SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
Filed by 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-b(e)(2)) [ ] Definitive Proxy Statement [ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss. 240.14a-11(c) or ss. 240.14a-12
LaserSight Incorporated
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement if other than the 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)(1) 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:
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LASERSIGHT INCORPORATED
12161 Lackland Road
St. Louis, Missouri 63146
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NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD DECEMBER 10, 1997
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To the Stockholders:
NOTICE IS HEREBY GIVEN that a Special Meeting of Stockholders (the
"Special Meeting") of LaserSight Incorporated (the "Company") will be held at
the Sheraton Plaza Hotel, 900 West Port Plaza, St. Louis, Missouri 63146, on
December 10, 1997 at 10:00 a.m. local time, solely for the following purposes:
1. To vote on a proposal to approve and reserve for issuance shares of
the Company's Common Stock issuable upon the conversion of shares of
the Company's Series B Convertible Participating Preferred Stock,
$.001 par value (the "Series B Preferred Stock"), issued in an August
1997 private placement, as dividends and other payments relating to
such Series B Preferred Stock and in respect of related investor and
placement agent warrants. Such approval will remove the limitation on
the number of shares of Common Stock issuable upon conversion
currently required in order for the Company to be in compliance with
Rule 4460(i)(1)(D) of the Nasdaq Stock Market Inc.
2. To vote on a proposal to approve an amendment to the Corporation's
Certificate of Incorporation to increase the number of authorized
shares of Common Stock from 20 million to 40 million.
3. To vote on a proposal to approve an adjournment of the special meeting
to another date or place for the purpose of soliciting additional
proxies in the event that there are not sufficient votes at the time
of the Special Meeting to approve the 1997 Private Placement Issuances
or the Charter Amendment.
The Board of Directors has fixed the close of business on October 17, 1997
as the record date for the determination of the stockholders entitled to notice
of, and to vote at, the Special Meeting or any adjournment or postponement
thereof.
The enclosed proxy is solicited by the Board of Directors of the Company,
which unanimously recommends that stockholders vote FOR all proposals. Please
refer to the attached Proxy Statement, which forms a part of this Notice and is
incorporated herein by reference, for further information with respect to the
business to be transacted at the Special Meeting.
Whether or not you plan to attend the Special Meeting in person, it is
important that you sign, date and return promptly the enclosed proxy in the
envelope provided to assure that your shares are represented at the Special
Meeting. If you subsequently decide to attend the Special Meeting and wish to
vote your shares in person, you may do so. Your prompt attention will be much
appreciated.
By Order of the Board of Directors
Gregory L. Wilson
Secretary
St. Louis, Missouri
November __, 1997
THE ENCLOSED PROXY, WHICH IS BEING SOLICITED ON BEHALF OF THE BOARD OF
DIRECTORS OF THE COMPANY, CAN BE RETURNED IN THE ENCLOSED ENVELOPE, WHICH
REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES.
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LASERSIGHT INCORPORATED
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PROXY STATEMENT
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INTRODUCTION
General
The enclosed proxy is solicited by and on behalf of the Board of Directors
of LaserSight Incorporated, a Delaware corporation (the "Company"), in
connection with the Special Meeting of Stockholders of the Company (the "Special
Meeting") to be held at 10:00 a.m. local time at the Sheraton Plaza Hotel, 900
West Port Plaza, St. Louis, Missouri 63146, on December 10, 1997, and any
adjournment or postponement thereof. At the Special Meeting, stockholders will
be asked to consider and vote on the following proposals:
1. to approve and reserve for issuance shares of the Company's Common
Stock, $.001 par value ("Common Stock") issuable upon the conversion of
shares of the Company's Series B Convertible Participating Preferred Stock,
$.001 par value (the "Series B Preferred Stock") issued in an August 1997
private placement, as dividends, if any, and payments thereon and in
respect of related investor and placement agent warrants (such issuances of
Common Stock are collectively referred to as the "1997 Private Placement
Issuances"),
2. to amend the Certificate of Incorporation to increase the authorized
number of shares of Common Stock from 20,000,000 to 40,000,000 (the
"Charter Amendment"), and
3. to approve an adjournment of the special meeting to another date or
place for the purpose of soliciting additional proxies in the event that
there are not sufficient votes at the time of the Special Meeting to
approve the 1997 Private Placement Issuances or the Charter Amendment (the
"Adjournment Proposal").
Only stockholders of record of shares of Common Stock at the close of
business on October 17, 1997, the record date for the Special Meeting fixed by
the Board of Directors, are entitled to vote at the Special Meeting. On that
date, there were outstanding and entitled to vote at the Special Meeting
9,984,672 shares of Common Stock, each of which is entitled to one vote at the
Special Meeting. Holders of the Series B Preferred Stock are not entitled to
notice of, or to vote at, the Special Meeting. It is expected that this Proxy
Statement and accompanying proxy card will first be mailed to stockholders on or
about November __, 1997.
The cost of soliciting proxies will be paid by the Company. Proxies may be
solicited by directors, officers and employees of the Company in person or by
mail, telephone or facsimile transmission, but such persons will not be
specially compensated for such services. Kissel-Blake Inc., 110 Wall Street, New
York, NY 10005, (telephone: (212) 344-6733), has been retained to assist in
soliciting proxies by mail, telephone, facsimile or personal solicitation for a
fee of approximately $6,000, plus expenses.
The Company's executive offices are located at 12161 Lackland Road, St.
Louis, Missouri, 63146, telephone (314) 469-3220. References herein to the
"Company" refer to LaserSight Incorporated and its subsidiaries, unless the
context otherwise requires.
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Voting and Revocation of Proxies
All shares represented by the accompanying proxy, if the proxy is properly
executed, returned and not revoked, will be voted as specified by the
stockholder. If no contrary instructions are given, such shares will be voted
FOR approval of the 1997 Private Placement Issuances, FOR approval of the
Charter Amendment and FOR approval of the Adjournment Proposal. As of the date
of this Proxy Statement, the Board of Directors does not know of any other
matter which will be brought before the Special Meeting. Under the Company's
bylaws, the only business that may be conducted at a special meeting of
stockholders is that which is set forth in the related notice of meeting.
Although not expected, if any other matter properly comes before the Special
Meeting, or any adjournment or postponement thereof, which may properly be acted
upon, the proxies solicited hereby will be voted on such matter in accordance
with the discretion of the proxy holders named therein unless otherwise
indicated.
Any stockholder has the power to revoke his or her proxy at any time before
it has been voted by filing with the Corporate Secretary of the Company an
instrument revoking it, by submitting a substitute proxy bearing a later date or
by voting in person at the Special Meeting.
A majority of the outstanding shares of the Company's Common Stock,
represented in person or by proxy, will constitute a quorum at the Special
Meeting. Shares represented by proxies that reflect abstentions or "broker
non-votes" will be counted as shares that are present and entitled to vote for
purposes of determining the presence of a quorum. Proxies that reflect
abstentions as to a particular proposal will be treated as voted for purposes of
determining the approval of that proposal and will have the same effect as a
vote against that proposal.
The affirmative vote of the holders of a majority of the shares of Common
Stock cast at the Special Meeting is required to authorize and approve the 1997
Private Placement Issuances and the Adjournment Proposal. Proxies that reflect
broker non-votes will be treated as unvoted for purposes of determining approval
and will not be counted as votes for or against Proposal No. 1 or Proposal No.
3.
Because the Charter Amendment requires the approval of the majority of the
shares of Common Stock outstanding, a broker non-vote will be counted as a vote
against Proposal No. 2.
PROPOSAL NO. 1:
APPROVAL OF 1997 PRIVATE PLACEMENT ISSUANCES
General
On August 29, 1997, the Company received aggregate net proceeds of
approximately $15.0 million (after cash fees to the placement agent and
estimated transaction expenses) from the issuance of shares of Series B
Preferred Stock and agreed to issue to the investors and the placement agent
certain warrants to purchase an aggregate of 790,000 shares of Common Stock are
(the "Series B Warrants"). The proceeds were used to purchase various patents
from International Business Machines Corporation ("IBM") relating to the use of
ultraviolet light for laser vision correction as well as all non-ophthalmic
applications (the "IBM Patents"). These patents represent fundamental claims in
13 countries including the United States. See Appendix I for additional
information regarding the IBM Patents.
<PAGE>
Such transactions are referred to herein as the "1997 Private Placement,"
and the related securities issuances (including shares of Common Stock issuable
upon the conversion of shares of Series B Preferred Stock or as payments in
respect of shares of Series B Preferred Stock, and upon exercise and conversion
of the Series B Warrants) are referred to as the "1997 Private Placement
Issuances." All of the securities sold in the 1997 Private Placement were sold
in a private placement solely to accredited investors.
Approval of the 1997 Private Placement Issuances is sought in order to
satisfy the stockholder approval requirements contained in the Company's listing
agreement with the Nasdaq National Market in the event that the 1997 Private
Placement Issuances require that more than approximately 1,995,532 shares of
Common Stock (slightly less than 20.0% of the shares of Common Stock outstanding
on the date of the 1997 Private Placement) be issued in connection therewith.
Under the Nasdaq's rules, this calculation is based solely on the shares
outstanding and does not consider the effect of any other common stock
equivalents that may be outstanding. Specifically, such outstanding stock amount
excludes all shares issuable in respect of outstanding options and warrants. See
"--Introduction," "--Nasdaq Listing Obligation" and "Description of Capital
Stock."
On October 28, 1997, the Company used proceeds from the exclusive license
in the vascular and cardiovascular fields of the patents acquired to redeem
$3,050,000 of the face amount of the Series B Preferred Stock. The Company is
continuing to negotiate with industry sources regarding royalty payments and in
one case a lump sum royalty payment that was in discussion at the time of the
transaction. However, there can be no assurances as to how many, if any,
additional shares of the Series B Preferred Stock will be redeemed prior to
January 26, 1998.
The Company has not entered into any other material license agreements to date.
Introduction
The exact number of shares of Common Stock issuable upon full consummation
of the 1997 Private Placement Issuances cannot currently be estimated because
the Series B Preferred Stock is subject to adjustment mechanisms which cause the
number of shares of Common Stock issuable to be dependent on future events,
principally consisting of the future trading prices of the Common Stock in the
marketplace and the conversion decisions of holders of Series B Preferred Stock.
The number of shares of Common Stock issuable upon full consummation of the 1997
Private Placement Issuances will, generally, vary inversely with the market
price of the Common Stock. Under the terms of the Series B Preferred Stock,
holders generally are not required to convert such shares prior to the third
anniversary of the original date of issuance. Depending on the market price of
the Common Stock during such period, and the conversion formulas applicable to
the Series B Preferred Stock at the time of conversion, such conversions could
require the issuance of more than approximately 1,995,532 shares of Common
Stock.
The number of shares of Common Stock issuable upon conversion of shares of
Series B Preferred Stock (the "Conversion Shares") will equal the liquidation
preference of the shares being converted divided by the then-effective
conversion price applicable to the Common Stock (the "Conversion Price"). The
Conversion Price as of any date following the date of issuance shall be the
lesser of (i) $6.68 per share or (ii) the "Variable Conversion Price," defined
as the average of the three (3) lowest Closing Bid Prices per share of Common
Stock during the Lookback Period (as herein defined) (subject to equitable
adjustment for any stock splits, stock dividends, reclassifications or similar
events during the Lookback Period), subject to adjustment as provided herein.
For purposes hereof, the "Lookback Period" shall mean the period of 20
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consecutive trading days ending on the trading day immediately preceding the
Conversion Date; provided, however, that in the event the average Closing Bid
Price of the Common Stock during the period of five consecutive trading days
ending on the date 180 days after August 29, 1997 is less than $5.1375 per
share, the Lookback Period shall be the period of 30 consecutive trading days
ending on the trading day immediately preceding the Conversion Date. As of
November 3, 1997 the Variable Conversion Price was $4.2083 per share whether a
20 day or a 30 day Lookback Period was applied. The terms of the Series B
Preferred Stock do not provide for any limit on the number of shares of Common
Stock which the Company may be required to issue in respect thereof.
The Company's listing agreement with the Nasdaq National Market requires
stockholder approval in the event that the 1997 Private Placement Issuances
require more than approximately 1,995,532 shares of Common Stock be issued in
connection therewith (slightly less than 20.0% of the shares of Common Stock
outstanding on the date of the 1997 Private Placement). Such outstanding share
amount excludes all Common Stock equivalents outstanding as of such date,
including shares issuable in respect of outstanding options and warrants.
In addition, should the Company fail to meet all its obligations subsequent
to August 29, 1997, including meeting certain deadlines in conversion or
registration of the securities, the investors have the option of receiving
additional shares of Series B Preferred Stock as additional payments. Such
shares would increase the otherwise required number of shares of Common Stock
upon conversion.
If the stockholder approval sought hereby to satisfy the Nasdaq requirement
is not obtained, the Company will be prohibited under the terms of its listing
agreement with Nasdaq from issuing more than approximately 1,995,532 shares of
Common Stock in connection with the 1997 Private Placement Issuances. In such
event, the Company would have to satisfy further obligations with cash. One such
obligation would be to return an estimated $10,938,000 to the holders of the
Series B Preferred Stock (including a premium of 25%, or approximately
$2,188,000), assuming a Variable Conversion Price of $4.2083 per share and a
market price of the common stock of $4.375 per share (based on market data on
the Nasdaq National Market as of November 3, 1997) and completion of the
redemption by January 2, 1998. The Company has not established a reserve of cash
and marketable securities to satisfy this obligation, and there can be no
assurance that the Company will have available the cash resources to satisfy
future obligations which might arise, or that such payments would not have a
material adverse effect on the Company's financial position or ability to
execute its growth plan. See "--Consequences if Stockholder Approval Not
Obtained" and "--Use of Proceeds."
Of the $16.0 million in gross proceeds from the 1997 Private Placement,
$14.9 million was paid to IBM to finance the purchase of the IBM Patents,
$800,000 was paid to the Company's Placement Agent, and the balance for legal,
accounting, and other expenses relating to the transaction. See "--Use of
Proceeds."
Possible Disadvantages of Approving the Proposal
As noted above, the exact number of shares issuable upon full consummation
of the 1997 Private Placement Issuances cannot currently be estimated. Depending
on the ultimate financial results achieved by the Company pursuant to its
licensing of the patents acquired, the current holders of Common Stock may be
diluted by the 1997 Private Placement Issuances and may be substantially diluted
depending on the future market price of the Common Stock. If, however, the
market price of the Common Stock increases significantly prior to the date any
of the Series B Preferred Stock is converted, the current holders of Common
<PAGE>
Stock would benefit relative to a placement at market prices which prevailed on
August 29. The last reported sales price of the Common Stock on the Nasdaq
National Market on such date was $5.00 per share. The holders of the Series B
Preferred Stock have also been given certain other rights, preferences and
privileges. The indeterminate nature of the Company's obligations under the
Series B Preferred Stock, along with such other rights, preferences and
privileges, may, among other things, have the effect of delaying, deferring or
preventing a change in control of the Company, discouraging tender offers for
the Company and inhibiting certain equity issuances until substantially all such
shares are converted or redeemed.
Generally, the number of shares of Common Stock issuable upon full
consummation of the 1997 Private Placement Issuances will vary inversely with
the market price of the Common Stock. Under the terms of the Series B Preferred
Stock, holders generally are not required to convert such shares prior to the
third anniversary of the original date of issuance. The current holders of
Common Stock will be diluted in their percent of ownership of the Company by the
1997 Private Placement Issuances and may be substantially diluted depending on
the market price of the Common Stock during such period, and the conversion
formulas applicable to the Series B Preferred Stock at the time of conversion.
The dilution of earnings per share will be determined by both the increase in
the number of shares and earnings associated with the patents acquired. If,
however, the market price of the Common Stock were to increase significantly
prior to the date any of the Series B Preferred Stock is converted, the current
holders of Common Stock would benefit relative to a placement at market prices
prevailing on August 29, 1997.
On November 3, 1997, the average of the lowest three-day closing bid price
in 20 trading days of the Common Stock on the Nasdaq National Market was $4.2083
per share. If such Variable Conversion Price were used to determine the number
of shares of Common Stock issuable as of the first date on which the Series B
Preferred Stock may be converted, the Company would issue a total of
approximately 3,077,227 shares of Common Stock if all such shares were converted
at such time, after reflecting the Company's redemption on October 28, 1997, of
$3,050,000 of the face amount of the Series B Preferred Stock. To the extent the
Variable Conversion Price of the Common Stock is higher than $4.2083 as of any
date on which shares of Series B Preferred Stock are converted, the Company
would issue fewer shares of Common Stock than described above. Conversely, to
the extent the Variable Conversion Price of the Common Stock is lower than
$4.2083 on any such date, the Company would issue more shares of Common Stock.
The information presented above is not intended to constitute a prediction as to
the future Variable Conversion Price of the Common Stock or as to when holders
will elect to convert shares of Series B Preferred Stock into shares of Common
Stock. The Board considered these disadvantages, and concluded that they are
outweighed by the advantages discussed in the following section. See "--Effects
of 1997 Private Placement Issuances on Holders of Common Stock."
The Board's Evaluation of the IBM Purchase and Its Financing
As indicated in the Company's prior reports, the Board of Directors has
recognized for some time that the acquisition of the IBM Patents contemplated
for 1997 would require additional capital. See "Appendix I -IBM Patents
Acquired." The Board of Directors discussed the acquisition at a February 7,
1997 board meeting and authorized the execution of the agreement between
International Business Machines Corporation and LaserSight Incorporated, as
amended (the "IBM Patent Agreement"). The factors considered by the Board in
connection with its February 7 meeting included:
. The proposed agreement was the result of extensive negotiations.
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. Between Mr. Michael R. Farris, the Company's CEO and Mr. Emmett J.
Murtha, Director of Business Development, Office of the Vice President
of Intellectual Property and Licensing - Corporate, of IBM, that
commenced in June 1996. Such negotiations had included the exploration
of alternative transaction structures such as licensing the patents,
forming a joint venture, seller financing, and ultimately a cash
purchase by the Company.
. Certain existing licenses were not ultimately included in the
transaction based on the fact that the Company placed a lower value on
them than IBM's requested price.
. The price of $14.9 million was the result of negotiations between the
parties.
. Royalties were forecast with a financial model developed by the Company
with the help of an outside consultant and industry sources. The
Company did not request any fairness opinion for the Board.
. There were prospects for lump sum payments for some of the patents.
. The proposed agreement did not require the Company to consummate its
acquisition of the patents and certain related licenses until July 1,
1997, thereby giving the Company some time to explore financing
alternatives.
. The proposed agreement provided that in the event the Company were to
fail to satisfy its obligation to acquire the patents by July 1, IBM's
sole remedy was expressly limited to the payment of $1 million, and
such payment could be made either in the form of cash or Company stock.
. The possible enhancement of the value of the Company's LaserSight
Technologies subsidiary which could facilitate the Company's pursuit of
the strategic alternatives that it had announced in its press release
of October 1996.
In addition, at two board meetings in August 1997, the Board of Directors
discussed the potential 1997 Private Placement Issuances and authorized a
private placement of the Series B Preferred Stock. The Board considered the
benefits and risks of raising equity based on future market prices relative to
available alternatives and concluded that the 1997 Private Placement Issuance'
were in the best interest of the Company and its stockholders. Factors
considered by the Board included:
. The patents related to ultra-violet laser ablation of any human tissue,
not just the Company's use of such laser ablation for vision
correction, and there is a wide range of such uses.
. There would be an enhancement of the Company's strategic position in
use of the technology for vision applications and the fact that certain
other companies in the industry (but not including VISX, Incorporated,
Summit Technology, Inc. and Autonomous Technologies Corporation) lacked
a license to use the patents.
. The Company had preliminary discussions with alternate sources of
financing, including other Companies in the same industry, but the
Company received only one other proposal that would have aggregated
financing in the amount of $16 million. Management concluded that such
other proposal was unlikely to be concluded in a timely manner and was
unlikely to result in terms that were more favorable to the Company.
<PAGE>
. If the Company was unable to consummate the transaction, it would have
been required to pay IBM cash or stock with an aggregate value of $1
million.
. Although IBM had been willing to extend the original deadline for
closing from July 1, 1997 to August 1, 1997 and then to September 1,
1997, it appeared unlikely that IBM would grant any further extensions.
. This financing could impair the Company's ability to raise additional
equity in the public or private markets.
. There was a potential for unlimited dilution of the Company's existing
stockholders by the indeterminate number of shares which were issuable.
However, an important factor was the ability of the Company to redeem
up to 70% of the face amount of the Series B Preferred Stock on or
before November 27, 1997 and up to 40% of the face amount of the Series
B Preferred Stock on or before January 26, 1998.
. The Company had prospects to enter into licensing arrangements
providing for lump sum licensing fees in an amount sufficient to
finance some portion of such redemption. Although there had been
preliminary discussions and indications of interest (one such
indication of interest eventually developed into an exclusive license
of cardiovascular and vascular rights to another health care company
for $4 million as announced on September 23, 1997, and lead to the
redemption of 19% of the face value of the Series B Preferred Stock),
no definitive licensing arrangements had been entered into.
. Certain events could result in the Series B Preferred being redeemable
at the Holders' option, including without limitation the failure of the
Company's stockholders to approve the transaction within 120 days of
Closing or any failure of the Company's stockholders to approve
amendments to the Company's certificate of incorporation that may be
needed from time to time to maintain a number of shares for issuance
upon conversion of the Series B Preferred equal to at least 175% of the
number of Conversion Shares then issuable.
Summary of Transaction Terms
Set forth below is a summary of the material terms of the 1997 Private
Placement. The detailed provisions are provided in the transaction documents.
The Certificate of Designations, Preferences and Rights of Series B Convertible
Participating Preferred Stock was filed as an exhibit to the Company's Form 8-A,
filed with the SEC on September 29, 1997. Copies of other transaction documents,
including the Securities Purchase Agreement, the Warrant Agreement, and the
Registration Rights Agreement are available from the Secretary of the Company
upon request.
Series B Preferred Stock Placement. Pursuant to the terms of the several
Series B Preferred Stock Investment Agreements, each dated as of August 29, 1997
(collectively, the "Series B Preferred Stock Investment Agreement"), the Company
issued and sold in a private placement to certain accredited investors for
$10,000.00 per share an aggregate of 1,600 restricted shares of a
newly-established series of preferred stock, designated as Series B Convertible
Participating Preferred Stock, resulting in gross proceeds to the Company of
$16.0 million in the aggregate.
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Each share of Series B Preferred Stock is entitled to participate in any
dividends received by the Common Stock while they remain outstanding, when and
as declared by the Company's Board of Directors. However, the Company does not
currently anticipate paying dividends for the foreseeable future. Any dividend
payable after the date of issuance of the Series B Preferred Stock shall be paid
in cash concurrently with the dividend or distribution to the holders of Common
Stock. Each share of Series B Preferred Stock is also entitled to a liquidation
preference of $10,000.00 per share, plus any accrued but unpaid dividends, in
preference to any other class or series of capital stock of the Company. Except
as otherwise provided by applicable law, holders of shares of Series B Preferred
Stock have no voting rights.
Commencing on any date after August 29, 1997, the number of shares of
Series B Preferred Stock held of record by each holder on such day shall become
convertible into shares of Common Stock. The number of shares of Common Stock
issuable upon conversion of shares of Series B Preferred Stock will equal the
liquidation preference of the shares being converted divided by the
then-effective conversion price applicable to the Common Stock (the "Conversion
Price"). The Conversion Price as of any date following the date of issuance
shall be the lesser of (i) $6.68 per share or (ii) the "Variable Conversion
Price," defined as the average of the three (3) lowest Closing Bid Prices per
share of Common Stock during the Lookback Period (as herein defined) (subject to
equitable adjustment for any stock splits, stock dividends, reclassifications or
similar events during the Lookback Period), subject to adjustment as provided
herein. For purposes hereof, the "Lookback Period" shall mean the period of 20
consecutive trading days ending on the trading day immediately preceding the
Conversion Date; provided, however, that in the event the average Closing Bid
Price of the Common Stock during the period of five consecutive trading days
ending on the date 180 days after August 29, 1997 is less than $5.1375 per
share, the Lookback Period shall be the period of 30 consecutive trading days
ending on the trading day immediately preceding the Conversion Date. The terms
of the Series B Preferred Stock do not provide for any limit on the number of
shares of Common Stock which the Company may be required to issue in respect
thereof except for the limitations described in the following paragraph relating
to the Company's listing on the Nasdaq National Market. The Conversion Price is
at all times also subject to adjustment for customary anti-dilution events such
as stock splits, stock dividends, reorganizations and certain mergers affecting
the Common Stock, as well as by any announcement of a tender offer, by a
distribution, and by issuance of securities with a discounted variable
conversion price. In addition, upon a merger or consolidation, holders shall
have the option of receiving 125% of the face amount of the Series B Preferred
Stock. The holders shall also participate in any purchase rights given to
holders of Common Shares. On August 29, 2000, all of the then outstanding shares
of Series B Stock will be automatically converted into shares of Common Stock at
the then-applicable Conversion Price. Notwithstanding the foregoing, no holder
of Series B Preferred Stock will be entitled to convert any shares of Series B
Preferred Stock into shares of Common Stock if, following such conversion, the
holder and its affiliates (within the meaning of the Securities Exchange Act of
1934) will be the beneficial owners (as defined in Rule 13d-3 thereunder) of
more than 9.9% of the outstanding shares of Common Stock, without the approval
of the Board of Directors and a majority of the outstanding common shares,
unless this provision is waived by a majority of the holders.
Unless the approval sought hereby is received, the Company, pursuant to its
listing obligation with the Nasdaq National Market, will be permitted to issue
only up to approximately 1,995,532 shares of Common Stock upon conversion of
shares of Series B Preferred Stock (including shares of Series B Preferred Stock
issuable in payment of dividends, if any, or other payments). If the approval
sought hereby is not granted by stockholders or if such approval is not for any
reason received by December 26, 1997, and thereafter insufficient shares are
<PAGE>
available due to this limitation to allow conversion of the outstanding Series B
Preferred Stock plus a 75% reserve, the Company will be obligated to redeem, at
a 25% premium, a sufficient number of shares of Series B Preferred Stock which,
in its reasonable judgment, will permit conversion of the remaining shares of
Series B Preferred Stock without breaching any obligation of the Company under
the Company's listing agreement with the Nasdaq National Market and, upon
issuance of all such 1,995,532 shares of Common Stock, the Company will be
required upon subsequent conversion of shares of Series B Preferred Stock to
redeem such shares for cash at the Special Redemption Price (as defined below).
Any delay in payment will cause such redemption amount to accrue interest at the
prime rate (as provided by the Wall Street Journal) plus 5%, (or if lower, the
highest rate permitted by law) until paid. See "--Nasdaq Listing Obligation" and
"--Consequences if Stockholder Approval Not Obtained."
The Company has agreed to cause to be registered the shares of Common Stock
issuable upon conversion of the Series B Preferred Stock, including shares
payable as dividends, if any, thereon, for resale under the Securities Act,
together with a reserve of an additional 75%, no later than November 27, 1997.
Any delay in having such registration statement declared effective by the
Commission beyond November 27, 1997, or any unavailability to the holders of the
Series B Preferred Stock of a current prospectus after such period, will cause
the Company to pay to each holder, in cash, 1% of the total purchase price of
the Series B Preferred Stock for the first 30-day period of the delay (pro rated
for any shorter period), and 2% of the total purchase price for each month
thereafter (pro rated for any shorter period).
Placement Agent Compensation. The Placement Agent for the 1997 Private
Placement was Shoreline Pacific, the Institutional Finance Division of Financial
West Group (the "Placement Agent"). In consideration for placing such
securities, the Placement Agent was paid cash compensation of 5% of the gross
proceeds received by the Company. Further, the Company also issued to the
Placement Agent Series B Warrants to acquire an aggregate of 40,000 shares of
Common Stock for a purchase price of $5.91 per share. Such Warrants are
exercisable at any time through August 2002. The Company will be obligated to
register the shares of Common Stock issuable upon exercise and conversion of the
Series B Warrants for resale under the Securities Act. The Placement Agent will
retain its compensation whether or not the stockholder approval sought hereby is
obtained.
Nasdaq Listing Obligation
The Company has entered into a listing agreement with Nasdaq regarding the
quotation of the Common Stock on the Nasdaq National Market. Among other things,
the listing agreement obligates the Company to comply with certain
"non-quantitative designation criteria" promulgated by Nasdaq. These criteria
include the requirement that, with certain exceptions, issuers quoted on the
Nasdaq National Market obtain stockholder approval of the issuance of discounted
or potentially discounted Common Stock equal to 20% or more of the number of
shares or voting power then issued and outstanding. Stockholder approval is also
required of transactions deemed to constitute a "change in control." Although
the Company does not believe that the issuances contemplated by the 1997 Private
Placement Issuances constitute a "change in control" under the Nasdaq's rules,
if the transactions were to be so construed, the approval sought hereby would
also be effective to satisfy the stockholder vote required thereby. The
Company's belief is based on the fact that no voting rights were granted to
holders of the Series B Preferred Stock as such, that such holders do not have
any contractual right to elect a director or otherwise influence management of
the Company, and the Chairman of the Board of Directors, and the Chief Executive
Officer remain unchanged.
<PAGE>
In order to assure continued compliance with the applicable rules of the
Nasdaq National Market, the transaction documents governing the 1997 Private
Placement Issuances expressly provide that no more than an aggregate of
approximately 1,995,532 shares of Common Stock (slightly less than 20.0% of the
shares of Common Stock outstanding on the date of the 1997 Private Placement)
may be issued in connection therewith unless and until the approval sought
hereby is obtained. Such outstanding share amount excludes all shares issuable
in respect of outstanding options and warrants. See "Description of Capital
Stock."
By approving this proposal, stockholders will be approving the issuance by
the Company of shares of Common Stock in satisfaction of its obligations under
the securities issued in the 1997 Private Placement as described in this Proxy
Statement. No further stockholder vote or approval related to the 1997 Private
Placement Issuances will be sought or required, unless the number of shares
required to retain a reserve of 75% in excess of the required amount based on
ongoing conversion price changes shall exceed the number of authorized shares.
If the approval sought hereby is not obtained, the Company will only be
permitted to issue an aggregate of approximately 1,995,532 shares in connection
with the 1997 Private Placement, and any other obligations will have to be paid
in cash as described below. See "--Consequences if Stockholder Approval Not
Obtained."
Consequences if Stockholder Approval Not Obtained
If the stockholder approval sought hereby is not obtained, the Company will
be prohibited under the terms of its listing agreement with Nasdaq from issuing
more than an aggregate of approximately 1,995,532 shares of Common Stock in
connection with the 1997 Private Placement Issuances (slightly less than 20.0%
of the shares of Common Stock outstanding on the date of the 1997 Private
Placement). If the approval sought hereby is not granted by stockholders or if
such approval is not for any reason received by December 26, 1997, the Company
may be obligated to redeem, at the Special Redemption Price (as defined below),
a sufficient number of shares of Series B Preferred Stock which will permit
conversion of 200% of the remaining shares of Series B Preferred Stock without
breaching any obligation of the Company under the Company's listing agreement
with the Nasdaq National Market. The "Special Redemption Price" means a cash
payment equal to the greater of (i) the liquidation preference of $10,000
multiplied by 125% or (ii) the current value of the Common Stock, using the
price per share of Common Stock, which the holders of such shares of Series B
Preferred Stock would otherwise be entitled to receive upon conversion. Such
redemption must be completed within five business days of the event which
required such redemption. Any delay in payment will cause such redemption amount
to accrue interest at the rate of 1% per month during the first 30 days, pro
rated daily (2% monthly, pro rated daily, thereafter).
Under the terms of the Preferred Stock Investment Agreement, the amount of
cash which the Company would be required to return in the event of stockholder
disapproval will depend on the per share market price history of the Common
Stock on the date such payment must be made. After the Company redeemed
$3,050,000 of the face amount of the Series B Preferred Stock from the proceeds
from the exclusive vascular and cardiovascular field license of the patents
acquired, and assuming a Variable Conversion Price of $4.2083 per share (the
lowest three day average closing bid price during the 20 day Look-Back period
ending on November 3, 1997), a $4.375 per share market price, and completion of
the redemption by January 2, 1997, the Company would be required to pay
approximately $10,938,000 (including a premium of 25%, or approximately
$2,188,000). Because of the manner in which the conversion price is determined
under the Series B Preferred Stock Investment Agreement, the number of shares of
Common Stock issuable upon conversion of the Series B Preferred Stock will
<PAGE>
generally increase if the market price of the Common Stock decreases.
Accordingly, if the market price of the Common Stock decreases significantly,
the number of shares of Series B Preferred Stock which could not be converted
into Common Stock would increase and the amount of cash that the Company would
be required to pay to holders of the Series B Preferred Stock would increase.
The Company has not established a reserve of cash and marketable securities to
satisfy this obligation, and there can be no assurance that the Company will
have available the cash resources to satisfy future obligations which might
arise depending on the future market price of the Common Stock, if stockholder
approval of this proposal is not obtained, or that such payments would not have
a material adverse effect on the Company's financial position or ability to
execute its growth plans.
Effects of 1997 Private Placement Issuances on Holders of Common Stock
Although the holders of the Series B Preferred Stock have voting rights
only under the limited circumstances required by Delaware corporate law and are
not entitled to receive any dividends unless dividends are concurrently paid on
the Common Stock, there is no limit on the number of shares which the holders of
the Series B Preferred Stock would be entitled to receive upon the conversions
thereof, subject to the approval of the Company's shareholders of the issuance
of more than 1,995,532 shares of Common Stock in connection with such
conversions. In addition, in the event of a liquidation of the Company, the
holders of the Series B Preferred Stock would be entitled to receive
distributions in preference to the holders of the Common Stock.
As noted in the above discussion captioned "-Possible Disadvantages of
Approving the Proposal," the exact number of shares issuable upon full
consummation of the 1997 Private Placement Issuances cannot currently be
estimated and the current holders of Common Stock will be diluted in their
percent of ownership of the Company by the 1997 Private Placement Issuances and
may be substantially diluted depending on the market price of the Common Stock
during such period, and the conversion formulas applicable to the Series B
Preferred Stock at the time of conversion. The dilution of earnings per share,
if any, will be determined by both the increase in the number of shares and
earnings associated with the patents acquired.
The following table illustrates the effect of various Conversion Prices,
assuming (i) all Series B Preferred Stock was converted at the same time at
these prices and (ii) the Company's shareholders approve the 1997 Private
Placement Issuance and the Charter Amendment:
<TABLE>
<CAPTION>
Assumed Number of As Percent of Common
Conversion Conversion Shares Outstanding
Price(1) Shares Issuable After Conversion(2)
<S> <C> <C>
$1.00 12,950,000 56.5%
$2.00 6,475,000 39.3%
$3.00 4,316,667 30.2%
$4.00 3,237,500 24.5%
$5.00 2,590,000 20.6%
$6.00 2,158,333 17.8%
$6.68 1,938,622 16.3%
(maximum
Conversion
Price)
<FN>
<PAGE>
(1) Such Conversion Price is based on the lesser of $6.68 per
share or the Variable Conversion Price, as defined in "Summary
of Transaction Terms-Series B Preferred Placement".
(2) Assumes that the aggregate number of shares outstanding at
the time of conversion equals the 9,984,672 shares of Common
Stock outstanding on November 3, 1997 plus the number of
Conversion Shares issuable.
</FN>
</TABLE>
Under applicable Delaware law and the Company's Certificate of
Incorporation, the Company's Board of Directors has the authority, without
further action by the stockholders, to issue additional shares of preferred
stock in one or more series and to fix the rights, preferences, privileges and
restrictions granted to or imposed upon any series of unissued preferred stock
and to fix the number of shares constituting any series and the designation of
such series, without any further vote or action by the stockholders. The
issuance of additional shares of preferred stock, and shares of Common Stock
into which such preferred stock may be converted, may, among other things, have
the effect of delaying, deferring or preventing a change in control of the
Company, discouraging tender offers for the Company and inhibiting certain
equity issuances until substantially all such shares of preferred stock are
converted or redeemed. The Company currently has no plans to designate and/or
issue any additional shares of preferred stock, except those pursuant to the
Series B Preferred Stock Warrants and as dividends on shares of Series B
Preferred Stock.
Board of Directors Approval
As indicated in the Company's prior reports, the Board of Directors has
recognized for some time that the purchase of the IBM patents required that
additional capital be raised. The Board of Directors discussed this need for
capital at two 1997 board meetings and authorized management to acquire the
capital through this proposed private placement of convertible preferred stock.
The Board considered the benefits and risks of raising equity based on future
market prices relative to other available alternatives and concluded that the
1997 Private Placement Issuances were in the best interest of the Company and
should be pursued. See "--Use of Proceeds."
Use of Proceeds
The Company estimates that the aggregate net proceeds received by it from
the issuance of shares Series B Preferred Stock in the 1997 Private Placement
was approximately $15.0 million (after cash fees to the Placement Agent and
estimated transaction expenses). The Company used substantially all of such
funds to finance the purchase of the IBM Patents.
Interests of Certain Persons
To the Company's knowledge, prior to the 1997 Private Placement none of the
investors therein was a director, executive officer or 5% stockholder of the
Company or an affiliate of any such person or entity.
No Appraisal or Dissenters' Rights; No Preemptive Rights
<PAGE>
Under applicable Delaware law, stockholders are not entitled to any
statutory dissenters' rights or appraisal of their shares of Common Stock in
connection with the 1997 Private Placement or the 1997 Private Placement
Issuances. Existing stockholders have no preemptive rights in respect of any of
the securities to be issued in the 1997 Private Placement Issuances or any other
securities issuances by the Company.
Certain Voting and Market Standoff Undertakings
The CEO and the CFO have agreed with the holders of the Series B Preferred
Stock to vote all shares of Common Stock over which they exercise voting
authority in favor of this Proposal No. 1. As of the date of this Proxy
Statement, the Company has been advised that such undertakings cover an
aggregate of approximately 427,200 shares, representing approximately 4.3% of
the shares outstanding on the record date for the Special Meeting.
Separately, the CEO has agreed for the 18-month period following August 29,
1997, not to sell, transfer or assign more than the lesser of 15% or 125,000
shares of the Common Stock owned by such stockholder as of such date without the
prior consent of the holders of the Series B Preferred Stock. See "--Certain
Voting and Market Standoff Undertakings."
Vote Required
Stockholder approval of the 1997 Private Placement Issuances requires
the affirmative vote of the holders of a majority of the shares of Common Stock
entitled to vote thereon present in person or by proxy at the Special Meeting.
The Company's Board of Directors unanimously recommends that stockholders vote
FOR the 1997 Private Placement Issuances. The directors and officers of the
Corporation intend to vote their shares in favor of this Proposal.
PROPOSAL NO. 2:
APPROVAL OF AN AMENDMENT TO THE CORPORATION'S
CERTIFICATE OF INCORPORATION TO INCREASE THE NUMBER OF
AUTHORIZED SHARES OF COMMON STOCK
General
The Board of Directors has unanimously adopted a resolution to submit to
shareholders a proposal to amend the first paragraph of Article IV of the
Corporation's Certificate of Incorporation to increase the number of shares of
Common Stock which the Corporation is authorized to issue from 20,000,000 to
40,000,000. The Board of Directors determined that such an amendment is
advisable and directed that the proposed amendment be considered by the
Corporation's stockholders at the Special Meeting.
The full text of Section 1(a) of Article IV of the Corporation's
Certificate of Incorporation, if amended as proposed, would read as follows:
(a) Common Stock. The aggregate number of shares of Common Stock which
the corporation shall have authority to issue is 40,000,000, each with
a par value of $.001 per share.
<PAGE>
The Charter Amendment will not increase the number of shares of preferred
stock authorized. The relative rights and limitations of the Common Stock and
preferred stock would remain unchanged under the Charter Amendment. However,
because shareholders have no preemptive rights to purchase any additional shares
of Common Stock which may be issued, the issuance of additional shares would
likely reduce the percentage interest of current shareholders in the total
outstanding shares. The terms of the additional shares of Common Stock will be
identical to those of the currently outstanding Common Stock.
Purposes and Effects of Increasing the Number of Authorized Shares of Common
Stock
The proposed Charter Amendment would increase the number of shares of
Common Stock which the Corporation is authorized to issue from 20,000,000 to
40,000,000. The additional 20,000,000 shares, if and when issued, would have the
same rights and privileges as the shares of Common Stock presently issued and
outstanding. The holders of Common Stock are not entitled to preemptive rights
or cumulative voting.
The Board of Directors recommends the proposed increase in the authorized
number of shares of Common Stock to ensure that an adequate supply of authorized
and unissued shares are available for (i) additional issuances under the
Corporation's employee benefit plans, (ii) the raising of additional capital for
the operations of the Corporation, (iii) the financing of the acquisition of
other businesses, (iv) the payment of contingent obligations for stock or (v)
conversion of the Corporation's equity securities described above. Except as
described above, there are currently no plans or arrangements relating to the
issuance of any of the additional shares of Common Stock proposed to be
authorized and such shares would be available for issuance without further
action by stockholders, unless required by the Corporation's Certificate of
Incorporation, its Bylaws or applicable law.
The increase in the number of authorized shares of Common Stock has not
been proposed for any anti-takeover purpose and the Board of Directors and
members of management of the Corporation have no knowledge of any current effort
to obtain control of the Corporation or to accumulate large amounts of its
Common Stock. However, the availability of additional shares of Common Stock
could make any attempt to gain control of the Corporation or of the Board of
Directors more difficult. Shares of authorized but unissued Common Stock could
be issued in an effort to dilute the stock ownership and voting power of any
person or entity desiring to acquire control of the Corporation, which might
have the effect of discouraging or making less likely such a change of control.
Such shares could also be issued to other persons or entities who support the
Board of Directors in opposing a takeover attempt that the Board of Directors
has deemed not to be in the best interests of the Corporation and its
stockholders.
On October 17, 1997, the Corporation had 9,984,672 shares of Common Stock
issued and outstanding. In addition, an aggregate of approximately 5,791,342
shares of Common Stock were reserved for issuance by the Corporation, including
shares reserved for issuance (i) upon exercise of options granted and available
for grant under the Corporation's employee and director stock option plans, (ii)
upon exercise of warrants issued in connection with previous financing
arrangements of the Corporation in 1996 and 1997, (iii) upon conversion of the
issued and outstanding Series B Preferred Stock discussed in Proposal No. 1, as
currently limited pending shareholder approval of Proposal No. 1, and the
associated warrants and (iv) that are contingently issuable in connection with
all transactions the Corporation has consummated through the date hereof. The
total does not include an indeterminate number of shares that may be issuable to
Florida Laser Partners as royalties payable beginning on March 11, 2002 or after
all shares contingently issuable to the former shareholders and former
optionholders of LaserSight Centers have been issued, whichever first occurs (as
previously reported).
<PAGE>
If all such options and warrants were exercised and all outstanding shares
of Series B Preferred Stock were converted under the current Rule 4460(i)
limits, the Corporation would have an aggregate of approximately 15,776,014
shares of Common Stock issued and outstanding. (This number excludes the 343,300
shares that are contingently issuable to the CEO as an earnout from the 1995
sale of The Farris Group to the Company, as the CEO has agreed to renounce his
shares should Proposal No. 2 not be approved.) In addition, as described in
Proposal No. 1, the Corporation's Series B Preferred are convertible into
additional shares of Common Stock should the shareholders approve Proposal No.
1. The Corporation is obligated to reserve 175% of the remaining portion of the
$16 million face amount of the Series B Preferred Stock, divided by the Variable
Conversion Price. The Company voluntarily redeemed the face amount of the Series
B Preferred Stock by $3,050,000 on October 28, 1997, and thus reduced the face
amount of the Series B Preferred Stock to $12,950,000. After that reduction,
assuming the Variable Conversion Price is $4.2083 per share, the number of
shares then required to be reserved, in addition to the 1,995,532 shares which
are reserved prior to the approval of Proposal No. 1, would be 3,389,617,
creating a total of 19,165,631 issued and reserved shares and leaving 834,369
authorized common shares.
<TABLE>
<CAPTION>
The following table summarizes this analysis:
<S> <C> <C> <C>
Authorized Shares 20,000,000
Issued and Outstanding as of November 3 9,984,672
Reserved for Issuance:
(i) Options 1,510,150
(ii) Warrants-Previous Financings 567,509
(iii) Series B Conversion, Nasdaq Limit 1,995,532
Series B-Related Warrants 790,000
(iv) Contingently Issuable Shares 928,150
----------
Total Reserved 5,791,342
---------
Total Shares Issued and Reserved (15,776,014)
Additional Reserved Shares Upon Shareholder Approval at a
Variable Conversion Price of $4.2083 (3,389,617)
-----------
Total Shares Available 834,369
===========
</TABLE>
To elaborate, on August 29, 1997, the Corporation issued and sold the
Series B Preferred Stock for an aggregate purchase price of $16.0 million. The
Series B Preferred Stock is convertible into the number of shares of Common
Stock determined by dividing (i) the sum of $10,000 stated value per share of
Series B Preferred Stock plus all unpaid dividends accrued and deemed to have
accrued, if any, with respect to such shares of Preferred Stock through the last
dividend payment date preceding the conversion by the lesser of (x) the Variable
Conversion Price or (y) $6.68 per share. The Series B Preferred Stock provides
for a dividend at the rate of any dividend declared on the Corporation's Common
Stock. The Preferred Stock became convertible into Common Stock on August 29,
1997 and remains convertible until August 29, 2000. Pursuant to agreements
<PAGE>
entered into in connection with the issuance and sale of the Series B Preferred
Stock, the Corporation has reserved 1,995,532 shares of Common Stock for
issuance upon conversion of, or payable as dividends on account of, the
Preferred Stock. If Proposal No. 1 is approved, and the Preferred Stock is
converted to Common Stock at the current Variable Conversion Rate, the
Corporation will be required to issue more shares of Common Stock upon
conversion and than it has currently reserved for this purpose. The Corporation
cannot determine the ultimate number of shares which will be issued upon
conversion or as dividends on the new Preferred Stock. If the proposed increase
in the authorized number of shares of Common Stock is approved by the
stockholders, the Corporation will be required to have reserved, at all times,
175% of the number of shares of Common Stock then issuable upon conversion of,
or payable as dividends on account of, the Series B Preferred Stock. Should
insufficient shares be reserved, the Corporation shall then be required to put
on reserve 200% of the number of shares of Common Stock then issuable upon
conversion of, or payable as dividends on account of, the Preferred Stock.
In evaluating the proposed Charter Amendment, stockholders should
consider the effect of certain other provisions of the Corporation's Certificate
of Incorporation and Bylaws that may have anti-takeover consequences. These
provisions include (a) the authorization of 10,000,000 shares of Preferred
Stock, the terms of which may be fixed by the Board of Directors without further
action by the Corporation's stockholders, (b) a provision that standing
Directors may be removed only by a majority vote of stockholders entitled to
vote, (c) a limitation on the ability of the Corporation's stockholders to call
special stockholder meetings, and (d) a provision that vacancies in, and newly
created directorships resulting from an increase in the authorized number of
directors on, the Board of Directors may be filled by a majority of the
remaining Directors.
Vote Required, Effective Date of Proposed Amendment and Recommendation of the
Board
If the proposed Charter Amendment is adopted by a vote of the majority
of the outstanding shares of Common Stock, such Amendment will become effective
upon the filing by the Corporation of a Certificate of Amendment to the
Corporation's Certificate of Incorporation with the Secretary of the State of
Delaware, which is expected to be accomplished as soon as practicable after
stockholder approval is obtained. The Company's Board of Directors unanimously
recommends that stockholders vote FOR the proposed Charter Amendment. The
directors and officers of the Corporation intend to vote their shares in favor
of this Proposal.
RELATIONSHIP OF PROPOSAL No. 1 AND PROPOSAL No. 2
Proposal No. 1 and Proposal No. 2 are separate proposals; the adoption
of one is not conditioned upon the shareholders' approval of the other. However,
if Proposal No.1 is approved, and Proposal No. 2 is not approved, the
Corporation's authorized shares not already committed for future issuance would
equal 834,369. This share number is based upon the closing bid prices of the
Common Stock price between October 6, and October 31, 1997 and includes the
redemption of $3,050,000 face amount of the Series B Preferred on October 28,
1997 and assumes that the CEO renounces his 343,300 contingent shares if
Proposal No. 2 is not approved. The Company could also choose to suspend option
grants to its employees and directors, for which 489,000 shares are presently
reserved. If the Company took such action, the remaining authorized but unissued
and unreserved stock would then be 1,323,369. There can be no assurances that
sufficient authorized shares will remain should the market price of the
Company's Common Stock decrease significantly in the future.
<PAGE>
PROPOSAL NO. 3:
ADJOURNMENT OF SPECIAL MEETING, IF NEEDED
TO SOLICIT ADDITIONAL PROXIES
If a quorum is not obtained or if fewer shares are likely to be voted
to approve the 1997 Private Placement Issuance or the Charter Amendment than the
number required for approval, the Special Meeting may be adjourned for the
purpose of obtaining additional proxies or votes or for any other purposes, and,
at any subsequent reconvening of the Special Meeting, all proxies will be voted
in the same manner as such proxies would have been voted at the original
convening of the meeting (except for any proxies which have theretofore
effectively been revoked or withdrawn), notwithstanding that they may have been
effectively voted on the same or any other matter prior to the adjournment.
If there are not sufficient votes to approve the 1997 Private
Placement Issuance or the Charter Amendment at the Special Meeting, such
proposals could not be approved unless the Special Meeting were adjourned to
permit further solicitation of proxies from the Company's stockholders. Proxies
that are being solicited by the Board grant the discretionary authority to vote
for any such adjournment. If it is necessary to adjourn the Special Meeting, no
notice of the time and place of the adjourned meeting is required to be given to
the Company's stockholders other than the announcement of such time and place at
the Special Meeting. The affirmative vote of at least a majority of the Common
Stock present or represented, in person or by proxy, and voting at the Special
Meeting is required to approve such adjournment, whether or not a quorum is
present at the Special Meeting. An adjournment of the Special Meeting may be
necessary because the limited time between the mailing of the Proxy Statement
and the Special Meeting may result in the lack of a quorum at the Special
Meeting. To obtain the requisite vote, it may be necessary to adjourn the
Special Meeting to solicit additional proxies.
If the Special Meeting is postponed or adjourned, at any subsequent
reconvening of the Special Meeting, all proxies will be voted in the same manner
as such proxies would have been voted at the original convening of the Special
Meeting (except for any proxies that have theretofore effectively been revoked
or withdrawn).
The Company's Board of Directors unanimously recommends that
stockholders vote FOR Proposal No. 3.
<PAGE>
SECURITY OWNERSHIP OF MANAGEMENT AND PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding the
beneficial ownership of Common Stock as of September 30, 1997 by (i) each person
known to the Company to beneficially own 5% or more of the Common Stock, (ii)
each Director, and (iii) all officers and directors of the Company as a group.
The number of shares of Common Stock shown as owned below assumes the exercise
of all currently exercisable options and conversion of all convertible
securities held by the applicable person or group, and the percentages shown
assume the exercise of such options, the conversion of such convertible
securities, and assume that no options or convertible securities held by others
are exercised or converted, as the case may be. Unless otherwise indicated
below, the persons named below have sole voting and investment power with
respect to the number of shares set forth opposite their respective names. For
purposes of the following table, each person's "beneficial ownership" of the
Common Stock has been determined in accordance with the rules of the Securities
and Exchange Commission.
<TABLE>
<CAPTION>
Number of Percentage
Shares of of Common
Name of Individual or Group Position Held Common Stock Stock Owned
- --------------------------- ------------------- -------------- --------------
<S> <C> <C> <C>
Francis E. O'Donnell, Jr., M.D. Chairman of the Board; 500,261 (1)(2) 4.8
Director
Michael R. Farris President and Chief 447,200 (2) 4.3
Executive Officer; Director
J. Richard Crowley Director; Chief Operating 45,000 (2) *
Officer, LaserSight
Technologies, Inc.
Richard C. Lutzy Director 15,000 (2) *
Thomas Quinn Director 25,000 (2) *
David T. Pieroni Director 102,500 (2) *
Richard Stensrud Chief Operating Officer 45,110 (2) *
Gregory L. Wilson Chief Financial Officer 25,000 (2) *
All directors and executive officers
as a group (8 persons) 1,205,071 (2) 11.6
Frederic Kremer, M.D. 535,515 5.4
200 Mall Boulevard
King of Prussia, PA 19406
Stark International and
Shepherd Investments International, Ltd. (3)
c/o Staro Asset Management, L.L.C. 1,372,766 (4) 12.1
1500 West Market Street
Mequon, WI 53092
CC Investments, LDC 857,979 (5) 7.9
Corporate Centre, West Bay Road
P.O. Box 31106 SMB
Grand Cayman, Cayman Islands
<PAGE>
<FN>
**
- ---------------------------------
* Less than 1%.
** Excludes Societe Generale, which holds Series B Preferred Stock and warrants
which are convertible into or exercisable for 514,787 shares of Common Stock or
4.9% of the shares that would be outstanding after giving effect to such
exercise and conversion. Should Proposal No. 1 be approved, the number of such
shares so issuable would increase to 718,051 shares of Common Stock or 6.7%,
after giving effect to such issuance.
(1) Includes 357,983 shares held by Irrevocable Trust No. 7 for the benefit of
Francis E. O'Donnell, Jr., M.D., of which Trust Ms. Kathleen M. O'Donnell
is trustee (the "O'Donnell Irrevocable Trust No. 7") and 22,778 shares held
by Francis E. O'Donnell, Jr. Descendants Trust, of which Trust Ms.
O'Donnell is trustee (the "Descendant's Trust"). Ms. O'Donnell is Dr.
O'Donnell's sister. Dr. O'Donnell disclaims beneficial ownership of these
shares.
(2) Includes options to acquire shares of Common Stock exercisable on or before
November 17, 1997, as follows: Dr. Francis E. O'Donnell, Jr. (91,000);
Michael Farris (35,000); J. Richard Crowley (45,000); Richard C. Lutzy
(15,000); Thomas Quinn (25,000); David T. Pieroni (100,000); Richard
Stensrud (45,000); Gregory L. Wilson (10,000); and all officers and
directors as a group (366,000).
(3) According to a Schedule 13D filed by Michael A. Roth and Brian J. Stark on
October 1, 1997, such shares may be deemed to be beneficially owned by
Messrs. Roth and Stark, who are Investment Fund Managers for Staro Asset
Management, L.L.C., Stark & Roth, Inc., and Staro Partners. The business
address of Messrs. Roth and Stark is the same as that of Staro Asset
Management, L.L.C.
(4) Includes 997,766 shares of Common Stock issuable upon conversion of 420
shares of Series B Preferred Stock, based on the current 1,995,532 share
limit described in this Proxy statement, and 375,000 warrants to acquire
shares of Common Stock exercisable on or before November 17, 1997. Should
Proposal No. 1 be approved, the 1,995,532 share limitation would be
removed, and an assumed Conversion Price of $4.2083, based on the estimates
discussed above under caption "-Introduction," a total of 3,077,227 shares
of Common Stock would be issuable upon conversion of all Series B Preferred
Stock, and Stark International and Shepherd Investments International, Ltd.
would potentially receive 1,539,802 shares of Common Stock. Together with
the 375,000 shares issuable upon the exercise of warrants they would hold
1,914,802 shares or 16.1% of the common shares then outstanding, after
giving effect to such issuance. See "Proposal No. 1- Effects of 1997
Private Placement Issuances on Holders of Common Stock."
(5) Includes 623,604 shares of Common Stock issuable upon conversion of 262
shares of Series B Preferred Stock, based on the current 1,995,532 share
limit described in this Proxy statement, and 234,375 warrants to acquire
shares of Common Stock exercisable on or before November 17, 1997. Should
Proposal No. 1 be approved, the 1,995,532 share limitation would be
removed, and an assumed Conversion Price of $4.2083, based on the estimates
discussed above under caption "-Introduction," a total of 3,077,227 shares
of Common Stock would be issuable upon conversion of all Series B Preferred
Stock, and CC Investments would potentially receive 857,979 shares of
Common Stock. Together with the 234,375 shares issuable upon the exercise
of warrants C. C. Investments would hold 1,194,375 shares or 10.7% of the
common shares then outstanding, after giving effect to such issuance. See
"Proposal No. 1- Effects of 1997 Private Placement Issuances on Holders of
Common Stock."
</FN>
</TABLE>
DESCRIPTION OF SECURITIES
The following description of the Company's capital stock is not complete
and is subject in all respects to the Delaware General Corporation Law (the
"DGCL") and to the provisions of the Company's Certificate of Incorporation, as
amended (the "Existing Charter"), and By-Laws.
The authorized capital stock of the Company consists of 20,000,000 shares
of Common Stock and 10,000,000 shares of preferred stock, $.001 par value,
issuable in series. As of November 3, 1997, 9,984,672 shares of Common Stock
were outstanding (not including outstanding options to acquire Common Stock or
<PAGE>
any shares of Common Stock issuable upon the conversion or exchange of
outstanding preferred stock). As of November 3, 1997, the only shares of
preferred stock outstanding were 1,295 shares of the Series B Convertible
Participating Preferred Stock (the "Series B Preferred"). Of the original 1,600
shares, 305 were redeemed at the option of the Company on October 28, 1997.
Common Stock
Holders of Common Stock are entitled to one vote for each share held on all
matters submitted to a vote of stockholders and do not have cumulative voting
rights. Accordingly, holders of a majority of the shares of Common Stock
entitled to vote in any election of directors may elect all of the directors
standing for election. Holders of Common Stock are entitled to share pro rata in
such dividends and other distributions, if any, as may be declared by the Board
of Directors out of funds legally available therefor, subject to any prior
rights accruing to any holders of preferred stock. Upon the liquidation or
dissolution of the Company, the holders of Common Stock are entitled to share
proportionally in all assets available for distribution to such holders. Holders
of Common Stock have no preemptive, redemption or conversion rights. The
outstanding shares of Common Stock issued are fully paid and nonassessable.
The transfer agent and registrar for the Common Stock is American Stock
Transfer & Trust Company.
Preferred Stock
The Board of Directors is authorized, subject to certain limitations
prescribed by law, without further stockholder approval, to issue from time to
time up to an aggregate of 10,000,000 shares of preferred stock in one or more
series and to fix or alter the designations, preferences, rights and any
qualifications, limitations or restrictions of the shares of each such series,
including the dividend rights, dividend rates, conversion rights, voting rights,
terms of redemption (including sinking fund provisions), redemption price or
prices, liquidation preferences and the number of shares constituting any series
or designations of such series. The rights, preferences and privileges of
holders of Common Stock are subject to, and may be adversely affected by, the
rights of the holders of shares of any series of preferred stock which the
Company may designate and issue.
Series A Convertible Preferred Stock
On January 10, 1996, the Company issued 116 shares of Series A Convertible
Preferred Stock. All of such shares have been converted into Common Stock.
Series B Convertible Participating Preferred Stock
The terms and conditions of the Series B Convertible Participating
Preferred Stock, including the rights of the holders thereof to dividends,
conversions, registration rights and voting are set forth under the caption
"Approval of 1997 Private Placement Issuances--Summary of Transaction
Terms--Series B Convertible Participating Preferred Stock Placement."
<PAGE>
Delaware Law and Certain Charter Provisions
The Company is subject to the provisions of Section 203 of the DGCL.
Subject to certain exceptions, Section 203 prohibits a publicly-held Delaware
corporation from engaging in a "business combination" with an "interested
stockholder" for a period of three years after the date of the transaction in
which the person became an interested stockholder, unless the interested
stockholder attained such status with the approval of the corporation's board of
directors or unless the business combination is approved in a prescribed manner.
A "business combination" includes mergers, asset sales and other transactions
resulting in a financial benefit to the interested stockholder which is not
shared pro rata with the other stockholders of the Company. Subject to certain
exceptions, an "interested stockholder" is a person who, together with
affiliates and associates, owns, or within three years did own, 15% or more of a
corporation's voting stock.
The DGCL provides generally that the affirmative vote of a majority of the
shares entitled to vote on any matter is required to amend a corporation's
certificate of incorporation or by-laws, unless a corporation's certificate of
incorporation or by-laws, as the case may be, requires a greater percentage. In
addition, the By-laws of the Company may, subject to the provisions of DGCL, be
amended or repealed by a majority vote of the Company's Board of Directors.
The Existing Charter contains certain provisions permitted under the DGCL
relating to the liability of directors. These provisions eliminate a director's
liability for monetary damages for a breach of fiduciary duty, except in certain
circumstances involving certain wrongful acts, such as the breach of a
director's duty of loyalty or acts or omissions which involve intentional
misconduct or a knowing violation of law. The Existing Charter contains
provisions indemnifying the directors and officers of the Company to the fullest
extent permitted by the DGCL. The Company also has a directors' and officers'
liability insurance policy which provides for indemnification of its directors
and officers against certain liabilities incurred in their capacities as such.
The Company believes that these provisions will assist the Company in attracting
and retaining qualified individuals to serve as directors.
Warrants and Options
In connection with the private placement of Preferred Stock on January 10,
1996, the Company issued to its placement agent, Spencer Trask Securities
Incorporated ("Spencer Trask") and to an assignee of Spencer Trask, the 1996
Warrants to purchase an aggregate of 17,509 shares of Common Stock at an
exercise price of $13.25 per share.
The 1996 Warrants may be exercised at any time through January 10, 1999.
In connection with the financing of a credit facility in April 1997, the
Company issued to Foothill Capital Corporation ("FCC"), the 1997 FCC Warrants to
purchase an aggregate of 500,000 shares of Common Stock at an exercise price of
$6.0667 per share. In addition, the 1997 FCC Warrants have certain anti-dilution
features which provide for approximately 50,000 additional shares pursuant to
the issuance of the Series B Preferred Stock and a corresponding reduction in
the exercise price to $5.52 per share. The 1997 FCC Warrants may be exercised
after March 31, 1998 and then prior to April 1, 2002.
In connection with the 1997 Private Placement, the Company agreed to issue
to the holders and the Placement Agent the Series B Warrants to purchase 750,000
and 40,000 shares, respectively, of Series B Preferred Stock at $5.91 per share.
The Series B Warrants will be exercisable for a period of five years from the
date of issuance for Common Stock. The Company will be obligated to register the
shares of Common Stock issuable upon exercise and conversion of the Series B
Warrants for resale under the Securities Act. See "Proposal No. 1: Approval of
1997 Private Placement Issuances--Summary of Transaction Terms--Placement Agent
Compensation."
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Exchange Act and, in accordance therewith, files periodic reports, proxy
statements and other information with the Commission. A copy of the Registration
Statement, including exhibits and schedules thereto, filed by the Company with
the Commission, as well as other reports, proxy statements and other information
filed by the Company may be inspected without charge at the office of the
Commission, 450 Fifth Street, N.W., Washington, D.C., and at the following
Regional Offices of the Commission: 7 World Trade Center, Suite 1300, New York,
New York, and 500 West Madison Street, Suite 1400, Chicago, Illinois. Copies of
such material can be obtained, upon payment of prescribed fees at the Public
Reference Room of the Commission at 450 Fifth Street, N.W., Washington, D.C.
20549. The Commission maintains a Web site that contains reports, proxy and
information statements and other information regarding registrants that file
electronically with the Commission. The address of such site is
http://www.sec.gov. Such reports, proxy statements and other information
concerning the Company can also be inspected at the offices of the National
Association of Securities Dealers, Inc., 1735 K Street, N.W., Washington, D.C.
20006.
<PAGE>
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company with the Securities and
Exchange Commission are incorporated by reference in this Proxy Statement:
A. The Company's Annual Report on Form 10-K for the year ended
December 31, 1996;
B. The Company's Quarterly Report on Form 10-Q for the quarters ended
March 31 and June 30, 1997;
C. The Company's Current Reports on Form 8-K filed on February 25,
March 18, March 27, April 8, April 25, July 1, July 31, August 13,
September 2, September 11, September 15, and September 29, 1997;
and
D. The description of the Common Stock contained in the Company's
Form 8-A/A (Amend. No. 3) filed on September 29, 1997.
Any statement contained in a document incorporated or deemed incorporated
by reference herein shall be deemed to be modified or superseded for purposes of
this Proxy Statement to the extent that a statement contained herein, or in any
subsequently filed document that also is or is deemed to be incorporated by
reference herein, modifies or supersedes such statement. Any such statement so
modified or superseded shall not be deemed, except as so modified or superseded,
to constitute a part of the Proxy Statement.
<PAGE>
This Proxy Statement incorporates by reference documents which are not
presented herein or delivered herewith. The Company will provide without charge
to each person to whom a copy of this Proxy Statement is delivered, upon the
written or oral request of any such persons, a copies (other than certain
exhibits to such documents) of the Reports. Requests for such copies should be
addressed to: Corporate Secretary, LaserSight Incorporated, 12161 Lackland Road,
St. Louis, Missouri 63146, telephone: (314) 469-3220.
STOCKHOLDER PROPOSALS
Proposals of stockholders which are intended to be presented by such
stockholders at the Company's 1998 annual meeting of stockholders must be
received by the Company no later than January 21, 1998 in order that they may be
included in the Company's proxy statement relating to the 1998 annual meeting.
OTHER MATTERS
We urge you to sign, date and return the enclosed proxy in the envelope
provided. No further postage is required if the envelope is mailed within the
United States. If you subsequently decide to attend the Special Meeting and wish
to vote your shares in person, you may do so. We will appreciate your
cooperation in giving this matter your prompt attention.
By Order of the Board of Directors
Gregory L. Wilson
Secretary
November __, 1997
<PAGE>
<TABLE>
Appendix I
IBM Patents Acquired
--------------------
<CAPTION>
Country Patent/Application Number Expiration Date Title
- ------- ------------------------- --------------- -----
<S> <C> <C> <C>
United States 4,784,135 11/15/05 Far Ultraviolet Surgical
and Dental Procedures
United States 4,925,523 10/28/08 Enhancement of
Ultra-violet Light
Ablation and Etching
Organic Solids
Australia 570,225 11/24/99 Far Ultraviolet Surgical
and Dental Procedures
Australia 598,135 11/24/99 Far Ultraviolet Surgical
and Dental Procedures
Austria 28,974 09/06/03 Far Ultraviolet Surgical
and Dental Procedures
Belgium 111,060 09/06/03 Far Ultraviolet Surgical
and Dental Procedures
Brazil PI8306654 12/02/98 Far Ultraviolet Surgical
and Dental Procedures
Canada 1,238,690 06/28/05 Far Ultraviolet Surgical
and Dental Procedures
France 111,060 09/06/03 Far Ultraviolet Surgical
and Dental Procedures
Germany 3,373,055 09/06/03 Far Ultraviolet Surgical
and Dental Procedures
Italy 111,060 09/06/03 Far Ultraviolet Surgical
and Dental Procedures
Japan 1,838,057 10/19/03 Far Ultraviolet Surgical
and Dental Procedures
Spain 527,415 01/01/05 Far Ultraviolet Surgical
and Dental Procedures
Sweden 111,060 09/06/03 Far Ultraviolet Surgical
and Dental Procedures
Switzerland 111,060 09/06/03 Far Ultraviolet Surgical
and Dental Procedures
United Kingdom 111,060 09/06/03 Far Ultraviolet Surgical
and Dental Procedures
France 365,754 07/07/09 Enhancement of
Ultra-violet Light Ablation
and Etching Organic Solids
Germany 68919328.9 07/07/09 Enhancement of
Ultra-violet Light Ablation
and Etching Organic Solids
Japan 2,502,768 10/09/09 Enhancement of
Ultra-violet Light Ablation
and Etching Organic Solids
United Kingdom 365,754 07/07/09 Enhancement of
Ultra-violet Light Ablation
and Etching Organic Solids
</TABLE>
<PAGE>
LASERSIGHT INCORPORATED
PROXY
SPECIAL MEETING OF STOCKHOLDERS, DECEMBER 10, 1997
This Proxy is solicited on behalf of the Board of Directors The undersigned
hereby (i) appoints Michael R. Farris, Richard L. Stensrud, and Gregory L.
Wilson and each of them as Proxy holders and attorneys, with full power of
substitution to appear and vote all of the shares of Common Stock of LaserSight
Incorporated which the undersigned shall be entitled to vote at the Special
Meeting of Stockholders of the Company, to be held on Wednesday, December 10,
1997 at 10:00 a.m., St. Louis time, and at any adjournments thereof, hereby
revoking any and all proxies heretofore given and (ii) authorizes and directs
said Proxy holders to vote all of the shares of Common Stock of the Company
represented by this Proxy as follows. If no directions are given below, said
shares will be voted "FOR" items 1, 2 and 3.
(1) APPROVAL OF 1997 PRIVATE PLACEMENT ISSUANCES
FOR [ ]
AGAINST [ ]
ABSTAIN [ ]
(2) AUTHORIZATION OF ADDITIONAL SHARES OF COMMON STOCK
FOR [ ]
AGAINST [ ]
ABSTAIN [ ]
(3) ADJOURNMENT OF SPECIAL MEETING, IF NEEDED TO SOLICIT ADDITIONAL PROXIES
FOR [ ]
AGAINST [ ]
ABSTAIN [ ]
(4) In their discretion to act on any other matters which may properly come
before the Special Meeting.
PLEASE DATE, SIGN AND RETURN PROMPTLY IN THE ACCOMPANYING ENVELOPE The Board of
Directors unanimously recommends that you vote FOR the above proposals.
Signature______________________________________________
Signature______________________________________________
(IF JOINTLY HELD)
Dated: _______________, 1997
Note:
Your signature should be exactly the same as the name imprinted herein. Persons
signing as executors, administrators, trustees or in similar capacities should
so indicate. For joint accounts, each joint owner must sign.
