UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-K


  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 8, 2002,  (based upon the closing price of $0.08 per share as quoted on
the OTC  Bulletin  Board) was  approximately  $1,711,100.  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 8, 2002,  there were  approximately  21,388,750
outstanding shares of Common Stock held by non-affiliates.

     As of April 8,  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).




<PAGE>


Item 1.  Business
         --------

General

     Emerging   Vision,   Inc.  (the   "Registrant"   and,   together  with  its
subsidiaries,  hereinafter  the "Company" or  "Emerging")  is one of the largest
chains of retail optical stores and one of the largest  franchise optical chains
in the United States,  based upon management's  beliefs,  domestic sales and the
number  of  locations  of  Company-owned  and  franchised  stores  (collectively
referred to herein as "Sterling Stores").  The Registrant was incorporated under
the laws of the State of New York in January  1992 and, in July 1992,  purchased
substantially  all  of  the  assets  of  Sterling  Optical  Corp.,  a  New  York
corporation then a debtor-in-possession  under Chapter 11 of the U.S. Bankruptcy
Code.

     In March 2001, the Board of Directors decided that the Company should focus
its  efforts and  resources  on growing its retail  optical  business  and, as a
result, approved a plan to discontinue all other operations then being conducted
by the Company. In connection with this decision, the Company completed its plan
of disposal of  substantially  all of the net assets of Insight  Laser  Centers,
Inc. ("Insight Laser") - which operated three laser vision correction centers in
the  New  York  metropolitan  area;  Insight  Laser  Centers  N.Y.I,  Inc.  (the
"Ambulatory  Center")  - owner of the  assets of an  ambulatory  surgery  center
located in Garden City, New York; and the yet-to-be-developed  Internet Division
- which was to provide a web-based  portal being  designed to take  advantage of
business-to-business  opportunities  in the  optical  industry,  for  which  the
Company simply ceased further development and discontinued the operations of.

     In early 2001, the Company closed two of its three Insight Laser  locations
and, in an effort to pursue a sale of the remaining net assets, and continued to
operate the one remaining location from its center located in Trump Tower in New
York  City.  The  Company  was  unable  to secure a  favorable  deal to sell the
remaining net assets,  and in November 2001, the Trump Tower location was closed
as well, thereby completely ceasing operations of Insight Laser.

     On May 31, 2001, the Company sold the net assets of the  Ambulatory  Center
to the owner of the license required to operate the center.  The Company remains
a guarantor of certain  liabilities and future  obligations  associated with the
Ambulatory Center.


Store Operations

     The Company and its franchisees  operate retail optical stores  principally
under the trade names "Sterling  Optical," "IPCO Optical," "Site For Sore Eyes,"
"Duling  Optical,"  and "Singer  Specs,"  although  most stores  (other than the
Company's  Site for Sore Eyes  stores  located in Northern  California)  operate
under the name  "Sterling  Optical."  The Company also  operates  VisionCare  of
California ("VCC"), a specialized health care maintenance  organization licensed
by the State of  California  Department  of Managed  Health Care,  which employs
licensed  optometrists  who  render  services  in  offices  located  immediately
adjacent to, or within, most Sterling Stores located in California.

     Most  Sterling  Stores  offer  eye  care  products  and  services  such  as
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, an optometrist is employed by,
or  affiliated   with,  most  Sterling  Stores  to  provide   professional   eye
examinations to the public. The Company fills  prescriptions from these employed
or  affiliated  optometrists,  as  well as from  unaffiliated  optometrists  and
ophthalmologists.  Most  Sterling  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,  which,  in many cases,  allows
Sterling Stores to offer same-day service.

     The  Company  sells the assets of certain  of its  Company-owned  stores to
qualified  franchisees,  and,  in  certain  instances,  realizes a profit on the
conveyance  of the assets of such stores.  Through  these sales,  along with the
opening of new stores by qualified  franchisees,  the Company  seeks to create a
stream of royalty  payments based upon a percentage of the gross revenues of the
franchised  locations,  and grow the Sterling  Optical  brand name.  The Company
currently derives its retail optical store revenues principally from the sale of
eye care products and services at Company-owned stores, and ongoing royalty fees
based upon a percentage of the gross revenues of its franchised stores.

     As of December  31,  2001,  there were 203  Sterling  Stores in  operation,
consisting  of 34  Company-owned  stores  (including 9 stores  being  managed by
franchisees),  and 169 franchised stores (including 1 store being managed by the
Company on behalf of the franchisee  thereof).  The Company continually seeks to
expand both its Company-owned  and franchised store operations.  Sterling Stores
are located in 24 states, the District of Columbia,  Canada, and the U.S. Virgin
Islands.


                                       2
<PAGE>


The following chart sets forth the breakdown of Sterling Stores in operation as
of December 31, 2001 and 2000:

                                                            December 31,
                                                     2001(*)            2000
                                                    --------          --------
  I.    COMPANY-OWNED STORES:
        --------------------

        Company-owned stores.........................  25                20
        Company-owned stores managed by franchisees..   9                12
                                                      ----              ----

                              Total..................  34                32
                                                      ====              ====

     (*)Existing  store  locations:  California  (3),  Illinois  (3),  Iowa (1),
Kentucky (1),  Minnesota (4),  Missouri (2),  Nebraska (1), New York (15), North
Dakota (1), Pennsylvania (1), Virginia (1) and Wisconsin (1).


   II.    FRANCHISED STORES:
          -----------------

          Franchised stores.......................... 168               198
          Franchised stores managed by the Company...   1                 3
                                                      ----              ----
                              Total.................. 169               201
                                                      ====              ====

     (*)Existing  store locations:  California (27),  Colorado (1),  Connecticut
(1),  Delaware (5),  Florida (2),  Illinois (2),  Kentucky (2),  Maryland  (20),
Massachusetts  (1),  Minnesota (1), Montana (1), Nevada (1), New Jersey (8), New
York (45),  North Dakota (5),  Ontario,  Canada (3),  Pennsylvania  (15),  South
Dakota (1), Texas (2),  Virginia (8),  Washington,  D.C. (2), West Virginia (1),
Wisconsin (13), and the U.S. Virgin Islands (2).


     Sterling  Stores  generally range in size from  approximately  1,000 square
feet to 2,000  square feet,  are similar in  appearance  and are operated  under
certain  uniform  standards and operating  procedures.  Many Sterling Stores are
located in enclosed regional shopping malls and smaller strip centers;  however,
some  Sterling  Stores are located on the ground  floor of office  buildings  or
other  commercial  structures,  with a limited  number of Sterling  Stores being
housed in  freestanding  buildings with adjacent  parking  facilities.  Sterling
Stores are generally  clustered within  geographic  market areas to maximize the
benefit  of  advertising   strategies  and  minimize  the  cost  of  supervising
operations.

     In response to the eyewear market  becoming  increasingly  fashion-oriented
during the past decade, most Sterling Stores carry a large selection of designer
eyeglass  frames.  The  Company  continually   test-markets  various  brands  of
sunglasses,  ophthalmic  lenses,  contact  lenses  and  designer  frames.  Small
quantities of these items are usually  purchased  for selected  stores that test
customer  response and interest.  If a product test is  successful,  the Company
attempts to negotiate a system-wide preferred vendor discount for the product in
an effort to maximize system-wide sales and profits.


Franchise System

     An integral part of the Company's  franchise system includes providing what
the Company  believes to be a high level of marketing,  financial,  training and
administrative support to its franchisees.  The Company provides "grand opening"
assistance for each new franchised  location by consulting  with its franchisees
with respect to store design,  fixture and equipment  requirements  and sources,
inventory  selection  and  sources,  and  marketing  and  promotional  programs.
Specifically, the Company's grand opening assistance helps to establish business
plans and budgets, provides preliminary store designs and plan approval prior to
construction of a franchised store, and provides training,  an operations manual
and a  comprehensive  business  review to aid the  franchisee  in  attempting to
maximize its sales and profitability.  Further, on an ongoing basis, the Company
provides training through regional seminars,  offers assistance in marketing and
advertising  programs and  promotions,  and consults with its  franchisees as to
their management and operational strategies and business plans.

     Preferred Vendor Network. With the collective buying power of Company-owned
and  franchised  Sterling  Stores,  the  Company  has  established  a network of
preferred  vendors (the  "Preferred  Vendors")  whose  products may be purchased
directly  by  franchisees  at group  discount  prices,  thereby  providing  such
franchisees  with the  opportunity for higher gross margins.  Additionally,  the
Company  negotiates  and  executes  cooperative  advertising  programs  with its
Preferred Vendors for the benefit of all Company-owned and franchised stores.


                                       3
<PAGE>
     Franchise  Agreements.  Each franchisee  enters into a franchise  agreement
(the  "Franchise  Agreement")  with the  Company,  the  material  terms of which
generally are as follows:

     (a) Term. Generally, the term of each Franchise Agreement is ten years and,
subject to certain conditions, is renewable at the option of the franchisee.

     (b)  Initial  Fees.  Generally,  franchisees  (except  for any  franchisees
converting their existing retail optical store to a Sterling Store (a "Converted
Store"), and those entering into agreements for more than one location) must pay
the Company a  non-recurring,  initial  franchise  fee of  $20,000.  The Company
charges each franchisee of a Converted Store a non-recurring,  initial franchise
fee of $10,000 per location.  For each  franchisee  entering into agreements for
more than one location,  the Company charges a non-recurring,  initial franchise
fee of $15,000 for the second location,  and $10,000 for each location in excess
of two.

     (c) Ongoing Royalties. Franchisees are obligated to pay the Company ongoing
royalties  in an  amount  equal  to a  percentage  (generally  8%) of the  gross
revenues  generated by their Sterling  Store.  Franchisees of Converted  Stores,
however, pay ongoing royalties,  on their store's historical average base sales,
at reduced  rates  increasing  (in most cases) from 2% to 6% for the first three
years of the term of the Franchise Agreement. In addition, most of the Franchise
Agreements  acquired  by the  Company  from  Singer  Specs,  Inc.  (the  "Singer
Franchise  Agreements")  provide for ongoing royalties calculated at 7% of gross
revenues.  Franchise  Agreements  entered into prior to January 1994 provide for
the payment of ongoing  royalties on a monthly  basis,  while those entered into
after January 1994 provide for their  payment on a weekly  basis,  in each case,
based upon the gross revenues for the preceding period. Gross revenues generally
include all revenues  generated  from the  operation  of the  Sterling  Store in
question,  excluding refunds to customers,  sales taxes, a limited amount of bad
debts and, to the extent  required  by state law,  fees  charged by  independent
optometrists.

     (d) Advertising  Fund  Contributions.  Most  franchisees  must make ongoing
contributions to one of two advertising funds (the "Advertising  Fund") equal to
a percentage of their store's gross  revenues.  Except for the Singer  Franchise
Agreements,  which  generally  provide  for  contributions  equal to 7% of gross
revenues,  for Franchise  Agreements entered into prior to August 1993, the rate
of contribution  is generally 4% of the store's gross revenues,  while Franchise
Agreements  entered into after August 1993 generally  provide for  contributions
equal to 6% of the store's  gross  revenues.  Generally,  50% of these funds are
expended at the  direction of each  individual  franchisee  (for the  particular
Sterling  Store  in  question),   with  the  balance  being  expended  on  joint
advertising  campaigns for all franchisees  located within  specific  geographic
areas.

     (e)  Financing.  The  Company  generally  has  financed a  majority  of the
acquisition  price of the assets (other than inventory) of Company-owned  stores
sold to  franchisees,  to be repaid over a period of seven years,  together with
interest at the rate of 12% per annum.  The Company  generally  does not finance
the initial,  non-recurring  franchise fee or rent security deposits,  which are
generally  required  under  a  franchisee's  sublease.  The  purchase  price  is
generally  based upon the  historical  and  projected  cash flow of the Sterling
Store in question.  However, the Company has, on occasion,  financed (and may in
the future finance) up to 100% of the acquisition  price of a franchised  store.
Substantially all such financing is personally guaranteed by the franchisee (or,
if a  corporation,  by the  principals  owning in excess of an  aggregate of 51%
thereof) and is generally  secured by all of the assets of the Sterling Store in
question,  including subsequently acquired assets and the proceeds thereof. From
time to time, certain  franchisees obtain financing from third parties.  In such
cases, the Company generally subordinates its security interest in the assets of
the  franchised  location to the security  interests  granted to the provider of
such financing.

     (f) Termination.  Franchise  Agreements may be terminated if the franchisee
has defaulted on its payment of monies due to the Company, or in its performance
of the other terms and  conditions of the Franchise  Agreement.  During 2001, 25
franchised  stores were closed,  and the assets of (as well as possession of) an
additional 13 franchise stores were reacquired by the Company. Substantially all
of  the  assets  located  in  such  stores  were  voluntarily   surrendered  and
transferred  back to the  Company  in  connection  with the  termination  of the
related Franchise Agreements.  In such instances,  it is generally the Company's
intention to re-convey the assets of such a store to a new franchisee, requiring
the new  franchisee to enter into the  Company's  then current form of Franchise
Agreement. Subsequent to December 31, 2001, the Company repossessed 2 franchised
locations and currently operates them as Company-owned stores.

Marketing and Advertising

     The Company's marketing strategy emphasizes  professional eye examinations,
competitive   pricing   (primarily  through  product   promotions),   convenient
locations,  excellent  customer  service,  customer-oriented  store  design  and
product displays,  knowledgeable sales associates,  and a broad range of quality
products, including privately-labeled contact lenses and lens cleaning solutions
presently  being  offered  by  the  Company  and  certain  of  its  franchisees.
Examinations by licensed  optometrists  are generally  available on the premises
of, or directly adjacent to, substantially all Sterling Stores.

                                       4
<PAGE>
     The   Company    continually    prepares   and   revises   its    in-store,
point-of-purchase  displays,  which  provide  various  promotional  messages  to
customers upon their arrival at Sterling  Stores.  Both  Company-owned  and most
franchised  Sterling Stores participate in advertising and in-store  promotions,
which include visual merchandising  techniques to draw attention to the products
displayed in the Sterling Store in question.  The Company is also in the process
of refining its interactive  web site,  which further markets the "Sterling" and
"Site for Sore Eyes" brands in an effort to increase  traffic to its stores and,
in many instances,  also uses direct mail advertising to reach  prospective,  as
well as existing, consumers.

     The Company  annually budgets  approximately 4% to 6% of system-wide  sales
for  advertising  and  promotional  expenditures.   Generally,  franchisees  are
obligated to contribute a percentage of their Sterling Store's gross revenues to
the Company's segregated advertising fund accounts,  which the Company maintains
for advertising,  promotional and public relations programs.  In most cases, the
Company permits each franchisee to direct the expenditure of  approximately  50%
of such contributions,  with the balance being expended to advertise and promote
all Sterling  Stores located within the geographic area of the Sterling Store in
question, and/or on national promotions and campaigns.

Insight Managed Vision Care

     Managed care is a  substantial  and growing  segment of the retail  optical
business.  Under the trade name  "Insight  Managed  Vision  Care,"  the  Company
promotes the use of its Sterling  Stores through the ongoing  development of its
managed care network. The Company,  through Insight Managed Vision Care, markets
to  payers  (e.g.   health   maintenance   organizations,   preferred   provider
organizations,  insurance companies, Taft-Hartley unions, and mid-sized to large
companies)  that offer eye care  benefits to their  covered  participants.  When
Sterling  Stores provide  services or products to a covered  participant,  it is
generally at a discount from the everyday  advertised  retail price.  Typically,
participants  will be eligible for greater eye care benefits at Sterling  Stores
than those offered at eye care providers that are not participating in a managed
care  program.  The  Company  believes  that  the  additional  customer  traffic
generated by covered participants,  along with purchases by covered participants
above and beyond their eye care  benefits,  more than offsets the reduced  gross
margins being realized on these sales.  The Company believes that convenience of
store  locations and hours of operation  are key factors in  attracting  managed
care  business.  As the Company  increases  its presence  within  markets it has
already entered as well as expands into new markets, it believes it will be more
attractive to managed care payors due to the  additional  Sterling  Stores being
operated by the Company and its franchisees.

Competition

     The optical  business is highly  competitive  and includes chains of retail
optical stores,  superstores,  individual  retail outlets,  the operators of web
sites  and  a  large   number  of   individual   opticians,   optometrists   and
ophthalmologists  who  provide  professional  services  and may,  in  connection
therewith,  dispense  prescription eyewear. As retailers of prescription eyewear
generally  service local  markets,  competition  varies  substantially  from one
location or geographic area to another. Since 1994, certain major competitors of
the Company have been offering promotional incentives to their customers and, in
response thereto, the Company generally offers the same or similar incentives to
its customers.

     The Company believes that the principal  competitive  factors in the retail
optical   business  are  convenience  of  location,   on-site   availability  of
professional eye examinations, rapid service, quality and consistency of product
and service, price, product warranties, a broad selection of merchandise and the
participation  in  third-party,  managed  care  provider  programs.  The Company
believes that it competes favorably in each of these areas.

Government Regulation

     The Company and its operations are subject to extensive federal,  state and
local laws,  rules and  regulations  affecting  the health care industry and the
delivery of health care, including laws and regulations prohibiting the practice
of  medicine  and  optometry  by persons not  licensed  to practice  medicine or
optometry,  prohibiting  the  unlawful  rebate or unlawful  division of fees and
limiting  the  manner  in  which  prospective  patients  may be  solicited.  The
regulatory  requirements  that the Company  must satisfy to conduct its business
will vary from state to state.  In  particular,  some states have  enacted  laws
governing  the  ability  of  ophthalmologists  and  optometrists  to enter  into
contracts to provide  professional  services with business  corporations  or lay
persons,  and some states  prohibit the Company from  computing  its  continuing
royalty fees based upon a percentage of the gross revenues of the fees collected
by affiliated  optometrists.  Various  federal and state  regulations  limit the
financial  and  non-financial   terms  of  agreements  with  these  health  care
providers;  and the revenues  potentially  generated by the Company differ among
its various health care provider affiliations.

     The  Company  is also  subject  to certain  regulations  adopted  under the
Federal  Occupational  Safety  and  Health  Act  with  respect  to its  in-store
laboratory  operations.  The Company believes that it is in material  compliance
with all such applicable laws and regulations.

                                       5
<PAGE>


     As a  franchisor,  the  Company  is subject  to  various  registration  and
disclosure  requirements  imposed by the Federal  Trade  Commission  and by many
states  in which  the  Company  conducts  franchising  operations.  The  Company
believes that it is in material  compliance  with all such  applicable  laws and
regulations.


Environmental Regulation

     The  Company's  business  activities  are  not  significantly  affected  by
environmental regulations, and no material expenditures are anticipated in order
for the Company to comply with any such environmental regulations.  However, the
Company  is  subject  to  certain  regulations  promulgated  under  the  Federal
Environmental  Protection  Act ("EPA")  with respect to the  grinding,  tinting,
edging and  disposal  of  ophthalmic  lenses and  solutions,  which the  Company
believes it is in material compliance with.


Employees

     As of April 8, 2002, the Company employed approximately 238 individuals, of
which  approximately  77% were employed on a full-time  basis.  Except for those
individuals  employed at  Company-owned  Sterling Stores located in the New York
metropolitan area, and except for those individuals employed by the Registrant's
wholly-owned  subsidiary,  Insight IPA of New York, Inc. (which solicits managed
care provider agreements in the State of New York), of which there were none, no
employees  are  covered by any  collective  bargaining  agreement.  The  Company
considers its labor relations with its associates to be in good standing and has
not  experienced  any  interruption  of its  operations  due  to  disagreements.
Additionally,  the  Company  has  employment  agreements  with  two of  its  key
executives.


Item 2.  Properties

     The Company's headquarters,  consisting of approximately 7,000 square feet,
are located in an office building situated at 100 Quentin  Roosevelt  Boulevard,
Garden City,  New York 11530,  under a sublease  that expires in November  2006.
This  facility  houses the  Company's  principal  executive  and  administrative
offices.

     The Company leases the space occupied by all of its Company-owned  Sterling
Stores and the majority of its franchised  Sterling Stores. The remaining leases
for its  franchised  Sterling  Stores,  are held in the names of the  respective
franchisees thereof.

     Sterling Stores are generally located in commercial areas,  including major
shopping malls, strip centers,  freestanding buildings and other areas conducive
to retail trade. Sterling Stores range in size from 1,000 to 2,000 square feet.


Item 3.  Legal Proceedings

     Information  with respect to the Company's  legal  proceedings  required by
Item 103 of  Regulation  S-K is set forth in Notes 2 and 12 to the  Consolidated
Financial  Statements  included in Item 8 of this Report, and is incorporated by
reference herein


Item 4.  Submission of Matters to a Vote of Security Holders

     There were no matters  submitted  to a vote by the  Company's  shareholders
during the fourth quarter ended December 31, 2001.



                                       6
<PAGE>



                                     PART II

Item 5.  Market for Registrant's Common Equity and Related Stockholder Matters

     The  Registrant's  Common Stock was listed on the OTC Bulletin  Board under
the trading symbol "ISEE.OB" as of August 23, 2001, and was previously listed on
the Nasdaq National Market System.  Over-the-counter  market quotations  reflect
inter-dealer prices, without retail mark-up, mark-down or commission and may not
necessarily  represent actual transactions.  The range of the high and low sales
prices for the  Registrant's  Common Stock for each quarterly period of the last
two years, is as follows:

                             2001                       2000
                      ------------------         ------------------
  Quarter Ended:        High       Low             High       Low
  --------------      -------    -------         -------    -------

  March 31             $0.72      $0.22           $15.13     $5.44
  June 30              $0.37      $0.19            $8.19     $1.88
  September 30         $0.80      $0.13            $2.63     $0.94
  December 31          $0.14      $0.06            $1.50     $0.19


     The approximate  number of  shareholders of record of the Company's  Common
Stock as of April 8, 2002, was 328.

     The number of  shareholders of record of the Company's  Senior  Convertible
Preferred Stock as of April 8, 2002, was 2.

     Historically,  the Company has not paid dividends on its Common Stock,  and
has no intention to pay dividends on its Common Stock in the foreseeable future.
It is the  present  policy  of the  Registrant's  Board of  Directors  to retain
earnings, if any, to finance the Company's operations and expansion.




                                       7
<PAGE>


Item 6.  Selected Financial Data


               SELECTED CONSOLIDATED FINANCIAL AND OPERATING DATA


     The  following  Selected  Financial  Data has been derived from the audited
consolidated  financial  statements  of  the  Company  and  should  be  read  in
conjunction  with those  statements,  which are  included  in this  Report.  The
consolidated  financial  statements have been examined and reported on by Arthur
Andersen LLP,  independent public  accountants,  with respect to the years ended
December 31, 2001,  2000, 1999 and 1998. The consolidated  financial  statements
for the year ended  December  31,  1997 were  audited by  Deloitte & Touche LLP,
independent public accountants.

<TABLE>
<CAPTION>
                                                               (In thousands except for per share data and number of stores)
                                                                                      Year Ended December 31,
                                                             ------------------------------------------------------------------
Statement of Operations Data:                                    2001         2000          1999          1998          1997
                                                             ------------------------------------------------------------------
<S>                                                          <C>           <C>           <C>           <C>           <C>
System-wide sales (1)                                        $  124,589    $  128,775    $  140,321    $  147,402    $  145,534
                                                             ==========    ==========    ==========    ==========    ==========

Total revenues                                               $   20,619    $   23,058    $   29,580    $   32,582    $   35,193
                                                             ==========    ==========    ==========    ==========    ==========
Loss from continuing operations                              $   (5,088)   $  (14,628)   $   (2,691)   $  (16,016)   $  (12,670)
                                                             ==========    ==========    ==========    ==========    ==========
Income (loss) from discontinued operations                   $    1,312    $  (15,533)   $      430    $     (956)   $   (1,492)
                                                             ==========    ==========    ==========    ==========    ==========
Loss on disposal of discontinued operations                  $        -    $   (8,831)   $        -    $        -    $        -
                                                             ==========    ==========    ==========    ==========    ==========
Net loss                                                     $   (3,776)   $  (38,992)   $   (2,261)   $  (17,777)   $  (14,162)
                                                             ==========    ==========    ==========    ==========    ==========

Per Share Information - basic and diluted
-----------------------------------------
Loss from continuing operations                              $    (0.19)   $    (2.04)   $    (0.41)   $    (1.10)   $    (0.91)
                                                             ==========    ==========    ==========    ===========   ==========
Income (loss) from discontinued operations                   $     0.05    $    (0.66)   $     0.03    $    (0.07)   $    (0.11)
                                                             ==========    ==========    ==========    ==========    ==========
Loss on disposal of discontinued operations                  $        -    $    (0.37)   $        -    $        -    $        -
                                                             ==========    ==========    ==========    ==========    ==========
Net loss per share                                           $    (0.14)   $    (3.07)   $    (0.38)   $    (1.23)   $    (1.02)
                                                             ==========    ==========    ==========    ==========    ==========

Weighted-average common shares outstanding                       26,409        23,627        15,232        14,627        13,883
                                                             ==========    ==========    ==========    ==========    ==========


Balance Sheet Data:

Working capital (deficit)                                    $   (1,758)   $   (3,987)   $   (4,795)   $   (3,351)   $    3,472
Total assets                                                     11,057        22,531        30,312        32,685        43,265
Total debt                                                        1,299           754         7,347         9,751        11,120

</TABLE>

<TABLE>
<CAPTION>
Sterling Store Data:                                                    (In thousands except for number of stores)
                                                                                   Year Ended December 31,
                                                             ---------------------------------------------------------------------
                                                                 2001          2000          1999          1998          1997
                                                             ---------------------------------------------------------------------
<S>                                                              <C>           <C>           <C>           <C>           <C>
Company-owned stores bought, opened or reacquired                 15             3            11             6             7
Company-owned stores sold or closed                              (10)          (13)          (16)          (21)          (19)
Company-owned stores at end of period                             25            20            30            35            50
Company-owned stores being managed by Franchisees at end
   of period                                                       9            12             6             6             0
Franchised stores being managed by Company at end of period        1             3             5            12             6
Franchised stores at end of period                               169           201           218           251           263

</TABLE>


                                       8
<PAGE>

<TABLE>
<CAPTION>
Average sales per store: (2)
<S>                                                           <C>           <C>           <C>           <C>           <C>
Company-owned stores                                          $  518        $  396        $  420        $  478        $  424
Franchised stores                                             $  564        $  546        $  495        $  475        $  478
Average franchise royalties per franchised store (2)          $   43        $   42        $   38        $   35        $   37

</TABLE>

     (1)  System-wide  sales  represent   combined  retail  sales  generated  by
Company-owned and franchised stores, as well as revenues generated by VCC.

     (2) Average sales per store and average franchise  royalties per franchised
store are computed based upon the  weighted-average  number of Company-owned and
franchised stores in operation, respectively, for each of the specified periods.
For periods of less than a year, the averages have been annualized.


                                       9
<PAGE>


Item 7.  Management's Discussion and Analysis of Financial Condition and
         ---------------------------------------------------------------
         Results of Operations
         ---------------------

     This Report  contains  certain  forward-looking  statements and information
relating  to the  Company  that  is  based  on  the  beliefs  of  the  Company's
management,  as well as assumptions made by, and information currently available
to, the Company's management.  When used in this Report, the words "anticipate",
"believe",  "estimate", "expect", and similar expressions, as they relate to the
Company or the Company's  management,  are intended to identify  forward-looking
statements. Such statements reflect the current view of the Company with respect
to future events,  are not guarantees of future  performance  and are subject to
certain  risks and  uncertainties.  These risks and  uncertainties  may include:
product demand and market acceptance  risks; the effect of economic  conditions;
the impact of competitive products,  services and pricing;  product development,
commercialization  and  technological  difficulties;  the outcome of current and
future  litigation;  and other risks described  elsewhere herein.  Should one or
more  of  these  risks  or  uncertainties  materialize,   or  should  underlying
assumptions  prove  incorrect,  actual  results may vary  materially  from those
described herein as anticipated,  believed,  estimated, or expected. The Company
does not intend to update these forward-looking statements.


Results of Operations

For the Year Ended December 31, 2001 compared to December 31, 2000

     Net sales for Company-owned stores,  including revenues generated by VCC, a
specialized  health  care  maintenance  organization  licensed  by the  State of
California Department of Managed Health Care, decreased by $467,000, or 3.9%, to
$11,648,000 for the year ended December 31, 2001, as compared to $12,115,000 for
the  comparable  period in 2000. On a same store basis (for stores that operated
as a Company-owned store during the entirety of both of the years ended December
31, 2001 and 2000), comparative net sales decreased by $1,043,000,  or 14.5%, to
$6,129,000  for the year ended  December 31, 2001, as compared to $7,172,000 for
the comparable period in 2000. While, on average,  there were more Company-owned
stores in operation  during 2001 as compared to 2000, the Company  experienced a
decline in sales during the last quarter of 2001.  Management believes that this
decline was a direct result of the general  economic  downturn  experienced as a
result of the tragic  events of September  11, 2001,  especially in light of the
fact that the nearly  50% of  Company-owned  stores  operate in the State of New
York.

     Franchise  royalties  decreased by $1,217,000,  or 13.3%, to $7,860,000 for
the year ended  December 31, 2001, as compared to $9,077,000  for the comparable
period in 2000.  This  decrease  was a result of the fact that  there were fewer
franchised  stores in operation  during 2001 as compared to 2000. As of December
31, 2001, there were 169 franchised  stores in operation,  as compared to 201 as
of December 31, 2000.

     Net gains  and fees on the  conveyance  of  Company-owned  store  assets to
franchisees (which includes renewal fees and the fees related to the transfer of
store ownership from one franchisee to another) decreased by $158,000, or 53.0%,
to $140,000 for the year ended  December  31, 2001,  as compared to $298,000 for
the  comparable  period  in 2000.  This  decrease  was due to the fact  that the
Company did not convey to  franchisees  (and thus did not realize a gain on) any
assets of Company-owned stores during the year ended December 31, 2001. In 2000,
however,   the  Company  conveyed  the  assets  of  3  Company-owned  stores  to
franchisees. The $140,000 reflected for the year ended December 31, 2001 relates
solely to transfer and renewal fees.

     Interest on franchise notes receivable decreased by $263,000,  or 21.7%, to
$947,000 for the year ended December 31, 2001, as compared to $1,210,000 for the
comparable  period in 2000.  This decrease was  principally due to the fact that
several franchise notes matured during 2001.

     Other income decreased by $334,000, or 93.3%, to $24,000 for the year ended
December 31, 2001,  as compared to $358,000 for the  comparable  period in 2000.
This  decrease  was  primarily  a result of a decrease in the amount of interest
income earned by the Company,  due to lower average cash balances on hand in its
banks during 2001, as compared to 2000.

     The Company's gross profit margin  increased by 5.5%, to 73.6% for the year
ended December 31, 2001, as compared to 68.1% for the comparable period in 2000.
This  increase  was a result  of  improved  inventory  management  and  control,
improved  purchasing  at lower  average  product  costs,  and  better  discounts
obtained in 2001 from  certain of the  Company's  vendors.  In the  future,  the
Company's gross profit margin may fluctuate depending upon the extent and timing
of changes in the product mix in Company-owned stores,  competitive pricing, and
promotional incentives.



                                       10
<PAGE>
     Selling,  general and administrative expenses decreased by $11,870,000,  or
36.6%,  to  $20,361,000  for the year ended  December 31,  2001,  as compared to
$31,260,000  for the comparable  period in 2000. This decrease was primarily due
to the the fact that the  Company  recorded  increased  charges  of  $10,260,000
during the year ended December 31, 2000, related to the Company's  provision for
doubtful  accounts  associated  with  accounts  and  notes  receivable  due from
franchisees,  along with certain  receivables  from  franchisees for advertising
expenditures  that the  Company  incurred  on their  behalf,  while the  Company
incurred no such charges  during the year ended  December 31, 2001. As discussed
in the prior  year,  the  increased  charges  in 2000 were a direct  result of a
change in  management  philosophy,  policy,  direction,  and related  courses of
action  resulting  from a change in the Company's  senior  management  personnel
subsequent to December 31, 2000, to take back franchise stores and/or reevaluate
notes receivable due from various problem franchisees.  During 2001, the Company
did not incur similar charges, as management carefully monitored and managed its
franchise receivables and notes.  Additionally,  due to corporate downsizing and
improved scheduling in its Company-owned  stores, the Company reduced salary and
related expenses by approximately  $1,500,000.  Finally, there was a decrease in
depreciation  and  amortization  of  approximately  $350,000  due  to  the  full
depreciation  in the  prior  year  of  certain  of the  Company's  property  and
equipment.

     Provision for store  closings was $964,000 for the year ended  December 31,
2001. No such  provision  was provided for the year ended  December 31, 2000. In
2001,  management made the decision to close 11 of its Company-owned  stores. In
connection therewith, the Company recorded a provision based on the expected net
proceeds, if any, to be generated from the disposition of the store's assets, as
compared to the carrying value (after  consideration  of impairment,  if any) of
such store's assets and the estimated costs (including lease  termination  costs
and other expenses) that will be incurred in the closing of the stores.

     Non-cash  charges  for  issuance  of warrants  and  induced  conversion  of
warrants  decreased  by  $201,000,  or 54.9%,  to  $165,000  for the year  ended
December  31,  2001,  from  $366,000  for the  comparable  period in 2000.  This
decrease was principally due to the fact that there were no induced  conversions
of warrants  during  2001.  The 2001  charges  relate  solely to the issuance of
common shares in consideration for consulting services. Furthermore, the Company
has  outstanding   contingent   warrants  that  become   exercisable   upon  the
achievement,  by the Company, of certain  predetermined  EBITDA targets.  Due to
these  contingencies,  the future valuation of the contingent  warrants,  if and
when they become exercisable, will result in charges to the Company's results of
operations in future periods. The significance of these charges, if any, will be
dependent  upon the fair market value of the Company's  common stock at the time
that the respective EBITDA targets are achieved.

     Loss  from the  operation  of  franchised  stores  managed  by the  Company
decreased by $460,000,  or 73.4%, to  approximately  $167,000 for the year ended
December  31, 2001,  as compared to  approximately  $627,000 for the  comparable
period in 2000.  As of  December  31,  2001,  there was only one store  that the
Company was managing on behalf of a  franchisee,  as opposed to the three stores
the Company was managing on behalf of franchisees as of December 31, 2000.

     Interest expense  decreased by $389,000,  or 90.0%, to $43,000 for the year
ended  December 31, 2001, as compared to $432,000 for the  comparable  period in
2000.  This decrease  resulted from a decrease in long-term debt during the year
ended December 31, 2001, as compared to the comparable period in 2000.


For the Year Ended December 31, 2000 compared to December 31, 1999

     Net sales for Company-owned stores,  including revenues generated by VCC, a
specialized  health  care  maintenance  organization  licensed  by the  State of
California  Department  of  Managed  Health  Care,  decreased  by  approximately
$5,486,000,  or 31.2%,  to $12,115,000  for the year ended December 31, 2000, as
compared to  $17,601,000  for the comparable  period in 1999.  This decrease was
principally  due to a lower  number of stores in  operation  for the year  ended
December 31, 2000,  as compared to the  comparable  period in 1999, as described
below.  As of December 31, 2000,  there were 233 Sterling  Stores in  operation,
consisting of 32 Company-owned  stores (including 12 Company-owned  stores being
managed by franchisees) and 201 franchised stores (including 3 franchised stores
being  managed by the  Company on behalf of  franchisees),  as  compared  to 254
Sterling Stores in operation for the comparable period in 1999, consisting of 36
Company-owned   stores  (including  6  Company-owned  stores  being  managed  by
franchisees) and 218 franchised  stores (including 5 stores being managed by the
Company on behalf of  franchisees).  On a same  store  basis  (for  stores  that
operated as a Company-owned store during the entirety of both of the years ended
December 31, 2000 and 1999),  comparative  net sales  decreased by $257,000,  or
3.8%,  to  $6,524,000  for the year ended  December  31,  2000,  as  compared to
$6,781,000 for the comparable period in 1999.

     Franchise royalties  decreased by $278,000,  or 3.0%, to $9,077,000 for the
year ended  December  31, 2000,  as compared to  $9,355,000  for the  comparable
period  in 1999.  This  decrease  was a result  of fewer  franchised  stores  in
operation throughout fiscal year 2000, as compared to fiscal year 1999.

                                       11
<PAGE>
     Net gains  and fees on the  conveyance  of  Company-owned  store  assets to
franchisees,  including  renewal  fees and the fees  related to the  transfer of
ownership from one franchisee to another,  decreased by $369,000,  or 55.3%,  to
$298,000 for the year ended  December 31, 2000,  as compared to $667,000 for the
comparable  period in 1999.  This decrease was principally due to the conveyance
of the assets of 3  Company-owned  stores to  franchisees  during the year ended
December  31,  2000,  as  compared  to  the  conveyance  of  the  assets  of  13
Company-owned  stores  to  franchisees  during  the  comparable  period in 1999.
Management  believed  that this  decrease was  principally  due to the Company's
original decision to sell the assets of its Sterling Optical division (which was
subsequently   reversed),   which  was   believed  to   negatively   impact  the
marketability of Sterling Stores to independent franchisees.

     Interest on franchise notes receivable decreased by $255,000,  or 17.4%, to
$1,210,000  for the year ended  December 31, 2000, as compared to $1,465,000 for
the comparable  period in 1999.  This decrease was principally due to reductions
of the  principal  balance of several  franchisees  notes and fewer  notes being
generated during fiscal 2000.

     Other income (primarily  initial franchise fees) decreased by $134,000,  or
27.2%, to $358,000 for the year ended December 31, 2000, as compared to $492,000
for the comparable  period in 1999, due to fewer stores being franchised  during
fiscal year 2000.

     The Company's gross profit margin  decreased by 4.3%, to 68.1% for the year
ended December 31, 2000, as compared to 72.4% for the comparable period in 1999,
due to the mix of  products  being  sold in  Company-owned  stores  during  each
respective period.

     Selling,  general and administrative  expenses increased by $8,782,000,  or
37.2%,  to  $32,391,000  for the year ended  December 31,  2000,  as compared to
$23,609,000  for the  comparable  period in 1999.  This  increase was  primarily
related to an increase of approximately $5,960,000 in the provision for doubtful
accounts  associated  with accounts and notes  receivable due from  franchisees.
This increase was a direct result of a change in management philosophy,  policy,
direction,  and  related  courses  of  action  resulting  from a  change  in the
Company's  senior  management  personnel  subsequent  to year-end,  to take back
franchise  stores and/or  reevaluate  notes  receivable due from various problem
franchisees,  the number of which  increased in 2000 as compared to prior years.
In this regard,  the Company took back 7 franchised store locations  immediately
subsequent  to  December  31,  2000.  The  increase  in  selling,   general  and
administrative expenses also includes approximately $4,300,000 of losses related
to receivables  from franchisees for advertising  expenditures  that the Company
incurred on their behalf in the current period and in prior years,  all of which
was determined in fiscal year 2000 to be unrealizable,  or not  collectible,  by
the Company's new senior  management.  Another factor leading to the increase in
selling,  general  and  administrative  expense  was the  impairment  charges of
approximately  $1,131,000  primarily  related  to  certain  fixed  assets at the
corporate headquarters that the Company deemed to no longer have future use, and
the write-off of the capitalized web development costs associated with the 1-800
Anylens business that was sold in the November 2000.  Offsetting these increases
was a decrease  of  approximately  $2,200,000  in  Company-owned  store  related
operating  costs due to the reduction in the number of  Company-owned  stores in
operation for the year ended  December 31, 2000,  as compared to the  comparable
period in 1999.

     Warrant issuance and induced  conversion costs decreased by $2,005,000,  or
84.67%,  to $366,000 for the year ended December 31, 2000,  from  $2,371,000 for
the  comparable  period  in  1999.  This  decrease  was  principally  due to the
incurrence,  during fiscal year 1999,  of $2,000,000 of expenses  related to the
Company's issuance of 2,500,000 warrants, all of which vested immediately.

     Loss  from the  operation  of  franchised  stores  managed  by the  Company
increased  by  approximately  $22,000,  or 3.6%,  to $627,000 for the year ended
December 31, 2000, as compared to $605,000 for the comparable period in 1999.

     Interest expense decreased by $398,000,  or 48.0%, to $432,000 for the year
ended  December 31, 2000, as compared to $830,000 for the  comparable  period in
1999.  This decrease  resulted from a decrease in long-term debt during the year
ended December 31, 2000, as compared to the comparable period in 1999.

     Loss  from  discontinued  operations  represents  the  net  loss  from  the
operations  of the Company's  Internet  Division,  Insight Laser and  Ambulatory
Center  of  $19,573,000,  $1,083,000  and  $3,708,000,  respectively.  The  loss
attributable  to  the  Internet  Division  included  a  net  operating  loss  of
$15,409,000 (which primarily included charges for web-site  development costs of
approximately $11,800,000,  approximately $800,000 related to professional fees,
and  approximately  $1,300,000  related  to  salaries  and  wages),  a  non-cash
impairment  charge of  $711,000  on the  expected  disposal  of certain  assets,
$1,660,000  for  estimated  future  liabilities  and  costs  resulting  from the
decision to dispose, and $1,700,000 related to the estimated operating losses of
the Internet  Division through the end of April 2001 (the  anticipated  disposal
date).  The loss  attributable to Insight Laser included net operating losses of
$169,000,  a non-cash  impairment charge of $803,000 on the expected disposal of
certain assets and $111,000 for estimated future losses and

                                       12
<PAGE>
liabilities  through the anticipated disposal date. The loss for the  Ambulatory
Center  included  net  operating  income  of  $31,000,  offset  by  a   non-cash
impairment charge of $2,594,000 on the expected disposal of certain assets,  and
$1,145,000 for estimated  future losses and liabilities  through the anticipated
disposal date.


Liquidity and Capital Resources

     For the  year  ended  December  31,  2001,  cash  flows  used in  operating
activities  were  $5,703,000,  as  compared  to cash  flows  used  in  operating
activities of  $1,915,000  for the year ended  December 31, 2000.  Approximately
$3,977,000 of the cash flows used in 2001 related to one-time  liabilities  that
arose  as a  result  of the  Company's  plan  of  disposal  of its  discontinued
operations,  and payment of those  liabilities  is  reflected  in the outflow of
$5,365,000  related to accounts payable and accrued  liabilities.  Other factors
leading to the increased cash used in operating  activities  were the $5,088,000
loss from  continuing  operations,  offset by a decrease in franchise  and other
receivables  of  $1,007,000,  an increase  in the accrual for store  closings of
$964,000, charges of $930,000 related to long-lived assets, and depreciation and
amortization of $1,351,000.

     For the year ended  December  31,  2001,  cash flows  provided by investing
activities  were  $1,616,000,  principally  due to the proceeds  received on its
franchise notes receivable,  offset in part by limited capital expenditures made
by the Company during 2001.

     For the year ended  December  31,  2001,  cash flows  provided by financing
activities were $544,000,  principally  due to $750,000 of proceeds  received in
connection with short-term loans provided to the Company by two related parties,
Horizon Investors Corp. ("Horizon") and Broadway Partners LLC ("Broadway").

     As of  December  31,  2001,  the Company had  negative  working  capital of
$1,758,000,  and cash on hand of  $1,053,000.  As discussed  above,  the Company
utilized   approximately   $3,977,000  of  cash  in  connection   with  one-time
liabilities associated with its plan of disposal of its discontinued operations.

     On  January  23,  2002,   the  Company   secured  two  separate   financing
arrangements, as follows:

     Secured  Term  Note

     The  Company  entered  into a  secured  term  note for  $1,000,000  with an
independent  financial  institution.  This note is repayable in 24 equal monthly
installments  of $41,666,  and bears interest as defined (4.95% at the inception
of the  note).  The  note is  fully  collateralized/guaranteed  by a  $1,000,000
certificate of deposit posted by Horizon, a related party, at the same financial
institution.

     Credit Facility

     The  Company  entered  into an  agreement  with  Horizon  to borrow up to a
maximum of  $1,000,000.  This credit  facility  bears interest at the prime rate
plus 1% (5.5% as of the date of the loan  agreement),  provided  for an  initial
advance of $300,000,  requires minimum incremental advances of $150,000, matures
on January 22, 2004, requires ratable monthly principal and interest payments of
each borrowing,  amortizable through the maturity date of the facility, is fully
collateralized by the Company's  qualifying  franchise notes (as referenced by a
pledge  agreement),  and requires the payment of a facility fee of 2% per annum,
payable monthly, on the unused portion of the credit facility.

     Simultaneous  with  obtaining  the  above  financing,  the  Company  repaid
outstanding  related  party  borrowings  due to Horizon  and  Broadway  totaling
$750,000,  plus interest.  In  consideration  for providing access to the credit
facility  and  guaranteeing  the term  note,  the  Company  granted  Horizon  an
aggregate  of  2,500,000   warrants   (1,750,000   of  which  were   immediately
exercisable,  with the  balance  vesting in  quarterly  increments  of  250,000,
beginning April 22, 2002, so long as any amounts remain unpaid under the secured
term note  and/or  credit  facility).  Each  warrant  has a  five-year  term and
provides for an exercise price of $0.01.  The fair value of the warrants  issued
was approximately  $234,000.  As of April 8, 2002, remaining  availability under
the credit facility was approximately $700,000.

     The Company  believes that, in the furtherance of its business  strategies,
the Company's immediate future capital  requirements will include the renovating
and/or remodeling of certain Company-owned stores, terminating the leases of and
closing certain non-profitable Company-owned stores, the upgrading of management
information  systems for  Company-owned  and  franchised  stores,  and  improved
support services for its franchise system.

     The  Company  plans to  attempt to improve  its cash flows  during  2002 by
improving store  profitability  through  increased  monitoring of store-by-store
operations, closing non-profitable Company-owned stores, implementing reductions
of  administrative  overhead  expenses,  where necessary and feasible,  actively
supporting   development  programs  for  franchisees,   and  seeking  additional
financing,  if  necessary  and  available.  Management  believes  that  with the
successful   execution  of  its  business  plan  (including  the  aforementioned
activities),   its  existing  cash  on  hand,   the  collection  of  outstanding
receivables, and the availability under its existing credit facility, sufficient
liquidity  will be  available  for the Company to continue in operation at least
through the end of the first quarter of 2003. However, there can be no assurance
that the Company  will be able  achieve the  aforementioned  plans,  or that any
additional financing, if needed, will be available.

                                       13
<PAGE>

Management's Discussion of Critical Accounting Policies

     High-quality   financial   statements   require  rigorous   application  of
high-quality accounting policies.  Management believes that its policies related
to revenue recognition, legal contingencies,  allowances on franchise, notes and
other  receivables,  and  accruals  for store  closings and costs of disposal of
discontinued  operations  are  critical  to an  understanding  of the  Company's
financial  statements  because  their  application  places the most  significant
demands on management's  judgment,  with financial  reporting results relying on
estimation about the effect of matters that are inherently uncertain.


Recently Issued Accounting Pronouncements

Goodwill

     In July 2001, the Financial  Accounting  Standards  Board  ("FASB")  issued
Statements  of  Financial  Accounting  Standards  ("SFAS")  No.  141,  "Business
Combinations" and No. 142, "Goodwill and other Intangible Assets".  SFAS No. 141
requires all business combinations initiated after June 30, 2001 to be accounted
for using the  purchase  method.  Under SFAS No. 142,  goodwill  and  intangible
assets with indefinite lives are no longer  amortized but are reviewed  annually
(or more frequently,  if impairment indicators arise) for impairment.  Separable
intangible  assets that are not deemed to have indefinite lives will continue to
be amortized over their useful lives (but with no maximum life).

     The  Company  has  adopted  SFAS No.  142  effective  January  1, 2002 and,
accordingly,  goodwill will no longer be amortized.  In accordance with the SFAS
No. 142, goodwill will be evaluated periodically for impairment.  The Company is
currently evaluating the effect of adoption, if any.


Asset Retirement Obligations

     In June  2001,  the  FASB  issued  SFAS  No.  143,  "Accounting  for  Asset
Retirement  Obligations."  This statement  addresses the financial and reporting
obligations associated with the retirement of tangible long-lived assets and the
associated asset retirement  costs. It applies to legal  obligations  associated
with  the  retirement  of  long-lived   assets  that  result  from  acquisition,
construction,  development  and/or the normal  operation of a long-lived  asset,
except for certain  obligations  of lessees.  This  statement is  effective  for
fiscal years beginning after June 15, 2001. The Company is currently  evaluating
the effect of adoption of SFAS No. 143 on its financial  position and results of
operations, but does not expect its impact to be material.


Long-Lived Assets

     In August 2001, the FASB issued SFAS No. 144 "Accounting for the Impairment
or  Disposal of  Long-Lived  Assets".  This  statement  supersedes  SFAS No. 121
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
Be Disposed  Of" and  Accounting  Principles  Board  Opinion  No. 30  "Reporting
Results of  Operations  -  Reporting  the  Effects of Disposal of a Segment of a
Business,  and  Extraordinary,  Unusual and  Infrequently  Occurring  Events and
Transactions".  The Statement retains the fundamental provisions of SFAS No. 121
for  recognition  and  measurement of impairment,  but amends the accounting and
reporting standards for segments of a business to be disposed of. The provisions
of this  statement  are  required  to be  adopted  no later  than  fiscal  years
beginning after December 31, 2001, with early adoption  encouraged.  The Company
is currently evaluating the impact of the adoption of SFAS No. 144.




                                       14
<PAGE>


Item 7A.  Quantitative and Qualitative Disclosures about Market Risk

     The Registrant  presently has outstanding  certain equity  instruments with
beneficial conversion terms.  Accordingly,  the Registrant, in the future, could
incur non-cash charges to equity (as a result of the exercise of such beneficial
conversion  terms),  which  would  have a  negative  impact on future  per share
calculations.

     The Company is exposed to market risks from  potential  changes in interest
rates as they relate to the Company's  investments  in highly liquid  marketable
securities and borrowings under its credit  facility.  The Company believes that
the amount of risk as it relates to its  investments  and any such borrowings is
not material to the Company's financial condition or results of operations.  The
Company does not expect to use interest rate swaps or other instruments to hedge
its borrowings under its credit facility.




                                       15
<PAGE>


Item 8.  Financial Statements and Supplementary Data


                                TABLE OF CONTENTS


                                                                       PAGE
                                                                      ------
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS                                17

CONSOLIDATED FINANCIAL STATEMENTS

  Consolidated Balance Sheets as of December 31, 2001 and 2000          18

  Consolidated Statements of Operations for the Years Ended
      December 31, 2001, 2000 and 1999                                  19

  Consolidated Statements of Shareholders' Equity for the
      Years Ended December 31, 2001, 2000 and 1999                      20

  Consolidated Statements of Cash Flows for the Years Ended
      December 31, 2001, 2000 and 1999                                  21

  Notes to Consolidated Financial Statements                            22



     Information required by schedules called for under Regulation S-X is either
not applicable or is included in the consolidated  financial statements or notes
thereto.







                                       16
<PAGE>



                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS






To Emerging Vision, Inc.:


     We have audited the  accompanying  consolidated  balance sheets of Emerging
Vision,  Inc. (a New York  corporation) and subsidiaries as of December 31, 2001
and 2000, and the related consolidated  statements of operations,  shareholders'
equity  and cash  flows for the three  years  ended  December  31,  2001.  These
financial  statements are the  responsibility of the Company's  management.  Our
responsibility  is to express an opinion on these financial  statements based on
our audits.

     We conducted our audits in accordance  with  auditing  standards  generally
accepted in the United States.  Those standards require that we plan and perform
the audit to obtain reasonable  assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.  An
audit also includes  assessing the accounting  principles  used and  significant
estimates  made by  management,  as well as  evaluating  the  overall  financial
statement  presentation.  We believe that our audits provide a reasonable  basis
for our opinion.

     In our opinion,  the financial statements referred to above present fairly,
in all material respects,  the financial  position of Emerging Vision,  Inc. and
subsidiaries  as of  December  31,  2001  and  2000,  and the  results  of their
operations  and their cash flows for the three years ended  December 31, 2001 in
conformity with accounting principles generally accepted in the United States.



                                               /s/ Arthur Andersen LLP

Melville, New York
April 8, 2002





                                       17
<PAGE>



                     EMERGING VISION, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                        (In Thousands, Except Share Data)
<TABLE>
<CAPTION>
                                                                                                                 December 31,
                                                                                                       -----------------------------
                                                                                                            2001            2000
                                                                                                       -----------------------------

                                    ASSETS
<S>                                                                                                        <C>            <C>
Current assets:
         Cash and cash equivalents                                                                         $   1,053      $   5,215
         Franchise receivables, net of allowance of $3,095 and $3,521, respectively                            1,837          1,493
         Other receivables, net of allowance of $171 and $323, respectively                                      739          1,997
         Current portion of franchise notes receivable                                                         2,993          2,622
         Inventories, net                                                                                        783          1,033
         Prepaid expenses and other current assets                                                                94            475
                                                                                                           ---------      ---------
                     Total current assets                                                                      7,499         12,835
                                                                                                           ---------      ---------

Property and equipment, net                                                                                    1,075          2,995
Franchise notes and other receivables, net of allowance of $3,326 and $3,019, respectively                       862          3,926
Goodwill, net                                                                                                  1,266          1,534
Other assets                                                                                                     355            401
Net assets of discontinued operations                                                                              -            840
                                                                                                           ---------      ---------
                                Total assets                                                               $  11,057      $  22,531
                                                                                                           =========      =========

                                    LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
         Current portion of capital lease obligations                                                      $     186      $     221
         Accounts payable and accrued liabilities                                                              7,122         13,595
         Accrual for store closings                                                                              964              -
         Related party borrowings (Note 13)                                                                      750              -
         Net liabilities of discontinued operations                                                              235          3,006
                                                                                                           ---------      ---------
                     Total current liabilities                                                                 9,257         16,822
                                                                                                           ---------      ---------

Capital lease obligations                                                                                        363            533
                                                                                                           ---------      ---------
Excess of fair value of assets acquired over cost                                                                  -            317
                                                                                                           ---------      ---------
Franchise deposits and other liabilities                                                                         820            954
                                                                                                           ---------      ---------
Commitments and contingencies (Note 12)

Shareholders' equity
     Preferred stock, $.01 par value per share; 5,000,000 shares authorized:
        Senior Convertible Preferred Stock, $100,000 liquidation preference per
        share; 3 shares issued and outstanding                                                                   287            287
     Common stock, $.01 par value per share; 50,000,000 shares authorized; 27,187,309 and
        25,559,231 shares issued, respectively, and 27,004,972 and 25,382,230 shares outstanding,
        respectively                                                                                             272            256
     Treasury stock, at cost, 182,337 and 177,001 shares, respectively                                          (204)          (203)
     Additional paid-in capital                                                                              119,926        119,453
     Accumulated deficit                                                                                    (119,664)      (115,888)
                                                                                                           ---------      ---------
                                                                                                                 617          3,905
                                                                                                           ---------      ---------
                                                                                                           $  11,057      $  22,531
                                                                                                           =========      =========
</TABLE>

     The accompanying notes are an integral part of these  consolidated  balance
sheets.



                                       18
<PAGE>



                     EMERGING VISION, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                      (In Thousands, Except Per Share Data)
<TABLE>
<CAPTION>

                                                                                                For the Year Ended December 31,
                                                                                           -----------------------------------------
                                                                                              2001           2000            1999
                                                                                           -----------------------------------------
<S>                                                                                        <C>             <C>            <C>
Revenues:
         Net sales                                                                         $  11,648       $  12,115      $  17,601
         Franchise royalties                                                                   7,860           9,077          9,355
         Net gains and fees from the conveyance of Company-owned store
              assets to franchisees                                                              140             298            667
         Interest on franchise notes receivable                                                  947           1,210          1,465
         Other income                                                                             24             358            492
                                                                                           ---------       ---------      ---------
                                                                                              20,619          23,058         29,580
                                                                                           ---------       ---------      ---------
Costs and expenses:

         Cost of sales                                                                         3,077           3,870          4,856
         Selling, general and administrative expenses                                         20,361          31,260         23,609
         Loss from franchised stores operated under management agreements                        167             627            605
         Provision for store closings (Note 8)                                                   964               -              -
         Charges related to long-lived assets                                                    930           1,131              -
         Non-cash charges for issuance of common stock, warrants and induced
           conversions of warrants                                                               165             366          2,371
         Interest expense                                                                         43             432            830
                                                                                           ---------       ---------      ---------
                                                                                              25,707          37,686         32,271
                                                                                           ---------       ---------      ---------

Loss from continuing operations before provision for income taxes                             (5,088)        (14,628)        (2,691)
Provision for income taxes                                                                         -               -              -
                                                                                           ---------       ---------      ---------
Loss from continuing operations                                                               (5,088)        (14,628)        (2,691)
                                                                                           ---------       ---------      ---------
Discontinued operations: (Note 2)
     Income (loss) from discontinued operations                                                1,312         (15,533)           430
     Loss on disposal of discontinued operations                                                   -          (8,831)             -
                                                                                           ---------       ---------      ---------
          Income (loss) from discontinued operations                                           1,312         (24,364)           430
                                                                                           ---------       ---------      ---------
Net loss                                                                                   $  (3,776)      $ (38,992)     $  (2,261)
                                                                                           =========       =========      =========

Per share information - basic and diluted: (Note 4)

            Loss from continuing operations                                                $   (0.19)      $   (2.04)     $   (0.41)
            Income (loss) from discontinued operations                                          0.05           (0.66)          0.03
            Loss on disposal of discontinued operations                                            -           (0.37)             -
                                                                                           ---------       ---------      ---------
              Net loss per share                                                           $   (0.14)      $   (3.07)     $   (0.38)
                                                                                           =========       =========      =========

Weighted-average number of common shares outstanding - basic and diluted                      26,409          23,627         15,232
                                                                                           =========       =========      =========
</TABLE>

     The  accompanying   notes  are  an  integral  part  of  these  consolidated
statements.


                                       19
<PAGE>

<TABLE>
<CAPTION>

                                                                    EMERGING VISION, INC. AND SUBSIDIARIES
                                                               CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
                                                             FOR THE YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999
                                                                      (In Thousands, Except Share Data)

                                                                 Series B Convertible    Senior Convertible
                                                                   Preferred Stock        Preferred Stock        Common Stock
                                                                 Shares        Amount    Shares    Amount   Shares       Amount
                                                                 ------        ------    ------    ------  ----------   --------


<S>                                                            <C>           <C>         <C>      <C>      <C>          <C>
BALANCE - DECEMBER 31, 1998................................         -        $   -           35   $4,025   14,920,351   $   149
                                                               -----------   -------     ------   ------   ----------   --------
Issuance of common shares upon induced conversion
     of Senior Convertible Preferred Stock.................         -            -          (14)  (1,608)   1,172,500        12
Issuance of common shares to vendors and franchisees.......         -            -            -        -       61,273         1
Acquisition of RBG Consulting, Ltd.........................         -            -            -        -            -         -
Issuance of common shares upon exercise of warrants........         -            -            -        -      500,000         5
Charge for payments related to stock price guarantees......         -            -            -        -            -         -
Dividends on Senior Convertible Preferred Stock............         -            -            -        -       22,506         -
Issuance of warrants for consulting services...............         -            -            -        -            -         -
Charge related to reductions in exercise price of warrants.         -            -            -        -            -         -
Net loss...................................................         -            -            -        -            -         -
                                                               -----------   -------     ------   ------   ----------   --------
BALANCE - DECEMBER 31, 1999................................         -            -           21    2,417   16,676,630       167
Issuance of common shares upon induced conversion
     of Senior Convertible Preferred Stock.................         -            -          (18)  (2,130)   2,468,334        25
Exercise of stock options and warrants.....................         -            -            -        -    2,048,460        20
Issuance of common shares for consulting services..........         -            -            -        -    1,010,000        10
Issuance of Series B Convertible Preferred Stock...........     1,677,570        -            -        -            -         -
Issuance of warrants in connection with
     Series B Convertible Preferred Stock..................         -            -            -        -            -         -
Accretion of dividends on Series B Convertible
     Preferred Stock.......................................         -         11,743          -        -            -         -
Issuance of common shares upon conversion of Series B
     Convertible Preferred Stock...........................    (1,677,570)   (11,743)         -        -    3,355,140        34
Issuance of common shares to franchisees...................         -            -            -        -          667         -
Issuance of warrants and options for consulting services...         -            -            -        -            -         -
Equity contribution related to extinguishment of
     debt to related party.................................         -            -            -        -            -         -
Acquisition of treasury shares.............................         -            -            -        -            -         -
Net loss...................................................         -            -            -        -            -         -
                                                               -----------   -------     ------   ------   ----------   --------
BALANCE - DECEMBER 31, 2000................................         -            -            3      287   25,559,231       256
Issuance of common shares for consulting services (Note 14)         -            -            -        -    1,628,078        16
Acquisition of treasury shares (Note 14)...................         -            -            -        -            -         -
Net loss...................................................         -            -            -        -            -         -
                                                               -----------   -------     ------   ------   ----------   --------
BALANCE - DECEMBER 31, 2001................................         -        $   -            3   $  287   27,187,309    $  272
                                                               ===========   =======     ======   ======   ==========   ========


                        The  accompanying  notes  are an  integral  part of these consolidated statements.
</TABLE>


<TABLE>
<CAPTION>

                                                                    EMERGING VISION, INC. AND SUBSIDIARIES
                                                               CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY - (CONTINUED)
                                                             FOR THE YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999
                                                                      (In Thousands, Except Share Data)

                                                                Treasury Stock,     Additional                   Total
                                                                   at cost           Paid-In    Accumulated   Shareholders'
                                                               Shares      Amount    Capital     Deficit        Equity
                                                               ------      -----     --------   ---------      --------
<S>                                                            <C>         <C>       <C>        <C>            <C>
BALANCE - DECEMBER 31, 1998.................................         -     $   -     $ 46,036   $ (37,663)     $ 12,547
                                                               -------     -----     --------   ---------      --------
Issuance of common shares upon induced conversion
     of Senior Convertible Preferred Stock..................         -         -        5,035      (3,439)            -
Issuance of common shares to vendors and franchisees........         -         -          249           -           250
Acquisition of RBG Consulting, Ltd..........................         -         -          640           -           640
Issuance of common shares upon exercise of warrants.........         -         -          995           -         1,000
Charge for payments related to stock price guarantees.......         -         -         (386)          -          (386)
Dividends on Senior Convertible Preferred Stock.............         -         -           83         (83)            -
Issuance of warrants for consulting services................         -         -        2,000           -         2,000
Charge related to reductions in exercise price of warrants..         -         -          371           -           371
Net loss....................................................         -         -            -      (2,261)       (2,261)
                                                               -------     -----     --------   ---------      --------
BALANCE - DECEMBER 31, 1999.................................         -         -       55,023     (43,446)       14,161
Issuance of common shares upon induced conversion
     of Senior Convertible Preferred Stock..................         -         -       23,812     (21,707)            -
Exercise of stock options and warrants......................         -         -        7,672           -         7,692
Issuance of common shares for consulting services...........         -         -        9,798           -         9,808
Issuance of Series B Convertible Preferred Stock............         -         -        6,239           -         6,239
Issuance of warrants in connection
      with Series B Convertible Preferred Stock.............         -         -        4,379           -         4,379
Accretion of dividends on Series B Convertible
     Preferred Stock........................................         -         -            -     (11,743)            -
Issuance of common shares upon conversion of Series B
     Convertible Preferred Stock............................         -         -       11,709           -             -
Issuance of common shares to franchisees....................         -         -            -           -             -
Issuance of warrants and options for consulting services....         -         -           94           -            94
Equity contribution related to extinguishment of
     debt to related party..................................         -         -          727           -           727
Acquisition of treasury shares..............................   177,001      (203)           -           -          (203)
Net loss....................................................         -         -            -     (38,992)      (38,992)
                                                               -------     -----     --------   ---------      --------
BALANCE - DECEMBER 31, 2000                                    177,001      (203)     119,453    (115,888)        3,905
Issuance of common shares for consulting services (Note 14)          -         -          473           -           489
Acquisition of treasury shares (Note 14)...................      5,336        (1)           -           -            (1)
Net loss...................................................          -         -            -      (3,776)       (3,776)
                                                               -------     -----     --------   ---------      --------
BALANCE - DECEMBER 31, 2001................................    182,337     $(204)    $119,926   $(119,664)      $   617
                                                               =======     =====     ========   =========      ========


</TABLE>



     The  accompanying   notes  are  an  integral  part  of  these  consolidated
statements.


                                       20
<PAGE>


                     EMERGING VISION, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                             (Dollars in Thousands)
<TABLE>
<CAPTION>

                                                                                              For the Year Ended December 31,
                                                                                      ----------------------------------------------
                                                                                            2001            2000            1999
                                                                                      ----------------------------------------------
<S>                                                                                       <C>              <C>            <C>
Cash flows from operating activities:
     Net loss from continuing operations                                                  $  (5,088)       $ (14,628)     $  (2,691)
         Adjustments to reconcile net loss from continuing operations
                to net cash used  in operating activities:
            Depreciation and amortization                                                     1,351            1,440          1,653
            Provision for doubtful accounts                                                     138            6,967          1,007
            Provision for inventories                                                           100                -              -
            Net gains from the conveyance of Company-owned store assets to
               franchisees                                                                        -             (298)          (667)
            Accrued interest                                                                      -                -             83
            Amortization of excess of fair value of assets acquired over cost                  (317)            (348)          (348)
            Non-cash compensation charges related to options and warrants                       165               94          2,371
            Charges related to long-lived assets                                                930            1,131              -
        Changes in operating assets and liabilities:
            Franchise and other receivables                                                   1,007              (35)        (1,526)
            Inventories                                                                         150              880            355
            Prepaid expenses and other current assets                                           381               95             69
            Other assets                                                                         15              330         (1,117)
            Accounts payable and accrued liabilities                                         (5,365)           2,788           (269)
            Franchise deposits and other liabilities                                           (134)             (32)          (106)
            Accrual for store closings                                                          964             (299)           180
                                                                                          ---------        ---------      ---------
Net cash used in operating activities                                                        (5,703)          (1,915)        (1,006)
                                                                                          ---------        ---------      ---------

Cash flows from investing activities:
     Franchise notes receivable issued                                                            -             (582)        (2,816)
     Proceeds from franchise and other notes receivable                                       1,961            2,030          3,859
     Purchases of property and equipment                                                       (345)          (1,579)        (1,386)
     Proceeds from conveyance of property and equipment                                           -                -          1,947
                                                                                          ---------        ---------      ---------
Net cash provided by (used in) investing activities                                           1,616             (131)         1,604
                                                                                          ---------        ---------      ---------
Cash flows from financing activities:
     Payments related to stock price guarantees                                                   -                -           (386)
     Proceeds from the exercise of stock options and warrants                                     -            7,692          1,000
     Proceeds from borrowings                                                                   750                -            981
     Payments on borrowings                                                                    (205)          (6,594)        (2,968)
     Net proceeds from the issuance of Series B Convertible Preferred Stock                       -           10,618              -
     Acquisition of treasury shares                                                              (1)            (203)             -
                                                                                          ---------        ---------      ---------
Net cash provided by (used in) financing activities                                             544           11,513         (1,373)
                                                                                          ---------        ---------      ---------
Net cash (used in) provided by continuing operations                                         (3,543)           9,467           (775)
                                                                                          ---------        ---------      ---------
Net cash (used in) provided by discontinued operations                                         (619)          (4,360)            55
                                                                                          ---------        ---------      ---------
Net (decrease) increase in cash and cash equivalents                                         (4,162)           5,107           (720)
Cash and cash equivalents - beginning of year                                                 5,215              108            828
                                                                                          ---------        ---------      ---------
Cash and cash equivalents - end of year                                                   $   1,053        $   5,215      $     108
                                                                                          =========        =========      =========

Supplemental disclosures of cash flow information:
  Cash paid during the year for:
        Interest                                                                          $      49        $     324      $     699
                                                                                          =========        =========      =========
        Taxes                                                                             $      69        $      28      $      62
                                                                                          =========        =========      =========

     Non-cash investing and financing activities:
        Franchise store assets reacquired                                                 $     501        $     416      $     815
        Issuance of common shares for consulting services                                       165                -              -
        Issuance of common shares to settle vendor payable related to discontinued
           operations                                                                           324                -              -
        Extinguishment of related party debt                                                      -              727              -
        Preferred stock dividend paid in common shares                                            -                -             83

</TABLE>

     The  accompanying   notes  are  an  integral  part  of  these  consolidated
statements.


                                       21
<PAGE>

                     EMERGING VISION, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 1 - ORGANIZATION AND BUSINESS:

Business
--------

     Emerging  Vision,  Inc. and  subsidiaries  (the  "Company"),  is one of the
largest chains of retail optical stores and one of the largest franchise optical
chains in the  United  States,  based  upon  domestic  sales  and the  number of
locations of  Company-owned  and  franchised  stores  (collectively  referred to
herein as "Sterling Stores"). The Company was incorporated under the laws of the
State of New York in January 1992 and, in July 1992, purchased substantially all
of  the  assets  of  Sterling  Optical  Corp.,  a New  York  corporation  then a
debtor-in-possession under Chapter 11 of the U.S. Bankruptcy Code.

     On March 28, 2001,  the Board of Directors  decided that the Company should
focus its efforts and resources on growing its retail optical business and, as a
result, approved a plan to discontinue all other operations then being conducted
by the Company  (Note 2). In connection  with this  decision,  during 2001,  the
Company completed its plan of disposal of substantially all of the net assets of
Insight Laser  Centers,  Inc.  ("Insight  Laser") - which  operated  three laser
vision  correction  centers in the New York  metropolitan  area,  Insight  Laser
Centers N.Y.I,  Inc. (the  "Ambulatory  Center") - the owner of the assets of an
ambulatory  surgery  center  located in Garden City,  New York, and its Internet
Division  - which was to  provide a  web-based  portal  being  designed  to take
advantage of business-to-business opportunities in the optical industry.

     As of December  31,  2001,  there were 203  Sterling  Stores in  operation,
consisting  of 34  Company-owned  stores  (including 9 stores  being  managed by
franchisees),  and 169  franchised  stores  (including 1 franchised  store being
managed by the Company on behalf of the  franchisee  - Note 3). As  discussed in
Note 8, the Company anticipates  closing 11 of its non-profitable  Company-owned
stores during 2002.

Basis of Presentation
---------------------

     The  Consolidated  Financial  Statements  reflect  the  operations  of  the
Company's retail optical store division as continuing operations. The results of
operations  and cash  flows of  Insight  Laser,  the  Ambulatory  Center and the
Internet  Division are reflected as  discontinued  operations in accordance with
Accounting  Principles  Board ("APB") Opinion No. 30,  "Reporting the Results of
Operations - Reporting  the Effects of Disposal of a Segment of a Business,  and
Extraordinary,  Unusual and Infrequently Occurring Events and Transactions". The
remaining net liabilities of those segments of the Company's  business have been
separately stated on the accompanying  Consolidated Balance Sheets as net assets
or liabilities of discontinued operations, and are classified depending on their
expected realization and/or settlement date.

Management's Liquidity Plans
----------------------------

     As of  December  31,  2001,  the Company had  negative  working  capital of
$1,758,000, and cash on hand of $1,053,000. During 2001, the Company's operating
activities  used  approximately  $5,703,000  of  cash,  of  which  approximately
$3,977,000  related  to  one-time  liabilities  that  arose as a  result  of the
Company's plan of disposal (Note 2).

     The  Company  plans to  attempt to improve  its cash flows  during  2002 by
improving store  profitability  through  increased  monitoring of store-by-store
operations, closing non-profitable Company-owned stores, implementing reductions
of  administrative  overhead  expenses,  where necessary and feasible,  actively
supporting  development  programs  for  franchisees,  and by seeking  additional
financing,  if necessary and available.  Management believes that with its plans
to attempt to improve cash flows as discussed  above,  its  existing  cash,  the
collection of outstanding  receivables,  and the availability under its existing
credit facility (Note 19), there will be sufficient  liquidity  available to the
Company to continue in operation  until at least the end of the first quarter of
2003. There can be no assurance,  however, that the Company will be able achieve
the aforementioned plans, or that any financing will be available.


NOTE 2 - DISCONTINUED OPERATIONS:

     As discussed  in Note 1, in March 2001,  the  Company's  Board of Directors
decided  to  discontinue  the  operations  of the  Internet,  Insight  Laser and
Ambulatory  Center  divisions.  The Company  successfully  completed its plan of
disposal of the assets of these  segments in 2001;  accordingly,  the  remaining
results  of  operations  and cash  flows  have been  reflected  as  discontinued
operations in the accompanying consolidated financial statements. As of December
31, 2001 and 2000,  respectively,  net  liabilities  of $235,000 and  $2,166,000
related to these  discontinued  operations were  segregated on the  accompanying
Consolidated Balance Sheets.



                                       22
<PAGE>


     In  connection  with its  original  plan of disposal,  the  Company,  as of
December 31, 2000, recorded an initial provision of approximately $8,116,000 for
costs  associated  with the plan.  This provision  included  estimates of future
operating losses, known and anticipated expenses associated with the sale of the
net assets of these divisions,  and an estimate of loss upon disposition.  As of
December 31, 2000,  approximately  $4,719,000  of this  provision was accrued as
part  of  accounts   payable  and  accrued   liabilities  on  the   accompanying
Consolidated Balance Sheet.

     Internet Division

     During  2001,  in  connection  with  discontinuing  the  operations  of the
Internet Division,  the Company incurred an aggregate of approximately  $805,000
in severance payments to all of the Internet Division's personnel located in its
Dallas, Texas office, and approximately  $1,298,000 of operating costs. Included
in such severance payments were payments of $277,000 and $205,000, respectively,
to Mr. Gregory Cook, the Company's former President and Chief Executive Officer,
and Mr. James Ewer, the Company's  former Senior  Vice-President  of Operations.
Additionally,  on March 23, 2001, the Company issued to each of Mssrs.  Cook and
Ewer,  fully-vested  stock options to purchase  250,000  shares of the Company's
Common Stock at an exercise price of $0.25, the fair market value on the date of
grant.

     On April 24, 2001, the Company and Ms. Sara V. Traberman,  the former Chief
Financial  Officer of the  Company,  settled  her claim for  severance  benefits
(which,  in  accordance  with the  terms of her  Employment  Agreement  with the
Company,  called for a cash settlement in the approximate  amount of $1,300,000,
and the immediate vesting of the 400,000 stock options previously granted to her
under the  Agreement,  all as a result of the failure of the Company to sell its
non-Internet  related  assets  by  March 1,  2001)  for a lump  sum  payment  of
$750,000,  plus the issuance of fully-vested  stock options to purchase  125,000
shares of the  Company's  Common Stock at an exercise  price of $0.29,  the fair
market value on the date of grant.

     On July 5, 2001,  the Company and each of Rare Medium Group,  Inc. and Rare
Medium,  Inc.  (collectively,  "Rare")  entered into a Settlement  Agreement and
Mutual  Release  whereby  the  Company's   dispute  with  Rare  regarding  their
respective   obligations  under  the  Company's  various  agreements  with  Rare
(pertaining to the development and implementation of the e-commerce business and
strategies of the Company's previously abandoned Internet Division) was settled,
and each of the parties was released from  substantially  all of its  respective
obligations under the various agreements between the parties (including, but not
limited to, the $3.00 price protection  guarantee  afforded Rare with respect to
the 1,000,000  shares of the Company's  Common Stock  previously  issued to Rare
under the agreements (the "Existing Shares"),  all in exchange for the Company's
payment to Rare of $375,000,  the  Company's  issuance to Rare of an  additional
1,000,000  shares of its Common Stock (which the Company was required to attempt
to  register  for resale  under the  Securities  Act of 1933,  as  amended  (the
"Act")),  and the Company's  agreement not to impede Rare's  ability to sell the
Existing Shares, all of which were previously  registered under the Act. As this
settlement  amount  was  accrued  as of  December  31,  2000,  no  charge to the
accompanying Consolidated Statement of Operations was required in 2001.

     Additionally,  the Company  successfully  settled certain claims related to
its Internet Division for less than the amounts originally accrued. As a result,
at various times during 2001, the Company  reevaluated its total accrual related
to  the   discontinuance  of  the  operations  of  its  Internet  Division  and,
accordingly, reversed approximately $610,000 of such accrual into earnings.

     Insight Laser

     In early 2001, the Company closed two of its three Insight Laser  locations
and, in an effort to pursue a sale of the  remaining  net assets,  continued  to
operate from its flagship  center  located in Trump Tower in New York City.  The
Company was  unsuccessful in its attempts to sell the business and net assets of
Insight Laser and, in September  2001,  made a decision to cease all operations,
effective as of November 30, 2001, and attempt to settle all of Insight  Laser's
liabilities  in connection  therewith  (including  lease  termination  costs and
employee-related severance costs), as well as to thereafter liquidate the assets
thereof.  As a result of this  decision  not to sell such  assets,  the  Company
accrued an additional  $425,000 related to the  discontinuance of the operations
of Insight Laser.

     Ambulatory Center

     On May 31,  2001,  the Company  and the  owner/licensee  of the  Ambulatory
Center reached an agreement  whereby the Company sold and transferred its assets
then located in the Ambulatory  Center to a limited  liability company owned, in
principal part, by the owner/licensee  thereof. In consideration of the sale and
transfer,  the purchaser assumed the Ambulatory Center's liabilities (subject to
certain limitations),  released the Company from its obligations under the lease
for the premises of the  Ambulatory  Center  (except in limited  circumstances),
agreed  to  the  termination  of  the  Administrative  Services  and  Consulting
Agreement



                                       23
<PAGE>
     whereby the Company rendered  services to the  owner/licensee in connection
with the operation of the Ambulatory  Center,  and agreed to the  termination of
the  Purchase  Agreement  whereby  an  affiliate  of the  Company  had agreed to
purchase the New York State  License  (Certificate  of Need) for the  Ambulatory
Center.  As a result,  the  Company  reversed  into  earnings,  $887,000  of the
previously accrued  $1,145,000 of liabilities  related to the Ambulatory Center.
For the year  ended  December  31,  2001,  the  Company  incurred  approximately
$62,000,  related to the aforementioned  guarantee of certain liabilities of the
Ambulatory  Center.  Additionally,  as of  December  31,  2001,  the Company has
accrued an additional  $104,000 related to such estimated  guaranty  liabilities
for 2002.

     The reversal of $1,497,000 of amounts  previously  accrued for the Internet
Division and Ambulatory Center, offset by the aforementioned  additional accrual
of  $425,000  for  Insight  Laser,  is  reflected  in income  from  discontinued
operations on the accompanying Consolidated Statement of Operations for the year
ended December 31, 2001. As of December 31, 2001, approximately $141,000 related
to  discontinued  operations  remains  accrued as part of  accounts  payable and
accrued liabilities on the accompanying Consolidated Balance Sheet.

     Summarized  financial  information for these discontinued  operations is as
follows (in thousands):

      As of and for the Years Ended December 31:

                           Internet     Insight    Ambulatory
                           Division      Laser       Center         Total
                           --------    ---------   ----------     ---------
2001

Net revenues               $      -     $  1,004    $     72      $  1,076
                           ========    =========   ==========     =========
Net income (loss) *        $    563     $    (47)   $    796      $  1,312
                           ========    =========   ==========     =========
Current assets             $      -     $      -    $      -      $      -
                           ========    =========   ==========     =========
Total assets               $      -     $      -    $      -      $      -
                           ========    =========   ==========     =========
Current liabilities        $    145     $     90    $      -      $    235
                           ========    =========   ==========     =========
Net assets (liabilities)   $   (145)    $    (90)   $      -      $   (235)
                           ========    =========   ==========     =========


2000

Net revenues               $    108     $  2,610    $    753      $  3,471
                           ========    =========   ==========     =========
Net loss                   $(19,573)    $ (1,083)   $ (3,708)     $(24,364)
                           ========    =========   ==========     =========
Current assets             $     36     $     13    $     10      $     59
                           ========    =========   ==========     =========
Total assets               $     36     $    953    $     10      $    999
                           ========    =========   ==========     =========
Current liabilities        $  1,208     $  1,857    $      -      $  3,065
                           ========    =========   ==========     =========
Net assets (liabilities)   $ (1,172)    $ (1,004)   $     10      $ (2,166)
                           ========    =========   ==========     =========

     * Net income  results  from the  reversal of accruals  associated  with the
Company's plan of disposal.


NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

Use of Estimates
----------------

     The  preparation  of financial  statements  in  conformity  with  generally
accepted  accounting  principles  requires  management  to  make  estimates  and
assumptions  that affect the reported  amount of assets and  liabilities and the
disclosure  of  contingent  assets  and  liabilities  as of the  dates  of  such
financial  statements,  and the reported amounts of revenues and expenses during
the  reporting  periods.  Actual  results  could  differ  from those  estimates.
Significant  estimates  made by  management  include,  but are not  limited  to,
allowances on  franchise,  notes and other  receivables,  and accruals for store
closings and costs of disposal of discontinued operations.

Principles of Consolidation
---------------------------

     The  Consolidated  Financial  Statements  include the  accounts of Emerging
Vision, Inc. and its operating subsidiaries,  all of which are wholly owned. All
intercompany balances and transactions have been eliminated in consolidation.

                                       24
<PAGE>
Company-Managed Stores
----------------------

     The Company  accounts for the results of operations  of certain  franchised
Sterling  Stores  operated  by  the  Company  under  management   agreements  in
accordance   with  Emerging   Issues  Task  Force  Issue  97-2  ("EITF   97-2"),
"Application  of FASB  Statement  No. 94 and APB  Opinion  No.  16 to  Physician
Practice  Management  Entities  and  Certain  Other  Entities  with  Contractual
Management   Arrangements."  In  accordance  with  EITF  97-2,  the  results  of
operations  of  Company-managed  stores  are  shown  on a  net  basis,  and  are
classified as a loss from franchised stores operated under management agreements
in the accompanying Consolidated Statements of Operations.

     For the years ended December 31, 2001,  2000 and 1999, the Company  managed
1, 3 and 5 Sterling  Stores,  respectively,  for  franchisees,  under management
agreements entered into with each such franchisee.  These management  agreements
generally  provide for the operation of the Sterling  Store in question,  by the
Company,  with all operating decisions primarily being made by the Company.  The
Company  owns  the  inventory  at these  locations  and is  responsible  for the
collection of all revenues and the payment of all associated  expenses.  For the
years ended December 31, 2001, 2000 and 1999, these stores generated revenues of
$216,000, $1,382,000 and $1,524,000,  respectively,  and net losses of $167,000,
$627,000 and $605,000, respectively. Subsequent to December 31, 2001, due to the
significant  operating losses being incurred,  the Company terminated its single
outstanding  management  agreement  with the franchisee of the Sterling Store in
question,  recovered  the assets of such store,  and entered into a  termination
agreement with the landlord  thereof for the lease of the location.  The cost of
this termination amounted to approximately $80,000.

Revenue Recognition
-------------------

     The Company generally charges franchisees a nonrefundable initial franchise
fee.  Initial  franchise fees are  recognized at the time all material  services
required  to be  provided  by the  Company  have been  substantially  performed.
Continuing  franchise  royalty  fees are based  upon a  percentage  of the gross
revenues generated by each franchised location and are recorded as earned.

     The Company  recognizes  revenues in accordance  with SEC Staff  Accounting
Bulletin No. 101, "Revenue  Recognition in Financial  Statements."  Accordingly,
revenues  are  recorded  when  persuasive  evidence  of an  arrangement  exists,
delivery has occurred or services have been rendered, the Company's price to the
buyer is fixed or determinable, and collectibility is reasonably assured.

     The Company derives its revenues from the following four principal sources:

     Net sales - Represents sales from eye care products and related services;

     Franchise  royalties - Represents  continuing  franchise  fees based upon a
percentage of the gross revenues generated by each franchised location;

     Net gains from the  conveyance  of  Company-store  assets to  franchisees -
Represents  the net  gains  from  the  sale of  Company-owned  store  assets  to
franchisees; and

     Interest on franchise  notes - Represents  interest  charged to franchisees
pursuant  to  promissory   notes  issued  in  connection   with  a  franchisee's
acquisition  of the assets of a Sterling  Store or a qualified  refinancing of a
franchisee's obligations to the Company.

     The Company  also follows the  provisions  of EITF 01-09,  "Accounting  for
Consideration  Given  by a  Vendor  to a  Customer  (Including  Reseller  of the
Vendor's  Products)"  and,  accordingly,  accounts  for  discounts,  coupons and
promotions (that are offered to its customers) as a direct reduction of sales.

Cash and Cash Equivalents
-------------------------

     Cash  represents cash on hand at  Company-owned  stores and cash on deposit
with  financial  institutions.  All highly liquid  investments  with an original
maturity  (from date of purchase) of three months or less,  are considered to be
cash  equivalents.  The  Company's  cash  equivalents  are  invested  in various
investment-grade, money market accounts.

Fair Value of Financial Instruments
-----------------------------------

     As of December 31, 2001,  the carrying  values of the  Company's  financial
instruments,  such as cash and cash  equivalents,  accounts and notes receivable
and long-term debt,  approximated  their fair values,  based on their short-term
maturities and the nature of these instruments.

                                       25
<PAGE>
Inventories
-----------

     Inventories  are stated at the lower of cost or market  value,  and consist
primarily of contact lenses, ophthalmic lenses, eyeglass frames and sunglasses.

Property and Equipment
----------------------

     Property and equipment are recorded at cost, less accumulated  depreciation
and  amortization.  Depreciation is recorded on a  straight-line  basis over the
estimated useful lives of the respective classes of assets.

Goodwill
--------

     Through December 31, 2001, goodwill was being amortized, on a straight-line
basis, over its estimated useful life of 20 years, and accumulated  amortization
on goodwill was approximately  $1,275,000 and $1,007,000 as of December 31, 2001
and 2000, respectively.

     In July 2001, the Financial  Accounting  Standards  Board  ("FASB")  issued
Statement of Financial  Accounting  Standards  ("SFAS") No. 142,  "Goodwill  and
Other Intangible  Assets." This Statement  provides that goodwill and intangible
assets  with  indefinite  lives  should no longer be  amortized,  but  should be
reviewed,  at least annually,  for  impairment.  This Statement is effective for
fiscal years  beginning after December 15, 2001. In accordance with the adoption
of SFAS No. 142,  beginning  January 1, 2002, the Company will cease  amortizing
its  existing  net  goodwill  of  $1,266,000,  resulting  in  the  exclusion  of
approximately  $268,000 of amortization  expense for the year ended December 31,
2002.  The  Company  believes  that its  existing  goodwill  will  likely not be
impaired  based upon the fact that the Company is one reporting  unit - a retail
optical business (Note 1).

Impairment of Long-Lived Assets
-------------------------------

     The Company  follows the  provisions of SFAS No. 121,  "Accounting  for the
Impairment  of Long Lived Assets and for  Long-Lived  Assets to be Disposed Of".
This  Statement  requires  that  long-lived  assets  and  certain   identifiable
intangibles   be  reviewed  for  impairment   whenever   events  or  changes  in
circumstances  indicate  that  the  carrying  amount  of the  assets  may not be
recoverable,  but  amends  the prior  accounting  and  reporting  standards  for
segments of a business to be disposed of. The Company periodically evaluates its
long-lived assets (on a store-by-store basis) based on, among other factors, the
estimated,  undiscounted  future cash flows  expected to be generated  from such
assets  in  order to  determine  if an  impairment  exists.  For the year  ended
December  31,  2001,  the Company  recorded  impairment  charges of $574,000 for
stores it will continue to operate,  and wrote off $356,000 of long-lived assets
related to stores that  management  has made the decision to close (Note 8). For
the year ended December 31, 2000,  the Company  recorded  impairment  charges of
$1,131,000 related to certain corporate  long-lived assets that it no longer had
use for, along with the capitalized web  development  costs  associated with the
development  of the  website for its 1-800  Anylens  business  (Note 13).  These
amounts were  reflected in the  Consolidated  Statements of  Operations  for the
years  ended  December  31,  2001 and 2000,  and a new  basis,  if any,  for the
impaired assets was  established.  There were no impairment  charges recorded in
1999.

Comprehensive Income
--------------------

     The  Company   follows  the   provisions   of  SFAS  No.  130,   "Reporting
Comprehensive   Income,"   which   establishes   rules  for  the   reporting  of
comprehensive income and its components.  For the years ended December 31, 2001,
2000 and 1999, the Company's operations did not give rise to items includible in
comprehensive  loss that were not already included in net loss.  Therefore,  the
Company's  comprehensive  loss  is the  same  as its net  loss  for all  periods
presented.

Income Taxes
------------

     The Company  accounts  for income  taxes in  accordance  with SFAS No. 109,
"Accounting for Income Taxes". Under the asset and liability method specified by
SFAS No.  109,  the  deferred  income tax amounts  included in the  Consolidated
Balance Sheets are  determined  based on the  differences  between the financial
statement  and tax basis of assets and  liabilities,  as measured by the enacted
tax rates,  that will be in effect when these differences  reverse.  Differences
between assets and liabilities  for financial  statement and tax return purposes
are principally related to inventories and the depreciable lives of assets.

                                       26
<PAGE>

Stock-Based Compensation
------------------------

     The Company follows the provisions of Accounting  Principles  Board ("APB")
Opinion  No.  25,   "Accounting   for  Stock  Issued  to  Employees"   and  FASB
Interpretation  No. 44  "Accounting  for Certain  Transactions  Involving  Stock
Compensation  (an  Interpretation  of APB Opinion No.  25)" in  connection  with
stock-based  compensation granted to employees and directors of the Company. The
Company provides the required pro forma disclosures, as if the fair value method
of SFAS No. 123,  "Accounting for Stock Based  Compensation,"  was adopted (Note
15).  Stock-based  compensation  granted to non-employees is accounted for using
the provisions of SFAS No. 123.

Concentration of Credit Risk
----------------------------

     The Company operates retail optical stores in North America,  predominantly
in the United States,  and its receivables are primarily from  franchisees  that
also operate retail optical stores in the United States.

Segment Information
-------------------

     SFAS No. 131,  "Disclosures  about  Segments of an  Enterprise  and Related
Information,"   establishes  annual  and  interim  reporting  standards  for  an
enterprise's  operating  segments,  and related  disclosures about its products,
services, geographic areas and major customers. For the years ended December 31,
2001,  2000 and 1999, the Company's  continuing  operations were classified into
one principal  industry  segment - retail  optical (Note 1). All other  segments
have been reflected as  discontinued  operations.  Accordingly,  the disclosures
required by SFAS No. 131 have not been provided.

Reclassifications
-----------------

     Certain   reclassifications  have  been  made  to  prior  years'  financial
statements to conform to the current year presentation.

New Accounting Pronouncements
-----------------------------

     In June  2001,  the  FASB  issued  SFAS  No.  143,  "Accounting  for  Asset
Retirement  Obligations."  This Statement  addresses the financial and reporting
obligations associated with the retirement of tangible long-lived assets and the
associated asset retirement costs, and applies to legal  obligations  associated
with  the  retirement  of  long-lived   assets  that  result  from  acquisition,
construction,  development  and/or the normal  operation of a long-lived  asset,
except for certain  obligations  of lessees.  This  Statement is  effective  for
fiscal years beginning after June 15, 2001. The Company is currently  evaluating
the effect of the adoption of SFAS No. 143 on its financial position and results
of operations, but does not expect its impact to be material.

     In July 2001, the FASB issued SFAS No. 141, "Business  Combinations," which
requires  that all  business  combinations  initiated  after  June  30,  2001 be
accounted for using the purchase method.

     In  August  2001,  the  FASB  issued  SFAS  No.  144,  "Accounting  for the
Impairment or Disposal of Long-Lived Assets." This Statement supersedes SFAS No.
121 and APB No.  30,  retains  the  fundamental  provisions  of SFAS No. 121 for
recognition  and  measurement  of  impairment,  but  amends the  accounting  and
reporting standards for segments of a business to be disposed of. The provisions
of this  Statement  are  required  to be  adopted  no later  than  fiscal  years
beginning  after  December 31, 2001.  The Company is  currently  evaluating  the
effect of the adoption of SFAS No. 144 on its financial  position and results of
operations.


NOTE 4 - PER SHARE INFORMATION:

     In accordance with SFAS No. 128,  "Earnings Per Share",  basic net loss per
common share ("Basic EPS") is computed by dividing the net loss  attributable to
common shareholders by the weighted-average number of common shares outstanding.
Diluted net loss per common  share  ("Diluted  EPS") is computed by dividing the
net loss attributable to common shareholders by the  weighted-average  number of
common shares and dilutive common share  equivalents and convertible  securities
then  outstanding.  SFAS No. 128 requires the presentation of both Basic EPS and
Diluted EPS on the face of the Company's Consolidated  Statements of Operations.
There were  5,398,133,  5,590,966  and  3,571,624  stock  options  and  warrants
excluded from the  computation  of diluted EPS for the years ended  December 31,
2001, 2000 and 1999, respectively, as their effect on the computation of diluted
EPS would have been  anti-dilutive.  Additionally,  for the years ended December
31, 2001 and 2000,  there were 2.51 shares of our Senior  Convertible  Preferred
Stock  outstanding,  convertible  into 334,667  shares of the  Company's  Common
Stock. Similarly, these shares were not "assumed converted" as the effect on the
computation would also have been anti-dilutive.


                                       27
<PAGE>


     The  following  table sets forth the  computation  of basic and diluted per
share information:
<TABLE>
<CAPTION>

                                                                                                     (In thousands)
                                                                                  -------------------------------------------------
Numerator:                                                                               2001             2000             1999
----------                                                                               ----             ----             ----
<S>                                                                                  <C>               <C>              <C>
     Loss from continuing operations                                                 $  (5,088)        $ (14,628)       $  (2,691)
     Senior Convertible Preferred Stock dividends                                            -                 -              (83)
     Induced conversion of Senior Convertible Preferred Stock                                -           (21,707)          (3,439)
     Accretion of dividends on Series B Convertible Preferred Stock                          -           (11,743)               -
                                                                                     ---------         ---------        ---------
     Numerator for basic and diluted loss per share -
          loss attributable to common shareholders                                      (5,088)          (48,078)          (6,213)
                                                                                     ---------         ---------        ---------

Basic and Diluted:
------------------

     Loss attributable to common shareholders                                           (5,088)          (48,078)          (6,213)
     Income (loss) from discontinued operations                                          1,312           (15,533)             430
     Loss on disposal of discontinued operations                                             -            (8,831)               -
                                                                                     ---------         ---------        ---------
          Net loss attributable to common shareholders                               $  (3,776)        $ (72,442)       $  (5,783)
                                                                                     =========         =========        =========

Denominator:
------------

     Denominator for basic and diluted per share information -
          weighted-average shares outstanding                                           26,409            23,627           15,232
                                                                                     =========         =========        =========

Basic and Diluted Per Share Information:
----------------------------------------

     Loss attributable to common shareholders                                        $   (0.19)        $   (2.04)       $   (0.41)
     Income (loss) from discontinued operations                                           0.05             (0.66)            0.03
     Loss on disposal of discontinued operations                                             -             (0.37)               -
                                                                                     ---------         ---------        ---------
          Net loss attributable to common shareholders                               $   (0.14)        $   (3.07)       $   (0.38)
                                                                                     =========         =========        =========
</TABLE>

NOTE 5 - FRANCHISE NOTES RECEIVABLE:

     Franchise  notes held by the Company  consist  primarily of purchase  money
notes related to  Company-financed  conveyances of Company-owned store assets to
franchisees,  and certain franchise notes receivable  obtained by the Company in
connection with acquisitions in prior years. Substantially all notes are secured
by the underlying  assets of the related  franchised  store, as well as, in most
cases, the personal  guarantee of the principal owners of the franchisee.  As of
December 31, 2001,  these notes  provided for interest at various  rates ranging
from 8% to 12%.

     Scheduled  maturities of notes  receivable as of December 31, 2001,  are as
follows (in thousands):

                           2002                                       $   2,993
                           2003                                           1,170
                           2004                                             835
                           2005                                             722
                           2006                                             626
                           Thereafter                                       835
                                                                      ---------
                                                                          7,181
                           Less: allowance for doubtful accounts         (3,326)
                                                                      ---------
                                                                      $   3,855
                                                                      =========


                                       28
<PAGE>
NOTE 6 - VALUATION AND QUALIFYING ACCOUNTS:

     Franchise  receivables (such as royalties and rents receivable),  franchise
notes receivable,  and other Company receivables,  are shown on the Consolidated
Balance  Sheets net of  allowances  for doubtful  accounts.  The  following is a
breakdown, by major component, of the change in those allowances, along with the
accruals for store closings and discontinued operations:
<TABLE>
<CAPTION>
                                                                                                         (In thousands)
                                                                                                       As of December 31,
                                                                                        --------------------------------------------

Franchise Receivables:                                                                       2001             2000            1999
                                                                                             ----             ----            ----
<S>                                                                                       <C>              <C>             <C>
     Balance, beginning of year                                                           $  3,521         $  2,443        $  2,060
          Charged to expense                                                                   138            2,994             910
          Reductions                                                                          (564)          (1,916)           (527)
                                                                                          --------         --------        --------
     Balance, end of year                                                                 $  3,095         $  3,521        $  2,443
                                                                                          ========         ========        ========

Franchise Notes Receivables:

     Balance, beginning of year                                                           $  3,019         $    400        $    450
          Charged to expense                                                                     -            3,650              97
          Reductions, principally write-offs                                                     -           (1,031)           (147)
          Additions                                                                            307                -               -
                                                                                          --------         --------        --------
     Balance, end of year                                                                 $  3,326         $  3,019        $    400
                                                                                          ========         ========        ========

Other Company Receivables:

     Balance, beginning of year                                                           $    323         $      -        $      -
          Charged to expense                                                                     -              323               -
          Reductions                                                                          (152)               -               -
                                                                                          --------         --------        --------
     Balance, end of year                                                                 $    171         $    323        $      -
                                                                                          ========         ========        ========

Accrual for Store Closing:

     Balance, beginning of year                                                           $      -         $    299        $    954
          Charged to expense                                                                   964                -               -
          Reductions                                                                             -             (299)           (655)
                                                                                          --------         --------        --------
     Balance, end of year                                                                 $    964         $      -        $    299
                                                                                          ========         ========        ========

Accrual for Costs of Disposal of Discontinued Operations:

     Balance, beginning of year                                                           $  4,719         $      -        $      -
          Charged to expense                                                                   425           11,919               -
          Reductions (including approximately $1,497 of accrual reversal)                   (5,003)          (7,200)              -
                                                                                          --------         --------        --------
     Balance, end of year                                                                 $    141         $  4,719        $      -
                                                                                          ========          =======        ========
</TABLE>

NOTE 7 - PROPERTY AND EQUIPMENT, NET:

     Property and equipment, net, consists of the following:


                                        (In thousands)                 Estimated
                                      As of December 31,                 Useful
                                       2001       2000                   Lives
                                     -------    -------                ---------

Furniture and fixtures               $  275     $  703                  5 years
Machinery and equipment               1,580      3,524                3-5 years
Leasehold improvements                1,105      1,733                 10 years*
                                     -------    -------
                                      2,960      5,960
  Less: accumulated depreciation     (1,885)    (2,965)
                                     -------    -------
     Property and equipment, net     $1,075     $2,995
                                     =======    =======

     * Based  upon the  lesser of the  assets'  useful  lives or the term of the
lease of the related property.

                                       29
<PAGE>
     The net book value of assets held under capital leases included in property
and equipment aggregated $139,000 and $374,000 (net of accumulated  depreciation
of  $129,000  and  $146,000)  as of December  31,  2001 and 2000,  respectively.
Depreciation  expense for the years ended December 31, 2001,  2000 and 1999, was
$885,000, $1,172,000 and $1,304,000, respectively.


NOTE 8 - PROVISION FOR STORE CLOSINGS:

     The Company follows the provisions of EITF 94-3 "Liability  Recognition for
Certain Employee  Termination Benefits and Other Costs to Exit an Activity," and
in  accordance  therewith,  the  Company  provides  for  losses  it  anticipates
incurring with respect to those Company-owned  stores that it has identified for
future  closure,  at the time that management  makes a formal  commitment to any
such plan of closure. The provision is recorded at the time the determination is
made to close a particular  store and is based on the expected net proceeds,  if
any, to be generated from the disposition of the store's assets,  as compared to
the carrying value (after  consideration of impairment,  if any - see Note 3) of
such store's assets and the estimated costs (including lease  termination  costs
and other  expenses)  that are  anticipated to be incurred in the closing of the
store in question.  For the year ended December 31, 2001, the Company recorded a
provision for 11 store closings totaling  approximately  $964,000  (comprised of
$766,000 in lease termination costs and $198,000 for other associated expenses),
and  such  provision  is  separately  stated  in the  accompanying  Consolidated
Statement of Operations for 2001. As of December 31, 2001, the entire  provision
remains accrued as accrual for store closings on the  accompanying  Consolidated
Balance Sheet. The Company anticipates closing all of the aforementioned  stores
during 2002. No provision  for store  closings was provided for during the years
ended December 31, 2000 and 1999.


NOTE 9 - ACCOUNTS PAYABLE AND ACCRUED LIABILITIES:

     Accounts  payable  and accrued  liabilities  consist of the  following  (in
thousands):

                                               As of December 31,
                                          ---------------------------
                                            2001               2000
                                          --------           --------

Accounts payable                          $ 3,798            $ 5,811
Accrued payroll and fringe benefits           621                490
Accrual for costs of disposal of
  discontinued operations (Note 2)            141              4,719
Accrued professional fees                     306                330
Accrued rent                                  361                368
Accrued advertising                           612                809
Other accrued expenses                      1,283              1,068
                                          --------          ---------
                                          $ 7,122           $ 13,595
                                          ========          =========

NOTE 10 - INCOME TAXES:

     The Company's  effective tax rate differs from the statutory Federal income
tax rate of 34%, primarily due to the impact of recording a valuation  allowance
to offset the potential  future tax benefit  resulting  from net operating  loss
carry-forwards for all years presented.

     As  of  December   31,  2001  and  2000,   net  deferred  tax  assets  were
approximately  $20,600,000 and $21,300,000,  respectively,  resulting  primarily
from the future tax benefit of net operating loss carry-forwards.  In accordance
with SFAS No. 109,  the  Company has fully  reserved  for its net  deferred  tax
assets as of December  31,  2001 and 2000,  due to the  uncertainty  as to their
future realizability.

     As of December 31, 2001, the Company had net operating loss  carry-forwards
totaling approximately $48,000,000 available to offset future taxable income for
federal  income tax purposes.  The net operating loss  carry-forwards  expire in
varying  amounts  through 2021 and may be limited in accordance with Section 382
of the Internal  Revenue Code of 1986, as amended,  based on certain  changes in
ownership that have occurred.


NOTE 11 - CAPITAL LEASE OBLIGATIONS:

     Total  capital  lease  obligations  as of  December  31, 2001 and 2000 were
$549,000 and $754,000, respectively. Capital leases are recorded at the lower of
the  present  value of the  minimum  lease  payments  or the  fair  value of the
underlying  assets,  and are  payable in  monthly  installments,  together  with
interest at various rates  ranging from 6.47% to 14.60%.  These leases mature at
various dates through  April 2006. As of December 31, 2001,  principal  payments
due on the Company's capital leases are as follows (in thousands):



                                       30
<PAGE>

                                                                 Principal
                                           Year                   Payments
                                          ------                  --------

                                           2002                   $    186
                                           2003                        179
                                           2004                        153
                                           2005                         23
                                           2006                          8
                                                                  --------
                                                                  $    549
                                                                  ========

NOTE 12 - COMMITMENTS AND CONTINGENCIES:

Operating Lease Commitments
---------------------------

     The Company leases locations for the majority of both its Company-owned and
franchised  stores, as well as its executive and administrative  offices.  As of
December 31, 2001,  minimum future rental payments for Company-owned  stores and
the Company's executive and administrative offices, as well as for stores leased
by the Company and subleased to  franchisees,  in the aggregate,  are as follows
(in thousands):

             ------------------- ----------------- ----------------------
                 Total Lease          Sublease           Net Company
                 Obligations          Rentals            Obligations
             ------------------- ----------------- ----------------------

2002              $  8,889            $  7,313            $  1,576
2003                 7,029               6,010               1,019
2004                 6,163               5,271                 892
2005                 5,047               4,268                 779
2006                 4,887               4,304                 583
Thereafter           3,819               2,986                 833
                  --------            --------            --------
                  $ 35,834            $ 30,152            $  5,682
                  ========            ========            ========


     The  Company  holds  the  master  lease  on  substantially  all  franchised
locations and, as part of the franchise agreement,  sublets the subject premises
to the  franchisee.  In  addition  to the fixed rent  payable  under such master
leases,  most master leases require payment of a pro rata portion of common area
maintenance  expenses and real estate taxes,  as well as  percentage  rent based
upon the sales  volume  of the store in  question.  As  required  by SFAS No. 13
"Accounting  for  Leases,"  the  Company   recognizes  its  rent  expense  on  a
straight-line  basis  over the  life of the  related  lease.  Rent  expense  was
approximately $2,048,000, $3,444,000, and $4,267,000, net of sublease rentals of
approximately  $8,443,000,  $8,997,000,  and  $9,190,000,  for the  years  ended
December 31, 2001, 2000 and 1999, respectively.

Employment Agreements
---------------------

     The Company has employment agreements with two of its key employees,  which
extend through July 2003 and June 2004, respectively.  Each employment agreement
provides for certain base compensation and other miscellaneous  benefits. One of
the employment  agreements also provides for incentive  compensation  plan based
upon the  Company's  achievement  of certain  EBITDA  targets,  as  defined.  In
connection with these employment agreements, the Company granted an aggregate of
550,000  employee stock options at exercise  prices ranging from $0.26 to $0.43,
and in all cases equal to the fair market value of the Company's Common Stock at
each respective date of grant. The options generally vest over a period of three
years (with accelerated vesting provided for in one of the agreements,  upon the
Company's  achievement of certain  EBITDA  targets,  as defined),  and expire 10
years from the  respective  dates of grant.  The  aggregate  future  annual base
compensation  relating  to  these  employment  agreements  for the  years  ended
December  31,  2002,  2003  and  2004,  is  $385,000,   $334,000  and  $125,000,
respectively.



                                       31
<PAGE>
Contingencies
-------------

     In 1999, the Company  commenced an action in the Supreme Court of the State
of New York against Dr. Larry Joel and Apryl Robinson for amounts claimed due by
the  Company  on a series of five  separate  Negotiable  Promissory  Notes  (the
"Notes").  The Notes were  issued by  corporations  owned by the  defendants  in
connection  with their purchase of the assets of, and a Sterling  Optical Center
Franchise  for, an aggregate of four of the Company's  retail optical stores and
an  optical  laboratory.  The  repayment  of each of the  Notes  was  personally
guaranteed  by each of the  defendants.  In response,  the  defendants  asserted
counterclaims in excess of $13,000,000  based upon the Company's alleged failure
to comply with the terms of an oral, month-to-month consulting agreement between
Dr. Joel and the Company, as well as to purchase the assets of various companies
owned by Dr. Joel,  including Duling Optical and D & K Optical - notwithstanding
the fact that the parties  failed to agree upon the terms of any such  purchase,
the parties  failed to enter into any  written  agreement  memorializing  such a
transaction,  and the Company  subsequently  purchased  such assets from Norwest
Bank (which held a first lien on  substantially  all of the assets as collateral
for  various  loans  made to each of the  entities,  all of which  were  then in
default) in a private  foreclosure  sale. In March 2001, the Appellate  Division
granted  the  Company's  Motion  for  Summary  Judgment  on  the  issue  of  the
defendants'  liability,  as guarantors  of each of such Notes.  A hearing on the
Company's  damages  took  place in July 2001;  and,  in August  2001,  the Court
granted the Company's claim for damages in the  approximate  amount of $800,000,
which the Company is seeking to enforce.  In November 2001, the defendants  each
filed for  protection  under the U.S.  Bankruptcy  Code and, in  February  2002,
received  a  discharge  in such  proceedings,  which the  Company  is  presently
attempting  to  overturn.  In  addition,  in March 2001,  the  Company  filed an
additional  Motion  for  Summary  Judgment  seeking  dismissal  of  all  of  the
defendants'  counterclaims;  and the  defendant,  Dr. Joel,  thereafter  filed a
cross-motion   seeking  a   determination   that  the   Company   breached   the
aforementioned  oral,  month-to-month  consulting  agreement  and  that  he  is,
accordingly,  entitled to damages of  approximately  $13,000,000,  each of which
motions were decided entirely in favor of the Company.  Subsequently, on July 2,
2001, the defendants,  without counsel,  filed an appeal of this decision by the
Court, which appeal has not yet been decided.

     In February 2000, Essilor Laboratories of America, L.P. commenced an action
against  the  Company in the  District  Court of Dallas  County,  Texas  seeking
damages of  approximately  $250,000,  representing  the  alleged  unpaid cost of
certain  ophthalmic lenses previously  purchased by the Company.  In April 2002,
the Company settled this action for approximately $50,000.

     In January 2001,  the Company  commenced an action  against Binns  Optical,
Inc. ("BOI"), Michael Binns and Mary Ann Binns (collectively,  the "Guarantors")
in the United  States  District  Court for the  Eastern  District  of  Missouri,
seeking to prohibit the  defendants  from  operating the Sterling  Optical store
located in Ballwin,  Missouri,  under any name other than Sterling  Optical,  as
well as to require the defendants to return to the Company all patient  records,
customer lists, furniture, fixtures and equipment removed by the defendants from
the six  Sterling  Optical  stores  previously  franchised  to,  and  ultimately
abandoned by, BOI. In February 2001,  the defendants  entered into a Stipulation
agreeing to the entry of a preliminary  injunction whereby the defendants agreed
to substantially all of the relief requested by the Company;  and in March 2001,
the defendants  filed a counterclaim  against the Company seeking damages in the
amount of  $3,000,000,  plus  punitive  damages,  as a result  of the  Company's
alleged  fraud  in  the  inducement,  negligent  misrepresentation,   breach  of
fiduciary duty and claims stated in the  alternative  for breach of contract and
breach of oral agreement.  The Company denied the defendants'  counterclaims and
filed a motion to  dismiss  all such  counterclaims,  as well as a claim for its
legal fees and costs associated with the action.  On March 29, 2002, this motion
was decided by the Court in favor of the Company and, in  connection  therewith,
the  Company  was  awarded  legal  fees and costs in the  approximate  amount of
$40,000. In a related matter, in February 2001, the Company commenced a separate
action  against the  Guarantors  in the New York State Supreme Court by filing a
Motion for Summary  Judgment in Lieu of Complaint,  seeking  damages  (under the
Guarantors'  payment  guarantee  in favor  of the  Company)  as a result  of the
failure of BOI to comply with its obligations under a series of eight Negotiable
Promissory  Notes made by BOI in its favor; and in April 2001 and July 2001, the
Court  granted  the  Company's  motion and awarded  the  Company  judgments  for
damages, in the aggregate approximate amount of $1,500,000, which the Company is
seeking to enforce in the State of Missouri, where the Guarantors both reside.

     In February  2001,  five of the  Company's  Site for Sore Eyes  franchisees
(owning an aggregate of seven franchised Site for Sore Eyes stores) commenced an
action  in the  United  States  District  Court  for the  Northern  District  of
California  seeking  $35,000,000 of damages as a result of the Company's alleged
breach of the respective Franchise Agreements whereby each  franchisee/plaintiff
operates  its Site for Sore  Eyes  Optical  store(s),  fraud and  violations  of
California  law, as well as a  declaratory  judgment  that each of the Franchise
Agreements had been modified to afford each  plaintiff  certain rights which are
in addition to those set forth in the applicable Franchise Agreements.  On April
1, 2002, the parties entered into a Settlement Agreement, whereby the plaintiffs
dismissed the action,  with prejudice,  in exchange for the Company  agreeing to
certain  amendments  to  the  Franchise  Agreement  pertaining  to  each  of the
aforementioned  seven Site for Sore Eyes  Optical  Centers,  and the Company and
Site-Ncal  Area Rep, LLC, a California  limited  liability  company owned by the
plaintiffs ("NCAL"), entering into an Area Representation Agreement whereby NCAL
is  authorized  to  solicit  individuals  that are  interested  in  acquiring  a
franchise  for one or more new Site for Sore Eyes  retail  optical  stores to be
opened in the San Francisco Bay area of California. Additionally, NCAL agreed to
provide certain services to each new franchisee,  all in  consideration  for the
Company's  payment,  to NCAL,  of a portion of the  initial  franchise  fees and
continuing  royalty  fees to  become  payable  to the  Company  under  each  new
Franchise  Agreement,  as well as the Company's  reimbursement  of the estimated
administrative  costs  and  expenses  to  be  incurred  by  NCAL  in  connection
therewith.
                                       32
<PAGE>
     In July 2001,  the  Company  commenced  an  Arbitration  Proceeding  in the
Ontario  Superior  Court  of  Justice,  against  Eye-Site,  Inc.  and  Eye  Site
(Ontario),  Ltd.,  as the  makers  of two  promissory  notes  (in the  aggregate
original  principal  amount of  $600,000)  made by one or more of the  makers in
favor of the Company,  as well as against  Mohammed Ali, as the guarantor of the
obligations  of each maker under each note.  The notes were issued by the makers
in connection  with their  acquisition of a Master  Franchise  Agreement for the
Province of Ontario,  Canada,  as well as their purchase of the assets of, and a
Sterling  Optical  Center  Franchise  for, four of the Company's  retail optical
stores  then  located  in  Ontario,   Canada.   In  response,   the   defendants
counterclaimed for damages, in the amount of $1,500,000, based upon, among other
items,  alleged  misrepresentations  made by  representatives  of the Company in
connection  with  these  transactions.  The  Company  believes  that  it  has  a
meritorious  defense  to  each  counterclaim.  As  of  the  date  hereof,  these
proceedings were in the discovery stage.

     In February 2002, Kaye Scholer,  LLP, the law firm  previously  retained by
the Company as its outside  counsel,  commenced  an action in the New York State
Supreme  Court  seeking  unpaid legal fees in the amount of $122,500.  As of the
date hereof,  the time for the Company to answer the Complaint,  in such action,
has not yet expired.  The Company believes that it has a meritorious  defense to
such claim.

     In  addition  to the  foregoing,  the  Company  is a  defendant  in certain
lawsuits  alleging  various claims  incurred in the ordinary course of business,
certain of which claims are covered by various  insurance  policies,  subject to
certain  deductible  amounts  and  maximum  policy  limits.  In the  opinion  of
management,  the resolution of these claims,  should not have a material adverse
effect,  individually  or in the  aggregate,  upon  the  Company's  business  or
financial  condition.  Other than as set forth above,  management  believes that
there are no other legal proceedings  pending or threatened to which the Company
is, or may be, a party, or to which any of its properties are or may be subject,
which, in the opinion of management,  will not have a material adverse effect on
the Company.

     As of December 31, 2001,  the Company was a guarantor of certain  leases of
Sterling Stores franchised and subleased to its franchisees.  In the case all of
such franchisees  defaulted on their  subleases,  the Company would be obligated
for aggregate lease obligations of approximately $2,890,000.


NOTE 13 - RELATED PARTY TRANSACTIONS:

     In 1999, the Company transferred one of its store locations in exchange for
a store  location of Cohen's  Fashion  Optical  ("CFO"),  a retail optical chain
owned by certain of the principal shareholders and directors of the Company, and
purchased the lease and assets for another store from CFO for $100,000,  payable
over 7 years, together with interest rate at a rate of 10% per annum.

     In March 2000, the Company purchased the assets of the CFO store located in
Rochester, New York, for $100,000,  payable over 7 years, together with interest
rate at a rate of 10% per annum.  In connection  therewith,  CFO  terminated its
lease for such store and the Company  entered  into a new lease for the premises
thereof.

     During the first quarter of 2000,  Broadway  Partners LLC  ("Broadway"),  a
partnership  owned by  certain  of the  children  of  certain  of the  Company's
principal  shareholders  and  directors,  accepted from the Company its $550,000
offer to purchase a certain  non-interest  bearing  debenture payable in full on
September  15, 2015  (previously  issued by the Company in  connection  with its
acquisition of  substantially  all of the assets of Benson Optical Co., Inc. and
affiliates,  and subsequently  purchased by Broadway),  having a then discounted
present value of  approximately  $1,277,000.  The resulting gain of $727,000 was
reflected  as a capital  contribution,  as it was  shareholder  related,  in the
accompanying Consolidated Statements of Shareholders' Equity.

     On  November  30,  2000,  the  Company  sold  and  transferred  to  Anylens
Acquisition,  LLC, a Delaware limited liability company owned by the children of
certain of the principal  shareholders and directors of the Company,  all of the
assets (including certain federally  registered  trademarks) then comprising the
proposed mail order,  contact lens business  previously  being  developed by the
Company,  together  with all of the  Company's  equity  interests  in two of its
wholly owned subsidiaries, 1-800-Anylens, Inc. and 1-800 Any Lens of Boca Raton,
Inc.,  which were then the  lessees  of  certain  real  property  and  equipment
previously  intended  to be  utilized  by the  Company  in  connection  with the
operation of the aforementioned business.

     In June 2001, due to the  significant  losses being incurred by the Company
in  connection  with the  operation  thereof,  the Company  subleased  its store
(together  with  certain of the assets  located  therein) in Nyack,  New York to
General Vision Services LLC ("GVS"),  a retail optical chain owned by certain of
the principal  shareholders  and directors of the Company,  and members of their
respective  immediate  families.  In connection with this transfer,  the Company
agreed to provide a rent subsidy of $2,500 per month through June 30, 2003.

                                       33
<PAGE>
     In October 2001, the Company  entered into a certain  management  agreement
with H&H Optical,  LLC ("H&H") to manage the operations of a Company-owned store
located in Palm Desert,  California. H&H is owned, in part, by the sister of the
Company's  President and CEO. 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,  at the end of the
respective terms thereof.

     On December 3, 2001 and  December  20, 2001,  respectively,  the  Company's
Board of Directors  authorized the Company to borrow  $150,000 and $300,000 from
Horizon Investors Corp. ("Horizon"), a New York corporation principally owned by
a director and  principal  shareholder  of the Company.  The loan was payable on
demand, together with interest calculated at the prime rate plus 1%. The Company
repaid these loans (which aggregated $450,000 as of December 31, 2001), in full,
on January 23, 2002 (Note 19).

     On  December 6, 2001,  the  Company's  Board of  Directors  authorized  the
Company  to borrow  $300,000  from  Broadway.  The loan was  payable  on demand,
together with interest  calculated at the prime rate plus 1%. The Company repaid
this loan ($300,000 as of December 31, 2001), in full, on January 23, 2002 (Note
19).

     During 2001, the Company  purchased from City Lens, Inc. ("City Lens"),  an
ophthalmic  lens  laboratory  owned,  directly or indirectly,  by certain of the
principal  shareholders  and  directors  of the Company,  together  with certain
members  of  their  immediate  families,  ophthalmic  lenses  and  certain  lens
refinishing  services for Company-owned  stores. For the year ended December 31,
2001,  the total  cost of lenses and  services  purchased  from City  Lens,  was
approximately $243,000.

     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  to an office  building
located in Garden City,  New York,  and entered into a sublease with CFO for one
of the two  floors  then  being  subleased  to CFO.  Occupancy  costs  are being
allocated  between the Company and CFO based upon the respective square footages
being occupied. Management believes that such sublease is at fair market value.

     During the ordinary  course of  business,  largely due to the fact that the
entities  occupy office space in the same  building,  and in an effort to obtain
savings with respect to certain  administrative  costs, the Company and CFO will
at times share in the costs of minor  expenses.  Management  believes that these
expenses have been appropriately accounted for herein.

     In the opinion of the Company's  management,  all of the above transactions
were conducted at "arms-length."

NOTE 14 - SHAREHOLDERS' EQUITY:

1998 Debentures/Convertible Preferred Stock
-------------------------------------------

     On  April  14,   1998,   the  Company   issued   $3,500,000   stated  value
(approximately  $4,025,000  fair value) of a series of the  Company's  Preferred
Stock, par value $.01 per share (the "Senior Convertible  Preferred Stock"), and
certain  warrants  (the  "Warrants"),  entitling  the  holders to purchase up to
700,000  shares of Common  Stock at a price of $5.00 per  share,  all  remaining
Warrants having expired on February 17, 2001.

     The Senior Convertible  Preferred Stock originally  required the Company to
pay quarterly  dividends (in cash or Common Stock) calculated at the rate of 10%
percent  per annum,  commencing  May 17,  1998.  Additionally  the  Company  was
required  to redeem  (in cash or Common  Stock)  all of the  Senior  Convertible
Preferred  Stock  outstanding  on  February  17,  1999,  at  105%  of  the  then
outstanding  stated value thereof,  based on a conversion price of $5.00, or, in
lieu thereof,  at the Company's option, pay dividends thereon at the rate of 24%
per annum. In addition,  the Senior  Convertible  Preferred Stock provided for a
price-protection  guarantee,  whereby the Company,  under certain circumstances,
would be required to pay to the  original  holders  the  difference  between the
$5.00  conversion  price and the selling price (net of  commissions) of any such
shares sold.

     During 1999, certain holders of the Company's Senior Convertible  Preferred
Stock exercised  their right to convert an aggregate of $1,398,125  stated value
of Senior Convertible Preferred Stock, into an aggregate of 1,172,500 registered
shares of the Company's  Common Stock and, in December 1999,  certain holders of
the Warrants exercised their right to acquire an aggregate of 500,000 registered
shares of the Company's  Common Stock.  Additionally,  in 1999, the Company paid
cash  dividends  (on its Senior  Convertible  Preferred  Stock) in the aggregate
amount of $8,419 and in  addition  issued,  in the form of stock  dividends,  an
aggregate of 22,506 registered shares of its Common Stock.

                                       34
<PAGE>
     During 2000,  certain of the holders of the  Company's  Senior  Convertible
Preferred  Stock  exercised  their right to convert an aggregate  of  $1,851,250
stated  value of  Senior  Convertible  Preferred  Stock,  into an  aggregate  of
2,468,334 shares of the Company's Common Stock.

     As of  December  31,  2001,  there were 2.51  shares of Senior  Convertible
Preferred Stock  outstanding  with a stated value of $251,000,  convertible into
Common Stock at a rate of $0.75. The holders of the Company's Senior Convertible
Preferred  Stock  have the right to vote,  as a single  class,  with the  Common
Stock,  on an  as-converted  basis,  on all  matters on which the holders of the
Company's Common Stock are entitled to vote.

Series B Convertible Preferred Stock
------------------------------------

     During the first quarter of 2000, the Company completed a private placement
pursuant to which it sold an aggregate of 1,677,570  units (the  "Units"),  each
Unit  consisting  of one share of the Company's  Series B Convertible  Preferred
Stock,  par value $0.01 per share,  with a  liquidation  preference of $7.00 per
share (the "Series B Preferred Stock"), and one warrant (the "Series B Warrant")
to purchase one-half share of Series B Preferred Stock at an exercise price, per
one-half share, equal to $7.59, exercisable from and after the expiration of the
six-month  period  following  the date of the first  issuance  of such  Series B
Warrants, for a period of 5 years thereafter.

     Each share of Series B Preferred Stock was automatically converted into two
shares of the Company's  Common Stock upon the Company's  filing of an amendment
to its Certificate of Incorporation (the "Amendment")  increasing its authorized
Common Stock from  28,000,000  to  50,000,000  shares,  which was subject to the
Company's  receipt of the  approval  of a  majority  of its  shareholders.  This
approval  was obtained on April 17,  2000.  Each Series B Warrant was  initially
exercisable for one-half share of Series B Preferred  Stock;  however,  upon the
automatic  conversion  of the Series B Preferred  Stock into Common  Stock,  the
Series B Warrants (to the extent not previously  exercised) became  exercisable,
at the same exercise price of $7.59, for one full share of Common Stock.

     In accordance with EITF Issue 98-05, "Accounting for Convertible Securities
with  Beneficial  Conversion  Features  or  Contingently  Adjustable  Conversion
Ratios,"  the net  proceeds  received  in the private  placement  (approximately
$10,618,000)  were  allocated  based on the relative fair values of the Series B
Preferred Stock and the Series B Warrants. Accordingly, approximately $6,239,000
was allocated to the Series B Preferred  Stock and  $4,379,000  was allocated to
the Series B Warrants.  The approximately  $11,743,000  liquidation value of the
1,677,570  shares of Series B Preferred Stock was recorded net of issuance costs
of approximately $1,125,000,  and net of a full discount, of which approximately
$4,379,000 was attributable to the fair value of the Series B Warrants issued in
connection  therewith,  and  approximately  $6,239,000 was  attributable  to the
beneficial  conversion  feature embodied in the Series B Preferred  Stock.  This
discount was accreted in its entirety as preferred  dividends  through April 17,
2000,  the  date on which  all of the  Series B  Preferred  Stock  automatically
converted  into shares of the Company's  Common Stock (as described  above) at a
ratio of 1 to 2. In connection with the private placement, the Company issued to
the placement  agents an aggregate of 500,000 warrants to purchase shares of the
Company's  Common Stock at an exercise  price of $7.59.  The fair value of these
warrants, which expire on February 13, 2005, was treated as part of the issuance
costs of the Units.

Treasury Stock Purchases
------------------------

     On October 31,  2000,  the Company  announced a program to  repurchase,  in
accordance with the applicable  requirements  of the Securities  Exchange Act of
1934,  as amended,  up to  1,000,000  shares of its Common  Stock at  prevailing
prices  in  open  market  transactions   effected  during  the  one-year  period
commencing  November 1, 2000. As of December 31, 2001,  the Company had acquired
182,337 shares of its Common Stock pursuant to such program.

Issuance of Common Stock for Consulting Services
------------------------------------------------

     In February 2000, the Company issued  1,000,000  shares of its Common Stock
to Rare, pursuant to the terms of an agreement entered into between Rare and the
Company  in  connection  with  the  development  of  the  Company's  anticipated
Internet-based  portal  business for its Internet  Division  (Note 2). Under the
terms of this agreement, Rare was to provide professional services to assist the
Internet  Division  with  its  web-based   business   strategy,   including  the
development  of  multiple  web sites,  operations  planning  and other  services
related to building the Internet  business.  The terms of the Agreement afforded
Rare a price-protection  guarantee on any such shares sold in the open market at
a price of less than $3.00 per share, and contained certain "lock-up" provisions
regarding  the  ability  to  sell  such  shares  prior  to  certain  dates.  The
Consolidated  Statement of Operations  for the year ended  December 31, 2000 was
charged as a result of this  transaction.  These charges were  reflected in loss
from discontinued operations.  On July 5, 2001, the Company issued an additional
1,000,000  unregistered  shares of its Common Stock (the fair value of which was
approximately  $325,000) to Rare as part of a settlement  whereby the  Company's
dispute with Rare,  regarding their respective  obligations  under the Company's
various agreements with Rare, were settled (Note 2).

                                       35
<PAGE>
     On January 16, 2001,  the Company  entered  into an  agreement  with Goldin
Associates,   L.L.C.   ("Goldin")  whereby  Goldin  agreed  to  provide  interim
management  services  to the  Company,  for an initial  six-month  period,  with
respect to its Sterling  Optical,  Insight Laser and Ambulatory Center divisions
(collectively,  the "Divisions"), all at the direction of the Board of Directors
of the  Company  or its  Chairman  or  other  officers,  pursuant  to  delegated
authority.  The fee for such services was $50,000 per month,  plus an additional
fee comprised of unregistered  shares  totaling 1.65% of the outstanding  Common
Stock of the Company as of January 22,  2001,  and warrants to purchase up to an
aggregate of 3.35% of the outstanding Common Stock of the Company.  As a result,
the Company  issued  418,719  unregistered  shares of its Common Stock (the fair
value  of  which  was  approximately   $108,000  and  was  charged  directly  to
operations)  to Goldin,  along with  warrants to  purchase  up to an  additional
850,126 shares of Common Stock,  all at an exercise  price of $0.01,  subject to
the Company  achieving  certain  earnings  targets  (the  "Incentive  Fee").  In
connection with the shares issued, Goldin was granted certain limited piggy-back
registration rights.

     The  terms of the  Incentive  Fee  provide  that the  warrants  may only be
exercised according to the following schedule:  (1) warrants to purchase 279,146
shares of the Company's Common Stock  immediately  following a year in which the
Divisions  shall realize  earnings  before  interest,  taxes,  depreciation  and
amortization  ("EBITDA")  of at least  $1,000,000;  (2)  warrants to purchase an
additional 279,146 shares of the Company's Common Stock immediately  following a
year in which the Divisions shall realize EBITDA of at least $2,000,000; and (3)
warrants to purchase an additional  291,834 shares of the Company's Common Stock
immediately  following a year in which the Divisions  shall realize EBITDA of at
least  $3,000,000.  These  warrants  become  exercisable  only if the applicable
EBITDA   targets  are  achieved  prior  to  December  31,  2004.  Due  to  these
contingencies,  the future valuation of these warrants,  if and when they become
exercisable,  will result in charges to the  Company's  results of operations in
future periods. Any warrants that vest will expire on January 22, 2008.

     On April 26, 2001, the Company's  Board of Directors  approved the terms of
an  agreement  whereby  it agreed  to issue to  Balfour  Investors  Incorporated
("Balfour"), in exchange for certain advisory services rendered to the Company's
Board of Directors,  209,359  unregistered  shares of its Common Stock (the fair
value  of  which  was   approximately   $57,000  and  was  charged  directly  to
operations),  together with warrants to purchase up to 425,063 additional shares
of Common Stock at an exercise  price of $0.01.  In  connection  with the shares
issued, Balfour was granted certain limited piggy-back  registration rights. The
warrants  will become  exercisable  according  to the  following  schedule:  (1)
warrants to purchase  139,573 shares of the Company's  Common Stock  immediately
following  a year in  which  the  Divisions  shall  realize  EBITDA  of at least
$1,000,000;  (2)  warrants  to  purchase  an  additional  139,573  shares of the
Company's Common Stock immediately following a year in which the Divisions shall
realize  EBITDA  of at  least  $2,000,000;  and  (3)  warrants  to  purchase  an
additional 145,917 shares of the Company's Common Stock immediately  following a
year in which  the  Divisions  shall  realize  EBITDA  of at  least  $3,000,000.
Further, these warrants become exercisable only if the applicable EBITDA targets
are achieved prior to December 31, 2004. Due to these contingencies,  the future
valuation of these warrants, if and when they become exercisable, will result in
charges to the Company's  results of operations in future periods.  Any warrants
that vest will expire on April 26, 2008.

Delisting of Common Stock
-------------------------

     On August 23, 2001,  the Company  notified The Nasdaq  Stock  Market,  Inc.
("Nasdaq")  of its Board of  Directors'  intention  not to  effect,  in the near
future,  a reverse stock split of its  outstanding  shares of Common  Stock.  In
response to this  decision,  on August 24, 2001,  Nasdaq  delisted the Company's
Common Stock from the Nasdaq National Market System ("Nasdaq-NMS"),  pursuant to
Marketplace  Rule No.  4310(c)(8)(B),  due to its  failure  to  comply  with the
minimum bid price ($1.00) requirement for the continued listing of its shares of
Common Stock on the Nasdaq-NMS,  all set forth in Nasdaq's  Marketplace Rule No.
4450(a)(5).  As a result,  the  Company's  Common  Stock  now  trades on the OTC
Bulletin Board under the symbol ISEE.OB.


NOTE 15 - STOCK OPTIONS AND WARRANTS:

Sterling Stock Option Plan
--------------------------

     In April 1995, the Company adopted a Stock Incentive Plan (the "Plan") that
permits the  issuance of options to selected  employees  and  directors  of, and
consultants to, the Company. The Plan, as amended,  reserves 7,000,000 shares of
Common Stock for grant and provides that the term of each award be determined by
the Compensation  Committee of the Board of Directors (the "Committee")  charged
with  administering  the  Plan.  Under the  terms of the  Plan,  options  may be
qualified or  non-qualified  and granted at exercise  prices and for terms to be
determined by the Committee.  Additionally,  certain options  previously  issued
under the Plan provide that  notwithstanding  the  termination  of the Company's
employment of any such employee/holder, he/she will retain the right to exercise
those options that have previously  vested in his/her favor until such time that
the options expire in accordance with the terms of the original grant.

                                       36
<PAGE>
     A summary of the options  previously  issued under the Plan is presented in
the table below:
<TABLE>
<CAPTION>

                                                          2001                         2000                       1999
                                                -----------------------      ----------------------      ----------------------
                                                               Weighted                    Weighted                    Weighted
                                                                Average                     Average                    Average
                                                               Exercise                    Exercise                    Exercise
                                                  Shares         Price        Shares         Price        Shares        Price
                                                 --------      --------      --------      --------      --------      --------
<S>                                             <C>             <C>          <C>            <C>          <C>            <C>
Options outstanding, beginning of period         5,590,966      $  6.54      3,571,624      $  5.52      2,598,624      $  5.89
     Granted                                     2,194,000      $  0.32      3,207,500      $  7.32      1,090,500      $  4.31
     Exercised                                           -      $     -       (855,657)     $  5.44              -            -
     Canceled, forfeited or expired             (2,386,833)     $  6.39       (332,501)     $  6.24       (117,500)     $  6.01
                                                 ---------      -------      ---------      -------      ---------      -------
Options outstanding, end of period               5,398,133      $  4.07      5,590,966      $  6.54      3,571,624      $  5.52
                                                 =========      =======      =========      =======      =========      =======
Options exercisable, end of period               4,320,300      $  4.80      2,823,466      $  6.24      2,992,791      $  5.75
                                                 =========      =======      =========      =======      =========      =======
</TABLE>

     Of the total  options  outstanding  as of  December  31,  2001,  there were
1,173,209  held by current  employees  of the  Company,  and  4,224,924  held by
directors of the Company, outside consultants and former employees. Of the total
options  granted  during 2001,  944,500 were granted to employees of the Company
and 1,249,500 were granted to directors of the Company,  outside consultants and
former employees.

     The following table summarizes  information about stock options outstanding
and exercisable as of December 31, 2001:

<TABLE>
<CAPTION>

                                                Options Outstanding                                     Options Exercisable
                             --------------------------------------------------------           ----------------------------------
                                                     Weighted-             Weighted-                                    Weighted-
                                                      Average               Average                                      Average
       Range of                                      Remaining              Exercise                                    Exercise
    Exercise Prices          Outstanding         Contractual Life            Price              Exercisable               Price
    ---------------          -----------         ----------------          ---------            -----------             ---------
    <C>                       <C>                       <C>                  <C>                  <C>                    <C>
    $0.22 to $ 0.33            1,632,000                 7.39                 $ 0.29              1,204,167              $ 0.27
    $0.34 to $ 0.51              500,000                 9.51                   0.43                      -                   -
    $1.81 to $ 2.72                5,000                 7.83                   1.88                  5,000                1.88
    $2.73 to $ 4.10              653,000                 7.12                   3.26                636,333                3.25
    $4.11 to $ 6.17              927,133                 4.93                   5.95                793,800                5.94
    $6.18 to $ 9.27            1,652,667                 5.77                   8.08              1,652,667                8.08
    $9.28 to $13.92               28,333                 8.21                   9.73                 28,333                9.73

</TABLE>

     The fair value of each option grant is estimated on the date of grant using
the Black-Scholes option-pricing model with the following assumptions:

                                  2001              2000             1999
                                  ----              ----             ----

Expected life (years)               5                5                 5
Interest rate                     4.80%            6.13%             6.00%
Volatility                        114%              108%             102%
Dividend yield                      -                -                 -


     The Company has adopted  the pro forma  disclosure  provisions  of SFAS No.
123.  Accordingly,  no  compensation  cost has been recognized for those options
issued,  under the Plan, to employees.  Had compensation  cost for the Company's
Plan been determined under SFAS No. 123, the Company's net loss and net loss per
share would approximate the pro forma amounts presented below (in thousands):


                                       37
<PAGE>

                                                 2001        2000         1999
                                                 ----        ----         ----
Net loss attributable to common shareholders:
         As reported                          $ (3,776)   $ (72,442)   $ (5,783)
         Pro forma                            $ (8,916)   $ (82,501)   $(10,009)

Net loss per share - basic and diluted:
         As reported                          $  (0.14)   $   (3.07)   $  (0.38)
         Pro forma                            $  (0.34)   $   (3.49)   $  (0.66)


     In  2000  and  1999,  the  Company   recognized   $94,000  and  $2,000,000,
respectively,  of expense  related to its issuance of stock options and warrants
to certain non-employee consultants to the Company. The Company incurred no such
expenses in 2001.

Stock Purchase Warrants
-----------------------

     In December 1999, the Company issued 2,500,000 warrants to MY2000,  LLC, an
entity acting as an  independent  advisor to the Company in connection  with its
planned Internet business and strategy (Note 2), to purchase 2,500,000 shares of
the Company's  Common Stock at a price of $2.00 per share, the fair value on the
date of issuance.  In 1999, the Company recognized  approximately  $2,000,000 in
expense  representing  the fair value of the  warrants  granted.  A principal of
MY2000,  LLC,  was also an  executive of the entity the Company had retained and
paid,  in cash and stock,  to develop  and launch its  business-to-business  web
sites and  related  strategy.  During  the first  quarter of 2000,  MY2000,  LLC
exercised 1,000,000 of these warrants, the remaining 1,500,000 being unexercised
as of December 31, 2001, and expire on December 2, 2004.

     In January 2001, the Company  issued 850,126  warrants to Goldin (Note 14).
These  warrants are only  exercisable  upon the  achievement  of certain  EBITDA
targets by the Company, and expire on January 22, 2008.

     In April 2001, the Company  issued  425,063  warrants to Balfour (Note 14).
These  warrants are only  exercisable  upon the  achievement  of certain  EBITDA
targets by the Company, and expire on April 26, 2008.


NOTE 16 - 401(K) EMPLOYEE SAVINGS PLANS:

     Emerging  Vision,  Inc. and VisionCare of California,  Inc., each sponsor a
401(k)  Employee  Savings  Plan (the  "401(k)  Plan") to provide  all  qualified
employees  of  these  entities  with   retirement   benefits.   Presently,   the
administrative  costs of each  401(k) Plan are paid  entirely by such  qualified
employees, no matching contributions having been provided by the Company.


NOTE 17 - FOURTH QUARTER CHARGES:

     The  Company   periodically   evaluates   its   long-lived   assets  (on  a
store-by-store basis) based on, among other factors, the estimated, undiscounted
future  cash  flows  expected  to be  generated  from such  assets,  in order to
determine if an impairment  exists.  In the fourth  quarter of 2001, the Company
recognized approximately $574,000 of impairment charges for Company-owned stores
for which it has forecasted undiscounted negative future cash flows. The Company
also  recorded a fourth  quarter  charge of  approximately  $475,000  related to
estimated closure costs of certain Company-owned stores (Note 8).


NOTE 18 - QUARTERLY INFORMATION (UNAUDITED) (in thousands):
<TABLE>
<CAPTION>

                                          First Quarter          Second Quarter          Third Quarter          Fourth Quarter
                                         ---------------        ----------------        ---------------        ----------------
                                         2001      2000          2001      2000         2001        2000        2001      2000
                                         ----      ----          ----      ----         ----        ----        ----      ----
<S>                                   <C>        <C>          <C>        <C>          <C>        <C>         <C>        <C>
Net revenues                          $  5,464   $  6,533     $  5,288   $  5,583     $  5,006   $  5,408    $  4,861   $  5,534
Net (loss) income from continuing
   operations                         $    (41)  $   (696)    $    (57)  $   (312)    $ (1,942)  $     24    $ (3,048)  $(13,644)
Income (loss) from discontinued
   operations                         $    431   $ (1,279)    $  1,064   $ (3,819)    $   (657)  $ (2,009)   $    474   $(17,257)
Net income (loss)                     $    390   $ (1,975)    $  1,007   $ (4,131)    $ (2,599)  $ (1,985)   $ (2,574)  $(30,901)

</TABLE>

                                       38
<PAGE>

NOTE 19 - SUBSEQUENT EVENTS:

Financing Arrangements
----------------------

     Subsequent to December 31, 2001, the Company secured two separate financing
arrangements as follows:

     Secured Term Note

     On January 23,  2002,  the  Company  entered  into a secured  term note for
$1,000,000 with an independent financial institution.  This note is repayable in
24 equal monthly  installments of $41,666,  and bears interest as defined (4.95%
at the inception of the note). The note is fully  collateralized/guaranteed by a
$1,000,000  certificate of deposit posted by Horizon, a related party (Note 13),
at the same financial institution.

     Credit Facility

     On January 23, 2002, the Company  entered into an agreement with Horizon to
borrow up to a maximum of $1,000,000. This credit facility bears interest at the
prime rate plus 1% (5.5% as of the date of the loan agreement),  provided for an
initial advance of $300,000,  requires minimum incremental advances of $150,000,
matures on January 22, 2004,  requires  ratable  monthly  principal and interest
payments  of  each  borrowing,  amortizable  through  the  maturity  date of the
facility,  is fully  collateralized by the Company's  qualifying franchise notes
(as  referenced by a pledge  agreement),  and requires the payment of a facility
fee of 2% per  annum,  payable  monthly,  on the  unused  portion  of the credit
facility.

     Simultaneous  with  obtaining the above  financing,  the Company repaid its
outstanding related party borrowings totaling $750,000, plus interest (Note 13).
In  consideration  for providing  access to the credit facility and guaranteeing
the term note, the Company  granted  Horizon an aggregate of 2,500,000  warrants
(1,750,000 of which were  immediately  exercisable,  with the balance vesting in
quarterly  increments  of  250,000,  beginning  April 22,  2002,  so long as any
amounts remain unpaid under the secured term note and/or credit facility).  Each
warrant has a five-year  term and provides for an exercise  price of $0.01.  The
fair value of the warrants  issued  (valued using the  Black-Scholes  model) was
approximately  $234,000, and will result in additional interest expense over the
term of the financing arrangements.




                                       39
<PAGE>


Item 9.    Changes in and Disagreements with Accountants on Accounting and
           ---------------------------------------------------------------
           Financial Disclosure
           --------------------

           None.









                                       40
<PAGE>


                                    PART III


Item 10.   Directors and Executive Officers of the Registrant
           --------------------------------------------------

     Information  with respect to the Company's  directors  required by Item 401
and its directors and executive  officers required by Item 405 of Regulation S-K
will be set forth in the Company's  Proxy  Statement for the 2002 Annual Meeting
of  Stockholders,  to be  filed  with the  Securities  and  Exchange  Commission
pursuant  to  Section  14 of  the  Securities  Exchange  Act  of  1934,  and  is
incorporated by reference herein, or will be filed in a Form 10-K/A.


Item 11.   Executive Compensation
           ----------------------

     Information  required for executive  compensation  will be set forth in the
Company's  Proxy  Statement for the 2002 Annual Meeting of  Stockholders,  to be
filed with the Securities and Exchange  Commission pursuant to Section 14 of the
Securities  Exchange Act of 1934, and is  incorporated by reference  herein,  or
will be filed in a Form 10-K/A.


Item 12.   Security Ownership of Certain Beneficial Owners and Management
           --------------------------------------------------------------

     Information relating to the security ownership of certain beneficial owners
and management  will be set forth in the Company's  Proxy Statement for the 2002
Annual  Meeting of  Stockholders,  to be filed with the  Securities and Exchange
Commission pursuant to Section 14 of the Securities Exchange Act of 1934, and is
incorporated by reference herein, or will be filed in a Form 10-K/A.


Item 13.   Certain Relationships and Related Transactions
           ----------------------------------------------

     Information relating to certain relationships and related transactions will
be set forth in the Company's  Proxy  Statement  for the 2002 Annual  Meeting of
Stockholders,  to be filed with the Securities and Exchange  Commission pursuant
to Section 14 of the  Securities  Exchange Act of 1934, and is  incorporated  by
reference herein, or will be filed in a Form 10-K/A.






                                       41
<PAGE>



                                     PART IV


Item 14.  Exhibits, Financial Statement Schedules and Reports on Form 8-K
          ---------------------------------------------------------------

(a)    The following documents are filed as a part of this Report:

1.  Financial Statements.

        Consolidated Balance Sheets as of December 31, 2001 and 2000

        Consolidated Statements of Operations for the Years Ended December 31,
        2001, 2000 and 1999

        Consolidated Statements of Shareholders' Equity for the Years Ended
        December 31, 2001, 2000 and 1999

        Consolidated Statements of Cash Flows for the Years Ended December 31,
        2001, 2000 and 1999

        Notes to Consolidated Financial Statements


2.      Financial Statement Schedules:

     All financial  statement  schedules have been omitted  because they are not
applicable,  are not  required,  or the  information  required  to be set  forth
therein is included in the Consolidated Financial Statements or Notes thereto.


3.      Exhibits

                                  EXHIBIT INDEX
                                  -------------

Exhibit
Number
-------

     3.1 Amended and Restated  Certificate of  Incorporation of Sterling Vision,
Inc.,  dated December 18, 1995  (incorporated by reference to Exhibit 3.1 to the
Company's  Annual Report on Form 10K/A for the calendar year ended  December 31,
1995, File No. 1-14128)

     3.2 Amended and Restated By-Laws of Sterling  Vision,  Inc., dated December
18, 1995  (incorporated  by  reference  to Exhibit 3.2 to the  Company's  Annual
Report on Form 10K/A for the calendar  year ended  December  31, 1995,  File No.
1-14128)

     3.3 Form of Certificate of Amendment of the Certificate of Incorporation of
the Company,  dated February 8, 2000 (incorporated by reference to Exhibit 10.94
to the Company's Current Report on Form 8-K, dated February 8, 2000)

     3.4 Form of Certificate of Amendment of the Certificate of Incorporation of
the Company,  dated February 4, 2000 (incorporated by reference to Exhibit 10.96
to the Company's Current Report on Form 8-K, dated February 8, 2000)

     4.1  Specimen of Common  Stock  Certificate  (incorporated  by reference to
Exhibit 4.1 to the Company's Registration Statement 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)

     10.1 Sterling  Vision,  Inc.'s 1995 Stock Incentive Plan  (incorporated  by
reference to Exhibit 10.2 to the Company's Registration Statement No. 33-98368)

     10.2 Form of Sterling Vision,  Inc.'s Franchise Agreement  (incorporated by
reference to Exhibit 10.3 to the Company's Registration Statement No. 33-98368)



                                       42
<PAGE>

     10.3 Lease Agreements between Neptune Technology Leasing Corp. and Sterling
Vision, Inc., Sterling Vision of California,  Inc. and Sterling Vision, Inc., as
successor in interest to CFO  (incorporated  by reference to Exhibit 10.5 to the
Company's Registration Statement No. 33-98368)

     10.4  Assignment  and  Assumption  of Equipment  Lease by and between Cohen
Fashion Optical,  Inc. and Sterling Vision,  Inc.  (incorporated by reference to
Exhibit 10.6 to the Company's Registration Statement No. 33-98368)

     10.5 Convertible,  Callable, Subordinated Debenture Due September 15, 2015,
made by Sterling Vision, Inc. and payable to Benson Eyecare Corp.  (incorporated
by  reference  to Exhibit  10.37 to the  Company's  Registration  Statement  No.
33-98368)

     10.6 Assignment, dated September 15, 1995, by Benson Eyecare Corporation to
Sterling Vision,  Inc. of that certain  Revolving  Credit Note  (incorporated by
reference  to  Exhibit  10.39  to  the  Company's   Registration  Statement  No.
33-98368)

     10.7 Assignment, dated September 15, 1995, by Benson Eyecare Corporation to
Sterling Vision, Inc. of that certain  Subordinated  Promissory Note made by OCA
Acquisition  Inc.  (incorporated  by reference to Exhibit 10.40 to the Company's
Registration Statement No. 33-98368)

     10.8 Assignment, dated September 15, 1995, by Benson Eyecare Corporation to
Sterling Vision, Inc. of Benson Eyecare Corporation's rights, title and interest
in certain trade receivables  (incorporated by reference to Exhibit 10.41 to the
Company's Registration Statement No. 33-98368)

     10.9 Note Purchase  Agreement,  dated  September 15, 1995,  between  Benson
Eyecare  Corporation and Sterling  Vision,  Inc.  (incorporated  by reference to
Exhibit 10.42 to the Company's Registration Statement No. 33-98368)

     10.10 Form of Franchisee  Stockholder  Agreement to be entered into between
Sterling Vision, Inc. and certain of its Franchisees  (incorporated by reference
to Exhibit 10.47 to the Company's Registration Statement No. 33-98368)

     10.11  First   Amendment  to  the  Company's  1995  Stock   Incentive  Plan
(incorporated by reference to Exhibit 10.63 to the Company's Quarterly Report on
Form 10-Q for the quarter ended June 30, 1996, File No. 1-14128)

     10.12 Purchase and Sale Agreement,  dated  September 30, 1996,  between Eye
Site (Ontario) Ltd. And the Company  (incorporated by reference to Exhibit 10.64
to the Company's  Quarterly  Report on Form 10-Q for the quarter ended September
30, 1996, File No. 1-14128)

     10.13 Master  Franchise  Agreement,  dated September 30, 1996,  between Eye
Site,  Inc.,  and Eye Site  (Ontario)  Ltd.  and the  Company  (incorporated  by
reference to Exhibit  10.65 to the Company's  Quarterly  Report on Form 10-Q for
the quarter ended September 30, 1996, File No. 1-14128)

     10.14 Form of Convertible  Debentures and Warrants Subscription  Agreement,
dated  February  26,  1997  (incorporated  by  reference  to Exhibit  4.1 to the
Company's Current Report on Form 8-K, dated February 26, 1997)

     10.15 Exchange Agreement,  dated April 14, 1998, between the Registrant and
the Original Holders of the Registrant's Convertible Debentures Due February 17,
1999  (incorporated by reference to Exhibit 10.78 to the Company's  Current Form
on 8-K, dated April 14, 1998)

     10.16  First   Amendment  to  Convertible   Preferred  Stock  and  Warrants
Subscription  Agreement,  dated  January 4, 1999  (incorporated  by reference to
Exhibit  10.78 to the  Company's  Current  Report on Form 8-K,  dated January 4,
1999)

     10.17  Second  Amendment  to  Convertible   Preferred  Stock  and  Warrants
Subscription  Agreement,  dated  March 4, 1999  (incorporated  by  reference  to
Exhibit 10.79 to the Company's Current Report on Form 8-K, dated March 4, 1999)

     10.18* Employment  Agreement,  dated as of August 20, 1999, between Insight
Laser  Centers,  Inc. and Kim  Greenberg  (incorporated  by reference to Exhibit
10.88 to the Company's Current Report on Form 8-K, dated August 20, 1999)


                                       43
<PAGE>
     10.19  Third   Amendment  to  Convertible   Preferred  Stock  and  Warrants
Subscription  Agreement,  dated December 7, 1999  (incorporated  by reference to
Exhibit 10.90 to the Company's  Current  Report on Form 8-K,  dated  December 7,
1999)

     10.20 Form of Warrant,  dated  December 16, 1999,  in favor of MY2000,  LLC
(incorporated  by reference to Exhibit 10.93 to the Company's  Current Report on
Form 8-K/A, dated December 16, 1999)

     10.21*  Employment   Agreement,   dated  February  29,  2000,  between  the
Registrant and Joseph Silver  (incorporated by reference to Exhibit 11.01 to the
Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2000)

     10.22*  Legal Fee Retainer  Agreement,  dated  February  29, 2000,  between
Sterling Vision of California, Inc. and Joseph Silver (incorporated by reference
to Exhibit 11.02 to the Company's  Quarterly Report on Form 10-Q for the quarter
ended March 31, 2000)

     10.23* Form of Severance  Agreement and General Release,  dated as of March
27, 2001,  between  Emerging Vision,  Inc. and Gregory T. Cook  (incorporated by
reference to Exhibit 10.107 to the Company's  Annual Report on Form 10-K for the
year ended December 31, 2000)

     10.24* Form of Severance  Agreement and General Release,  dated as of March
27, 2001,  between  Emerging  Vision,  Inc. and James E. Ewer  (incorporated  by
reference to Exhibit 10.108 to the Company's  Annual Report on Form 10-K for the
year ended December 31, 2000)

     10.25 Form of Consulting  Agreement,  dated as of November 7, 2000, between
Emerging  Vision,  Inc.  and Balfour  Investors  Incorporated  (incorporated  by
reference to Exhibit 10.109 to the Company's  Annual Report on Form 10-K for the
year ended December 31, 2000)

     10.26 Form of Consulting Agreement,  dated as of December 18, 2000, between
Emerging  Vision,  Inc.  and Balfour  Investors  Incorporated  (incorporated  by
reference to Exhibit 10.110 to the Company's  Annual Report on Form 10-K for the
year ended December 31, 2000)

     10.27 Form of Stock Option Agreement, dated as of November 7, 2000, between
Emerging  Vision,  Inc.  and Balfour  Investors  Incorporated  (incorporated  by
reference to Exhibit 10.111 to the Company's  Annual Report on Form 10-K for the
year ended December 31, 2000)

     10.28 Form of Management Services Agreement,  dated as of January 22, 2001,
between Emerging Vision,  Inc. and Goldin  Associates,  L.L.C.  (incorporated by
reference to Exhibit 10.112 to the Company's  Annual Report on Form 10-K for the
year ended December 31, 2000)

     10.29* Form of Settlement  Agreement,  dated as of April 24, 2001,  between
Emerging  Vision,  Inc.  and Sara V.  Traberman  (incorporated  by  reference to
Exhibit  10.113 to the Company's  Quarterly  Report on Form 10-Q for the quarter
ended March 31, 2001)

     10.30 Asset  Purchase  Agreement,  dated as of May 31,  2001,  by and among
Insight Laser Centers  N.Y.I,  Inc.,  Insight  Amsurg  Centers,  Inc.,  Emerging
Vision, Inc. and Amsurg Acquisition Corp.  (incorporated by reference to Exhibit
10.114 to the Company's Current Report on Form 8-K, dated June 13, 2001)

     10.31* Employment  Agreement,  dated as of June 6, 2001 and effective as of
July 2, 2001, between Emerging Vision, Inc. and Robert Hillman  (incorporated by
reference to Exhibit  10.115 to the Company's  Current Report on Form 8-K, dated
July 2, 2001)

     10.32  Warrant  Certificate  and  Agreement,  dated as of January 16, 2001,
between Emerging Vision, Inc. and Goldin Associates, LLC

     10.33  Warrant  Certificate  and  Agreement,  dated as of April  26,  2001,
between Emerging Vision, Inc. and Balfour Investors Incorporated

     10.34  Settlement  Agreement and Mutual Release,  dated as of July 5, 2001,
between Emerging Vision,  Inc. and Rare Medium Group,  Inc. and Rare Medium Inc.
(incorporated by reference to Exhibit 10.116 to the Company's  Current Report on
Form 8-K, dated July 2, 2001)

     10.35 Form of Term Note, dated January 23, 2002, executed by the Company in
favor of North Fork Bank  (incorporated  by reference  to Exhibit  10.119 of the
Company's Current Report on Form 8-K, dated January 23, 2002)

     10.36 Form of Loan Agreement and Exhibits,  dated January 23, 2002, between
the Company and Horizon  Investors Corp.  (incorporated  by reference to Exhibit
10.120 of the Company's Current Report on Form 8-K, dated January 23, 2002)

     10.37** Form of Settlement Agreement and General Release, dated as of April
1, 2002, between the Company and each of V.C. Enterprises,  Inc., Bridget Licht,
Sitescope,  Inc.,  Eyemagination Eyeworks, Inc. and Susan Assael,  including the
form of Area Representation Agreement annexed thereto as an Exhibit

     21** List of Subsidiaries

     23** Consent of Independent Public Accountants

     99** Letter to Commission Pursuant to Temporary Note 3T

                                       44
<PAGE>



b.)  Reports on Form 8-K

     On February 4, 2002,  the Company  filed a Report on Form 8-K regarding its
loan from North Fork Bank, and its credit facility from Horizon Investors Corp.


*  Indicates exhibits relating to executive compensation.
**  Exhibit being filed herewith





                                       45
<PAGE>



                                   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 16, 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        Chairman of the Board of Directors   April 16, 2002
--------------------------   President and Chief Executive
Robert S. Hillman            Officer (Principal Executive
                             Officer)


/s/ Christopher G. Payan     Senior Vice President, Treasurer,    April 16, 2002
--------------------------   Secretary and Chief Financial
Christopher G. Payan         Officer (Principal Financial and
                             Accounting Officer)


/s/ Alan Cohen               Director                             April 16, 2002
--------------------------
Alan Cohen


/s/ Robert Cohen             Director                             April 16, 2002
--------------------------
Robert Cohen


/s/ Benito (Ben) Fernandez   Director                             April 16, 2002
--------------------------
Benito (Ben) Fernandez


                             Director                             April __, 2002
--------------------------
Joel Gold


                             Director                             April __, 2002
--------------------------
William Stasior




                                       46
<PAGE>
                                                                   EXHIBIT 10.37


                              SETTLEMENT AGREEMENT
                               AND GENERAL RELEASE

     This Settlement Agreement and General Release  ("Settlement  Agreement") is
made and entered into as of the 1st day of April,  2002, by and between EMERGING
VISION,  INC.,  f/k/a STERLING  VISION,  INC.  ("EVI"),  on the one hand, and VC
ENTERPRISES,  INC.;  BRIDGET LICHT, d/b/a SITE FOR SORE EYES;  SITESCOPE,  INC.;
EYEMAGINATION  EYEWORKS,  INC.; and SUSAN ASSAEL,  d/b/a COREY  OPTICAL,  on the
other hand (individually, collectively, and in any combination, "Plaintiffs").

                                    RECITALS

     WHEREAS,  Plaintiffs  brought an action  against  EVI in the United  States
District Court for the Northern District of California  entitled VC Enterprises,
Inc.; Bridget Licht, d/b/a Site for Sore Eyes;  Sitescope,  Inc.;  Eyemagination
Eyeworks,  Inc.; and Susan Assael,  d/b/a Corey Optical v. Emerging Vision, Inc.
(the "Action");

     WHEREAS, in order to avoid expensive and time-consuming litigation, EVI and
Plaintiffs desire to compromise and have agreed,  without admission of any party
of any of the  allegations  set  forth in the  Action,  to  adjust,  settle  and
compromise the claims asserted in the Action and, in addition, any claim, right,
controversy,  cause of action,  obligation  and  liability of any kind or nature
whatsoever which may and/or could have been asserted in the Action, as described
more fully below; and

     WHEREAS, EVI desires that, except as may be required by applicable law, the
terms,  conditions and negotiations involved in the resolution and settlement of
the matters in  controversy  forever  remain  absolutely  confidential  and that
absolutely  no publicity be accorded  the terms and  conditions  of the parties'
settlement or the terms and conditions proposed during the negotiations  leading
up to this Settlement Agreement without the prior written consent of EVI.
<PAGE>

     NOW, THEREFORE,  the parties to this Settlement Agreement, in consideration
of each and  every  undertaking  and  commitment  of each to the other set forth
herein,  the  sufficiency  of which is hereby  acknowledged,  mutually  agree as
follows:


1.       Settlement Terms

     1.1 Plaintiffs  hereby represent that, prior to the date hereof,  they have
caused to be formed SITE-NCAL AREA REP, LLC, a new California  limited liability
company  ("SNAR"),  the  equity  interests  in  which  are  owned by each of the
Plaintiffs (or the principal owner(s) of each Plaintiff,  as the case may be) in
accordance with Schedule A annexed hereto.

     1.2 EVI and SNAR shall enter into an Area  Representation  Agreement in the
form attached hereto as Exhibit 1.

     1.3 EVI and each  Plaintiff  shall execute  amendments to each  Plaintiff's
Site for Sore Eyes Franchise Agreement substantially in the form attached hereto
as Exhibit 2.


2.       General Releases

     2.1 In  consideration of the obligations the parties have undertaken as set
forth above,  Plaintiffs,  together with each of Carol  Seltzer,  Paul Licht and
Raymond  J.  Robison  (individually,  collectively  or in any  combination,  the
"Plaintiff-Releasing  Parties") each hereby releases and forever  discharges EVI
and its past and present shareholders,  agents, attorneys,  employees, partners,
officers,  directors,  representatives,  predecessors and successors,  heirs and
<PAGE>

assigns,   and  their  past  and  present   parents,   divisions,   departments,
subsidiaries and affiliates  (individually,  collectively or in any combination,
the"EVI  Released  Parties"),  from any and all  suits,  claims,  controversies,
rights, promises, debts,  liabilities,  demands,  obligations,  costs, expenses,
actions and causes of action of every nature, character and description,  in law
or in  equity,  whether  presently  known  or  unknown,  vested  or  contingent,
suspected or unsuspected,  related or unrelated to the Action as to law or facts
or both,  which the  Plaintiff-Releasing  Parties now own or hold or have at any
time  heretofore  owned or held,  or may at any time own or hold against the EVI
Released  Parties,  arising  prior  to,  up to and  including  the  date of this
Settlement Agreement.

     2.2 The  Plaintiff-Releasing  Parties  represent and warrant that they have
not heretofore  assigned or  transferred or purported to assign or transfer,  to
any person,  firm or  corporation  whatsoever,  any claim,  controversy,  right,
promise, debt, liability,  demand, obligation, cost, expense, action or cause of
action  herein  released or  purported  to be  released.  If there is any claim,
controversy, right, promise, debt, liability, demand, obligation, cost, expense,
action or cause of action based on or arising out of or in  connection  with any
such transfer or assignment or purported transfer or assignment, the party which
made or purported to make such  transfer or  assignment  agrees to indemnify and
hold the EVI  Released  Parties  harmless  from  and  against  any  such  claim,
controversy, right, promise, debt, liability, demand, obligation, cost, expense,
action  or cause of  action,  including  reasonable  attorneys'  fees and  costs
incurred in connection therewith.
<PAGE>

     2.3 The parties hereto  expressly accept and assume the risk that the facts
and/or law  pertaining  to the claims  released  herein may change,  or that the
facts  pertaining  to the  claims  released  herein  may  later  be  found to be
different  from that  which is now known or  believed  by the  parties  or their
attorneys to be true.  This Settlement  Agreement shall be and remain  effective
notwithstanding any such change or difference.


3.       No Admission of Wrongdoing or Liability

     This Settlement  Agreement is a full and final  compromise,  settlement and
release of disputed claims and is not intended to be, shall not constitute,  and
shall not be  construed  as, an  admission  of the truth or  correctness  of any
allegation made by any party to the Action, or of the liability of any party, or
of their respective agents, representatives, predecessors, successors, heirs, or
assigns, to the others, any such liability being expressly denied.


4.       Confidentiality of Settlement

     The parties  recognize  that EVI,  except as may be required by  applicable
law, desires to keep the terms of this Settlement Agreement, and all discussions
related thereto,  absolutely confidential.  Plaintiffs represent and agree that,
except  as  may  be  required  by   applicable   law,  they  will  maintain  the
confidentiality  of the settlement terms and,  further,  that they have not and,
except with the prior written  consent of EVI,  will not,  disclose the terms of
the settlement of the Action to any other person.


5.       Waiver of Known and Unknown Claims

     This  Settlement  Agreement is intended to include a general release and is
intended  to extend to all  claims,  whether  or not known or  suspected  by the
Plaintiff-Releasing  Parties  to exist in their  favor at the time of  execution
hereof,  and the  Plaintiff-Releasing  Parties,  by their execution  hereof each
expressly  waives all rights under Section 1542 of the California Civil Code and
any similar law of any jurisdiction.  For the purposes of clarifying the content
of  Section  1542  so  that  each  of the  Plaintiff-Releasing  Parties  clearly
understands the importance of such a waiver,  the parties hereto to hereby elect
to fully set forth the words of such Section,  which  provides  that: "A general

<PAGE>

release does not extend to claims which the creditor does not know or suspect to
exist in his favor at the time of  executing  a  release,  which if known to him
must have materially affected his settlement with the debtor."


6.       General Terms

     6.1 Each of the Plaintiff-Releasing Parties and EVI hereby acknowledge that
in negotiating this Settlement Agreement,  each has received advice from counsel
of  their/its  choosing.  Each of the  parties  hereto do hereby  represent  and
warrant that the individuals  signing this Settlement  Agreement on their behalf
have full authority to do so.

     6.2 This Settlement Agreement may only be amended in writing, signed by all
of the parties hereto.

     6.3 This Settlement Agreement and the making hereof shall be governed as to
validity, interpretation, construction, effect, and in all other respects by the
laws of the State of  California,  which laws shall  prevail in the event of any
conflict  of  law,  without  regard  to,  and  without  giving  effect  to,  the
application of California choice of law rules.

     6.4 This  Settlement  Agreement  may be  signed in  counterparts  and shall
become  effective  upon its  execution by all of the parties,  but its effective
date shall be the date first above written.

     6.5 The provisions of this Settlement Agreement shall be severable.  If any
provision  shall  become or be  declared  invalid  or  unenforceable,  all other
provisions shall remain in effect.  If any provision shall become or be declared
invalid or  unenforceable,  it shall be interpreted in such a manner and to such
an extent as to be  enforceable.
<PAGE>

     6.6 Should any party prevail in any  litigation  involving or relating to a
breach by any other party of any  provision of this  Settlement  Agreement,  the
party  which  prevails  shall  be  entitled  to the  amount  of  all  reasonable
attorneys' fees and costs incurred in the course of that litigation.

     6.7 This  Settlement  Agreement  shall be  binding  upon,  and inure to the
benefit of, the parties hereto,  and their respective  agents,  representatives,
successors and assigns forever.

     6.8 Plaintiffs  agree to dismiss all claims in this Action with  prejudice,
with each side to bear its own costs and attorneys' fees.

     6.9  The  parties  agree  that  the  terms  of each  Plaintiff's  Franchise
Agreement shall remain in effect,  except as expressly  modified by the terms of
the  definitive  form of each of the Amendments  thereto,  to be entered into in
accordance with the provisions of Section 1.3 hereof.

     6.10  The  parties  agree  to  execute  any  and all  additional  documents
reasonably  necessary to carry out the terms,  conditions and provisions of this
Settlement Agreement.

     6.11 This Settlement  Agreement  constitutes the entire,  full and complete
agreement between the parties hereto,  and supersedes all prior  agreements,  no
other  representation   having  induced  the  parties  hereto  to  execute  this
Settlement Agreement.

<PAGE>


     NOW THEREFORE,  the parties have entered into this Settlement  Agreement on
the date and year first written above.



                                                EMERGING VISION, INC.

Witness                                         By:      Christopher G. Payan
                                                Title:   Chief Financial Officer
Dated:   March ___, 2002                        Dated:   March ___, 2002




                                                VC ENTERPRISES, INC.

Witness                                         By:      Paul Licht
                                                Title:   President
Dated:   March ___, 2002                        Dated:   March ___, 2002




                                                PAUL LICHT, Individually


Witness                                         By:      Paul Licht

Dated:   March ___, 2002                        Dated:   March ___, 2002




[SIGNATURES CONTINUED ON NEXT PAGES]



<PAGE>


                                         BRIDGET LICHT, d/b/a SITE FOR SORE EYES




Witness                                  By:       Bridget Licht
                                         Title:    Sole Proprietor
Dated:   March ___, 2002                 Dated:    March ___, 2002




                                         BRIDGET LICHT, Individually


Witness                                  By:       Bridget Licht

Dated:   March ___, 2002                 Dated:    March ___, 2002



                                         SITESCOPE, INC.




Witness                                  By:       Carol Seltzer
                                         Title:    President

Dated:   March ___, 2002                 Dated:    March ___, 2002




                                         CAROL SELTZER, Individually




Witness                                  By:       Carol Seltzer

Dated:   March ___, 2002                 Dated:    March ___, 2002




[SIGNATURES CONTINUED ON NEXT PAGE]
<PAGE>


                                         EYEMAGINATION EYEWORKS, INC.

Witness                                  By:       Raymond J. Robison
                                         Title:    President
Dated:   March ___, 2002                 Dated:    March ___, 2002



                                         RAYMOND J. ROBISON, Individually


Witness                                  By:       Raymond J. Robison

Dated:   March ___, 2002                 Dated:    March ___, 2002



                                         SUSAN ASSAEL d/b/a COREY OPTICAL

Witness                                  By:       Susan Assael
                                         Title:    Sole Proprietor

Dated:   March ___, 2002                 Dated:    March ___, 2002



                                         SUSAN ASSAEL, Individually




Witness                                  By:       Susan Assael

Dated:   March ___, 2002                 Dated:    March ___, 2002


<PAGE>


                                   SCHEDULE A

                               OWNERSHIP OF EQUITY
                      INTERESTS IN SITE-NCAL AREA REP, LLC


         NAME                                                      PERCENT OWNED

         Carol Seltzer                                                28.334%

         Marty Seltzer                                                28.333%

         Paul Licht                                                   28.333%

         Bridget Licht                                                 5.000%

         Raymond J. Robison                                            5.000%

         Susan Assael                                                  5.000%


















<PAGE>







                              EMERGING VISION, INC.


                          AREA REPRESENTATION AGREEMENT


































                                    EXHIBIT I


<PAGE>


                                TABLE OF CONTENTS

                                                                            Page

         RECITALS.............................................................1

     1.  GRANT................................................................2
         -----

     2.  TERM.................................................................3
         ----

     3.  DUTIES OF FRANCHISOR.................................................3
         --------------------

     4.  FEES AND COMPENSATION................................................5
         ---------------------

     5.  DUTIES OF AREA REPRESENTATIVE........................................6
         -----------------------------

     6.  PROPRIETARY MARKS....................................................9
         -----------------

     7.  CONFIDENTIAL INFORMATION.............................................10
         ------------------------

     8.  ADVERTISING AND PROMOTION............................................11
         -------------------------

     9.  INSURANCE............................................................11
         ---------

     10. TRANSFER OF INTEREST.................................................12
         --------------------

     11. DEFAULT AND TERMINATION..............................................15
         -----------------------

     12. OBLIGATIONS UPON TERMINATION OR EXPIRATION...........................17
         ------------------------------------------

     13. COVENANTS............................................................18
         ---------

     14. INDEPENDENT CONTRACTOR AND INDEMNIFICATION...........................20
         ------------------------------------------

     15. APPROVALS AND WAIVERS................................................20
         ---------------------

     16. NOTICES..............................................................21
         -------

     17. ENTIRE AGREEMENT AND AMENDMENT.......................................21
         ------------------------------

     18. SEVERABILITY AND CONSTRUCTION........................................21
         -----------------------------

     19. APPLICABLE LAW.......................................................22
         --------------


ATTACHMENT A      ADDENDUM
ATTACHMENT B      INDEMNIFICATION AND GUARANTY AGREEMENT



<PAGE>




                              EMERGING VISION, INC.

                          AREA REPRESENTATION AGREEMENT


     THIS AREA REPRESENTATION AGREEMENT ("Agreement") is hereby made and entered
into as of the 1st day of April, 2002, between Emerging Vision, Inc., a New York
corporation  with its  principal  place of  business  at 100  Quentin  Roosevelt
Boulevard,  Garden City, New York 11530 ("Franchisor"),  and Site-Ncal Area Rep,
LLC, a California  limited  liability  company with its principal offices at 140
Battery Street, San Francisco, California 94111 ("Area Representative").


                                    RECITALS:

     1. Franchisor  operates and franchises retail optical centers  specializing
in the sale of prescription and  non-prescription  eye wear,  contact lenses and
solutions, other optical and opthalmic products and related optical products and
services.  The retail optical  centers  utilize  distinctive and common formats,
layouts,  signs,  systems,  designs and decor, and certain  methods,  management
techniques,  standards,  specifications and business  operating  procedures (the
"System"),  which System is embodied in Franchisor's  operating  manuals (as the
same may be  hereafter  supplemented,  amended  and/or  modified by  Franchisor,
hereinafter collectively referred to as the "Manuals").

     2.  Franchisor  identifies  the  System by means of  certain  trade  names,
service marks,  trademarks,  logos, emblems and indicia of origin including, but
not  limited  to, the name and mark,  "SITE FOR SORE EYES"  (together  with such
other trade names,  service  marks,  and/or  trademarks  as may  hereinafter  be
designated by Franchisor for use in substitution of the name and mark, "Site for
Sore Eyes",  being  hereinafter  collectively  referred  to as the  "Proprietary
Mark") for use in connection with the System.

     3.  Franchisor  continues  to  develop,  use,  and  control the use of such
Proprietary Mark in order to identify, to the public, the source of products and
services  marketed  thereunder  and the  System's  high  standards  of  quality,
appearance and service.

     4. Franchisor enters into franchise agreements and other related agreements
with unrelated  third parties,  by which such third parties obtain the right and
assume the responsibility to operate a retail optical store under one or more of
Franchisor's  proprietary names and marks, all in accordance with such franchise
agreements and the Manual.

     5. Area  Representative  desires to serve as a representative of Franchisor
with the right to solicit, evaluate, and screen (collectively,  the "Promotional
Services") prospective franchisees who are ready, willing, and able to construct
and/or open and thereafter  operate,  under the  Proprietary  Mark, a new retail
optical store to be located  within the  Territory (as said term is  hereinafter
defined) (any such retail  optical store  operated by an AR Franchisee  [as said


<PAGE>

term is hereinafter  defined] under the Proprietary  Mark and located within the
Territory,  is hereinafter defined as a "Center") and, in connection  therewith,
the  responsibility  to train and  provide  start-up  and  ongoing  support  and
assistance to, and to monitor the performance of, such  franchisees  ("Servicing
Responsibilities").

     6.  Based   upon  the   information   provided   to   Franchisor   by  Area
Representative,  Franchisor  believes that Area  Representative  is qualified to
assume and perform such Promotional Services and Servicing Responsibilities (and
all  obligations,  duties and/or  responsibilities  associated  therewith and/or
attendant  thereto) in each case,  pursuant to and in accordance with, the terms
and provisions hereinafter set forth.

     7. Area  Representative  understands  and  acknowledges  the  importance of
ensuring that all AR Franchisees (as said term is hereinafter  defined) serviced
by Area Representative (pursuant to the terms hereof) achieve proper support and
assistance,  and fully conform to Franchisor's  System in operating  its/his/her
Center.


     NOW, THEREFORE, the parties hereto do hereby agree as follows:

1.       GRANT

     1.1  Franchisor  grants  to Area  Representative,  and Area  Representative
accepts, the following rights and obligations:

     1.1.1  to  provide   Promotional   Services   within  the  geographic  area
("Territory")  specified  in  paragraph  1 of the  Addendum  to  this  Agreement
attached  hereto as Exhibit A ("Addendum")  and to present,  to  Franchisor,  in
accordance  with the  development  plan (the  "Development  Plan")  specified in
paragraph 2 of the Addendum,  Qualified  Prospects (as said term is  hereinafter
defined) who are then ready,  willing, and able to acquire,  from Franchisor,  a
Site for Sore Eyes Optical Center Franchise (a "Franchise") to own and operate a
new Center at a Qualified Location (as said term is hereinafter  defined) within
the Territory;  it being  understood  that, for purposes of this Agreement,  the
term: (i)  "Qualified  Prospect"  shall mean one or more  unrelated  third party
individual  ( who are not then the  owner(s) of an  existing  Site for Sore Eyes
Franchise ) having the financial ability  (including working capital) and retail
optical store experience (in each case, as reasonably  determined by Franchisor)
to construct, and/or open and operate a new Center in accordance with the Manual
and Franchisor's then current form of franchise agreement  (hereinafter referred
to as a "Franchise  Agreement" and,  together with each of the documents related
thereto and required by Franchisor in connection  therewith,  as the same may be
amended, modified and/or supplemented by Franchisor from time to time during the
term  of this  Agreement,  being  hereinafter  collectively  referred  to as the
"Franchise  Documents"),  all as described in Franchisor's  then current form of
Franchise  Offering  Circular  for the State of  California  (as the same may be
amended, modified and/or supplemented by Franchisor from time to time during the
term of this Agreement,  being  hereinafter  referred to as a "UFOC");  and (ii)
"Qualified  Location"  shall mean a new retail optical store  location,  located
within the  Territory,  that does not  infringe  upon the rights of any other of
Franchisor's franchisees then operating in the Territory and which is reasonably

                                       2
<PAGE>

anticipated (based upon demographic studies obtained by Area  Representative) to
generate annual gross sales (exclusive of optometric exam fees), after the first
year of operation, of not less than five hundred thousand dollars ($500,000), it
being  understood  that a location shall not be deemed to qualify as a Qualified
Location in the event  Franchisor  is  required  to  guaranty  more than six (6)
months of the rent and additional  rent to become payable under the master lease
for such location; and

     1.1.2  thereafter from time to time during the term of this  Agreement,  to
provide Servicing  Responsibilities  to Qualified  Prospects who have acquired a
Franchise for a Qualified Location situated within the Territory during the term
hereof (such  Qualified  Prospects  who actually  acquire such  Franchise  being
hereinafter referred to as an "AR Franchisee").

     1.1.3 Except as  otherwise  specified  in this  Agreement,  as long as Area
Representative is not then in default,  in any material  respect,  in performing
its responsibilities  and/or obligations set forth herein, and this Agreement is
then in full force and effect, Franchisor shall: (i) not enter into an agreement
that allows any other person or entity to exercise or assume  substantially  all
of the rights granted to Area  Representative  pursuant to this  Agreement;  and
(ii) refer to Area  Representative  any Qualified Prospect desiring to acquire a
Franchise for a Center.

     1.2  Notwithstanding  the  provisions  of Sections 1.1 and 1.2 above,  Area
Representative  acknowledges that Franchisor  retains the right to own, acquire,
establish and/or operate, and to license or franchise third parties to establish
and  operate,  retail  optical  centers  under any name and mark  other than the
Proprietary Mark, at any location within or outside the Territory.

     1.3 Except as provided herein, this Agreement does not confer any rights or
obligations  on  Area   Representative  with  respect  to  any  of  Franchisor's
franchisees who have not become an AR Franchisee pursuant to the terms hereof.

     1.4 Area  Representative's  rights under this Agreement are contingent upon
Area  Representative  timely meeting the Development Plan, it being specifically
understood  that,  in the event Area  Representative  does not  timely  meet the
Development  Plan as set forth in the Addendum,  Franchisor shall have the right
(but not the  obligation)  to terminate  this  Agreement in accordance  with the
provisions of Section 11.2 hereof.


2.       TERM

     The  term of this  Agreement  shall  be for ten  (10)  years  from the date
hereof, unless sooner terminated in accordance with the terms hereof.


                                       3

<PAGE>


3.       DUTIES OF FRANCHISOR

     3.1  Franchisor  shall  have  the  sole  and  absolute  authority  to grant
franchises and execute Franchise  Documents with Qualified  Prospects who desire
to  become  AR  Franchisees.  Franchisor  shall  collect  all fees  from each AR
Franchisee,  as required under the terms of its respective  Franchise Agreement,
and  thereafter  distribute  to Area  Representative  its share of such fees, as
provided for (and subject to the provisions of) Section 4 hereof.

     3.2  Franchisor,  from time to time during the term  hereof,  shall use its
reasonable,  good  faith  efforts to prepare  one or more  franchise  disclosure
documents  (UFOCs) for use in offering  franchises in the Territory  and, to the
extent  required,  will,  from  time to time  during  the term  hereof,  use its
reasonable,  good  faith  efforts  to  prepare  any  materials  required  to  be
registered  with  any  state  regulatory  agency.   Franchisor's  obligation  is
contingent  upon  Area  Representative  providing  Franchisor  with  all  of the
information requested or required by Franchisor in connection therewith, in each
case,  within the time periods  reasonably  specified by Franchisor.  Franchisor
will bear the costs of the  preparation  of the UFOCs and any  registrations  or
other filings. If Franchisor, through no fault of Area Representative, loses its
rights to solicit  and/or sell  franchises  in the  Territory,  Franchisor  will
modify the  Development  Plan to accommodate  Area  Representative  for the lost
opportunity.  However,  Area  Representative  understands  that it is common for
temporary lapses in the ability to offer and sell franchises due to the need for
periodic  modifications,  updates,  and regulatory  approvals.  Thus,  lapses of
registration  for consecutive  time periods of ninety (90) days or less will not
require any modification of the Development Plan.  Franchisor shall provide Area
Representative  with an adequate number of current copies of  Franchisor's  UFOC
for delivery to Qualified Prospects.

     3.3  Franchisor,   at  its  sole  cost  and  expense,  shall  provide  Area
Representative with the following:

     3.3.1  all forms  (including  applications  for a  franchise)  required  by
Franchisor for reporting details concerning Qualified Prospects;

     3.3.2 such advertising  materials as may then be utilized by Franchisor for
purposes of generally promoting the opportunity to become a Franchisee; and

     3.3.3 copies of Franchisor's then current UFOC for the Territory.

     3.4 Franchisor shall promptly refer to Area  Representative  any inquiry it
may receive from Qualified Prospects  regarding their proposed  acquisition of a
Franchise for a Qualified Location to be situated in the Territory.


                                       4
<PAGE>


     3.5 Franchisor shall promptly process all referrals of Qualified  Prospects
and their  respective  applications  forwarded by Area  Representative  that are
submitted in accordance with  Franchisor's  policies and  procedures;  provided,
however,  that  Franchisor's  decision to execute  Franchise  Documents with any
Qualified Prospect for a Qualified Location shall be at Franchisor's  reasonable
discretion.

     3.6  Franchisor  shall  have the  right to  monitor  Area  Representative's
performance of its Promotional  Services and Servicing  Responsibilities at such
times and utilizing such methods as Franchisor deems necessary.


4.       FEES AND COMPENSATION

     4.1 Franchisor,  in partial  reimbursement of the  administrative and other
costs  and/or  expenses  anticipated  to be incurred by Area  Representative  in
performing  its  obligations  hereunder,  shall pay to Area  Representative  the
aggregate  sum of One  Hundred and Forty  Thousand  Dollars  ($140,000)  (all as
specified in paragraph 3 of the Addendum annexed hereto as Exhibit A), the first
installment of which  ($25,000)  shall be paid to Area  Representative  within a
maximum period of ten (10) days after the complete execution hereof (which first
installment   shall  be  deemed   fully  earned  by  Area   Representative   and
non-refundable).

     4.2  Provided  that  Area  Representative  is not then in  default,  in any
material respect, in performing its obligations hereunder,  Franchisor shall pay
to Area Representative,  as consideration for Area Representative's  Promotional
Services,  a promotional services fee equal to twenty five percent (25%) of each
initial  franchise  fee,  in excess of One Hundred  and Forty  Thousand  Dollars
($140,000),  actually  paid to, and  received by,  Franchisor  under each set of
Franchise  Documents executed by Franchisor and an AR Franchisee for a Center to
be established in the Territory. Franchisor shall pay each such fee on the tenth
(10th) day after the  expiration of each calendar  month during the term of this
Agreement  during which the Franchisor  receives the full amount of such initial
franchise fee from an AR Franchisee.

     4.3  Provided  that  Area  Representative  is not then in  default,  in any
material respect, in performing its obligations hereunder,  Franchisor shall pay
to Area  Representative,  as consideration for Area  Representative's  Servicing
Responsibilities,   a  franchise   servicing   fee  equal  to  forty  three  and
three/fourths  percent  (43.75%) of the  continuing  royalty fees, as defined in
each  Franchise  Agreement,  actually  received  by  Franchisor  from  those  AR
Franchisees  then operating their Center and for whom Area  Representative  then
provides   Servicing   Responsibilities.   Such  fee   shall  be  paid  to  Area
Representative on the tenth (10th) day of the month following the month in which
such fees are actually paid to, and received by, Franchisor.

     4.4  Franchisor  shall use its  reasonable  good  faith  efforts to collect
initial franchise fees and continuing royalty fees directly from AR Franchisees,


                                       5

<PAGE>

and provide  Area  Representative  with a report by the tenth (10th) day of each
month on the  amounts  collected  during  the  preceding  month,  along with the
payments,  if any, due Area Representative  based upon such amounts.  Franchisor
shall have sole  discretion as to the terms and conditions of  collections.  Any
deferred  payments  from  AR  Franchisees  shall  not  become  payable  to  Area
Representative  by Franchisor  unless and until such fees have been collected by
Franchisor.   In  the  event  Franchisor   refunds  amounts  collected  from  AR
Franchisees or if Area Representative, for any reason, owes money to Franchisor,
Franchisor shall have the right, as it deems appropriate,  to set-off the amount
due  from  any  monies  owed  to  Area   Representative,   or  to  require  Area
Representative to pay the monies due to Franchisor prior to Franchisor's payment
to Area Representative of any fees then due it hereunder.  Franchisor shall have
no  liability  to Area  Representative  for  payments  required to be made to it
pursuant  to this  Paragraph  4.4 in the event that any AR  Franchisee,  for any
reason,  fails to pay any monies owed to  Franchisor,  including any  continuing
royalty fees then due by he/she/it to Franchisor.


5.       DUTIES OF AREA REPRESENTATIVE

     As a condition of receiving the rights set forth in Section 1.1 above,  two
of  Area   Representative's   members,   Carol   Seltzer  and  Paul  Licht  (the
"Guarantors"),  each shall execute the  Indemnification  and Guaranty  Agreement
attached hereto as Exhibit B (the "Guaranty"). The Guarantors, together with the
other  individuals  specified in  paragraph 4 of the  Addendum are  collectively
referred to herein as the "Principals".

     5.1 In  connection  with  Franchisor  fulfilling  its  legal  and/or  other
franchise disclosure requirements, Area Representative shall:

     5.1.1  provide  to  Franchisor  all  information   reasonably  required  by
Franchisor  to prepare  all  requisite  UFOCs and  ancillary  documents  for the
offering of franchises  in the  Territory,  and review all materials  Franchisor
prepares on Area Representative's behalf;

     5.1.2 sign and return to Franchisor  all documents  reasonably  required by
Franchisor,  or its  designee,  for the  purpose  of  registering  the  offer of
franchises throughout the Territory; and

     5.1.3 review all  materials  Franchisor  prepares on Area  Representative's
behalf,  it being  understood that Franchisor shall not be liable for any errors
or omissions which may occur in the preparation of those materials.

     5.2 In performing the Promotional  Services required of it hereunder,  Area
Representative shall:


                                       6

<PAGE>

     5.2.1 at its sole cost and expense, reasonably advertise the System through
sales  presentations  and other  means  (such as local  seminars  and  franchise
expositions, and local newspapers) as approved by Franchisor;

     5.2.2  represent  the System  accurately,  and make no  representations  or
omissions that  contradict the terms and  conditions of  Franchisor's  Franchise
Documents, UFOC, or related documents;

     5.2.3  refer to  Franchisor  any  inquiries  from  individuals  or entities
regarding the  establishment  of franchised  retail optical stores to be located
outside of the Territory;

     5.2.4 honestly and accurately answer all inquiries of Qualified  Prospects;
provide Qualified  Prospects seeking to acquire an AR Franchise for a Center (to
be located in the Territory) with a copy of the  Franchisor's  then current form
of UFOC and other  documents that  Franchisor  may require;  and obtain from all
Qualified Prospects to whom it provides a copy of the UFOC, a signed copy of the
receipt annexed thereto ("Receipt");

     5.2.5  conduct  initial  screening  of  Qualified  Prospects  according  to
Franchisor's standards;

     5.2.6 recommend promptly to Franchisor those Qualified  Prospects whom Area
Representative  deems  qualified  (as set forth  herein and in  accordance  with
Franchisor's  standards)  by  submitting  to  Franchisor  such reports and other
documentation in the form prescribed by Franchisor;

     5.2.7  respond  to  requests  from  Franchisor  for  clarification   and/or
additional information regarding any Qualified Prospect;

     5.2.8  prepare and maintain a written  report,  in the form  prescribed  by
Franchisor,  for each Qualified  Prospect rejected by Franchisor,  which reports
shall be made available to Franchisor upon request;

     5.2.9 comply at all times with all  applicable  federal,  state,  and local
laws and regulations  affecting the promotion of franchise  opportunities in the
Territory,  including,  without limitation, those relating to the offer and sale
of franchises and business opportunities; including:

     5.2.9.1 furnish to Qualified  Prospects only the then-current  form of UFOC
Franchisor has authorized for use within Area Representative's  Territory, along
with such promotional material that Franchisor may have previously approved;


                                       7

<PAGE>

     5.2.9.2  comply with all  requirements  for timing of delivery of UFOCs and
obtain and deliver to Franchisor the original signed  acknowledgment  of receipt
for each UFOC which Area Representative delivers to any Qualified Prospect;

     5.2.9.3 make no  representations or other statements that conflict with any
of the  information  contained  in the UFOC  delivered  to a Qualified  Prospect
and/or within Franchisor's then-current Franchise Documents;

     5.2.9.4 make no earnings claims or projections,  or provide any information
with  regard to sales,  revenues,  income,  costs,  or  expenses  relating  to a
franchise or retail optical store;

     5.2.9.5  promptly  notify  Franchisor of any material  information or event
which comes to Area  Representative's  attention that may require  disclosure in
the UFOC;

     5.2.9.6 use,  display,  publish and distribute,  for purposes of soliciting
Qualified Prospects, only advertising, marketing, and promotional materials that
Franchisor has previously approved as acceptable for use in the Territory; and

     5.2.9.7 stop soliciting  Qualified  Prospects  immediately at any time that
Franchisor notifies Area Representative that the UFOC and/or Franchise Documents
are  not  then  in  compliance  with  applicable  law  or,  if  applicable,  the
registration of the franchise program is not then in effect.

     5.3  Notwithstanding  any of the  Franchisor's  responsibilities  under any
Franchise  Document  with an AR Franchisee  (and without any inference  that the
foregoing  describes the Franchisor's  obligation to an AR Franchisee under such
Franchise Documents),  in discharging its Servicing  Responsibilities,  the Area
Representative shall:

     5.3.1  utilize at least one retail  optical  store owned by any one of Area
Representative's  Principals as a training center for AR Franchisees  ("Training
Center")  and offer  therefrom  initial  and  on-going  training  programs to AR
Franchisees,  which Training  Center and training  programs shall conform to the
standards and specifications established and modified by Franchisor from time to
time in its operations  manual or otherwise in writing,  and which shall include
such other required and optional training programs,  seminars,  and workshops as
Franchisor may from time to time deem reasonably necessary and appropriate;

     5.3.2 at all times, cause Carol Seltzer (or another  individual  acceptable
to the  Franchisor,  it being  understood  that  such  acceptance  shall  not be
unreasonably  withheld by the Franchisor  provided such  individual  possesses a
good moral character and business  reputation,  and has the aptitude and ability
to perform and fulfill the  obligations of such Certified  Trainer (as said term
is defined  below),  as may be  evidenced  by such  individual's  prior  related


                                       8

<PAGE>

business experience including,  but not limited to, experience in the duties and
responsibilities of such Certified Trainer),  one of the Principals,  to provide
initial and ongoing  training to each  Operations  Support Staff Person (as said
term is hereinafter  defined)  and/or AR Franchisee  (such person to be known as
the "Certified Trainer");

     5.3.3 employ, at all times, one person whose primary  responsibility  shall
be to assist the  Certified  Trainer  in  fulfilling  the Area  Representative's
Servicing  Responsibilities  ("Operations  Support Staff Person") for every five
(5) Centers opened and then operating in the Territory;

     5.3.4 provide,  in accordance  with  Franchisor's  criteria for a Qualified
Location,  site selection counseling and assistance,  on-site inspections,  site
evaluations,  and site  recommendations.  Area  Representative  acknowledges and
agrees  that  final  approval  of all  Qualified  Locations  shall  be  made  by
Franchisor at Franchisor's  discretion,  and that  Franchisor  shall not, in any
case,  guaranty more than six (6) months of the rent to become payable under the
prorated lease for any such Qualified Location; 1.1.1

     5.3.5 provide ongoing advice and consultation to AR Franchisees with regard
to, and during,  the  construction of leasehold  improvements to the premises of
its Center,  and the  installation  of all  equipment,  fixtures,  and  supplies
required  for the  operation  thereof,  and  certify  to  Franchisor,  upon  the
completion thereof,  that all construction and installations have been completed
in accordance with Franchisor's prototype plans and specifications;

     5.3.6  provide grand opening  assistance,  and other opening  assistance in
such  manner  and form as may be  reasonably  required  in  connection  with the
opening of a Center;

     5.3.7 visit each AR Franchisee at least four (4) times each year during the
term of its Franchise  Agreement and any renewals  thereof,  in order to provide
continuing  assistance  to such AR Franchisee  and to verify  compliance by each
such AR Franchisee with Franchisor's  standards and  specifications,  as well as
with all applicable  laws,  rules,  regulations and  procedures;  and provide to
Franchisor  reports (on such forms and containing such information as Franchisor
may reasonably request) concerning each visit and any necessary follow-up visits
to verify the correction of deficiencies;

     5.3.8 if requested by Franchisor,  develop a specific marketing program for
one,  more than one, or all AR  Franchisees  in the  Territory,  using  material
provided or approved by Franchisor;

     5.3.9 if  requested  by  Franchisor,  conduct  periodic  meetings of all AR
Franchisees  in the  Territory  for the purpose of  describing  new products and
services, training, and general networking;



                                       9

<PAGE>

     5.3.10  provide such other  periodic and  continuing  assistance to each AR
Franchisee as Franchisor may reasonably request or direct; and

     5.3.11 provide such other reports to the  Franchisor  concerning the market
conditions in the Territory  and/or the  performance of each AR  Franchisee,  as
Franchisor may reasonably request.

     5.4 Area  Representative  shall  assist  Franchisor  in the  collection  of
delinquent accounts and royalty payments.

     5.5 Area Representative  shall not establish any computer website including
Internet and/or World Wide Web home pages,  without  Franchisor's  prior written
approval.  Any website  must  comply with  standards  specified  in writing,  by
Franchisor,   it  being   understood  that  Franchisor  may  require  that  Area
Representative  establish its own website as part of any website  established by
Franchisor.


6.       PROPRIETARY MARKS

     6.1 Area  Representative's  right to use the  Proprietary  Mark is  derived
solely from this  Agreement.  Area  Representative  may only use the Proprietary
Mark in connection  with the operation of its Area  Representation  business and
only in accordance with this Agreement.  Any unauthorized use of the Proprietary
Mark by Area  Representative  shall  constitute an  infringement of Franchisor's
rights  in  and  to  the  Proprietary  Mark.  Area  Representative's  use of the
Proprietary Mark, and any goodwill  established by Area  Representative's use of
the  Proprietary  Mark,  shall inure to  Franchisor's  exclusive  benefit.  Area
Representative  must  not,  at any  time,  contest,  or  assist  anyone  else in
contesting, the validity or ownership of the Proprietary Mark. All provisions of
this  Agreement  applicable  to the  Proprietary  Mark  apply to any  additional
trademarks,  service marks, logo forms, trade dress, and commercial symbols that
Franchisor  authorizes for use by, and licenses to, AR  Franchisees  and/or Area
Representative in connection with this Agreement.

     6.2 Area  Representative  may not use the  Proprietary  Mark as part of any
corporate or trade name or with any prefix,  suffix,  or other modifying  words,
terms, designs, or symbols, or in any modified form. Area Representative may not
use the Proprietary Mark in connection with the sale of any unauthorized product
or service or in any other manner not  expressly  authorized  by  Franchisor  in
writing.  Area  Representative  must give such notices of trademark  and service
mark   registrations   and   copyrights  as  Franchisor   specifies,   and  Area
Representative  must obtain such fictitious or assumed name registrations as may
be  required  under  applicable  law.  Area  Representative  will not employ the
Proprietary  Mark in any way  that  Franchisor  has  determined  may  result  in
liability to Franchisor for any debts or obligations of Area Representative.



                                       10

<PAGE>

     6.3 Area Representative  shall notify Franchisor  immediately in writing if
Area Representative  becomes aware of any apparent infringement of, or challenge
to, Area  Representative's use of the Proprietary Mark or claim by any person of
any rights in the  Proprietary  Mark. Area  Representative  must not communicate
with any person other than  Franchisor  and  Franchisor's  counsel in connection
with any such infringement,  challenge, or claim. Franchisor shall have the sole
right  to take  any  action  Franchisor  deems  appropriate,  and the  right  to
exclusively control any litigation,  administrative, or other proceeding arising
out of any  infringement,  challenge,  or claim or  otherwise,  relating  to the
Proprietary  Mark.  Area  Representative  will sign all  documents,  render such
assistance,  and do such acts as Franchisor  considers  advisable to protect and
maintain  Franchisor's  interest in any such proceeding or to otherwise  protect
and maintain Franchisor's interest in the Proprietary Mark.

     6.4 If it  becomes  advisable  at  any  time  for  Franchisor  and/or  Area
Representative  to modify or discontinue use of the Proprietary Mark, and/or use
one  or  more  additional  or  substitute  trademarks  or  service  marks,  Area
Representative   shall  comply   therewith   within  a  reasonable   time  after
Franchisor's notice to Area Representative,  and Franchisor's sole liability and
obligation  to  Area  Representative  in the  event  of such  change  will be to
reimburse  Area  Representative  for  Area  Representative's  (but  not  any  AR
Franchisee's) out-of-pocket costs of compliance.


7.       CONFIDENTIAL INFORMATION

     7.1 Neither Area Representative,  nor any of its Principals,  shall, during
or  after  the  term of this  Agreement,  communicate,  divulge,  or use for the
benefit of any other  person,  partnership,  association,  or  corporation,  any
confidential  information,  knowledge,  or know-how concerning  Franchisor,  its
guidelines  for  franchisee   qualifications   and/or  the  System,  which  Area
Representative  and/or any of its Principals may be apprised,  by virtue of Area
Representative's  performance  of  its  obligations  under  the  terms  of  this
Agreement.  Area Representative shall divulge such confidential information only
to such of its  employees  as must have  access to it in order to perform  their
employment  responsibilities  to Area  Representative.  Any and all information,
knowledge,   know-how  and/or   techniques   which   Franchisor   designates  as
confidential shall be deemed confidential for purposes of this Agreement.

     7.2 Area  Representative  acknowledges  that any failure to comply with the
requirements  of this  Section 7 will cause  Franchisor  irreparable  injury for
which no adequate remedy at law may be available, and Area Representative agrees
that Franchisor may seek, and Area Representative agrees to pay, all court costs
and  reasonable  attorneys'  fees incurred by  Franchisor in obtaining,  without
posting a bond,  an ex parte order for  injunctive  or other legal or  equitable
relief with respect to the requirements of this Section 7.

     7.3 Area  Representative  shall  require  anyone who may have access to any
such confidential  information to execute an agreement  pursuant to which he/she


                                       11

<PAGE>


shall agree to maintain the confidentiality of any such confidential information
which  they  may  receive  in  connection  with  their   association  with  Area
Representative.  Such agreement  shall be in a form  satisfactory  to Franchisor
including, without limitation,  specific identification of Franchisor as a third
party beneficiary of such covenants, with the independent right to enforce them.


8.       ADVERTISING AND PROMOTION

     8.1 All advertising and promotion by Area Representative shall be conducted
in a dignified  manner,  conform to such standards as Franchisor has established
in the Franchise Documents, and not be used without Franchisor's prior approval.

     8.2  Area  Representative   shall  submit  to  Franchisor  (in  the  manner
prescribed in Section 16) samples of all advertising  and promotional  plans and
materials  prior to their use,  and may  commence use of such plans or materials
twenty (20) days after  Franchisor's  receipt  thereof  unless,  prior  thereto,
Franchisor   shall  have  furnished   written  notice  to  Area   Representative
prohibiting such use.

     8.3 Franchisor  shall have the right at any time after Area  Representative
commences use of any  advertising or promotional  materials to prohibit  further
use of such materials,  effective  immediately upon receipt of written notice to
Area Representative.


9.       INSURANCE

     9.1 Area  Representative  shall  maintain  in full  force and effect at all
times during the term of this Agreement,  at Area Representative's sole cost and
expense, insurance policies as specified in paragraph 6 of Exhibit A hereto that
shall protect Area  Representative,  Franchisor  and its  affiliates,  and their
respective shareholders,  directors, employees and agents, against any demand or
claim with respect to personal and bodily injury,  death, or property damage, or
any loss, liability,  or expense whatsoever arising out of or in connection with
the operation of Area Representative's  business. Such policy or policies shall:
(i) be written by  insurer(s)  reasonably  acceptable to  Franchisor;  (ii) name
Franchisor  and  its  subsidiaries,  and  each  of  their  respective  officers,
directors,  employees and agents, as additional insureds;  (iii) comply with the
requirements  prescribed by  Franchisor  in the Franchise  Documents at the time
such policies are obtained;  (iv) provide at least the types and minimum amounts
of coverage  specified in the Addendum hereto;  and (v) contain a waiver by Area
Representative  and its insurers of their subrogation  rights against Franchisor
and its affiliates, and their respective shareholders,  directors, employees and
agents.

     9.2 At least  ten (10)  days  prior  to the  time  any  insurance  is first
required to be carried by Area Representative,  and thereafter at least ten (10)
days prior to the  expiration  of any such  policy,  Area  Representative  shall


                                       12

<PAGE>


deliver to Franchisor  Certificates of Insurance evidencing the proper types and
minimum amounts of coverage required hereunder. All Certificates shall expressly
provide that no less than twenty (20) days' prior written  notice shall be given
to  Franchisor  in the event of a material  alteration  to, or  cancellation  or
non-renewal  of, the  coverages  evidenced  by such  Certificates.  Certificates
evidencing  the insurance  required by this Section 9 shall name  Franchisor and
its  subsidiaries,  and their respective  officers,  directors,  employees,  and
agents, as additional insureds, and shall expressly provide that any interest of
each shall not be  affected by any breach by Area  Representative  of any policy
provisions for which such Certificates evidence coverage.

     9.3 Should Area Representative, for any reason, fail to procure or maintain
the insurance required by this Agreement, as such requirements may reasonably be
revised  by  Franchisor  by  notice  given to Area  Representative  in  writing,
Franchisor  shall  have the  right and  authority  (but not the  obligation)  to
procure such insurance and to charge same to Area Representative, which charges,
together  with a  reasonable  fee for the expenses of  Franchisor  in so acting,
shall be payable by Area Representative immediately after its receipt of written
notice  thereof.  The  foregoing  remedies  shall be in  addition  to any  other
remedies Franchisor may have.


10.      TRANSFER OF INTEREST

     10.1  Franchisor  shall have the right to transfer or assign this Agreement
and all or any part of its rights or  obligations  under this  Agreement  to any
person or legal  entity,  and any assignee of  Franchisor  shall  become  solely
responsible  for all  obligations  of Franchisor  under this  Agreement from and
after the date of any such assignment.

     Area Representative understands and acknowledges that the rights and duties
set  forth  in  this  Agreement  are  personal  to Area  Representative  and its
Principals  as of the  date  hereof,  and  that  Franchisor  has  executed  this
Agreement in reliance on the Principals' business skill, financial capacity, and
personal character. Accordingly:

     10.1.1 Area Representative  shall not, without the prior written consent of
Franchisor,   transfer,   assign,  give  away,  pledge,  or  otherwise  encumber
("Transfer") the rights and/or obligations of the Area Representative under this
Agreement; and

     10.1.2 a  Principal  shall  not,  without  the  prior  written  consent  of
Franchisor, Transfer any interest of the Principal in Area Representative.

     10.2 Franchisor  shall not  unreasonably  withhold any consent  required by
Section 10.2 above,  provided,  if Area Representative  proposes to Transfer its
obligations  hereunder,  or if a Principal  proposes  to Transfer  any direct or
indirect  interest  in  Area  Representative,  Franchisor  shall  have  absolute
discretion  to require any or all of the  following  as  conditions  to any such
approval:



                                       13

<PAGE>


     10.2.1 The  transferor  shall have  executed a general  release,  in a form
prescribed by Franchisor,  by which such transferor  releases any and all claims
he/she may have against  Franchisor and/or its  subsidiaries,  and each of their
respective affiliates,  successors, assigns, directors, officers,  shareholders,
partners, agents,  representatives,  servants, and employees, in their corporate
and individual  capacities including,  without limitation,  claims arising under
this Agreement, any other agreement between the transferor and Franchisor or its
affiliates, and federal, state, and local laws and rules;

     10.2.2 The transferee of a Principal shall be designated as a Principal and
each  transferee  who is  designated  a  Principal  shall  enter  into a written
agreement,  in a form  satisfactory  to  Franchisor,  agreeing  to be bound as a
Principal  under the terms of this  Agreement  as long as such  person or entity
owns  any  interest  in  Area  Representative  and to  personally  guaranty  the
performance of all such obligations by Area Representative; and

     10.2.3 The transferor must  acknowledge and agree that the transferor shall
remain  bound  by the  covenants  contained  in  Sections  13.1 and 13.2 of this
Agreement; and

     10.2.4 In the event the  transferor  shall be either of the  Guarantors (or
either of their respective prior  transferees),  the transferee  shall: (i) then
have a financial  "net  worth"  equal to or  exceeding  such  transferor's  then
financial  "net  worth,"  as well as have  liquid  assets  (such as cash  and/or
marketable  securities) then equal to or exceeding such transferor's then liquid
assets; and (ii) execute and deliver to Franchisor a guaranty in the form of the
Guaranty annexed hereto as Exhibit B.

     10.3 In addition to requirements contained in Sections 10.2 and 10.3 above,
if a proposed Transfer, alone or together with other previous,  simultaneous, or
proposed  Transfers,  would have the  effect of  changing  control  of: (i) Area
Representative and/or its Principals; or (ii) ownership of Area Representative's
obligations  and/or  rights  under  this  Agreement,  Franchisor,  in  its  sole
discretion, may require any of the following conditions to any such approval:

     10.3.1 The Principals of the Area  Representative  shall: meet Franchisor's
educational,  managerial,  and  business  standards;  each  possess a good moral
character, business reputation, and credit rating; have the aptitude and ability
to fulfill the responsibilities of the Area Representative under this Agreement,
as may be evidenced by prior related business  experience or otherwise;  and, in
the case the transferor is a Guarantor,  have adequate  financial  resources and
capital to fulfill the responsibilities of the Area Representative under Section
10.3.4 of this Agreement;

     10.3.2 In the event such transferor  shall be a Guarantor,  such transferor
shall remain  liable for all of the  obligations  to  Franchisor  under,  and/or
pursuant to,  Section 14.2 of this  Agreement  that arose prior to the effective
date of the  transfer,  and shall  execute  any and all  instruments  reasonably
requested by Franchisor to evidence such liability; and



                                       14


<PAGE>


     10.3.3 Area  Representative  shall have  complied  with Section  10.5,  and
Franchisor shall not have exercised its right of first refusal.

     10.4 Franchisor  shall have a right of first refusal to purchase the equity
interests of a Principal of Area Representative, as set forth below:

     10.4.1 If any Principal  desires to accept any bona fide offer from a third
party to purchase such Principal's equity interests in Area Representative, such
Principal shall promptly notify  Franchisor of such offer and shall provide such
information and  documentation  relating to the offer as Franchisor may require.
The  information  and  documentation  relating  to the offer  shall  include all
details of the proposed  offer to enable  Franchisor to adequately  evaluate the
offer. Franchisor shall have the right and option, exercisable within sixty (60)
days  after  receipt  of all such  information,  to send  written  notice to the
Principal that Franchisor  intends to purchase the Principal's  interests on the
same terms and conditions  offered by the third party.  If Franchisor  elects to
purchase such  Principal's  interests,  the closing of such purchase shall occur
within  one  hundred  and  twenty  (120)  days  from the date of  notice to such
Principal of the election to purchase by Franchisor;

     10.4.2 Any material change in the terms of the offer prior to closing shall
constitute  a new  offer,  subject  to the  same  rights  of  first  refusal  by
Franchisor  as in the  case of the  third  party's  initial  offer.  Failure  of
Franchisor  to  exercise  the option  afforded  by this  Section  10.5 shall not
constitute a waiver of any other provision of this  Agreement,  including all of
the  requirements  of this Section 10, with respect to any  subsequent  proposed
transfer.

     10.4.3 In the event the consideration,  terms, and/or conditions offered by
a third party are such that Franchisor may not reasonably be required to furnish
the same consideration,  terms, and/or conditions,  then Franchisor may purchase
the interest  proposed to be sold for the reasonable  equivalent in cash. If the
parties cannot agree within a reasonable  time on the  reasonable  equivalent in
cash of the consideration,  terms, and/or conditions offered by the third party,
they each shall appoint an independent  appraiser to conduct an appraisal of the
consideration,  terms,  and/or  conditions  offered by the third party,  and the
average of the two appraisals  shall be a binding  determination of the value of
the assets or interests proposed to be sold. The cost of the appraisals shall be
shared equally by Franchisor and the Principal. If Franchisor elects to exercise
its right under this Section  10.5,  Franchisor  shall have the right to set off
all amounts due from Area Representative,  if any, against any payment to become
due such Principal.

     10.5 Upon the death of a Principal, the deceased's executor, administrator,
or other personal  representative  shall  transfer the deceased's  interest to a
third party  approved by  Franchisor  within six (6) months after the death;  it
being  understood  that, if such deceased  Principal shall be a Guarantor,  such
approval shall be conditioned  upon the transferee  complying  with, and meeting
the  requirements  of,  subsections  10.3.4 and 10.4.3  hereof.  If no  personal


                                       15

<PAGE>


representative  is  designated  or  appointed  or  no  probate  proceedings  are
instituted with respect to the deceased's  estate,  then the distributee of such
interest must be approved by Franchisor.  If the  distributee is not approved by
Franchisor,  then the  distributee  shall transfer the deceased's  interest to a
third party  approved by Franchisor  within six (6) months after the  deceased's
death.

     10.6 Upon the permanent disability of any Principal, Franchisor may, in its
sole  discretion,  require  such  interest  to be  transferred  to a third party
designated by Area Representative and approved by Franchisor in accordance with,
and subject to, the  conditions  described  in this  Section 10 within three (3)
months after notice to Area  Representative.  "Permanent  Disability" shall mean
any physical,  emotional,  or mental injury,  illness,  or incapacity that would
prevent a person from performing the obligations set forth in this Agreement for
at least three (3) consecutive  months and from which condition  recovery within
three (3)  consecutive  months from the date of  determination  of disability is
unlikely.  Permanent  disability  shall be determined  by a licensed  practicing
physician  selected by Franchisor  upon  examination  of such person or, if such
person refuses to be examined,  then such person shall  automatically  be deemed
permanently  disabled  for the  purposes of this  Section 10.7 as of the date of
refusal. Franchisor shall pay the cost of any required examination.

     10.7  Upon the  death or  Permanent  Disability  of any  Principal  of Area
Representative,  such person or his/her  representative  shall  promptly  notify
Franchisor  of such death or claim of Permanent  Disability.  Any transfer  upon
death or Permanent  Disability shall be subject to the same terms and conditions
as any inter vivos transfer.

     10.8  Franchisor's  consent  to a  transfer  which is the  subject  of this
Section 10 shall not  constitute  a waiver of any claims it may have against the
transferring  party,  nor shall it be deemed a waiver of  Franchisor's  right to
demand  exact  compliance  with  any of  the  terms  of  this  Agreement  by the
transferor or transferee.

     10.9 If Area Representative or any Principal of Area Representative becomes
a debtor in a proceeding  under the U.S.  Bankruptcy  Code or any similar law in
the U.S. or elsewhere,  it is the parties'  understanding and agreement that any
transfer of Area Representative, Area Representative's obligations and/or rights
hereunder, any material assets of Area Representative, or any indirect or direct
interest  in Area  Representative  shall be  subject to all of the terms of this
Section 10.


11.      DEFAULT AND TERMINATION

     11.1 Area Representative shall be in default under this Agreement,  and all
rights  granted  herein shall  automatically  terminate  without  notice to Area
Representative:  if Area Representative shall become insolvent or make a general
assignment for the benefit of creditors; or if a petition in bankruptcy is filed
by Area  Representative  or such a petition is filed  against and not opposed by
Area  Representative;  or if Area  Representative  is  adjudicated a bankrupt or



                                       16
<PAGE>


insolvent;  or if a bill in equity or other  proceeding for the appointment of a
receiver of Area  Representative  or other  custodian for Area  Representative's
business or assets is filed and  consented  to by Area  Representative;  or if a
receiver or other  custodian  (permanent or temporary) of Area  Representative's
assets or property,  or any part thereof, is appointed by any court of competent
jurisdiction; or if proceedings for a composition with creditors under any state
or federal law should be instituted by or against Area  Representative;  or if a
final  judgment  remains  unsatisfied  or of record  for  thirty  days or longer
(unless a supersedeas bond is filed); or if Area Representative is dissolved; or
if execution is levied against Area Representative's business or property; or if
suit to foreclose any lien or mortgage  against Area  Representative's  business
premises  or  equipment  is  instituted  against  Area  Representative  and  not
dismissed  within  thirty  days;  or if the real or  personal  property  of Area
Representative  shall be sold after levy thereupon by any sheriff,  marshal,  or
constable.

     11.2 Area  Representative  shall be deemed to be in default and  Franchisor
may, at its option,  terminate this Agreement and all rights granted  hereunder,
without  affording  Area  Representative  any  opportunity  to cure the default,
effective  immediately upon receipt of notice by Area  Representative,  upon the
occurrence of any of the following events:

     11.2.1 If Area  Representative  fails to meet the total Minimum  Cumulative
Number of  Franchised  Centers  Open and  Operating in the  Territory  under the
Development Plan within any time period specified in the Addendum; or if, during
each  of  the  final  five  (5)  years  of  the  tem  of  this  Agreement,  Area
Representative  fails  to  present  to  Franchisor  at least  one (1)  Qualified
Prospect;  provided,  however,  that in the  event  Franchisor  terminates  this
Agreement  pursuant to this Section  11.2.1,  Area  Representative,  provided it
continues to provide the Servicing  Responsibilities,  shall continue to receive
the fees set forth in  Section  4.3 above for each AR  Franchisee  whose  Center
opened prior to such termination;

     11.2.2 If Area  Representative  (or one of its  Principals)  is  charged or
convicted of a felony, a crime involving moral turpitude,  or any other crime or
offense that Franchisor  believes is reasonably likely to have an adverse effect
on the System,  the  Proprietary  Mark, the goodwill  associated  therewith,  or
Franchisor's interest therein;

     11.2.3  If  Area  Representative  or  one  of  the  Principals  assigns  or
transfers,  or attempts to assign or transfer,  any of its rights or obligations
under this Agreement without Franchisor's prior written consent, in violation of
Section 10;

     11.2.4 If Area  Representative  discloses  or divulges  the contents of the
confidential  information  provided to Area  Representative  by  Franchisor in a
manner contrary to the terms of Section 7 hereof;

     11.2.5 If Area Representative fails to comply with the covenants in Section
13.2 hereof or fails to obtain execution of the covenants required under Section
13.4 hereof;



                                       17

<PAGE>


     11.2.6 If Area  Representative,  after curing a default pursuant to Section
11.3 hereof, commits the same default again, whether or not cured after notice;

     11.2.7 If Area  Representative  repeatedly is in default under Section 11.3
hereof for failure to comply  substantially with any of the requirements imposed
by this Agreement, whether or not cured after notice; or

     11.2.8 If any of Area Representative's Principals commits any default under
any franchise  agreement  and/or related document between him/her (or any entity
principally  owned and/or  controlled by him/her) and  Franchisor,  and fails to
cure such default, if such default can be cured, in accordance with the terms of
that franchise agreement.

     11.3 Except with  respect to the  defaults  set forth in Sections  11.1 and
11.2 of this Agreement,  Area Representative  shall have ten (10) days after its
receipt from  Franchisor of a notice of default  within which to remedy  (and/or
cause to be remedied) any other default  hereunder and provide  evidence thereof
to  Franchisor.  If evidence  sufficient to prove such a cure is not provided to
Franchisor  within  such  time  period,  this  Agreement  may be  terminated  by
Franchisor  on  notice  to  Area  Representative,  effective  immediately.  Area
Representative  shall  be  in  default  hereunder  for  any  failure  to  comply
substantially  with any of the  requirements  imposed by this  Agreement,  or to
carry out the terms of this Agreement in good faith.


12.      OBLIGATIONS UPON TERMINATION OR EXPIRATION

     Upon  termination  or  expiration,  this  Agreement and all rights  granted
hereunder to Area Representative shall forthwith terminate, and:

     12.1 Area Representative shall immediately cease to perform any Promotional
Services and any Servicing Responsibilities and shall not be entitled to receive
any  further  fees or  compensation  pursuant  to  Section 4  hereof;  provided,
however, that in the event Franchisor shall terminate this Agreement as a result
of Area  Representative's  failure to comply  with the  Development  Plan,  Area
Representative  shall continue to receive the  compensation set forth in Section
4.3 hereof if, and to the extent only that,  Area  Representative  continues  to
provide to each then AR Franchisee,  the Servicing  Responsibilities required of
it hereunder,  in which event, this Agreement shall thereafter  continue in full
force and effect (with respect to such then existing AR Franchisees) for so long
as Area Representative shall continue to provide such Servicing Responsibilities
and is not  otherwise  in  default  in  performing  and/or  complying  with  its
obligations hereunder.

     12.2 Area  Representative  shall  immediately  turn over to Franchisor  all
advertising   and   promotional   materials,   records,   files,   instructions,
correspondence,  brochures,  forms, agreements,  and any and all other materials
and  all  copies  thereof  in  Area   Representative's   possession  related  to



                                       18
<PAGE>

Franchisor's  business,  and shall  otherwise  cease to represent  itself to the
public as a current or former Area  Representative of Franchisor,  except if and
to  the  extent  necessary  to  comply  with  its   post-termination   Servicing
Responsibilities;

     12.3   Except  if  and  to  the  extent   necessary   to  comply  with  its
post-termination Servicing Responsibilities, Area Representative shall take such
action as may be necessary to cancel any assumed name or equivalent registration
which contains the mark "SITE FOR SORE EYES" or any other  proprietary  marks of
Franchisor;  and Area  Representative  shall furnish  Franchisor  with evidence,
satisfactory to Franchisor, of its compliance with this obligation within twenty
(20) days after any such termination or expiration of this Agreement; and

     12.4 Area  Representative  shall pay to Franchisor all damages,  costs, and
expenses,  including  reasonable  attorneys'  fees  and  expenses,  incurred  by
Franchisor  subsequent to the  termination  or  expiration of this  Agreement in
obtaining  injunctive or other relief for the  enforcement  of any provisions of
this Section 12.


13.      COVENANTS

     13.1 Area Representative  specifically  acknowledges that, pursuant to this
Agreement,  Area Representative will receive valuable confidential  information,
including,  without limitation,  information  regarding the operational,  sales,
advertising and promotional methods and techniques of Franchisor and the System.
Area Representative covenants that, during the term of this Agreement, except as
otherwise approved in writing by Franchisor, neither Area Representative nor any
of   its   Principals    shall,    either    directly   or    indirectly,    for
itself/himself/herself,  or through,  on behalf of, or in  conjunction  with any
person, persons, partnership, or corporation:

     13.1.1 Divert or attempt to divert to any competitor, by direct or indirect
inducement  or otherwise,  any business or customer of any retail  optical store
operating  under the System or any  persons  or  businesses  who have  expressed
interest  in entering  into a  franchise  agreement  with  Franchisor,  or do or
perform,  directly or indirectly,  any other act injurious or prejudicial to the
goodwill associated with the Proprietary Mark or the System; or

     13.1.2 Unless released in writing by the employer, employ or seek to employ
any person who is, at the time,  employed by Franchisor or by any  Franchisee or
Franchisor (other than Area  Representative or an entity affiliated with it), or
otherwise,  directly or  indirectly,  induce any such person to leave his or her
employment.

     13.2 Area  Representative  covenants that, except as otherwise  approved in
writing by Franchisor, neither Area Representative, nor any of its Principals:



                                       19

<PAGE>


     13.2.1  shall,  during  the  term of this  Agreement,  either  directly  or
indirectly,  for  itself/himself/herself,  or  through,  on  behalf  of,  or  in
conjunction with any person, persons, partnership or corporation, own, maintain,
operate,  engage  in, or have any  interest  in any  business  which  promotes a
franchise  opportunity  for any entity that operates a business,  or that offers
franchises to operate a business, that is the same as or similar to the business
then being operated by Franchisor, including without limitation, a business that
manufactures  or sells,  at wholesale or retail,  contact  lenses,  prescription
and/or non-prescription  eyewear and/or related eye care products, if any or all
such products comprise ten percent (10%) or more of the business'  products,  as
measured  by  the  gross  sales  of  the  products  sold  by  such  business  (a
"Competitive  Business"),  or fulfill  any  Servicing  Responsibilities  for any
entity that has entered into one or more franchise agreements  authorizing third
parties to operate any other similar type of business; or

     13.2.2 shall, for a continuous uninterrupted period of three (3) years from
the  date of:  (i) a  transfer  permitted  under  Section  10,  above;  (ii) the
expiration  or  termination  of this  Agreement  (regardless  of the  cause  for
termination);  or (iii) a final order of a duly authorized arbitrator,  panel of
arbitrators,  or a court of competent  jurisdiction (after all appeals have been
taken) with respect to any of the  foregoing or with respect to the  enforcement
of this Section 13.2, either directly or indirectly, for itself/himself/herself,
or  through,  on behalf  of, or in  conjunction  with any  person,  partnership,
corporation,  or other entity,  own, maintain,  operate,  engage in, or have any
interest in any business which operates, or promotes a franchise opportunity for
any entity that  offers  franchises  to  operate,  a  Competitive  Business,  or
fulfills  any  Servicing  Responsibilities  for any entity that has entered into
franchise  agreements  authorizing  third  parties to operate  any other type of
business within the Territory.

     13.3  Section  13.2  hereof  shall  not  apply  to the  ownership  by  Area
Representative  (or any of its  Principals)  of less  than a ten  percent  (10%)
beneficial  interest in the outstanding  equity  securities of any publicly-held
corporation.  As used in this Agreement,  the term  "publicly-held  corporation"
refers  to a  corporation  which  has  outstanding  securities  that  have  been
registered  under the Securities Act of 1933 and/or the Securities  Exchange Act
of 1934.

     13.4 Area Representative  shall obtain (and deliver to Franchisor) executed
covenants similar to those set forth in this Section 13 (as modified to apply to
an  individual)  from any officers,  directors,  and employees who have received
training  from  Franchisor  or who are or may be involved in the  management  or
operation of the Area Representative's business. Every covenant required by this
Section 13.4 shall be in a form satisfactory to Franchisor,  including,  without
limitation, specific identification of Franchisor, as a third-party beneficiary,
of such covenants,  with the independent right to enforce them.  Failure by Area
Representative  to obtain execution of a covenant  required by this Section 13.4
and deliver such  executed  covenant to  Franchisor  shall  constitute a default
under Section 11.2.5 hereof.

     13.5 The  parties  agree  that  each of the  foregoing  covenants  shall be
construed as independent  of any other covenant or provision of this  Agreement.


                                       20

<PAGE>



If all or any portion of a covenant in this Section 13 is held  unreasonable  or
unenforceable  by a court or agency having valid  jurisdiction  in an unappealed
final decision to which  Franchisor is a party,  Area  Representative  expressly
agrees to be bound by any  lesser  covenant  subsumed  within  the terms of such
covenant  that  imposes the maximum duty  permitted by law, as if the  resulting
covenant were separately stated in and made a part of this Section 13.

     13.6 Area Representative understands and acknowledges that Franchisor shall
have the right, in its sole discretion,  to reduce the scope of any covenant set
forth in  Sections  13.1 and 13.2 of this  Agreement,  or any  portion  thereof,
without Area  Representative's  consent,  effective  immediately upon receipt by
Area  Representative of written notice thereof;  and Area  Representative  agree
that it shall comply forthwith with any covenant as so modified,  which shall be
fully enforceable notwithstanding the provisions of Section 17 hereof.

     13.7 Area Representative  expressly agrees that the existence of any claims
it may have  against  Franchisor,  whether or not arising  from this  Agreement,
shall not constitute a defense to the enforcement by Franchisor of the covenants
contained  in this Section 13. Area  Representative  agrees to pay all costs and
expenses  (including  reasonable  attorneys'  fees)  incurred by  Franchisor  in
connection with the enforcement of this Section 13.

     13.8 Area Representative  acknowledges that Area Representative's violation
of the terms of this Section 13 would result in irreparable injury to Franchisor
for which no adequate  remedy at law may be available,  and Area  Representative
accordingly consents to the issuance of an injunction prohibiting any conduct by
Area Representative in violation of the terms of this Section 13.


14.      INDEPENDENT CONTRACTOR AND INDEMNIFICATION

     14.1 The parties intend that their  relationships  with each other shall be
as  independent  contractors.   Each  party  shall  be  solely  responsible  for
fulfilling  its  obligations  under this  Agreement,  and  neither  party  shall
constitute,  appoint or consider the other as its agent, employee or servant for
any purpose whatsoever.  Neither Franchisor nor Area Representative  (and/or any
of Area Representative's Principals) shall have any right or authority to assume
or create any obligation,  express or implied,  on behalf of, or in the name of,
the other, or to bind the other in any manner whatsoever.

     14.2 Area  Representative  shall (as such obligations are guaranteed by the
Guarantors)  indemnify and hold  Franchisor,  and its  shareholders,  directors,
employees  and agents,  harmless  from and  against any and all claims,  losses,
costs, expenses,  liabilities and damages arising, directly or indirectly, from,
as a result of, or in connection with the performance by Area Representative and
its employees  and all persons  acting on its behalf,  of Area  Representative's
obligations  and  undertakings  pursuant  to this  Agreement,  or  otherwise  in



                                       21

<PAGE>


connection with the promotion of the opportunity to become an AR Franchisee,  as
well as the costs, including attorneys' fees, of defending against them.


15.      APPROVALS AND WAIVERS

     15.1  Whenever  this  Agreement  requires the prior  approval or consent of
Franchisor,   Area  Representative  shall  make  a  timely  written  request  to
Franchisor  therefor,  and such approval or consent must be obtained in writing.
Franchisor  shall  respond  to  Area  Representative's   timely  requests  in  a
reasonably timely and prompt manner.

     15.2  Franchisor   makes  no  warranties  or  guarantees  upon  which  Area
Representative  may  rely,  and  assumes  no  liability  or  obligation  to Area
Representative by providing any waiver, approval, consent, or suggestion to Area
Representative  in connection with this Agreement,  or by reason of any neglect,
delay or denial of any request therefor.

     15.3 No delay, waiver, omission or forbearance on the part of Franchisor or
Area Representative to exercise any right, option, duty, or power arising out of
any  breach or default by the other  party  under any of the terms,  provisions,
covenants,  or  conditions  hereof,  shall  constitute a waiver by such party to
enforce any such right, option, duty, or power as against the other party, or as
to any subsequent breach or default by the other party. Subsequent acceptance by
Franchisor  of any  payments  due to it  hereunder  shall  not be deemed to be a
waiver by  Franchisor  of any  preceding  breach by Area  Representative  of the
terms, provisions, covenants or conditions of this Agreement.


16.      NOTICES

     16.1 Any and all notices  required or permitted  under this Agreement shall
be in writing and shall be personally  delivered,  sent by telecopier (with hard
(paper)  copy sent by overnight  delivery),  mailed by  certified  mail,  return
receipt  requested,  or  dispatched  by  overnight  delivery  envelope  (using a
recognized  overnight  service),  to the  respective  parties  at the  following
addresses  unless and until a different  address has been  designated by written
notice to the other party:




                                       22

<PAGE>



Notices to Area Representative:                      Notices to Franchisor:
------------------------------                       ---------------------

Site-Ncal Area Rep, LLC                          Emerging Vision, Inc.
140 Battery Street                               100 Quentin Roosevelt Boulevard
San Francisco, California 94111                  Garden City, New York 11530
Attention: Marty Seltzer                         Attention: President
Fax: 415-421-6072                                Fax: 516-390-2110
                                                 with a copy to: General Counsel
                                                 Fax: 516-390-2150


     Notices  shall be deemed to have been  received  as  follows:  by  personal
delivery or telecopier -- at the time of delivery; by overnight delivery service
-- on the next  business day following the date on which the Notice was given to
the overnight  delivery  service;  by certified mail -- three (3) days after the
date of mailing.


17.      ENTIRE AGREEMENT AND AMENDMENT

     This Agreement and the documents  referred to herein constitute the entire,
full,  and  complete  Agreement  between  Franchisor  and  Area   Representative
concerning  the subject matter hereof,  and supersede all prior  agreements,  no
representations,  other than those specifically set forth herein, having induced
Area Representative to execute this Agreement.  Except for those permitted to be
made  unilaterally by Franchisor  hereunder,  no amendment,  change, or variance
from this  Agreement  or the  Guaranty  shall be binding on either  party unless
mutually agreed to by the parties and executed by their  authorized  officers or
agents in writing.


18.      SEVERABILITY AND CONSTRUCTION

     18.1 If any of the  provisions  of this  Agreement may be construed in more
than one way,  one of which  would  render the  provision  illegal or  otherwise
voidable or  unenforceable,  such provision shall have the meaning which renders
it valid and enforceable.  In the event any court or other government  authority
shall  determine any provision of this Agreement is not  enforceable as written,
the parties agree that the provision  shall be amended so that it is enforceable
to the  fullest  extent  permissible  under the laws and public  policies of the
jurisdiction  in which  enforcement  is sought and which affords the parties the
same basic  rights and  obligations  and has the same  economic  effect.  If any
provision of this  Agreement is held invalid or otherwise  unenforceable  by any
court or other  government  authority  or in any  arbitration  proceeding,  such
findings  shall not  invalidate  the remainder of the Agreement  unless,  in the
reasonable opinion of Franchisor,  the effect of such  determination  shall have
the effect of frustrating the purposes of this Agreement,  whereupon  Franchisor
shall  have  the  right,  by  notice  in  writing  to  Area  Representative,  to
immediately terminate this Agreement.




                                       23

<PAGE>

     18.2 Except as expressly  provided to the contrary herein,  nothing in this
Agreement is intended,  nor shall be deemed,  to confer upon any person or legal
entity  other  than  Area  Representative,  Franchisor,  Franchisor's  officers,
directors,  and employees,  and such of Area  Representative's  and Franchisor's
respective  successors  and  assigns  as may be  contemplated  (and,  as to Area
Representative, permitted) by Section 10 hereof, any rights or remedies under or
by reason of this Agreement.

     18.3 Area  Representative  expressly  agrees to be bound by any  promise or
covenant imposing the maximum duty permitted by law which is subsumed within the
terms of any provision hereof,  as though it were separately  articulated in and
made a part of this  Agreement,  that may result from  striking  from any of the
provisions  hereof  any  portion  or  portions  which  a  court  may  hold to be
unenforceable  in a final  decision  to which  Franchisor  is a  party,  or from
reducing  the scope of any promise or covenant to the extent  required to comply
with such a court order.

     18.4 All captions in this Agreement are intended solely for the convenience
of the parties,  and none shall be deemed to affect the meaning or  construction
of any provision hereof.

     18.5 All provisions of this Agreement which, by their terms or intent,  are
designed to survive the expiration or termination  of this  Agreement,  shall so
survive the expiration and/or termination of this Agreement,  including Sections
7, 12, and 13 hereof.


19.      APPLICABLE LAW

     19.1 This  Agreement  shall be deemed to have  taken  effect as of the date
first set forth above,  and shall be interpreted and construed under the laws of
the State of  California.  In the event of any  conflict of law, the laws of the
State of California shall prevail,  without regard to, and without giving effect
to, the  application  of  California  conflict of law rules.  If,  however,  any
provision of this Agreement would not be enforceable under the laws of the State
of California,  and if any such provision would be enforceable under the laws of
the state in which the  Territory  is  located,  then  such  provision  shall be
interpreted and construed under the laws of that state.  Nothing in this Section
19.1 is intended by the parties to subject this  Agreement  to any  franchise or
similar law,  rule, or regulation of the State of New York or of any other state
to which it would not otherwise be subject,  including,  but not limited to, the
State of California.

     19.2 Any legal action brought by Area Representative  against Franchisor in
any forum or court,  whether federal or state,  shall be brought  exclusively in
the federal  district  court  covering the location at which  Franchisor has its
principal place of business at the time of the action;  provided,  however, that
if the federal court would not have subject matter  jurisdiction  had the action
been commenced in such court,  then, in such event,  the action shall be brought
in the state court  within the  judicial  district in which  Franchisor  has its
principal  place of  business  at the time the  action is  commenced.  Any legal



                                       24

<PAGE>



action brought by Franchisor against Area  Representative in any forum or court,
whether federal or state, may be brought within the state and judicial  district
in which  Franchisor  has its  principal  place of  business  at the time of the
action. Area Representative hereby waives all questions of personal jurisdiction
or venue for the purpose of carrying out this provision.

     19.3 No right or remedy  conferred  upon or reserved to  Franchisor or Area
Representative  by this  Agreement is intended to be, nor shall be deemed to be,
exclusive  of any other right or remedy  provided  herein or permitted by law or
equity, but each shall be cumulative of every other right or remedy.

     19.4 Franchisor and Area Representative  irrevocably waive trial by jury in
any action, proceeding, or counterclaim, whether at law or in equity, brought by
either of them against the other, whether or not there are other parties in such
action, proceeding, or counterclaim.  Any and all claims and actions arising out
of or relating to this Agreement,  the relationship of Area  Representative  and
Franchisor,  brought by either party hereto against the other shall be commenced
within two (2) years from the  occurrence of the facts giving rise to such claim
or action, as evidenced by the filing of a claim in a legal action in accordance
with Section 19.2, or such claim or action shall be barred.

     19.5 Franchisor and Area Representative hereby waive, to the fullest extent
permitted  by law,  any  right  to, or claim of,  any  punitive,  exemplary,  or
multiple damages against the other.

     19.6  Nothing  herein  contained  shall  bar  Franchisor's  right to obtain
injunctive  relief  against  threatened  conduct  is  likely to cause it loss or
damage,  including  violations of the terms of Sections 7, 10, 12 and 13 hereof,
under the usual equity  rules,  including  the  applicable  rules for  obtaining
restraining orders and preliminary injunctions.




                                       25


<PAGE>



     IN WITNESS  WHEREOF,  the parties  hereto have duly  executed and delivered
this Agreement on the day and year first above written.




WITNESS:                                    EMERGING VISION, INC.,
                                            Franchisor

_____________________                       By: ________________________________

                                            Name:    Christopher G. Payan
                                            Title:   Chief Financial Officer




                                            SITE-NCAL AREA REP, LLC,
                                            Area Representative

ATTEST:

                                            By:_________________________________
_____________________
Paul Licht,                                 Name:    Martin Seltzer
Managing Member                             Title:   Managing Member








                                       26

<PAGE>



                                  EXHIBIT A to
               Emerging Vision, Inc. Area Representation Agreement


                    ADDENDUM TO AREA REPRESENTATIVE AGREEMENT
                          WITH SITE-NCAL AREA REP, LLC


     1. The Territory is the San Francisco Bay area of Northern California.


     2. The Development Plan is:


================================  ==============================================
  Minimum Cumulative Number of
   Franchised Centers Opened
      in the Territory*                            By:
--------------------------------  ----------------------------------------------
               0                  The fifth (5th) anniversary of the Agreement
--------------------------------  ----------------------------------------------
               1                  The sixth (6th) anniversary of the Agreement
--------------------------------  ----------------------------------------------
               2                  The seventh (7th) anniversary of the Agreement
--------------------------------  ----------------------------------------------
               3                  The eighth (8th) anniversary of the Agreement
--------------------------------  ----------------------------------------------
               4                  The ninth (9th) anniversary of the Agreement
--------------------------------  ----------------------------------------------
               5                  The tenth (10th) anniversary of the Agreement
================================  ==============================================

     * The Centers that are,  after the date hereof,  developed,  owned,  and/or
operated  by Area  Representative  or its  Principals  and/or  their  respective
affiliates shall not be included in, and will not be counted toward satisfaction
of, the Development Plan.


     3.  Franchisor  shall pay to Area  Representative  the aggregate sum of One
Hundred  and  Forty  Thousand  Dollars   ($140,000)  in  reimbursement  of  Area
Representative's anticipated costs and/or expenses in performing its obligations
under the Agreement,  payable as follows: Twenty-Five Thousand Dollars ($25,000)
within a  maximum  period of ten (10) days  after  the  final  execution  of the
Agreement,  and the remaining One Hundred Fifteen  Thousand  Dollars  ($115,000)
payable in six (6) equal consecutive quarterly  installments,  commencing ninety
(90) days after the execution of the Agreement.



                                      A-1

<PAGE>


     4. The Principals of Area  Representative,  together with their  respective
percentage ownership of the equity interests of Area Representative, are:

                                                            PERCENTAGE OWNERSHIP
         NAME                                                OF EQUITY INTERESTS
         ----                                               --------------------

         Carol Seltzer                                             28.334%

         Marty Seltzer                                             28.333%

         Paul Licht                                                28.333%

         Bridget Licht                                              5.000%

         Raymond J. Robison                                         5.000%

         Susan Assael                                               5.000%



     5. The Minimum Insurance  Coverage  Requirements are Liability  Coverage of
one million  dollars  ($1,000,000)  per  occurrence  and three  million  dollars
($3,000,000) in the aggregate.







Franchisor's Initials _____________; dated: ______________

Area Representative's Initials _____________; dated: ______________




                                      A-2

<PAGE>


                                  EXHIBIT B to
               Emerging Vision, Inc. Area Representation Agreement


                     INDEMNIFICATION AND GUARANTY AGREEMENT


     THIS  INDEMNIFICATION AND GUARANTY AGREEMENT (the "Guaranty") is being made
and given as of this 1st day of April 2002, by CAROL  SELTZER,  an individual of
the State of California ( the "Guarantor").

     FOR VALUE RECEIVED,  and as an inducement to Emerging  Vision,  Inc., a New
York  corporation  (together with its  successors  and/or  assigns,  hereinafter
collectively referred to as the "Beneficiary"),  to enter into that certain Area
Representation  Agreement of even date herewith (the "Agreement") with Site-Ncal
Area Rep,  L.L.C.,  a  California  limited  liability  company  (the  "Principal
Debtor"),  Guarantor hereby personally and  unconditionally  agrees to indemnify
and hold  harmless  the  Beneficiary,  its  shareholders,  directors,  officers,
employees and/or agents, from and against any and all claims,  losses,  damages,
liabilities,  costs and/or expenses  (including,  but not limited to, reasonable
attorney's fees, reasonable costs of investigation, court costs, and arbitration
fees and expenses) arising, directly or indirectly,  from, as a result of, or in
connection with: (i) the performance, by the Principal Debtor (and its employees
and  all  persons  acting  on  its  behalf),  of  all  of  its  obligations  and
undertakings  under,  and/or  pursuant  to,  the  Agreement,   or  otherwise  in
connection  with the promotion of the opportunity to become an AR Franchisee (as
said term is defined in the  Agreement),  including  the costs  and/or  expenses
(including,  but not limited to, reasonable  attorneys'  fees),  incurred by the
Beneficiary  in defending  against the same;  and (ii) the  enforcement,  by the
Beneficiary, of the Guaranty.

     Guarantor further acknowledges,  agrees, stipulates and covenants that: (i)
his/her  duties  and  obligations   under  this  Guaranty  shall  be  immediate,
unconditional, personal and conditioned only upon the Principal Debtor's failure
to timely comply with its  obligations  under Section 14.2 of the Agreement when
and as the same  becomes  due and  performable;  (ii)  he/she  shall  tender any
payment guaranteed hereby immediately upon the Principal Debtor's failure to pay
the same;  (iii)  Guarantor's  liability  hereunder  shall not be  contingent or
conditional  upon the  Beneficiary's  pursuit  of any remedy  against  any other
person,  including  the  Principal  Debtor  and/or  any  other  guarantor;  (iv)
Guarantor's  obligations  hereunder shall not be impaired,  limited or otherwise
diminished  by  the  existence  of  any  other  guaranty  with  respect  to  any
indebtedness guaranteed hereby, it being the intention of Guarantor that, in the
event that more than one person guarantees any obligation or indebtedness of the
Principal  Debtor which is also  guaranteed  hereby,  the  liability of all such
guarantors  shall be joint and several with respect to such  obligations  and/or
indebtedness;  (v)  Guarantor's  liability  hereunder  shall not be  diminished,
relieved  or  otherwise  affected  by any  extension  of time,  credit  or other
indulgence  which the Beneficiary may, from time to time, grant to the Principal
Debtor or any other person including,  without limitation, the acceptance of any
partial payment or performance  and/or the compromise,  release or settlement of
any claims;  and (vi) this  Guaranty  shall  continue  and shall be  irrevocable
during  the  term  of  the  Agreement  and  for  such  additional  period  after
termination or expiration as any provision of the Agreement provides.

<PAGE>


     Notwithstanding  any  payment  or  payments  made by  Guarantor  hereunder,
Guarantor  expressly  waives any and all rights of  subrogation,  reimbursement,
indemnity, exoneration,  contribution or any other claim which he/she may now or
hereafter  have against the  Principal  Debtor or any other  person  directly or
contingently  liable for the  obligations  guaranteed  hereby or against or with
respect to the  Principal  Debtor's  property  (including,  without  limitation,
property   collateralizing   the  obligations  arising  from  the  existence  or
performance of this Guaranty).

     The Guarantor hereby consents and agrees, without limiting any other method
of obtaining  jurisdiction,  that in any action or proceeding commenced pursuant
to the terms of this Guaranty,  service of a summons and complaint, or any other
process,  in any  action  or  proceeding,  shall be  sufficient  if made on such
Guarantor  by  registered  or  certified  mail to the  Guarantor  at the address
specified  herein,   whether  such  address  shall  be  within  or  without  the
jurisdiction  of the Court where such action or proceeding  is pending,  and the
Guarantor hereby unconditionally and irrevocably waives personal service of such
process.

     THIS GUARANTY SHALL BE CONSTRUED AND ENFORCED IN ALL RESPECTS IN ACCORDANCE
WITH THE LAWS OF THE STATE OF CALIFORNIA WITHOUT GIVING EFFECT TO ANY PRINCIPLES
RELATING TO  CONFLICT OF LAWS.  THE  PARTIES  HERETO  CONSENT  THAT ANY LEGAL OR
EQUITY  PROCEEDING  BROUGHT  IN  CONNECTION  WITH OR  ARISING  OUT OF ANY MATTER
RELATING TO THIS GUARANTY,  SHALL BE INSTITUTED ONLY IN A FEDERAL OR STATE COURT
COVERING THE  LOCATION OF THE  FRANCHISOR'S  PRINCIPAL  PLACE OF BUSINESS AT THE
TIME THE ACTION IS COMMENCED;  AND THE GUARANTOR HEREBY IRREVOCABLY CONSENTS AND
SUBMITS TO THE  JURISDICTION  OF SUCH COURTS AND WAIVES ANY AND ALL QUESTIONS OF
PERSONAL JURISDICTION OR VENUE FOR THE PURPOSE OF CARRYING OUT THIS PROVISION.


     IN WITNESS WHEREOF,  Guarantor has executed this Guaranty as of the day and
year first above written.


                                            GUARANTOR



                                            ------------------------------------
                                            Name:     CAROL SELTZER
                                            Address:  1 Pine Street
                                                      San Francisco,  CA  94111




<PAGE>





STATE OF                   )
                           )   SS.:
COUNTY OF __________       )


     On the _____  day of March in the year 2002  before  me,  the  undersigned,
personally appeared Carol Seltzer, personally known to me or proved to me on the
basis of satisfactory  evidence to be the individual whose name is subscribed to
the within  instrument and  acknowledged  to me that he executed the same in his
capacity,  and that by his signature on the  instrument,  the  individual or the
person upon behalf of which the individual acted, executed the instrument.



                                                --------------------------------
                                                         Notary Public


























<PAGE>


                                  EXHIBIT B to
               Emerging Vision, Inc. Area Representation Agreement


                     INDEMNIFICATION AND GUARANTY AGREEMENT


     THIS  INDEMNIFICATION AND GUARANTY AGREEMENT (the "Guaranty") is being made
and given as of this 1st day of April 2002, by PAUL LICHT,  an individual of the
State of California ( the "Guarantor").

     FOR VALUE RECEIVED,  and as an inducement to Emerging  Vision,  Inc., a New
York  corporation  (together with its  successors  and/or  assigns,  hereinafter
collectively referred to as the "Beneficiary"),  to enter into that certain Area
Representation  Agreement of even date herewith (the "Agreement") with Site-Ncal
Area Rep,  L.L.C.,  a  California  limited  liability  company  (the  "Principal
Debtor"),  Guarantor hereby personally and  unconditionally  agrees to indemnify
and hold  harmless  the  Beneficiary,  its  shareholders,  directors,  officers,
employees and/or agents, from and against any and all claims,  losses,  damages,
liabilities,  costs and/or expenses  (including,  but not limited to, reasonable
attorney's fees, reasonable costs of investigation, court costs, and arbitration
fees and expenses) arising, directly or indirectly,  from, as a result of, or in
connection with: (i) the performance, by the Principal Debtor (and its employees
and  all  persons  acting  on  its  behalf),  of  all  of  its  obligations  and
undertakings  under,  and/or  pursuant  to,  the  Agreement,   or  otherwise  in
connection  with the promotion of the opportunity to become an AR Franchisee (as
said term is defined in the  Agreement),  including  the costs  and/or  expenses
(including,  but not limited to, reasonable  attorneys'  fees),  incurred by the
Beneficiary  in defending  against the same;  and (ii) the  enforcement,  by the
Beneficiary, of the Guaranty.

     Guarantor further acknowledges,  agrees, stipulates and covenants that: (i)
his/her  duties  and  obligations   under  this  Guaranty  shall  be  immediate,
unconditional, personal and conditioned only upon the Principal Debtor's failure
to timely comply with its  obligations  under Section 14.2 of the Agreement when
and as the same  becomes  due and  performable;  (ii)  he/she  shall  tender any
payment guaranteed hereby immediately upon the Principal Debtor's failure to pay
the same;  (iii)  Guarantor's  liability  hereunder  shall not be  contingent or
conditional  upon the  Beneficiary's  pursuit  of any remedy  against  any other
person,  including  the  Principal  Debtor  and/or  any  other  guarantor;  (iv)
Guarantor's  obligations  hereunder shall not be impaired,  limited or otherwise
diminished  by  the  existence  of  any  other  guaranty  with  respect  to  any
indebtedness guaranteed hereby, it being the intention of Guarantor that, in the
event that more than one person guarantees any obligation or indebtedness of the
Principal  Debtor which is also  guaranteed  hereby,  the  liability of all such
guarantors  shall be joint and several with respect to such  obligations  and/or
indebtedness;  (v)  Guarantor's  liability  hereunder  shall not be  diminished,
relieved  or  otherwise  affected  by any  extension  of time,  credit  or other
indulgence  which the Beneficiary may, from time to time, grant to the Principal
Debtor or any other person including,  without limitation, the acceptance of any
partial payment or performance  and/or the compromise,  release or settlement of
any claims;  and (vi) this  Guaranty  shall  continue  and shall be  irrevocable
during  the  term  of  the  Agreement  and  for  such  additional  period  after
termination or expiration as any provision of the Agreement provides.

<PAGE>



     Notwithstanding  any  payment  or  payments  made by  Guarantor  hereunder,
Guarantor  expressly  waives any and all rights of  subrogation,  reimbursement,
indemnity, exoneration,  contribution or any other claim which he/she may now or
hereafter  have against the  Principal  Debtor or any other  person  directly or
contingently  liable for the  obligations  guaranteed  hereby or against or with
respect to the  Principal  Debtor's  property  (including,  without  limitation,
property   collateralizing   the  obligations  arising  from  the  existence  or
performance of this Guaranty).

     The Guarantor hereby consents and agrees, without limiting any other method
of obtaining  jurisdiction,  that in any action or proceeding commenced pursuant
to the terms of this Guaranty,  service of a summons and complaint, or any other
process,  in any  action  or  proceeding,  shall be  sufficient  if made on such
Guarantor  by  registered  or  certified  mail to the  Guarantor  at the address
specified  herein,   whether  such  address  shall  be  within  or  without  the
jurisdiction  of the Court where such action or proceeding  is pending,  and the
Guarantor hereby unconditionally and irrevocably waives personal service of such
process.

     THIS GUARANTY SHALL BE CONSTRUED AND ENFORCED IN ALL RESPECTS IN ACCORDANCE
WITH THE LAWS OF THE STATE OF CALIFORNIA WITHOUT GIVING EFFECT TO ANY PRINCIPLES
RELATING TO  CONFLICT OF LAWS.  THE  PARTIES  HERETO  CONSENT  THAT ANY LEGAL OR
EQUITY  PROCEEDING  BROUGHT  IN  CONNECTION  WITH OR  ARISING  OUT OF ANY MATTER
RELATING TO THIS GUARANTY,  SHALL BE INSTITUTED ONLY IN A FEDERAL OR STATE COURT
COVERING THE  LOCATION OF THE  FRANCHISOR'S  PRINCIPAL  PLACE OF BUSINESS AT THE
TIME THE ACTION IS COMMENCED;  AND THE GUARANTOR HEREBY IRREVOCABLY CONSENTS AND
SUBMITS TO THE  JURISDICTION  OF SUCH COURTS AND WAIVES ANY AND ALL QUESTIONS OF
PERSONAL JURISDICTION OR VENUE FOR THE PURPOSE OF CARRYING OUT THIS PROVISION.


     IN WITNESS WHEREOF,  Guarantor has executed this Guaranty as of the day and
year first above written.


                                                  GUARANTOR



                                                  ------------------------------
                                                  Name:     PAUL LICHT
                                                  Address:  1070 Gray Fox Circle
                                                            Pleasanton, CA 94566




<PAGE>



STATE OF                   )
                           )   SS.:
COUNTY OF __________       )


     On the _____  day of March in the year 2002  before  me,  the  undersigned,
personally  appeared Paul Licht,  personally  known to me or proved to me on the
basis of satisfactory  evidence to be the individual whose name is subscribed to
the within  instrument and  acknowledged  to me that he executed the same in his
capacity,  and that by his signature on the  instrument,  the  individual or the
person upon behalf of which the individual acted, executed the instrument.



                                                --------------------------------
                                                         Notary Public

























<PAGE>



                                  STORE NO. 505

                      AMENDMENT NO. 1 TO SITE FOR SORE EYES

                       OPTICAL CENTER FRANCHISE AGREEMENT
                              AND RELATED DOCUMENTS



     THIS  AMENDMENT  NO. 1 TO SITE  FOR  SORE  EYES  OPTICAL  CENTER  FRANCHISE
AGREEMENT (the  "Amendment") is being made and entered into as of the 1st day of
April, 2002, by and between EMERGING VISION, INC. (f/k/a Sterling Vision, Inc.),
a New York  corporation  having an office at 100  Quentin  Roosevelt  Boulevard,
Garden City, New York 11530 (the  "Company"),  and BRIDGET LICHT,  an individual
residing  at  1070  Gray  Fox   Circle,   Pleasanton,   California   94566  (the
"Franchisee").



                              W I T N E S S E T H :

WHEREAS, on November 15, 1993, the Company and the Franchisee entered into a
certain Site For Sore Eyes Optical Center Franchise Agreement (the "Agreement")
for that certain retail optical store originally located at 1000 Broadway,
Oakland, California 94607 and subsequently relocated, by the Franchisee, to new
retail optical store premises situated at 829 Broadway, Oakland, California
94607 (the"Center"); and


     WHEREAS,  each of V.C.  Enterprises,  Inc. and/or Paul Licht guaranteed the
obligations of the  Franchisee  under the Agreement and certain of the documents
executed and delivered by the Franchisee in connection therewith; and


     WHEREAS,   the  parties  hereto  desire  to  modify  and/or  amend  certain
provisions of the  Agreement,  as well as certain of the documents  executed and
delivered in connection therewith.

     NOW,  THEREFORE,  in  consideration  of the  mutual  terms,  covenants  and
conditions herein contained, and for other good and valuable consideration,  the
receipt and sufficiency of which are hereby acknowledged,  the parties hereto do
hereby agree as follows:


<PAGE>



     1) All capitalized  terms used (but not otherwise  defined)  herein,  shall
have the identical, respective meanings ascribed to them in the Agreement;

     2)  Notwithstanding  anything to the contrary contained in the Agreement in
the  Agreement  and/or  in any  of the  documents  more  particularly  described
hereinbelow,  it is  expressly  understood  and  agreed  that,  effective  as of
September 1, 1997 the Premises of the Center shall be deemed to be 829 Broadway,
Oakland,  California;  and each of the following documents are hereby amended by
substituting,  in the appropriate section/ paragraph of each such document,  the
address of 829 Broadway,  Oakland,  California,  for the address 1000  Broadway,
Oakland, California:

     a) Security Agreement,  dated November 15, 1997, between Sterling Vision of
California,  Inc., a California  corporation  ("SVCI"),  as Secured  Party,  and
Bridget Licht, as Debtor;

     b) Guaranty and Assumption Agreement, dated November 15, 1993, made by Paul
Licht, as Guarantor, in favor of EVI, as Beneficiary;

     c) Guaranty,  dated November 15, 1993,  made by each of Paul Licht and V.C.
Enterprises, Inc., as Guarantor, in favor of SVCI, as Beneficiary; and

     d) Telephone Assignment Agreement, dated November 15, 1993, between Bridget
Licht, as Assignor, and EVI, as Assignee.

     3) Subsection  1(C) of the Agreement is hereby modified by adding thereto a
new paragraph, as follows:

     "It is expressly  understood and agreed that nothing contained herein shall
be deemed to limit or otherwise restrict the Company from acquiring other chains
of retail  optical  stores  then  operating  one or more retail  optical  stores
located within the Designated Territory of the Center (each a "Competing Store")
so long as each such  Competing  Store  operates  (and  thereafter  continues to
operate)  under a name other than "Site for Sore Eyes" (or such other  tradename
under which the Center is then being operated); provided, however, that, in such
event,  the  Company,  commencing  six (6)  month's  after  the date of any such
acquisition,  will be  required  to use its  reasonable,  good faith  efforts to
dispose of the assets of, and the lease for, all such Competing Stores, only, to

<PAGE>


one or more unaffiliated third parties,  provided the sales price thereof is not
less than the purchase price reasonably  allocated to such Competing Store(s) by
the Company, in good faith".

     4) Subsection  6(B) of the Agreement is hereby  modified by adding thereto,
after the end of the first paragraph thereof, the following:

     "Notwithstanding  anything to the contrary  contained herein,  the Company:
(i) hereby amends the Operating Manual applicable to the Center; and (ii) hereby
agrees,  if and to the extent  permitted by the terms of each  existing Site for
Sore Eyes Optical Center Franchise  Agreement,  to forthwith amend the operating
manual applicable  (and/or to become applicable) to all other Site for Sore Eyes
optical centers presently (and/or in the future) in operation,  in each case, to
provide for the  Advertising  and  Promotion  Procedures  set forth on Exhibit A
annexed hereto and by this reference made a part hereof".

     5) Subsection 10(D) of the Agreement is hereby modified by adding thereto a
new paragraph, as follows:

     "Notwithstanding  the foregoing  provisions of this Subsection 10(D), it is
expressly  understood  that the  Company  will not have the right to require the
Franchisee to change and/or modify the tradename of the Center unless a majority
of those Site for Sore Eyes  franchisees  who are then in Good Standing  (which,
for purposes hereof,  shall be deemed to be those Site for Sore Eyes franchisees
[including the Franchisee] who are not then in default, in any material respect,
in performing their respective  obligations under their Franchise  Agreement and
related  documents),  determine to  discontinue  the use of such name,  it being
understood  that the  Franchisee,  together  with the  franchisees  of each then
existing  Site for Sore Eyes optical  center which is then in Good  Standing (as
well as the Company,  with  respect to those Site for Sore Eyes optical  centers
then owned and/or being  operated by the Company) will have one vote per center.
In addition,  it is understood that in the event it is determined to change such
name:  (i) the new trade name of each  center  (including  the  Center)  will be
changed to Sterling Optical or such other tradename  reasonably  designed by the
Company;  and (ii) the  owner/operator  of each such Site for Sore Eyes  optical
center (including the Franchisee) will be responsible for obtaining any required
consents  of  the  Master  Landlord  of  its/his/her  respective  center  and/or
governmental   authorities,   as  well  as  for  the   cost  of   changing   the
exterior/interior signage of each such center".


     6) Subsection 16(C) of the Agreement is hereby modified by adding thereto a
new paragraph, as follows:

     "Provided the Franchisee  has renewed the term of this  Agreement  pursuant
to,  and in  accordance  with,  the terms and  provisions  hereof  and,  further
provided,  that the Franchisee is not then in default (after any required notice
and the expiration of any applicable  cure and/or grace  provision  provided for
herein), in any material respect, in the observance and/or performance of any of

<PAGE>


the provisions of the renewal franchise agreement to be entered into between the
parties,  the Company  shall credit the full amount of the renewal fee (actually
paid by the Franchisee to the Company pursuant to Subsection  16(C)(1)(b) above)
to the first dollars of continuing royalty fees to become payable to the Company
pursuant to such renewal franchise agreement".

     7) There is hereby  added to the  Agreement  a new  Section  Number  25, as
follows:

     "25. OPERATION OF STERLING VISIONCARE OFFICE Provided the Franchisee is not
then in default,  in any material  respect,  in: (i) performing and/or complying
with its obligations hereunder and/or under the Sublease for the Premises of the
Center;  and/or (ii) in complying  with its  obligations  and/or  liabilities in
favor of the Company's wholly owned subsidiary,  VisionCare of California ("VCC"
and,  together with its  successors  and/or  assigns,  hereinafter  collectively
referred to as the "Owner"),  the Company shall use its  reasonable,  good faith
efforts, during the Term hereof, to cause the Owner: (i) to continue to maintain
the operation of the Sterling  VisionCare  office  located within or adjacent to
the Center (the "VCC Office")  consistent  with the operation  thereof as of the
date hereof;  and (ii) to continue to provide the same level of doctor  coverage
in such VCC Office provided that the aggregate,  daily  enrollment fees (for all
such Sterling  VisionCare offices then in operation) actually paid, from time to
time,  to the Owner are  sufficient  to reimburse the Owner for all of its costs
and expenses  (including an allocable  share of overhead) in providing each such
doctor at each such Sterling  VisionCare office,  plus a profit (with respect to
all existing  Sterling  VisionCare  offices,  as a group) of ten (10%)  percent,
which costs and expenses  shall  increase,  each year, by an amount equal to the
Owner's  increased costs and expenses in operating all such Sterling  VisionCare
offices, it being specifically understood that Owner, within a maximum period of
fifteen  days  after  it files  the  same  with  the  California  Department  of
Corporations,  shall be required to deliver to Franchisee a copy of VCC's annual
audited financial statements.

     8) All other terms and  provisions  of the  Agreement  shall remain in full
force and effect.

     9) This Amendment may be executed in counterparts, all of which, when taken
together, shall constitute one and the same instrument.



<PAGE>



     IN WITNESS  WHEREOF,  the parties hereto have executed this Amendment as of
the day and year first above written.

                                                  EMERGING VISION, INC.
                                                  By:  _________________________
                                                       Robert Hillman, President


                                                  ______________________________
                                                  BRIDGET LICHT



                                                  V.C. ENTERPRISES, INC.

                                                  By:  _________________________
                                                       Paul Licht, President


                                                  ______________________________
                                                  PAUL LICHT, Individually

<PAGE>

                                                                      EXHIBIT 21



LIST OF SUBSIDIARIES:

                                     STERLING ADVERTISING, INC.
                                     STERLING VISION OF MAIN PLACE, INC.
                                     STERLING VISION OF HEMPSTEAD, INC.
                                     STERLING VISION OF NORTHWAY MALL, INC.
                                     STERLING VISION OF BATAVIA, INC.
                                     STERLING VISION OF REGO PARK, INC.
                                     STERLING VISION OF NORTH SHORE MART, INC.
                                     STERLING VISION OF BAY STREET, INC.
                                     STERLING VISION OF BRAMALEA, INC.
                                     STERLING VISION OF HAMILTON, INC.
                                     STERLING VISION OF LIME RIDGE, INC.
                                     STERLING VISION OF KINGSTON, INC.
                                     STERLING VISION OF BLUE HEN MALL, INC.
                                     STERLING VISION, OF LANDOVER, INC.
                                     STERLING VISION OF MONDAWMIN, INC.
                                     STERLING VISION OF PADDOCK MALL, INC.
                                     STERLING VISION OF METRO NORTH, INC.
                                     STERLING VISION OF FRANKLIN MALL, INC.
                                     STERLING VISION OF TINLEY PARK, INC.
                                     STERLING VISION OF EAU CLAIRE, INC.
                                     STERLING VISION OF SENECA, INC.
                                     STERLING ROSLYN CORP.
                                     STERLING VISION OF WALDEN, INC.
                                     STERLING VISION OF INDEPENDENCE, INC.
                                     STERLING VISION OF ROTTERDAM, INC.
                                     STERLING VISION OF FRANKLIN MILLS, INC.
                                     STERLING VISION OF NEWBURGH, INC.
                                     STERLING VISION OF BAY RIDGE, INC.
                                     STERLING VISION OF WESTPORT, INC.
                                     STERLING VISION OF DUNKIRK, INC.
                                     STERLING VISION U.S.A., INC.
                                     STERLING VISION OF CALIFORNIA, INC.
                                     SITE FOR SORE EYES SACRAMENTO, INC.
                                     SITE FOR SORE EYES ADVERTISING, INC.
                                     STERLING VISION OF POTOMAC MILLS, INC.
                                     STERLING VISION OF WHEATON PLAZA, INC.
                                     STERLING VISION OF MID RIVERS, INC.
                                     SVCI REAL ESTATE, INC.
                                     STERLING VISION OF EAST ROCKAWAY, INC.
                                     STERLING VISION OF NEWPARK, INC.
                                     STERLING VISION OF NANUET, INC.
                                     STERLING VISION OF DELAFIELD, INC.
                                     STERLING VISION OF TOMS RIVER, INC.
                                     STERLING MANAGEMENT SERVICES, INC.
                                     OPTI-PLEX OF NEW YORK, INC.
                                     STERLING VISION OF ISLANDIA, INC.
                                     STERLING VISION OF HAWTHORNE CENTER, INC.
                                     STERLING VISION OF LEVITTOWN, INC.
                                     STERLING VISION OF CHARLESTOWN, INC.





<PAGE>



LIST OF SUBSIDIARIES (Continued):

                                   STERLING VISION OF SYOSSET, INC.
                                   STERLING VISION OF CAPITOLA, INC.
                                   STERLING VISION OF FOX RUN, INC.
                                   STERLING VISION OF METRO N.Y., INC.
                                   STERLING VISION OF ROSYLN, INC.
                                   INSIGHT LASER CENTERS, INC.
                                   INSIGHT LASER CENTERS, N.Y.I, INC.
                                   INSIGHT LASER CENTERS NEW YORK II, LTD.
                                   INSIGHT LASER CENTER N.C. II, INC.
                                   STERLING VISION OF EAST MADISON, INC.
                                   STERLING VISION OF HAGERSTOWN, INC.
                                   STERLING BRYANT II CORP.
                                   VISIONCARE OF CALIFORNIA
                                   STERLING VISION OF WHITE FLINT, INC.
                                   STERLING VISION OF CAMBRIDGE SQUARE, INC.
                                   STERLING VISION OF CAPE GIRARDEAU, INC.
                                   STERLING VISION OF EDISON, INC.
                                   STERLING VISION OF NAPA, INC.
                                   STERLING VISION OF LOS GATOS, INC.
                                   STERLING VISION OF PRINCE GEORGES PLAZA, INC.
                                   STERLING VISION OF TRACY, INC.
                                   STERLING VISION OF COLUMBUS MILLS, INC.
                                   STERLING VISION OF ONTARIO MILLS, INC.
                                   STERLING VISION OF GREEN ACRES, INC.
                                   STERLING VISION OF M.V., INC.
                                   STERLING VISION OF SOUTHPARK, INC.
                                   STERLING VISION OF NORTHPARK, INC.
                                   STERLING VISION OF BREA, INC.
                                   STERLING VISION OF BLASDELL, INC.
                                   STERLING VISION OF SOUTHDALE, INC.
                                   STERLING VISION OF WESTMINSTER, INC.
                                   STERLING VISION OF FAIR OAKS, INC.
                                   STERLING VISION OF NEWPORT BEACH, INC.
                                   STERLING VISION OF FULTON ST., INC.
                                   STERLING VISION DKM ADVERTISING, INC.
                                   720 MARKET STREET REALTY CORPORATION
                                   STERLING VISION OF SACRAMENTO, INC.
                                   STERLING VISION OF FARGO, INC.
                                   STERLING VISION OF ANAHEIM, INC.
                                   STERLING VISION OF EASTLAND, INC.
                                   STERLING VISION OF GASTONIA, INC.
                                   STERLING VISION OF KIRKWOOD MALL, INC.
                                   STERLING VISION OF BLUEFIELD, INC.
                                   STERLING VISION OF GREEN BAY, NC.
                                   STERLING VISION OF KENNEDY BLVD., INC.
                                   STERLING VISION OF WEST BEND, INC.
                                   STERLING VISION OF WEST MADISON, INC.




<PAGE>



LIST OF SUBSIDIARIES (Continued):

                                  STERLING VISION DKM OF SHEBOYGAN, INC.
                                  STERLING VISION OF KENOSHA, INC.
                                  STERLING VISION OF HAMPTON, INC.
                                  STERLING VISION OF FORESTVILLE, INC.
                                  STERLING VISION OF FOND DU LAC, INC.
                                  STERLING VISION OF FNR, INC.
                                  STERLING LABORATORIES, INC.
                                  STERLING VISION OF BASHFORD MANOR, INC.
                                  STERLING VISION OF RIVERSIDE, INC.
                                  STERLING VISION OF PALISADES, INC.
                                  STERLING VISION OF DULLES, INC.
                                  STERLING VISION OF LIGHT STREET, INC.
                                  STERLING VISION OF PENN CENTER, INC.
                                  SINGER SPECS ADVERTISING, INC.
                                  STERLING VISION OF COLLINGTON PLAZA, INC.
                                  INSIGHT TOTAL MANAGED CARE, INC.
                                  STERLING VISION OF 78TH STREET, INC.
                                  STERLING VISION OF DENVER, INC.
                                  INSIGHT IPA OF NEW YORK, INC.
                                  INSIGHT AMSURG CENTERS, INC.
                                  STERLING VISION OF JERSEY GARDENS, INC.
                                  STERLING VISION OF SHOPPINGTOWN, INC.
                                  STERLING VISION OF CAMP HILL, INC.
                                  STERLING VISION OF GREAT NORTHERN, INC.
                                  STERLING VISION OF 125TH STREET, INC.
                                  STERLING VISION OF THE FALLS, INC.
                                  STERLING VISION OF OWINGS MILLS, INC.
                                  STERLING VISION OF MACARTHUR CENTER, INC.
                                  STERLING VISION OF MONTGOMERY, INC.
                                  STERLING VISION OF CONCORD MILLS, INC.
                                  STERLING VISION OF JAMESTOWN MALL, INC.
                                  STERLING VISION OF ORLANDO, INC.
                                  STERLING VISION OF BEAVER DAM, INC.
                                  STERLING VISION OF APPLETON, INC.
                                  STERLING VISION OF COLUMBIA MALL, INC.
                                  1-800 ANY LENS OF BOCA RATON, INC.
                                  STERLING VISION OF 794 LEXINGTON, INC.
                                  INSIGHT LASER CENTERS OF BAY TERRACE, INC.
                                  1-800 ANY LENS, INC.
                                  STERLING VISION OF SEACLIFF VILLAGE, INC.
                                  INSIGHT LASER CENTERS OF KING OF PRUSSIA, INC.
                                  STERLING VISION OF ANNAPOLIS, INC.
                                  STERLING VISION OF APACHE, INC.
                                  STERLING VISION OF MAMARONECK, INC.



<PAGE>

                                                                      EXHIBIT 23






CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS




     As independent public  accountants,  we hereby consent to the incorporation
of our  reports  included  in this  Form  10-K,  into  Emerging  Vision,  Inc.'s
previously filed Registration Statement File No. 333-33355.



                                             /S/ ARTHUR ANDERSEN LLP



Melville, New York
April 16, 2002


<PAGE>
                                                                      EXHIBIT 99






LETTER TO COMMISSION PURSUANT TO TEMPORARY NOTE 3T




Emerging Vision, Inc.
100 Quentin Roosevelt Blvd.
Garden City, New York 11530



April 16, 2002


Securities and Exchange Commission
450 Fifth Street, NW
Washington, DC 20549-0408


Ladies and Gentlemen:


     Pursuant to  Temporary  Note 3T to Article 3 of  Regulation  S-X,  Emerging
Vision,  Inc. has obtained a letter of  representation  from Arthur Andersen LLP
("Andersen")  stating  that the  December  31,  2001 audit was  subject to their
quality control system for the U.S.  accounting and auditing practice to provide
reasonable  assurance  that the  engagement  was  conducted in  compliance  with
professional  standards,  that  there was  appropriate  continuity  of  Andersen
personnel working on the audit and availability of national office consultation.
Availability  of personnel at foreign  affiliates of Andersen is not relevant to
this audit.



Very truly yours,

Emerging Vision, Inc.

/s/ Christopher G. Payan
------------------------------
Christopher G. Payan
Senior Vice President and
Chief Financial Officer
(Principal Accounting Officer)