UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A
X Annual Report pursuant to Section 13 or 15(d) of the Securities Exchange
----- Act of 1934, for the fiscal year ended December 31, 2001
or
Transition Report pursuant to Section 13 or 15(d) of the Securities
----- Exchange Act of 1934 for the transition period from _______ to _______.
Commission File Number: 1-14128
EMERGING VISION, INC.
(Exact name of Registrant as specified in its Charter)
New York 11-3096941
(State of Incorporation) (IRS Employer Identification Number)
100 Quentin Roosevelt Boulevard
Garden City, NY 11530
Telephone Number: (516) 390-2100
(Address and Telephone Number of
Principal Executive Offices)
------------------------------
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
TITLE
Common Stock, par value $0.01 per share
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days:
Yes X No
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in the definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
The aggregate market value of the Registrant's Common Stock, par value
$0.01 per share (the "Common Stock") held by non-affiliates of the Registrant as
of April 22, 2002 (based upon the closing price of $0.08 per share as quoted on
the OTC Bulletin Board), was approximately $1,711,000. For purposes of this
computation, the shares of Common Stock held by directors, executive officers
and principal shareholders owning more than 5% of the Registrant's outstanding
Common Stock and for which a Schedule 13G was filed, were deemed to be stock
held by affiliates. As of April 22, 2002, there were approximately 21,389,000
outstanding shares of Common Stock held by non-affiliates.
As of April 22, 2002, there were outstanding 27,004,972 shares of the
Registrant's Common Stock and 2.51 shares of the Registrant's Senior Convertible
Preferred Stock, par value $0.01 per share (convertible into an aggregate of
334,667 shares of the Registrant's Common Stock).
This Report on Form 10-K/A - Amendment No. 1 (this "Amendment") amends and
supplements the Annual Report on Form 10-K (the "Original Form 10-K") filed by
Emerging Vision, Inc., a New York corporation ("EVI" and, together with its
subsidiaries, hereinafter collectively referred to as the "Company"), on April
16, 2002. The sole purpose of this Amendment is to amend and restate Items
10,11,12 and 13 of Part III of the Original Form 10-K to read in their entirety
as set forth below. Capitalized terms used, but not otherwise defined herein
shall have the respective meanings ascribed to them in the Original Form 10-K.
PART III
Item 10. Directors and Executive Officers of the Registrant
The Board of Directors presently consists of six directors, Mr. Jerry
Novack, who was appointed to the Board on August 15, 2001, having previously
resigned. The directors of EVI are divided into two classes, designated as Class
1 and Class 2, respectively. Directors of each Class will be elected at the
Annual Meeting of the Shareholders of EVI held in the year in which the term of
such Class expires, and will serve thereafter for two years. All directors serve
until their respective successors are duly elected and qualified or until an
earlier resignation, removal from office, retirement or death. Mr. Robert S.
Hillman, Mr. William F. Stasior and Mr. Benito R. Fernandez presently serve as
Class 1 Directors and are scheduled to hold office until the 2002 Annual Meeting
of Shareholders. Drs. Robert and Alan Cohen and Mr. Joel L. Gold presently serve
as Class 2 Directors and are scheduled to hold office until the 2003 Annual
Meeting of Shareholders.
INFORMATION CONCERNING DIRECTORS AND EXECUTIVE OFFICERS
The directors and executive officers of EVI, VCC and/or the Company are as
follows:
Name Age Position
Robert S. Hillman 59 Chairman of the Board of
Directors, President and
Chief Executive Officer
Alan Cohen, O.D. 51 Vice Chairman of the Board
of Directors
Robert Cohen, O.D. 57 Director
William F. Stasior 61 Director
Joel L. Gold 58 Director
Benito R. Fernandez 60 Director
Christopher G. Payan 27 Senior Vice President,
Chief Financial Officer,
Secretary and Treasurer
Dr. Nicholas Shashati 42 President - VisionCare of
California, Inc. ("VCC")
Robert S. Hillman was appointed as Chairman of the Company's Board of
Directors, President and Chief Executive Officer, effective July 2, 2001. From
1994 to June 2001, Mr. Hillman was the Managing Director of America's Eyes, a
subsidiary of Moulin International, a publicly traded, Hong Kong company
operating a 23 store retail optical chain located in Shanghai, China, which
position he resigned from in June 2001, although he continues to be a principal
shareholder of such entity. Mr. Hillman is a veteran of the optical industry,
having been the founder, President and principal shareholder of: (i)
Hillman/Kohan Eyeglasses, Inc., a 15 store retail optical chain which
subsequently merged with and into Pearle Vision, thereafter growing into the
first national eyewear chain, with over 200 stores; (ii) Eyelab, Inc., the
creator of the first "mega super store" for the optical industry, thereafter
growing into a 40 store chain; and (iii) Hillman/Kohan Eyes, Inc., a 10 store
retail optical chain catering to the fashion segment of the optical industry,
which subsequently was sold to Lenscrafters. Most recently, Mr. Hillman was the
recipient of the 2001 Star Vision Award from PPG Industries and Jobson
Publishing, the publishers of "Vision Monday" and "20/20", two of the leading
trade magazines in the optical industry.
Dr. Alan Cohen has served as a director of the Company since its inception.
He also served as Chief Operating Officer of the Company from 1992 until October
1995, when he became Vice Chairman of the Board of Directors, and as the
Company's President, Chief Executive Officer and Chief Operating Officer from
October 1998 through April 17, 2000, when he became President of the Company's
retail optical store division, which position Dr. Cohen resigned from on January
9, 2001. Dr. Cohen, together with his brother, Dr. Robert Cohen, is the owner of
Meadows Management, LLC ("Meadows") which, until April 9, 2000, rendered
consulting services to the Company. From 1974 to the present, Dr. Alan Cohen has
been engaged in the retail and wholesale optical business. For more than 10
years, Dr. Cohen has also been a director, principal shareholder and officer of
Cohen Fashion Optical, Inc. and its affiliates ("CFO"), which currently
maintains its principal offices in Garden City, New York; and, since January 15,
2001, as President of General Vision Services, LLC ("GVS"), which currently
maintains its principal offices in New York City. Dr. Cohen and his brother, Dr.
Robert Cohen, are also shareholders of CFO and members of GVS. CFO and GVS each
engage in the operation (and, in the case of CFO, franchising) of retail optical
stores similar to those operated and franchised by the Company. Dr. Cohen is
also an officer and a director of several privately held management and real
estate companies and other businesses. Dr. Cohen graduated from the Pennsylvania
School of Optometry in 1972, where he received a Doctor of Optometry degree.
Dr. Robert Cohen served as Chairman of the Board of Directors of the
Company from its inception through April 7, 2000, when he resigned as Chairman,
but not as a director. He also served as Chief Executive Officer of the Company
from its inception until October 1995. Dr. Cohen, together with his brother, Dr.
Alan Cohen, is the owner of Meadows, which, until April 9, 2000, rendered
consulting services to the Company. From 1968 to the present, Dr. Robert Cohen
has been engaged in the retail and wholesale optical business. For more than 10
years, Dr. Cohen has also served as President and a director of CFO; and, since
January 15, 2001, as the Chief Executive Officer of GVS. Dr. Cohen and his
brother, Dr. Alan Cohen, are also shareholders of CFO and members of GVS. Dr.
Cohen is also an officer and a director of several privately held management and
real estate companies and other businesses. Dr. Cohen graduated from the
Pennsylvania School of Optometry in 1968, where he received a Doctor of
Optometry degree.
William F. Stasior was appointed as Chairman of the Company's Board of
Directors, effective April 10, 2000, and resigned as Chairman, but not as a
director, as of July 2, 2001. From 1991 to March 1999, Mr. Stasior served as the
Chairman and Chief Executive Officer of Booz-Allen & Hamilton, Inc., one of the
world's largest management and technology consulting firms; and, since March
1999, he continues to serve as such entity's Senior Chairman. Mr. Stasior
currently serves on the Board of Advisors for both Northwestern University's
Kellogg Graduate School of Management and INSEAD, the leading business school in
Europe, and serves on the Board of Directors of Opnet Technologies, Inc., a
publicly held software company that specializes in enhancing network performance
for the Internet and other applications, and Rare Medium Group, Inc., a publicly
held investment company. Mr. Stasior also serves on the Board of Advisors of
Vanu, Inc., a developer of software-based radios. He is also a member of the
Board of Directors of the United Negro College Fund, and chairs several of its
committees. He is active in technical professional associations, and has served
on various panels of the National Research Council. Mr. Stasior holds Masters
and Bachelors degrees from Northwestern University, in Engineering and Computer
Sciences.
Joel L. Gold has served as a director of the Company since December 1995.
He is currently Executive Vice President of Investment Banking of Berry Shino
Securities, Inc., an investment banking firm located in New York City. From
January 1999 until December 1999, he was an Executive Vice President of Solid
Capital Markets, an investment banking firm also located in New York City. From
September 1997 to January 1999, he served as a Senior Managing Director of
Interbank Capital Group, LLC, an investment banking firm also located in New
York City. From April 1996 to September 1997, Mr. Gold was an Executive Vice
President of LT Lawrence & Co., and from March 1995 to April 1996, a Managing
Director of Fechtor Detwiler & Co., Inc., a representative of the underwriters
for the Company's initial public offering. Mr. Gold was a Managing Director of
Furman Selz Incorporated from January 1992 until March 1995. From April 1990
until January 1992, Mr. Gold was a Managing Director of Bear Stearns and Co.,
Inc. ("Bear Stearns"). For approximately 20 years before he became affiliated
with Bear Stearns, he held various positions with Drexel Burnham Lambert, Inc.
He is currently a director, and serves on the Compensation Committee of, PMCC
Financial Corp. ("PMCC"), a publicly held specialty, consumer finance company.
Benito R. Fernandez was appointed as a director of the Company as of June
12, 2001. Since 1986, Mr. Fernandez has been the President of Horizon Investors
Corp., located in Albany, New York, an entity which owns, develops and manages
real estate properties, and which also acts as agent for various companies in
the health field, as well as the President of Horizon Hotels Corp., located in
San Juan, Puerto Rico, which owns and manages hotel properties. In addition,
since 1980, Mr. Fernandez has been the President of the Brooklyn Manor Group,
located in Brooklyn, New York, an entity which owns and manages a health care
facility and acts as a consultant to various health related facilities; and,
since 1973, has been the President of Typhoon Fence of L.I., Inc., the operator
of a fence construction company located in Long Island, New York. Mr. Fernandez,
who was a former member of the Federal Reserve Bank of New York Advisory Council
of Small Business and Agriculture, graduated from the City University of the
City of New York in 1966, where he received his B.A. in Accounting. In 1999, he
received The South Bronx Board of Trades and The Somos Uno Foundation Award for
outstanding professional leadership in economic development; in 1995, he
received the Bedford Stuyvesant Y.M.C.A. Man of the Year Award; and, in 1990, he
received the New York State Puerto Rican/Hispanic Legislator Task Force
Conference Center Award for excellence in advancing business opportunities for
Puerto Ricans and Latinos.
Christopher G. Payan joined the Company as its Vice President of Finance in
July 2001; and, in October 2001, was appointed as its Senior Vice President,
Secretary, Treasurer and Chief Financial Officer. From March 1995 through July
2001, Mr. Payan was employed by Arthur Andersen LLP, located in Melville, New
York, one of the world's largest professional services firms, where he provided
various audit, accounting, consulting and advisory services to various small and
mid-sized companies in various industries. Mr. Payan is a certified public
accountant and holds a Bachelors of Science degree in Accounting, graduating Cum
Laude with Honors from C.W. Post - Long Island University.
Dr. Nicholas Shashati has been the Director of Professional Services of the
Company since July 1992 and, since March 1, 1998, the President of the Company's
wholly owned subsidiary, VCC. Dr. Shashati earned a Doctor of Optometry degree
from Pacific University of California in 1984, and received a Bachelor of
Science degree in Visual Science from Pacific University and a Bachelor of
Science degree in Biology from San Diego State University. Dr. Shashati is
licensed as an optometrist in the States of New York, California, Arizona and
Oregon. He is Chairperson for the Quality Assurance Committee of the Company, as
well as a Practice Management Consultant.
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
EVI's executive officers and directors, and persons who own more than ten
percent of a registered class of EVI's equity securities, to file reports of
ownership and changes in ownership with the Securities and Exchange Commission
(the "SEC"). Executive officers, directors and greater than ten percent
shareholders are required, by SEC regulation, to furnish EVI with copies of all
Section 16(a) forms they may file.
Based solely on a review of the copies of such forms furnished to EVI, or
written representations that no Forms 5 were required, EVI believes that, during
the year ended December 31, 2001, all Section 16(a) filing requirements
applicable to its executive officers, directors and greater than ten percent
beneficial owners were complied with, except that Mr. Hillman filed his Form 3
after the required deadline and Mr. Fernandez filed certain of his Forms 4 after
the required deadlines.
Item 11. Executive Compensation
The following Summary Compensation Table sets forth the compensation, for
the three years ended December 31, 2001, of: (i) each individual who served as
the Chief Executive Officer of EVI during the year ended December 31, 2001; (ii)
each of the Company's two most highly-compensated executive officers who were
serving as executive officers of the Company and/or VCC as of December 31, 2001;
and (iii) one additional individual who would have been included with the
individuals described in clause (ii) above, but for the fact that he was not
serving as an executive officer of the Company as of December 31, 2001
(collectively, the "Named Executive Officers"):
SUMMARY COMPENSATION TABLE
Long Term
Compensation
Securities
Fiscal Annual Compensation Underlying All Other
Name and Principal Position Year Salary Bonus Stock Options Compensation
------------------------------- ------ -------------------------- --------------- --------------
Robert S. Hillman, 2001 $115,345 $ - 500,000 (3) $ 21,851
President and Chief Executive
Officer (1)
Michael C. McGeeney, 2001 $ - $ - - $ -
Former President and Chief
Executive Officer (5)
Gregory T. Cook, 2001 $ 62,577 (7) $ - 250,000 (8) $277,000 (9)
Former President and Chief 2000 $167,692 (10)$ - 800,000 (11) $ 2,000 (12)
Executive Officer (6)
George D. Papadopoulos, 2001 $163,673 (14)$ - 150,000 (15) $ -
Former Senior Vice 2000 $ 96,154 (16)$ - 100,000 (17) $ -
President, Chief Financial
Officer, Secretary and
Treasurer (13)
Dr. Nicholas Shashati, 2001 $102,000 (18)$ - 100,000 (19) $ 24,200 (20)(21)
President - VisionCare of 2000 $102,000 (18)$ - - $ 6,000 (20)
California, Inc. 1999 $102,000 (18)$ - 30,000 (8) $ 6,000 (20)
(1) Mr. Hillman became the President and Chief Executive Officer of the
Company on July 2, 2001.
(2) Represents salary paid to Mr. Hillman for the period from July 2, 2001
through December 31, 2001.
(3) 250,000 of these options will vest as follows: one-third on each of
July 1, 2002, 2003 and 2004, provided that Mr. Hillman is still then employed by
the Company. The balance of these options will vest on July 1, 2010 (provided
that Mr. Hillman is still then employed by the Company); however, one-third of
these options will sooner vest as of August 31st of any fiscal year ending June
30th that the Company achieves certain levels of Net Income, as defined in his
Employment Agreement.
(4) Represents automobile lease payments made on behalf of Mr. Hillman, and
the costs of insuring such automobile; and corporate apartment lease payments
made on behalf of Mr. Hillman.
(5) Mr. McGeeney became the President of the Company's retail optical,
laser and ambulatory surgery center businesses on January 16, 2001, and the
President and Chief Executive Officer of the Company on March 22, 2001, which
position he resigned from on June 29, 2001. Mr. McGeeney was employed and
compensated by Goldin Associates, LLC, a firm retained by the Company, on
January 16, 2001, to provide interim management services to the Company, at the
direction of EVI's Board of Directors, which retention ceased on June 29, 2001.
(6) Mr. Cook was appointed to the position of President and Chief Executive
Officer of EVI's Internet division, effective February 22, 2000 and, effective
as of April 18, 2000, as the Company's President and Chief Executive Officer,
which positions he resigned from on March 27, 2001.
(7) Represents salary paid to Mr. Cook for the period from January 1, 2001
through March 27, 2001.
(8) All of these options are fully vested and exercisable.
(9) Represents severance paid to Mr. Cook upon the termination of his
employment with the Company.
(10) Represents salary paid to Mr. Cook for the period from March 1, 2000
through December 31, 2000.
(11) One-third (33 1/3%) of these options vested on March 1, 2001, and
remain outstanding and exercisable; and the balance of these options were
cancelled as a result of Mr. Cook's resignation from the Company in March 2001.
(12) Represents legal fees paid to Mr. Cook's attorney.
(13) Mr. Papadopoulos became Vice President of the Company's Internet
Division in March 2000 and, on March 22, 2001, became the Senior Vice President,
Chief Financial Officer, Secretary and Treasurer, which positions he resigned
from on December 14, 2001.
(14) Represents salary paid to Mr. Papadopoulos for the period from January
1, 2001 through December 14, 2001.
(15) All of these options vested and became fully exercisable on December
14, 2001.
(16) Represents salary for the period from March 13, 2000 through December
31, 2000.
(17) All of these options were cancelled on December 14, 2001, as a result
of Mr. Papadopoulos' resignation from the Company.
(18) Represents salary paid to Dr. Shashati by VCC.
(19) One-third of these options are fully vested; and an additional
one-third will vest on each of April 26, 2003 and 2004, provided that Dr.
Shashati is then still employed by the Company.
(20) Includes car allowance payments made to Dr. Shashati.
(21) Includes fees paid to Dr. Shashati for other professional services
provided to the Company.
OPTION GRANTS IN LAST FISCAL YEAR
During the fiscal year ended December 31, 2001, EVI's Compensation
Committee (the "Committee") granted the following options to the Named Executive
Officers:
(i) On March 21, 2001, the Committee granted to George D. Papadopoulos, its
then Senior Vice President, Chief Financial Officer, Secretary and Treasurer,
additional options to purchase 150,000 shares of EVI's Common Stock, each of
which has a term of ten (10) years and provides for an exercise price equal to
the composite closing price of EVI's Common Stock, as quoted, at that time, on
the Nasdaq National Market System (the "Closing Price") on the date of grant,
and each of which became vested and immediately exercisable on December 14,
2001, the date of Mr. Papadopoulos' termination of employment with the Company;
(ii) On March 23, 2001, the Committee granted to Gregory T. Cook, in
connection with the termination of his employment by the Company, additional
options to purchase 250,000 shares of EVI's Common Stock, each of which has a
term of five (5) years and provides for an exercise price equal to the Closing
Price on the date of grant, each of which options became immediately vested and
exercisable;
(iii) On April 26, 2001, the Committee granted to Dr. Nicholas Shashati,
the President of VCC, additional options to purchase 100,000 shares of EVI's
Common Stock, each of which has a term of ten (10) years and provides for an
exercise price equal to the Closing Price on the date of grant. One-third
(33.3%) of these options vested on April 26, 2002, and an additional one-third
(33.3%) will vest on each of April 26, 2003 and 2004, provided that Dr. Shashati
is then still employed by the Company;
(iv) On July 2, 2001, the Committee granted to Mr. Robert S. Hillman, the
Company's President and Chief Executive Officer, an aggregate of 500,000 options
to purchase EVI's Common Stock, each of which has a term of ten (10) years and
provides for and exercise price equal to the Closing Price on the date of grant.
One-sixth (16.67%) of these options will vest on each of July 1, 2002, 2003 and
2004, provided Mr. Hillman is then still employed by the Company. The balance of
these options (250,000) will vest on July 1, 2010 (provided that Mr. Hillman is
then still employed by the Company); however, one-third (33.3%) of these
remaining options will sooner vest as of August 31st of any fiscal year ending
June 30th that the Company achieves certain levels of Net Income, as defined in
his Employment Agreement;
The following table sets forth information concerning the options granted
during 2001 to each of the Company's Named Executive Officers:
% of Total
Number of Options Potential Realizable Value of
Shares Granted to Exercise Assumed Annual Rates of Stock
Underlying Employees in Price Price Appreciation for Option Term
Name Options Granted Fiscal Year Per Share Expiration Date 5% 10%
--------------------- ---------------- -------------- ------------- ---------------- ------------------ ----------------
Robert S. Hillman 500,000 22.8% $0.43 7/02/11(*) $ 135,212 $ 342,655
Gregory T. Cook 250,000 11.4% $0.25 3/23/06 $ 17,268 $ 38,157
George D. Papadopoulos 150,000 6.8% $0.22 3/21/11 $ 20,754 $ 52,594
Dr. Nicholas Shashati 100,000 4.6% $0.33 4/26/11(*) $ 20,754 $ 52,594
(*) Subject to earlier cancellation ninety (90) days after the resignation
or termination of the employee's employment by the Company.
AGGREGATED OPTIONS EXERCISED IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
Shares
Acquired Number of Securities
on Value Underlying Unexercised Value of Unexercised In-the-Money
Exercise Realized Options at FY-End (#) Options at FY-End ($)*
Name (#) ($) Exercisable/Unexercisable Exercisable/Unexercisable
------------------------- ------------ ------------ ------------------------------- ------------------------------------
Robert S. Hillman - $ - -0-/500,000 $0.00/$0.00
Gregory T. Cook - $ - 516,667/-0- $0.00/$0.00
George D. Papadopoulos - $ - 150,000/-0- $0.00/$0.00
Dr. Nicholas Shashati - $ - 73,333/100,000 $0.00/$0.00
* Based on the OTC Bulletin Board closing price for the last business day
of the fiscal year ($0.095). The stock options granted to the Named Executive
Officers have exercise prices as follows: Robert S. Hillman: 500,000 options at
$0.43; Gregory T. Cook: 266,667 options at $8.06 and 250,000 options at $0.25;
George D. Papadopoulos: 150,000 options at $0.22; and Dr. Nicholas Shashati:
10,000 options at $7.50, 10,000 options at $3.25, 20,000 options at $6.31 and
100,000 options at $0.33.
Compensation Committee Interlocks and Insider Participation
-----------------------------------------------------------
The current members of the Compensation Committee (the "Committee") are Dr.
Alan Cohen, Mr. Joel L. Gold and Mr. Robert S. Hillman. Additionally, Mr.
Gregory T. Cook, Dr. Robert Cohen and Mr. William F. Stasior served on the
Committee at various times during 2001.
Dr. Alan Cohen, who is a member of the Committee, was an executive officer
of the Company until January 9, 2001, and has certain relationships with the
Company, all as described below in "Certain Transactions and Other Matters". Dr.
Robert Cohen, who was also a member of the Committee during 2001, was an
executive officer of the Company until April 7, 2000, and has certain
relationships with the Company, all as described below in "Certain Transactions
and Other Matters". Mr. Hillman, who is also a member of the Committee, is an
executive officer of the Company, and has certain relationships with the
Company, all as described below in "Certain Transactions and Other Matters".
EMPLOYMENT CONTRACTS
On June 6, 2001, the Company and Mr. Robert Hillman entered into an
employment agreement pursuant to which he was appointed as the Company's
President and Chief Executive Officer for a period of three (3) years,
commencing July 2, 2001. Pursuant to said agreement, Mr. Hillman: (i) was
initially paid an annual base salary of $250,000 per year; (ii) receives a
monthly automobile allowance of $400.00 (which amount was subsequently increased
to $850.00 per month); (iii) is entitled to the use of a corporate apartment to
be leased and partially furnished by the Company; and (iv) is entitled to an
annual bonus in an amount equal to ten percent (10%) by which the Net Income of
the Company (as said term is defined in the Agreement) for any fiscal year
ending June 30th, is not less than $2,000,000, which minimum Net Income will
increase to the Net Income achieved by the Company during any fiscal year in
which the Company was required to pay such annual bonus to Mr. Hillman, if any.
Thereafter, on July 11, 2001, the members of the Compensation Committee
agreed to reimburse Mr. Hillman for his moving expenses (in relocating to the
United States), in the amount of $20,000. In addition, on December 15, 2001, Mr.
Hillman and EVI modified his original agreement so as to: (i) require EVI to
lease a new apartment for Mr. Hillman at a rental per month higher than that
previously agreed to by the Committee; and (ii) reduce Mr. Hillman's annual base
salary by the sum of $14,450 as a result thereof.
In addition, Mr. Hillman, pursuant to the terms of said agreement, was
granted: (i) 250,000 employee stock options, one-third (33.3%) of which will
vest on each of July 1, 2002, 2003 and 2004, provided that Mr. Hillman is still
then employed by the Company; and (ii) 250,000 additional employee stock
options, each of which will vest on July 1, 2010 (provided that Mr. Hillman is
still then employed by the Company); provided, however, that: (x) one-third
(33.3%) of such additional options will vest as of August 31st of any year
following the expiration of a fiscal year (ending June 30th) in which the
Company has achieved Net Income (as defined in the agreement) of at least $2
million; (y) an additional one-third (33.3%) of such additional options will
vest as of August 31st of any year following the expiration of a fiscal year
(ending June 30th) in which the Company has achieved Net Income of at least $3
million; and (z) an additional one-third (33.3) of such additional options will
vest as of August 31st of any year following the expiration of a fiscal year
(ending June 30th) in which the Company has achieved Net Income of at least $4
million.
OPERATION OF THE BOARD OF DIRECTORS
During the fiscal year ended December 31, 2001, the Board of Directors of
Emerging held nine meetings in person, held two additional meetings
telephonically, and acted by unanimous written consent six times. Each director
(including Messrs. Gregory T. Cook and Suresh Mathews, who resigned as directors
in March 2001, and Mr. Jerry Novack, who resigned as a director on April 15,
2002) attended at least 75% of the meetings held by the Board of Directors
during the period in which such Director served, including the meetings held by
the Committees on which such director served.
Committees of the Board
-----------------------
The standing committees of the Board of Directors include the Executive
Committee, the Audit Committee, the Compensation Committee and the Independent
Committee.
The Executive Committee, whose members currently are Robert Hillman, Joel
Gold and Robert Cohen (and whose members, from time to time during the 2001
fiscal year, also included William Stasior, Gregory Cook and Alan Cohen) is
generally authorized to exercise the powers of the Board of Directors in
connection with the management of the Company; provided, however, that the
Executive Committee does not have the authority to submit to shareholders any
action that needs shareholder approval under law, fill vacancies in the Board of
Directors or in any Committee, fix the compensation of Directors for serving on
the Board of Directors or on any Committee, amend or repeal the By-Laws of the
Company or adopt new by-laws of the Company, or amend the Company's Certificate
of Incorporation. The Executive Committee was established in December 1995, and,
during the year ended December 31, 2001, met once in person, and acted nine
times by unanimous written consent.
The Audit Committee, whose members currently are William Stasior, Benito
Fernandez and Joel Gold (and whose members, from time to time during the 2001
fiscal year, also included Suresh Mathews), recommends the selection of the
Company's independent auditors, receives reports from such independent auditors
on any material recommendations made to management, and reviews, with the
auditors, any material questions or problems with respect to the accounting
records, procedures or operations of the Company which have not been resolved to
their satisfaction after having been brought to the attention of management. The
Audit Committee was established in December 1995 and met once in person during
the year ended December 31, 2001, and three times telephonically.
The Compensation Committee, whose members are Robert S. Hillman, Dr. Alan
Cohen and Joel L. Gold (and whose members, from time to time during the 2001
fiscal year, also included William F. Stasior, Gregory T. Cook and Dr. Robert
Cohen) administers Emerging's 1995 Stock Incentive Plan and recommends to the
Board of Directors the salaries and bonuses of the executive officers of the
Company. The Compensation Committee was established in December 1995 and, during
the year ended December 31, 2001, met two times in person and acted two times by
unanimous written consent.
The Independent Committee, whose members are William F. Stasior, Benito R.
Fernandez and Joel L. Gold (and whose members, from time to time during the 2001
fiscal year, also included Suresh Mathews), is generally authorized to review
any transaction (or series of transactions) involving more than $10,000 in any
single instance, or more than $50,000 in the aggregate (other than compensation
matters which are determined by the Compensation Committee) between the Company
and: (i) any of its directors, officers, principal shareholders, and/or each of
their respective affiliates; or (ii) any employee of, or consultant to, the
Company who also renders services to CFO and/or GVS, retail optical companies
owned by certain shareholders of the Company, whether or not for compensation.
The Independent Committee was established in December 1995 and, during the year
ended December 31, 2001, met once in person and acted five times by unanimous
written consent.
DIRECTOR COMPENSATION
Directors who are not employees or officers of Emerging or associated with
Emerging receive $1,000 for each Board and Committee meeting attended in person,
and $250 for each Board and Committee meeting attended telephonically. Further,
all directors are reimbursed for certain expenses in connection with their
attendance at Board and Committee meetings.
On April 26, 2001, the Compensation Committee of the Board of Directors
(and the Independent Committee as it relates to Drs. Robert and Alan Cohen)
authorized the grant, to each of Dr. Robert Cohen, Dr. Alan Cohen and Joel L.
Gold, options to purchase 100,000 shares of EVI's Common Stock, each of which
options has a term of ten years, has an exercise price equal to the Closing
Price on the date of grant ($0.33) and vested immediately; and on June 4, 2001,
the Compensation Committee authorized the grant, to William F. Stasior, of
options to purchase 100,000 shares of the EVI's Common Stock at an exercise
price equal to the Closing Price on the date of grant ($0.27), which options
have a term of ten years and vested immediately.
Other than with respect to reimbursement of expenses, directors who are
employees or officers of the Company will not receive additional compensation
for serving as a director.
Item 12. Security Ownership of Certain Beneficial Owners and Management
I. COMMON STOCK:
The following table sets forth certain information, as of April 22, 2002,
regarding the beneficial ownership of Emerging's Common Stock by: (i) each
shareholder known by the Company to be the beneficial owner of more than five
percent of the outstanding shares of EVI's Common Stock; (ii) each director of
Emerging; (iii) each Named Executive Officer of the Company; and (iv) all
directors and executive officers of the Company as a group. The percentages in
the "Percent of Total Voting Power" column do not give effect to shares included
in the "Beneficial Ownership" column as a result of the ownership of options or
warrants. Unless otherwise indicated, the Company believes that the beneficial
owners of the Common Stock listed below, based on information provided by such
owners, have sole investment and voting power with respect to such shares. The
address of William F. Stasior is 3570 East Calle Porta De Acero, Tucson, Arizona
85718. The address of Benito R. Fernandez is 2830 Pitkin Avenue, Brooklyn, New
York 11208. The address of Joel L. Gold is c/o Berry Shino Securities, 45
Broadway, New York, New York 10006. The address of Nicholas Shashati is c/o
Sterling VisionCare, 9663 Tierra Grande Street, San Diego, California 92126. The
address of all other persons listed below is 100 Quentin Roosevelt Boulevard,
Garden City, New York 11530.
Name Beneficial Percent
Ownership of Class
------------------------ --------------- -----------
Robert Hillman (a)(b) -- (1) *
Michael C. McGeeney (c) -- *
Gregory T. Cook (c) 516,667 (2) 1.9%
William F. Stasior (a) 233,333 (3) *
Dr. Robert Cohen (a) 1,389,490 (4) 5.0%
Dr. Alan Cohen (a) 1,589,490 (5) 5.7%
Joel L. Gold (a) 126,500 (6) *
Benito R. Fernandez (a) 5,457,075 (7) 18.8%
Dr. Nicholas Shashati (b) 73,333 (8) *
George D. Papadopoulos (c) 150,000 (9) *
All current directors and 8,869,221 (10) 28.9%
executive officers as a
group (8 persons) (d)
* less than 1%
(a) Director
(b) Executive officer
(c) Former director and/or executive officer
(d) Includes Christopher G. Payan, the Company's Senior Vice President,
Chief Financial Officer, Secretary and Treasurer, but excludes Messrs.
McGeeney, Cook and Papadopoulos.
(1) This number excludes the right to acquire 500,000 shares of Common
Stock pursuant to outstanding options, the exercisability of each of which are
subject to certain vesting requirements.
(2) This number represents the right to acquire 516,667 share of Common
Stock upon the exercise of presently exercisable, outstanding options.
(3) This number represents the right to acquire 233,333 shares of Common
Stock upon the exercise of presently exercisable, outstanding options, but
excludes an additional 66,667 options which are subject to certain vesting
requirements.
(4) This number includes the right to acquire 650,000 shares of Common
Stock upon the exercise of presently exercisable, outstanding options.
(5) This number includes the right to acquire 650,000 shares of Common
Stock upon the exercise of presently exercisable, outstanding options, but
excludes an additional: (i) 100,000 shares owned by Meryl Cohen, as custodian
for each of Erica and Nicole Cohen, the children of Alan and Meryl Cohen, to
which Dr. Cohen disclaims beneficial ownership; and (ii) 10,000 shares owned by
Dr. Cohen, as custodian for each of Erica and Nicole Cohen, to which Dr. Cohen
disclaims beneficial ownership.
(6) This number includes 1,500 shares of Common Stock owned by Mr. Gold's
children and the right to acquire 120,000 shares of Common Stock upon the
exercise of presently exercisable, outstanding options, but excludes an
additional 5,000 shares of Common Stock owned by Mr. Gold's wife, which Mr. Gold
disclaims beneficial ownership of.
(7) This number includes the right to acquire 2,000,000 shares of Common
Stock upon the exercise of presently exercisable outstanding warrants issued to
Horizon Investors Corp., a New York corporation principally owned by Mr.
Fernandez ("Horizon") pursuant to presently exercisable warrants, but excludes
an additional 500,000 options which are subject to certain vesting requirements.
(8) This number represents the right to acquire 73,333 shares of Common
Stock upon the exercise of presently exercisable, outstanding options, but
excludes an additional 66,667 options which are subject to certain vesting
requirements.
(9) This number represents the right to acquire 150,000 shares of Common
Stock upon the exercise of presently exercisable, outstanding options.
(10) This number includes: (1) the right to acquire 3,726,666 shares of
Common Stock upon the exercise of presently exercisable, outstanding options and
warrants. In accordance with Rule 13d-3(d)(1) under the Securities Exchange Act
of 1934, as amended, the 3,726,666 shares of Common Stock for which the
Company's directors and executive officers, as a group, hold currently
exercisable options and warrants, have been added to the total number of issued
and outstanding shares of Common Stock solely for the purpose of calculating the
percentage of such total number of issued and outstanding shares of Common Stock
beneficially owned by such directors and executive officers as a group.
II SENIOR CONVERTIBLE PREFERRED STOCK:
Set forth below is the name, address, stock ownership and voting power of
each person or group of persons known by the Company to own beneficially more
than 5% of the outstanding shares of Emerging's Senior Convertible Preferred
Stock:
Beneficial Percent of
Name Ownership Class
----------------------------------- ---------------- -----------------
Huberfeld/Bodner Family Foundation
152 West 57th Street
New York, NY 10019 1.77 (1) 70.5%
Rita Folger
1257 East 24th Street
Brooklyn, NY 11210 .74 (2) 29.5%
----------------------------------- ---------------- -----------------
(*) Less than 1%
(1) These shares are convertible into an aggregate of 236,000 shares of
Common Stock and the holder thereof will be entitled to cast that
number of votes at any meeting of shareholders.
(2) These shares are convertible into an aggregate of 98,667 shares of
Common Stock and the holder thereof will be entitled to cast that
number of votes at any meeting of shareholders.
Item 13. Certain Relationships and Related Transactions
Cohen's Fashion Optical
-----------------------
Drs. Robert and Alan Cohen are officers and directors of CFO, including its
affiliate, Real Optical, LLC. ("REAL"). CFO, which has been in existence since
1978, owns a chain of company-operated and franchised retail optical stores
doing business under the name "Cohen's Fashion Optical." As of April 22, 2002,
CFO had 71 franchised stores and 13 company-owned stores (including one store
operated by an affiliate of CFO under the name "Cohen's Optical"). In addition,
CFO also licenses to retail optical stores the right to operate under the name
"Cohen's Kids Optical" or "Ultimate Spectacle." As of April 22, 2002, there were
two Ultimate Spectacle stores located in the State of New York; and REAL, as of
such date, operated three stores (under the name "Cohen's Fashion Optical), all
of which were located in New York State. CFO and REAL stores are similar to the
Company's retail optical stores. CFO has been offering franchises since 1979 and
currently has retail optical stores in the States of Connecticut, Florida, New
Hampshire, Massachusetts, New Jersey and New York. In the future, Cohen's
Fashion Optical, Cohen's Kids Optical or Ultimate Spectacle stores may be
located in additional states. As of April 22, 2002, approximately 20 CFO stores
were located in the same shopping center or mall as, or in close proximity to,
certain of the Company's retail optical stores. It is possible that one or more
additional Cohen's Fashion Optical stores, Cohen's Kids Optical stores or
Ultimate Spectacle stores may, in the future, be located near one or more of the
Company's retail optical stores, thereby competing directly with such Company
stores. In addition, the Company's stores and certain of CFO's stores jointly
participate, as providers, under certain third party benefit plans obtained by
either the Company or CFO, which arrangement is anticipated to continue in the
future.
In January 2002, the Company subleased from CFO, for a term of five years,
a portion of the space then being leased by CFO in a building located at 100
Quentin Roosevelt Boulevard, Garden City, New York and, in connection therewith,
relocated its principal executive offices to such premises. The Company believes
that its rent with respect to such premises is equal to the fair market rental
value of such space.
Until January 10, 2002, the Company subleased, from a limited liability
company owned by certain of the Company's principal shareholders, and shared
with CFO and others, an office building located in East Meadow, New York.
Occupancy costs were appropriately allocated based upon the applicable square
footage leased by the respective tenants of the building. For the years ended
December 31, 2001, 2000 and 1999, the Company paid approximately $440,000,
$420,000 and $494,000, respectively, for rent and related charges for these
offices. On January 10, 2002, the Company relocated its principal executive
offices to 100 Quentin Roosevelt Boulevard, Garden City, New York, and, in
connection therewith, entered into a sublease with CFO for one of the two floors
then being subleased to CFO, for a term of five years. Occupancy costs are being
allocated between the Company and CFO based upon the respective square footages
being occupied. Management believes that its rent with respect to such premises
is equal to the fair market rental value thereof.
General Vision Services
-----------------------
In January 2001, GVS, a Delaware limited liability company located in New
York City and beneficially owned, in principal part, by Drs. Robert and Alan
Cohen and certain members of their respective, immediate families (collectively,
the "Cohen Family") acquired substantially all of the assets of General Vision
Services, Inc. As of April 22, 2002, GVS operated approximately 20 retail
optical stores located in the New York metropolitan area, which stores are
similar to the retail optical stores operated and franchised by the Company. In
addition, GVS solicits and administers third party benefit programs similar to
those being administered by the Company. It is possible that a GVS store, or
another retail optical store which provides third party benefit plans
administered by GVS, may now or in the future be located near one or more of the
Company's retail optical stores and may be competing directly with such store.
Furthermore, the Company, CFO and/or GVS jointly participate in certain
third party benefit plans, and certain of the Company's retail optical stores,
CFO's stores and GVS' stores participate as providers under third party benefit
plans obtained by either the Company, CFO or GVS and, in all likelihood, will
continue to do so in the future.
In June 2001, the Company subleased to GVS its retail optical store (and
the furniture, fixtures and equipment located therein), located in Nyack, New
York, at a rent per month equal to the rent and additional rent payable under
the Master Lease for such store, less a monthly rental credit, until May 31,
2003, of $2,500. Pursuant to the terms of such sublease, the Company will be
required to transfer and convey to GVS all of such store's furniture, fixtures
and equipment from and after June 15, 2003, provided GVS is not then in default
in performing its obligations under such sublease.
Further, in April 2002, Emerging sold to GVS, for the sum of $55,000,
substantially all of the assets of one of its stores located in New York City,
together with all of the capital stock of its wholly-owned subsidiary, Sterling
Vision of 125th Street, Inc., which is the tenant under the Master Lease for
such store.
Additional Agreements and Transactions Between the Company and the Cohen Family
--------------------------------------------------------------------------------
During the fiscal year ended December 31, 2001, certain of the Company's
real estate and construction supervisory service personnel were also employed by
CFO in similar positions. The Company believes that the terms of this
transaction was as favorable to the Company as could have been obtained from an
unrelated party.
On December 6, 2001, the Company borrowed from Broadway Partners, LLC
("Broadway"), a New York partnership owned by certain of Dr. Robert and Alan
Cohen's children, the sum of $300,000, which loan, together with interest
thereon, calculated at 1% above the prime rate of interest, was repaid to
Broadway, in full, on January 23, 2002.
During 2001, the Company purchased from City Lens, Inc. ("City Lens"), an
ophthalmic lens laboratory owned, directly or indirectly, by members of the
Cohen family, ophthalmic lenses and certain lens refinishing services for its
Company-owned stores. For the year ended December 31, 2001, the total cost of
such lenses and services purchased from City Lens, was approximately $243,000.
The Company believes that the cost of such lenses and services were as favorable
to the Company as those which could have been obtained from an unrelated third
party.
Horizon Investors Corp. and Matters Relating to Benito R. Fernandez
-------------------------------------------------------------------
In November 2001, Horizon Investors Corp. ("Horizon"), a New York
corporation principally owned by Benito R. Fernandez, a Director of the Company,
purchased from Rare Medium, Inc. ("Rare"), a portion (1,325,000) of the shares
of EVI's Common Stock previously issued to Rare pursuant to its various
agreements with such entity; and, in connection therewith, Horizon acquired
Rare's right to require EVI to use its reasonable, good faith efforts to
register all such shares under the Securities Act of 1933, as amended (the
"Act").
On December 3, 2001 and December 20, 2001, the Company borrowed from
Horizon the sum of $150,000 and $300,000, respectively, each of which loans,
together with interest thereon, calculated at 1% above the prime rate, were
repaid by the Company, in full, on January 23, 2002.
On January 23, 2002, the Company and Horizon entered into a series of
agreements pursuant to which Horizon established, in favor of the Company, a
credit facility, in the maximum amount of $1 million and, in connection
therewith, the Company obtained from Horizon an initial advance thereunder, in
the amount of $300,000. Loans under such credit facility: (i) are secured by a
pledge to Horizon of a substantial portion of the Company's franchise notes
receivable; (ii) must be in increments of at least $150,000; (iii) bear interest
at the rate of 1% above the prime rate; and (iv) must be fully amortized
(repaid) over the then remaining term of the facility, which will expire on
January 23, 2004. In addition, pursuant to the terms of such agreements with
Horizon, the Company: (i) is required to pay to Horizon a facility fee equal to
2% per annum of the average daily principal balance of the unused portion of the
facility from time to time outstanding; (ii) issued to Horizon five-year
warrants to purchase up to 2,500,000 shares of EVI's Common Stock at an exercise
price of $0.01 per share, 2,000,000 of which warrants are presently exercisable
and the balance of which will vest in increments of 250,000 provided there is
due and owing to Horizon (and/or North Fork Bank), as of each of July 22, 2002
and October 22, 2002, any amounts under such credit facility (and/or under the
Company's loan from North Fork Bank); (iii) is required to use its reasonable,
good faith efforts to register, under the Act, the shares of EVI's Common Stock
underlying such warrants; and (iv) is required to pay to Horizon an interest
rate differential fee equal to the difference between the rate of interest
actually paid, by the Company, to North Fork Bank on its $1 million term loan
from such Bank (which loan was personally guaranteed by Horizon and Mr.
Fernandez and secured by Horizon's pledge, to the Bank, of a $1 million
certificate of deposit) and 1% above the prime rate of interest.
Matters Relating to Robert S. Hillman
-------------------------------------
In October 2001, the Company entered into a certain management agreement
with H&H Optical, LLC ("H&H") (a Nevada limited liability company owned, in
part, by Susan Hillman, the sister of Robert S. Hillman, the Company's President
and CEO) to manage the operations of its store located in Palm Desert,
California, and, in December 2001, similar management agreements were entered
into with H&H to manage the operations of an additional three Company-owned
stores located in the State of Minnesota. These management agreements generally
have a term of 1 to 2 years, provide for the payment of additional rent and
Advertising Fund contributions (based upon the gross revenues of the Sterling
Stores in question), provide for a full rent subsidy by the Company, and provide
H&H with an option to purchase the assets of each store, together with a
Sterling Optical Center Franchise, for the same, upon the expiration of the
respective terms thereof.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Report to be signed on
its behalf by the undersigned, thereunto duly authorized.
EMERGING VISION, INC.
By: /s/ Robert S. Hillman
---------------------------------
Robert S. Hillman
President and Chief Executive Officer
Date: April 29, 2002
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, this Report has been signed below by the following persons on behalf of
the Registrant and in the capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
/s/ Robert S. Hillman President, Chief April 29, 2002
------------------------- Executive Officer
Robert S. Hillman and Chairman of the
Board of Directors
(Principal Executive
Officer)
/s/ Christopher G. Payan Senior Vice President, April 29, 2002
------------------------- Chief Financial Officer,
Christopher G. Payan Secretary and Treasurer
(Principal Financial and
Accounting Officer)
/s/ Alan Cohen Vice Chairman of the Board April 29, 2002
-------------------------- of Directors
Alan Cohen
/s/ Robert Cohen Director April 29, 2002
--------------------------
Robert Cohen
/s/ Joel L. Gold Director April 29, 2002
--------------------------
Joel L. Gold
/s/ Benito R. Fernandez Director April 29, 2002
--------------------------
Benito R. Fernandez
/s/ William F. Stasior Director April 29, 2002
--------------------------
William F. Stasior