<PAGE> 1
SCHEDULE 14C INFORMATION
INFORMATION STATEMENT PURSUANT TO SECTION 14(C) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. 1)
Check the appropriate box:
<TABLE>
<S> <C>
[X] Preliminary Information Statement [ ] Confidential, for Use of
[ ] Definitive Information Statement the Commission Only (as
permitted by Rule 14c-5(d)(2))
</TABLE>
Eye Technology, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Information 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 14c-5(g) and 0-11.
(1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
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(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:
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(5) Total fee paid:
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[ ] 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:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE> 2
EYE TECHNOLOGY, INC.
----------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD JUNE 29, 1998
----------
The Annual Meeting of Shareholders of Eye Technology, Inc. (the
"Company") will be held at the Conference Room, Virginia Biotechnology Research
Park, 800 E. Leigh Street, Richmond, Virginia, on Monday, June 29, 1998, at
10:00 a.m., local time. At the meeting, shareholders will consider and vote upon
the following proposals:
1. To elect three (3) directors to hold office until the next
Annual Meeting of Shareholders.
2. To amend the Company's Certificate of Incorporation to
increase the number of authorized shares of Common Stock to
100,000,000.
3. To amend the Company's Certificate of Incorporation to change
the name of the Company to "______________".
4. To adopt the Company's 1998 Stock Option Plan.
5. To transact such other business as may properly come before
the Annual Meeting or any adjournment thereof.
Shareholders of record at the close of business on June 5, 1998 will be
entitled to attend and vote at the Annual Meeting of Shareholders.
By Order of the Board of Directors,
David P. Sheets
President and Chief Executive Officer
Petersburg, Virginia
June 10, 1998
YOU ARE CORDIALLY INVITED TO ATTEND THE ANNUAL MEETING OF SHAREHOLDERS IN
PERSON. WE ARE NOT ASKING YOU FOR A PROXY, AND YOU ARE REQUESTED NOT TO SEND US
A PROXY.
<PAGE> 3
EYE TECHNOLOGY, INC.
----------
INFORMATION STATEMENT
----------
This Information Statement is furnished in connection with the Annual
Meeting of Shareholders of Eye Technology, Inc. (the "Company") to be held at
the Conference Room, Virginia Biotechnology Research Park, 800 E. Leigh Street,
Richmond, Virginia, on Monday, June 29, 1998, at 10:00 a.m., local time, for the
purposes set forth in the accompanying notice. This Information Statement is
first being sent or given to shareholders on or about June 10, 1998.
RECORD DATE AND SHARE OWNERSHIP
Shareholders of record at the close of business on June 5, 1998 (the
"Record Date") are entitled to notice of and to vote at the Annual Meeting. As
of the close of business on the Record Date, the Company had approximately
9,883,311 shares of Common Stock outstanding and approximately ____ shareholders
of Common Stock of record. As of the close of business on the Record Date, the
Company had 250 shares of Class A Preferred Stock outstanding and one
shareholder of Class A Preferred Stock of record. As of the close of business on
the Record Date, the Company had 13,301 shares of Series B Preferred Stock
outstanding and four shareholders of Series B Preferred Stock of record.
VOTING
Each holder of Common Stock is entitled to one vote for each share held
on the Record Date. Each holder of Class A Preferred Stock is entitled to 80
votes for each share held on the Record Date. Each holder of Series B Preferred
Stock is entitled to 500 votes for each share held on the Record Date.
Shareholders may vote only if they attend the Annual Meeting of Shareholders in
person or proxy. No proxies are being solicited for this Annual Meeting pursuant
to this Information Statement, and shareholders are requested not to send
proxies to the Company. Shareholders of record on the Record Date owning Common
Stock, Class A Preferred Stock and Series B Preferred Stock representing more
than 50% of the Common Stock and 50% of the combined voting power of these
securities have advised the Company that they intend to vote their shares of
Common Stock for the election of directors and for proposals 2 through 4.
Accordingly, the Company expects such matters to be approved.
The required quorum for the transaction of business at the Annual
Meeting is a majority of the outstanding votes of Common Stock, Class A
Preferred Stock and Series B Preferred Stock. If a quorum is not present, the
shareholders entitled to vote who are present at the Annual Meeting have the
power to adjourn the Annual Meeting from time to time, without notice, other
than an announcement at the Annual Meeting, until a quorum is present. At any
adjourned Annual Meeting at which a quorum is present, any business may be
transacted that might have been transacted at the Annual Meeting as originally
notified.
In accordance with the Company's Bylaws, the directors will be elected
by a plurality of the votes cast by the holders of Common Stock, Class A
Preferred Stock and Series B Preferred Stock, voting as a single class, present
and entitled to vote at the Annual Meeting. In accordance with the Company's
Bylaws, the approval of proposal 4 requires a majority of the votes of Common
Stock, Class A Preferred Stock and Series B Preferred Stock, voting as a single
class, present and entitled to vote at the Annual Meeting. In accordance with
Delaware corporate law, the approval of the proposed amendment to the Company's
Certificate of Incorporation to change the corporate name requires a majority of
the votes of Common Stock, Class A Preferred Stock and Series B Preferred Stock,
voting as a single class. In accordance with Delaware corporate law, the
approval of the proposed amendment to the Company's Certificate of Incorporation
to increase the number of authorized shares of Common Stock requires a majority
of the outstanding votes of the Common Stock, voting as a separate class, and a
majority of the outstanding votes of the Common Stock, Class A Preferred Stock
and Series B Preferred Stock, voting together as a single class.
For purposes of establishing a quorum, abstentions and broker non-votes
will count in determining whether a quorum is present at the Annual Meeting. For
purposes of the election of directors, neither abstentions nor broker non-votes
will have any effect on the outcome of the vote. For purposes of the approval of
proposals 2 and 3, and the proposed amendments to the Company's Certificate of
Incorporation, both abstentions and broker non-votes will have the same effect
as votes against the proposed amendments. For purposes of the approval of
proposal 4,
<PAGE> 4
abstentions will have the same effect as votes against these proposals, and
broker non-votes will not have any effect on the outcome of the vote.
PROPOSAL NO. 1
ELECTION OF DIRECTORS
At the Annual Meeting, three (3) directors will be elected by the
shareholders of the Company to serve until the next Annual Meeting and until
their successors are elected and qualified.
Pursuant to the Company's Certificate of Incorporation and Bylaws, the
Board of Directors is divided into three classes. Each class serves for a
three-year term. The term of office of the first class expires at the annual
meeting of shareholders to be held in 1999 (Class One), the term of office of
the second class expires at the annual meeting of shareholders to be held in
2000 (Class Two) and the term of office of the third class expires at the Annual
Meeting (Class Three). David P. Sheets and Robert J. DeLorenzo, M.D., Ph.D.
currently serve as Class Three directors, Malcolm L. "Mac" Bailey currently
serves as the Class One director and there are no Class Two directors. In order
that each class include the same number of directors, the shareholders are being
requested at the Annual Meeting to elect a director for each class, as follows:
Malcolm L. "Mac" Bailey, Class One, Robert J. DeLorenzo, Class Two; and David P.
Sheets, Class Three.
Because the Board is divided into classes, only those directors in a
single class may be changed in any one year. Consequently, changing a majority
of the Board would generally require two years. Having a classified Board, which
may be regarded as an "anti-takeover" provision, may make it more difficult for
the Company's shareholders to change the majority of directors and thus have the
effect of maintaining the continuity of management.
INFORMATION WITH RESPECT TO NOMINEES
Set forth below are the names, ages and positions of the nominees, as
well as certain information furnished by them as to their business experience
for the last five years, other directorships held by them, and the years in
which each of them first became a director of the Company, as of the Record
Date:
<TABLE>
<CAPTION>
Director If Elected, Term as
Name Age Since Director Expires
---- --- -------- -------------------
<S> <C> <C> <C>
Malcolm L. "Mac" Bailey 55 May 1998 1999
(Class One)
Robert J. DeLorenzo, M.D., Ph.D. 50 February 1998 2000
(Class Two)
David P. Sheets 52 May 1998 2001
(Class Three)
</TABLE>
DAVID P. SHEETS has served as President and Chief Executive of the
Company since May 1998. From July 1996 to November 1997, he was Vice President
and Chief Financial Officer of Tri-Valley Growers, a manufacturer of canned
fruits and vegetables, and from April 1995 to July 1996, he was Executive Vice
President and Chief Financial Officer of Liggett Group, Inc., a manufacturer of
tobacco products. From 1984 to December 1994, Mr. Sheets held various executive
positions with R.J. Reynolds and its subsidiaries, including its primary
international tobacco products company and its Planters-Lifesavers subsidiary, a
snack food and confectionary products company.
ROBERT J. DELORENZO, M.D., PH.D. has served as the
Neurologist-in-Chief, Medical College of Virginia Hospitals, Professor and
Chairman, Neurology, Medical College of Virginia ("MCV"), Professor,
Biochemistry and Molecular Biophysics, MCV, Professor, Pharmacology and
Toxicology, MCV, and Director, Molecular Neurobiology Laboratories, MCV for more
than five years.
2
<PAGE> 5
MALCOLM L. "MAC" BAILEY has been the owner and President of Golden Leaf
Tobacco Company, a tobacco leaf dealer, and owner and President of S&M Brands,
Incorporated, a manufacturer of cigarettes, for more than five years. Mr. Bailey
is also President of the Virginia Agricultural Growers Association, a trade
association which includes approximately 85% of the tobacco farms in Virginia.
VOTE REQUIRED; RECOMMENDATION OF THE BOARD OF DIRECTORS
In order to be elected, a nominee must receive the vote of a plurality
of the votes cast by the holders of Common Stock, Class A Preferred Stock and
Series B Preferred Stock, voting as a single class, present and entitled to vote
at the Annual Meeting. THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" EACH
NOMINEE.
BOARD MEETINGS AND COMMITTEES
The Board of Directors did not hold any meetings during 1997.
The Board of Directors intends to establish an Audit Committee and a
Compensation Committee. The functions of the Audit Committee will be to make
recommendations to the Board of Directors regarding the engagement of the
Company's independent auditors and to review with management and the independent
auditors the Company's financial statements, basic accounting and financial
policies and practices, audit scope and competency of accounting personnel.
Members of the Audit Committee will be appointed annually by the Board of
Directors. If elected to the Board, Dr. DeLorenzo and Mr. Bailey are expected to
be appointed to serve on the Audit Committee.
The Compensation Committee will be responsible for reviewing and making
recommendations to the Board of Directors with respect to compensation of
executive officers, other compensation matters and awards under the Company's
stock option plan. Members of the Compensation Committee will be appointed
annually by the Board of Directors. If elected to the Board, Dr. DeLorenzo and
Mr. Bailey are expected to be appointed to serve on the Compensation Committee.
COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
All decisions relating to the compensation of executive officers for
the year ended December 31, 1997 were made by the Board of Directors, acting as
a whole. No executive officer of the Company serves as a member of the board of
directors or compensation committee of any entity which has one or more
executive officers serving as a member of the Company's Board of Directors.
REMUNERATION OF DIRECTORS
Directors receive no compensation for their services as directors. They
are reimbursed for their expenses.
PROPOSAL NO. 2
PROPOSED AMENDMENT TO CERTIFICATE OF INCORPORATION
TO INCREASE THE NUMBER OF AUTHORIZED SHARES
The Board of Directors has approved an amendment to the Company's
Certificate of Incorporation to increase the number of authorized shares of
Common Stock from 10,000,000 to 100,000,000. As of the Record Date, 9,883,311
shares of Common Stock were issued and outstanding.
The Board of Directors believes that it is in the best interests of the
shareholders to increase the number of authorized shares of Common Stock in
order to have additional authorized but unissued shares available for issuance
for appropriate corporate purposes. Of the additional shares of authorized
Common Stock, approximately 200,000 shares will be reserved for the issuance of
Common Stock upon conversion of the Class A Preferred Stock, approximately
43,627,280 shares will be reserved for the issuance of Common Stock upon
conversion of the Series B Preferred Stock, and 2,000,000 shares will be
reserved for issuance of Common Stock upon exercise of options which may be
granted under the Company's 1998 Stock Option Plan. The holders of Series B
Preferred Stock have advised
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<PAGE> 6
the Company of their intent to convert shares of Series B Preferred Stock into
approximately 43,627,280 shares of Common Stock upon the adoption of this
amendment. The Board of Directors believes that the availability of the
additional shares of authorized Common Stock will also provide the Company the
flexibility it may need in the future to raise capital, acquire technologies or
other companies, restructure debt, broaden ownership through stock dividends and
stock splits, attract and retain key personnel or for other corporate purposes.
The additional shares of Common Stock authorized pursuant to the
amendment will be identical to the outstanding shares of Common Stock. All
outstanding shares would continue to have one vote per share on all matters to
be voted on by the shareholders, including the election of directors.
The Board of Directors has no present agreement or arrangement to issue
any of the shares for which approval is sought, other than the issuance of
Common Stock upon conversion of the Class A Preferred Stock and the Series B
Preferred Stock and upon exercise of outstanding options and warrants. In
accordance with Delaware corporate law, the additional shares of Common Stock to
be authorized pursuant to the proposed amendment may be issued by the Company
without the expense and delay of a special shareholders' meeting. If the
amendment is approved by the shareholders, the Board of Directors does not
intend to solicit further shareholder approval prior to the issuance of any
additional shares of Common Stock, unless shareholder action is required by
applicable law, the Company's Certificate of Incorporation or Bylaws or the
rules of any stock exchange or market system on which the Company's securities
are then listed or traded. Frequently, opportunities arise that require prompt
action, and the Company believes that the delay necessitated for shareholder
approval of a specific issuance could be to the detriment of the Company and its
shareholders.
The increase in authorized Common Stock will not have any immediate
effect on the rights of existing shareholders. To the extent that the additional
authorized shares are issued in the future, except in the case of a stock split
or stock dividend, such issuances will dilute existing shareholders' ownership
of Common Stock. The holders of Common Stock have no preemptive rights or
similar rights to subscribe for or purchase any additional shares of Common
Stock that may be issued in the future.
The increase in the authorized number of shares of Common Stock and the
subsequent issuance of such shares could have the effect of delaying, deferring
or preventing a change in control of the Company without further action by the
shareholders. Shares of authorized and unissued Common Stock could (within the
limits imposed by applicable law) be issued in one or more transactions which
would make a change in control of the Company more difficult, and therefore less
likely. Any such issuance of additional stock could have the effect of diluting
the earnings per share and book value per share of outstanding stock ownership
or voting rights of persons seeking to obtain control of the Company.
In accordance with Delaware corporate law, if approved by the
shareholders, the proposed amendment will become effective upon the filing of a
certificate of amendment relating thereto with the Secretary of State of
Delaware, which will occur as promptly as practicable after the date of the
Annual Meeting.
A majority of the outstanding votes of Common Stock, voting as a
separate class, and a majority of the Common Stock, Class A Preferred Stock and
Series B Preferred Stock, voting together as a single class, are required to
approve the amendment to the Certificate of Incorporation to increase the number
of authorized shares of Common Stock to 100,000,000. THE BOARD OF DIRECTORS
RECOMMENDS A VOTE "FOR" THE PROPOSAL TO AMEND THE CERTIFICATE OF INCORPORATION
TO INCREASE THE NUMBER OF AUTHORIZED SHARES OF COMMON STOCK.
PROPOSAL NO. 3
PROPOSED AMENDMENT TO CERTIFICATE OF INCORPORATION
TO CHANGE CORPORATE NAME TO "______________________________________"
The Board of Directors has approved an amendment to the Company's
Certificate of Incorporation to change the name of the Company to "_____________
______________________". If the corporate name change is approved by the
shareholders, the Company intends to apply to have the Common Stock quoted under
the symbol "_____" on the Nasdaq Stock Market.
4
<PAGE> 7
The Company desires to change the name of the Company from Eye Technology, Inc.
to ________________ in order to align the Company's name with its tobacco and
pharmaceutical products and to emphasize the transition in the Company's
business.
In accordance with Delaware corporate law, if approved by the
shareholders, the proposed amendment will become effective upon the filing of a
certificate of amendment relating thereto with the Secretary of State of
Delaware, which will occur as promptly as practicable after the date of the
Annual Meeting. Assuming this proposal is adopted, it will not be necessary for
shareholders to surrender stock certificates. Instead, when certificates are
presented for transfer, new certificates bearing the new name will be issued.
A majority of the outstanding votes of Common Stock, Class A Preferred
Stock and Series B Preferred Stock, voting together as a single class, is
required to approve the amendment to the Certificate of Incorporation to change
the name of the Company to _____________________________________. THE BOARD OF
DIRECTORS RECOMMENDS A VOTE "FOR" THE PROPOSAL TO AMEND THE CERTIFICATE OF
INCORPORATION TO CHANGE THE NAME OF THE COMPANY.
PROPOSAL NO. 4
APPROVAL OF SALE OR DISPOSITION OF THE
COMPANY'S OPHTHALMIC PRODUCTS BUSINESS
The Board of Directors believes it is in the best interests of the
shareholders for the Company to concentrate its resources on the development of
the business of its subsidiary, Star Tobacco and Pharmaceuticals, Inc., which
consists of (a) the development of proprietary technology for the curing of
tobacco to prevent the formation of certain carcinogens, known as
tobacco-specific nitrosamines, otherwise present in tobacco and tobacco smoke,
(b) the development of products utilizing tobacco which has been cured pursuant
to the Company's proprietary process described above, (c) the manufacture and
sale of cigarettes and little cigars, and (d) the sale of a tobacco-flavored
chewing gum. This business accounts for approximately 82% of the Company's
consolidated assets and approximately 94% of the Company's consolidated
revenues. The Company intends to sell or otherwise dispose of the Company's
ophthalmic products business, which accounts for the remainder of its assets and
revenues. For both strategic and financial reasons, the Board of Directors
believes the best alternative to improve the Company's profitability and
maximize shareholder value is to focus on its core tobacco and pharmaceutical
business.
As of June 10, 1998, the Company has not entered into any definitive
agreements with respect to any specific assets to be divested by the Company and
no assurance can be given with respect to the prices at which any assets will be
sold, the timing of any such dispositions or even that any particular asset will
be sold.
A majority of the votes cast by holders of Common Stock, Class A
Preferred Stock and Series B Preferred Stock, voting as a single class, present
and entitled to vote at the Annual Meeting is required to approve the sale or
disposition of the Company's ophthalmic products business. THE BOARD OF
DIRECTORS RECOMMENDS A VOTE "FOR" THE PROPOSAL TO SELL OR DISPOSE OF THE
COMPANY'S INTRAOCULAR LENSES AND OTHER OPHTHALMIC PRODUCTS BUSINESS.
PROPOSAL NO. 5
ADOPTION OF 1998 STOCK OPTION PLAN
The Company believes it is necessary to adopt the 1998 Stock Option
Plan (the "Plan") in order to provide an effective method of recognizing
contributions to the success of the Company by executive officers, key employees
and nonemployee directors. The Company also believes that its ability to grant
stock options is critical to its success in attracting and retaining experienced
and qualified employees.
5
<PAGE> 8
VOTE REQUIRED; RECOMMENDATION OF BOARD OF DIRECTORS
A majority of the votes cast by holders of Common Stock, Class A
Preferred Stock and Series B Preferred Stock, voting as a single class, present
and entitled to vote at the Annual Meeting is required to approve the adoption
of the 1998 Stock Option Plan. THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A
VOTE "FOR" THE ADOPTION OF THE 1998 STOCK OPTION PLAN.
SUMMARY OF THE PLAN
Purpose. The purposes of the 1998 Plan are to provide additional
incentives to those executive officers, key employees and nonemployee directors
of the Company and its subsidiaries whose substantial contributions are
essential to the continued growth and success of the Company's business, to
strengthen their commitment to the Company and its subsidiaries, to motivate
those executive officers, key employees and nonemployee directors to perform
their assigned responsibilities faithfully and diligently, and to attract and
retain competent and dedicated individuals whose efforts will result in the
long-term growth and profitability of the Company.
Eligibility. The 1998 Plan provides that Nonqualified stock options may
be granted to executive officers, key employees and nonemployee directors of the
Company or any subsidiary of the Company. Incentive stock options may be granted
only to employees, including executive officers and directors who are employees,
of the Company or any subsidiary of the Company.
Number of Shares Subject to Stock Options. The maximum number of
shares of Common Stock that may be issued upon exercise of options granted under
the Plan is 2,000,000.
Incentive and Nonqualified Stock Options. The 1998 Plan permits the
granting of stock options that either qualify as incentive stock options
("Incentive Stock Options" or "ISOs") under Section 422 of the Internal Revenue
Code of 1986, as amended (the "Code"), or do not so qualify ("Nonqualified Stock
Options" or "NSOs").
The term of each option is fixed by the administrator but may not
exceed ten years from the date of grant in the case of ISOs or five years from
the date of grant in the case of ISOs granted to the holder of Common Stock
possessing more than 10% of the total combined voting power of all classes of
stock of the Company or any subsidiary (a "10% Shareholder"). When the fair
market value of shares subject to ISOs first exercisable in one calendar year is
greater than $100,000, the excess options shall be treated as NSOs. For these
purposes, fair market value is determined on the date of grant, and ISOs shall
be taken into account in the order in which they were granted. The administrator
determines the time or times each option may be exercised. Options may be made
exercisable in installments, and the exercisability of options may be
accelerated by the administrator. The Company reserves the right under the 1998
Plan to pay an optionee the net cash value (the fair market value less the
exercise price) of the stock subject to an option at the time the Company
receives a notice of exercise of the option from the optionee.
Option Price. The option exercise price for each share covered by an
ISO may not be less than 100% of the fair market value of a share of Common
Stock on the date of grant of such option. In the case of ISOs granted to a 10%
Shareholder, the option exercise price for each share covered by such option may
not be less than 110% of the fair market value of a share of Common Stock on the
date of grant of such option. In the case of an NSO, the per share exercise
price shall be determined by the administrator. For so long as the Company's
Common Stock is traded on the Nasdaq National Market, the fair market value of a
share of Common Stock shall be the last sales price for such stock (or the
closing bid if no sales were reported) as quoted on such system on the date of
grant.
Consideration. The consideration to be paid for shares issued upon
exercise of options granted under the 1998 Plan, including the method of
payment, is determined by the administrator (and, in the case of ISOs,
determined at the time of grant) and may consist entirely of (1) cash, (2)
check, (3) shares of Common Stock which, in the case of shares acquired upon
exercise of an option, have been beneficially owned for at least six months or
which were not acquired directly or indirectly from the Company, with a fair
market value on the exercise date equal to the aggregate exercise price of the
shares being purchased, or (4) any combination of the foregoing methods.
Miscellaneous Provisions. Under the 1998 Plan, in the event of an
optionee's termination of employment or consulting relationship for any reason
other than death or total and permanent disability, an option shall terminate
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<PAGE> 9
immediately. If an optionee retires in good standing for reasons of age (but not
due to a total and permanent disability), the option will be exercisable for
three months following such retirement, but only to the extent it was
exercisable at the date of such retirement and to the extent that the term of
the option has not expired. If an optionee's employment or consulting
relationship is terminated as a result of the optionee's total and permanent
disability, the option will be exercisable for twelve months following such
termination, but only to the extent it was exercisable at the date of
termination and to the extent that the term of the option has not expired. If an
optionee's employment or consulting relationship is terminated by reason of the
optionee's death, the option will be exercisable by the optionee's estate or
successor for twelve months following death, but only to the extent it was
exercisable at the date of death and to the extent that the term of the option
has not expired.
All options granted under the 1998 Plan are evidenced by a stock option
agreement between the Company and the optionee to whom such option is granted.
Options granted to persons who are subject to Section 16 of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), are subject to any
additional restrictions applicable to options granted to such persons in
compliance with Rule 16b-3 of the Exchange Act.
Nontransferability of Options. Options granted pursuant to the 1998
Plan are nontransferable by the optionee, other than by will or by the laws of
descent and distribution and may be exercised, during the lifetime of the
optionee, only by the optionee.
Adjustment Upon Changes in Capitalization. In the event any change,
such as a stock split or dividend, is made in the Company's capitalization which
results in an increase or decrease in the number of outstanding shares of Common
Stock without receipt of consideration by the Company, an appropriate adjustment
shall be made in the number of shares which have been reserved for issuance
under the 1998 Plan and the price per share covered by each outstanding option.
Change of Control. In the event of a Change in Control (as defined in
the 1998 Plan), (i) all options outstanding on the date of such Change in
Control shall become immediately and fully exercisable and (ii) an optionee will
be permitted to surrender for cancellation within sixty (60) days after such
Change in Control any option or portion of any option to the extent not yet
exercised, and the optionee will be entitled to receive a cash payment in an
amount equal to the excess, if any, of (x) (A) in the case of NSOs, the greater
of (1) the fair market value, on the date preceding the date of surrender, of
the shares subject to the option or portion thereof surrendered or (2) the
adjusted fair market value (as determined pursuant to the 1998 Plan) of the
shares subject to the option or portion thereof surrendered or (B) in the case
of an ISO, the fair market value, at the time of surrender, of the shares
subject to the option or portion thereof surrendered, over (y) the aggregate
purchase price of such shares under the option; provided, however, that in the
case of an option granted within six (6) months prior to the Change in Control
to any optionee who may be subject to liability under Section 16(b) of the
Exchange Act, such optionee shall be entitled to surrender for cancellation such
optionee's option during the sixty (60) day period commencing upon the
expiration of six (6) months from the date of grant of any such option.
Liquidation, Dissolution, Merger or Consolidation. Subject to the
provisions regarding a Change of Control, in the event of (i) the liquidation or
dissolution of the Company or (ii) a merger or consolidation of the Company (a
"Transaction"), all outstanding options shall continue in effect in accordance
with their respective terms and each optionee shall be entitled to receive in
respect of each share subject to any outstanding options, as the case may be,
upon exercise of any option, the same number and kind of stock, securities,
cash, property or other consideration that each holder of a share was otherwise
entitled to receive in the Transaction in respect of a share.
Amendment and Termination. The Board may at any time amend, alter,
suspend or terminate the 1998 Plan, but such amendment, alteration, suspension
or termination shall not adversely affect any stock option then outstanding
under the 1998 Plan, without the written consent of the optionee. To the extent
necessary and desirable to comply with applicable state and federal laws and the
Code, the Company shall obtain shareholder approval of any amendment to the 1998
Plan in such a manner and to such a degree as required.
Administration. The 1998 Plan provides for administration by the
Compensation Committee of the Board, which shall consist of two or more "outside
directors." Subject to the other provisions of the 1998 Plan, the administrator
has the authority to determine the employees, nonemployee directors or
consultants to whom, and the time or times at which, options are granted, the
number of shares to be represented by each option and the other terms and
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conditions of such option. The interpretation and construction of any provision
of the 1998 Plan by the administrator shall be final and binding.
TAX INFORMATION
Options granted under the 1998 Plan may be either ISOs or NSOs.
An optionee who is granted an ISO will not recognize income either at
the time the option is granted or upon its exercise, although the exercise may
subject the optionee to the alternative minimum tax. Upon a sale or exchange of
the shares more than two years after the grant of the option and one year after
its exercise, any gain or loss will be treated as long-term capital gain or
loss. If these holding periods are not satisfied, the optionee will recognize
ordinary income at the time of the sale or exchange equal to the difference
between the exercise price and the lower of (i) the fair market value of the
shares on the date of exercise or (ii) the sale price of the shares. A different
rule of measuring ordinary income upon such a premature disposition may apply if
the optionee is also an officer, director, or 10% Shareholder of the Company.
Any gain or loss recognized on such a premature disposition of the
shares in excess of the amount treated as ordinary income will be characterized
as long-term or short-term capital gain or loss, depending on the holding
period. Generally, the Company will be entitled to a deduction in the same
amount as the ordinary income recognized by the optionee at the time of such
disposition.
Options that do not qualify as ISOs are referred to as NSOs. An
optionee will not recognize income at the time an NSO is granted. However, upon
its exercise, the optionee will recognize ordinary income generally measured as
the excess of the then fair market value of the shares over the exercise price.
Any ordinary income recognized in connection with the exercise of an NSO by an
optionee who is also an employee of the Company will be subject to tax
withholding by the Company. Generally, the Company will be entitled to a tax
deduction in the same amount as the ordinary income recognized by the optionee
upon exercise of an NSO.
Upon resale of the shares by the optionee, any difference between the
sale price and the optionee's purchase price, to the extent not recognized as
ordinary income as described above, will be treated as long-term or short-term
capital gain or loss, depending on the holding period.
THE FOREGOING IS ONLY A SUMMARY OF THE EFFECT OF FEDERAL INCOME
TAXATION UPON THE OPTIONEE AND THE COMPANY WITH RESPECT TO THE GRANT AND
EXERCISE OF OPTIONS UNDER THE 1998 PLAN. IT DOES NOT PURPORT TO BE COMPLETE, AND
IT DOES NOT DISCUSS THE TAX CONSEQUENCES OF THE OPTIONEE'S DEATH OR THE INCOME
TAX LAWS OF ANY MUNICIPALITY, STATE OR FOREIGN COUNTRY IN WHICH THE OPTIONEE MAY
RESIDE.
OTHER INFORMATION
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The table below sets forth as of the Record Date certain information
with respect to the beneficial ownership of the Company's Common Stock, Class A
Preferred Stock and Series B Preferred Stock by each beneficial owner of more
than 5% of each class of the Company's voting securities, each Director of the
Company, the Named Executive Officer (as defined below) and all Directors and
Officers and significant personnel of the Company as a group. Shares of Class A
Preferred Stock are convertible into shares of Common Stock at a rate of 80
shares of Common Stock for each share of Class A Preferred Stock. Shares of
Series B Preferred Stock are convertible into shares of Common Stock at a rate
of 3,280 shares of Common Stock for each share of Series B Preferred Stock.
Consequently, shares of Common Stock shown in the table include shares of Common
Stock into which the shares of Class A Preferred Stock and Series B Preferred
Stock are convertible. Shares of Common Stock, Class A Preferred Stock and
Series B Preferred Stock all vote as one class. Holders of Common Stock are
entitled to one vote for each share held, holders of Class A Preferred Stock are
entitled to 80 votes for each share held, and holders of Series B Preferred
Stock are entitled to 500 votes for each share held.
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<PAGE> 11
<TABLE>
<CAPTION>
PERCENTAGE OF
VOTING POWER
PERCENTAGE OF SECURITIES
AMOUNT OF VOTING OWNED IF ALL
AND POWER OF ALL SHARES OF
PERCENTAGE AMOUNT AND SECURITIES SERIES B
NAME AND ADDRESS OF AMOUNT OF OF CLASS A PERCENTAGE OF OWNED AS OF PREFERRED
INDIVIDUAL OR IDENTITY COMMON PREFERRED SERIES B THE RECORD STOCK ARE
OF GROUP STOCK STOCK (1) PREFERRED STOCK DATE CONVERTED
-------- ----- --------- --------------- ---- ---------
<S> <C> <C> <C> <C> <C>
Jonnie R. Williams 42,498,890 (1)(2) -0- 12,426,979 (1)(2) 48.1% 79.4%
16 S. Market Street --% 93.4%
Petersburg, VA 23803
Francis E. O'Donnell, 42,498,890 (1)(3) -0- ) 12,426,979 (1)(3) 48.1% 79.4%
Jr., M.D. --% 93.4%
709 The Hamptons Lane
Chesterfield, MO 63017
David P. Sheets 200,000 -0- -0- 1.2% .4%
16 S. Market Street --%
Petersburg, VA 23803
Robert J. DeLorenzo, 500,000 -0- 60.9756 1.8% .9%
M.D., Ph.D., M.P.H. --% .5%
Medical College of
Virginia
MCV Box 980599
Richmond, VA 23298
Malcolm L. Bailey -0- -0- -0- --% --%
Route 3, Box 90 --% --%
Keysville, VA 23947
Edward L. Tucker 200,000 250 -0- 1.2% .4%
55 Union Ave. 100% --%
Sudbury, MA 01776
Robert J. Fitzsimmons 1,152,281 -0- -0- 7.0% 2.2%
1997 Sloan Place --% --%
St. Paul, MN 55117
All Directors and 43,198,890 -0- 12,487.9546 51.3% 80.7%
Officers and Significant --% 93.9%
Personnel (5 Persons)
</TABLE>
- ----------
(1) Includes 11,043.831 shares of Series B Preferred Stock, convertible into
36,223,765 shares of Common Stock, owned of record by Regent Court
Partnership, a general partnership of which Jonnie R. Williams and
Francis E. O'Donnell, Jr. are the sole partners.
(2) Includes 691.5740 shares of Series B Preferred Stock, convertible into
2,268,362 shares of Common Stock, owned by a trust for the benefit of the
children of Jonnie R. Williams. Mr. Williams disclaims beneficial
ownership of these shares.
(3) Includes 691.5740 shares of Series B Preferred Stock, convertible into
2,268,362 shares of Common Stock, owned by a trust for the benefit of the
descendants of Francis E. O'Donnell, Jr. Also includes 691.5740 shares of
Series B Preferred Stock,
9
<PAGE> 12
convertible into 2,268,362 shares of Common Stock, owned by trusts of
which Dr. O'Donnell is trustee but in which neither he nor any member of
his family has a beneficial interest. Dr. O'Donnell disclaims any
beneficial interest in such shares.
EXECUTIVE OFFICERS
Set forth below is information regarding the executive officers of the
Company, and their respective ages and positions as of the Record Date:
<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<S> <C> <C>
David P. Sheets 52 President and Chief Executive Officer, Director
Jonnie R. Williams 43 Director of Product Development, Director of
Marketing
</TABLE>
SUMMARY COMPENSATION TABLE
The following table sets forth certain information concerning
compensation paid and accrued to the Chief Executive Officer of the Company for
the three fiscal years ended December 31, 1997 (the "Named Executive Officer").
Mr. Fitzsimmons resigned as Chief Executive Officer and Chairman of the Board on
February 6, 1998, and resigned as President on May 18, 1998. The Chief Executive
Officer was the only executive officer or significant employee whose annual
compensation exceeded $100,000 in any of such fiscal years.
<TABLE>
<CAPTION>
Annual Annual Compensation All Other
Name Compensation Paid Accrued But Not Paid Compensation
---- ----------------- -------------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Robert J. Fitzsimmons 1995 - $179,156 1995 - $ --- 1995 - (2)
Chairman of the Board, 1996 - 103,179 1996 - 58,831(1) 1996 - $ 15,706
President and Chief 1997 - 15,456 1997 - 147,619(1) 1997 - 15,706
Executive Officer
</TABLE>
- ----------
(1) See Certain Relationships and Related Transactions below regarding
the issue to Mr. Fitzsimmons of shares of Common Stock of the
Company in partial consideration of the cancellation of
indebtedness of the Company to Mr. Fitzsimmons, including
indebtedness for accrued compensation set forth in the above
table.
(2) Less than 10% of compensation paid for the year.
OPTIONS
In 1994, Mr. Fitzsimmons was granted an option to acquire 150,000 shares
of Common Stock at an exercise price of $0.50 per share. The option was
exercisable with respect to 50,000 shares at year-end. The option was to expire
on February 28, 1999. As of year-end, the option was out-of-the-money. No
options were granted to Mr. Fitzsimmons in 1997. See "Certain Relationships and
Related Transactions."
EMPLOYMENT CONTRACTS AND CHANGE OF CONTROL ARRANGEMENTS
The Company entered into a five-year employment agreement with Robert J.
Fitzsimmons on November 1, 1989, which provided that Mr. Fitzsimmons would serve
as Chief Executive Officer of the Company at an annual salary of $120,000
subject to increase by the Board of Directors. Such agreement was renewed for an
additional five-year term beginning November 1, 1994. Mr. Fitzsimmons' annual
salary was increased twice by the Board, once in 1990 and again in 1991, to a
level of $192,000. Mr. Fitzsimmons' employment agreement provided that, in the
event of a hostile change in control of the Company, and in the event Mr.
Fitzsimmons' employment was terminated as a result thereof, the Company was
obligated to make a cash payment to Mr. Fitzsimmons totaling 299.99% of his
average annual base salary during the five-year period prior to termination.
This employment agreement was canceled on February 6, 1998,
10
<PAGE> 13
with Mr. Fitzsimmons releasing the Company from any liability under the
agreement in consideration for the issue of shares of Common Stock of the
Company to Mr. Fitzsimmons. See "Certain Relationships and Related Transactions"
below.
In May 1998, the Company entered into a two-year employment agreement
with David P. Sheets to serve as President and Chief Executive Officer of the
Company. The agreement provides for a base salary of $250,000 per year with a
targeted bonus of up to 50% of the base salary based upon certain performance
criteria. Mr. Sheets received 200,000 shares of Common Stock and an option to
acquire an additional one million shares at a price of $2.00 per share with such
options vesting over the two-year period of the agreement. In addition, Mr.
Sheets is entitled to various benefits, including health insurance, use of an
automobile, reimbursement of relocation expenses, and death and disability
benefits. In the event of a hostile change of control, Mr. Sheets is entitled to
receive a lump sum payment equal to the greater of 150% of his base salary for
an 18-month period, or his base salary for the remainder of the term of the
agreement.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Throughout 1997, the Company owed Robert J. Fitzsimmons, Chairman of the
Board, President and Chief Executive Officer of the Company during that year,
the sum of $172,500 plus accrued interest in consideration for loans provided by
Mr. Fitzsimmons in March 1994 and April 1995. The sums bear interest at two
percent (2%) in excess of the prime rate. At December 31, 1997, the amount of
accrued interest was $48,343.
In February 1994, the Company issued to Mr. Fitzsimmons a stock option to
acquire 150,000 shares of Common Stock at $0.50 per share. The option was due to
expire on February 28, 1999. On February 5, 1998, 50,000 of such shares were
exercisable and options to purchase 100,000 shares were exercisable only upon
satisfaction of certain conditions which had not yet occurred. On February 6,
1998, the Company agreed to issue to Mr. Fitzsimmons a total of 887,500 shares
of Common Stock of the Company in consideration for (i) cancellation of
indebtedness of the Company to Mr. Fitzsimmons for unpaid compensation and for
the loans of Mr. Fitzsimmons to the Company in the aggregate amount at February
6, 1998 of $378,950, (ii) the mutual termination of Mr. Fitzsimmons' employment
contract with the Company (See "Item 10. Executive Compensation" above), and
(iii) cancellation of options held by Mr. Fitzsimmons to purchase shares of
Common Stock of the Company, as described above.
Samuel P. Sears, Jr., a Director of the Company throughout 1997 and,
effective February 6, 1998 until May 19, 1998, Chairman and Chief Executive
Officer of the Company, provided legal services to the Company during 1995 and
1996. Fees payable to Mr. Sears for such services for those years were $38,175
and $500, respectively. As of December 31, 1997, Mr. Sears was owed a total of
$56,332 for legal services. In February 1998, Mr. Sears received a total of
225,300 shares of Common Stock in consideration of cancellation of such
indebtedness.
In November 1993, the Company issued to Mr. Sears a stock option to
acquire 50,000 shares of Common Stock at $0.50 per share in recognition of his
services as a Director and counsel to the Company since 1985. The option was due
to expire on January 31, 2001. On February 6, 1998, the Company issued to Mr.
Sears 15,000 shares of Common Stock of the Company in consideration of the
cancellation of his stock option.
The foregoing transactions were among affiliated parties and necessarily
involved conflicts of interest. The Company believes that these transactions
were on no less favorable terms than were reasonably available from unaffiliated
third parties.
The Company may in the future enter into other transactions incident to
its business with its directors, officers, shareholders and other affiliates.
The Company's policy is that any transaction in the future with an affiliated
entity, executive officer or director will be subject to review and approval by
a majority of the Company's directors who have no interest in the transaction
and will be on no less favorable terms than the Company could obtain from
unaffiliated parties.
11
<PAGE> 14
INDEPENDENT AUDITORS
Olsen Thielen & Co., Ltd. served as independent auditors for the Company
for the year ended December 31, 1997. Representatives of Olsen Thielen & Co.,
Ltd. are not expected to be present at the Annual Meeting. The Board of
Directors has not yet selected the independent auditors of the Company for the
year ended December 31, 1998.
SECURITIES REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires the Company's officers and directors and persons who own more than 10%
of a registered class of the Company's equity securities to file reports of
ownership and changes in ownership with the Securities and Exchange Commission
(the "SEC"). Officers, directors and greater than 10% beneficial owners are
required by SEC regulations to furnish the Company with copies of all Section
16(a) forms they file. Based solely on a review of the copies of the forms
furnished to the Company, or written representations that no Forms 5 were
required, the Company believes that during the fiscal year ended December 31,
1997 all Section 16(a) filing requirements applicable to its officers, directors
and greater than 10% beneficial owners were complied with, except that Mr.
Fitzsimmons acquired 6,481 shares of Common Stock in December 1997 for which a
Form 4 was filed in March 1998.
NO SHAREHOLDER SOLICITATION
No proxies are being solicited for this Annual Meeting, and shareholders
are requested not to send proxies to the Company.
SHAREHOLDER PROPOSALS
Proposals of shareholders of the Company that are intended to be
presented by such shareholders at the Company's 1999 Annual Meeting must be
received by the Company, addressed to Secretary, Eye Technology, Inc., 16
South Market Street, Petersburg, Virginia 23803, no later than February 10,
1999, for inclusion in the proxy statement relating to that meeting.
OTHER BUSINESS
The Board of Directors is not aware of any other matter which may be
presented for action at the Annual Meeting, other than the matters set forth in
this Information Statement.
ANNUAL AND QUARTERLY REPORTS
Copies of the Company's Annual Report on Form 10-K for the year ended
December 31, 1997 and the Company's Quarterly Report on Form 10-Q for the
quarter ended March 31, 1998 are enclosed.
By Order of the Board of Directors
David P. Sheets
President and Chief Executive Officer
Petersburg, Virginia
June 10, 1998
12
