SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange
Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to
240.14a-11(c) or 240.14a-12
LCA-Vision Inc.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement if other than Registrant)
Payment of Filing fee (Check the appropriate box)
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4)
and 0-11.
1) Title of each class of securities to which transaction
applies:
________________________________________________________
2) Aggregate number of securities to which transaction applies:
__________________________________________________________________
3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (Set forth the amount on
which the filing fee is calculated and state how it was determined):
__________________________________________________________________
4) Proposed maximum aggregate value of transaction:
_________________________________________________________________
5) Total fee paid:
_________________________________________________________________
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for which the
offsetting fee was paid previously. Identify the previous filing by
registration statement number, or the Form or Schedule and the date
of its filing.
1) Amount Previously Paid:
___________________________________
2) Form, Schedule or Registration Statement No.:
___________________________________
3) Filing party:
___________________________________
4) Date filed:
___________________________________ <PAGE>
LCA-VISION INC.
7840 Montgomery Road
Cincinnati, Ohio 45236
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
October 16, 1998
TO THE STOCKHOLDERS OF LCA-VISION INC.:
You are cordially invited to attend a Special Meeting of the
Stockholders of LCA-Vision Inc. to be held on October 16, 1998 at
9:00 a.m. at the Company's executive offices located at 7840
Montgomery Road, Cincinnati, Ohio 45236, for the purpose of
considering and acting on the following:
1. To approve the issuance of an indeterminate number of
shares of the Company's Common Stock issuable upon the conversion of
shares of 6% Series B-1 and B-2 Convertible Preferred Stock,
outstanding or to be outstanding, for purposes of complying with the
stockholder approval requirements of The Nasdaq Stock Market.
2. To approve and adopt the Company's 1998 Long Term Stock
Incentive Plan.
3. Transaction of such other business as may properly come
before the meeting or any adjournment thereof.
Stockholders of record at the close of business on September
15, 1998 will be entitled to vote at the meeting.
By Order of the Board of Directors
Sandra F.W. Joffe
Secretary
September 21, 1998
IMPORTANT
A Proxy Statement and proxy are submitted herewith. As a
stockholder, you are urged to complete and mail the proxy promptly
whether or not you plan to attend this Annual Meeting in person.
The enclosed envelope for return of proxy requires no postage if
mailed in the U.S.A. Stockholders attending the meeting may
personally vote on all matters which are considered in which event
their signed proxies are revoked. It is important that your shares
be voted. In order to avoid the additional expense to the Company
of further solicitation, we ask your cooperation in mailing your
proxy promptly.
<PAGE>
PROXY STATEMENT
LCA-VISION INC.
7840 Montgomery Road
Cincinnati, Ohio 45236
SPECIAL MEETING OF STOCKHOLDERS
October 16, 1998
INTRODUCTION
The enclosed form of proxy is being solicited on behalf of the
Board of Directors of LCA-Vision Inc. (also referred to as "LCA-Vision" or the
"Company") for a Special Meeting of Stockholders to
be held on October 16, 1998. Each of the ________ shares of LCA-Vision
Common Stock, $.001 par value (the "Common Stock") and each
of the 1,688 shares of LCA-Vision Class A Preferred Stock, $.001 par
value (the "Class A Preferred Stock") outstanding on September 15,
1998, the record date of the meeting, is entitled to one vote on all
matters coming before the meeting. Each of the 12.6 shares of
Interim Series Class B Preferred Stock, $.001 par value (the "Class
B Preferred Stock") outstanding on such date is entitled to one vote
for each share of Common Stock into which a share of Class B
Preferred Stock is convertible on such date (a total of __________
shares of Common Stock). Only stockholders of record on the books
of the Company at the close of business on September 15, 1998 will
be entitled to vote at the meeting either in person or by proxy.
This Proxy Statement is being mailed to stockholders on or about
September 21, 1998.
The shares represented by all properly executed proxies which
are sent to the Company will be voted as designated and each not
designated will be voted affirmatively. Each person granting a
proxy may revoke it by giving notice to the Company's Secretary in
writing or in open meeting at any time before it is voted. Proxies
will be solicited principally by mail, but may also be solicited by
directors, officers and other regular employees of the Company who
will receive no compensation therefor in addition to their regular
salaries. Brokers and others who hold stock in trust will be asked
to send proxy materials to the beneficial owners of the stock, and
the Company will reimburse them for their expenses. The expense of
soliciting proxies will be borne by the Company.
PROPOSAL TO APPROVE SHARES OF COMMON STOCK
TO BE ISSUED UPON CONVERSION
OF SERIES B-1 AND B-2 PREFERRED STOCK
Background
On May 8, 1998, the Company entered into a Convertible
Preferred Stock Purchase Agreement with Brown Simpson Strategic
Growth Fund, L.P., Brown Simpson Strategic Growth Fund, Ltd.,
Southbrook International Investments, Ltd., Proprietary Convertible
Investment Group, Inc., Westover Investments, LP and Montrose
Investments, Ltd. (the "Investors") pursuant to which the Investors
purchased a total of 10,000 shares of Series B-1 6% Convertible
Preferred Stock (the "B-1 Preferred") for a total of $10 million
cash and were granted the right to purchase an additional 5,000
shares of Series B-2 6% Convertible Preferred Stock (the "B-2
Preferred) for $5 million cash. The option to purchase the B-2
Preferred is exercisable between November 11, 1998 and May 11, 1999.
This transaction was effected in accordance with Delaware law
and pursuant to the authority conferred upon the Company's Board of
Directors in the Company's Certificate of Incorporation to designate
the terms of and to issue shares of Class B Preferred Stock. A
Certificate of Designation (as corrected) of the terms of the B-1
Preferred was filed with the Delaware Secretary of State. The Board
approved the transaction because the Company was in need of the
funds obtained in order to pay down bank debt and to fund its
business strategy.
The B-1 Preferred and the B-2 Preferred (if issued) are
identical in all respects except the conversion price. Both the B-1
Preferred and the B-2 Preferred are convertible into Common Stock at
a conversion price equal to the lessor of (A) 125% of the per share
market value of Common Stock as of the original issuance date of the
B-1 Preferred and/or B-2 Preferred, as the case may be, or (B) the
average of the four lowest daily per share closing market prices for
the Common Stock during the 22 trading days prior to the date notice
of conversion is given. Other than the different original issuance
dates of the B-1 Preferred and B-2 Preferred and the resultant
potentially different conversion prices, the terms and conditions of
the two series will be identical.
Because the conversion price can vary depending on changes in
market value of the underlying Common Stock issuable upon conversion
of the B-1 Preferred and the B-2 Preferred (if issued), the exact
number of shares of Common Stock to be issued cannot be exactly
determined in advance of a conversion election. As of August 31,
1998 the outstanding B-1 Preferred was convertible into a total of
____________ shares of Common Stock, or _____% of the total
outstanding Common Stock immediately prior to the issuance of the
B-1 Preferred. However, assuming the B-2 Preferred is also issued in
the future, and if the market price of the Company's Common Stock
were to decrease to $_______ per share or lower, it is possible that
the total number of shares of Common Stock issuable upon conversion
of both the B-1 Preferred and the B-2 Preferred could exceed
7,372,972, or 20% of the total Common Stock outstanding as of the
May 8, 1998 date of issuance of the B-1 Preferred.
The Nasdaq Stock Market
The Company's Common Stock is traded on The Nasdaq SmallCap
Market. It is now the policy of The Nasdaq Stock Market, applicable
to both Nasdaq National Market and SmallCap companies, to require
stockholder approval of the issuance, other than in a public
offering, of securities convertible into Common Stock if such
underlying Common Stock would have upon issuance voting power equal
to or in excess of 20% of the voting power outstanding before such
issuance. As noted above, under certain circumstances it is
possible that the B-1 Preferred and the B-2 Preferred could be
convertible into Common Stock exceeding such 20% threshold.
For this reason, the terms of the B-1 Preferred include, and
the terms of the B-2 Preferred will include, a provision to the
effect that if on any date the holders of the B-1 Preferred and/or
B-2 Preferred elect to convert their shares and the number of shares
of Common Stock then issuable would exceed the 20% limitation, then
the Company at its election must either use its best efforts to
obtain the necessary stockholder approval or pay cash to the holders
equal to the market value (determined under a contractual formula)
of the shares of Common Stock not issued but which would have been
issued but for the 20% limitation. Rather than waiting until a
proposed conversion that would trigger this provision, the Company
has elected to request the requisite stockholder approval at the
Special Meeting.
At the Special Meeting, the following resolution will be
introduced:
RESOLVED, that the stockholders of LCA-Vision do hereby approve
the Company's issuance of 10,000 shares of 6% Convertible Preferred
Stock and its potential issuance of 5,000 shares of 6% Convertible
Series B-2 Preferred Stock as described in the Proxy Statement
relating to this Special Meeting of Stockholders.
The affirmative vote of the holders of a majority of the voting
power of the Company's outstanding voting stock present in person or
by proxy at the Special Meeting is required to adopt the resolution.
Proxies in the form solicited hereby which are returned to the
Company will be voted in favor of the resolution unless otherwise
instructed by the stockholders. Abstentions will have the same
effect as votes cast against the resolution, provided such shares
are properly present at the meeting in person or by proxy. Shares
not voted by broker and other entities holding shares on behalf of
beneficial owners will have no effect on the outcome of the
proposal. The Board of Directors recommends the adoption of the
resolution.
Other Terms and Conditions of the B-1 and B-2 Preferred
In addition to the aspects of the B-1 Preferred (and the B-2
Preferred, if issued) described above, there are numerous other
terms and conditions, certain of which are described below. It
should be noted that such terms and conditions are contained in
several lengthy documents which have been filed with the Securities
and Exchange Commission as exhibits to the Company's Quarterly
Report on Form 10-QSB relating to the quarter ended March 31, 1998
which is incorporated by reference herein (see "Incorporation of
Certain Documents by Reference"). The following description is
merely a brief summary of such documents and is qualified in its
entirety by reference to such documents.
Conversion Features. Each share of B-1 and/or B-2 Preferred is
convertible into that number of shares of Common Stock of the
Company determined by multiplying such share by $1,000 (plus the
amount of any accrued but unpaid dividends other than dividends of
Common Stock) and dividing the result by a conversion price equal to
the lessor of (i) 125% of the closing bid price on the trading day
preceding original issuance of such shares of B-1 and/or B-2
Preferred, or (ii) the average of the lowest closing bid prices on
any four of the 22 trading days immediately preceding conversion of
such shares of B-1 and/or B-2 Preferred, subject to adjustment as
described in the Certificate of Designation for B-1 and/or B-2
Preferred. However, each Investor has agreed to restrict its
ability to convert shares of B-1 Preferred and B-2 Preferred (and
receive shares of Common Stock in payment of dividends thereon) to
the extent that the number of shares of Common Stock held by it and
its affiliates after such conversion exceeds 4.999% of the then
issued and outstanding shares of Common Stock following such
conversion.
Call Provision. If the per share market value of the Company's
Common Stock exceeds 175% of such market value in the trading date
immediately preceding the original issuance date of the B-1 and/or
B-2 Preferred for a period of at least 15 days, and certain other
conditions are not, the Company can force conversion of the B-1
and/or B-2 Preferred.
Mandatory Redemption. The holders of the B-1 and/or B-2
Preferred have the right, if certain triggering events occur, to
require the Company to redeem the outstanding B-1 and/or B-2
Preferred for a cash redemption price equal to the market value
(based on a stated formula) of the Common Stock into which the
Preferred could have been converted on the redemption date plus
accrued dividends. Triggering events include failure of the Company
to secure registration of the Common Stock underlying the B-1 and/or
B-2 Preferred under the federal securities laws within prescribed
periods, failure to maintain listing of the Common Stock on The
Nasdaq Stock Market, certain change of control transactions, and
certain other defaults by the Company.
Registration Rights. The Company is required to file a
registration statement with respect to resales of the underlying
Common Stock within 30 days of the original issuance date of the B-1
and/or B-2 Preferred and to secure its effectiveness within 90 days
thereafter. Failure to secure effectiveness by such time will
result in a penalty in the form of reductions in the B-1 and/or B-2
Preferred conversion price of 2% per month effectiveness of the
registration statement is delayed.
B-2 Preferred Purchase Option. If the Investors owning shares
of B-1 Preferred exercise their option to purchase up to 5,000
shares of B-2 Preferred, the Company will file a Certificate of
Designation for the B-2 Preferred which will establish respective
rights, preferences and privileges for B-2 Preferred identical to
the B-1 Preferred, with equal priority with regard to dividends,
liquidation, voting rights and any other preferential rights, except
that the price of conversion for B-2 Preferred shall be determined
by reference to the issue date of the B-2 Preferred.
Dividends. The B-1 and/or B-2 Preferred are entitled to
dividends, payable in either cash or Common stock, at the rate of 6%
per annum.
Voting Rights. The B-1 and/or B-2 Preferred do not carry
voting rights.
PROPOSAL TO ADOPT 1998 LONG TERM
STOCK INCENTIVE PLAN
A key factor in the Company's continuing advancement and growth
is its ability to attract, motivate and retain highly qualified
employees. The market for such employees has always been extremely
competitive and the competition for employees at all levels is
continually growing more intense.
Many of the companies with which the Company must compete
for employees at all levels make extensive use of stock incentives,
and the most desirable prospective employees insist upon receiving
stock incentives. The Company believes stock incentives enable the
Company to cost-effectively compete for the services of key
employees.
The Company believes that stock incentives, especially
stock options, are an effective tool which can be used to focus its
key employees on the Company's strategic direction.
The Company believes that stock incentives provide a
long-term ownership stake in the Company and as a result serve to
align the economic interests of its employees with those of its
stockholders.
The Company has been using its 1995 Long-Term Stock Incentive
Plan (the "1995 Plan") to provide stock incentives to key employees.
However, the Common Stock which remains available under the 1995
Plan is insufficient to satisfy the Company's anticipated future
compensation requirements. Accordingly, the Company now believes
that it is necessary to adopt the 1998 Long-Term Stock Incentive
Plan (the "1998 Plan"). Although the proposed 1998 Plan is
fundamentally similar to the 1995 Plan, there are some material
changes. While the 1995 Plan authorized grants of stock appreciation
rights, stock appreciation rights are not part of the 1998 Plan
because, as a device which does not result in the actual issuance of
shares to employees, the Board believes stock appreciation rights
are not as effective as stock options and stock awards in aligning
the long-term interests of employees and shareholders. The Company
also believes that it is necessary to have the flexibility to cancel
or suspend incentive compensation awards in order to protect its
trade secrets and confidential processes. The 1998 Plan contains
the authority to determine whether, to what extent and under what
circumstances stock options or restricted stock may be canceled or
suspended in the event of improper actions by employees.
On August 10, 1998, the Board of Directors approved, subject to
stockholder approval, the adoption of the LCA-Vision Inc. 1998 Long-Term
Stock Incentive Plan. The 1998 Plan will be submitted for
shareholder approval at the Special Meeting. The full text of the
1998 Plan is attached as Exhibit A to this Proxy Statement, and the
following discussion is qualified in its entirety by reference to
Exhibit A.
General
The Company presently has the 1995 Plan which provides for
option grants to employees. The 1995 Plan provides that the total
shares of Common Stock subject to stock incentives granted under
this plan in any calendar year may not exceed 5,000,000 shares of
Common Stock. As of August 31, 1998, options covering a total of
________ such shares had been granted, leaving ________ shares
available for future grants, an insufficient number to cover the
Company's anticipated future needs. The 1995 Plan does not provide
for the authorization of any additional shares during the six
remaining years of its term.
In approving the 1998 Plan for submission to the Company's
stockholders, the Board of Directors recognized both the Company's
anticipated needs for additional options and the changing
environment for the compensation of eligible employees. To provide
a flexible vehicle under which appropriate incentives can be
awarded, the 1998 Plan permits the grant of nonqualified and
incentive stock options and restricted stock awards as is currently
provided for under the 1995 Plan. Unlike the 1995 Plan, the 1998
Plan eliminates the use of stock appreciation rights. In reviewing
the Company's overall compensation practices as well as its
corporate goal of increasing the level of outright ownership of the
Company's Common Stock by executive officers and other employees,
the Board of Directors concluded that stock options and stock awards
are preferable to stock appreciation rights, and the 1998 Plan
reflects this determination. Although the Company currently does
not have any specific plans to grant any awards under the 1998 Plan
other than options, the Board of Directors feels that it is
desirable that the Company have the ability to grant stock awards,
including restricted stock, in the future should changing conditions
so require.
In drafting the 1998 Plan, the Board of Directors was mindful
of Section 162(m) of the Internal Revenue Code of 1986, as amended,
which limits the deductibility, for federal income tax purposes, of
compensation paid to certain executive officers in excess of $1
million per year per executive officer. The limitation excludes
"performance-based compensation", however, and the 1998 Plan was
prepared so that stock options and possibly restricted stock granted
under the 1998 Plan will constitute performance-based compensation
which is fully tax deductible by the Company. See "Federal Income
Tax Consequences."
The 1998 Plan will become effective as of the day it is
approved and adopted by the stockholders. If it is not approved by
the shareholders, the 1998 Plan will be of no force and effect. If
approved, the 1998 Plan will continue in existence indefinitely
until terminated by the Board of Directors, except that incentive
options, described below, may not be granted under the 1998 Plan
after August 10, 2008. The Board of Directors may terminate the
1998 Plan at any time, but outstanding stock incentives will
continue to be exercisable until they expire or are otherwise
terminated in accordance with their terms.
On August 31, 1998, the closing price of the Company's Common
Stock on The Nasdaq SmallCap Market was $_____________.
Nature of Incentives; Eligibility; Purposes
Stock incentives which may be issued under the 1998 Plan
include stock options (which for federal income tax purposes may be
either "nonqualified" options or "incentive" options which meet the
requirements of Section 422 of the Internal Revenue Code of 1986, as
amended) and stock awards, as well as any combination thereof.
Stock incentives may be granted to "eligible employees" of the
Company and its subsidiaries. Eligible employees are defined as
employees of the Company or a subsidiary who in the opinion of the
Committee (as defined below) are deemed to have the capacity to
contribute significantly to the growth and successful operations of
the Company. The number of persons who will be eligible employees
is not determinable. The Committee determines those persons who are
eligible employees.
The purposes of the 1998 Plan are to secure for the Company the
benefits of incentives inherent in ownership of Common Stock by
eligible employees, to encourage eligible employees to increase
their interest in the future growth and prosperity of the Company
and to stimulate and sustain constructive and imaginative thinking
by eligible employees, to further the identity of interest of those
who hold positions of major responsibility in the Company and its
subsidiaries with the interests of the Company's shareholders, to
induce the employment or continued employment of eligible employees,
and to enable the Company to compete with other organizations
offering similar or other incentives in obtaining and retaining the
services of competent employees.
Limitations on Available Shares
A total of 5,000,000 shares of Common Stock are available for
stock incentives granted under the 1998 Plan. If any shares of
Common Stock that are subject to stock incentives are forfeited,
such shares will again be available under the 1998 Plan. For this
purpose, "forfeited shares" means any shares that were issued
pursuant to prior grants of stock incentives that expire or
terminate for any reason without having been exercised. In the
future, if another company is acquired by the Company or combines
with the Company, any of the Company's shares covered by or issued
as a result of the assumption or substitution of outstanding grants
of the acquired company would not be deemed issued under the 1998
Plan and would not be subtracted from the shares of Common Stock
available for grant under the 1998 Plan.
Grants of stock incentives under the 1998 Plan are subject to
the further limitation that the maximum number of shares granted to
any one person in a calendar year may not exceed 100,000 shares,
except for recipients who are granted awards at the time of their
initial hire by the Company, in which case such limitation will be
1,000,000 shares. Additionally, the maximum number of shares which
may be granted under the 1998 Plan as stock awards (as described
below) to all participants may not exceed an aggregate of 500,000
shares of Common Stock (i.e.,10% of the total number of shares
available for stock incentives under the 1998 Plan). The number of
shares available under the 1998 Plan, and the separate limitations
on the amounts that may be granted to individuals, will not be
adjusted if the Company effects the reverse stock split described
below.
Administration
The 1998 Plan is to be administered by a committee (the
"Committee") consisting of no fewer than two directors designated by
the Board of Directors of the Company. All members of the Committee
must be both "disinterested persons" within the meaning of Rule 16b-3
promulgated by the Securities and Exchange Commission and "outside
directors" within the meaning of Section 162(m) of the Internal
Revenue Code of 1986, as amended, and any regulations promulgated
thereunder. The Committee determines which employees of the Company
and its subsidiaries are eligible employees who might participate in
the 1998 Plan and the form, terms and number of shares covered by
each stock incentive granted to such persons under the 1998 Plan.
In making such determinations, the Committee may consider an
employee's present or potential contribution to the success of the
Company or any subsidiary and other factors which it may deem
relevant. Stock incentives may be granted only by the Committee.
The Board has determined that the Committee will initially be
comprised of John H. Gutfreund and William O. Coleman.
Director Options
Directors are presently entitled to receive options to purchase
75,000 shares of Common Stock upon their initial election or
appointment to the Board and are thereafter entitled to automatic
annual grants of options to purchase 1,250 shares under the LCA-Vision
Directors' Nondiscretionary Stock Option Plan (the
"Directors' Plan"). The Board believes that the annual grants are
unrealistically low and are insufficient to permit the Company to
attract and retain qualified directors in the future. Accordingly,
the 1998 Plan contains a provision for annual automatic grants of
options to purchase 12,500 shares of Common Stock and continues the
practice of initial grants of options to purchase 75,000 shares. If
the 1998 Plan is adopted by the stockholders, the current Directors'
Plan will be discontinued.
New Plan Benefits
No specific determinations have been made or can be made in
advance as to future recipients of awards under the 1998 Plan.
Stock Options
A stock incentive in the form of a stock option will provide
for the purchase of shares of Common Stock in the future at an
option price per share which will not be less than 100% of the fair
market value of the shares covered thereby on the date the stock
option is granted. An incentive option granted to a person who, on
the date of grant, owns 10% or more of the shares of voting stock of
the Company or its subsidiaries must have an option price of not
less than 110% of the fair market value of the Common Stock on the
date of grant. Each option shall be exercisable in full or in part
six months after the date the option is granted, or may become
exercisable in one or more installments and at such later time or
times, as the Committee shall determine. Options may be, but are
not required to be, made subject to the attainment of specified
performance objectives. Unless otherwise provided in the option, an
option, to the extent it is or becomes exercisable, may be exercised
at any time in whole or in part until the expiration or termination
of the option.
Upon the exercise of an option, the purchase price may be paid
in cash or, unless otherwise provided in the option, in shares of
Common Stock (including shares withheld by the Company from the
shares issuable upon exercise of the option) or in a combination of
cash and such shares. The Company may cancel all or a portion of an
option subject to exercise, and pay the holder cash or shares equal
in value to the excess of the fair market value of the shares
subject to the portion of the option so canceled over the option
price of such shares.
All stock options granted under the 1998 Plan will expire
within ten years from the date of grant. A stock option is not
transferable or assignable by an optionee otherwise than by will or
by the laws of descent and distribution, and each option is
exercisable, during the optionee's lifetime, only by the optionee.
Unexercised options terminate on the sixtieth day following
termination of employment, except that if termination arises from a
resignation with the consent of the Committee, death or disability,
the options terminate 18 months after an optionee's termination of
employment. The exercise of options after the termination of
employment is limited to the extent that the options could have been
exercised as of the date the optionee's employment terminated. A
leave of absence for military or governmental service or for other
purposes, if approved by the Committee, does not constitute a
termination of employment.
The Committee shall have full power and authority to determine
whether, to what extent and under what circumstances any stock
option shall be canceled or suspended. In particular, but without
limitation, all outstanding stock options to any participant shall
be canceled if the participant, without the consent of the
Committee, while employed by the Company or after termination of
such employment, engages in any activity which is in competition
with the Company, as determined by the Committee.
Exercise of a stock option will be conditioned on an optionee's
payment in full of the purchase price for the shares, in cash or by
transfer to the Company of shares of the Company's Common Stock
(including shares withheld by the Company from the shares issuable
upon exercise of the option) at fair market value on the date of
transfer. An optionee shall not be considered a holder of the
shares subject to a stock option until actual delivery of a
certificate representing such shares is made by the Company.
The proceeds of the sale of Common Stock upon the exercise of
options issued under the 1998 Plan constitute general funds of the
Company and may be used by it for any purpose.
Stock Awards
Shares subject to a stock award may be issued when the award is
granted or at a later date, with or without dividend equivalent
rights. The number of shares of Common Stock which may be granted
as restricted stock is limited to 500,000 shares (i.e., 10% of the
maximum aggregate number of shares of Common Stock that may be
granted to participants in the Plan). A stock award shall be
subject to such terms, conditions and restrictions (including
restrictions on the transfer of the shares issued pursuant to the
award) as the Committee may determine, including specified corporate
or personal performance objectives the attainment of which may, but
is not required to be, specified as a condition to the vesting of
the stock award.
The Committee shall have full power and authority to determine
whether, to what extent and under what circumstances any stock award
shall be canceled or suspended. In particular, but without
limitation, all outstanding stock awards to any participant shall be
canceled if the participant, without the consent of the Committee,
while employed by the Company or after termination of such
employment, engages in any activity which is in competition with the
Company, as determined by the Committee.
Federal Income Tax Consequences
No taxable income for federal income tax purposes results from
the exercise of an incentive option at the time of exercise. Any
gain realized on the sale of stock acquired on exercise of an
incentive option is considered as capital gain for federal income
tax purposes if the stock has been held at least one year after it
was acquired on exercise of the option and if at least two years
have expired after the grant of the option. Except as hereafter
indicated, the Company is not entitled to any deduction with respect
to the grant or exercise of any incentive option. If the stock is
sold or otherwise disposed of within one year after exercise or
within two years after the grant, any appreciation at the date of
exercise above the option price is treated, subject to certain
limitations, as "ordinary" income for federal income tax purposes.
Any appreciation after the date of exercise is considered as long-term
capital gain to the optionee if the stock was held longer than
eighteen months. The amount of ordinary income received by the
optionee generally is treated as a tax deductible expense to the
Company.
Gain taxable as ordinary income to the optionee is generally
deemed to be realized at the date of exercise of a nonqualified
option, the amount of gain on each share being the difference
between the market price on the date of exercise and the option
price. This amount is generally treated as a tax deductible expense
to the Company at the time of exercise. Any appreciation in the
value of the stock after the date of exercise is considered as long
or short-term capital gain, depending on the length of time the
stock is held by the optionee prior to the time of its sale.
With respect to stock awards that are settled either in cash or
in Common Stock that is either transferable or not subject to a
substantial risk of forfeiture, the employee must recognize ordinary
income equal to the cash or the fair market value of the Common
Stock and the Company will be entitled to a tax deduction for the
same amount. With respect to stock awards that are settled in
Common Stock that is restricted as to transferability and subject to
substantial risk of forfeiture, the employee must recognize ordinary
income equal to the fair market value of the Common Stock at the
first time the Common Stock becomes transferable or not subject to
a substantial risk of forfeiture, whatever occurs earlier, and the
Company will be entitled to a deduction for the same amount.
Under Section 162(m) of the Internal Revenue Code of 1986, as
amended, corporations with a class of securities required to be
registered under Section 12 of the Securities Exchange Act of 1934
(i.e., "public companies") are not permitted to deduct, for income
tax purposes, compensation paid to certain executive officers to the
extent such compensation exceeds $1 million in a tax year. However,
certain types of compensation, including generally compensation
which constitutes "performance-based" compensation, are excluded
from this limitation.
The cash compensation paid by the Company to its executive
officers does not currently approach the Section 162(m) limitation.
However, in any given year, as to options exercised by an executive
officer, the difference between the exercise price and the market
price on the exercise date (the "spread") would be included as
compensation for Section 162(m) purposes unless the applicable
option plan meets certain requirements contained in the Treasury
regulations under Section 162(m) of the Code (the "Regulations").
The Regulations provide that in order for the spread realized
upon the exercise of an option to constitute performance-based
compensation which is exempt from the Section 162(m) deduction
limitation, the stock option plan under which the options were
granted must, among other requirements, be administered by a
compensation committee comprised solely of two or more "outside
directors" and must contain a specific limit on the number of
options which may be granted to any one employee participant.
The 1998 Plan was drafted with the intention of preserving the
Company's ability to deduct for federal income tax purposes the
compensation expense relating to stock options and other stock
incentives granted to executive officers. Accordingly, only
directors who are "outside directors" within the meaning of Section
162(m) and applicable regulations may serve as members of the
Committee. The number of shares with respect to which stock
incentives may be granted to any one person in a calendar year is
limited to 100,000 shares, except for recipients who are granted
awards at the time of their initial hire by the Company, in which
case such limitation will be 1,000,000 shares. Also, the Committee
may impose performance standards on any stock incentive granted
under the 1998 Plan.
Change in Control
Notwithstanding any vesting schedule contained in any stock
incentives granted under the 1998 Plan, if a change in control (as
such term is defined in the 1998 Plan) of the Company occurs, any
stock incentives under the 1998 Plan that have been outstanding for
over six months will become immediately exercisable in full.
Plan Amendments
The Board of Directors, upon the recommendation of the
Committee, may amend the 1998 Plan subject, in the case of specified
amendments, to stockholder approval. The 1998 Plan may be
discontinued at any time by the Board of Directors. No amendment or
discontinuance of the 1998 Plan shall, without the consent of the
employee, adversely affect any stock incentive held by him under the
1998 Plan.
Stockholder Approval
The proposal to approve the 1998 Plan as described above is
contained in the following resolution which will be submitted to the
shareholders for adoption at the Annual Meeting. The proposal is
being submitted for approval of the shareholders in accordance with
the requirements of The Nasdaq SmallCap Market, Rule 16b-3 of the
Securities and Exchange Commission, and Section 162(m) of the
Internal Revenue Code of 1986, as amended. The affirmative vote of
the holders of a majority of voting power of the Company's
outstanding voting stock present in person or by proxy at the
Special Meeting is required to adopt the resolution. Proxies in the
form solicited hereby which are returned to the Company will be
voted in favor of the following resolution unless otherwise
instructed by the stockholders. Abstentions will have the same
effect as votes cast against the proposal, provided such shares are
properly present at the meeting in person or by proxy. Shares not
voted by brokers and other entities holding shares on behalf of
beneficial owners will have no effect on the outcome of the
proposal. The Board of Directors recommends the adoption of the
resolution.
The resolution states:
RESOLVED, that the LCA-Vision Inc. 1998 Long-Term Stock
Incentive Plan be, and it hereby is, adopted in the form attached as
Exhibit A to the Proxy Statement relating to this Special Meeting of
Stockholders.
SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Under Section 13(d) of the Securities Exchange Act of 1934 and
the rules promulgated thereunder, a beneficial owner of a security
is any person who directly or indirectly has or shares voting power
or investment power over such security. Such beneficial owner under
this definition need not enjoy the economic benefit of such
securities. The following table sets forth information with respect
to the beneficial ownership of shares of Common Stock and Preferred
Stock as of September 15, 1998 of each executive officer, each
director, and each stockholder known to be the beneficial owner of
5% or more of Common Stock, and all officers and directors as a
group.
Name and Address of
Beneficial Owner
Title of Class
Amount and Nature
of Ownership(1)
Percent
of Class
Stephen N. Joffe, M.D.,
President & Director
Sandra F.W. Joffe,
Secretary & Treasurer
8750 Red Fox Lane
Cincinnati, Ohio 45243
Common Stock
Class A Preferred
Stock
Interim Series
Class B Preferred
Stock
__________ shares
owned of record
and
beneficially(2)
844 shares owned
of record and
beneficially
12.6 shares owned
of record and
beneficially
______%
50.0%
100.0%
Summit Technology, Inc.
21 Hickory Drive
Waltham, MA 02154
Common Stock
7,164,371 shares
owned of record
and beneficially
______%
Craig P.R. Joffe
7840 Montgomery Road
Cincinnati, Ohio 45236
Common Stock
2,500,313 shares
owned of record
and
beneficially(3)
______%
William O. Coleman
Director
Common Stock
96,250 shares
owned
beneficially (4)
*
John H. Gutfreund
Director
Common Stock
126,900 shares
owned of record
and beneficially
(5)
*
John C. Hassan
Director
Common Stock
151,250 shares
owned
beneficially(6)
*
Larry P. Rapp
Chief Financial Officer
Common Stock
205,500 shares
owned of record
and beneficially
(7)
*
All directors and
executive officers as a
group (6 persons)
Common
Stock
_________shares
owned of record
and
beneficially(8)
______%
Class A Preferred
Stock
844 shares owned
of record and
beneficially
50.0%
Interim Series
Class B Preferred
Stock
12.6 shares owned
of record and
beneficially
100.0%
__________________________
*Less than 1%
(1) The persons named in the table have sole voting and
investment power with respect to all shares of common stock shown as
beneficially owned by them, subject to community property laws,
where applicable, and the information contained in other footnotes
to this table.
(2) Stephen N. Joffe, MD and Sandra F.W. Joffe are married to
one another and each is therefore deemed to be the beneficial owner
of all shares owned by the other. The total shown consists of
11,077,950 shares of Common Stock owned of record by Dr. Joffe,
3,851,649 shares of Common Stock owned of record by Mrs. Joffe,
1,000 shares of Common Stock owned of record by Dr. and Mrs. Joffe
jointly,__________ shares of Common Stock issuable to Dr. Joffe in
the event of conversion of 11 shares of Interim Series Class B
Preferred Stock owned by him, and __________ shares of Common Stock
issuable to Mrs. Joffe in the event of conversion of 1.6 shares of
Interim Series Class B Preferred Stock owned by her.
(3) Includes 11 shares owned of record by Dr. Joffe and 1.6
shares owned of record by Mrs. Joffe.
(4) Includes 20,000 shares owned of record and 76,250 shares
issuable to Mr. Coleman upon the exercise of certain unexercised
stock options.
(5) Includes 50,000 shares owned of record by Mr. Gutfreund, 650
shares owned of record by him as custodian for his minor child, and
76,250 shares of Common Stock issuable to Mr. Gutfreund upon the
exercise of certain unexercised outstanding stock options.
(6) Consists of 151,250 shares of Common Stock issuable to Mr.
Hassan upon the exercise of certain unexercised stock options.
(7) Consists of 205,000 shares of Common Stock issuable to Mr.
Rapp upon the exercise of certain unexercised stock options and 500
shares owned of record.
(8) Consists of 15,301,749 shares owned of record directly or
indirectly by such persons, _________ shares issuable upon
conversion of Interim Series Class B Preferred Stock owned by such
persons, and 508,750 shares issuable upon the exercise of stock
options held directly or indirectly by such persons.
EXECUTIVE COMPENSATION
Summary
The following table summarizes, for the fiscal years indicated,
all annual compensation earned by or granted to the Company's Chief
Executive Officer and the only other executive officers whose
compensation exceeded $100,000 for all services rendered to the
Company in all capacities (the "named executives") during the last
fiscal year:
SUMMARY COMPENSATION TABLE
Annual
Compensation
Long-Term
Compensation
Awards
Name and Principal
Position
Year
Salary($)
Bonus($)
Securities
Underlying
Options (#)
All Other
Compensation($)
Stephen N. Joffe,
President and
Chief Executive
Officer
1997
1996
1995
$198,000
$198,000
$547,032
- --
- --
- --
- --
- --
- --
$55,009(1)
$52,534(1)
$60,672(1)
Larry P. Rapp,
Chief Financial
Officer
1997
1996
$114,975
$
76,915(2)
- --
- --
- --
200,000 shs
- --
- --
Judith A. Crist,
Executive Vice-President,
Operations
1997
1996
1995
$109,400
$109,400
$
94,600
- --
- --
$25,594
- --
200,750 shs.
- --
- --
- --
- --
_____________________________
(1) Includes for 1995, 1996 and 1997, respectively, $5,845,
5,845 and $7,468, which was a car allowance and $14,139, $778 and
$681, which were term life insurance and long-term disability
premiums for insurance benefitting named executive. Also includes
for 1995, 1996 and 1997, respectively, $40,688, $45,911 and $46,860,
respectively, placed in a life insurance trust benefitting the named
executive.
(2) Partial year salary. Mr. Rapp commenced his employment with
the Company on April 15, 1996.
Stock Options
The Company did not grant any stock options to any of the named
executives in 1997, nor did any named executives exercise any
options held by them in 1997. The following table sets forth
information regarding the value of unexercised in-the-money options
held by the named executives as of December 31, 1997:
AGGREGATED OPTION EXERCISES IN LAST
FISCAL YEARS AND FY-END OPTION VALUES
Name
Shares
Acquired
on
Exercise(#)
Value
Realized
($)
Number of Securities
Underlying Unexercised
Options at FY-End
Value of Unexercised In-the-Money Options at FY-End($)
Exercisable
Unexercisable
Exercisable
Unexercisable
Larry P.
Rapp
- --
- --
40,000
160,000
- --
- --
Judith A.
Crist
- --
- --
40,188
160,562
- --
- --
Director Compensation
Effective 1998, non-employee directors of the Company are paid
cash director's fees of $2,500 per calendar quarter plus
reimbursement of related out-of-pocket expenses. In addition,
directors are entitled to receive stock option grants under the LCA-Vision
Directors' Nondiscretionary Stock Option Plan. Under this
Plan, a nonemployee director receives a grant of options to purchase
75,000 shares of Common Stock upon his or her election or
appointment to the Board and is entitled thereafter to an annual
grant of options to purchase 1,250 shares.
INCORPORATION OF CERTAIN
DOCUMENTS BY REFERENCE
The following documents filed by the Company with the
Securities and Exchange Commission are incorporated into this Proxy
Statement by reference:
1. The Company's Annual Report on Form 10-KSB for the year
ended December 31, 1997.
2. The Company's Quarterly Report on Form 10-QSB for the
quarter ended March 31, 1998.
3. The Company's Current Report on Form 8-K filed on July
2, 1998.
Any statement contained in a document incorporated by reference
in this Proxy Statement shall be deemed to be modified or superseded
for purposes of this Proxy Statement to the extent that a statement
contained in this Proxy Statement modifies or supersedes such
statement. Any statement so modified or superseded shall not be
deemed, except as so modified or superseded, to constitute a part of
this Proxy Statement.
OTHER MATTERS
The Board of Directors does not know of any other business to
be presented to the meeting and does not intend to bring other
matters before the meeting. However, if other matters properly come
before the meeting, it is intended that the persons named in the
accompanying proxy will vote thereon according to their best
judgment in the interests of the Company.
By Order of the Board of Directors
Sandra F.W. Joffe
Secretary
1714-PS-SP98
<PAGE>
EXHIBIT A
LCA-VISION INC.
1998 LONG-TERM STOCK INCENTIVE PLAN
1. Purposes: The purposes of this Plan are (a) to secure
for the Company the benefits of incentives inherent in ownership of
Common Stock by Eligible Employees, (b) to encourage Eligible
Employees to increase their interest in the future growth and
prosperity of the Company and to stimulate and sustain constructive
and imaginative thinking by Eligible Employees, (c) to further the
identity of interest of those who hold positions of major
responsibility in the Company and its Subsidiaries with the
interests of the Company's shareholders, (d) to induce the
employment or continued employment of Eligible Employees and (e) to
enable the Company to compete with other organizations offering
similar or other incentives in obtaining and retaining the services
of competent employees.
2. Definitions: Unless otherwise required by the context,
the following terms when used in this Plan shall have the meanings
set forth in this section 2.
Board of Directors: The Board of Directors of the Company.
Change of Control: The event which shall be deemed to have
occurred if either (i) after the date this Plan is adopted by the
Company's shareholders, without prior approval of the Board, any
"person" becomes a beneficial owner, directly or indirectly, of
securities of the Company representing 20% or more of the combined
voting power of the Company's then outstanding securities; or (ii)
without prior approval of the Board, as a result of, or in
connection with, or within two years following, a tender or exchange
offer for the voting stock of the Company, a merger or other
business combination to which the Company is a party, the sale or
other disposition of all or substantially all of the assets of the
Company, a reorganization of the Company, or a proxy contest in
connection with the election of members of the Board of Directors,
the persons who were directors of the Company immediately prior to
any of such transactions cease to constitute a majority of the Board
of Directors or of the board of directors of any successor to the
Company (except for resignations due to death, disability or normal
retirement). For purposes of this definition, a person shall be
deemed the "beneficial owner" of any securities (i) which such
person or any of its Affiliates or Associates beneficially owns,
directly or indirectly; or (ii) which such person or any of its
Affiliates or Associates, has directly or indirectly, (1) the right
to acquire (whether such right is exercisable immediately or only
after the passage of time), pursuant to any agreement, arrangement
or understanding or upon the exercise of conversion rights, exchange
rights, warrants or options, or otherwise, or (2) the right to vote
pursuant to any agreement, arrangement or understanding; or (iii)
which are beneficially owned, directly or indirectly, by any other
person with which such person or any of its Affiliates or Associates
has any agreement, arrangement or understanding for the purpose of
acquiring, holding, voting or disposing of any securities. For
purposes of this definition, a "person" shall mean any individual,
firm, company, partnership, other entity or group, and the terms
"Affiliate" or "Associate" shall have the respective meanings
ascribed to such terms in Rule 12b-2 of the General Rules and
Regulations promulgated by the Securities and Exchange Commission
under the Securities Exchange Act of 1934, as in effect on the date
the Plan is approved by the shareholders of the Company and becomes
effective.
Code: The Internal Revenue Code of 1986, as amended.
Committee: The Committee of the Board of Directors designated
to administer this Plan pursuant to the provisions of section 11.
Common Stock: The Common Stock of the Company, without par
value.
Company: LCA-Vision Inc., a Delaware corporation.
Eligible Employee: An employee (as such term is defined for
purposes of the Form S-8 registration statement promulgated by the
Securities and Exchange Commission) of the Company or of a
Subsidiary who in the opinion of the Committee can contribute
significantly to the growth and successful operations of the Company
or a Subsidiary. The recommendation of the grant of a Stock
Incentive to an employee by the Committee shall be deemed a
determination by the Committee that such employee is an Eligible
Employee.
Fair Market Value: As applied to any date, the mean of the
highest and lowest quoted selling prices of a share of Common Stock
on the composite tape of the Nasdaq National Market (or any stock
exchange on which the Company's Common Stock may be listed in the
future) on the date specified, or if the Common Stock was not traded
on such system on such date, on the next preceding date on which the
Common Stock was traded; provided, however, that, if the Common
Stock is not so quoted, Fair Market Value shall be determined in
accordance with the method approved by the Board of Directors, and,
provided further, if any of the foregoing methods of determining
Fair Market Value shall not be consistent with the regulations of
the Secretary of the Treasury or his delegate at the time applicable
to a Stock Incentive of the type involved, Fair Market Value in the
case of such Stock Incentive shall be determined in accordance with
such regulations and shall mean the value as so determined.
Incentive Compensation: Bonuses, extra and other compensation
payable in addition to a salary or other base amount, whether
contingent or discretionary or required to be paid pursuant to an
agreement, resolution or arrangement, and whether payable currently,
or on a deferred basis, in cash, Common Stock or other property,
awarded by the Company or a Subsidiary prior or subsequent to the
date of the approval and adoption of this Plan by the shareholders
of the Company.
Incentive Option: An option granted under this Plan which is
designated to be an incentive stock option under the provisions of
Section 422 of the Code; and any provisions elsewhere in this Plan
or in any such Incentive Option which would prevent such option from
being an incentive stock option may be deleted and/or voided
retroactively to the date of the granting of such option, by action
of the Committee.
Nonqualified Option: An option granted under this Plan which
is not an incentive stock option under the provisions of Section 422
of the Code; and which is exercisable even though there is
outstanding an Incentive Option which was granted before the
granting of the Nonqualified Option to the same participant. Such
Nonqualified Option shall not be affected by any actions taken
retroactively as provided above with respect to Incentive Options.
Option: An option to purchase shares of Common Stock.
Outside Director: A duly elected or appointed member of the
Board of Directors who is not employed by the Company in any other
capacity.
Performance Objectives: Stated criteria which may, but need
not be set forth in a Stock Incentive at the discretion of the
Committee, the successful attainment of which is specified in the
Stock Incentive as a condition precedent to the issuance, transfer
or retention of some or all of the shares of Common Stock covered by
the Stock Incentive. Performance Objectives may be personal and/or
corporate in nature and shall include, but shall not be limited to,
objectives determined by reference to or changes in (a) the Fair
Market Value, book value or earnings per share of Common Stock, or
(b) sales and revenues, income, profits and losses, return on
capital employed, or net worth of the Company (on a consolidated or
unconsolidated basis) or of any or more of its groups, divisions,
Subsidiaries or departments, or (c) a combination of two or more of
the foregoing or other factors.
Plan: The 1998 Long-Term Stock Incentive Plan herein set forth
as the same may from time to time be amended.
Stock Award: An issuance or transfer of shares of Common Stock
at the time the Stock Incentive is granted or as soon thereafter as
practicable, or an undertaking to issue or transfer such shares in
the future.
Stock Incentive: A stock incentive granted under this Plan in
one of the forms provided for in section 3.
Subsidiary: A company or other entity designated by the
Committee in which the Company has a significant equity interest,
except that, with respect to grants of Incentive Options, the term
"Subsidiary" shall be deemed to mean a company or other form of
business association of which shares (or other ownership interests)
having 50% or more of the voting power are owned or controlled,
directly or indirectly, by the Company.
3. Grants of Stock Incentives:
(a) Subject to the provisions of this Plan, the Committee
may at any time, or from time to time, grant Stock Incentives under
this Plan to, and only to, Eligible Employees.
(b) Stock Incentives may be granted in the following forms:
(i) an Option, or
(ii) a Stock Award, or
(iii) a combination of an Option and a Stock Award.
(c) Stock Incentives contingently granted prior to the
approval of this Plan by the Company's stockholders but subject to
such approval shall be deemed to be granted hereunder as of the date
of such stockholder approval.
4. Stock Subject to this Plan:
(a) A total of 5,000,000 shares of Common Stock are
available for Stock Incentives granted under the Plan; provided,
that if another company is acquired by the Company or combines with
the Company, any of the Company's shares covered by or issued as a
result of the assumption or substitution of outstanding grants of
the acquired company would not be deemed issued under the Plan and
would not be subtracted from the shares of Common Stock available
for grant under the Plan; and provided further, that if any shares
of Common Stock that are subject to Stock Incentives are forfeited,
such shares shall again become available under the Plan. For
purposes of the preceding sentence:
(i) "Forfeited shares" means any shares issued
pursuant to grants of Stock Incentives which expire or terminate for
any reason in a calendar year without ever having been exercised or
as to which the recipient did not receive any benefits of ownership
(other than voting rights).
(ii) Shares of Common Stock subject to Stock
Incentives granted under this Plan may be either authorized but
unissued shares or shares held in the Company's treasury, or any
combination thereof, in the discretion of the Committee.
(b) The maximum amount of Common Stock with respect to
which Stock Incentives may be granted to any person during any
calendar year shall be 100,000 shares; provided, however, that in
the event of a grant made to a recipient upon the recipient's
initial hiring by the Company, such limitation shall be 1,000,000
shares.
5. Options: Stock Incentives in the form of Options shall
be subject to the following provisions:
(a) Upon the exercise of an Option, the purchase price
shall be paid in cash by means reasonably acceptable to the Company
or, unless otherwise provided by the Committee (and subject to such
terms and conditions as are specified in the Option or by the
Committee), in shares of Common Stock delivered to the Company by
the optionee or by the withholding of shares issuable upon exercise
of the Option or in a combination of such payment methods. Shares
of Common Stock thus delivered or withheld shall be valued at their
Fair Market Value on the date of the exercise. The purchase price
per share shall be not less than 100% of the Fair Market Value of a
share of Common Stock on the date the Option is granted.
(b) Each Option shall be exercisable in full or in part not
less than six months after the date the Option is granted, or may
become exercisable in one or more installments at such later time or
times as the Committee shall determine. Unless otherwise provided
in the Option, an Option, to the extent it is or becomes
exercisable, may be exercised at any time in whole or in part until
the expiration or termination of the Option. Any term or provision
in any outstanding Option specifying that the Option not be
immediately exercisable or that it be exercisable in installments
may be modified at any time during the life of the Option by the
Committee, provided, however, no such modifications of an
outstanding Option shall, without the consent of the optionee,
adversely affect any Option theretofore granted to the optionee.
(c) Each Option shall be exercisable during the life of the
optionee only by the optionee and, after the optionee's death, only
by the optionee's estate or by a person who acquired the right to
exercise the Option by will or the laws of descent and distribution.
An Option, to the extent that it shall not have been exercised,
shall terminate at the close of business on the 60th day following
the date the optionee ceases to be an employee or director of the
Company or a Subsidiary, unless the optionee ceases to be an
employee or director because of resignation with the consent of the
Committee (which consent may be given before or after resignation),
or by reason of death or incapacity, in which case any unexercised
Option or portion thereof held by such person shall terminate 18
months after such resignation, death or incapacity, or at the
Option's stated expiration date, whichever is earlier. Any Option
that is exercisable hereunder after the date an optionee ceases to
be an employee or director of the Company for any reason may be
exercised only to the extent it could have been exercised as of the
date the optionee ceases to be an employee or director. A leave of
absence for military or governmental service or for other purposes
shall not, if approved by the Committee, be deemed a termination of
employment within the meaning of this paragraph (c).
Notwithstanding the foregoing provisions of this paragraph (c) or
any other provisions of this Plan, no Option shall be exercisable
after expiration of the term for which the Option was granted, which
shall in no event exceed ten years.
(d) Options shall be granted for such lawful consideration
as the Committee shall determine.
(e) No Option nor any right thereunder may be assigned or
transferred by the optionee except by will or the laws of descent
and distribution. If so provided in the Option or if so authorized
by the Committee and subject to such terms and conditions as are
specified in the Option or by the Committee, the Company shall have
the right, upon or without the request of the holder of the Option
and at any time or from time to time, to cancel all or a portion of
the Option then subject to exercise and either (i) pay the holder an
amount of money equal to the excess, if any, of the Fair Market
Value, at such time or times, of the shares subject to the portion
of the Option so canceled over the aggregate purchase price of such
shares, or (ii) issue or transfer shares of Common Stock to the
holder with a Fair Market Value, at such time or times, equal to
such excess.
(f) Each Option shall be evidenced by a written instrument,
which shall contain such terms and conditions (including, without
limitation, Performance Objectives), and shall be in such form, as
the Committee may determine, provided the Option is consistent with
this Plan and incorporates it by reference. Notwithstanding the
preceding sentence, an Option if so recommended by the Committee,
may include restrictions and limitations in addition to those
provided for in this Plan.
(g) Any federal, state or local withholding taxes payable
by an optionee upon the exercise of an Option shall be paid in cash
or, unless otherwise provided by the Committee, by the surrender of
shares of Common Stock or the withholding of shares of Common Stock
to be issued to the optionee, or in any combination thereof, or in
such other form as the Committee may authorize from time to time.
All such shares so surrendered or withheld shall be valued at Fair
Market Value on the date they are surrendered to the Company or
authorized to be withheld.
(h) Options may be either Incentive Options or Nonqualified
Options at the discretion of the Committee. Options not otherwise
designated shall be Nonqualified Options. Notwithstanding any other
provisions herein, the following provisions shall apply to Incentive
Options: (i) the exercise price of any Incentive Option granted to
any person who on the date of grant owns (within the meaning of
Section 425(d) of the Code) stock possessing more than 10% of the
total combined voting power of all classes of stock of the Company
or any Subsidiary shall not be less than 110% of the Fair Market
Value of the stock on the date of grant; (ii) the maximum term of
any Incentive Option granted hereunder shall be ten years, except
that the maximum term of any Incentive Option granted to a person
described in section 5(h)(i) above shall be five years; (iii) no
Incentive Option may be granted subsequent to the tenth anniversary
of the date of shareholder approval of this Plan; (iv) Incentive
Options may only be granted to persons who are employees of the
Company or any Subsidiary within the meaning of the Code; (v) the
aggregate Fair Market Value, determined as of the time of the grant,
of the shares of Common Stock with respect to which Incentive Stock
Options held by any Eligible Employee which are exercisable for the
first time by such Eligible Employee during any calendar year under
the Plan and under any other benefit plans of the Company shall not
exceed $100,000, or if different, the maximum limitation in effect
at the time of grant under Section 422 of the Code, or any successor
provision, and any regulations promulgated thereunder; and (vi)
Incentive Options may not be granted with respect to more than an
aggregate of 3,500,000 shares of Common Stock under this Plan.
6. Stock Awards: Stock Incentives in the form of Stock
Awards shall be subject to the following provisions:
(a) A Stock Award shall be granted only in payment of
Incentive Compensation that has been earned or as Incentive
Compensation to be earned, including, without limitation, Incentive
Compensation awarded concurrently with or prior to the grant of the
Stock Award.
(b) For the purposes of this Plan, in determining the value
of a Stock Award, all shares of Common Stock subject to such Stock
Award shall be valued at not less than 100% of the Fair Market Value
of such shares on the date such Stock Award is granted, regardless
of whether or when such shares are issued or transferred to the
Eligible Employee and whether or not such shares are subject to
restrictions which affect their value.
(c) The number of shares of Common Stock which may be
granted under the Plan as Stock Awards shall not exceed 500,000
shares of Common Stock (i.e.,10% of the maximum aggregate number of
shares of Common Stock that may be granted to participants in the
Plan).
(d) Shares of Common Stock subject to a Stock Award may be
issued or transferred to the Eligible Employee at the time the Stock
Award is granted, or at any time subsequent thereto, or in
installments from time to time, as the Committee shall determine.
In the event that any such issuance or transfer shall not be made to
the Eligible Employee at the time the Stock Award is granted, the
Committee may provide for payment to such Eligible Employee, either
in cash or in shares of Common Stock from time to time or at the
time or times such shares shall be issued or transferred to such
Eligible Employee, of amounts not exceeding the dividends which
would have been payable to such Eligible Employee in respect of such
shares (as adjusted under section 8) if they had been issued or
transferred to such Eligible Employee at the time such Stock Award
was granted. Any amount payable in shares of Common Stock under the
terms of a Stock Award may, at the discretion of the Company, be
paid in cash, on each date on which delivery of shares would
otherwise have been made, in an amount equal to the Fair Market
Value on such date, of the shares which would otherwise have been
delivered.
(e) A Stock Award shall be subject to such terms and
conditions, including, without limitation, restrictions on sale or
other disposition of the Stock Award or of the shares issued or
transferred pursuant to such Stock Award, as the Committee shall
determine; provided, however, that upon the issuance or transfer of
shares pursuant to a Stock Award, the recipient shall, with respect
to such shares, be and become a shareholder of the Company fully
entitled to receive dividends, to vote and to exercise all other
rights of a shareholder except to the extent otherwise provided in
the Stock Award. The Committee may, in its sole discretion, but
shall not be required to, specify in any Stock Award that the
issuance, transfer and/or retention of some or all of the shares of
Common Stock covered by the Stock Award shall be subject to the
attainment of Performance Objectives. Each Stock Award shall be
evidenced by a written instrument in such form as the Committee
shall determine, provided such written instrument is consistent with
this Plan and incorporates it by reference.
(f) In the event the holder of shares of Common Stock
subject to a Stock Award dies prior to the time such shares are no
longer subject to forfeiture pursuant to the terms of the Stock
Award, the estate of such holder may retain such shares subject to
the restrictions set forth in the Stock Award.
7. Combinations of Options and Stock Awards: Stock
Incentives authorized by paragraph (b)(iii) of Section 3 in the form
of combinations of Options and Stock Awards, shall be subject to the
following provisions:
(a) A Stock Incentive may be a combination of any form of
Option with any form of Stock Award; provided, however, that the
terms and conditions of such Stock Incentive pertaining to an Option
are consistent with Section 5 and the terms and conditions of such
Stock Incentive pertaining to a Stock Award are consistent with
Section 6.
(b) Such combination Stock Incentive shall be subject to
such other terms and conditions as the Committee may determine,
including, without limitation, a provision terminating in whole or
in part a portion thereof upon the exercise in whole or in part of
another portion thereof. Such combination Stock Incentive shall be
evidenced by a written instrument in such form as the Committee
shall determine, provided it is consistent with this Plan and
incorporates it by reference.
8. Nondiscretionary Grants to Outside Directors: Upon
election or appointment to the Board of Directors, an Outside
Director shall automatically be granted a Nonqualified Option to
purchase 75,000 shares of the Company's Common Stock. In addition,
at every annual organizational meeting of the Board of Directors
following the Company's regular annual meeting of stockholders, each
Outside Director who is then serving on the Board of Directors shall
receive an automatic grant of a Nonqualified Option to purchase
12,500 shares of Common Stock; provided, however, that the number of
shares subject to such annual options granted to Outside Directors
who have not yet served a full year on the Board of Directors shall
be prorated such that those Outside Directors shall receive an
Option to purchase a percentage of 12,500 shares commensurate with
the actual portion of the year that such director served on the
Board of Directors. The following additional provisions shall apply
to Nonqualified Options granted under this Section 8:
(a) Each such Option shall terminate not later than five
years from the date of grant thereof; and
(b) Each such Option shall not be exercisable for the first
year after grant. On and after the first anniversary of the grant
date, such an option shall be exercisable as to 50% of the shares
covered thereby, and on and after the second anniversary of the
grant date, such Option shall be exercisable as to 100% of the
shares covered thereby to the extent not previously exercised.
9. Adjustment Provisions: In the event that any
recapitalization, reclassification, forward or reverse split (except
as provided below) of shares of Common Stock, or any similar
transaction shall be effected, or the outstanding shares of Common
Stock are, in connection with a merger or consolidation of the
Company or a sale by the Company of all or a part of its assets,
exchanged for a different number of class of shares of stock or
other securities of the Company or for shares of the stock or other
securities of any other company, or a record date for determination
of holders of Common Stock entitled to receive a dividend payable in
Common Stock shall occur, (a) the number and class of shares or
other securities that may be issued or transferred pursuant to Stock
Incentives or with respect to which a cash payment pursuant to the
Stock Incentive is determinable, (b) the number and class of shares
or other securities which have not been issued or transferred under
outstanding Stock Incentives, (c) the purchase price to be paid per
share or other security under outstanding Options, and (d) the price
to be paid by the Company or a Subsidiary for shares or other
securities issued or transferred pursuant to Stock Incentives which
are subject to a right of the Company or a Subsidiary to reacquire
such shares or other securities, shall in each case be equitably
adjusted. Notwithstanding the foregoing or any other provision in
this Plan, there shall be no adjustment to the number of shares
available under this Plan for Stock Incentives, or in any of the
Plan limitations upon numbers of shares underlying Stock Incentives
granted to individuals, or available for Stock Awards, as the result
of a reverse stock split approved by the Company's stockholders at
the same stockholders' meeting this Plan is approved by the
stockholders.
10. Acceleration: In the event of a Change of Control, any
Stock Incentives which have then been outstanding hereunder for at
least six months shall be immediately exercisable (without regard to
any limitation imposed by the Plan or the Committee at the time the
Stock Incentive was granted, which permits all or any part of the
Stock Incentive to be exercised only after the lapse of time or the
attainment of Performance Objectives or other conditions to
exercise), and will remain exercisable until the expiration of the
Stock Incentive.
11. Term: This Plan shall be deemed adopted and shall
become effective on the date it is approved and adopted by the
shareholders of the Company. This Plan shall remain in effect until
such time as it is terminated by the Board of Directors; provided,
however, that no Incentive Options may be granted hereunder after
August 31, 2008.
12. Administration:
(a) The Plan shall be administered by the Committee, which
shall consist of not less than two directors of the Company
designated by the Board of Directors in accordance with the Bylaws
of the Company; provided, however, that no director shall be
designated as or continue to be a member of the Committee unless
such director shall at the time of designation and service be both
(i) a "disinterested person" within the meaning of Rule 16b-3 of the
Securities and Exchange Commission (or any successor provision at
the time in effect) and (ii) an "outside director" within the
meaning of Section 162(m) of the Code and any regulations
promulgated thereunder by the Department of the Treasury. Grants of
Stock Incentives may be recommended by the Committee either with or
without consultation with employees, but, anything in this Plan to
the contrary notwithstanding, the Committee shall have full
authority to act in the matter of selection of all Eligible
Employees and in recommending Stock Incentives to be granted to
them.
(b) The Committee may establish such rules and regulations,
not inconsistent with the provisions of this Plan, as it deems
necessary to determine eligibility to participate in this Plan and
for the proper administration of this Plan, and may amend or revoke
any rule or regulation so established. The Committee may make such
determinations and interpretations under or in connection with this
Plan as it deems necessary or advisable. All such rules,
regulations, determinations and interpretations shall be binding and
conclusive upon the Company, its Subsidiaries, its shareholders and
all employees, and upon their respective legal representatives,
beneficiaries, successors and assigns and upon all other persons
claiming under or through any of them.
(c) Members of the Board of Directors and members of the
Committee acting under this Plan shall be fully protected in relying
in good faith upon the advice of counsel and shall incur no
liability except for gross negligence or willful misconduct in the
performance of their duties.
13. Acquisitions: Notwithstanding Section 4(a), if the
Company or any Subsidiary should merge or consolidate with, or
purchase stock or assets or otherwise acquire the whole or part of
the business of, another company, the Company in connection
therewith, upon the recommendation of the Committee and the approval
of the Board of Directors, (a) may assume, in whole or in part and
with or without modifications or conditions, any stock options
granted by the acquired company to its employees, in their capacity
as such, or (b) may grant new Options in substitution therefore;
provided that the granting of an Option with the terms and
conditions of the assumed or substitute options is permissible
under either this Plan or a plan approved by the shareholders of the
acquired company. For the purposes of the preceding sentence, the
permissibility of the granting of an option under a plan shall be
determined as of the date of grant of the original option by the
acquired company and not as of the date of assumption or
substitution by the Company.
14. General Provisions:
(a) Nothing in this Plan nor in any instrument executed
pursuant hereto shall confer upon any employee any right to continue
in the employ of the Company or a Subsidiary, or shall affect the
right of the Company or of a Subsidiary to terminate the employment
of any employee with or without cause.
(b) No shares of Common Stock shall be issued or
transferred pursuant to a Stock Incentive unless and until all legal
requirements applicable to the issuance or transfer of such shares,
in the opinion of counsel to the Company, have been complied with.
In connection with any such issuance or transfer the person
acquiring the shares shall, if requested by the Company, give
assurances, satisfactory to counsel to the Company, that the shares
are being acquired for investment and not with a view to resale or
distribution thereof and assurances in respect of such other matters
as the Company or a Subsidiary may deem desirable to assure
compliance with all applicable legal requirements. No employee
(individually or as a member of a group), and no beneficiary or
other person claiming under or through him, shall have any right,
title or interest in or to any shares of Common Stock allocated or
reserved for the purposes of this Plan or subject to any Stock
Incentive except as to shares of Common Stock, if any, as shall have
been issued or transferred to him.
(c) The Company or a Subsidiary may, with the approval of
the Committee, enter into an agreement or other commitment to grant
a Stock Incentive in the future to a person who is or will be an
Eligible Employee at the time of grant, and, notwithstanding any
other provision of this Plan, any such agreement or commitment shall
not be deemed the grant of a Stock Incentive until the date on which
the Company takes action to implement such agreement or commitment.
(d) In the case of a grant of a Stock Incentive to an
employee of a Subsidiary, such grant may, if the Committee so
directs, be implemented by the Company issuing or transferring the
shares, if any, covered by the Stock Incentive to the Subsidiary,
for such lawful consideration as the Committee may specify, upon the
condition or understanding that the Subsidiary will transfer the
shares to the employee in accordance with the terms of the Stock
Incentive specified by the Committee pursuant to the provisions of
this Plan. Notwithstanding any other provision hereof, such Stock
Incentive may be issued by and in the name of the Subsidiary and
shall be deemed granted on the date it is approved by the Committee,
on the date it is delivered by the Subsidiary, or on such other date
between said two dates, as the Committee shall specify.
(e) The Committee shall have full power and authority to
determine whether, to what extent and under what circumstances any
Stock Incentive shall be canceled or suspended by the Company. In
particular, but without limitation, all outstanding Stock Incentives
to any Eligible Employee may be canceled if the Eligible Employee,
without the consent of the Committee, while employed by the Company
or after termination of such employment, engages in any activity
which is in competition with the Company, including but not limited
to an activity whereby the Company's or its Subsidiary's trade
secrets or confidential information may conceivably be divulged, or
is otherwise detrimental to the Company's best interest, as
determined by the Committee.
(f) The Company or a Subsidiary may make such provisions as
it may deem appropriate for the withholding of any taxes which the
Company or a Subsidiary determines it is required to withhold in
connection with any Stock Incentive.
(g) Nothing in this Plan is intended to be a substitute
for, or shall preclude or limit the establishment or continuation
of, any other plan, practice or arrangement for the payment of
compensation or fringe benefits to employees generally, or to any
class or group of employees, which the Company or any Subsidiary or
other affiliate now has or may hereafter lawfully put into effect,
including, without limitation, any retirement, pension, group
insurance, stock purchase, stock bonus or stock option plan.
(h) The Plan and any rules and regulations relating to the
Plan shall be determined in accordance with the laws of the State of
Delaware and applicable federal law.
(i) If any provision of the Plan is or becomes or is deemed
invalid, illegal or unenforceable in any jurisdiction, or would
disqualify the Plan or any stock option or Stock Award under any law
deemed applicable by the Committee, such provision shall be
construed or deemed amended to conform to applicable laws or if it
cannot be construed or deemed amended without, in the determination
of the Committee, materially altering the intent of the Plan, it
shall be stricken and the remainder of the Plan shall remain in full
force and effect.
(j) Stock options or Stock Awards may be granted to
Eligible Employees who are foreign nationals or employed outside the
United States, or both, on such terms and conditions different from
those specified in the Plan as may, in the judgment of the
Committee, be necessary or desirable in order to recognize
differences in local law or tax policy. The Committee also may
impose conditions on the exercise or vesting of stock options or
Stock Awards in order to minimize the Company's obligation with
respect to tax equalization for Eligible Employees on assignments
outside their home country.
15. Amendments and Discontinuance:
(a) This Plan may be amended by the Board of Directors upon
the recommendation of the Committee, provided that, without the
approval of the stockholders of the Company, no amendment shall be
made which (i) increases the maximum aggregate number of shares of
Common Stock that may be issued or transferred pursuant to Stock
Incentives as provided in Section 4, (ii) withdraws the
administration of this Plan from the Committee or amends the
provisions of paragraph (a) of section 11 with respect to
eligibility and disinterest of members of the Committee, (iii)
permits any person who is not at the time an Eligible Employee of
the Company or of a Subsidiary to be granted a Stock Incentive, (iv)
permits any Option to be exercised more than ten years after the
date it is granted, (v) amends Section 10 to extend the date set
forth therein, or (vi) amends this Section 15.
(b) The Board of Directors may by resolution adopted by a
majority of the entire Board of Directors discontinue this Plan.
(c) No amendment or discontinuance of this Plan by the
Board of Directors or the stockholders of the Company shall, without
the consent of the employee, adversely affect any Stock Incentive
theretofore granted to him.
1714-PS-SP98<PAGE>
PROXY
LCA-VISION INC.
7840 Montgomery Road
Cincinnati, Ohio 45236
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
The undersigned hereby appoints Stephen N. Joffe, M.D. and Larry P.
Rapp, and each of them, with full power of substitution, as proxies
to vote, as designated below, for and in the name of the undersigned
all shares of stock of LCA-Vision Inc. which the undersigned is
entitled to vote at the Special Meeting of the Stockholders of said
Company scheduled to be held on October 16, 1998 at 9:00 a.m. at
LCA-Vision Inc., 7840 Montgomery Road, Third Floor, Cincinnati, Ohio
45236 or at any adjournment or recess thereof.
Please mark X in the appropriate box. The Board of Directors
recommends a FOR vote on each proposal.
1. To approve the issuance of an indeterminate number of shares
of the Company's Common Stock issuable upon the conversion of shares
of 6% Series B-1 and B-2 Convertible Preferred Stock, outstanding or
to be outstanding, for purposes of complying with the stockholder
approval requirements of The Nasdaq Stock Market.
FOR AGAINST ABSTAIN
2. To approve and adopt the Company's 1998 Long Term Stock
Incentive Plan.
FOR AGAINST ABSTAIN
3. In their discretion, the proxies are authorized to vote upon
such other business as may properly come before the meeting or an
adjournment thereof.
This proxy when properly executed will be voted in the manner
directed herein by the undersigned shareholder. If no direction is
made, this proxy will be voted FOR the above proposals.
ALL FORMER PROXIES ARE HEREBY REVOKED.
NUMBER OF SHARES ___________
_______________________________
_______________
(Signature of Stockholder)
Date
_______________________________
_______________
(Signature of Stockholder)
Date
Please mark, date and sign as your
name appears at left and return in the
envelope.
(Please sign exactly as your name appears hereon.
All joint owners should sign. When signing in a
fiduciary capacity or as a corporate officer,
please give your full title as such.)
