock, and warrant agreements
representing the warrants, as soon as practicable after the expiration date of
the offering.
How much money will we receive from this offering?
Our gross proceeds from the rights offering will depend upon the number of
units that are purchased. If all rights are exercised, then we will receive net
cash proceeds of approximately $1,870,000. In addition, if all of the warrants
constituting a part of the units are exercised, we will receive additional cash
proceeds of approximately $2,500,000, assuming a warrant exercise price of $0.05
per share.
How will we use the proceeds from this offering?
We will use any proceeds generated from the exercise of rights in this
rights offering, and from the exercise of the warrants issued in this rights
offering:
o to repay the remaining amounts outstanding under our credit facility with
Horizons Investors Corp.;
o to repay the remaining principal balance on our term loan from North Fork
Bank;
o to fund our plans to continue to close non-profitable stores; and
o for general corporate purposes and working capital.
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How many shares will be outstanding after the rights offering?
If we sell all of the units offered by this prospectus, then we will issue
50,000,000 new shares of common stock that will result in us having 79,490,620
shares of common stock outstanding. In addition, we will issue 50,000,000 new
warrants that, if exercised, would result in the issuance of 50,000,000
additional shares of common stock.
What should I do if I want to participate in this offering, but my shares are
held in the name of my broker, dealer or other nominee?
If you hold your shares of common stock through a broker, dealer or other
nominee, for example, through a custodian bank, then your broker, dealer or
other nominee is the record holder of the shares you own. This record holder
must exercise the rights, on your behalf, for the units you wish to purchase.
Therefore, you will need to have your record holder act for you.
What fees or charges apply if I purchase units?
We are not charging any fee or sales commission to issue rights to you or
to issue to you shares of common stock and warrants if you exercise your rights.
If you exercise rights through a record holder of your shares, you are
responsible for paying any fees that person may charge.
How do I exercise my rights? What forms and payment are required to purchase
units?
As a record holder of our shares of common stock on February 25, 2003, you
are receiving this prospectus, a subscription certificate evidencing your
subscription rights and instructions on how to purchase units. If you wish to
participate in this offering, then, before your rights expire, you must deliver
to the subscription agent (or to the registered holder of your shares, such as a
broker-dealer or other nominee, if applicable):
o the subscription price by certified or cashier's check, bank draft drawn
upon a U.S. bank or a U.S. postal money order, or a personal check that clears
before expiration of the rights; and
o a properly completed subscription certificate.
To whom should I send forms and payments?
You should send your subscription documents and payment by mail or courier
service to our subscription agent, as follows:
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MELLON BANK, N.A.
By Mail: By Hand:
Mellon Bank, N.A. Mellon Bank, N.A.
c/o Mellon Investor Services LLC c/o Mellon Investor Services LLC
P.O. Box 3301 120 Broadway, 13th Floor
South Hackensack, NJ 07606 New York, New York 10271
Attention: Reorganization Dept. Attention: Reorganization Dept.
By Overnight Courier:
Mellon Bank, N.A.
c/o Mellon Investor Services LLC
85 Challenger Road
Overpeck Centre
Ridgefield Park, NJ 07660
Attention: Reorganization Dept.
For instructions on how your subscription payment should be sent to the
subscription agent, see "The Offering - Required Forms of Payment of
Subscription Price" on page 21.
What should I do if I have other questions?
If you have questions, need additional copies of offering documents or
otherwise need assistance, please contact the information agent for this
offering:
Mellon Investor Services LLC
85 Challenger Road
Overpeck Centre
Ridgefield Park, NJ 07660
800-932-6798
To ask other questions or to receive copies of our recent SEC filings, you
also can contact us by mail or telephone, or refer to the other sources
described under "Where You Can Find More Information" on the inside back cover
of this prospectus.
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RISK FACTORS
An investment in our common stock involves a number of very significant
risks. Because of these risks, only persons able to bear the risk and withstand
the loss of their entire investment, should invest in our common stock.
Prospective investors should also consider the following before making an
investment decision.
Our common stock was delisted from The Nasdaq National Market, which makes it
more difficult for shareholders to sell shares of our common stock.
On August 24, 2001, The Nasdaq Stock Market terminated the listing of our
common stock on The Nasdaq National Market as a result of our failure to
maintain a $1.00 per share minimum bid price for our common stock. As a result,
our common stock began trading on the OTC Bulletin Board on August 24, 2001. The
OTC is generally considered a less efficient market than The Nasdaq National
Market. Shareholders are likely to find it more difficult to trade our common
stock on the OTC than on The Nasdaq National Market. In order for our common
stock to resume trading on The Nasdaq National Market, we must satisfy all of
Nasdaq's requirements for initial listing on The Nasdaq National Market, apply
for listing and be accepted for listing. We do not currently satisfy Nasdaq's
initial listing requirements for either The Nasdaq National Market or The Nasdaq
SmallCap Market, and we are unable to determine whether we will ever be able to
satisfy either of those initial listing requirements.
The application of the "penny stock rules" could reduce the liquidity and,
therefore, the market price of our common stock.
On February 6, 2003, the last reported sales price of our common stock was
$0.09. Because the trading price of our common stock is less than $5.00 per
share and our common stock no longer trades on either The Nasdaq National Market
or The Nasdaq SmallCap Market, our common stock comes within the definition of a
"penny stock." The "penny stock rules" impose additional sales practice
requirements on broker-dealers who sell our securities to persons other than
established customers and accredited investors, generally those with assets in
excess of $1,000,000 or annual income exceeding $200,000, or $300,000 together
with their spouse. Before a broker-dealer can sell a penny stock, SEC rules
require the firm to first approve the customer for the transaction in question
and receive from the customer a written agreement to such transaction. The firm
must furnish the customer a document describing the risks of investing in penny
stocks. The broker-dealer must also advise the customer of the current market
quotation, if any, for the penny stock and the compensation the firm and its
broker will receive for the trade. Finally, the firm must send monthly account
statements showing the market value of each penny stock held in the customer's
account. These additional burdens imposed on broker-dealers may restrict the
ability of broker-dealers to sell our securities and may affect your ability to
resell our common stock.
-7-
We have incurred a net loss for each of the years ended December 31, 1999, 2000
and 2001, as well as for the nine month period ended September 30, 2002, and may
not attain profitability in the future.
We incurred a net loss of $2,261,000, $38,992,000 and $3,776,000 for the
years ended December 31, 1999, 2000 and 2001, respectively, as well as a net
loss of $2,658,000 for the nine month period ended September 30, 2002.
Furthermore, we may not operate profitably or be commercially successful at any
time in the foreseeable future, as our ability to attain profitability in the
future will depend, in large part, on the uncertain general condition of our
country's economy, competition and other factors regarding the retail optical
industry, and our ability to execute our business plan. Specifically, the
following factors may negatively impact our ability to be profitable and our
ability to execute our business plan:
o Better financed competitors that do greater levels of advertising, obtain
more favorable discounts from suppliers and offer customers aggressive discount
pricing;
o Laser surgery, which eliminates the need for certain eyeglasses and
contact lenses;
o Our inability to obtain the capital necessary to close non-profitable
stores, as well as to upgrade furniture, fixtures, equipment and machinery; and
o Our inability to negotiate favorable lease termination agreements, at
reasonable costs, with the respective landlords of our non-profitable stores.
Since our senior convertible preferred stock has beneficial conversion terms
which are indexed to the performance of our common stock, we may incur a
significant charge to our retained earnings in the future.
Currently, we have approximately 0.74 shares of senior convertible
preferred stock outstanding that are convertible into 98,333 shares of our
common stock. The conversion price of the senior convertible preferred stock is
$0.75 per share, which was reduced from $5.00 per share as of December 7, 1999.
Due to the incremental consideration provided to the holder as a result of this
reduction in conversion price, we will incur a charge to our retained earnings
upon conversion and, thus, our earnings per share will decrease. The extent of
the charge, and decrease in our earnings per share, will be based on the market
price of our common stock. Although this charge will not affect our earnings for
a given period, on the conversion date it will reduce our earnings per share
calculation, which could reduce the market price of our common stock.
We may not successfully execute our business plan, which would negatively impact
our ability to maintain adequate liquidity.
Our ability to improve our cash flow during fiscal 2003 will depend, in
large part, on our ability to successfully execute our business plan by
improving our store profitability through increased monitoring of store by store
operations; closing non-profitable company-operated store locations; reducing
administrative overhead expenses, and; implementing new marketing programs. In
order to successfully execute our business plan, we will need enough funds to
pay, to the respective landlords of our unprofitable stores, the consideration
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demanded by them to terminate our existing leases for such locations. In
addition, we may require additional employees to more adequately monitor store
operations. Therefore, if we do not have the requisite resources, including cash
and qualified employees, we may not be able to successfully execute our business
plan, which would be likely to reduce our cash flow and thus, we may need to
seek additional equity or debt financing, if available on reasonable terms.
We have incurred significant cash flow losses to date, and even if we receive
the maximum amount of proceeds from this offering, we may still require
additional financing in the future, which may be difficult to obtain and may
dilute your ownership interests in us.
We have incurred, and anticipate that we will incur, capital and operating
cash flow losses for the foreseeable future in that we will be required to make
substantial cash disbursements to satisfactorily complete our business plan, as
well as to reduce our existing liabilities, which, together with our marketing,
business development and operational expenses, may be in excess of our revenues.
We expect that these, and other expenses, will result in operating losses for at
least the foreseeable future until we are able to attain adequate revenue levels
and begin generating positive cash flow from operations. However, even if we are
able to generate a positive cash flow from operations, we may require additional
capital to expand and improve our operations, which additional capital may not
be available when needed or on terms acceptable to us. We also may need to seek
additional financing through public or private sales of our securities,
including equity securities, which equity securities, if and when issued, would,
in all likelihood, dilute your ownership interests in us. Furthermore,
insufficient funds may require us to delay, scale back or eliminate certain or
all of our operations and activities, including the successful execution of our
business plan.
Certain of our directors are involved with other companies in the retail optical
industry, which are in competition with our Sterling Stores and may result in
potential conflicts.
Dr. Robert Cohen and Dr. Alan Cohen, two of our directors, are also the
principal shareholders and executive officers and directors of Cohen Fashion
Optical, Inc. and its affiliate, Real Optical, LLC. Drs. Alan and Robert Cohen
are brothers. Cohen Fashion Optical and Real Optical operate and franchise
retail optical stores similar to Sterling Stores in the States of Connecticut,
Florida, New Hampshire, Massachusetts, New Jersey and New York and may, in the
future, operate in other states as well. As of the date hereof, many Cohen
Fashion Optical stores were located in the same shopping center or mall as, or
in close proximity to, certain Sterling Stores; and, in the future, Cohen
Fashion Optical and/or Real Optical may open or franchise additional stores that
are located in the same areas as Sterling Stores. These competing businesses
could reduce the revenues generated at our competing Sterling Stores.
Drs. Robert and Alan Cohen are also the principal members and executive
officers of General Vision Services, LLC, or GVS, which operates retail optical
stores located in the New York metropolitan area. GVS stores are similar to, and
compete with, the Sterling Stores being operated and franchised by us in the
same areas. Furthermore, GVS solicits and administers third party benefit
programs, similar to those being administered by us, through GVS's network of
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company-owned and independent retail optical stores. It is possible that
additional GVS stores, or other retail optical stores which provide services
under third party benefit plans administered by GVS, may, in the future, be
located near one or more of our Sterling Stores and may compete directly with
our stores.
Additionally, we, Cohen Fashion Optical and/or GVS jointly participate in
certain third party benefit plans and certain of our Sterling Stores, Cohen
Fashion Optical stores and GVS stores participate as providers under third party
benefit plans obtained by either us, Cohen Fashion Optical or GVS and, in all
likelihood, will continue to do so in the future.
Because of the interests that Drs. Robert and Alan Cohen have in Cohen
Fashion Optical, Real Optical and GVS, conflicts of interest may arise that may
cause these individual shareholders/members to enter into business relationships
that compete with us and cause a decrease in our revenues. We have no procedures
in place to determine how corporate opportunities presented to Drs. Robert and
Alan Cohen will be allocated, by them, among the various competing businesses in
which they are involved.
We significantly depend on the ability and experience of certain members of our
management, and their departure may prevent or delay the successful execution of
our business plan and our attainment of profitability.
We rely on the skills of certain members of our senior management team to
guide our operations including, but not limited to, Mr. Christopher G. Payan,
one of our co-chief operating officers and our senior vice president, chief
financial officer, treasurer and secretary, the loss of whom could have an
adverse effect on our operations. Furthermore, none of the members of our senior
management team, other than Mr. Payan, have employment agreements with us.
Accordingly, our key executives may not continue to work for us, which could
prevent or delay the successful execution of our business plan and our
attainment of profitability.
We do not control the management of all of the Sterling Stores that operate
under our name, and these stores may be managed by unsuccessful franchisees,
which would reduce our revenues from these stores.
We rely, in substantial part, on our franchisees for revenues. Since we do
not control the management of our franchised stores, it is possible that a
franchisee/owner may not have the business acumen or financial resources to
successfully operate his or her franchised Sterling Store. We, together with a
substantial number of our franchisees, have recently experienced a decline in
the sales generated from our/their operation of Sterling Stores. If a
substantial number of our franchisees experience further declines in their sales
and/or are ultimately not successful, our revenues from our franchisees would
decrease. We believe that our franchisees have experienced sales declines due to
many factors, including, among others:
o Decreased spending by consumers, due to a weaker economy;
o Increased competition by large discount eyewear chains, which increases
the need for our franchisees to provide more aggressive promotional sales, thus
decreasing their profit margins; and
-10
o The limitations of vision care benefits available under medical and third
party benefit plans.
We compete with many types of eyewear providers, which may prevent us from
increasing or maintaining our market share.
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 that provide
professional services and dispense prescription eyewear. These competitors may
take advantage of prompt payment discount plans, aggressive discounting and
price-cutting for customers, and increased advertising. As retailers of
prescription eyewear, we and our franchisees generally service local markets
and, therefore, our, and their, competition varies substantially from one
location or geographic area to another. If we are not successful in dealing with
our competition, we will not be able to increase or maintain our customer base
or market share.
We often offer incentives to our customers, which lower our profit margins.
At times when our major competitors offer significantly lower prices for
their products, we are often required to do the same. Certain of our major
competitors offer promotional incentives to their customers including free eye
exams,"50% Off" on designer frames and "Buy One, Get One Free" eyecare
promotions. In response to these promotions, we have offered the same or similar
incentives to our customers. This practice has resulted in lower profit margins
and these competitive promotional incentives may further reduce our revenues,
gross margins and cash flows. 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 than us. Therefore, we
may not be able to continue to deliver cost efficient products in the event of
aggressive pricing by our competitors, which would reduce our profit margins,
net income and cash flow.
We have provided purchase money financing for a substantial portion of the sales
price of our store assets that were sold to franchisees and bear the risk of
nonpayment of this financing, which could negatively impact our future cash
position.
In most instances in the past, we provided purchase money financing for a
substantial portion of the sales price of our store assets sold to franchisees.
If our franchisees are unsuccessful, they may default on these loans. In certain
instances in which franchisees have defaulted on their purchase money
obligations, we have been able to repossess the store's assets and sell these
assets to another franchisee. However, we may not be able to continue to be
successful with reselling the assets of an unsuccessful franchisee due to the
lack of financial viability and, therefore, the lack of marketability of the
Sterling Store in question, and the failure to do so could have a material
adverse effect on our cash position and ability to finance our business.
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As refractive laser surgery gains market acceptance, we may lose revenue from
traditional eyewear customers.
As traditional eyewear users undergo laser vision correction procedures or
other vision correction techniques, the demand for certain contact lenses and
eyeglasses will decrease. Due to the fact that the marketing and sale of
eyeglasses and contact lenses is a significant part of our business, a decrease
in customer demand for these products could have a material adverse effect on
our sales of prescription eyewear, as well as those of our franchisees.
We are subject to a variety of state, local and federal regulations that affect
the health care industry, which may affect our ability to generate revenues or
subject us to additional expenses.
The regulatory requirements that we and our franchisees must satisfy to
conduct our and their businesses, varies 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 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.
We and our franchisees are also subject to regulations regarding our
franchise business and in-store laboratory operations, as well as the operation,
in California, of VisionCare of California, which is regulated by the State of
California Department of Managed Health Care. As a franchisor, we are 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 applicable laws and/or regulations, we may not be able to
sustain compliance if these laws and/or regulations change in the future and, in
that event, we may have to incur significant expenses to maintain compliance.
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We may be exposed to significant risk from liability claims if we are unable to
obtain insurance, at acceptable costs, to protect us against potential liability
claims.
The provision of professional eyecare services entails an inherent risk of
professional malpractice and other similar claims. We do not influence or
control the practice of optometry by the optometrists that we employ or
affiliate with, nor do we have responsibility for their compliance with certain
regulatory and other requirements directly applicable to these individual
professionals. As a result of the relationship between our employed and
affiliated optometrists and us, we may become subject to professional
malpractice actions or claims under various theories relating to the
professional services provided by these individuals. We may not be able to
continue to obtain adequate liability insurance at reasonable rates, in which
event, our insurance may not be adequate to cover claims asserted against us, in
which event, our future cash position could be reduced and our ability to
continue operations could be jeopardized.
Our operations and success are highly dependent upon health care providers, and
we may be unable to enter into favorable arrangements with these providers.
Certain states prohibit us and our franchisees from employing optometrists
to render professional services on our and their behalf. Accordingly, the
success of our and their operations as full-service eyecare providers, depends
upon our and their ability to enter into agreements with these health care
providers to render professional services at Sterling Stores. Due to the
increased competition, among large discounters of retail eyewear, to enter into
agreements with health care providers and the finite number of available health
care providers, the costs of compensating these health care providers has
increased materially. We and our franchisees may not be able to enter into
agreements with these health care providers on satisfactory terms, or these
agreements may not be profitable to us or them, which would reduce the revenues
we and our franchisees could generate from the operation of our and their
Sterling Stores.
Certain events could result in a dilution of your ownership of our common stock.
As of September 30, 2002, we had 29,490,620 shares of our common stock
outstanding and 9,585,991 shares that were reserved for issuance under
outstanding warrants, options and senior convertible preferred stock. The
exercise and conversion prices, as the case may be, of our common stock
equivalents range from $0.01 to $8.25 per share. If converted or exercised,
these securities will result in a dilution of your percentage ownership of our
common stock. In addition, if we acquire new companies through the issuance of
our common or preferred stock, your percentage of ownership will be further
diluted.
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We have created provisions in our governing documents which may 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 over our business to
occur. One of these provisions is a classified board of directors which
established two classes of directors which are nominated on alternate years.
Further, our by-laws provide that special meetings of shareholders may only be
called by resolution of our board or by our chief executive officer, chief
operating officer or president. Our charter prevents the removal, by our
shareholders, of directors who serve on our classified board of directors except
for cause, even if some or a majority of them voted for the removal of a
director. Currently, we have authorized 5,000,000 shares of preferred stock, of
which we have issued and outstanding approximately 0.74 shares of senior
convertible preferred stock, which are convertible into an aggregate of 98,333
shares of our common stock. Our board of directors has the authority to fix the
rights, privileges, and preferences of the remaining authorized but unissued
shares of our preferred stock, without any further vote or action by the
shareholders. Therefore, the rights of the holders of our common stock are and
may, in the future, be subject to, and may be subjugated by, the rights of the
holders of our senior convertible preferred stock, as well as the holders of any
additional shares of our preferred stock that may be issued in the future.
Currently, until our shares of senior convertible preferred stock have been
converted into common stock, we cannot consolidate, merge or transfer all or
substantially all of our assets to any person or entity, unless the terms of the
consolidation, merger or transfer include the preservation of the senior
convertible preferred stock. 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
over our business.
One of our directors may exercise significant influence over our company.
As of September 30, 2002, Benito R. Fernandez, who is one of our directors,
beneficially owned 6,301,075 shares of our common stock (including the shares
underlying warrants to purchase 250,000 additional shares of common stock)
representing approximately 21.2% of our shares of common stock outstanding. As a
result, Mr. Fernandez may control the election of our directors and all other
matters that are subject to a vote of shareholders. This concentration of
ownership may also have the effect of delaying or preventing a change of control
of our company, even if this change of control would benefit all of our
shareholders.
Risks Related to this Offering
The price of our common stock may decline before or after the subscription
rights expire.
The public trading price of our common stock may decline after you exercise
your subscription rights. If that occurs, you will have committed to buy our
common stock at a price above the prevailing market price, resulting in an
immediate unrealized loss to you. Moreover, following your exercise of
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subscription rights, you may not be able to sell your common stock at a price
equal to or greater than the subscription price. Until certificates are
delivered to you, which will not occur until after the closing of this offering,
you may not be able to sell the common stock you purchase in this offering.
Certificates representing our common stock purchased by you will be delivered as
soon as practicable after the expiration of this offering. In addition, the
market price of our common stock may not rise above the exercise price of the
warrants and, accordingly, the warrants could expire worthless.
The rights offering may cause a dilution to your percentage ownership of us.
If you do not exercise any of your rights, then your percentage ownership
of us will be reduced, assuming other shareholders exercise their rights. Even
if you participate in the rights offering, your percentage ownership of us may
be reduced if other shareholders exercise the warrants, purchased by them, in
the rights offering and you do not.
Once you exercise your subscription rights, you may not revoke the exercise,
even if you no longer desire to invest in us.
Once you exercise your subscription rights, you may not revoke the
exercise. Therefore, even if circumstances arise, after you have subscribed in
the offering, that eliminate your interest in investing in our common stock, you
will nevertheless be required to purchase the common stock for which you
subscribed.
If you do not act promptly and follow instructions carefully, you may not be
able to participate in this offering and your current investment in our company
would be diluted.
Shareholders who desire to purchase units in this rights offering must act
promptly to ensure that all required forms and payments are actually received by
our subscription agent, Mellon Bank, N.A., prior to the expiration date. If you
fail to complete and sign the required subscription forms, send an incorrect
payment amount, or otherwise fail to strictly follow the subscription procedures
that apply to your desired transaction, we may, depending on the circumstances,
reject your subscription or accept it only to the extent of the payment
received, in which event, your current investment in our company would be
diluted.
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USE OF PROCEEDS
We will use the net proceeds from this offering: (i) first, to repay the
remaining principal balance of our credit facility with Horizons Investors
Corp.; (ii) second, to repay the remaining principal balance outstanding under
our term loan with North Fork Bank; and (iii) third, to fund the completion of
our plan to close non-profitable stores, and for general corporate purposes and
for working capital. Our gross proceeds from the rights offering depend on the
number of units that are purchased. If all of the subscription rights offered by
this prospectus are exercised, then we will receive net cash proceeds of
approximately $1,870,000. In addition, if all of the warrants offered by this
prospectus are exercised, then we will receive additional cash proceeds of
approximately $2,500,000, assuming a warrant exercise price of $0.05, which we
would also use for general corporate purposes and for working capital.
THE OFFERING
Before exercising any rights, you should read carefully the information set
forth under the caption "Risk Factors" beginning on page 7 of this prospectus.
The Rights
As soon as practicable after the date of this prospectus, we are
distributing, at no charge, to holders of our shares of common stock as of 5:00
p.m., New York City time, on the record date, February 25, 2003, 1.67
non-transferable subscription rights for every share of common stock owned at
that time. Each right entitles you to purchase one unit for the subscription
price of $0.04. Each unit consists of one share of common stock and a warrant to
purchase one additional share of common stock at an exercise price per share
equal to $0.05, unless the average of the last reported sales price of our
common stock, as quoted on the OTC Bulletin Board, during the fifteen (15)
trading days immediately preceding, and including, April 7, 2003 is $0.125 or
more and the average number of shares traded during each of those fifteen (15)
trading days is 50,000 or more, in which case the exercise price will be equal
to $0.06, or if the same volume conditions are met but the average of the last
reported sales prices is $0.195 or more, in which case the exercise price will
be equal to $0.07. The warrants will be exercisable for twelve months from their
issuance date. You will not receive fractional subscription rights but, instead,
we will round your number of subscription rights down to the nearest whole
number. On October 23, 2002, the day on which we announced this offering and the
subscription price, the last reported sales price for our shares of common stock
on the OTC Bulletin Board was $0.04 per share.
Record Date
February 25, 2003 at 5:00 p.m., New York City time. Only our shareholders
of common stock as of the record date will receive rights to subscribe for
units.
Subscription Price
The subscription price is $0.04 per unit, payable in cash. All payments
must be cleared on or before the expiration date.
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Basic Subscription Privilege
You are entitled to purchase one unit, consisting of one share of common
stock and a warrant to purchase one additional share of common stock at the
exercise price described above, at the subscription price for each right
exercised.
Oversubscription Privilege
If you exercise your basic subscription privilege in full, you may also
subscribe for additional units that other shareholders have not purchased under
their basic subscription privilege. You may purchase a percentage of the
unsubscribed units equal to the percentage of units purchased by you under the
basic subscription privilege, as compared to the total number of units purchased
by all shareholders, including you, who are exercising their oversubscription
privilege. If there are not enough units available to fill all subscriptions for
additional units, then the available units will be allocated pro rata, in
successive rounds, based on the number of units each subscriber for additional
units has purchased under his, her or its basic subscription privilege.
For example, if there are 900,000 available units under the
oversubscription privilege and the only oversubscribing shareholders are a 10%
shareholder subscribing for 500,000 additional units and a 5% shareholder
subscribing for 500,000 additional units, then the 10% shareholder would receive
500,000 units and the 5% shareholder would receive the remaining 400,000 units,
as follows: the subscription agent will initially allocate 500,000 units to the
10% shareholder and 250,000 units to the 5% shareholder according to their
relative 2:1 ownership percentages and, thereafter, will allocate the remaining
shares to the 5% shareholder since he, she or it was the only shareholder to
subscribe for these units. We will not allocate to you more than the number of
units you have actually subscribed and paid for. As soon as practicable after
the expiration date, April 14, 2003, Mellon Bank, N.A., acting as our
subscription agent, will determine the number of units that you may purchase
pursuant to the oversubscription privilege.
You are not entitled to exercise the oversubscription privilege unless you
have fully exercised your basic subscription privilege. For this purpose, you
would only count the shares you own in your own name, and not other shares that
might, for example, be jointly held by you with a spouse, held as a custodian
for someone else, or held in an individual retirement account.
You can elect to exercise the oversubscription privilege only at the same
time you exercise your basic subscription privilege in full.
In exercising the oversubscription privilege, you must pay the full
subscription price for all of the units you are electing to purchase. If we do
not allocate to you all of the units you have subscribed for under the
oversubscription privilege, we will refund to you, by mail, any payment you have
made for units which are not being made available to you, promptly after
completion of this offering. Interest will not be payable on amounts refunded.
Banks, brokers and other nominees who exercise the oversubscription
privilege on behalf of beneficial owners of shares must report certain
information to us and the subscription agent, Mellon Bank, N.A., and report
certain other information received from each beneficial owner exercising rights.
Generally, banks, brokers and other nominees must report:
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o the number of shares held on the record date on behalf of each beneficial
owner;
o the number of rights as to which the basic subscription privilege has
been exercised on behalf of each beneficial owner;
o that each beneficial owner's basic subscription privilege, held in the
same capacity, has been exercised in full; and
o the number of units subscribed for, pursuant to the oversubscription
privilege, by each beneficial owner, if any.
If you complete the portion of the subscription certificate required for
you to exercise the oversubscription privilege, you will be representing and
certifying that you have fully exercised your basic subscription privilege as
described above. You must exercise your oversubscription privilege at the same
time you exercise your basic subscription privilege.
In some circumstances, in order to comply with applicable state securities
laws, we may not be able to honor your basic and/or oversubscription privileges,
even if we have shares available and the above conditions are met.
Reasons for the Offering
We are seeking additional equity in order to repay certain of our
indebtedness, to obtain the funds required in connection with the closure of
non-profitable company-owned stores, and for general corporate and working
capital purposes. Our board of directors has chosen to give you the opportunity
to buy more shares of our common stock on the same basis as each of our other
shareholders.
The Board Makes No Investment Recommendations to Shareholders
Our board of directors has approved of this offering, but does not make any
recommendation to you about whether you should exercise any of your rights. In
making the decision to exercise or not exercise your rights, you must consider
your own best interests.
If you choose not to exercise your subscription rights in full, your
relative ownership interest in us will be diluted. If you exercise your rights,
you risk an immediate loss on your investment because the trading price of our
common stock may decline below the subscription price before the offering is
completed. We cannot assure you that the subscription price will remain below
any trading price for our common stock or that its trading price will not
decline to below the subscription price during or after this offering. For a
summary of some of the risks a new investment would entail, see "Risk Factors"
beginning on page 7.
Expiration Time and Date
The rights expire on April 14, 2003 at 5:00 p.m., New York City time. We
have the option of extending the expiration date for any reason, although
presently we do not intend to do so. Rights not exercised by the expiration date
will be null and void.
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In order to exercise rights in a timely manner, you must ensure that the
subscription agent actually receives, prior to expiration of the rights, a
properly executed and completed subscription certificate, together with full
payment for all units you wish to purchase, including any units you wish to
purchase under your oversubscription privilege.
No Revocation
You are not allowed to revoke or change your exercise of rights after you
send in your subscription form and payment, even if you later learn information
about us that you consider to be unfavorable.
Determination of Subscription Price
The subscription price is $0.04 per unit. Our board of directors determined
the per unit subscription price based upon a number of factors including:
o our need for capital;
o the average of the last reported sales price of our common stock during
the first ten trading days of October 2002;
o the amount of proceeds desired;
o the difficult market conditions currently prevailing for raising equity
capital;
o general conditions in the securities markets;
o alternatives available to us for raising capital; and
o general economic, business and market conditions.
The $0.04 per unit price should not be considered an indication of the
actual value of our common stock. You may not be able to sell the common stock
purchased by you in this offering at a price equal to or greater than $0.04 per
share. In addition, you may not be able to exercise the warrants issued to you
and sell the underlying common stock for a profit. The market price of our
common stock fluctuates and might decrease, either during or after the offering,
below the offering price.
Transferability of Subscription Rights
Only you may exercise the subscription privilege. You may not sell, give
away or otherwise transfer the subscription privilege. The rights will not be
listed for trading on any stock exchange.
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Transferability of Warrants
Only you may exercise the warrants. You may not sell, give away or
otherwise transfer the warrants. The warrants will not be listed for trading on
any stock exchange.
Extension, Withdrawal and Amendment
We have the option of extending the period for exercising your rights,
although we do not intend to do so at this time. We also reserve the right to
withdraw or terminate this offering at any time and for any reason. In the event
that this offering is withdrawn or terminated, all funds received from
subscriptions will be returned promptly. We will not pay interest on any
returned funds. We will notify shareholders if we extend, withdraw or terminate
this offering by issuing a press release and filing that press release with the
Securities and Exchange Commission as an exhibit to a Current Report on Form
8-K.
We reserve the right to amend the terms of this offering. If we make an
amendment that we consider significant, we will
o mail notice of the amendment to all shareholders of record as of the
record date;
o extend the expiration date by at least ten days; and
o offer all subscribers no less than ten days to revoke any subscription
already submitted.
The extension of the expiration date will not, in and of itself, be treated
as a significant amendment for these purposes.
Mailing of Subscription Certificates and Record Holders
We are sending a subscription certificate to each record holder, together
with this prospectus and related instructions to exercise the rights. In order
to exercise rights, you must fill out and sign the subscription certificate and
timely deliver it to the subscription agent, together with full payment for the
units to be purchased. Only the holders of record of our common stock as of the
close of business as of the record date may exercise rights.
A depository bank, trust company or securities broker or dealer which is a
record holder for more than one beneficial owner of shares may divide or
consolidate subscription certificates to represent shares held as of the record
date by their beneficial owners, upon providing the subscription agent with
certain required information.
If you own shares held in a brokerage, bank or other custodial or nominee
account, in order to exercise your rights you must promptly send the proper
instruction form to the person holding your shares. Your broker, dealer,
depository or custodian bank or other person holding your shares is the record
holder of your shares and will have to act on your behalf in order for you to
exercise your rights. We have asked your broker, dealer or other nominee holder
of our common stock to contact the beneficial owner(s) thereof and provide them
with instructions concerning the rights the beneficial owner(s) it represents
are entitled to exercise.
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Right to Block Exercise Due to Regulatory Issues
We reserve the right to refuse the exercise of rights by any holder of
rights who would, in our opinion, be required to obtain prior clearance or
approval from any state or federal regulatory authority for the exercise of
rights or ownership of additional shares if, at the expiration date, this
clearance or approval has not been obtained. We are not undertaking to advise
you of any such required clearance or approval, nor to pay any expenses incurred
in seeking such clearance or approval.
We are not offering or selling, or soliciting any purchase of, units in any
state or other jurisdiction in which this offering is not permitted. We reserve
the right to delay the commencement of this offering in certain states or other
jurisdictions if necessary to comply with local laws. However, we may elect not
to accept the exercise of rights by residents of any state or other jurisdiction
whose laws would require a change in this offering in order to carry out this
offering in such state or jurisdiction.
Procedures to Exercise Rights
Please do not send subscription certificates or related forms to us. Please
send the properly completed and executed form of subscription certificate with
full payment to the subscription agent for this offering, Mellon Bank, N.A., or
to the record holder of your shares (such as your broker, nominee or other
custodial holder, if applicable).
You should read carefully the subscription certificate and related
instructions and forms which accompany this prospectus. You should contact
Mellon Investor Services LLC, the information agent for this offering, at the
address and telephone number listed below under the caption "The Offering -
Questions and Assistance Concerning the Rights," promptly with any questions you
may have.
You may exercise your rights by delivering to the subscription agent (or to
the record holder of your shares, if applicable), at the address specified below
and in the instructions accompanying this prospectus, on or prior to the
expiration date, the following:
o Properly completed and executed subscription certificate(s) which
evidence your rights. See "The Offering - Delivery of Subscription
Certificates" below, for instructions on where to send these;
o Any required signature guarantees; and
o Payment in full of the subscription price for each unit you wish to
purchase under your basic subscription privilege and your
oversubscription privilege. See "The Offering - Required Forms of
Payment of Subscription Price" below, for payment instructions.
Required Forms of Payment of Subscription Price
The subscription price is $0.04 per unit subscribed for, payable in cash.
All payments must be cleared on or before the expiration date.
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If you exercise any rights, you must deliver to the subscription agent (or
the record holder of your shares, if applicable) full payment in the form of a
personal check, certified or cashier's check or bank draft drawn upon a U.S.
bank, or a U.S. postal money order, payable to Mellon Investor Services LLC
(acting on behalf of Mellon Bank, N.A. as subscription agent).
In order for you to timely exercise your rights, the subscription agent
must actually receive good funds, in payment of the subscription price, before
the expiration date.
Funds paid by uncertified personal check may take at least five business
days to clear. Accordingly, if you pay the subscription price by means of
uncertified personal check, you should make payment sufficiently in advance of
the expiration date to ensure that your check actually clears and the payment is
received before such date. We are not responsible for any delay in payment by
you and suggest that you consider payment by means of certified or cashier's
check or bank draft drawn upon a U.S. bank, or a U.S. postal money order.
Delivery of Subscription Certificates
All subscription certificates, payments of the subscription price and
nominee holder certifications and Depository Trust Company participant
oversubscription exercise forms, to the extent applicable to your exercise of
rights, must be delivered to the subscription agent, Mellon Bank, N.A., as
follows:
By Mail: By Hand:
Mellon Bank, N.A. Mellon Bank, N.A.
c/o Mellon Investor Services LLC c/o Mellon Investor Services LLC
P.O. Box 3301 120 Broadway, 13th Floor
South Hackensack, NJ 07606 New York, New York 10271
Attention: Reorganization Dept. Attention: Reorganization Dept.
By Overnight Courier:
Mellon Bank, N.A.
c/o Mellon Investor Services LLC
85 Challenger Road
Overpeck Centre
Ridgefield Park, NJ 07660
Attention: Reorganization Dept.
Incomplete Forms; Insufficient Payment
If you do not indicate on your subscription certificate the number of
rights being exercised, or do not forward sufficient payment for the number of
rights that you indicate are being exercised, then we will accept the
subscription certificate and payment only for the maximum number of rights that
may be exercised by you, based on the actual payment delivered. We will make
this determination as follows: (i) you will be deemed to have exercised your
basic subscription privilege to the full extent of the payment received; and
(ii) if any funds remain, you will be deemed to have exercised your
oversubscription privilege to the extent of the remaining funds. We will
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promptly return any payment not applied to the purchase of units in this
offering. Interest will not be payable on amounts refunded.
Prohibition on Fractional Shares
Each right entitles you to purchase one unit at the subscription price. We
will accept any inadvertent subscription indicating a purchase of fractional
units, by rounding down to the nearest whole unit and promptly refunding,
without interest, any payment received for a fractional unit.
Instructions to Nominee Holders
If you are a broker, trustee, depository for securities or other nominee
holder for beneficial owners of our common stock, we are requesting that you
contact such beneficial owners as soon as possible to obtain instructions and
related certifications concerning their rights. Our request to you is further
explained in the suggested form of letter of instructions from nominee holders
to beneficial owners accompanying this prospectus.
To the extent so instructed, nominee holders should complete appropriate
subscription certificates on behalf of beneficial owners and, in the case of any
exercise of the oversubscription privilege, the related form of "Nominee Holder
Certification", and submit them on a timely basis to the subscription agent,
Mellon Bank, N.A., with the proper payment.
Risk of Loss on Delivery of Subscription Certificate Forms and Payments
Each holder of rights bears all risks of the method of delivery, to the
subscription agent, of subscription certificates and payments of the
subscription price.
If subscription certificates and payments are sent by mail, you are urged
to send these by registered mail, properly insured, with return receipt
requested, and to allow a sufficient number of days to ensure delivery, to the
subscription agent, and clearance of payment prior to the expiration date.
Because uncertified personal checks may take at least five business days to
clear, you are strongly urged to pay, or arrange for payment, by means of
certified or cashier's check or bank draft drawn upon a U.S. bank, or a U.S.
postal money order.
How Procedural and Other Questions are Resolved
We are entitled to resolve all questions concerning the timeliness,
validity, form and eligibility of any exercise of rights. Our determination of
such questions will be final and binding. We, in our reasonable discretion, may
waive any defect or irregularity, or permit a defect or irregularity to be
corrected within such time as we may determine, or reject the purported exercise
of any right because of any defect or irregularity.
Subscription certificates will not be considered received or accepted until
all irregularities have been waived or cured within such time as we determine,
in our reasonable discretion. Neither we nor the subscription agent have any
duty to give you notification of any state required pre-clearance or approval,
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nor any defect or irregularity in connection with the submission of subscription
certificates or any other required document or payment, although we may elect to
do so. Neither we nor the subscription agent will incur any liability for
failure to give such notification.
We reserve the right to reject any exercise of rights if the exercise does
not comply with the terms of this offering, is not in proper form, or if the
exercise of rights would be unlawful or materially burdensome to us.
Issuance of Shares of Common Stock and Warrants
Shares of common stock and warrants purchased in this offering will be
issued as soon as practicable after the expiration date. The subscription agent
will deliver subscription payments to us only after consummation of this
offering and the issuance of certificates and warrants to our shareholders that
exercised rights.
Shares of Common Stock Outstanding After the Rights Offering
Assuming we issue all of the units offered in this rights offering, each of
which will represent one share of common stock and a warrant to purchase one
additional share of common stock, approximately 79,491,000 shares of common
stock will be outstanding. This would represent an approximately 170% increase
in the number of outstanding shares of common stock as of the date of this
prospectus. In addition, if all of the warrants we are offering are exercised,
then an additional 50,000,000 shares of common stock will be issued and
outstanding. If you do not exercise your subscription privilege, the percentage
of our common stock that you hold after the offering, will decrease.
Fees and Expenses
We will pay all fees charged by the subscription agent and information
agent. You are responsible for paying any other commissions, fees, taxes or
other expenses incurred in connection with the exercise of your subscription
rights. None of the subscription agent, the information agent or us will pay
these expenses.
Subscription Agent
We have appointed Mellon Bank, N.A. as subscription agent for this
offering. The subscription agent's addresses for packages sent by hand, mail or
overnight courier are:
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By Mail: By Hand:
Mellon Bank, N.A. Mellon Bank, N.A.
c/o Mellon Investor Services LLC c/o Mellon Investor Services LLC
P.O. Box 3301 120 Broadway, 13th Floor
South Hackensack, NJ 07606 New York, New York 10271
Attention: Reorganization Dept. Attention: Reorganization Dept.
By Overnight Courier:
Mellon Bank, N.A.
c/o Mellon Investor Services LLC
85 Challenger Road
Overpeck Centre
Ridgefield Park, NJ 07660
Attention: Reorganization Dept.
The subscription agent's telephone number is 800-932-6798. You should
deliver your subscription certificate and payment of the subscription price only
to the subscription agent, except if your shares are held on record by a broker,
dealer, nominee or other custodial. We will pay the fees and expenses of the
subscription agent, information agent, warrant agent and printer, which we
estimate will total $47,000. We have also agreed to indemnify the subscription
agent from any liability which it may incur in connection with the offering.
IMPORTANT
Please carefully read the instructions accompanying the subscription
certificate and follow those instructions in detail. Do not send subscription
certificates directly to us. You are responsible for choosing the payment and
delivery method for your subscription certificate, and you bear the risks
associated with such delivery. If you choose to deliver your subscription
certificate and payment by mail, we recommend that you use registered mail,
properly insured, with return receipt requested. We also recommend that you mail
your subscription certificate and payment a sufficient number of days prior to
April 14, 2003. Because uncertified personal checks may take at least five
business days to clear, we strongly urge you to pay, or arrange for payment, by
means of certified or cashier's check or bank draft drawn upon a U.S. bank, or a
U.S. postal money order.
Questions and Assistance Concerning the Rights
If you have any questions or need assistance concerning the procedures for
exercising your subscription rights, or if you would like additional copies of
this prospectus or the instructions, you should contact us or the information
agent, as follows:
--------------------------------- --------------------------------
EMERGING VISION, INC.
100 Quentin Roosevelt Boulevard MELLON INVESTOR SERVICES LLC
Suite 508 85 Challenger Road
Garden City, New York 11530 Overpeck Centre
Attention: Christopher G. Payan Ridgefield Park, NJ 07660
516-390-2134 800-932-6798
--------------------------------- --------------------------------
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TAX CONSIDERATIONS OF THE RIGHTS OFFERING
Certain United States Federal Income Tax Consequences
The following general summary of the material federal income tax
consequences of the rights offering is based upon the advice of Piper Rudnick
LLP, our special counsel. This summary is based on the Internal Revenue Code of
1986, as amended ("Code"), the Treasury regulations promulgated under the Code,
judicial authority and current administrative rules and practice, all of which
are subject to change on a prospective or retroactive basis.
The tax consequences of this offering under state, local and foreign law
are not discussed. The consequences of this offering with respect to any taxes
other than income taxes also are not discussed. Moreover, special considerations
not described in this summary may apply to some taxpayers or some types of
taxpayers, including financial institutions, broker-dealers, nominee holders of
our shares, life insurance companies, tax-exempt organizations and foreign
taxpayers. The following discussion is limited to those who have held the common
stock, and will hold the rights and any common stock and warrants acquired upon
the exercise of the rights, as capital assets (generally, property held for
investment) within the meaning of Section 1221 of the Code.
You are urged to consult your own tax advisor with respect to the
particular federal income or other income tax consequences to you of the
offering, as well as the tax consequences under state, local and foreign law and
the possible effects of any change in any such laws.
Receipt of Rights
You will not recognize taxable income for federal income tax purposes upon
receipt of the rights.
Your basis in your common stock upon which the rights are distributed, will
be allocated among the common stock and the rights in proportion to their
respective fair market values, as determined by us, on the day you receive the
rights. However, if the fair market value of your rights at the time they are
received is less than 15% of the fair market value of the common stock you own
on the date of the receipt of your rights, then no portion of your basis in the
common stock will be allocated to the rights, unless you so elect. You should
consult your own tax adviser concerning whether and how to make such an election
Since the rights will not be transferable, it may be difficult to establish
the fair market value of the rights and hence the allocation of basis among the
common stock and rights.
Your holding period with respect to the rights will include your holding
period for the common stock with respect to which the rights were distributed.
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Exercise of the Rights
You will not recognize any gain or loss if you exercise your rights.
If you exercise your rights, you will receive common stock and warrants.
The basis of your common stock received upon exercise of the warrants, will be
equal to the sum of (i) the portion of your basis in the rights that is
allocable to the right to acquire common stock, and (ii) the portion of the
exercise price that is allocable to the common stock. Similarly, the basis of
the warrants that you receive upon exercise, will be equal to the sum of (i) the
portion of your basis in the rights that is allocable to the right to receive
warrants, and (ii) the portion of the exercise price that is allocable to the
warrants. The basis in your rights, if any (as determined above), will be
allocated among the right to receive common stock and the right to receive
warrants in proportion to the relative fair market values of the common stock
and warrants on the date of the distribution of the rights. The exercise price
paid will be allocated among the common stock and warrants received by you in
proportion to their relative fair market values on the day you exercise your
rights.
Your holding period in the common stock and warrants received by you upon
exercise of your rights, will begin on the day you exercise your rights.
Lapse of the Rights
If you allow your rights to lapse, no gain or loss will be recognized.
However, the basis of your common stock upon which such rights were distributed,
will be increased by the basis, if any, in the rights which lapsed.
Exercise of Warrants
You will not recognize gain or loss upon the exercise of your warrants. The
basis of the common stock acquired through exercise of your warrants will be the
basis of the warrants (as determined above) plus the exercise price paid upon
your exercise of the warrants. The holding period of the common stock received
by you upon exercise of your warrants, will begin on the day the warrants are
exercised.
Lapse of Warrants
If your warrants expire prior to having been exercised, you will recognize
a loss equal to the basis in such warrants. Such loss will be a capital loss,
and will be long-term or short term depending upon whether your holding period
in the lapsed warrants (which, as discussed above, will begin on the day you
received your warrants) is more than one year.
The foregoing summary is included for general informational purposes only.
Accordingly, we urge you to consult with your own tax advisor with respect to
the tax consequences of the rights offering applicable to your own particular
situation, including the application and effect of state and local income and
other tax laws.
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DESCRIPTION OF OUR CAPITAL STOCK
General
We are authorized to issue 150,000,000 shares of common stock, $0.01 par
value, and 5,000,000 shares of preferred stock, $0.01 par value. As of September
30, 2002, we had 29,672,957 shares of common stock issued, 182,337 shares of
which are held in our treasury and 29,490,620 shares of which were outstanding,
and approximately 0.74 shares of our senior convertible preferred stock issued
and outstanding, convertible into an aggregate of 98,333 shares of our common
stock.
Common Stock
Holders of shares of our common stock are entitled to dividends when and as
declared by our board of directors from legally available funds therefor and,
upon liquidation, are entitled to share pro rata in any shareholder
distributions, after payment of all debts and other liabilities and subject to
the prior rights of any holders of our preferred stock. 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 possible expansion. Each holder has one, non-cumulative vote for
each share held. The holders of our common stock have no preemptive,
subscription, redemption or conversion rights.
Preferred Stock
We have designated 35 shares of our preferred stock as senior convertible
preferred stock, of which approximately 0.74 shares were issued and outstanding
as of September 30, 2002. 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 currently be
converted into common stock at the conversion price of $0.75 per share.
Until the senior convertible preferred stock 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 the 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.
Units
We are offering an aggregate of up to 50,000,000 units. Each unit which we
are offering pursuant to this prospectus contains one share of our common stock
and one warrant to purchase one additional share of common stock. The common
stock and the warrant included in each unit will be immediately separable. Units
may be purchased until April 14, 2003, the expiration date of this offering.
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Warrants
As of September 30, 2002, there were outstanding warrants to purchase an
aggregate of 5,202,189 shares of our common stock, exercisable at a
weighted-average exercise price of approximately $3.76 per share, through
various expiration periods ranging from December 2004 to April 2008. In
addition, each unit contains a warrant to purchase one share of common stock.
The warrants are exercisable at a price per share equal to $0.05, unless the
average of the last reported sales price of our common stock, as quoted on the
OTC Bulletin Board, during the fifteen (15) trading days immediately preceding,
and including, April 7, 2003 is $0.125 or more and the average number of shares
traded during each of those fifteen (15) trading days is 50,000 or more, in
which case the exercise price will be equal to $0.06, or if the same volume
conditions are met but the average of the last reported sales prices is $0.195
or more, in which case the exercise price will be equal to $0.07, subject to
adjustment in certain circumstances, and expire on the twelfth month anniversary
of their issuance. We have authorized the issuance of up to 50,000,000 warrants
to purchase an aggregate of 50,000,000 shares of common stock and will reserve
that number of shares of common stock required for issuance upon exercise of the
warrants issued in this rights offering. None of these warrants are currently
issued and outstanding.
The exercise prices and number of shares of common stock issuable upon
exercise of the warrants are subject to adjustment in certain circumstances,
including in the event of a stock dividend, stock split, recapitalization,
reorganization, merger or consolidation. Holders of the warrants do not have the
rights or privileges of holders of common stock. The warrants to be issued
hereunder are part of the units to be sold in this rights offering. To the
extent that the warrants are exercised, the proportionate equity ownership of
holders of our common stock who do not exercise warrants, will decrease.
Warrants are generally more speculative than the shares of common stock
which are issuable upon the exercise of warrants. A warrant may become
valueless, or of reduced value, if the market price of the underlying common
stock decreases, or increases only modestly, over the term of the warrant.
Stock Options
As of September 30, 2002, there were outstanding options to purchase an
aggregate of 4,285,469 shares of our common stock at exercise prices ranging
from $0.075 to $8.25 per share, of which options to purchase 4,132,133 shares
were exercisable, with the balance being subject to vesting, generally over a
three-year period.
LEGAL MATTERS
The validity of the common stock that is being offered pursuant to this
prospectus will be passed upon by Piper Rudnick LLP, New York, New York.
EXPERTS
The financial statements and schedules incorporated by reference in this
prospectus and elsewhere in the registration statement, of which this prospectus
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forms a part, have been audited by Arthur Andersen LLP, independent public
accountants, as indicated in their reports with respect thereto, and are
included in this prospectus in reliance upon the authority of said firm as
experts in accounting and auditing in giving said reports. Prior to the date of
this prospectus, Arthur Andersen was indicted in connection with its rendering
of services to another company. Therefore, Arthur Andersen withdrew from
practice before the SEC, effective prior to the date hereof, and many of the
accountants at Arthur Andersen have left their current jobs or have been
searching for a new place of employment. Based on these factors, after
reasonable efforts, we were unable to obtain Arthur Andersen's consent to the
inclusion of their report, dated April 8, 2002. Accordingly, we have dispensed
with the requirement to file their consent in reliance upon Rule 437a of the
Securities Act. Because Arthur Andersen has not consented to the inclusion of
their report in this prospectus, you will not be able to recover against Arthur
Andersen under Section 11 of the Securities Act, for any untrue statements of a
material fact contained in the financial statements audited by Arthur Andersen,
or any omissions to state a material fact required to be stated therein.
WHERE YOU CAN FIND MORE INFORMATION
This prospectus is part of a registration statement on Form S-3 that we are
filing with the SEC. Certain information in the registration statement has been
omitted from this prospectus in accordance with the rules of the SEC.
We file annual, quarterly and current reports, proxy statements and other
information with the SEC. Our File Number is 1-14128.
You may read and copy, at prescribed rates, materials that we have filed
with the SEC, including the registration statement, at the SEC public reference
room located at 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549. You
may call the SEC at 1-800-732-0330 for further information about the public
reference room. We are also required to file electronic versions of these
documents with the SEC, which may be accessed through the SEC's web site,
http://www.sec.gov.
We have not authorized any dealer, salesperson or other person to give any
information or represent anything not contained in this prospectus. You should
not rely on any unauthorized information. This prospectus does not constitute an
offer to sell or a solicitation of an offer to buy any units in any jurisdiction
in which it is unlawful. The information in this prospectus is current as of the
date on the cover, only.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The SEC allows us to "Incorporate by Reference", into this prospectus,
certain of our publicly filed documents, which means that information included
in these documents is considered a part of this prospectus. We incorporate by
reference into this prospectus the following documents:
o Our Annual Report on Form 10-K for the year ended December 31, 2001.
o Our Annual Report on Form 10-K/A for the year ended December 31, 2001.
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o Our Quarterly Report on Form 10-Q for the quarter ended March 31, 2002.
o Our Quarterly Report on Form 10-Q for the quarter ended June 30, 2002.
o Our Quarterly Report on Form 10-Q for the quarter ended September 30,
2002.
o Our Current Report on Form 8-K, filed on February 4, 2002.
o Our Current Report on Form 8-K, filed on June 24, 2002.
o Our Current Report on Form 8-K, filed on August 12, 2002.
o Our Current Report on Form 8-K, filed on October 23, 2002.
o Our Definitive Proxy Statement, filed on June 18, 2002.
o Our description of our common stock which is contained in our
registration statement on Form 8-A, filed on December 5, 1995.
In addition, all documents subsequently filed by us pursuant to Sections
13(a), 13(c), 14 or 15(d) of the Exchange Act, prior to the termination of this
offering, will be deemed to be incorporated by reference into this prospectus.
Any statement contained in a document incorporated by reference in this
prospectus, will be deemed to be modified or superseded, for purposes of this
prospectus, to the extent that a statement in this prospectus or in any
subsequently filed document which also is, or is deemed to be, incorporated by
reference in this prospectus, modifies or supersedes such statement. Any
statement so modified or superseded will not be deemed, except as so modified or
superseded, to constitute a part of this prospectus.
If you are a shareholder, you may request a copy of any or all of these
documents incorporated by reference, at no cost, by contacting us at the
following address or telephone number: Emerging Vision, Inc., 100 Quentin
Roosevelt Boulevard, Suite 508, Garden City, New York 11530, Attention:
Christopher G. Payan, Chief Financial Officer, Telephone No.: (516) 390-2134.
FORWARD-LOOKING STATEMENTS
This prospectus contains or incorporates forward-looking statements,
including statements regarding, among other items, our business strategy, growth
strategy and anticipated trends in our business. We may make additional written
or oral forward-looking statements from time to time in filings with the SEC or
otherwise. When we use the words "believe," "expect," "anticipate," "project"
and similar expressions, this should alert you that this is a forward-looking
statement. Forward-looking statements speak only as of the date the statement is
made.
These forward-looking statements are based largely on our expectations.
They are subject to a number of risks and uncertainties, some of which cannot be
predicted or quantified and are beyond our control. Future events and actual
results could differ materially from those set forth in, contemplated by, or
underlying these forward-looking statements. Statements in this prospectus or
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made in documents incorporated into this prospectus by reference, describe
factors that could contribute to, or cause differences between, our expectations
and actual results.
We have described many of these factors in "Risk Factors" and "About
Emerging Vision, Inc." Because of these risks and uncertainties, the
forward-looking information contained in this prospectus may not, in fact, occur
or prove to be accurate. All subsequent written and oral forward-looking
statements attributable to us or persons acting on our behalf, are expressly
qualified in their entirety by this section.
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===================================================== ===================================================
Emerging Vision, Inc. has not authorized any
person to give you information that differs from
the information in this prospectus. You should 50,000,000 UNITS
rely solely on the information contained in this
prospectus. This prospectus is not an offer to EMERGING VISION, INC.
sell these securities, and we are not soliciting
offers to buy these securities, in any state where
the offer or sale of these securities is not
permitted. The information in this prospectus is RIGHTS OFFERING
accurate only as of the date of this prospectus,
even if this prospectus is delivered to you after
the prospectus date, or you buy shares of common
stock or warrants of Emerging Vision, Inc. after
the prospectus date.
Each Unit Consisting of One
Share of Common Stock
and a Warrant to Purchase
One Additional Share
of Common Stock
_____________________________
PROSPECTUS
_____________________________
February __, 2003
===================================================== ===================================================
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.................................................. $ 506
Printing and engraving, subscription agent, information agent
and warrant agent fees and expenses................................ 47,000
Legal fees and expenses............................................... 70,000
Blue sky fees and expenses............................................ 2,000
Miscellaneous......................................................... 10,000
---------
Total.............................................................. $ 129,506
=========
All expenses incurred in connection with this offering will be borne by the
Registrant. The selling stockholder will be responsible for all selling
commissions, transfer taxes and related charges in connection with the offer and
sale of the units offered by the prospectus constituting a part of this
registration statement.
Item 15. Indemnification of Directors and Officers.
The Business Corporation Law of the State of New York ("BCL") provides that
if a derivative action is brought against a director or officer, the Registrant
may indemnify him or her against amounts paid in settlement of such action and
reasonable expenses, including attorneys' fees incurred by him or her in
connection with the defense or settlement of such action, if such director or
officer acted in good faith for a purpose which he or she reasonably believed to
be in the best interests of the Registrant, except that no indemnification may
be made, without court approval, in respect of a threatened action, or a pending
action settled or otherwise disposed of, or in respect of any matter as to which
such director or officer has been found liable to the Registrant. In a
nonderivative action or threatened action, the BCL provides that the Registrant
may indemnify a director or officer against judgments, fines, amounts paid in
settlement and reasonable expenses, including attorneys' fees incurred by him or
her in defending such action, if such director or officer acted in good faith
for a purpose which he or she reasonably believed to be in the best interests of
the Registrant.
Under the BCL, a director or officer who is successful, either in a
derivative or nonderivative action, is entitled to indemnification as outlined
above. Under any other circumstance, such director or officer may be indemnified
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only if certain conditions specified in the BCL are met. The indemnification
provisions of the BCL are not exclusive of any other rights to which a director
or officer seeking indemnification may be entitled pursuant to the provisions of
the certificate of incorporation or the by-laws of a corporation or, when
authorized by such certificate of incorporation or by-laws, pursuant to a
shareholders' resolution, a directors' resolution or an agreement providing for
such indemnification.
The above is a general summary of certain indemnity provisions of the BCL
and is subject, in all cases, to the specific and detailed provisions of
Sections 721-725 of the BCL.
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 BCL. Our amended and restated
by-laws provide 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
Registrant, if such director or officer acted in good faith, for a purpose which
he/she reasonable believed to be in the best interests of our business and, in
criminal actions or proceedings, 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
The following exhibits were filed as part of this registration statement:
Exhibit Number Description of Document
-------------- -----------------------
4.1 Specimen of Common Stock Certificate (incorporated by
reference to Exhibit 4.1 to the Registrant's Registration
Statement on Form S-1, No. 33-98368)
4.2 Form of Convertible Debentures and Warrants Subscription
Agreement (incorporated by reference to Exhibit 4.2 of the
Registrant's Current Report on Form 8-K, dated February 17,
1998)
4.3 Form of warrant issued to purchasers in the Registrant's
private placement of units consisting of Series B
Convertible Preferred Stock and warrants to purchase common
stock (incorporated by reference to Exhibit 4.2 to the
Registrant's Registration Statement on Form S-3, No.
333-37160)
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4.4 Form of warrant issued to the Placement Agents (and/or their
respective designees) in connection with the Registrant's
private placement (incorporated by reference to Exhibit 4.3
to the Registrant's Registration Statement on Form S-3, No.
333-37160)
4.5 Form of warrant issued to subscribers in connection with the
Registrant's rights offering
5.1 Opinion of Piper Rudnick LLP
10.38 Warrant Agreement, dated as of February 10, 2003, by and
between Emerging Vision, Inc. and Mellon Investor Services
LLC
23.1 Consent of Piper Rudnick LLP (included in Exhibit 5.1)
24.1 Power of Attorney (appears on signature page to initial
filing of this Form S-3)
99.1 Form of Subscription Certificate
99.2 Form of Letter to Shareholders
99.3 Form of Letter to Brokers
99.4 Instructions to Shareholders
99.5 Subscription Agent Agreement, dated as of February 10, 2003,
by and between Emerging Vision, Inc. and Mellon Bank, N.A.
99.6 Information Agent Agreement, dated as of February 10, 2003,
by and between Emerging Vision, Inc. and Mellon Investor
Services LLC
Item 17. Undertakings.
(a) 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:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933, as amended (the "Securities Act");
(ii) To reflect in such prospectus any facts or events arising after the
effective date of this Registration Statement (or the most recent post-effective
amendment thereof) which, individually or together, represent a fundamental
change in the information contained in this Registration Statement.
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Notwithstanding the foregoing, any increase or decrease in the volume of
securities offered (if the total dollar value of securities offered would not
exceed that which was registered), and any deviation from the low or high end of
the estimated maximum offering range, may be reflected in the form of prospectus
filed with the SEC pursuant to Rule 424(b) promulgated under the Securities Act
if, in the aggregate, the changes in volume and price represent no more than a
20% change in the maximum aggregate offering price set forth in the "Calculation
of Registration Fee" table of this Registration Statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in this Registration Statement or any
material change to such information in this Registration Statement; provided,
however, that paragraphs (a)(1)(i) and (a)(1)(ii) shall not apply if the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed by the Registrant pursuant to
Section 13 or Section 15(d) of the Securities Exchange Act of 1934, as amended
(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 hereby, and treat the offering of the securities, at that
time, as an initial bona fide offering; and
3. To remove from registration, by means of a post-effective amendment, any
of the securities being registered hereby which remains unsold at the
termination of the offering.
(b) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
Registrant's Annual Report pursuant to Section 13(a) or 15(d) of the Exchange
Act that is incorporated by reference in this Registration Statement, shall be
deemed to be a new registration statement relating to the securities offered
hereby, and the offering of such securities, at that time, shall be deemed to be
the initial bona fide offering thereof.
(h) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
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 Registrant, of expenses
incurred or paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding, is asserted by such
director, officer or controlling person in connection with the securities being
-II-4-
registered hereby, the Registrant will, unless, in the opinion of its counsel,
the matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question as to whether such indemnification by the
Registrant is against public policy as expressed in the Securities Act and will
be governed by the final adjudication of such issue.
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing this Registration Statement on Form S-3 and has
duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Garden City, State of New
York, on February 10, 2003.
EMERGING VISION, INC.
By: /s/ Christopher G. Payan
--------------------------------
Christopher G. Payan
Senior Vice President, Co-Chief
Operating Officer, Chief Financial
Officer, Treasurer and Secretary
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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/ Christopher G. Payan Co-Chief Operating Officer, February 10, 2003
------------------------ Senior Vice President, Chief
Christopher G. Payan Financial Officer, Treasurer
and Secretary (Co-Principal
Executive Officer and Principal
Financial and Accounting Officer)
* Co-Chief Operating Officer and February 10, 2003
------------------------ Chief Marketing Officer (Co-
Samuel Z. Herskowitz Principal Executive Officer)
* Co-Chief Operating Officer and February 10, 2003
------------------------ Senior Vice President-Business
Myles Lewis Development (Co-Principal
Executive Officer)
* Chairman of the Board of February 10, 2003
------------------------ Directors
Alan Cohen, O.D.
* Director February 10, 2003
------------------------
Robert Cohen, O.D.
Director February __, 2003
------------------------
Joel L. Gold
* Director February 10, 2003
------------------------
Benito R. Fernandez
* By: /s/ Christopher G. Payan
--------------------------
Christopher G. Payan
Attorney-in-fact
-II-7-
EMERGING VISION, INC.
FORM S-3
REGISTRATION STATEMENT
EXHIBIT INDEX
Exhibit Number Description of Document
-------------- -----------------------
4.1 Specimen of Common Stock Certificate (incorporated by
reference to Exhibit 4.1 to the Registrant's Registration
Statement on Form S-1, No. 33-98368)
4.2 Form of Convertible Debentures and Warrants Subscription
Agreement (incorporated by reference to Exhibit 4.2 of the
Registrant's Current Report on Form 8-K, dated February 17,
1998)
4.3 Form of warrant issued to purchasers in the Registrant's
private placement of units consisting of Series B
Convertible Preferred Stock and warrants to purchase common
stock (incorporated by reference to Exhibit 4.2 to the
Registrant's Registration Statement on Form S-3, No.
333-37160)
4.4 Form of warrant issued to the Placement Agents (and/or their
respective designees) in connection with the Registrant's
private placement (incorporated by reference to Exhibit 4.3
to the Registrant's Registration Statement on Form S-3, No.
333-37160)
4.5 Form of warrant issued to subscribers in connection with the
Registrant's rights offering
5.1 Opinion of Piper Rudnick LLP
10.38 Warrant Agreement, dated as of February 10, 2003, by and
between Emerging Vision, Inc. and Mellon Investor Services
LLC
23.1 Consent of Piper Rudnick LLP (included in Exhibit 5.1)
24.1 Power of Attorney (appears on signature page to initial
filing of this Form S-3)
99.1 Form of Subscription Certificate
99.2 Form of Letter to Shareholders
99.3 Form of Letter to Brokers
99.4 Instructions to Shareholders
99.5 Subscription Agent Agreement, dated as of February 10, 2003,
by and between Emerging Vision, Inc. and Mellon Bank, N.A.
99.6 Information Agent Agreement, dated as of February 10, 2003,
by and between Emerging Vision, Inc. and Mellon Investor
Services LLC
Exhibit 4.5
THIS WARRANT CERTIFICATE IS EXERCISABLE ON OR BEFORE,
AND VOID AFTER 5:00 P.M., NEW YORK CITY TIME ON APRIL 14, 2004
WARRANTS TO PURCHASE COMMON STOCK OF
EMERGING VISION, INC.
INCORPORATED UNDER THE LAWS OF THE STATE OF NEW YORK
NO. W- CERTIFICATE FOR WARRANTS
THIS CERTIFIES THAT
or assigns, is the owner of the number of Warrants set forth above, each of
which represents the right to purchase from Emerging Vision, Inc., a New York
corporation (the "Company"), at any time on or before 5:00 P.M., New York City
time on April 14, 2004, upon compliance with and subject to the conditions set
forth herein and in the Warrant Agreement hereinafter referred to, shares
(subject to adjustments referred to below) of the Common Stock of the Company
(such shares or other securities or property purchasable upon exercise of the
Warrants being herein called the "Shares"), by surrendering this Warrant
Certificate, with the Purchase Form on the reverse side duly executed, at the
office of Mellon Investor Services LLC, designated for such purpose, or its
successor, as warrant agent (the "Warrant Agent"), and by paying in full, in
cash or by certified or official bank check payable to the order of the Warrant
Agent, the exercise price of $[ ] per share.
Upon any exercise of less than all the Warrants evidenced by this Warrant
Certificate, there shall be issued to the holder a new Warrant Certificate in
respect of the Warrants as to which this Warrant Certificate was not exercised.
Upon the surrender for transfer or exchange of any Warrant Certificates,
properly endorsed, to the Warrant Agent, the Warrant Agent at the Company's
expense will issue and deliver to the order of the holder hereof, a new Warrant
Certificate or Warrant Certificates of like tenor, in the name of such holder or
as such holder (upon payment by such holder of any applicable taxes or
governmental charges) may direct, calling in the aggregate on the face or faces
thereof for the number of shares of Common Stock called for on the face hereof.
The Warrant Certificates are issued only as registered Warrant
Certificates. Until this Warrant Certificate is transferred in the Warrant
Register, the Company and the Warrant Agent may treat the person in whose name
this Warrant Certificate is registered as the absolute owner hereof and of the
Warrants represented hereby for all purposes, notwithstanding any notice to the
contrary.
This Warrant Certificate is issued under the Warrant Agreement, dated as of
February 10, 2003, by and between the Company and the Warrant Agent. The Warrant
Agreement is hereby incorporated by reference into this Warrant Certificate and
this Warrant Certificate is subject to the terms and provisions contained in
said Warrant Agreement, to all of which terms and provisions the registered
holder of this Warrant Certificate consents by acceptance hereof. Copies of said
Warrant Agreement are on file at the office of the Company, and may be obtained
by writing to the Company.
The number of Shares receivable upon the exercise of the Warrants
represented by this Warrant Certificate and the exercise price per share are
subject to adjustment upon the happening of certain events specified in the
Warrant Agreement.
No fractional Shares of the Company's Common Stock will be issued upon the
exercise of the Warrants. As to any final fraction of a share which a holder of
Warrants exercised in the same transaction would otherwise be entitled to
purchase on such exercise, the Company shall pay a cash adjustment in lieu of
any fractional Share determined as provided in the Warrant Agreement.
This Warrant Certificate shall not entitle the holder hereof to any of the
rights of a holder of Common Stock of the Company, including, without
limitation, the right to vote, to receive dividends and other distributions, to
exercise any preemptive right, or to receive any notice of, or to attend
meetings of holders of Common Stock or any other proceedings of the Company.
This Warrant Certificate shall be void and the Warrants and any rights
represented hereby shall cease unless exercised on or before 5:00 P.M., New York
City time on April 14, 2004, unless extended by the Company.
[Remainder of page intentionally left blank.]
-2-
This Warrant Certificate shall not be valid for any purpose until it shall
have been countersigned by the Warrant Agent.
WITNESS the facsimile signatures of the Company's duly authorized officers.
Dated: April 14, 2003
EMERGING VISION, INC.
By:
------------------------------------
Name:
Title
COUNTERSIGNED AND
REGISTERED:
MELLON INVESTOR SERVICES LLC
as Warrant Agent
By:
-------------------------------------
Name:
Title:
-3-
To: Emerging Vision, Inc.
c/o Mellon Investor Services LLC
Warrant Agent
PURCHASE FORM
(TO BE EXECUTED BY THE REGISTERED HOLDER IN ORDER TO EXERCISE
WARRANT CERTIFICATES)
The undersigned hereby irrevocably elects to exercise the Warrants
represented by the Warrant Certificate and to purchase for cash _______________
Shares issuable upon the exercise of said Warrants and requests that
certificates for such Shares shall be issued in the name of
____________________.
PLEASE INSERT SOCIAL SECURITY OR
OTHER IDENTIFYING NUMBER OF
REGISTERED HOLDER OF CERTIFICATE
____________________________________
____________________________________
________________________________________
(Print Name)
________________________________________
(Address)
________________________________________
(Address)
Dated: Signature:
------------------------------ ------------------------------
ASSIGNMENT FORM
(TO BE EXECUTED BY THE REGISTERED HOLDER IN ORDER TO TRANSFER
WARRANT CERTIFICATES)
PLEASE INSERT SOCIAL SECURITY OF FOR VALUE RECEIVED, the undersigned
OTHER IDENTIFYING NUMBER hereby sells, assigns and transfers
OF ASSIGNEE _________ of the Warrants to purchase
shares of Common Stock represented by
this Warrant Certificate unto
________________________________
________________________________
________________________________________________________________________________
(Please print or typewrite name and address, including postal
zip code, of assignee)
________________________________________________________________________________
________________________________________________________________________________
and does hereby irrevocably constitute and appoint __________ Attorney to
transfer this Warrant Certificate on the records of the Company with full power
of substitution in the premises.
Dated: Signature(s):
------------------------------ --------------------------
SIGNATURE(S) GUARANTEED:
------------------------
NOTICE:
THE SIGNATURE(S) TO THE PURCHASE FORM OR THE ASSIGNMENT FORM MUST CORRESPOND
TO THE NAME(S) AS WRITTEN UPON THE FACE OF THIS WARRANT CERTIFICATE IN EVERY
PARTICULAR WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATSOEVER.
Exhibit 5.1
(Piper Rudnick LLP Letterhead)
February 10, 2003
Emerging Vision, Inc.
100 Quentin Roosevelt Boulevard
Garden City, New York 11530
Re: Emerging Vision, Inc. Registration Statement on Form S-3
Ladies and Gentlemen:
On the date hereof, Emerging Vision, Inc., a New York corporation (the
"Company"), intends to transmit to the Securities and Exchange Commission (the
"Commission") a Registration Statement on Form S-3 (the "Registration
Statement"), relating to 50,000,000 rights (the "Rights") to purchase 50,000,000
units (the "Units"), each Unit consisting of one share of the Company's common
stock, $0.01 par value per share (the "Common Stock"), and a warrant (the
"Warrants") to purchase one additional share of Common Stock. This opinion is an
exhibit to the Registration Statement.
We have at times acted as special counsel to the Company with respect to
certain corporate and securities matters, and in such capacity we are familiar
with the various corporate and other proceedings taken by or on behalf of the
Company in connection with the proposed offer and sale of the Units, and the
securities underlying the Units, as contemplated by the Registration Statement.
However, we are not general counsel to the Company and would not ordinarily be
familiar with or aware of matters relating to the Company unless they are
brought to our attention by representatives of the Company.
In connection with this opinion, we have examined and are familiar with
originals or copies, certified, or otherwise identified to our satisfaction, of
the Registration Statement, the Certificate of Incorporation and Bylaws of the
Company, each as amended to date, the records of corporate proceedings of the
Company and such other statutes, certificates, instruments and such other
documents relating to the Company and matters of law as we have deemed necessary
to the issuance of this opinion. In such examination, we have assumed, without
independent investigation, the genuineness of all signatures, the legal capacity
of all individuals who have executed any of the aforesaid documents, the
authenticity of all documents submitted to us as originals, the conformity with
originals of all documents submitted to us as copies (and the authenticity of
the originals of such copies), all public records reviewed are accurate and
complete, the Registration Statement being declared effective by the Commission
and the distribution of the Rights and the offer and sale of the Units, and the
Emerging Vision, Inc.
February 10, 2003
Page 2
securities underlying the Units, in the matter set forth in the Registration
Statement. As to factual matters, we have relied upon statements or
representations of officers and other representatives of the Company, public
officials or others and have not independently verified the matters stated
therein. Insofar as this opinion relates to securities to be issued in the
future, we have assumed that all applicable laws, rules and regulations in
effect at the time of such issuance are the same as such laws, rules and
regulations in effect as of the date hereof and the continued effectiveness of
the Registration Statement.
Based upon the foregoing, and subject to and in reliance on the accuracy
and completeness of the information relevant thereto provided to us, we are of
the opinion that, when issued and delivered in accordance with the terms of the
rights offering as described in the Registration Statement, (i) the Common Stock
underlying the Units will be validly issued, fully paid and non-assessable, (ii)
the Warrants will be validly issued and binding obligations of the Company and
(iii) upon the proper exercise of the Warrants, the Common Stock underlying the
Warrants will be validly issued, fully paid and non-assessable.
We express no opinion with respect to the laws of any jurisdiction other
than the State of New York and the federal laws of the United States typically
applicable to transactions of the type contemplated by the Registration
Statement. Without limiting the generality of the foregoing, we also express no
opinion concerning compliance with the laws or regulations of any other
jurisdiction or jurisdictions. We assume no obligation to supplement this
opinion if any applicable laws change after the date hereof or if we become
aware of any facts that might change the opinions expressed herein after the
date hereof. We express no opinion as to the application of securities or "Blue
Sky" laws of any state, including the State of New York, to the offer and/or
sale of the Units and the securities underlying the Units.
The opinion expressed in this letter is solely for the use of the Company
in connection with the Registration Statement. This opinion may not be relied on
by any other person or in any other connection without our prior written
approval. The opinion expressed in this letter is limited to the matters set
forth herein, and no other opinion should be inferred beyond the matters
expressly stated.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to us under the headings "Legal
Matters" and "Tax Considerations of the Rights Offering" in the Registration
Statement. In giving the foregoing consent, we do not thereby admit that we are
in the category of persons whose consent is required under Section 7 of the
Securities Act of 1933, as amended, or the rules and regulations of the
Commission promulgated thereunder.
Very truly yours,
/s/ Michael Hirschberg
---------------------------
Michael Hirschberg
Exhibit 10.38
WARRANT AGREEMENT
WARRANT AGREEMENT, dated as of February 10, 2003 (this "Warrant
Agreement"), by and between Emerging Vision, Inc., a New York corporation (the
"Company"), and Mellon Investor Services LLC, a New Jersey limited liability
company, as Warrant Agent (the "Warrant Agent").
A. The Company proposes to issue up to 50,000,000 Warrants (the "Warrants")
evidencing the right to purchase an aggregate of up to 50,000,000 authorized but
previously unissued shares of common stock, $0.01 par value per share, of the
Company (the "Common Stock"). The Warrants would be issued in connection with a
Rights Offering by which existing shareholders of the Company are issued the
right to purchase units comprised of one share of Common Stock and a warrant to
purchase one additional share of Common Stock. The rights by which shareholders
would be issued warrants shall occur during the term of the offering as defined
by the Company's Registration Statement on Form S-3 (File No. 333-100697), filed
with the Securities and Exchange Commission on October 23, 2002 and as
subsequently amended (the "Registration Statement").
B. The Company desires the Warrant Agent to act on behalf of the Company,
and the Warrant Agent desires so to act, in connection with the issuance,
registration, transfer, exchange and exercise of the Warrants.
NOW THEREFORE, it is agreed as follows:
ARTICLE 1.
APPOINTMENT OF WARRANT AGENT; ISSUANCE,
FORM AND EXECUTION OF WARRANT CERTIFICATES
Section 1.1 Appointment of Warrant Agent. The Company hereby appoints the
Warrant Agent to act as agent for the Company, and the Warrant Agent hereby
accepts the agency established herein and agrees to perform its agency duties in
accordance with the terms and conditions of this Warrant Agreement.
Section 1.2 Warrant Certificates. The Company shall execute and deliver to
the Warrant Agent certificates which the Company has authorized to represent the
Warrants ("Warrant Certificates"). The Warrant Certificates shall be
substantially as set forth in Exhibit A hereto and may have such legends,
summaries or endorsements printed, lithographed or engraved thereon as the
Company may deem appropriate (but which do not adversely affect the rights,
duties or responsibilities of the Warrant Agent) and as are not inconsistent
with the provisions of this Warrant Agreement, or as may be required to comply
with any law or with any rule or regulation relating to listing of the Warrants
on any stock exchange or to conform to usage. The Warrant Certificates shall be
dated with the date of their issuance.
Section 1.3 Execution of Warrant Certificates. The Warrant Certificates
shall be executed on behalf of the Company by a duly authorized officer of the
Company, either manually or by facsimile signature printed thereon. The Warrant
Certificates shall be manually countersigned by the Warrant Agent and shall not
be valid for any purpose unless so countersigned. Any Warrant Certificate may be
signed on behalf of the Company by the person who at the actual date of the
signing of such Warrant Certificate shall have been the proper officer of the
Company, although at the date of issuance of such Warrant Certificate any such
person has ceased to be such officer of the Company.
ARTICLE 2.
EXERCISE OF WARRANTS
Section 2.1 Exercise. Any or all of the Warrants represented by each
Warrant Certificate may be exercised by the holder thereof on or before 5:00
p.m., New York City time, on April 14, 2004, unless extended by the Company, by
surrender of the Warrant Certificate with the Purchase Form, which is printed on
the reverse thereof (or a reasonable facsimile thereof) duly executed by such
holder, to the Warrant Agent at its office designated for such purpose,
accompanied by payment, in cash or by certified or official bank check payable
to the order of the Warrant Agent, in an amount equal to the number of shares of
Common Stock issuable upon exercise of the Warrant represented by such Warrant
Certificate, as adjusted pursuant to the provisions of Article III hereof,
multiplied by the exercise price (as set forth in the Registration Statement)
per share, as adjusted pursuant to the provisions of Article III hereof (such
price as so adjusted from time to time being herein called the "Exercise
Price"), and such holder shall be entitled to receive such number of fully paid
and nonassessable shares of Common Stock, as so adjusted, at the time of such
exercise. Warrants, represented by a properly assigned Warrant Certificate, may
be exercised by a new holder without first having a new Warrant Certificate
issued. The Warrant Agent shall have no duties under this Section or Section 2.3
below unless and until it has been notified in writing by the Company of the
Exercise Price.
Section 2.2 Time of Exercise. Each exercise of Warrants shall be deemed to
have been effective immediately prior to the close of business on the business
day on which the Warrant Certificate relating to such Warrants shall have been
surrendered to the Warrant Agent as provided in Section 2.1, and at such time
the person or persons in whose name or names any certificate or certificates for
shares of Common Stock shall be issuable upon such exercise as provided in
Section 2.3, shall be deemed to have become the holder or holders of record
thereof.
Section 2.3 Issuance of Shares of Common Stock; No Fractional Shares. As
soon as practicable after the exercise of any Warrant, and in any event within
ten (10) days after receipt by the Warrant Agent of the notice of exercise under
Section 2.1, the Warrant Agent, at the written direction of the Company, will
cause to be issued in the name of and delivered to the holder thereof or as such
holder (upon payment by such holder of any applicable taxes and governmental
charges) may direct,
(a) certificate or certificates for the number of fully paid and
nonassessable shares of Common Stock to which such holder shall be entitled upon
such exercise plus, in lieu of any fractional share to which such holder would
otherwise be entitled, an amount in cash equal to such fraction multiplied by
the then current value of a share of Common Stock, determined as follows:
(i) if the Common Stock is listed or admitted to unlisted trading
privileges on any single stock exchange, then such current value shall be
computed on the basis of the last reported sale price of the Common Stock on
-2-
such exchange on the last business day prior to the date of the exercise of such
Warrant upon which a sale shall have been effected; or
(ii) if the Common Stock is not so listed or admitted to unlisted trading
privileges and bid and ask prices are reported by Nasdaq, including the National
Market system (or, if not so quoted on Nasdaq, by the National Quotation Bureau,
Inc.), then the current value shall be the last reported sale on the last
business day prior to the date of the exercise of such Warrant, or, in the event
the last reported sale is unavailable, the average of the closing bid and ask
prices on the last business day prior to the date of the exercise of such
Warrant as so reported; or
(iii) if the Common Stock is listed or admitted to unlisted trading
privileges on more than one stock exchange or one or more stock exchanges and
quoted on Nasdaq, then the current value shall, if different as a result of
calculation under the applicable method(s) described above in this Section 2.3,
be deemed to be the higher number calculated in connection therewith; or
(iv) if the Common Stock is not so listed or admitted to unlisted trading
privileges and bid and ask prices are not so reported, then the current value
shall be computed on the basis of the book value of Common Stock as of the close
of business on the last day of the month immediately preceding the date upon
which such Warrant was exercised, as determined by the Company,
and
(b) in case such exercise includes only part of the Warrants represented by
any Warrant Certificate, a new Warrant Certificate or Warrant Certificates of
like tenor, calling in the aggregate on the face or faces thereof for the number
of shares of Common Stock equal (without giving effect to any adjustment
therein) to the number of such shares called for on the face of such Warrant
Certificate minus the number of such shares designated by the holder for such
exercise as provided in Section 2.1.
Section 2.4 Extension of Exercise Period; Change of Exercise Price. The
Company may, upon written notice given to the Warrant Agent, and without the
consent of the holders of the Warrant Certificates, (i) reduce the Exercise
Price during all or any portion of the originally stated exercise period, or
(ii) extend the period over which the Warrants are exercisable beyond and
increase the Exercise Price for any period during which the Warrant exercise
period is extended. In the case of the extension of the exercise period or a
change in the Exercise Price, the Company must provide the Warrant Agent and the
Warrant holders of record written notice of such extension of the exercise
period, specifying, as the case may be, the time to which such exercise period
is extended, or specifying the new Exercise Price and the periods for which such
new Exercise Price is in effect, at least twenty (20) days prior to the date
such extension or new Exercise Price is to take effect.
ARTICLE 3.
ANTIDILUTION PROVISIONS
-3-
Section 3.1 Adjustment of Exercise Price.
(a) The Exercise Price shall be subject to the following adjustments. In
the event that:
(i) any dividends on any class of stock of the Company payable in Common
Stock or securities convertible into Common Stock shall be paid by the Company;
or
(ii) the Company shall subdivide its then outstanding shares of Common
Stock into a greater number of shares; or
(iii) the Company shall combine outstanding shares of Common Stock, by
reclassification or otherwise;
then, in any such event, the Exercise Price in effect immediately prior to
such event shall (until adjusted again pursuant hereto) be adjusted immediately
after such event to a price (calculated to the nearest full cent) determined by
dividing (A) the number of shares of Common Stock outstanding immediately prior
to such event, multiplied by the then existing Exercise Price, by (B) the total
number of shares of Common Stock outstanding immediately after such event
(including the maximum number of shares of Common Stock issuable in respect of
any securities convertible into Common Stock), and the resulting quotient shall
be the adjusted Exercise Price per share.
(b) No adjustment of the Exercise Price shall be made if the amount of such
adjustments shall be less than one cent per share, but in such case any
adjustment that would otherwise be required to be made shall be carried forward
and shall be made at the time and together with the next subsequent adjustment
which, together with any adjustment or adjustments so carried forward, shall
amount to not less than one cent per share.
Section 3.2 Adjustment of Number of Shares Purchasable on Exercise of
Warrants. Upon each adjustment of the Exercise Price pursuant to Section 3.1,
the registered holder of each Warrant shall thereafter (until another such
adjustment) be entitled to purchase at the adjusted Exercise Price the number of
shares, calculated to the nearest full share, obtained by multiplying the number
of shares specified in such Warrant (as adjusted as a result of all adjustments
in the Exercise Price in effect prior to such adjustment) by the Exercise Price
in effect prior to such adjustment and dividing the product so obtained by the
adjusted Exercise Price.
Section 3.3 Notice as to Adjustment. Upon any adjustment of the Exercise
Price and an increase or decrease in the number of shares of Common Stock
purchasable upon the exercise of the Warrants, then, and in each such case, the
Company shall within ten (10) days after the effective date of such adjustment
give written notice thereof to the Warrant Agent, and by first class mail,
postage prepaid, addressed to each registered Warrant holder at the address of
such Warrant holder as shown on the books of the Company, which notice shall
state the adjusted Exercise Price and the increased or decreased number of
shares purchasable upon the exercise of the Warrants, setting forth in
reasonable detail the method of calculation and the facts upon which such
calculation is based. The Warrant Agent shall be fully protected in relying on
-4-
any such notice and on any adjustment contained therein, and the Warrant Agent
shall have no duty with respect to and shall not be deemed to have knowledge of
any adjustment unless and until it shall have received such written notice.
Section 3.4 Effect of Reorganization, Reclassification, Merger, Etc. If at
any time while any Warrant is outstanding there should be any capital
reorganization or reclassification of the capital stock of the Company (other
than the issue of any shares of Common Stock in subdivision of outstanding
shares of Common Stock by reclassification or otherwise and other than a
combination of shares provided for in Section 3.1 hereof) or any consolidation
or merger of the Company with another entity or any sale, conveyance, lease or
other transfer by the Company of all or substantially all of its assets to any
other entity, the holder of any Warrant shall, during the remainder of the
period such Warrant is exercisable, be entitled to receive, upon payment of the
Exercise Price, the number of shares of stock or other securities or property of
the Company, or of the successor entity resulting from such consolidation or
merger, or of the entity to which the assets of the Company has been sold,
conveyed, leased or otherwise transferred, as the case may be, to which the
Common Stock (and any other securities and property) of the Company, deliverable
upon the exercise of such Warrant, would have been entitled upon such capital
reorganization, reclassification of capital stock, consolidation, merger, sale,
conveyance, lease or other transfer if such Warrant had been exercised
immediately prior to such capital reorganization, reclassification of capital
stock, consolidation, merger, sale, conveyance, lease or other transfer; and, in
any such case, appropriate adjustment (as determined by the Board of Directors
of the Company) shall be made in the application of the provisions set forth in
this Warrant Agreement with respect to the rights and interests thereafter of
the Warrant holders to the end that the provisions set forth in this Warrant
Agreement (including the adjustment of the Exercise Price and the number of
shares issuable upon the exercise of the Warrants) shall thereafter be
applicable, as near as may be reasonably practicable, in relation to any shares
or other property thereafter deliverable upon the exercise of the Warrants as if
the Warrants had been exercised immediately prior to such capital
reorganization, reclassification of capital stock, such consolidation, merger,
sale, conveyance, lease or other transfer and the Warrant holders had carried
out the terms of the exchange as provided for by such capital reorganization,
reclassification, consolidation or merger. The Company shall not effect any such
capital reorganization, consolidation, merger or transfer unless, upon or prior
to the consummation thereof, the successor entity or the entity to which the
property of the Company has been sold, conveyed, leased or otherwise transferred
shall assume by written instrument the obligation to deliver to the holder of
each Warrant such shares of stock, securities, cash or property as in accordance
with the foregoing provisions such holder shall be entitled to purchase.
Section 3.5 Prior Notice as to Certain Events. In case at any time:
(a) The Company shall pay any dividend upon its Common Stock payable in
stock or make any distribution (other than cash dividends) to the holders of its
Common Stock; or
(b) The Company shall offer for subscription pro rata to the holders of its
Common Stock any additional shares of stock of any class or any other rights; or
(c) There shall be any capital reorganization or reclassification of the
capital stock of the Company, or consolidation or merger of the Company with, or
-5-
sale, conveyance, lease or other transfer of all or substantially all of its
assets to, another entity; or
(d) There shall be a voluntary or involuntary dissolution, liquidation or
winding up of the Company;
then in any one or more of such cases, the Company shall give prior written
notice, by first class mail, postage prepaid, addressed to each registered
Warrant holder at the address of such Warrant holder as shown on the books of
the Company, of the date on which (i) the books of the Company shall close or a
record shall be taken for such stock dividend, distribution or subscription
rights or (ii) such reorganization, reclassification, consolidation, merger,
sale, dissolution, liquidation or winding up shall take place, as the case may
be. Such notice shall also specify the date as of which the holders of the
Common Stock of record shall participate in such dividend, distribution or
subscription rights or shall be entitled to exchange their Common Stock for
securities or other property deliverable upon such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation, or
winding up, as the case may be. Such written notice shall be given at least
twenty (20) days prior to the action in question and not less than twenty (20)
days prior to the record date or the date on which the Company's transfer books
are closed in respect thereto.
Section 3.6 Certain Obligations of the Company. The Company will not, by
amendment of its certificate of incorporation or through any reorganization,
transfer of assets, consolidation, merger, dissolution, issue or sale of
securities or any other voluntary action, avoid or seek to avoid the observance
or performance of any of the terms of this Warrant Agreement or the Warrant
Certificate, but will at all times in good faith assist in the carrying out of
all such terms. Without limiting the generality of the foregoing, the Company
(a) will take all such action as may be necessary or appropriate in order that
the Company may validly and legally issue fully paid and nonassessable shares of
such stock upon the exercise of all Warrants from time to time outstanding, and
(b) will not (i) transfer all or substantially all of its properties and assets
to any other person or entity, or (ii) consolidate with or merge into any other
entity where the Company is not the continuing or surviving entity, or (iii)
permit any other entity to consolidate with or merge into the Company where the
Company is the continuing or surviving entity but, in connection with such
consolidation or merger, the Common Stock then issuable upon the exercise of the
Warrants shall be changed into or exchanged for shares or other securities or
property of any other entity unless, in any such case, the other entity
acquiring such properties and assets, continuing or surviving after such
consolidation or merger or issuing or distributing such shares or other
securities or property, as the case may be, shall expressly assume in writing
and be bound by all the terms of this Warrant Agreement and the Warrant
Certificates.
Section 3.7 Reservation of Common Stock. The Company will at all times
reserve and keep available, solely for issuance and delivery upon the exercise
of the Warrants, all shares of Common Stock from time to time issuable upon such
exercise. All such shares shall be duly and validly issued, fully paid and
nonassessable with no liability on the part of the holder thereof.
Section 3.8 Registration or Exemption of Common Stock. The Company will use
its best efforts (a) at all times the Warrants are exercisable to maintain an
effective registration statement under the Securities Act of 1933, as amended
(the "Securities Act"), covering Common Stock issuable upon exercise of the
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Warrants, (b) from time to time to amend or supplement the prospectus contained
in such registration statement to the extent necessary in order to comply with
applicable law, (c) to qualify for exemption from the registration requirements
of the Securities Act the Common Stock issuable upon exercise of the Warrants,
and (d) to maintain exemptions or qualifications, in those jurisdictions in
which the original registration statement relating to the Warrants was initially
qualified, to permit the exercise of the Warrants and the issuance of the Common
Stock pursuant to such exercise. The Warrant Agent shall have no responsibility
for the maintenance of such exemptions or qualifications and shall incur no
liabilities arising from the exercise or attempted exercise of Warrants in
jurisdictions where exemptions or qualifications have not been maintained or are
otherwise unavailable.
ARTICLE 4.
CERTAIN OTHER PROVISIONS RELATING TO
RIGHTS OF HOLDERS OF WARRANT CERTIFICATES
Section 4.1 No Rights of Shareholders. The Warrant Certificates shall be
issued in registered form only. No Warrant Certificate shall entitle the holder
thereof to any of the rights of a holder of shares of Common Stock of the
Company, including, without limitation, the right to vote, to receive dividends
and other distributions, or to receive any notice of, or to attend, meetings of
holders of Common Stock or any other proceedings of the Company.
Section 4.2 Loss, Theft, Destruction or Mutilation of Warrant Certificates.
Upon receipt by the Warrant Agent of evidence reasonably satisfactory to the
Warrant Agent of the loss, theft, destruction or mutilation of any Warrant
Certificate, and (a) in the case of any such loss, theft, or destruction, upon
delivery to the Warrant Agent of an indemnity bond in form and amount, and
issued by a bonding company, satisfactory to the Company and the Warrant Agent,
or (b) in the case of any such mutilation upon surrender to and cancellation by
the Warrant Agent of such Warrant Certificate, the Company at its expense will
execute and cause the Warrant Agent to countersign and deliver, in lieu thereof,
a new Warrant Certificate of like tenor.
Section 4.3 Transfer Agent; Cancellation of Warrant certificates;
Unexercised Warrants. The Company shall authorize and direct the transfer agent
of the Common Stock (the "Transfer Agent"), to reserve at all times such number
of authorized and unissued shares of Common Stock as shall be sufficient to
permit the exercise in full of all Warrants from time to time outstanding. The
Company will keep a copy of this Warrant Agreement on file with the Transfer
Agent. The Warrant Agent, and any successor thereto, is hereby irrevocably
authorized to requisition from time to time from the Transfer Agent certificates
for shares of Common Stock required for exercise of Warrants. The Company will
supply the Transfer Agent with duly executed certificates for shares of Common
Stock for such purpose and will make available any cash required in settlement
of fractional share interests. All Warrant Certificates surrendered upon the
exercise or redemption of Warrants shall be canceled by the Warrant Agent and
shall thereafter be delivered to the Company; such canceled Warrant
Certificates, with the Purchase Form on the reverse thereof duly filled in and
signed, shall constitute conclusive evidence as between the parties hereto of
the numbers of shares of Common Stock which shall have been issued upon
exercises of Warrants. Promptly after the last day on which the Warrants are
exercisable (set forth in Section 2.1 above), the Warrant Agent shall certify to
the Company the aggregate number of Warrants then outstanding and unexercised.
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No shares of Common Stock shall be subject to reservation with respect to
Warrants not exercised prior to the time and date identified in Section 2. 1
above as the last time and date at which Warrants may be exercised.
ARTICLE 5.
TRANSFER AND EXCHANGE OF WARRANT CERTIFICATES
Section 5.1 Warrant Register; Transfer or Exchange of Warrant Certificates.
The Warrant Agent shall cause to be kept at the office of the Warrant Agent
designated for such purpose a register (the "Warrant Register") in which,
subject to such reasonable regulations as the Company may prescribe, provisions
shall be made for the registration of transfers and exchanges of Warrant
Certificates. Upon surrender for transfer or exchange of any Warrant
Certificates, properly endorsed, to the Warrant Agent, the Warrant Agent at the
Company's expense will issue and deliver to or upon the order of the holder
thereof a new Warrant Certificate or Warrant Certificates of like tenor, in the
name of such holder or as such holder (upon payment by such holder of any
applicable taxes and governmental charges) may direct, calling in the aggregate
on the face or faces thereof for the number of shares of Common Stock called for
on the face of the Warrant Certificate so surrendered. Any Warrant Certificate
surrendered for transfer or exchange shall be canceled by the Warrant Agent and
shall thereafter be delivered to the Company.
Section 5.2 Identity of Warrant holders. Until a Warrant Certificate is
transferred in the Warrant Register, the Company and the Warrant Agent may treat
the person in whose name the Warrant Certificate is registered as the absolute
owner thereof and of the Warrants represented thereby for all purposes,
notwithstanding any notice to the contrary, except that, if and when any Warrant
Certificate is properly assigned in blank, the Company and the Warrant Agent may
(but shall not be obligated to) treat the bearer thereof as the absolute owner
of the Warrant Certificate and of the Warrants represented thereby for all
purposes, notwithstanding any notice to the contrary.
ARTICLE 6.
CONCERNING THE WARRANT AGENT
Section 6.1 Taxes. The Company will, from time to time, promptly pay to the
Warrant Agent, or make provision satisfactory to the Warrant Agent for the
payment of, all taxes and charges that may be imposed by the United States or
any State upon the Company or the Warrant Agent upon the transfer or delivery of
shares of Common Stock upon the exercise of Warrants, but neither the Company
nor the Warrant Agent shall not be obligated to pay any tax or charge imposed in
connection with any transfer involved in the delivery of a certificate for
shares of Common Stock in any name other than that of the registered holder of
the Warrant Certificate surrendered in connection with the purchase thereof. The
Warrant Agent shall have no duty or obligation to take any action under any
Section of this Warrant Agreement which requires the payment by a Warrant holder
of applicable taxes or governmental charges unless and until the Warrant Agent
is satisfied that all such taxes and/or charges have been paid.
Section 6.2 Fractional Shares. The Warrant Agent shall have no duty or
obligation with respect to any Section hereof regarding fractional shares unless
and until the Warrant Agent shall have received specific written instructions
(and sufficient cash, if required) from the Company with respect to its duties
and obligations under such Sections.
-8-
Section 6.3 Replacement of Warrant Agent in Certain Circumstances. The
Warrant Agent or any successor Warrant Agent may resign and be discharged from
its duties under this Warrant Agreement upon 30 days' notice in writing mailed
to the Company by registered or certified mail, and to the holders of the
Warrant Certificates by first-class mail. The Company may remove the Warrant
Agent or any successor Warrant Agent upon 30 days' notice in writing, mailed to
the Warrant Agent or successor Warrant Agent, as the case may be, and to each
Transfer Agent of the Common Stock by registered or certified mail, and to the
holders of the Warrant Certificates by first-class mail. If the Warrant Agent
shall resign or be removed or shall otherwise become incapable of acting, the
Company shall appoint a successor to the Warrant Agent. If the Company shall
fail to make such appointment within a period of 30 days after giving notice of
such removal or after it has been notified in writing of such resignation or
incapacity by the resigning or incapacitated Warrant Agent or by the holder of a
Warrant Certificate (who shall, with such notice, submit his Warrant Certificate
for inspection by the Company), then the registered holder of any Warrant
Certificate may apply to any court of competent jurisdiction for the appointment
of a new Warrant Agent. Any successor Warrant Agent, whether appointed by the
Company or by such a court, shall be (a) a person or entity organized and doing
business under the laws of the United States or of the State of New York (or of
any other state of the United States so long as such person or entity is
authorized to do business in the State of New York), in good standing, having an
office in the State of New York, which is authorized under such laws to exercise
stock transfer powers and is subject to supervision or examination by federal or
state authority or (b) an affiliate of such a person or entity. After
appointment, the successor Warrant Agent shall be vested with the same powers,
rights, duties and responsibilities as if it had been originally named as
Warrant Agent without further act or deed; but the predecessor Warrant Agent
shall deliver and transfer to the successor Warrant Agent any property at the
time held by it hereunder, and execute and deliver any further assurance,
conveyance, act or deed necessary for the purpose. Not later than the effective
date of any such appointment the Company shall file notice thereof in writing
with the predecessor Warrant Agent and each Transfer Agent of the Common Stock,
and mail a notice thereof in writing to the registered holders of the Warrant
Certificates. Failure to give any notice provided for in this Section 6.3,
however, or any defect therein, shall not affect the legality or validity of the
resignation or removal of the Warrant Agent or the appointment of the successor
Warrant Agent, as the case may be.
Section 6.4 Concerning the Warrant Agent.
(a) The Company agrees to pay to the Warrant Agent reasonable compensation
for all services rendered by it hereunder and, from time to time, on demand of
the Warrant Agent, its reasonable expenses and counsel fees and other
disbursements incurred in the preparation, delivery, amendment, administration
and execution of this Warrant Agreement and the exercise and performance of its
duties hereunder. The Company also agrees to indemnify the Warrant Agent for,
and to hold it harmless against, any loss, liability, damage, judgment, fine,
penalty, claim, demand, settlement, cost or expense (including, without
limitation, the reasonable fees and expenses of legal counsel), incurred without
gross negligence or bad faith on the part of the Warrant Agent (which gross
negligence or bad faith must be determined by a final, non-appealable order,
judgment, decree or ruling of a court of competent jurisdiction), for any action
taken, suffered or omitted by the Warrant Agent in connection with the
acceptance, administration, exercise and performance of its duties under this
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Warrant Agreement. The costs and expenses incurred in enforcing this right of
indemnification shall be paid by the Company. The provisions of this Section 6.4
and Section 6.5 below shall survive the termination of this Warrant Agreement
and the resignation, replacement or removal of the Warrant Agent.
(b) The Warrant Agent shall be authorized and protected and shall incur no
liability for, or in respect of any action taken, suffered or omitted by it in
connection with its acceptance and administration of this Warrant Agreement and
the exercise and performance of its duties hereunder, in reliance upon any
Warrant Certificate or certificate for the Common Stock or for other securities
of the Company, instrument of assignment or transfer, power of attorney,
endorsement, affidavit, letter, notice, direction, consent, certificate,
statement, or other paper or document believed by it to be genuine and to be
signed, executed and, where necessary, verified or acknowledged, by the proper
person(s) or entity(s), or otherwise upon the advice of counsel as set forth in
Section 6.5 hereof.
Section 6.5 Rights and Duties of Warrant Agent. The Warrant Agent
undertakes to perform only the duties and obligations expressly imposed by this
Warrant Agreement (and no implied duties) upon the following terms and
conditions, by all of which the Company and the holders of Warrant Certificates,
by their acceptance thereof, shall be bound:
(a) The Warrant Agent may consult with legal counsel (who may be legal
counsel for the Company or an employee of the Warrant Agent), and the advice or
opinion of such counsel shall be full and complete authorization and protection
to the Warrant Agent and the Warrant Agent shall incur no liability for or in
respect of any action taken, suffered or omitted by it and in accordance with
such advice or opinion.
(b) Whenever in the performance of its duties under this Warrant Agreement
the Warrant Agent shall deem it necessary or desirable that any fact or matter
(including without limitation, the Exercise Price, the redemption price, or the
number of shares issuable upon exercise of a Warrant Certificate) be proved or
established by the Company prior to taking, suffering or omitting to take any
action hereunder, such fact or matter (unless other evidence in respect thereof
be herein specifically prescribed) may be deemed to be conclusively proved and
established by a certificate signed by any one of the President, any Vice
President, the Treasurer or the Secretary of the Company and delivered to the
Warrant Agent; and such certificate shall be full and complete authorization and
protection to the Warrant Agent and the Warrant Agent shall incur no liability
for or in respect of any action taken, suffered or omitted by it under the
provisions of this Warrant Agreement in reliance upon such certificate.
(c) The Warrant Agent shall be liable hereunder to the Company and any
other person or entity only for its own gross negligence or bad faith (which
gross negligence or bad faith must be determined by a final, non-appealable
order, judgment, decree or ruling of a court of competent jurisdiction).
Anything to the contrary notwithstanding, in no event shall the Warrant Agent be
liable for special, punitive, indirect, consequential or incidental loss or
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damage of any kind whatsoever (including but not limited to lost profits), even
if the Warrant Agent has been advised of the likelihood of such loss or damage.
Any liability of the Warrant Agent under this Warrant Agreement will be limited
to the amount of annual fees paid by the Company to the Warrant Agent.
(d) The Warrant Agent shall not be liable for or by reason of any of the
statements of fact or recitals contained in this Warrant Agreement or in the
Warrant Certificates (except its countersignature thereof) or be required to
verify the same, but all such statements and recitals are and shall be deemed to
have been made by the Company only.
(e) The Warrant Agent shall not have any liability for or be under any
responsibility in respect of the validity of this Warrant Agreement or the
execution and delivery hereof (except the due execution hereof by the Warrant
Agent) or in respect of the validity or execution of any Warrant Certificate
(except its countersignature thereof); nor shall it be responsible for the
making of any adjustment in the Exercise Price, or number of shares issuable
upon exercise of the Warrant Certificates or responsible for the manner, method
or amount of any such adjustment or the facts that would require any such
adjustment; nor shall it be responsible for any breach by the Company of any
covenant or condition contained in this Warrant Agreement or in any Warrant
Certificate; nor shall it be responsible for any change or adjustment in the
terms of the Warrants (including the manner, method or amount thereof), or the
ascertaining of the existence of facts that would require any such change or
adjustment; nor shall it by any act hereunder be deemed to make any
representation or warranty as to the authorization or reservation of any Common
Stock to be issued pursuant to this Warrant Agreement or any Warrant Certificate
or as to whether any Common Stock will, when issued, be validly authorized and
issued, fully paid and nonassessable.
(f) The Company will perform, execute, acknowledge and deliver or cause to
be performed, executed, acknowledged and delivered all such further and other
acts, instruments and assurances as may reasonably be required by the Warrant
Agent for the carrying out or performing by the Warrant Agent of the provisions
of this Warrant Agreement.
(g) The Warrant Agent is hereby authorized and directed to accept
instructions with respect to the performance of its duties hereunder from any
one of the President, any Vice President, the Treasurer or the Secretary of the
Company, and to apply to such officers for advice or instructions in connection
with its duties, and such instructions shall be full authorization and
protection to the Warrant Agent and the Warrant Agent shall not be liable for or
in respect of any action taken, suffered or omitted by it in accordance with
instructions of any such officer or for any delay in acting while waiting for
those instructions. The Warrant Agent shall be fully authorized and protected in
relying upon the most recent instructions received by any such officer. Any
application by the Warrant Agent for written instructions from the Company may,
at the option of the Warrant Agent, set forth in writing any action proposed to
be taken, suffered or omitted by the Warrant Agent under this Warrant Agreement
and the date on and/or after which such action shall be taken or suffered or
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such omission shall be effective. The Warrant Agent shall not be liable for any
action taken or suffered by, or omission of, the Warrant Agent in accordance
with a proposal included in any such application on or after the date specified
in such application (which date shall not be less than five calendar days after
the date any officer of the Company actually receives such application, unless
any such officer shall have consented in writing to an earlier date) unless,
prior to taking any such action (or the effective date in the case of an
omission), the Warrant Agent shall have received written instructions in
response to such application specifying the action to be taken, suffered or
omitted.
(h) The Warrant Agent and any shareholder, affiliate, director, officer or
employee of the Warrant Agent may buy, sell or deal in any of the Warrant or
other securities of the Company or become pecuniarily interested in any
transaction in which the Company may be interested, or contract with or lend
money to the Company or otherwise act as fully and freely as though the Warrant
Agent were not Warrant Agent under this Warrant Agreement. Nothing herein shall
preclude the Warrant Agent or any such shareholder, affiliate, director, officer
or employee from acting in any other capacity for the Company or for any other
person or entity.
(i) The Warrant Agent may execute and exercise any of the rights or powers
hereby vested in it or perform any duty hereunder either itself (through its
directors, officers and employees) or by or through its attorneys or agents, and
the Warrant Agent shall not be answerable or accountable for any act, default,
neglect or misconduct of any such attorneys or agents or for any loss to the
Company or any other person or entity resulting from any such act, default,
neglect or misconduct, absent gross negligence or bad faith in the selection and
continued employment thereof (which gross negligence or bad faith must be
determined by a final, non-appealable order, judgment, decree or ruling of a
court of competent jurisdiction).
(j) No provision of this Warrant Agreement shall require the Warrant Agent
to expend or risk its own funds or otherwise incur any financial liability in
the performance of any of its duties hereunder or in the exercise of its rights
if it believes that repayment of such funds or adequate indemnification against
such risk or liability is not reasonably assured to it.
(k) In the event the Warrant Agent believes any ambiguity or uncertainty
exists hereunder or in any notice, instruction, direction, request or other
communication, paper or document received by the Warrant Agent hereunder, the
Warrant Agent, may, in its sole discretion, refrain from taking any action, and
shall be fully protected and shall not be liable in any way to Company, the
holder of any Warrant Certificate or any other person or entity for refraining
from taking such action, unless the Warrant Agent receives written instructions
signed by the Company which eliminates such ambiguity or uncertainty to the
satisfaction of Warrant Agent.
Section 6.6 Merger or Consolidation or Change of Name of Warrant Agent.
(a) Any person or entity into which the Warrant Agent or any successor
Warrant Agent may be merged or with which it may be consolidated, or any person
or entity resulting from any merger or consolidation to which the Warrant Agent
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or any successor Warrant Agent shall be a party, or any person or entity
succeeding to the shareholder services business of the Warrant Agent or any
successor Warrant Agent, shall be the successor to the Warrant Agent under this
Warrant Agreement without the execution or filing of any paper or any further
act on the part of any of the parties hereto. In case at the time such successor
Warrant Agent shall succeed to the agency created by this Warrant Agreement, any
of the Warrant Certificates shall have been countersigned but not delivered, any
such successor Warrant Agent may adopt the countersignature of the predecessor
Warrant Agent and deliver such Warrant Certificates so countersigned; and in
case at that time any of the Warrant Certificates shall not have been
countersigned, any successor Warrant Agent may countersign such Warrant
Certificates either in the name of the predecessor Warrant Agent or in the name
of the successor Warrant Agent; and in all such cases such Warrant Certificates
shall have the full force provided in the Warrant Certificates and in this
Warrant Agreement; provided, that such person or entity would be eligible for
appointment as a successor Warrant Agent under Section 6.3 hereof. In case at
the time such successor Warrant Agent shall succeed to the agency created by
this Warrant Agreement, any of the Warrant Certificates shall have been
countersigned but not delivered, any such successor Warrant Agent may adopt the
countersignature of the predecessor Warrant Agent and deliver such Warrant
Certificates so countersigned; and in case at that time any of the Warrant
Certificates shall not have been countersigned, any successor Warrant Agent may
countersign such Warrant Certificates either in the name of the predecessor
Warrant Agent or in the name of the successor Warrant Agent; and in all such
cases such Warrant Certificates shall have the full force provided in the
Warrant Certificates and in this Warrant Agreement.
(b) In case at any time the name of the Warrant Agent shall be changed and
at such time any of the Warrant Certificates shall have been countersigned but
not delivered, the Warrant Agent may adopt the countersignature under its prior
name and deliver Warrant Certificates so countersigned; and in case at that time
any of the Warrant Certificates shall not have been countersigned, the Warrant
Agent may countersign such Warrant Certificates either in its prior name or in
its changed name; and in all such cases such Warrant Certificates shall have the
full force provided in the Warrant Certificates and in this Warrant Agreement.
Section 6.7 Amendment and Modification. The Warrant Agent may, without the
consent or concurrence of the holders of the Warrant Certificates, by
supplemental agreement or otherwise, join with the Company in making any changes
or corrections in this Warrant Agreement that they shall have been advised in a
certificate signed by any one of the President, any Vice President, the
Treasurer or the Secretary of the Company (a) are required to cure any ambiguity
or to correct any defective or inconsistent provision or clerical omission or
mistake or manifest error herein contained, (b) add to the obligations of the
Company in this Warrant Agreement further obligations thereafter to be observed
by it, (c) surrender any right or power reserved to or conferred upon the
Company in this Warrant Agreement, or (d) do not or will not adversely affect,
alter or change the rights, privileges or immunities of the holders of Warrant
Certificates not provided for under this Warrant Agreement; provided, however,
that any term of this Warrant Agreement or any Warrant Certificate may be
changed, waived, discharged or terminated by an instrument in writing signed by
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each party against which enforcement of such change, waiver, discharge or
termination is sought, or by which the same is to be performed or observed.
Notwithstanding the foregoing, the Warrant Agent shall have no obligation to,
and shall incur no liability in failing to, join in and execute any such
supplemental agreement or amendment if the rights, duties, liabilities or
obligations of the Warrant Agent will be adversely affected in any manner
thereby.
ARTICLE 7.
OTHER MATTERS
Section 7.1 Successors and Assigns. All the covenants and provisions of
this Warrant Agreement by or for the benefit of the Company or the Warrant Agent
shall bind and inure to the benefit of their respective successors and assigns.
Section 7.2 Notices. Any notice or demand authorized by this Warrant
Agreement to be given or made by the Warrant Agent or by the holder of any
Warrant Certificate to or on the Company shall be in writing and shall be
sufficiently given or made if sent (i) by telecopy facsimile transmission
(receipt of which is confirmed), (ii) by hand (including reputable overnight
courier) or (iii) by first class or registered mail, postage prepaid, addressed
(until another address is filed in writing by the Company with the Warrant
Agent) as follows:
Emerging Vision, Inc.
100 Quentin Roosevelt Boulevard
Garden City, NY 11530
Telecopy: (516) 390-2110
Attention: Christopher G. Payan
With a copy to:
Piper Rudnick LLP
1251 Avenue of the Americas
New York, NY 10022
Telecopy: (212) 835-6001
Attention: Michael Hirschberg, Esq.
Any notice or demand authorized by this Warrant Agreement to be given or
made by the holder of any Warrant Certificate or by the Company to or on the
Warrant Agent shall be in writing and shall be sufficiently given or made if
sent (i) by telecopy facsimile transmission (receipt of which is confirmed),
(ii) by hand (including reputable overnight courier) or (iii) by first class or
registered mail, postage prepaid, addressed (until another address is filed in
writing by the Warrant Agent with the Company) as follows:
Mellon Investor Services LLC
85 Challenger Road
Ridgefield Park, NJ 07660
Telecopy: (917) 320-6318
Attention: Deborah Bass
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With a copy to:
Kelley Drye & Warren LLP
101 Park Avenue
New York, NY 10178
Telecopy: (212) 808-7897
Attention: Merrill B. Stone, Esq.
Section 7.3 Governing Law. This Warrant Agreement and each Warrant
Certificate shall be deemed to be a contract made under the laws of the State of
New York and for all purposes shall be governed by and construed in accordance
with the laws of such State applicable to contracts to be made and performed
entirely within such State.
Section 7.4 No Benefits Conferred. Nothing in this Warrant Agreement
expressed and nothing that may be implied from any of the provisions hereof is
intended, or shall be construed, to confer upon, or give to, any person or
entity other than the Company, the Warrant Agent, and the holders of the Warrant
Certificates, any right, remedy or claim under or by reason of this Warrant
Agreement or of any covenant, condition, stipulation, promise or agreement
herein; and all covenants, conditions, stipulations, promises and agreements in
this Warrant Agreement contained shall be for the sole and exclusive benefit of
the Company, the Warrant Agent, their respective successors and the holders of
the Warrant Certificates.
Section 7.5 Headings. The descriptive headings used in this Warrant
Agreement are inserted for convenience only and shall not control or affect the
meaning or construction of any of the provisions hereof.
Section 7.6 Counterparts. This Warrant Agreement may be executed in one or
more counterparts, each of which shall be deemed an original, but all of which
shall constitute one and the same instrument.
[Remainder of page intentionally left blank.]
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IN WITNESS WHEREOF, this Warrant Agreement has been duly executed by the
parties hereto as of the day and year first above written.
EMERGING VISION, INC.
By: /s/ Christopher G. Payan
-----------------------------------
Name: Christopher G. Payan
Title: Senior Vice President,
Co-Chief Operating Officer and
Chief Financial Officer
MELLON INVESTOR SERVICES LLC
as Warrant Agent
By: /s/ Deborah Bass
-----------------------------------
Name: Deborah Bass
Title: Assistant Vice President
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Exhibit 99.1
----------------------------
RIGHTS CERTIFICATE NUMBER
---------------------------- --------------------------- ---------------------
UNITS ELIGIBLE TO SUBSCRIBE RIGHTS RECORD DATE SHARES
EMERGING VISION, INC.
SUBSCRIPTION FOR RIGHTS OFFERING
FEBRUARY __, 2003
SUBSCRIPTION CERTIFICATE
The registered owner of this Subscription Certificate is entitled to
subscribe for one unit (a "Unit") consisting of one share (a "Share") of the
common stock of Emerging Vision, Inc. and a warrant to purchase one additional
share of common stock for every one right (a "Right") held, 1.67 of which have
been issued for each share of common stock owned of record on February 25, 2003
(the "Record Date"). If such registered owner subscribes for the maximum number
of Units to which he or she is entitled through the basic subscription
privilege, he or she is entitled to subscribe for an unlimited number of
additional Units not otherwise subscribed for pursuant to the oversubscritpion
privilege, subject to proration as described in the Prospectus dated February
__, 2003, if there are sufficient available Units. For purposes of determining
the number of Units a holder may acquire, shareholders whose shares are held of
record on the Record Date by a depository or nominee will be deemed to be
holders of the Rights that are issued to such depository or nominee. All
subscriptions are subject to the terms and conditions set forth herein and in
the Prospectus.
By: Mellon Bank, N.A. as Subscription Agent
THIS RIGHTS OFFERING EXPIRES AT 5:00 P.M., NEW YORK CITY TIME, ON APRIL 14,
2003 AND THIS SUBSCRIPTION CERTIFICATE IS VOID THEREAFTER.
THIS RIGHTS OFFERING HAS BEEN QUALIFIED OR IS BELIEVED TO BE EXEMPT FROM
QUALIFICATION ONLY UNDER THE FEDERAL LAWS OF THE UNITED STATES AND THE LAWS OF
THE STATES IN THE UNITED STATES. RESIDENTS OF OTHER JURISDICTIONS MAY NOT
PURCHASE THE SECURITIES OFFERED HEREBY UNLESS THEY CERTIFY THAT THEIR PURCHASES
OF SUCH SECURITIES ARE EFFECTED IN ACCORDANCE WITH THE APPLICABLE LAWS OF SUCH
JURISDICTIONS.
SUBSCRIPTION TO PURCHASE UNITS OF EMERGING VISION, INC.
RETURN TO: MELLON BANK, N.A. C/O MELLON INVESTOR SERVICES LLC
---------------------------------------- --------------------------------------
BY MAIL: BY OVERNIGHT COURIER:
Mellon Bank, N.A. Mellon Bank, N.A.
c/o Mellon Investor Services LLC c/o Mellon Investor Services LLC
P.O. Box 3301 85 Challenger Road
South Hackensack, NJ 07606 Overpeck Centre
Attention: Reorganization Department Ridgefield Park, NJ 07660
Attention: Reorganization Department
---------------------------------------- --------------------------------------
----------------------------------------
BY HAND:
Mellon Bank, N.A.
c/o Mellon Investor Services LLC
120 Broadway, 13th Floor
New York, New York 10271
Attention: Reorganization Department
----------------------------------------
1. Number of Units subscribed for through the basic subscription privilege
(not to exceed one Unit for each Right held):
----------------------------------
Units
2. Number of Units subscribed for through the oversubscription privilege
(No limit, except basic subscription must be fully exercised):
---------------------------------
Units
3. Total Subscription Price (sum of lines 1 and 2 multiplied by $0.04):
$__________
4. Method of Payment (Check (A), (B) or (C):
|_| (A) Certified or Cashier's check or money order payable to Mellon Investor
Services LLC (acting on behalf of Mellon Bank, N.A.)
or
|_| (B) Wire Transfer directed to JP Morgan Chase Bank, New York, NY, ABA
#021000021, Reorg Acct #323-885489, FBO shareholder name, Ref: Emerging
Vision, Inc., Attn: Mellon Investor Services LLC, Evelyn O'Connor,
telephone no. 201-296-4515
or
|_| (C) Personal check payable to Mellon Investor Services LLC, received no
later than April 14, 2003. If your funds do not clear your bank before
5:00p.m., New York City time, Monday, April 14, 2003, your request for
Units will not be accepted.
--------------------------------------------------------------------------------
AGREEMENT AND SIGNATURE
I hereby irrevocably subscribe for the number of Units indicated above upon
the terms and conditions specified in the Prospectus relating thereto. Receipt
of the Prospectus is hereby acknowledged.
_______________________________
_______________________________
DATED: _______________________________, 2003
Please date and sign exactly as your name appears on the reverse side of
the Subscription Certificate. Joint owners should each sign. If signing as
executor, administrator, trustee, attorney or guardian, give title as such. If a
corporation, sign in full corporate name by authorized officer; if a
partnership, sign in the name of authorized person.
TO BE EXECUTED ONLY BY NON-UNITED STATES RESIDENTS:
I hereby certify that the foregoing purchase of Units has been effected in
accordance with the applicable laws of the jurisdiction in which I reside.
_______________________________
_______________________________
DATED: _______________________________, 2003
-2-
SPECIAL ISSUANCE OR DELIVERY INSTRUCTIONS
FOR RIGHTS HOLDERS:
(a) To be completed ONLY if the certificate representing the common stock
or the warrants is to be issued in a name other than that listed on the first
page. (See the Instructions.) DO NOT FORGET TO COMPLETE THE GUARANTEE OF
SIGNATURE(S) SECTION BELOW.
ISSUE SECURITIES TO:
-------------------------------------- -------------------------------------
(Please Print Name) (Street Address)
-------------------------------------- -------------------------------------
(Social Security # or Tax ID #) (City, State, Zip Code)
(b) To be completed ONLY if the certificate representing the common stock
or the warrants is to be sent to an address other than that listed on the first
page. (See the Instructions.) DO NOT FORGET TO COMPLETE THE GUARANTEE OF
SIGNATURE(S) SECTION BELOW.
-------------------------------------- -------------------------------------
(Please Print Name) (Street Address)
-------------------------------------- -------------------------------------
(Social Security # or Tax ID #) (City, State, Zip Code)
GUARANTEE OF SIGNATURE(S)
All holders of Rights who specify special issuance or delivery instructions
must have their signatures guaranteed by an Eligible Institution. An "Eligible
Institution" for this purpose is a bank, stockbroker, savings and loan
association and credit union with membership in an approved signature guaranteed
medallion program, pursuant to Rule 17Ad-l5 of the Securities Exchange Act of
1934, as amended.
Authorized Signature: _________________ Name of Firm:________________________
Name:__________________________________ Address:_____________________________
Title:_________________________________ Area Code and Telephone No.:_________
YOU MUST HAVE YOUR SIGNATURE GUARANTEED IF YOU WISH TO HAVE YOUR SECURITIES
DELIVERED TO AN ADDRESS OTHER THAN THAT LISTED ON THE FIRST PAGE OR TO A
SHAREHOLDER OTHER THAN THE REGISTERED HOLDER.
-3-
Your signature must be guaranteed by an Eligible Guarantor Institution, as
defined in Rule 17Ad-15 of the Securities Exchange Act of 1934, as amended.
These generally include a (a) commercial bank or trust company, (b) member firm
of a domestic stock exchange or (c) credit union.
Signature Guaranteed:
By:_______________________________________
(Signature of Officer)
_______________________________________
(Name of Bank or Firm)
-4-
Exhibit 99.2
EMERGING VISION, INC.
100 Quentin Roosevelt Boulevard
Garden City, New York 11530
February 25, 2003
Dear Shareholder:
On behalf of the Board of Directors of Emerging Vision, Inc. (the
"Company"), we are pleased to provide details on the Company's rights offering
to purchase units (the "Units"), each Unit consisting of one share of the
Company's common stock and a warrant to purchase one additional share of common
stock. The Units are being offered at the subscription price of $0.04 per share.
Each beneficial owner of the Company's common stock has the right to
purchase 1.67 Units for each share of common stock that they owned on February
25, 2003. You will not receive any fractional rights but instead the
subscription rights will be rounded down to the next lowest full subscription
right.
If you fully exercise the basic subscription privilege issued to you, you
may subscribe for additional Units through the oversubscription privilege. If
the Company's other shareholders receiving rights do not elect to purchase all
of the Units offered under their basic subscription privilege, then Units
purchased through the oversubscription privilege will be allocated pro rata
based on the number of Units each subscriber for additional Units has purchased
under the basic subscription privilege, as more fully described in the
Prospectus.
Enclosed are copies of the following documents:
1. Prospectus;
2. Instructions for Use of Emerging Vision, Inc. Subscription
Certificates;
3. Subscription Certificate; and
4. Return envelope addressed to Mellon Bank, N.A., the Subscription
Agent.
The enclosed Prospectus describes the rights offering and the procedure to
follow if you choose to exercise your rights. Please read the Prospectus and
other enclosed materials carefully.
Your prompt action is requested. The rights offering will expire at 5:00
p.m., New York City time, on April 14, 2003 (the "Expiration Date"), unless
extended by the Company in its sole discretion.
To exercise your rights, a properly completed and executed Subscription
Certificate and payment in full for all of the Units purchased must be delivered
to the Subscription Agent as indicated in the Prospectus prior to 5:00 p.m., New
York City time, on the Expiration Date.
Additional copies of the enclosed materials may be obtained by contacting
Mellon Investor Services LLC toll-free at 800-932-6798.
We are pleased to offer you this opportunity and hope that you will
consider a further investment in our Company.
Sincerely,
EMERGING VISION, INC.
-2-
Exhibit 99.3
EMERGING VISION, INC.
100 Quentin Roosevelt Boulevard
Garden City, New York 11530
50,000,000 UNITS, EACH UNIT CONSISTING OF ONE SHARE OF COMMON
STOCK AND A WARRANT TO PURCHASE ONE ADDITIONAL SHARE OF
COMMON STOCK,
ISSUABLE UPON EXERCISE OF SUBSCRIPTION RIGHTS
THE SUBSCRIPTION RIGHTS ARE EXERCISABLE UNTIL 5:00 P.M., NEW YORK
-----------------------------------------------------------------
CITY TIME, ON APRIL 14, 2003 UNLESS EXTENDED.
---------------------------------------------
February 25, 2003
To: Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees
This letter is being distributed to brokers, dealers, commercial banks,
trust companies and other nominees in connection with the offering by Emerging
Vision, Inc. of an aggregate of 50,000,000 units (the "Units"), each unit
consisting of one share of the Company's common stock ("Common Stock") and a
warrant to purchase one additional share of Common Stock, at a subscription
price of $0.04 per Unit (the "Subscription Price"), pursuant to the exercise of
non-transferable subscription rights ("Subscription Rights") initially
distributed to all holders of record of shares as of the close of business on
February 25, 2003. The Subscription Rights, including the oversubscription
privilege, are described in the enclosed prospectus and evidenced by a
Subscription Certificate registered in your name or in the name of your nominee.
Each beneficial owner of Common Stock registered in your name or the name
of your nominee is entitled to 1.67 Subscription Rights for each share of Common
Stock owned. Shareholders may purchase one Unit for each Subscription Right
exercised. Shareholders will not receive fractional Subscription Rights, but
instead Subscription Rights will be rounded down to the next lowest full
Subscription Right.
We are asking you to contact your clients for whom you hold shares of
Common Stock registered in your name or in the name of your nominee to obtain
instructions with respect to the Subscription Rights.
Enclosed are copies of the following documents for you to use:
1. Prospectus;
2. Form of Letter from Emerging Vision, Inc. to its Shareholders;
3. Instructions for Use of Emerging Vision, Inc. Subscription
Certificates; and
4. Return envelope addressed to Mellon Bank, N.A., the Subscription
Agent.
Your prompt action is requested. The Subscription Rights will expire at
5:00 P.M., New York City time, on April 14, 2003 (the "Expiration Date"), unless
extended by the Company in its sole discretion.
To exercise Subscription Rights, properly completed and executed
Subscription Certificates and payment in full for all Subscription Rights
exercised must be delivered to the Subscription Agent as indicated in the
prospectus prior to the Expiration Date.
The Company will not pay any fees or commissions to any broker, dealer or
other person for soliciting subscriptions for Subscription Rights pursuant to
the rights offering, other than the Subscription Agent and the Information Agent
as described in the prospectus.
Additional copies of the enclosed materials may be obtained by contacting
Mellon Investor Services LLC toll-free at 800-932-6798.
Sincerely,
EMERGING VISION, INC.
NOTHING HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU OR ANY
PERSON AS AN AGENT OF EMERGING VISION, INC., THE SUBSCRIPTION AGENT OR ANY OTHER
PERSON MAKING OR DEEMED TO BE MAKING OFFERS OF THE SECURITIES ISSUABLE UPON
VALID EXERCISE OF THE RIGHTS, OR AUTHORIZE YOU OR ANY OTHER PERSON TO MAKE ANY
STATEMENTS ON BEHALF OF ANY OF THEM WITH RESPECT TO THE OFFERING EXCEPT FOR
STATEMENTS MADE IN THE PROSPECTUS.
-2-
Exhibit 99.4
INSTRUCTIONS FOR USE OF
EMERGING VISION, INC.
SUBSCRIPTION CERTIFICATES
-----------------------------
CONSULT MELLON INVESTOR SERVICES LLC, YOUR BANK OR BROKER
AS TO ANY QUESTIONS
The following instructions relate to a rights offering (the "Rights
Offering") by Emerging Vision, Inc., a New York corporation (the "Company"), to
the holders of its common stock, par value $0.01 per share ("Common Stock"), as
described in Emerging Vision, Inc.'s prospectus, dated February __, 2003 (the
"Prospectus"). Holders of record of Common Stock at the close of business on
February 25, 2003 (the "Record Date") will receive 1.67 non-transferable
subscription rights (the "Subscription Rights") for each share of Common Stock
held by them as of the close of business on the Record Date. An aggregate of
50,000,000 Subscription Rights exercisable to purchase an aggregate of
50,000,000 units (the "Units"), each Unit consisting of one share of Common
Stock and a warrant (the "Warrants") to purchase one additional share of Common
Stock, are being distributed in connection with the Rights Offering. Each
Subscription Right is exercisable, upon payment of $0.04 (the "Subscription
Price"), to purchase one Unit (the "Basic Subscription Privilege"). In addition,
subject to the allocation described below, each Subscription Right also carries
the right to subscribe at the Subscription Price for additional unsubscribed
Units equal to the percentage of Units purchased by you under the Basic
Subscription Privilege, as compared to the total number of Units purchased by
all shareholders, including you, who are exercising their oversubscription
privilege (the "Oversubscription Privilege") (subject to proration). See "The
Offering" in the Prospectus.
No fractional Subscription Rights or cash in lieu thereof will be issued or
paid. The total number of Subscription Rights issued to each shareholder will be
rounded down to the next lowest full Subscription Right.
The Subscription Rights will expire at 5:00 p.m., New York City time, on
April 14, 2003 (as it may be extended, the "Expiration Date").
You are entitled to 1.67 Subscription Rights for each share of Common Stock
you own as of the Record Date. You should indicate your wishes with regard to
the exercise of your Subscription Rights by completing the appropriate section
on the back of your Subscription Certificate and returning the Subscription
Certificate to the Subscription Agent in the envelope provided.
THE SUBSCRIPTION AGENT MUST RECEIVE YOUR COMPLETED SUBSCRIPTION CERTIFICATE
ON OR BEFORE THE EXPIRATION DATE. IN ADDITION, THE SUBSCRIPTION AGENT MUST
RECEIVE PAYMENT OF THE SUBSCRIPTION PRICE, INCLUDING FINAL CLEARANCE OF ANY
CHECKS, FOR ALL SUBSCRIPTION RIGHTS EXERCISED ON OR BEFORE THE EXPIRATION DATE.
ONCE A HOLDER OF SUBSCRIPTION RIGHTS HAS EXERCISED THE SUBSCRIPTION PRIVILEGE
SUCH EXERCISE MAY NOT BE REVOKED.
1. Subscription Privileges. To exercise Subscription Rights, properly
complete and execute your Subscription Certificate and send it, together with
payment in full of the Subscription Price for each Unit subscribed for pursuant
to the Subscription Privilege to the Subscription Agent. Delivery of the
Subscription Certificate must be made by mail, by hand delivery or by overnight
delivery. FACSIMILE DELIVERY OF THE SUBSCRIPTION CERTIFICATE WILL NOT BE
ACCEPTED AND WILL NOT CONSTITUTE VALID DELIVERY. All payments must be made in
United States dollars by (a) check or bank draft (cashier's check) drawn on a
U.S. bank or money order payable to Mellon Investor Services LLC (acting on
behalf of Mellon Bank N.A. as Subscription Agent) or (b) wire transfer of
immediately available funds to the account maintained by the Subscription Agent
for such purpose at JP Morgan Chase Bank, New York, NY, ABA #021000021, Reorg
Acct #323-885489, FBO shareholder name, Ref: Emerging Vision, Inc., Attn: Mellon
Investor Services LLC, Evelyn O'Connor, telephone no. 201-296-4515. The
Subscription Price will be deemed to have been received by the Subscription
Agent under the conditions described in the paragraph below entitled Acceptance
of Payments.
Banks, brokers and other nominee holders of Subscription Rights who
exercise the Subscription Privilege on behalf of beneficial owners of
Subscription Rights will be required to certify to the Subscription Agent and to
the Company as to the aggregate number of Subscription Rights that have been
exercised by each beneficial owner of Subscription Rights on whose behalf such
nominee holder is acting.
Acceptance of Payments. Payments will be deemed to have been received by
the Subscription Agent only upon (a) the clearance of any uncertified check, (b)
the receipt by the Subscription Agent of any certified check or bank draft
(cashier's check) drawn on a U.S. bank, money order or (c) immediately available
funds transferred through a wire transfer. IF PAYING BY UNCERTIFIED PERSONAL
CHECK, PLEASE NOTE THAT THE FUNDS PAID THEREBY MAY TAKE AT LEAST FIVE BUSINESS
DAYS TO CLEAR FOLLOWING RECEIPT BY THE SUBSCRIPTION AGENT. ACCORDINGLY, HOLDERS
OF SUBSCRIPTION RIGHTS WHO WISH TO PAY THE SUBSCRIPTION PRICE BY MEANS OF
UNCERTIFIED PERSONAL CHECKS ARE URGED TO MAKE PAYMENT SUFFICIENTLY IN ADVANCE OF
THE EXPIRATION DATE TO ENSURE THAT THE SUBSCRIPTION AGENT RECEIVES CLEARED
PAYMENT BY SUCH DATE. YOU ARE URGED TO CONSIDER PAYMENT BY MEANS OF A CERTIFIED
CHECK, BANK DRAFT (CASHIER'S CHECK) OR MONEY ORDER.
Contacting the Subscription Agent. The address, telephone and facsimile
numbers of the Subscription Agent are as follows:
-2-
By Mail: By Overnight Courier:
-------- ---------------------
Mellon Bank, N.A. Mellon Bank, N.A.
c/o Mellon Investor Services LLC c/o Mellon Investor Services LLC
Post Office Box 3301 85 Challenger Road - Mail Drop - Reorg
Hackensack, NJ 07606 Ridgefield Park, NJ 07660
Attn: Reorganization Department Attn: Reorganization Department
By Hand:
--------
Mellon Bank, N.A.
c/o Mellon Investor Services LLC
120 Broadway, 13th Floor
New York, NY 10271
Attn: Reorganization Department
The address and telephone number of Mellon Investor Services LLC for
inquiries, information or requests for additional documentation is as follows:
44 Wall Street, 7th Floor
New York, NY 10005
(800) 932-6798
The Subscription Agent must receive the Subscription Certificate and
payment of the estimated subscription price on or before the Expiration Date.
Deposit in the mail will not constitute delivery to the Subscription Agent. The
Subscription Agent has discretion to refuse to accept any improperly completed
or unexecuted rights certificate.
No Subscription Rights Amount; Effect of Over and Underpayments. If you
have not indicated the number of Subscription Rights being exercised, or if you
do not deliver the dollar amount sufficient to purchase the number of Units
subscribed for, you will be deemed to have exercised the Subscription Privilege
with respect to the maximum number of whole Subscription Rights which may be
exercised for the Subscription Price payment you deliver. To the extent that the
dollar amount you deliver exceeds the product of the Subscription Price
multiplied by the number of Subscription Rights evidenced by the Subscription
Certificate you deliver (such excess being the "Subscription Excess"), any
excess amount will be returned to you.
2. Delivery of Stock Certificates. The following deliveries and payments to
you will be made to the address shown on the face of your Subscription
Certificate unless you provide instructions to the contrary on the reverse side
of your Subscription Certificate.
(a) Basic Subscription Privilege. As soon as practicable after the valid
exercise of Subscription Rights and the Expiration Date, the Subscription Agent
will mail to each exercising Subscription Rights holder (i) certificates
representing shares of Common Stock and (ii) Warrants purchased pursuant to the
Basic Subscription Privilege.
(b) Oversubscription Privilege. As soon as practicable after the Expiration
Date and after all prorations and adjustments contemplated by the terms of the
Rights Offering have been effected, the Subscription Agent will mail to each
Subscription Rights holder who validly exercises the Oversubscription Privilege
the number of (i) certificates representing shares of Common Stock and (ii)
Warrants allocated to such Subscription Rights holder pursuant to the
Oversubscription Privilege. See "The Offering" in the Prospectus.
-3-
(c) Excess Payments. As soon as practicable after the Expiration Date and
after all prorations and adjustments contemplated by the terms of the Rights
Offering have been effected, the Subscription Agent will mail promptly to each
Subscription Rights holder any excess funds received (without interest or
deduction) in payment of the Subscription Price for Units that are subscribed
for but not allocated to such Subscription Rights holder pursuant to the
Subscription Privilege.
3. To Have a Subscription Certificate Divided into Smaller Denominations.
To have a Subscription Certificate divided into certificates for smaller numbers
of Subscription Rights, send your Subscription Certificate, together with
complete instructions (including specification of the whole number of
Subscription Rights you wish to be evidenced by each new Subscription
Certificate) signed by you, to the Subscription Agent, allowing a sufficient
amount of time for new Subscription Certificates to be issued and returned so
that they can be used prior to the Expiration Date. Alternatively, you may ask a
bank or broker to effect such actions on your behalf. As a result of delays in
the mail, the time of the transmittal, the necessary processing time and other
factors, you may not receive such new Subscription Certificates in time to
enable you to complete an exercise by the Expiration Date. Neither the Company
nor the Subscription Agent will be liable to you for any such delays.
4. Execution.
(a) Execution by Registered Holder. The signature on the Subscription
Certificate must correspond with the name of the registered holder exactly as it
appears on the face of the Subscription Certificate without any alteration or
change whatsoever. Persons who sign the Subscription Certificate in a
representative or other fiduciary capacity must indicate their capacity when
signing and, unless waived by the Subscription Agent in its sole and absolute
discretion, must present to the Subscription Agent satisfactory evidence of
their authority so to act.
(b) Execution by Person Other than Registered Holder. If the Subscription
Certificate is executed by a person other than the holder named on the face of
the Subscription Certificate, proper evidence of authority of the person
executing the Subscription Certificate must accompany the same unless the
Subscription Agent, in its discretion, dispenses with proof of authority.
(c) Signature Guarantees. Your signature must be guaranteed by an Eligible
Guarantor Institution if you specify special issuance or delivery instructions.
5. Method of Delivery. The method of delivery of Subscription Certificates
and the payment of the Subscription Price to the Subscription Agent will be at
the election and risk of the Subscription Rights holder. If sent by mail, it is
recommended that they be sent by registered mail, properly insured, with return
receipt requested, and that a sufficient number of days be allowed to ensure
delivery to the Subscription Agent prior to the Expiration Date.
-4-
6. Special Provisions Relating to the Delivery of Subscription Rights
through Depository Facility Participants. In the case of holders of Subscription
Rights that are held of record through The Depository Trust Company ("DTC"),
exercises of the Subscription Privilege may be effected by instructing DTC to
transfer Subscription Rights (such Subscription Rights, "Depository Rights")
from the DTC account of such holder to the DTC account of the Subscription
Agent, together with payment of the Subscription Price for each Unit subscribed
for pursuant to the Subscription Privilege.
-5-
Exhibit 99.5
SUBSCRIPTION AGENT AGREEMENT
February 10, 2003
Mellon Bank, N.A.
85 Challenger Rd.
Ridgefield Park, NJ 07660
Attn: Reorganization Department
Gentlemen:
Emerging Vision, Inc., a New York corporation (the "Company"), is offering
(the "Subscription Offer") to the holders of record of its outstanding shares of
common stock, par value $0.01 per share (the "Common Stock"), at the close of
business on February 25, 2003 (the "Record Date"), the right to subscribe for
and purchase (each a "Right") units (the "Units"), each Unit consisting of one
share of Common Stock and a warrant (the "Additional Warrants," and together
with the shares of Common Stock underlying the Units, the "Securities") to
purchase one additional share of Common Stock, at a purchase price of $0.04 per
Unit (the "Subscription Price"), payable by certified or cashier's check, bank
draft drawn upon a U.S. bank or a U.S. postal money order, or a personal check
that clears before expiration of the Rights, upon the terms and conditions set
forth herein. The Company shall issue 1.67 Rights for each share of Common Stock
held as of the Record Date. The term "Subscribed" shall mean submitted for
purchase from the Company by a shareholder in accordance with the terms of the
Subscription Offer and the term "Subscription" shall mean any such submission.
The Subscription Offer will expire at 5:00 p.m., New York City time, on April
14, 2003 (the "Expiration Time"), unless the Company shall have extended the
period of time for which the Subscription Offer is open, in which event the term
"Expiration Time" shall mean the latest time and date at which the Subscription
Offer, as so extended by the Company from time to time, shall expire.
The Company filed an amended Registration Statement relating to the Units
with the Securities and Exchange Commission under the Securities Act of 1933, as
amended, on February 10, 2003. Said Registration Statement was declared
effective on February __, 2003. The terms of the Units are more fully described
in the Prospectus forming part of the Registration Statement as it was declared
effective, and the accompanying Letter of Instruction. Copies of the Prospectus
and the Letter of Instruction are annexed hereto as Exhibit 2 and Exhibit 3,
respectively. All terms used and not defined herein shall have the same meaning
as in the Prospectus. Promptly after the Record Date, the Company will provide
you with a list of holders of Common Stock as of the Record Date (the "Record
Shareholders List").
The Rights are evidenced by non-transferable subscription warrants (the
"Warrants"), a copy of the form of which is annexed hereto as Exhibit 4. The
Warrants entitle the holders to subscribe, upon payment of the Subscription
Price, for Units at the rate of one Unit for each Right evidenced by a Warrant
(the "Basic Subscription Privilege"). No fractional Rights will be issued, but
the number of Rights issued will be rounded down to the next lowest whole
number. Reference is made to the Prospectus for a complete description of the
Basic Subscription Privilege.
Further, the Subscription Offer provides that subscribing shareholders, and
only those subscribing shareholders who exercise their Rights in full, may
exercise an Oversubscription Right as more fully described in the Registration
-1-
Statement. Mellon Bank, N.A. shall, after the initial allocation of Units to
those shareholders exercising their Basic Subscription Right, allocate any
remaining Basic Subscription, as more fully described in the Registration
Statement.
The Company hereby appoints you as Subscription Agent (the "Subscription
Agent") for the Subscription Offer and agrees with you as follows:
1) As Subscription Agent, you are authorized and directed to:
(A) Issue the Warrants in accordance with this Agreement in the names of
the holders of the Common Stock of record on the Record Date, keep such records
as are necessary for the purpose of recording such issuance, and furnish a copy
of such records to the Company. The Warrants may be signed on behalf of the
Subscription Agent by the manual or facsimile signature of a Vice President or
Assistant Vice President of the Subscription Agent, or by the manual signature
of any of its other authorized officers.
(B) Promptly after you receive the Record Shareholders List:
(a) mail or cause to be mailed, by first class mail, to each holder of
Common Stock of record on the Record Date whose address of record is within the
United States and Canada, (i) a Warrant evidencing the Rights to which such
shareholder is entitled under the Subscription Offer, (ii) a copy of the
Prospectus, (iii) a Letter of Instruction and (iv) a return envelope addressed
to the Subscription Agent; and
(b) mail or cause to be mailed, by air mail, to each holder of Common Stock
of record on the Record Date whose address of record is outside the United
States and Canada, or is an A.P.O. or F.P.O. address (i) a copy of the
Prospectus and (ii) a Letter of Instruction (different from the Letter of
Instruction sent to shareholders whose address of record is within the United
States and Canada). You shall refrain from mailing Warrants issuable to any
holder of Common Stock of record on the Record Date whose address of record is
outside the United States and Canada, or is an A.P.O. or F.P.O. address, and
hold such Warrants for the account of such shareholder subject to such
shareholder making satisfactory arrangements with the Subscription Agent for the
exercise or other disposition of the Rights evidenced thereby, and follow the
instructions of such shareholder for the exercise, sale or other disposition of
such Rights if such instructions are received at or before 11:00 a.m., New York
City time, on April 10, 2003.
(C) Accept Subscriptions upon the due exercise (including payment of the
Subscription Price) on or prior to the Expiration Time of Rights in accordance
with the terms of the Warrants and the Prospectus.
(E) Subject to the next sentence, accept Subscriptions from shareholders
whose Warrants are alleged to have been lost, stolen or destroyed upon receipt
by you of an affidavit of theft, loss or destruction and a bond of indemnity in
form and substance satisfactory to you, accompanied by payment of the
Subscription Price for the total number of Units Subscribed for. Upon receipt of
such affidavit and bond of indemnity and compliance with any other applicable
requirements, stop orders shall be placed on said Warrants and you shall
withhold delivery of the Units Subscribed for until after the Warrants have
expired and it has been determined that the Rights evidenced by the Warrants
have not otherwise been purported to have been exercised or otherwise
surrendered.
(F) Accept Subscriptions, without further authorization or direction from
the Company, without procuring supporting legal papers or other proof of
authority to sign (including without limitation proof of appointment of a
fiduciary or other person acting in a representative capacity), and without
signatures of co-fiduciaries, co-representatives or any other person:
-2-
(a) if the Warrant is registered in the name of a fiduciary and is executed
by and the Securities are to be issued in the name of such fiduciary;
(b) if the Warrant is registered in the name of joint tenants and is
executed by one of the joint tenants, provided the certificate representing the
Securities are issued in the names of, and is to be delivered to, such joint
tenants;
(c) if the Warrant is registered in the name of a corporation and is
executed by a person in a manner which appears or purports to be done in the
capacity of an officer, or agent thereof, provided the Securities are to be
issued in the name of such corporation; or
(d) if the Warrant is registered in the name of an individual and is
executed by a person purporting to act as such individual's executor,
administrator or personal representative, provided, the Securities are to be
registered in the name of the subscriber as executor or administrator of the
estate of the deceased registered holder and there is no evidence indicating the
subscriber is not the duly authorized representative that he purports to be.
(G) Refer to the Company for specific instructions as to acceptance or
rejection, Subscriptions received after the Expiration Time, Subscriptions not
authorized to be accepted pursuant to this Paragraph G, and Subscriptions
otherwise failing to comply with the requirements of the Prospectus and the
terms and conditions of the Warrants.
(H) Upon acceptance of a Subscription:
(a) hold all monies received in a special account for the benefit of the
Company. Promptly following the Expiration Time you shall distribute to the
Company the funds in such account and issue certificates for Securities issuable
with respect to Subscriptions which have been accepted.
(b) advise the Company daily by telecopy or email transmission and confirm
by letter to the attention of Christopher G. Payan (the "Company
Representative") as to the total number of Units Subscribed for, total number of
Rights partially Subscribed for and the amount of funds received, with
cumulative totals for each; and in addition advise the Company Representative,
by telephone (516-390-2134), confirmed by telecopy or email, of the amount of
funds received identified in accordance with (a) above, deposited, available or
transferred in accordance with (a) above, with cumulative totals; and
(c) as promptly as possible but in any event on or before 3:30 p.m., New
York City time, on the first full business day following the Expiration Time,
advise the Company Representative in accordance with (b) above of the number of
Units Subscribed for and the number of Units unsubscribed for.
(I) Upon completion of the Subscription Offer, you shall requisition
certificates from the Transfer Agent for the Common Stock for shares of Common
Stock underlying the Units Subscribed for.
2) (A) The Warrants shall be issued in registered form only. The Company
shall appoint and have in office at all times a Transfer Agent and Registrar for
the Warrants, satisfactory to you, which shall keep books and records of the
registration and transfers and exchanges of Warrants (such books and records are
hereinafter called the "Warrant Register"). The Company shall promptly notify
-3-
the Transfer Agent and Registrar of the exercise of any Warrants. The Company
shall promptly notify you of any change in the Transfer Agent and Registrar of
the Warrants.
(B) All Warrants issued upon any registration of transfer or exchange of
Warrants shall be the valid obligations of the Company, evidencing the same
obligations, and entitled to the same benefits under this Agreement, as the
Warrants surrendered for such registration of transfer or exchange.
(C) Any Warrant when duly endorsed in blank shall be deemed negotiable, and
when a Warrant shall have been so endorsed the holder thereof may be treated by
the Company, you and all other persons dealing therewith as the absolute owner
thereof for any purpose and as the person entitled to exercise the rights
represented thereby, any notice to the contrary notwithstanding, but until such
transfer is registered in the Warrant Register, the Company and you may treat
the registered holder thereof as the owner for all purposes.
3) You will follow your regular procedures to attempt to reconcile any
discrepancies between the number of Units that any Warrant may indicate are to
be issued to a shareholder and the number that the Record Shareholders List
indicates may be issued to such shareholder. In any instance where you cannot
reconcile such discrepancies by following such procedures, you will consult with
the Company for instructions as to the number of Securities, if any, you are
authorized to issue. In the absence of such instructions, you are authorized not
to issue any Securities to such shareholder.
4) You will examine the Warrants received by you as Subscription Agent to
ascertain whether they appear to you to have been completed and executed in
accordance with the applicable Letter of Instruction. In the event you determine
that any Warrant does not appear to you to have been properly completed or
executed, or where the Warrants do not appear to you to be in proper form for
Subscription, or any other irregularity in connection with the Subscription
appears to you to exist, you will follow, where possible, your regular
procedures to attempt to cause such irregularity to be corrected. You are not
authorized to waive any irregularity in connection with the Subscription, unless
you shall have received from the Company the Warrant which was delivered, duly
dated and signed by an authorized officer of the Company, indicating that any
irregularity in such Warrant has been cured or waived and that such Warrant has
been accepted by the Company. If any such irregularity is neither corrected nor
waived, you will return to the subscribing shareholder (at your option by either
first class mail under a blanket surety bond or insurance protecting you and the
Company from losses or liabilities arising out of the non-receipt or nondelivery
of Warrants or by registered mail insured separately for the value of such
Warrants) to such shareholder's address as set forth in the Subscription any
Warrants surrendered in connection therewith and any other documents received
with such Warrants, and a letter of notice to be furnished by the Company
explaining the reasons for the return of the Warrants and other documents.
5) Each document received by you relating to your duties hereunder shall be
dated and time stamped when received.
6) (A) For so long as this Agreement shall be in effect, the Company will
reserve for issuance and keep available free from preemptive rights a sufficient
number of shares of Common Stock to permit the exercise in full of all Rights
issued pursuant to the Subscription Offer. Subject to the terms and conditions
of this Agreement, you will request the Transfer Agent for the Common Stock to
issue certificates evidencing the appropriate number of shares of Common Stock
as required from time to time in order to effectuate the Subscriptions.
-4-
(B) The Company shall take any and all action, including without limitation
obtaining the authorization, consent, lack of objection, registration or
approval of any governmental authority, or the taking of any other action under
the laws of the United States of America or any political subdivision thereof,
to ensure that all shares of Common Stock issuable upon the exercise of the
Warrants at the time of delivery of the certificates therefor (subject to
payment of the Subscription Price) will be duly and validly issued and fully
paid and nonassessable shares of Common Stock, free from all preemptive rights
and taxes, liens, charges and security interests created by or imposed upon the
Company with respect thereto.
(C) The Company shall from time to time take all action necessary or
appropriate to obtain and keep effective all registrations, permits, consents
and approvals of the Securities and Exchange Commission and any other
governmental agency or authority and make such filings under Federal and state
laws which may be necessary or appropriate in connection with the issuance,
sale, transfer and delivery of Warrants or Common Stock issued upon exercise of
Warrants.
7) If certificates representing Securities are to be delivered by you to a
person other than the person in whose name a surrendered Warrant is registered,
you will issue no certificate for Securities until the Warrant so surrendered
has been properly endorsed (or otherwise put in proper form for transfer) and
the person requesting such exchange has paid any transfer or other taxes or
governmental charges required by reason of the issuance of a certificate for
Securities in a name other than that of the registered holder of the Warrant
surrendered, or has established to your satisfaction that any such tax or charge
either has been paid or is not payable.
8) Should any issue arise regarding federal income tax reporting or
withholding, you will take such action as the Company instructs you in writing.
9) The Company may terminate this Agreement at any time by so notifying you
in writing. You may terminate this Agreement upon 30 days' prior notice to the
Company. Upon any such termination, you shall be relieved and discharged of any
further responsibilities with respect to your duties hereunder. Upon payment of
all your outstanding fees and expenses, you will forward to the Company or its
designee promptly any Warrant or other document relating to your duties
hereunder that you may receive after your appointment has so terminated.
Sections 11, 12, and 14 of this Agreement shall survive any termination of this
Agreement.
10) As agent for the Company hereunder you:
(A) shall have no duties or obligations other than those specifically set
forth herein or as may subsequently be agreed to in writing by you and the
Company;
(B) shall have no obligation to issue any Securities unless the Company
shall have provided a sufficient number of certificates for such Securities;
(C) shall be regarded as making no representations and having no
responsibilities as to the validity, sufficiency, value, or genuineness of any
Warrants surrendered to you hereunder or Securities issued in exchange therefor,
and will not be required to or be responsible for and will make no
representations as to, the validity, sufficiency, value or genuineness of the
Subscription Offer;
(D) shall not be obligated to take any legal action hereunder; if, however,
you determine to take any legal action hereunder, and where the taking of such
action might, in your judgment, subject or expose you to any expense or
liability you shall not be required to act unless you shall have been furnished
with an indemnity satisfactory to you;
-5-
(E) may rely on and shall be fully authorized and protected in acting or
failing to act upon any certificate, instrument, opinion, notice, letter,
telegram, telex, facsimile transmission or other document or security delivered
to you and believed by you to be genuine and to have been signed by the proper
party or parties;
(F) shall not be liable or responsible for any recital or statement
contained in the Prospectus or any other documents relating thereto;
(G) shall not be liable or responsible for any failure on the part of the
Company to comply with any of its covenants and obligations relating to the
Subscription Offer, including without limitation obligations under applicable
securities laws;
(H) may rely on and shall be fully authorized and protected in acting or
failing to act upon the written, telephonic or oral instructions with respect to
any matter relating to you acting as Subscription Agent covered by this
Agreement (or supplementing or qualifying any such actions) of officers of the
Company;
(I) may consult with counsel satisfactory to you, including Piper Rudnick
LLP, and the advice of such counsel shall be full and complete authorization and
protection in respect of any action taken, suffered, or omitted by you hereunder
in good faith and in accordance with the advice of such counsel;
(J) may perform any of your duties hereunder either directly or by or
through agents or attorneys and you shall not be liable or responsible for any
misconduct or negligence on the part of any agent or attorney appointed with
reasonable care by you hereunder; and
(K) are not authorized, and shall have no obligation, to pay any brokers,
dealers, or soliciting fees to any person.
11) In the event any question or dispute arises with respect to the proper
interpretation of the Subscription Offer or your duties hereunder or the rights
of the Company or of any shareholders surrendering Warrants pursuant to the
Subscription Offer, you shall not be required to act and shall not be held
liable or responsible for your refusal to act until the question or dispute has
been judicially settled (and, if appropriate, you may file a suit in
interpleader or for a declaratory judgment for such purpose) by final judgment
rendered by a court of competent jurisdiction, binding on all parties interested
in the matter which is no longer subject to review or appeal, or settled by a
written document in form and substance satisfactory to you and executed by the
Company and each such shareholder and party. In addition, you may require for
such purpose, but shall not be obligated to require, the execution of such
written settlement by all the shareholders and all other parties that may have
an interest in the settlement.
12) Any instructions given to you orally, as permitted by any provision of
this Agreement, shall be confirmed in writing by the Company as soon as
practicable. You shall not be liable or responsible and shall be fully
authorized and protected for acting, or failing to act, in accordance with any
oral instructions which do not conform with the written confirmation received in
accordance with this Section.
13) Whether or not any Warrants are surrendered to you, for your services
as Subscription Agent hereunder, the Company shall pay to you compensation in
accordance with the fee schedule attached as Exhibit 1 hereto, together with
reimbursement for out-of-pocket expenses, including reasonable fees and
disbursements of counsel.
-6-
14) (A) The Company covenants to indemnify and hold you harmless from and
against any loss, liability, claim or expense ("Loss") arising out of or in
connection with your duties under this Agreement, including the costs and
expenses of defending yourself against any Loss, unless such Loss shall have
been determined by a court of competent jurisdiction to be a result of your
gross negligence or intentional misconduct. Anything in this Agreement to the
contrary notwithstanding, in no event shall you be liable for special, indirect,
incidental or consequential loss or damage of any kind whatsoever (including but
not limited to lost profits), even if you have been advised of the likelihood of
such damages and regardless of the form of action. Any liability of yours will
be limited to the amount of fees paid by the Company hereunder.
(B) In the event any question or dispute arises with respect to the proper
interpretation of this Agreement or your duties hereunder or the rights of the
Company or of any shareholders surrendering Rights for Units pursuant to the
Subscription Offer, you shall not be required to act and shall not be held
liable or responsible for your refusal to act until the question or dispute has
been judicially settled (and you may, if you in your sole discretion deem it
advisable, but shall not be obligated to, file a suit in interpleader or for a
declaratory judgment for such purpose) by final judgment rendered by a court of
competent jurisdiction, binding on all shareholders and parties interested in
the matter which is no longer subject to review or appeal, or settled by a
written document in form and substance satisfactory to you and executed by the
Company and each such shareholder and party. In addition, you may require for
such purpose, but shall not be obligated to require, the execution of such
written settlement by all the shareholders and all other parties that may have
an interest in the settlement.
The obligations of Company under this section shall survive the termination
of this Agreement.
15) If any provision of this Agreement shall be held illegal, invalid, or
unenforceable by any court, this Agreement shall be construed and enforced as if
such provision had not been contained herein and shall be deemed an Agreement
among us to the full extent permitted by applicable law.
16) The Company represents and warrants that (a) it is duly incorporated,
validly existing and in good standing under the laws of its jurisdiction of
incorporation, (b) the making and consummation of the Subscription Offer and the
execution, delivery and performance of all transactions contemplated thereby
(including without limitation this Agreement) have been duly authorized by all
necessary corporate action and will not result in a breach of or constitute a
default under the certificate of incorporation or bylaws of the Company or any
indenture, agreement or instrument to which it is a party or is bound, (c) this
Agreement has been duly executed and delivered by the Company and constitutes
the legal, valid, binding and enforceable obligation of it, (d) the Subscription
Offer will comply in all material respects with all applicable requirements of
law and (e) to the best of its knowledge, there is no litigation pending or
threatened as of the date hereof in connection with the Subscription Offer.
17) In the event that any claim of inconsistency between this Agreement and
the terms of the Subscription Offer arise, as they may from time to time be
amended, the terms of the Subscription Offer shall control, except with respect
to the duties, liabilities and rights, including compensation and
indemnification of you as Subscription Agent, which shall be controlled by the
terms of this Agreement.
-7-
18) Set forth in Exhibit 5 hereto is a list of the names and specimen
signatures of the persons authorized to act for the Company under this
Agreement. The Secretary of the Company shall, from time to time, certify to you
the names and signatures of any other persons authorized to act for the Company
under this Agreement.
19) Except as expressly set forth elsewhere in this Agreement, all notices,
instructions and communications under this Agreement shall be in writing, shall
be effective upon receipt and shall be addressed, if to the Company, to its
address set forth beneath its signature to this Agreement, or, if to the
Subscription Agent, to Mellon Bank, N.A., c/o Mellon Investor Services LLC, 85
Challenger Rd., Ridgefield Park, NJ 07660, Attention: Reorganization Department,
or to such other address as a party hereto shall notify the other parties.
20) This Agreement shall be governed by and construed in accordance with
the laws of the State of New York, without giving effect to conflict of laws
rules or principles, and shall inure to the benefit of and be binding upon the
successors and assigns of the parties hereto; provided that this Agreement may
not be assigned by any party without the prior written consent of all other
parties.
21) No provision of this Agreement may be amended, modified or waived,
except in a written document signed by both parties.
22) This Agreement may be executed in one or more counterparts, each of
which shall be deemed an original, but all of which shall constitute one and the
same instrument.
[Remainder of page intentionally left blank.]
-8-
Please acknowledge receipt of this letter and confirm your agreement
concerning your appointment as Subscription Agent, and the arrangements herein
provided, by signing and returning the enclosed copy hereof, whereupon this
Agreement and your acceptance of the terms and conditions herein provided shall
constitute a binding Agreement between us.
Very truly yours,
EMERGING VISION, INC.
By: /s/ Christopher G. Payan
-----------------------------------
Name: Christopher G. Payan
Title: Senior Vice President,
Co-Chief Operating Officer and
Chief Financial Officer
Address for notices:
100 Quentin Roosevelt Boulevard
Suite 508
Garden City, NY 11530
Telecopy: (516) 390-2110
Accepted as of the date
above first written:
MELLON BANK, N.A.
AS SUBSCRIPTION AGENT
By: /s/ Michael A. Nespoli
---------------------------------
Name: Michael A. Nespoli
Title: Vice President
-9-
Exhibit 1 Schedule of Fees
Exhibit 2 Prospectus
Exhibit 3 Letter of Instruction
Exhibit 4 Form of Warrant
Exhibit 5 Authorized Persons
-10-
Exhibit 1
MELLON INVESTOR SERVICES LLC
Schedule of Fees
Subscription Agent, Information Agent and Warrant Agent
Combined Flat Fee (including printing) $ 47,530.00
--------------------------------------------------------------------------------
Plus:
-----
Out of Pocket Expenses Additional
Including Postage, Prospectus, Stationery,
Overtime, Transportation, etc.
Midnight Expirations, each $ 5,000.00
Includes System Time, Security, Window Facility, Post Office
Pick Up at Midnight, etc.
Extension of Offer, each $ 6,000.00
Special Services
----------------
* Special Tax Reporting $3.00/account
* Programming fees $250 per hour
* Attorney Review of Agreement (if there are $1,000.00
significant variations on the standard language)
* Mail Date changes $500.00
* Archive Storage of Boxes, each box $2.50/month
($50 minimum/month)
* Media & Drafting Services $175 per hour
* Changes to Standard Documents By Appraisal
* Additional Special Services By Appraisal
-11-
Exhibit 5
Names and Specimen Signatures of the Persons
Authorized to Act for the Company under this Agreement
Signature Title
--------- -----
Senior Vice President, Co-Chief
Operating Officer, Chief Financial
Officer, Secretary and Treasurer
President, Chief Financial Officer,
/s/ Christopher G. Payan Treasurer and Secretary
-----------------------------
Christopher G. Payan
Co-Chief Operating Officer and
/s/ Samuel Z. Herskowitz Chief Marketing Officer
-----------------------------
Samuel Z. Herskowitz
Co-Chief Operating Officer and
Senior Vice President - Business
/s/ Myles S. Lewis Development
-----------------------------
Myles S. Lewis
-12-
Exhibit 99.6
INFORMATION AGENT SERVICE AGREEMENT
February 10, 2003
Ladies and Gentlemen:
With respect to your role as Information Agent, you shall provide the
following services (the "services").
1. Services
a) Assist in the coordination of advertisement placement if
required.
b) Establishing contacts with brokers, dealers, banks and other
nominees on our behalf.
c) Determining the material requirements.
d) Assistance with document drafting and review.
e) Facilitate the distribution of materials to the registered and
beneficial owners and to other interested parties.
f) Providing a dedicated toll-free line for all shareholder
queries.
g) Status reporting to management.
h) Payment of all broker forwarding invoices, subject to
collection from us of monies for this purpose.
i) Assist in the coordination of all printing activities
2. Fees for Services. The management fee for acting as information agent
plus all out-of pocket expense incurred by you, including, without limitation,
documentation preparation, telephone, Bank/Broker listings, and postage costs
shall be payable upon the execution of this agreement. Invoices for
out-of-pocket expenses shall be rendered monthly as incurred and shall be
payable upon receipt. Your services shall commence upon receipt of a signed copy
of this contract and expire thirty days from the expiration of the offer, or May
31, 2003 whichever is sooner.
This Agreement may be executed in one or more counterparts, each of which
shall be deemed an original, but all of which shall constitute one and the same
instrument.
[Remainder of page intentionally left blank.]
Please acknowledge receipt of this letter and confirm your agreement
concerning your appointment as Information Agent, and the arrangements herein
provided, by signing and returning the enclosed copy hereof, whereupon this
Agreement and your acceptance of the terms and conditions herein provided shall
constitute a binding Agreement between us.
Very truly yours,
EMERGING VISION, INC.
By: /s/ Christopher G. Payan
---------------------------------------
Name: Christopher G. Payan
Title: Senior Vice President,
Co-Chief Operating Officer and
Chief Financial Officer
Address for notices:
100 Quentin Roosevelt Boulevard
Garden City, NY 11530
Telecopy: (516) 390-2110
Accepted as of the date above first written:
Mellon Investor Services LLC
AS INFORMATION AGENT
By: /s/ Mark C. Smith
--------------------------------------
Name: Mark C. Smith
Title: Event Manager - Corporate Actions