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
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[ ] Preliminary Proxy Statement
[ ] Confidential, for use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[X] 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)
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[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:
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pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee
is calculated and state how it was determined)
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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 FEBRUARY 27, 1998
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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
February 27, 1998 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 Common Stock issuable (A) upon the conversion of the Company's
Series B Convertible Participating Preferred Stock, $.001 par value,
issued in an August 1997 private placement, (B) as dividends, if any,
and other payments relating to such Series B Preferred Stock, and (C)
upon exercise of related investor and placement agent warrants. Such
approval will remove the 1,995,534 share limitation on the number of
shares of Common Stock issuable upon conversion currently required by
a listing rule of the Nasdaq Stock Market.
2. To vote on a proposal to approve an amendment to the Company'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 if there are not sufficient votes at the time of the Special
Meeting to approve either or both of the foregoing proposals.
The Board of Directors of the Company has fixed the close of business on
January 16, 1998 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, which has
unanimously recommended 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 later 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,
/s/ Gregory L. Wilson
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Gregory L. Wilson
Secretary
St. Louis, Missouri
January 30, 1998
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
(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
February 27, 1998, and any adjournment or postponement thereof. At the Special
Meeting, stockholders will 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 (A) upon 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, (B) as dividends, if any, and payments thereon, and (C)
upon exercise of related investor and placement agent warrants (this
proposal is referred to as the "1997 Private Placement Proposal"). Such
approval would remove the 1,995,534 share limitation on the number of
shares of Common Stock issuable upon conversion currently required by a
listing rule of the Nasdaq Stock Market.
2. To amend the Company's Certificate of Incorporation to increase the
authorized number of shares of Common Stock from 20,000,000 to 40,000,000
(the "Charter Amendment Proposal").
3. To approve an adjournment of the Special Meeting to another date or
place for the purpose of soliciting additional proxies if there are not
sufficient votes at the time of the Special Meeting to approve the 1997
Private Placement Proposal or the Charter Amendment Proposal (the
"Adjournment Proposal").
Only holders of record of shares of Common Stock at the close of business
on January 16, 1998, 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 entitles its holder 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. This Proxy Statement and accompanying proxy
card are being mailed to stockholders on or about January 30, 1998.
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, New York 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).
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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 Proposal, FOR approval of the Charter
Amendment Proposal 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 by this Proxy Statement will be voted on such matter
in accordance with the discretion of the proxy holders named in such proxies.
Any stockholder can revoke his or her proxy at any time before it has been
voted by filing with the Secretary of the Company a written revocation of the
proxy, 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 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 approve the 1997 Private
Placement Proposal 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 the 1997 Private Placement Proposal
or the Adjournment Proposal. Because the Charter Amendment Proposal requires the
approval of the holders of a majority of the shares of Common Stock outstanding,
a broker non-vote will be counted as a vote against the Charter Amendment
Proposal.
PROPOSAL NO. 1:
APPROVAL OF 1997 PRIVATE PLACEMENT
Acquisition of the IBM Patents
In a private placement completed on August 29, 1997 (the "1997 Private
Placement"), the Company sold to four institutional investors a total of 1,600
shares of Series B Preferred Stock, and issued to such investors and to the
Company's placement agent warrants to purchase a total of 790,000 shares of
Common Stock (the "Series B Warrants"). The Company received gross proceeds of
$16 million and net proceeds of approximately $14.8 million, after the payment
of cash fees to its placement agent and estimated transaction expenses.(1) On
the same date, the Company used such net proceeds to purchase several patents
from International Business Machines Corporation ("IBM") relating to the use of
ultraviolet light for laser vision correction as well as to all non-ophthalmic
applications (the "IBM Patents"). The IBM Patents represent fundamental claims
in 13 countries. The IBM Patents include patents for Far Ultraviolet Surgical
- --------------------------
(1) These amounts included $800,000 paid to the Company's placement agent and
approximately $400,000 for legal, accounting, and other expenses.
<PAGE>
and Dental Procedures, with an expiration date of November 2005 in the United
States and expiration dates ranging from December 1998 to June 2005 in
Australia, Austria, Belgium, Brazil, Canada, France, Germany, Italy, Japan,
Spain, Sweden, Switzerland and the United Kingdom. The IBM Patents also include
patents for Enhancement of Ultraviolet Light Ablation and Etching Organic
Solids, with an expiration date of October 2008 in the United States and
expiration dates ranging from July 2009 to October 2009, in France, Germany,
Japan and the United Kingdom.
As part of the same transaction, the Company also acquired, effective as of
January 1, 1997, all of IBM's rights to royalty payments under IBM's
pre-existing agreements licensing certain of the IBM Patents to Visx Inc.
("Visx") and Summit Technology, Inc. ("Summit Technology"). These license
agreements require Visx and Summit Technology to each pay, during each six-month
period, a royalty equal to 2% of their excimer laser revenues for such period
that are covered by such patents. Under these agreements, the Company has
received an aggregate of approximately $436,000 from Visx and Summit Technology
for first half of 1997 and is due to receive from Visx and Summit Technology
royalty payments within 60 days after the end of each subsequent six month
period thereafter throughout the term of the IBM Patents.
Licensing Arrangements
In September 1997, the Company received a $4.0 million lump-sum payment for
its grant of an exclusive, world-wide, royalty-free license to a third party
covering the use of the IBM Patents in the vascular and cardiovascular fields.
In January 1998, the Company entered into definitive agreements with Nidek
Co., Ltd., a Japanese surgical and diagnostic products company ("Nidek"), that
provide for the Company to grant to Nidek certain rights in the IBM Patents in
exchange for Nidek's payment of $7.5 million in cash at the closing, subject to
withholding of up to $200,000 for Japanese taxes. The Company expects the
transaction to close prior to the end of January 1998, subject to the approval
of both the holders of the Series B Preferred Stock and Foothill Capital
Corporation, the Company's secured lender ("Foothill"). Under the agreements,
the Company will transfer to Nidek all rights in those IBM Patents which have
been issued in countries outside of the United States (the "Non-U.S. Patents").
The Company will receive from Nidek an exclusive license to use and sublicense
the Non-U.S. Patents in all fields other than the ophthalmic, cardiovascular and
vascular fields. In addition, the Company will retain ownership of the IBM
Patents issued in the United States, and will grant Nidek a non-exclusive
license to use such patents. The Nidek transactions will not affect the rights
of the Company or other companies to use the IBM Patents in any country covered
by existing license agreements.
The Company intends to negotiate license agreements relating to the IBM
Patents with other companies. However, there can be no assurance as to whether,
when or on what terms the Company may be able to do so. As of the date of this
Proxy Statement, the Company had not entered into any other agreements relating
to the IBM Patents.
Partial Redemption of Series B Preferred Stock
On October 28, 1997, the Company voluntarily redeemed 305 shares of the
Series B Preferred Stock with a total face amount of $3,050,000 and representing
approximately 19% of the $16 million face amount issued in August 1997. The
Company paid the redemption price of $3,172,000 (including a 4% redemption
premium) with a portion of the $4 million proceeds which the Company had
received in September 1997 as a lump-sum payment for an exclusive, world-wide,
royalty-free license to a third party covering the use in the vascular and
cardiovascular fields of the IBM Patents. As required by its agreement with the
purchasers of the Series B Preferred Stock, the Company had placed 80% of such
proceeds in a blocked account to secure the Company's obligation to redeem the
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Series B Preferred Stock if it were to default in certain of its obligations to
the Series B preferred shareholders. The Company believes that its continued
holding of the restricted funds in the blocked account (instead of redeeming the
305 preferred shares) would not have meaningfully enhanced the Company's
liquidity and would, under the terms of the Series B Preferred Stock, have
resulted in an increase in the redemption premium (to as much as 14%) or the
expiration in January 1998 of the Company's option to redeem Series B Preferred
Stock. In addition, the Company believes that the redemption of such 305 shares
reduced the potential dilutive effect of the Series B Preferred Stock on the
Company's common shareholders.
Why the Company is Requesting Shareholder Approval
The Company is requesting its stockholders to approve the 1997 Private
Placement Proposal because the terms of the Series B Preferred Stock require the
Company to obtain such approval. A failure to obtain such approval would entitle
the holders of the Series B Preferred Stock to require the Company to redeem a
portion of their shares at a premium. See "Consequences if Stockholder Approval
Not Obtained."
Consequences if Stockholder Approval Not Obtained
If the Company's stockholders do not approve the 1997 Private Placement
Proposal, the terms of the Series B Preferred Stock and a listing rule of the
Nasdaq Stock Market will prohibit the Company from issuing more than 1,995,534
shares of Common Stock (slightly less than 20% of the shares of Common Stock
outstanding on the date of the 1997 Private Placement) upon the conversion of
the outstanding Series B Preferred Stock and the exercise of the outstanding
Series B Warrants. If the Company's stockholders do not approve the Charter
Amendment Proposal, the Company's commitments to issue Common Stock may exceed
the 20,000,000 shares presently authorized under the Company's certificate of
incorporation. If either of such Proposals is not approved by the stockholders
on or before February 28, 1998, 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 or
its certificate of incorporation. (The holders of Series B Preferred Stock
agreed to extend this deadline from December 26, 1997, to February 28, 1998, but
there can be no assurance as to whether, when or on what terms any further such
extension can be obtained.) Such redemption must be completed within five
business days of the Company's receipt of a redemption request. Any delay in
payment will cause such redemption amount to accrue interest at the rate of 1%
per month during the first 30 days, prorated daily (2% monthly, prorated daily,
thereafter). In addition, any such required redemption would cause a default
under the Company's loan agreement with Foothill and entitle Foothill to
accelerate the scheduled maturity date of the Company's obligations to Foothill
(June 15, 1998).
The "Special Redemption Price" means a cash payment equal to the greater of
(i) the liquidation preference of $10,000 multiplied by 1.25 or (ii) a fraction,
the numerator of which would equal the highest closing bid price of the Common
Stock during the period beginning 10 trading days before the redemption date and
ending five business days after such date, and the denominator of which would
equal the Conversion Price that would have been applicable if the preferred
shares had been converted as of the redemption date. (The fraction described in
the preceding sentence will depend on market prices of the Common Stock and
could possibly significantly exceed 1.25.)
The amount of cash which the Company would be required to return in the
event of stockholder disapproval will depend on the per share price history of
the Common Stock on the date such payment must be made. Assuming a Conversion
Price of $2.677083 per share (the average of the lowest three daily closing bid
prices during the 20-day Lookback Period ended on January 27, 1998), and
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completion of the redemption within five business days after the Company's
receipt of a redemption request, the Company would be required to pay at least
$15.5 million (including a premium of at least 25% or approximately $3.1
million). The number of shares of Common Stock issuable upon conversion of the
Series B Preferred Stock will 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 could be required to pay to holders of the Series B Preferred
Stock would increase. The Company does not now have sufficient financial
resources to satisfy this contingent obligation and there can be no assurance
that the Company will do so in the future. Accordingly, such redemption payments
could have a material adverse effect on the Company's liquidity and financial
position.
Possible Disadvantages of Approving the 1997 Private Placement Proposal
Potential for Increased Dilution of Common Stockholders. If the Company's
stockholders do approve the 1997 Private Placement Proposal, the number of
shares of Common Stock that may ultimately be issued upon the conversion of the
Series B Preferred Stock and the exercise of the Series B Warrants may be
significantly greater than the maximum number currently permitted (1,995,534
shares). For example, if such stockholder approval had already been received and
if all outstanding shares of Series B Preferred Stock had been converted on
January 27, 1998, the Company would have been required to issue approximately
4,837,354 shares of Common Stock. The issuance of more than 1,995,534 shares of
Common Stock would reduce (possibly to a significant extent) the percentage
ownership of the current holders of the Common Stock and dilute their interest
in the Company's operating results. Although the earnings that the Company may
derive form the IBM Patents could reduce (or even possibly offset) this
dilution, there can be no assurance that this will occur.
Potential for Increased Number of Shares Available for Sale. The approval
of the 1997 Private Placement Proposal could result in a greater number of
shares of Common Stock becoming eligible for sale into the public market. The
Company is required to keep in effect a registration statement under the
Securities Act of 1933 that allows the public sale of all of the Common Stock
issued upon conversion of the Series B Preferred Stock. Such sales, or the
possibility of such sales could depress the market price of the Common Stock.
Potential Effects on the Company's Ability to Obtain Equity Capital. The
approval of the 1997 Private Placement issuances may impede the Company's
ability to obtain additional equity capital because of the factors noted above
under "--Potential for Increased Dilution of Common Stockholders" and
"--Potential for Increased Number of Shares Available for Sale."
Potential for a Change of Control. The approval of the 1997 Private
Placement Proposal could, depending on the market prices of the Common Stock
during the periods prior to its conversion, result in the issuance of a large
number of shares of Common Stock, thereby possibly resulting in a change of
control of the Company if the converting holders were to retain such shares of
Common Stock rather than sell them. Under the terms of the Series B Preferred
Stock, no holder can convert its shares into Common Stock to the extent that
such conversion would result in its being the beneficial owner of more than 4.9%
(9.9% in the case of two of such holders) of the Common Stock that would be
outstanding after giving effect to such conversion. However, this restriction
can be terminated at any time upon 90 days' prior written notice to the Company
by the holders of a majority of the Series B Preferred Stock then outstanding.
Potential for Discouraging Certain Changes of Control. The potential for
the issuance of a larger number of shares of Common Stock following stockholder
approval of the 1997 Private Placement Issuances might tend to have the effect
<PAGE>
of delaying, deferring or preventing a change in control of the Company or
discouraging tender offers for the Company.
The Board of Directors 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."
Summary of 1997 Private Placement
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 the Series B
Preferred Stock is attached as an exhibit to the Company's amended Form 8-A
filed with the Securities and Exchange Commission ("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 a Securities Purchase
Agreement dated as of August 29, 1997 (the "Securities Purchase Agreement"), the
Company issued and sold in a private placement to certain accredited investors a
total of 1,600 shares of Series B Preferred Stock at a price of $10,000 per
share, resulting in gross proceeds to the Company of $16.0 million.
Each holder of Series B Preferred Stock has the option to convert any or
all of such shares into shares of Common Stock from time-to-time before August
29, 2000, on which date all shares of Series B Preferred Stock then outstanding
will automatically be converted into Common Stock, provided that all shares of
Common Stock issuable upon conversion of all outstanding shares of Series B
Preferred Stock are then (i) authorized and reserved for issuance, (ii)
registered under the Securities Act for resale and (iii) eligible to be traded
on either the Nasdaq National Market, the Nasdaq Small Cap Market, the New York
Stock Exchange or the American Stock Exchange.
The Company cannot predict the number of shares of Common Stock that will
ultimately be issued upon the conversion of the Series B Preferred Stock if its
stockholders approve the 1997 Private Placement issuances. Such number will
depend on future events, especially the market prices of the Common Stock and
the timing of the conversion decisions of the holders of Series B Preferred
Stock, and will increase if the market price of the Common Stock decreases
relative to its level during the 20- (or under certain circumstances 30-)
trading day period immediately prior to January 27, 1998, and will decrease if
the market price of the Common Stock increases relative to its level during such
period (but only up to $6.68 per share). However, such number could be
substantially greater than the 1,995,534 shares currently permitted by the terms
of the Series B Preferred Stock. If, as of January 27, 1998, the Company had
already obtained stockholder approval of the 1997 Private Placement Issuances
and if all outstanding shares of Series B Preferred Stock and all Series B
Warrants had been converted or exercise (as applicable) as of such date, the
Company would have been required to issue a total of 5,627,354 shares (including
790,000 shares relating to the exercise of the Series B Warrants).
The number of shares of Common Stock issuable upon conversion of shares of
Series B Preferred Stock (the "Conversion Shares") equals the liquidation
preference of the shares being converted (presently $10,000 per share) divided
by the then-effective conversion price applicable to the Series B Preferred
Stock (the "Conversion Price"). The Conversion Price as of any date is the
lesser of (i) $6.68 per share or (ii) the average of the three lowest closing
bid prices per share of Common Stock during the Lookback Period (as defined
below) (subject to equitable adjustment for any stock splits, stock dividends,
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reclassifications or similar events during the Lookback Period). For this
purpose, the "Lookback Period" means the 20 consecutive trading days (30
consecutive trading days if the average closing bid price of the Common Stock
during the period of five consecutive trading days ending on February 25, 1998,
is less than $5.1375 per share) immediately preceding the Conversion Date. As of
January 27, 1998, the Conversion Price would have been $2.677083 per share
whether a 20-day or a 30-day Lookback Period had been used. The terms of the
Series B Preferred Stock do not limit the number of shares of Common Stock which
the Company may be required to issue upon its conversion. If the Company's
shareholders approve the 1997 Private Placement Proposal, the terms of the
Series B Preferred Stock will continue to limit to 1,995,534 the total number of
Conversion Shares that may be issued upon the conversion of the Series B
Preferred Stock and the exercise of the Series B Warrants.
The Conversion Price is 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 conversion
feature similar to that of the Series B Preferred Stock. In addition, if a
conversion occurs when the Common Stock is not listed on the Nasdaq National
Market, the American Stock Exchange or the New York Stock Exchange, the
otherwise-applicable Conversion Price will be multiplied by 0.93. No holder of
Series B Preferred Stock is entitled to convert shares of Series B Preferred
Stock into shares of Common Stock to the extent that, following such conversion,
the holder would beneficially own more than 9.9% of the outstanding shares of
Common Stock, unless this provision is waived by a majority of the preferred
holders upon 90 days' prior notice to the Company. In addition, upon a merger or
consolidation of the Company, holders would have the option of receiving 125% of
the face amount of the Series B Preferred Stock then outstanding.
If either the 1997 Private Placement Proposal or the Charter Amendment
Proposal is not approved by the Company's stockholders on or before February 28,
1998, the Company will be required to redeem a portion of the outstanding Series
B Preferred Stock at a premium of at least 25%. See "---Consequences if
Stockholder Approval Not Obtained."
Each holder of Series B Preferred Stock is entitled to participate in any
dividends paid on the Common Stock while such shares of Series B Preferred Stock
remain outstanding, when and as declared by the Board of Directors. However, the
Company does not currently anticipate paying dividends for the foreseeable
future. Any dividend on 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 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 Series B Preferred Stock
have no voting rights.
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 require
the Company to pay to each holder, an amount equal to 1% of the total purchase
price of the Series B Preferred Stock for the first 30-day period of the delay
(prorated for any shorter period), and 2% of the total purchase price for each
month thereafter (prorated for any shorter period). The total amount of such
payments through the effective date of the registration statement was
approximately $380,000.
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
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securities, the Placement Agent was paid cash compensation of 5% of the gross
proceeds received by the Company. The Company also issued to the Placement Agent
Series B Warrants to acquire 40,000 shares of Common Stock at a price of $5.91
per share. Such Warrants are exercisable at any time through August 2002. The
Company is required to register the shares of Common Stock issuable upon
exercise 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.
How the Board Evaluated of the Purchase of the IBM Patents and the Related
Financing
Negotiations Between the Company and IBM. The discussions between the
Company and IBM regarding the IBM patents began in June 1996 with an exploratory
meeting between Mr. Emmett Murtha, the Director of Business Development in IBM's
Office of the Vice President of Intellectual Property and Licensing-Corporate,
and Mr. Michael Farris, President and Chief Executive Officer of the Company,
together with a consultant retained by the Company. By letter dated July 17,
1996, Mr. Farris proposed to Mr. Murtha an acquisition by the Company of IBM's
entire interest in all of its issued and pending patents relating to medical and
dental applications for lasers in exchange for total consideration of $10
million, payable 50% in cash and 50% in unregistered Common Stock whose transfer
would be restricted for 24 months. (This proposal included patents which the
Company ultimately did not acquire.) IBM would have retained a 25% interest in
the Company's revenues from the patents (subject to a ceiling) and would have
shared equally in the cost of prosecuting and defending the patents. On July 23,
1996, Mr. Farris received IBM's response to the effect that payments at the time
of the transaction would have to reflect at least half of the total price and
that a minimum amount of post-closing payments should be specified. IBM's
response also indicated a willingness to explore alternative transactions, such
as an exclusive license rather than an outright purchase and sale of the
patents, a transaction involving fewer of the patents, and excluding IBM's
existing license agreements with Visx and Summit Technology. On July 24, 1996,
Mr. Farris wrote to Mr. Murtha to propose that the Company would acquire both
(i) a worldwide license only for the ophthalmic applications and only involving
certain of those patents relating to the ablation of body tissue, and (ii) IBM's
rights under its agreements with Summit Technology and Visx. In exchange, the
Company would pay IBM $10 million in cash, stock and notes and would give IBM a
50% share in the royalties collected. On July 30, the Company received a letter
from Mr. Murtha to the effect that IBM would proceed with the Company's proposal
and would shortly forward a draft of an agreement. The Company received IBM's
draft agreement on August 9, 1996, and exchanged comments with IBM during
following weeks. On September 26, 1996, the Company and IBM shifted their
transaction structure focus toward a license arrangement rather than a purchase
and sale. By letter dated October 11, 1996, Mr. Farris proposed to Mr. Murtha a
schedule providing for payments of Common Stock and cash over a five-year
period. On December 2, 1996, the Company submitted two alternative proposals to
IBM in response to its request for an all-cash transaction. The Company's first
proposal was for IBM to receive $10 million in increasing annual installments
over five years, together with either 25% or 50% of the royalties collected by
the Company during such five years, payable after the cumulative amount of such
royalties were to exceed either $5 million (if IBM were to elect the 25% royalty
rate) or $8 million (if IBM were to elect the 50% royalty rate). The Company's
alternative proposal was for IBM to receive $10 million in increasing annual
installments payable over five years and additional annual payments in a total
amount of up to $5 million if and when certain royalty revenue targets were met
during such years. Neither proposal was accepted by IBM. On December 16, 1996,
the Company and IBM agreed to pursue the proposal for a fixed transaction price
of $15 million, with a portion to be paid into an escrow account at closing and
the balance to be paid in July 1997. IBM also agreed to transfer to the Company
as an additional element of the transaction both IBM's rights under its existing
royalty agreements with Visx and Summit Technology and IBM's right to pursue
patent infringement claims against unlicensed third parties.
<PAGE>
Factors Considered by the Board of Directors in February 1997. The Board
discussed the acquisition of the IBM Patents at its February 7, 1997, meeting
and authorized the execution of the agreement between IBM and the Company. The
factors considered by the Board at its February 7 meeting included:
o The proposed agreement and the price of $14.9 million were the result
of extensive negotiations (as described above).
o Certain of IBM's existing licenses of the IBM Patents to third parties
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.
o Royalties were forecast with a financial model developed by the Company
with the help of an outside consultant and industry sources. (However,
the Company did not request any fairness opinion regarding the
transaction.)
o There were prospects for the Company to receive lump sum license fees
for certain of the IBM Patents, although there were no agreements or
commitments for such fees at that time.
o The proposed agreement did not require the Company to consummate the
acquisition until July 1, 1997, thereby giving the Company some time to
explore financing alternatives.
o If the Company was not to acquire the IBM Patents by July 1, IBM's sole
remedy would be a payment from the Company of $1 million. The Company
could choose to make such payment in either cash or Common Stock.
o The value of the Company's LaserSight Technologies subsidiary could be
enhanced, thereby facilitating the Company's pursuit of strategic
alternatives that it had announced in October 1996.(2)
o The Company would need to obtain financing for substantially all of the
$14.9 million purchase price.
The Board of Directors viewed all of these factors as positive, except the
Company's need to finance the transaction and the Company's obligation to pay
IBM $1 million if the transaction did not close by July 1, 1997. The Board
determined that, taken as a whole, the positive factors outweighed these two
negative factors.
Factors Considered by the Board of Directors in August 1997. 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 preferred equity that was convertible at a price based on future market
prices of the Common Stock relative to the benefits and risks of the
alternatives available to the Company to finance its acquisition of the IBM
Patents. The Board concluded that the 1997 Private Placement Issuances were in
the best interest of the Company and its stockholders.
- --------------------------
(2) Upon the completion of its exploration and evaluation of possible
strategic alternatives, the Company determined in June 1997 not to pursue
further any such alternatives for the time being.
<PAGE>
The factors that the Board of Directors considered as positive in its
decision to proceed with the transaction included:
o The IBM Patents related to the use of an ultraviolet laser for the
ablation (i.e., surgical removal or shaping) of any human tissue rather
than only for vision correction, and management's belief that there
exists a wide range of such potential uses.
o 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, Summit
Technology and Autonomous Technologies Corporation) lacked a license to
use the IBM Patents.
o The Company had had preliminary discussions with alternate sources of
financing, including other companies in the same industry, but it had
received only one other proposal that would have yielded $16 million.
Management concluded that such other proposal was unlikely to be
concluded in a timely manner or to result in more favorable terms.
o If the Company did not consummate the IBM Patent transaction, it would
be required to pay IBM cash or stock with a value of $1 million.
o Although IBM had been willing to extend the original deadline for
closing from July 1, 1997, to August 1, 1997, and again to September 1,
1997, it appeared unlikely that IBM would grant any further extensions.
o The Company had prospects to enter into licensing or sale arrangements
providing for lump-sum fees in an amount sufficient to recover some
portion of the purchase price.(3)
o If the price of the Common Stock were to increase above $5.00 per share
(the closing price of the Common Stock on August 29, 1997) before the
Series B Preferred Stock is converted, the conversion price of the
Series B Preferred Stock could increase to as much as $6.68 per share,
thereby resulting in less dilution to the current holders of Common
Stock than if the Company had sold Common Stock at $5.00 per share to
finance its acquisition of the IBM Patents.
The factors that the Board of Directors considered as negative in its
decision to proceed with the transaction included:
o The Series B Preferred Stock financing could impair the Company's
ability to raise additional capital in the public or private markets.
o There was a potential for extensive dilution of the Company's existing
stockholders by the potentially unlimited number of shares of Common
Stock issuable upon conversion of the Series B Preferred Stock.
- --------------------------
(3) Although no definitive licensing or sale arrangements had been entered
into as of August 1997, there had been certain preliminary discussions and
indications of interest. One of these indications of interest subsequently
resulted in the Company receiving in September 1997 a lump-sum payment of $4
million for a third party's use of the IBM Patents in the cardiovascular and
vascular fields. Another indication of interest resulted the execution of a
definitive agreement with Nidek in January 1998 that provides for a lump-sum
payment of $7.5 million to the Company upon closing. See "Approval of 1997
Private Placement Issuances--Licensing Arrangements."
<PAGE>
(However, the Board believed that this factor was somewhat offset by
the Company's right to redeem up to 70% of the face amount of the
Series B Preferred Stock on or before November 27, 1997, or up to 40%
of the face amount on or before January 26, 1998.)
o Certain events could cause the Series B Preferred Stock to become
redeemable at the Holders' option, including the failure of the
Company's stockholders to approve the 1997 Private Placement Issuances
by February 28, 1998, 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 keep available for issuance upon
conversion of the Series B Preferred Stock a number of shares of Common
Stock equal to at least 175% of the number of Conversion Shares then
issuable.
The Board of Directors determined that, taken as a whole, the positive factors
outweighed these negative factors.
Nasdaq Listing Obligation
The Company's listing agreement regarding the trading of the Common Stock
on the Nasdaq National Market requires the Company to comply with certain
"non-quantitative designation criteria." These criteria include the requirement
that, with certain exceptions, issuers whose securities are listed 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 outstanding. Stockholder approval is also required for
transactions which result in "change in control." Although the Company does not
believe that the 1997 Private Placement 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 facts that (i) no voting rights were granted to
holders of the Series B Preferred Stock as such, (ii) such holders do not have
any contractual right to elect a director or otherwise influence management of
the Company, (iii) there has been no change in the Company's Chairman of the
Board or its President and Chief Executive Officer, and (iv) no holder of Series
B Preferred Stock can convert its shares to the extent that such conversion
would increase its beneficial ownership of Common Stock to more than 9.9% (4.9%
in the case of two of such holders) without obtaining the prior approval of the
holders of a majority of the Series B Preferred Stock and giving 90 days' prior
notice to the Company.
To assure continued compliance with the listing rules of the Nasdaq Stock
Market, the terms of the Series B Preferred Stock expressly provide that no more
than 1,995,534 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. See "Description of Capital Stock."
The approval of the 1997 Private Placement Proposal by the Company's
stockholders would result in the approval of 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 and
would free the Company from the requirements of the 20% Nasdaq Limit. No further
stockholder vote or approval related to the 1997 Private Placement will be
sought or required, unless a decline in the market price of the Common Stock
were to cause the Company's reserve of authorized but unissued shares of Common
Stock reserved for issuance as Conversion Shares to amount to less than 175% of
the amount of Conversion Shares then issuable based on current market prices of
the Common Stock, in which case the Company would be required to obtain
stockholder approval of an amendment to its certificate of incorporation to
increase the number of authorized shares of Common Stock. See "Proposal No. 2:
Approval of Charter Amendment."
<PAGE>
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 1,995,534 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.
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 Proposal:
Assumed Number of As % of Common
Conversion Conversion Shares Outstanding
Price (1) Shares Issuable After Conversion (2)
--------- ----------------- --------------------
$0.50 25,900,000 72.2%
$1.00 12,950,000 56.5%
$2.00 6,475,000 39.3%
$2.677083 (3) 4,837,354 32.6%
$3.00 4,316,666 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 (4) 1,938,622 16.3%
(1) The Conversion Price applicable to any conversion equals the lesser of
$6.68 per share or the average of the three lowest closing bid prices
of the Common Stock during the 20 (30 after February 25, 1998, under
certain conditions) consecutive trading days preceding such conversion
date, as defined under "Summary of Transaction Terms-Series B Preferred
Placement."
(2) Assumes that the number of shares outstanding at the time of conversion
equals the 9,984,672 shares of Common Stock outstanding on January 26,
1998, plus the number of Conversion Shares issuable at the Conversion
Price indicated.
(3) Equals the Conversion Price that would have been applicable if all of
the Series B Preferred Stock had been converted as of January 27, 1998.
(4) The maximum Conversion Price. See "Summary of Transaction Terms-Series
B Preferred Placement."
Under applicable Delaware law and the Company's Certificate of
Incorporation, the 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
<PAGE>
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.
Board of Directors Approval
As previously disclosed, the Board of Directors has recognized for some
time that the purchase of the IBM Patents required that additional capital be
raised. The Board discussed this need for capital at two Board meetings during
1997 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.
Interests of Certain Persons
None of the purchasers of the Series B Preferred Stock was or is an
executive officer or director of the Company or, to the Company's knowledge, an
affiliate of any such officer or director. To the Company's knowledge, none of
such purchasers beneficially owned 5% or more of the Common Stock before the
1997 Private Placement.
No Appraisal or Dissenters' Rights; No Preemptive Rights
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
Messrs. Michael Farris and Gregory Wilson, the Company's Chief Executive
Officer and Chief Financial Officer, respectively, have each 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 the 1997 Private Placement
Proposal. As of the date of this Proxy Statement, the Company believes that such
undertakings cover approximately 430,200 shares, representing approximately 4.3%
of the shares outstanding on the record date for the Special Meeting.
Separately, Mr. Farris has agreed, effective through February 28, 1999, not
to sell, transfer or assign more than the lesser of 125,000 shares of Common
Stock or 15% of the shares of Common Stock owned by Mr. Farris as of August 29,
1997, without the prior consent of the holders of the Series B Preferred Stock.
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 Board of Directors has unanimously recommended that stockholders vote FOR
the 1997 Private Placement Issuances. The directors and officers of the Company
intend to vote their shares in favor of this Proposal.
<PAGE>
PROPOSAL NO. 2:
APPROVAL OF CHARTER AMENDMENT
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
Company's Certificate of Incorporation to increase the number of shares of
Common Stock which the Company is authorized to issue from 20,000,000 to
40,000,000. The Board determined that such an amendment is necessary.
The full text of Section 1(a) of Article IV of the Company'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.
The terms of the additional shares of Common Stock will be identical to
those of the currently outstanding Common Stock. 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
Charter Amendment Proposal 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 Proposal.
Purposes and Effects of Increasing the Number of Authorized Shares of Common
Stock
If approved by the Company's stockholders, the Charter Amendment Proposal
would increase the number of shares of Common Stock which the Company 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
outstanding shares of Common Stock. See "Description of Securities--Common
Stock."
The Board of Directors recommends the proposed increase in the authorized
number of shares of Common Stock to enable the Company to satisfy its
obligations under the terms of the Series B Preferred Stock. See "Consequences
if Stockholder Approval Not Obtained." In addition, the approval of the Charter
Amendment Proposal would help ensure an adequate supply of authorized and
unissued shares for (i) additional issuances under the Company's employee
benefit plans, (ii) the raising of additional capital for the operations of the
Company, (iii) the financing of the acquisition of other businesses, and (iv)
the satisfaction of the Company's contingent obligations to issue Common Stock.
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 Company'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 Company have no knowledge of any current effort to
obtain control of the Company 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 Company or of the Board 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 Company, which might have the effect of discouraging or
making less likely such a change of control. Such shares could also be issued to
<PAGE>
other persons or entities who support the Board in opposing a takeover attempt
that the Board considers not to be in the best interests of the Company and its
stockholders.
If all such options and warrants were exercised and all shares of Series B
Preferred Stock outstanding on January 26, 1998, were converted under the
current-applicable 20% Nasdaq Limit, approximately 16,204,438 shares of Common
Stock would be outstanding. In addition, the Series B Preferred Stock would
become convertible into a greater number of shares of Common Stock if the
shareholders approve the 1997 Private Placement Proposal. The Company must as of
any date keep reserved for possible issuance a number of shares of Common Stock
equal to 175% of the number of shares of Common Stock that would be issuable if
all shares of the Series B Preferred Stock then outstanding were converted into
Common Stock as of such date. The number of shares of Common Stock required to
be reserved to satisfy such 200% requirement would be 7,679,174, in addition to
the 1,995,534 shares which have already been reserved, resulting in a total of
23,883,612 outstanding shares and reserved shares, or 3,883,612 shares more than
the 20,000,000 shares presently authorized under the Company's Certificate of
Incorporation. (These share amounts are based on an assumed Conversion Price of
$2.677083 per share, the price that would have been applicable if all of the
Series B Preferred Stock had been converted as of January 27, 1998.)
<TABLE>
<CAPTION>
The following table summarizes this analysis:
<S> <C> <C> <C>
Authorized shares 20,000,000
Outstanding at January 26, 1998 9,984,672
Reserved for future issuance:
Stock options--outstanding at January 26, 1998 1,099,000
Stock options--future grants 398,000
Warrants--previous financings 567,509
Series B Conversion Shares (20% Nasdaq Limit) 1,995,534
Series B Warrants 790,000
Contingently issuable shares (1) 1,369,723
---------
Total reserved 6,219,766
---------
Total issued or reserved for issuance (16,204,438)
Additional Series B Conversion Shares to be reserved
upon shareholder approval of 1997 Private
Placement Issuances (assuming a Conversion Price
of $2.677083) (7,679,174)
-----------
Total shares of Common Stock available (shortfall) (3,883,612)
===========
<FN>
(1) Includes (i) up to 600,000 shares issuable to the former
shareholders and optionholders of LaserSight Centers Incorporated
("LaserSight Centers") if that subsidiary achieves certain financial goals,
(ii) up to 343,000 shares issuable to Mr. Farris, the President and Chief
Executive Officer of the Company, if the Company's The Farris Group
subsidiary achieves specified financial goals, (ii) up to 102,798 shares
issuable in July 1998 pursuant to the Company's acquisition of the assets
of the Northern New Jersey Eye Institute, and (iv) an estimated 323,625
shares issuable if the Food & Drug Administration (FDA) approves a
LaserSight-manufactured laser system for general commercial use in the
treatment of hyperopia (farsightedness) after having approved the Company's
LASIK Pre-Market Approval (PMA) application for commercial sale (the actual
share amount will equal the number of shares with a market value of $1.0
</FN>
</TABLE>
<PAGE>
million at that time). Does not include an indeterminate and potentially
unlimited 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.
The Series B Preferred Stock is convertible into the number of shares of
Common Stock determined by dividing its $10,000 stated value per share (plus any
accrued but unpaid dividends) by the lesser of (x) $6.68 per share or (y) the
average of the three lowest closing bid prices of the Common Stock during the 20
(30 after February 25, 1998, under certain conditions) consecutive trading days
preceding such conversion date. The Series B Preferred Stock is entitled to a
dividend at the rate of any dividend declared on the Common Stock. The Preferred
Stock is convertible into Common Stock at any time or times until August 29,
2000. The Company has reserved 1,995,534 shares of Common Stock for issuance
upon conversion of, or payable as dividends on account of, the Preferred Stock.
If the 1997 Private Placement Issuances are approved, and all of the outstanding
Series B Preferred Stock were to have been converted as of January 27, 1998, the
Company would have been required to issue more shares of Common Stock than it
has currently reserved for this purpose. The Company cannot determine the
ultimate number of shares which will be issued upon conversion or as dividends
on the new Preferred Stock. Even if the proposed increase in the authorized
number of shares of Common Stock is approved by the stockholders, the Company
will be required to continue to keep reserved at all times a number of shares of
Common Stock equal to 175% of the number of Conversion Shares then issuable upon
conversion of, or payable as dividends on account of, the Series B Preferred
Stock. If the number of Conversion Shares reserved for issuance should ever fall
below this 175% threshold, the Company shall then be required to increase the
number of its authorized shares so as to increase the reserved share threshold
to 200% put on reserve 200% of the number of shares then issuable upon
conversion of, or payable as dividends on, the Series B Preferred Stock.
In evaluating the Charter Amendment Proposal, stockholders should consider
the effect of certain other provisions of the Company's Certificate of
Incorporation and Bylaws that may have anti-takeover consequences. These
provisions include (i) 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 Company's stockholders, (ii) a provision that standing Directors
may be removed only by a majority vote of stockholders entitled to vote, (iii) a
limitation on the ability of the Company's stockholders to call special
stockholder meetings, and (iv) a provision that vacancies in, and newly created
directorships resulting from an increase in the authorized number of directors
on, the Board may be filled by a majority of the remaining Directors.
Vote Required; Effective Date of Proposed Amendment; Recommendation of the Board
of Directors
If the Charter Amendment Proposal is approved by the holders of a majority
of the outstanding shares of Common Stock, it will become effective upon the
filing by the Company of a Certificate of Amendment to the Company's Certificate
of Incorporation with the Delaware Secretary of State, which is expected to be
done as soon as practicable after stockholder approval is obtained. The Board of
Directors has unanimously recommended that stockholders vote FOR the Charter
Amendment Proposal. The directors and executive officers of the Company intend
to vote their shares in favor of this Proposal.
<PAGE>
RELATIONSHIP OF PROPOSAL NOS. 1 AND 2
The 1997 Private Placement Proposal and the Charter Amendment Proposal are
separate; the adoption of one is not conditioned upon the shareholders' approval
of the other. However, either proposal is not approved, the holders of the
Series B Preferred Stock will have the right to require the Company to redeem
(at a premium of at least 25%) a portion their shares. There can be no
assurances that sufficient authorized shares will remain if the market price of
the Common Stock decreases significantly in the future.
PROPOSAL NO. 3:
APPROVAL OF ADJOURNMENT
If a quorum is not obtained or if fewer shares are likely to be voted to
approve the 1997 Private Placement Proposal or the Charter Amendment Proposal
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 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 the holders of at least a majority of the
shares of 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.
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 Board of Directors recommends that stockholders vote FOR the Adjournment
Proposal.
<PAGE>
SECURITY OWNERSHIP OF MANAGEMENT AND PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding the beneficial
ownership of Common Stock as of January 7, 1998, 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 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 such
exercises and conversions, and assume that no options or convertible securities
held by others are exercised or converted, as the case may be. Unless otherwise
indicated, such persons 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" has been determined in
accordance with the rules of the SEC.
<TABLE>
<CAPTION>
Name of Individual Number of Shares of % of Common
or Group(1) Position Held Common Stock Stock Owned
----------- ------------- ------------ -----------
<S> <C> <C> <C>
Francis E. O'Donnell, Jr., M.D. Chairman of the Board; Director 404,552 (2)(3) 4.0
Michael R. Farris President and Chief Executive
Officer; Director 450,200 (3) 4.5
J. Richard Crowley Director; President, LaserSight
Technologies, Inc. 48,000 (3) *
Terry A. Fuller Director -- --
Richard C. Lutzy Director 16,000 (3) *
Thomas Quinn Director 25,000 (3) *
David T. Pieroni Director 102,500 (3) 1.0
Richard Stensrud Chief Operating Officer 45,110 (3) *
Gregory L. Wilson Chief Financial Officer 25,000 (3) *
All directors and executive officers
as a group (9 persons) 1,116,362 (3) 10.8
Frederic Kremer, M.D.
200 Mall Boulevard
King of Prussia, PA 19406 535,515 5.4
Stark International and
Shepherd Investments International, Ltd. (4)
c/o Staro Asset Management, L.L.C.
1500 West Market Street
Mequon, WI 53092 1,373,536 (5)(6) 12.1
CC Investments, LDC
Corporate Centre, West Bay Road
P.O. Box 31106 SMB
Grand Cayman, Cayman Islands 856,919 (6)(7) 7.9
<FN>
* Less than 1%.
<PAGE>
(1) Excludes Societe Generale, which holds Series B Preferred Stock and Series
B Warrants which are presently convertible into or exercisable for, as
applicable, a total of 515,076 shares of Common Stock (or 4.9% of the
shares that would be outstanding after such exercise and conversion), based
on the presently-applicable 20% Nasdaq Limit. See Note (6) below.
(2) Includes 262,274 shares held by the Irrevocable Trust No. 7 for the benefit
of the Francis E. O'Donnell, Jr., M.D. Trust and 22,778 shares held by the
Francis E. O'Donnell, Jr. Descendants Trust. Ms. Kathleen M. O'Donnell, the
sister of Dr. O'Donnell, is trustee of both Trusts. Dr. O'Donnell disclaims
beneficial ownership of such shares.
(3) Includes options to acquire shares of Common Stock which are now
exercisable or will first become exercisable on or before March 8, 1998, as
follows: Dr. O'Donnell (91,000); Mr. Farris (35,000); Mr. Crowley (45,000);
Mr. Fuller (none); Mr. Lutzy (15,000); Mr. Quinn (25,000); Mr. Pieroni
(100,000); Mr. Stensrud (45,000); Mr. Wilson (10,000); and all directors
and executive officers as a group (366,000).
(4) 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.
(5) Includes 375,000 shares issuable upon the exercise of Series B Warrants and
998,536 Conversion Shares issuable upon the conversion of 268 shares of
Series B Preferred Stock, based on the presently-applicable 20% Nasdaq
Limit.
(6) If the 1997 Private Placement Proposal is approved, the 20% Nasdaq Limit
will cease to be applicable and the holders of Series B Preferred Stock
may, depending on the market prices of the Common Stock, be considered to
beneficially own additional shares of Common Stock. For example, assuming a
Conversion Price of $2.677083 per share (based on prices of the Common
Stock on the Nasdaq National Market during the period preceding January 27,
1998), the numbers of Conversion Shares and Warrant Shares issuable, and
the respective percentages of the Common Stock outstanding, would increase
to the amounts indicated in the table below. See "Proposal No. 1--Effects
of 1997 Private Placement Issuances on Holders of Common Stock."
Percentage of Common Stock
Outstanding Post-Conversion/Exercise
Conversion ------------------------------------
Shares and
Warrant Shares Only named holder All holders
Series B Preferred Holder Issuable converts/exercises convert/exercise
------------------------- -------- ------------------ ----------------
Stark International and Shepherd
Investments International, Ltd....... 2,795,545 21.9% 18.0%
CC Investments.......................... 1,743,480 14.9% 11.2%
Societe Generale........................ 1,048,329 9.5% 6.7%
Under the terms of the Series B Preferred Stock, no holder can convert
its shares into Common Stock to the extent that such conversion would
result in its being the beneficial owner of more than 4.9% (9.9% in the
case of Stark International and Shepherd Investments International Ltd.) of
the Common Stock that would be outstanding after giving effect to such
conversion. However, this restriction can be terminated at any time upon 90
days' prior written notice to the Company by the holders of a majority of
the Series B Preferred Stock then outstanding.
(7) Includes 234,375 shares issuable upon the exercise of Series B Warrants and
622,544 Conversion Shares issuable upon the conversion of 167 shares of
Series B Preferred Stock, based on the presently-applicable 20% Nasdaq
Limit.
</FN>
</TABLE>
<PAGE>
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 one or more series. As of January 26, 1998, 9,984,672 shares of
Common Stock were outstanding (not including options to acquire Common Stock or
any shares of Common Stock issuable upon the conversion of preferred stock). The
only shares of preferred stock outstanding as of such date were 1,295 shares of
Series B Preferred Stock (after giving effect to the Company's optional
redemption of 305 shares of Series B Preferred Stock) 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 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. The Company has no present plans to designate
and/or issue any additional shares of preferred stock, but may do so at a future
date.
Series A Preferred Stock
In January 1996, the Company issued and sold 116 shares of its Series A
Convertible Preferred Stock. All of such shares have been converted into Common
Stock.
<PAGE>
Series B 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 Preferred Stock Placement."
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 the holders 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 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 its Series A Preferred Stock in
January 1996, the Company issued to its placement agent and to an assignee of
its placement agent, warrants (the "Series A Warrants") to purchase 17,509
shares of Common Stock at an exercise price of $13.25 per share. The Series A
Warrants are exercisable at any time through January 10, 1999.
In connection with the financing of a credit facility in April 1997, the
Company issued to Foothill, the Foothill Warrants to purchase 500,000 shares of
Common Stock at an exercise price of $6.0667 per share. In addition, the
Foothill Warrants have certain anti-dilution features which provide for
approximately 50,000 additional shares as a result of the issuance of the Series
B Preferred Stock and a corresponding reduction in the exercise price to $5.52
per share. The Foothill Warrants are exercisable at any time after March 31,
1998, and before April 1, 2002.
<PAGE>
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 Common Stock at $5.91 per share. The Series
B Warrants are exercisable at any time before August 2002. See "Proposal No. 1:
Approval of 1997 Private Placement Issuances--Summary of Transaction
Terms--Placement Agent Compensation." The Company is required to register the
shares of Common Stock issuable upon exercise and conversion of the Series B
Warrants for resale under the Securities Act.
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.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Company incorporates by reference in this Proxy Statement its filings
with the SEC listed below:
A. Annual Report on Form 10-K for the year ended December 31, 1996, as
amended by a Form 10-K/A filed on December 12, 1997;
B. Quarterly Reports on Form 10-Q for the quarters ended March 31 and June
30, 1997 (each as amended by a Form 10-Q/A filed on December 11, 1997);
C. Quarterly Report on Form 10-Q for the quarter ended September 30, 1997
(as amended by Form 10-Q/A's filed on December 11, 1997 and January 9,
1998);
D. 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, September 24, November 7, and December 29, 1997, and
January 2, January 14 (as amended by Form 8-K/A filed on January 22,
1998) and January 20, 1998; and
E. The description of the Common Stock contained in the Company's Form
8-A/A (Amend. No. 3) filed on September 29, 1997.
Any information in a document incorporated by reference in this Proxy
Statement shall be modified or superseded for purposes of this Proxy Statement
to the extent that information included in this Proxy Statement or in any
subsequently-filed document that is also incorporated by reference herein,
<PAGE>
modifies or supersedes such information. Any such modified or superseded
information shall not be considered, except as so modified or superseded, to be
a part of the Proxy Statement.
This Proxy Statement incorporates by reference documents which are not
presented in this Proxy Statement 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, copies of such
documents (other than certain exhibits). Requests for 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 have been
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
Please sign, date and return the enclosed proxy in the envelope provided.
No postage is required if the envelope is mailed within the United States. If
you later decide to attend the Special Meeting and wish to vote your shares in
person, you may do so. We will appreciate your giving this matter your prompt
attention.
By Order of the Board of Directors,
/s/ Gregory L. Wilson
----------------------------
Gregory L. Wilson
Secretary
January 30, 1998
<PAGE>
LASERSIGHT INCORPORATED
PROXY
SPECIAL MEETING OF STOCKHOLDERS, FEBRUARY 27, 1998
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 Friday, February
27, 1998 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" Proposals 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, BOTH SHOULD SIGN)
Dated: _______________, 1998
Note:
Your signature should be exactly the same as the name imprinted on this proxy.
Persons signing as executors, administrators, trustees or in similar capacities
should so indicate. For joint accounts, each joint owner must sign.
