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:
..........................................................................
<PAGE>
LASERSIGHT INCORPORATED
12249 Science Drive, Suite 160
Orlando, Florida 32826
Dear Fellow Stockholder:
You are invited to attend the 1998 Annual Meeting of Stockholders of
LaserSight Incorporated to be held at the Clarion Plaza Hotel, 9700
International Drive, Orlando, Florida (telephone: (407) 354-1715) on Friday,
June 12, 1998 at 10:00 a.m. local time. We are pleased to enclose the notice of
our 1998 annual stockholders' meeting, together with the attached Proxy
Statement, a proxy card and an envelope for returning the proxy card.
Please carefully review the Proxy Statement and then complete, date and
sign your Proxy and return it promptly. If you attend the meeting and decide to
vote in person, you may withdraw your Proxy at the meeting.
If you have any questions or need assistance in how to vote your shares,
please call Julie Tockman, Director of Investor Relations, at (314) 469-3220.
Your time and attention are appreciated.
Sincerely,
Michael R. Farris
President and Chief Executive Officer
May ___, 1998
<PAGE>
LASERSIGHT INCORPORATED
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
The 1998 Annual Meeting of Stockholders of LaserSight Incorporated, a
Delaware corporation (the "Company"), will be held on Friday, June 12, 1998 at
10:00 a.m. local time, at the Clarion Plaza Hotel, 9700 International Drive,
Orlando, Florida, for the following purposes:
1. To elect the directors to serve until the next annual meeting;
2. To consider and vote on a proposal to amend the conversion
terms of the Company's Series B Convertible Participating
Preferred Stock, $.001 par value (the "Series B Preferred
Stock"), and to reduce the exercise price of the 750,000
warrants issued to the holders of the Series B Preferred Stock
in August 1997 (the "Existing Warrants") (collectively, the
"Series B Proposal");
3. To vote on an amendment of the Company's 1996 Equity Incentive
Plan ("Equity Incentive Plan") to increase the aggregate
number of shares available for delivery under the Equity
Incentive Plan and to make certain technical amendments to
reflect changes in the rules of the Securities and Exchange
Commission ("SEC");
4. To ratify the appointment of KPMG Peat Marwick LLP as auditors
of the Company for the 1998 fiscal year (the "Auditor
Ratification Proposal"); and
5. To transact such other business that is properly brought before
the meeting.
These proposals are described in the attached Proxy Statement.
Only holders of Common Stock of record on the books of the Company at the
close of business on May 15, 1998 will be entitled to vote at the Annual
Meeting.
Your vote is important. All stockholders are invited to attend the Annual
Meeting in person. However, to assure your representation at the Annual Meeting,
please mark, date and sign your Proxy and return it promptly in the enclosed
envelope. Any stockholder attending the Annual Meeting may vote in person even
if the stockholder returned a Proxy.
By Order of the Board of Directors
Gregory L. Wilson
Secretary
Orlando, Florida
May ___, 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.
<PAGE>
LASERSIGHT INCORPORATED
12249 Science Drive, Suite 160
Orlando, Florida 32826
PROXY STATEMENT
Proxies in the accompanying form are being solicited by the Board of
Directors of the Company for use at the Annual Meeting of Stockholders on
Friday, June 12, 1998, or at any adjournment thereof. The Annual Meeting will be
held at the Clarion Plaza Hotel, 9700 International Drive, Orlando, Florida at
10:00 a.m. local time. This Proxy Statement is being mailed to stockholders
commencing on or about May ___, 1998.
PROPOSAL NO. 1:
ELECTION OF DIRECTORS
The nominees for the Board of Directors are set forth below. At the Annual
Meeting, the shares of Common Stock represented by proxies in the form
accompanying this Proxy Statement, unless otherwise specified, will be voted to
elect the nominees named below. The terms of all incumbent directors expire at
the 1998 Annual Meeting of Stockholders or at such later time as their
successors have been duly elected and qualified. Nominees elected at the Annual
Meeting will serve until the Annual Meeting of Stockholders next succeeding and
until their election and until their successors have been duly elected and
qualified. All seven of the nominees are currently directors of the Company and
are standing for reelection.
The nominees have agreed to serve if elected. However, if any nominee
becomes unable or unwilling to serve if elected, the Proxies will be voted for
the election of the person, if any, recommended by the Board of Directors or, in
the alternative, for holding a vacancy to be filled by the Board of Directors.
The Board of Directors has no reason to believe that any nominee will be unable
or unwilling to serve.
Listed below are the names and ages of the Nominees, the year each
individual began continuous service as Director of the Company, and the business
experience of each, including principal occupations, at present and for at least
the past five years.
Nominees for Election at the Annual Meeting
Michael R. Farris (38) Director since 1995
Mr. Farris has been the Company's President and Chief Executive Officer
since November 1995. He had previously been President and Chief Executive
Officer of The Farris Group ("TFG") (which the Company acquired from Mr. Farris
in February 1994) and predecessor consulting and search firms for more than 10
years.
Francis E. O'Donnell, Jr., M.D. (48) Director since 1992
Dr. O'Donnell has been the Chairman of the Board of the Company since
April 1993. He also was Chief Executive Officer of the Company from April 1993
to July 1993. He is the Medical Director of the O'Donnell Eye Institute, St.
Louis, Missouri, which has performed photorefractive keratectomy procedures
since 1989. He is Chairman and Chief Executive Officer of Per Ardua and BioKeys,
privately-held biopharmaceutical companies. He is a member of Laser Skin Toner,
L.L.C., a privately-held aesthetic laser company, and Sublase, L.L.C., a
privately-held medical laser company. He is also a Clinical Professor of
Ophthalmology at the St. Louis University School of Medicine.
<PAGE>
Thomas Quinn (49) Director since 1994
Mr. Quinn has been President of Smithton Rockwell & Irwin, a development
company in the areas of healthcare management services and consulting programs
for managed care, since February 1998. From 1995 to 1997, he was a Vice
President of the Hospital Alliance Division of Olsten Kimberly QualityCare, a
home health care management services provider and a subsidiary of Olsten Corp.
From 1992 to 1995, he was Vice President of Sales and Marketing of Integrated
Health Services, Inc., a post-acute health care provider.
Richard C. Lutzy (52) Director since 1995
Mr. Lutzy has been the founder and Chief Executive Officer of Palmer
Capital Corporation, a financial advisory and venture capital services company,
since 1988. From 1981 through 1987, he was Managing Director of Merrill Lynch
Private Capital, Ltd., a London-based investment banking subsidiary of Merrill
Lynch & Company. He is a director of Acamedica, a privately-held demand
management company, and Markman Company, a privately-held, insurance financial
services organization.
J. Richard Crowley (42) Director since 1994
Mr. Crowley has been President of LaserSight Technologies since October
1997 and its Chief Operating Officer since June 1997. He had previously been the
Chief Operating Officer and Chief Financial Officer of Clinical Diagnostic
Systems, Inc., a medical diagnostic testing company, since 1991. From 1984 to
1991, he was President and Chief Financial Officer of Control Laser Corporation,
a manufacturer of industrial lasers.
David T. Pieroni (52) Director since 1996
Mr. Pieroni has been President of Pieroni Management Counselors, Inc., a
management consulting company, since September 1996 and during a portion of
1995. He was President of the Company's TFG subsidiary from November 1995 to
September 1996. From 1991 to 1995, he was President of Spencer & Spencer
Systems, Inc., an information systems consulting company. From 1977 to 1990, he
was a partner in the health care and management consulting practice of a
predecessor of Ernst & Young LLP. He is a director of Citation Computer Systems
Inc., a health care software company.
Terry A. Fuller, PhD. (49) Director since 1997
Dr. Fuller has been President and Chief Executive Officer of Fuller
Research Corporation, a privately-held producer of high-technology surgical
devices, since March 1984. Since December 1997, he has also been President and
Chief Executive Officer of Laser Skin Toner, L.L.C. From 1990 to November 1996,
he was Chief Operating Officer and Executive Vice-President of Surgical Laser
Technologies, Inc., a producer of laser systems for surgical use.
The Board of Directors recommends that stockholders vote "FOR" its nominees.
Other Executive Officers
The following executive officers of the Company are not directors:
Richard L. Stensrud (61)
Mr. Stensrud has been the Chief Operating Officer of the Company since
September 1996 and the President of TFG since May 1997. He was a director of the
<PAGE>
Company from June 1995 until September 1996. Prior to his employment by the
Company, he had operated a consulting practice serving small health care
companies since 1990. He is a director of Horizon Medical, Inc. and Aisa
Enterprises, Inc.
Gregory L. Wilson (40)
Mr. Wilson has been Chief Financial Officer of the Company since July 1994
and of its TFG subsidiary since 1993. From 1986 to 1993, he was a management
consultant with Deloitte & Touche LLP, an international accounting and
consulting firm.
BOARD OF DIRECTORS MEETINGS AND COMMITTEES
During 1997, the Board of Directors met in person or by telephone
conference call 15 times. No member of the Board attended fewer than 75% of the
aggregate of the total number of meetings of the Board of Directors and of the
meetings of committees on which such director serves.
The Board of Directors has an Executive Committee, an Audit and Finance
Committee, a Executive Compensation and Stock Option Committee and a Nominating
Committee. Each such committee consists of one or more directors appointed by
the Board of Directors.
The Executive Committee is responsible for facilitating certain executive
actions, thereby eliminating the need for full Board approval for such actions.
Specific duties, responsibilities and authority are established by the full
Board of Directors from time to time. The Executive Committee did not meet
during 1997. The Executive Committee consists of Messrs. O'Donnell and Farris.
The Audit and Finance Committee is responsible for recommending the
appointment of independent accountants; reviewing the arrangements for and scope
of the audit by independent accountants; reviewing the independence of the
independent accountants; considering the adequacy of the system of internal
accounting controls and reviewing any proposed corrective actions; discussing
with management and the independent accountants the Company's draft annual
financial statements and key accounting and/or reporting matters; and reviewing
the terms of potential acquisitions. The Audit and Finance Committee met six
times. The Audit and Finance Committee consists of Messrs. Lutzy, Crowley and
Pieroni.
The Nominating Committee is responsible for reviewing the qualifications
of, and recommending to the Board of Directors, candidates for election to the
Board of Directors. The Nominating Committee considers suggestions from many
sources regarding possible candidates for director. Although there are no formal
procedures for stockholders to recommend nominations, the Nominating Committee
will consider shareholder recommendations for the 1999 Annual Meeting. Any such
recommendation, together with appropriate biographical information and a
statement of the reasons for such recommendation, should be addressed to Mr.
Gregory L. Wilson, Secretary of the Company, and received at the Company's
principal offices by December 31, 1998. In 1997, the Nominating Committee met
once. The Nominating Committee consists of Messrs. Crowley, Lutzy and Quinn.
The Executive Compensation and Stock Option Committee (the "Compensation
Committee") is responsible for reviewing the Company's general compensation
strategy; establishing salaries and reviewing benefit programs for certain
executive officers; reviewing, approving, recommending and administering the
Company's stock option plans and certain other compensation plans; and approving
certain employment contracts. In 1997, Compensation Committee met four times.
The Compensation Committee consists of Messrs. Quinn, Lutzy and Fuller.
<PAGE>
COMPENSATION OF DIRECTORS
Each non-employee Director receives a fee of $500 for each board or
committee meeting attended. In addition, during 1997, each non-employee director
was granted an option under the Company's Non-Employee Directors Stock Option
Plan to purchase 15,000 shares of Common Stock and each committee chairman and
the Chairman of Board was granted an additional option to purchase 5,000 shares.
The exercise price of each such option was $7.00 per share (100% of the market
price of Common Stock on the date of grant). Directors who are also full-time
employees of the Company received no additional cash compensation for services
as directors.
<PAGE>
SECURITY OWNERSHIP OF MANAGEMENT AND PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding the
beneficial ownership of Common Stock as of April 27, 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.
Each number of shares of Common Stock shown as owned below assumes the exercise
of all currently-exercisable options and warrants and the conversion of all
convertible securities held by the applicable person or group. Each percentage
shown assumes the exercise of all such options and warrants and the conversion
of such convertible securities by the applicable person or group, but assumes
that no options, warrants or convertible securities held by any other persons
are exercised or converted. 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 SEC.
<TABLE>
<CAPTION>
Name of Number of Shares of % of Common
Individual or Group Position Held Common Stock Stock Owned
------------------- ------------- ------------ -----------
<S> <C> <C> <C>
Francis E. O'Donnell, Jr., M.D. Chairman of the Board; Director 424,552 (1)(2) 3.3
Michael R. Farris President and Chief Executive 450,200 (2) 3.5
Officer; Director
J. Richard Crowley President, LaserSight 68,000 (2) *
Technologies, Inc.; Director
Terry A. Fuller Director -- --
Richard C. Lutzy Director 36,000 (2) *
Thomas Quinn Director 46,050 (2) *
David T. Pieroni Director 117,500 (2) *
Richard Stensrud Chief Operating Officer; 45,110 (2) *
President, TFG
Gregory L. Wilson Chief Financial Officer 25,000 (2) *
All directors and executive officers 1,212,412 (2) 9.2
as a group (9 persons)
James W. Vaughan (3) 969,725 7.6
2470 Schuetz Road
Maryland Heights, MO 63043
Stark International and 1,678,486 (5) 11.7
Shepherd Investments International, Ltd. (4)
c/o Staro Asset Management, L.L.C.
1500 West Market Street
Mequon, WI 53092
Societe Generale 721,909 (5) 5.4
c/o Societe Generale Securities Corp.
1221 Avenue of the Americas
New York, NY 10020
CC Investments, LDC 661,531 (5) 4.9
P.O. Box 31106 SMB
Grand Cayman, Cayman Islands
<PAGE>
<FN>
* Less than 1%.
(1) 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.
(2) Includes options to acquire shares of Common Stock which are now
exercisable or will first become exercisable on or before June 26, 1998, as
follows: Dr. O'Donnell (111,000); Mr. Farris (35,000); Mr. Crowley
(65,000); Mr. Fuller (none); Mr. Lutzy (35,000); Mr. Quinn (45,000); Mr.
Pieroni (115,000); Mr. Stensrud (45,000); Mr. Wilson (10,000); and all
directors and executive officers as a group (461,000).
(3) Information derived from an amended Schedule 13D filed by Mr. Vaughan on
March 2, 1998.
(4) Based on a Schedule 13D filed by Michael Roth and Brian 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. The business address of Messrs. Roth and Stark is the same as that
of Staro Asset Management, L.L.C.
(5) Such shares of Common Stock (none of which were outstanding as of April 27,
1998) represent the number of shares of Common Stock that would have been
issuable if the indicated person had converted all of its shares of the
Series B Preferred Stock at an assumed conversion price of $2.270833 per
share (the conversion price in effect on April 27, 1998) and exercised all
of its warrants to purchase shares of Common Stock at a price of $5.91 per
share, as set forth in the following table:
</FN>
</TABLE>
<TABLE>
<CAPTION>
Shares of Common Stock Issuable Upon
Series B ------------------------------------
Preferred Conversion of Exercise of
Stockholder Shares Held Series B Preferred Warrants
----------- ----------- ------------------ --------
<S> <C> <C> <C>
Societe Generale 132 581,284 140,625
Stark International and Shepherd
Investments International, Ltd. 269 1,303,486 375,000
CC Investments, LDC 97 427,156 234,375
--- ------- -------
525 2,311,926 750,000
=== ========= =======
</TABLE>
The actual number of shares of Common Stock to be issued upon the
conversion of the Series B Preferred Stock cannot be determined at this
time, but will be based on the following formula: First, multiply the
number of shares of Preferred Stock being converted by the face amount
($10,000 per share). Then divide this dollar amount by a conversion price
equal to the lesser of (i) $6.68 per share or (ii) the average of the three
lowest closing bid prices of the Common Stock during the 30-trading day
period preceding the conversion date.
No holder can convert its shares into Common Stock to the extent that such
conversion would result in its beneficial ownership 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 upon 90 days'
written notice to the Company by the holders of a majority of the Series B
Preferred Stock.
In March 1998, the holders of the Series B Preferred Stock agreed to limit
their conversions so as to result in an aggregate of no more than 1,000,000
shares of Common Stock through June 12, 1998. As of April 27, 1998, 989,586
of such 1,000,000 shares have been issued. Such limit on conversions will
be extended to September 14, 1998 if the Company's stockholders approve the
Series B Proposal. The conversion limit may be terminated at any time under
certain conditions, including upon the occurrence of a material adverse
change in the Company's financial condition, operating results, assets,
liabilities, operations or business prospects. See "Summary of the Series B
Preferred Stock Agreement."
Share amounts exclude Common Stock issued through April 27, 1998 upon
conversions of Series B Preferred Stock as follows: Stark International
<PAGE>
(505,868), Shepherd Investments International, Ltd. (505,868), CC
Investments, LDC (1,130,970), and Societe Generale (249,514). The Company
believes that such shares of Common Stock have been sold pursuant to a
registration statement under the Securities Act of 1933.
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934 (the "Exchange Act")
requires the Company's officers and directors, and persons who own more than 10%
of the outstanding Common Stock, to file reports of ownership and changes in
ownership of such securities with the SEC. Officers, directors and over-10%
beneficial owners are required to furnish the Company with copies of all Section
16(a) forms they file. Based solely upon a review of the copies of the forms
furnished to the Company, and/or written representations from certain reporting
persons that no other reports were required, the Company believes that all
Section 16(a) filing requirements applicable to its officers, directors and
over-10% beneficial owners during or with respect to the year ended December 31,
1997 were met.
EXECUTIVE COMPENSATION
The following table sets forth summary information concerning the
compensation paid or earned for services rendered to the Company in all
capacities during 1995, 1996 and 1997 for (i) the Company's Chief Executive
Officer ("CEO"), and (ii) each of the other executive officers of the Company
serving at December 31, 1997 whose total annual salary and bonus for 1997
exceeded $100,000 (collectively, the "Named Executive Officers"). During such
years, the Company did not make any grants of stock appreciation rights ("SARs")
or restricted stock or any awards or payouts under any long-term incentive plan.
<TABLE>
Summary Compensation Table
<CAPTION>
Long Term
Compensation
Annual Compensation Awards
------------------- ------
Other Securities All
Annual Underlying Other
Compen- Options/ Compensation
Name and Principal Position Year Salary ($) Bonus ($) sation SARs (#) ($)
--------------------------- ---- ---------- --------- ------ -------- ----
<S> <C> <C> <C> <C> <C> <C>
Michael R. Farris................ 1997 250,000 -- -- -- --
President and CEO(1) 1996 250,000 -- -- -- --
1995 150,000 120,178 -- 35,000 --
Richard L. Stensrud.............. 1997 125,000 -- -- -- --
Chief Operating Officer of the 1996 43,750 -- -- 100,000 --
Company and President of TFG(2)
Gregory L. Wilson................ 1997 150,000 -- -- -- --
Chief Financial Officer 1996 120,000 -- -- -- --
1995 105,000 10,000 -- 10,000 --
- ------------------
<FN>
(1) Mr. Farris joined the Company in February 1994 and been President and CEO since November 1995.
(2) Mr. Stensrud joined the Company in September 1996 and has been its Chief Operating Officer since that time and
President of MRF, Inc. since May 1997.
</FN>
</TABLE>
No stock options or SARs were granted to the Named Executive Officers during
1997.
<PAGE>
The following table sets forth certain information relating to options
held by the Named Executive Officers at December 31, 1997:
<TABLE>
Aggregated Option/SAR Exercises in Last Fiscal Year
and FY-End Option/SAR Values
<CAPTION>
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money Options/
Options/SARs at SARs at
Year-End(#)(1) Year-End($)(1)(2)
Shares -------------- -----------------
Acquired on Value Exercisable/ Exercisable/
Name Exercise (#) Realized ($)(1) Unexercisable Unexercisable
---- ------------ --------------- ------------- -------------
<S> <C> <C> <C> <C>
Michael R. Farris............ -- -- 55,000/0 $0/0
Richard L. Stensrud.......... -- -- 45,000/60,000 $0/0
Gregory L. Wilson............ -- -- 10,000/0 $0/0
----------------
<FN>
(1) No SARs have been issued by the Company.
(2) The $2.75 closing price of the Common Stock on the Nasdaq National Market on December 31, 1997 was less than
the exercise price for each such option.
</FN>
</TABLE>
Employment Agreements
In December 1995, the Company entered into an employment agreement with
Mr. Farris (the "Employment Agreement"). The Employment Agreement provides for a
three-year term, an annual salary of $150,000, and an annual bonus equal to 10%
of the net pre-tax profit of TFG. If employment of Mr. Farris is terminated by
the Company without "cause" or by him with "good reason" (as such terms are
defined in the Employment Agreement), Mr. Farris would be entitled to all salary
and other benefits under his Employment Agreement through the lesser of (i) the
remaining term of the Agreement or (ii) one year after the date of his
termination. Under such circumstances, the amount of bonus for the
post-termination period would equal the greater of (x) $100,000 or (y) the
product of the most recent actual quarterly bonus amount multiplied by the
number of full or fractional fiscal quarters during a one-year post-termination
period. The Employment Agreement includes non-compete and confidentiality
covenants. The Company intends to revise Mr. Farris' employment agreement during
1998 to link his bonus opportunity to company-wide performance rather than to
the performance of TFG.
Under the Company's employment agreement with Mr. Stensrud dated September
1996 and amended effective July 1, 1997, Mr. Stensrud is entitled to an annual
salary of $100,000, a car allowance, club dues and other expense reimbursement.
If Mr. Stensrud's employment is terminated without "cause" (as defined in the
agreement) during the four-year term of the contract, he is entitled to his base
salary for one year after the date of his termination. The Stensrud Agreement
includes non-compete and confidentiality covenants.
Severance Arrangement
In connection with the resignation of Mr. Pieroni as President of TFG and
Chief Development Officer of the Company in September 1996, the Company agreed,
in lieu of the provisions under his Employment Agreement, to the following: (i)
<PAGE>
the payment of six months salary ($75,000) in monthly installments, (ii) the
amendment of Mr. Pieroni's option to purchase 200,000 shares of Common Stock at
an exercise price of $11.25 per share to provide that as to 100,000 shares, such
options become fully exercisable, and as to the remaining 100,000 shares, the
options will be canceled, and (iii) the continuation of a car allowance, office
space and clerical support for six months. The Company has not yet determined
whether the options should remain exercisable for more than 90 days after the
termination of Mr. Pieroni's service as a director.
Compensation Committee Interlocks and Insider Participation
During 1997, Messrs. Lutzy, Quinn and Crowley each served as members of the
Company's Executive Compensation and Stock Option Committee. In June 1997, Mr.
Crowley resigned from the committee upon his employment with the Company. In
January 1998, Mr. Fuller was appointed as a member of the committee. None of the
members of this Committee were employees of the Company while serving on the
Committee.
Compensation Committee Report on Executive Compensation
The Compensation Committee of the Board of Directors, composed of
independent outside directors, is responsible for setting the policies that
govern the Company's compensation programs, administering the Company's equity
compensation plans, and establishing the cash compensation of executive
officers. The Committee's objectives are to establish compensation programs
designed to attract, motivate, retain, and reward executives who can lead the
Company in achieving its long-term business goals in a highly competitive and
rapidly changing industry, whose services the Company needs to maximize its
return to stockholders, and to ensure that management compensation is reasonable
in light of the Company's objectives, compensation for similar personnel in
other companies, and other relevant criteria. The compensation mix for executive
officers consists of base salaries, a cash bonus system, and stock option
awards. As a result, much of an executive officer's compensation is based upon
the financial performance of the Company.
The Committee periodically establishes each executive officer's base
salary based on the Committee's evaluation of the officer's performance and
contribution in the previous year and on competitive pay practices.
The Chief Executive Officer's cash and bonus compensation is based on an
employment agreement which was last amended in December 1995 to reflect Mr.
Farris promotion from President of TFG to President and Chief Executive Officer
of the Company. See "Employment Agreements" section. Due to the his additional
duties and Company-wide responsibilities, the Committee increased the base
salary of Mr. Farris in 1996 at that time and determined that any bonus at the
Committee's discretion and not tied to the results of TFG. In light of the
Company's loss in 1997, the Committee did not increase Mr. Farris's base salary
or award him any bonus or stock options in 1997. The Committee intends to
continue its review of such agreement during 1998 to ensure a proper alignment
between compensation and the company-wide duties of Mr. Farris.
The Compensation Committee and the Board of Directors believe that
management's ownership of a significant equity interest in the Company is a
major incentive in building stockholder wealth and aligning the long-term
interests of management and stockholders. Stock options, therefore, are granted
by the Committee at option prices not less than the fair market value of Common
Stock on the grant date. Thus stock options have no value unless the share price
increases over the fair market value on the date of grant. Option awards
contribute to the retention of key executives since executives realize the
benefits of options only as they vest based on tenure after the grant. The
Compensation Committee determines which employees receive stock option grants by
evaluating the responsibilities and relative positions of key employees in
comparison to like or similar positions at competitor companies.
<PAGE>
Section 162(m) of the Internal Revenue Code, enacted in 1993, generally
disallows a tax deduction to public companies for compensation over $1 million
paid to the corporation's Chief Executive Officer or four other most-highly
compensated executive officers named in the proxy statement. The Compensation
Committee has reviewed the possible effect on the Company of Section 162(m), and
it does not believe that such section will be applicable to the Company in the
foreseeable future, but will review compensation practices as circumstances
warrant. To this effect, the 1996 Equity Incentive Plan made it possible for the
Company to satisfy the conditions for an exemption from Section 162(m)'s
deduction limit. However, other characteristics of a grant effect whether or not
compensation received from a stock option is counted in determining whether an
executive officer has received compensation in excess of $1 million.
Compensation Committee
Thomas Quinn
Richard Lutzy
Terry A. Fuller, Ph.D.
Performance Information
The following graph compares the performance of the Company's cumulative
stockholder return at December 31 of each year between 1992 and 1997 with
stockholder returns on (i) the Nasdaq Non-Financial Composite Index and (ii) the
Nasdaq National Market Composite Index. The graph assumes that the value of the
investment in the Common Stock and each index was $100 at December 31, 1992 and
that all dividends, if any, were reinvested.
<TABLE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<CAPTION>
Base Point Return Return Return Return Return
Company/Index Name 1992 1993 1994 1995 1996 1997
- ------------------ ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
LASERSIGHT INCORPORATED 100 143 225 239 118 50
NASDAQ NON-FINANCIAL 100 115 111 155 188 221
NASDAQ NATIONAL MARKET 100 115 112 159 195 240
</TABLE>
- --------------------
Certain Relationships and Related Transactions
LaserSight Centers. In March 1997, pursuant to an amendment to a
previously-reported 1993 acquisition agreement (as so amended, the "Amended
Centers Agreement"), the Company issued 625,000 unregistered shares of Common
Stock to a group of former stockholders and former optionholders (the "Former
Centers Holders") of LaserSight Centers Incorporated ("LaserSight Centers"), a
developmental stage company that the Company acquired in April 1993 and through
which the Company intends to begin to provide services for ophthalmic laser
surgical centers using excimer and other lasers. The Amended Centers Agreement
also provides for issuance of up to 600,000 additional shares of Common Stock to
the Former Centers Holders to the extent that a revised earnout (as described
below) is satisfied through March 31, 2002. Trusts for the benefit of Dr.
<PAGE>
O'Donnell, the Chairman of the Board of the Company, or his descendants
(collectively, the "O'Donnell Trusts") received 226,644 (approximately 36%) of
the 625,000 shares issued and would be entitled to receive the same percentage
of any additional shares issued.
Under the Amended Centers Agreement, Earnout Shares are issuable at the
rate of one share of Common Stock per $4.00 of PRK Earnings (as defined)
received by the Company through March 31, 2002. No Earnout Shares have become
issuable as of the date of this Proxy Statement. For this purpose, the following
items are considered revenue: (i) per procedure revenues received by the Company
in connection with the utilization of a fixed or mobile excimer laser owned or
operated by the Company to perform photorefractive keratectomy ("PRK") and treat
myopia, astigmatism and hyperopia; (ii) certain revenues received by the Company
from managed care companies or employers for arranging the delivery of PRK, and
(iii) any royalties received by the Company on account of patents assigned to
LaserSight Centers. The Amended Centers Agreement excludes the following from
the computation of PRK Earnings: (i) revenues derived from the manufacture and
servicing of excimer lasers, (ii) fees from patents not assigned to LaserSight
Centers, (iii) managed care fees for non-PRK services, and (iv) revenues from
non-excimer procedures. Management of the Company believes that these exclusions
will benefit the Company by eliminating uncertainty as to how the LaserSight
Centers earnout is to be computed. In addition, the Company is no longer
required to use LaserSight Centers as its exclusive representative in the U.S.
and Canada for the sale and distribution of ophthalmic refractive lasers or
related refractive procedures. However, it may be in the interest of Dr.
O'Donnell for the Company to pursue business strategies that maximize the
issuance of Earnout Shares.
In March 1997, the Company also amended its previously-reported royalty
agreement (as so amended, the "Amended Royalty Agreement") with Laser Partners,
a Florida general partnership, that it had entered into shortly before the
LaserSight Centers acquisition. The Amended Royalty Agreement reduces the
maximum per eye royalty to be paid by the Company from $86 to $43, and delays
the commencement of such royalty payments until after March 2002 or, if sooner,
the delivery of all of the 600,000 shares contingently issuable under the
earnout provisions of the Amended Centers Agreement. The Company's obligations
under the Amended Royalty Agreement are perpetual. The Company understands that
one of the O'Donnell Trusts is a partner of Laser Partners with a 36%
partnership interest.
The Amended Royalty Agreement provides that the Company is not required to
pay a royalty in connection with any of the following: (i) procedures which do
not involve both an excimer laser and PRK, (ii) laser procedures performed by a
third party in connection with any license granted by the Company, and (iii)
laser procedures performed pursuant to a contract with a managed care company or
an employer, pursuant to which the Company agrees to arrange for the delivery of
eye care services other than PRK or for eye care services which include PRK
without any identifiable fee attributable thereto. The management of the Company
believes that these exclusions reduce the scope of the Company's obligation to
make royalty payments. It may be in the interest of Dr. O'Donnell for the
Company to pursue business strategies that maximize such royalty payments.
The Board of Directors has discretion to discontinue, sell or transfer at
any time the Company's business related to arranging for the performance of PRK.
Sale of Laser System. As previously reported, in December 1995, the
Company sold one of its laser systems to a company owned by Dr. O'Donnell at a
price of $235,000 for use in clinical trials. The Company received payment of
the $235,000 in January 1997.
Acquisition of MRF, Inc. Pursuant to a December 1995 amendment to the
earnout provisions of the agreement pursuant to which the Company had acquired
TFG from Mr. Farris in February 1994, the Company and Mr. Farris agreed that the
<PAGE>
earnout would be payable in shares of Common Stock in both January 1997 (based
on TFG's annual performance during 1994, 1995, and 1996) and January 1999 (based
on TFG's annual performance during 1997 and 1998). The 406,700 earnout shares
which had been earned under the amended agreement for the three-year period
ended December 31, 1996 were issued in April 1997. In view of TFG's losses in
1997, no earnout shares were payable for that year. If TFG has pre-tax income in
1998, Mr. Farris will be entitled to a number of earnout shares equal to 750,000
multiplied by a fraction, the numerator of which is the amount of such pre-tax
income and the denominator of which is $3.3 million, provided that such number
of earnout shares cannot exceed 343,300. It may be in the interest of Mr. Farris
for the Company to pursue business strategies that maximize the issuance of MRF
Earnout Shares.
Consulting Arrangement. In May 1997, the Company's LaserSight Technologies
subsidiary entered into an agreement, effective as of January 1, 1997, with Dr.
Byron A. Santos ("Dr. Santos"), an ophthalmologist employed by the O'Donnell Eye
Institute, a corporation of which Dr. O'Donnell, the Chairman of the Board of
the Company, is the Medical Director and owner. The amount that became payable
to Dr. Santos under this agreement during 1997 was $96,000. Under the agreement,
Dr. Santos is required to be available to provide a minimum of 40 hours of
services each month. Such services have related to the development of the
LaserScan 2000 excimer laser system, the development of clinical protocols, and
training and other consulting services. The agreement provides for a term ending
December 31, 2002, subject to LaserSight Technologies' right to terminate the
agreement in the event that Dr. Santos fails to perform in accordance with the
terms of the agreement.
Fuller Agreement. The Company and Dr. Fuller have entered into discussions
concerning Dr. Fuller's performance of certain consulting services with respect
to the Company's patent portfolio. In exchange for his consulting services, the
Company anticipates granting Dr. Fuller an option to acquire up to 8,750 shares
of Common Stock pursuant to the Company's 1996 Equity Incentive Plan.
PROPOSAL NO. 2:
APPROVAL OF AMENDMENT TO CERTIFICATE OF DESIGNATION
AND OF REDUCTION OF EXERCISE PRICE OF EXISTING WARRANTS
Summary of the Series B Preferred Stock Agreement
On March 13, 1998, the Company entered into an agreement (the "Series B
Agreement") with all the holders of the Series B Preferred Stock (the "Series B
Holders") whereby such holders agreed that until June 12, 1998 (the "Initial
Restricted Period"), the preferred holders would limit their conversions of
Series B Preferred Stock so that no more than 1,000,000 common shares are issued
during such period (the "Conversion Limitation"). The Conversion Limitation will
be extended to September 14, 1998 (the "Extended Restricted Period") if the
Company's stockholders approve the Series B Proposal. In addition to agreeing to
the conversion limitation, the Series B Holders granted the Company an option to
purchase any or all of the remaining Series B Preferred Stock at a 20% premium
at any time before June 12, 1998 (the "Initial Purchase Option"), and the
Initial Purchase Option will be extended through September 14, 1998 (the
"Extended Purchase Period") if the Series B Proposal is approved by the
Company's stockholders.
In exchange for the Series B Holders agreeing to the Conversion Limitation
and granting the Company the option to purchase the Series B Preferred Stock,
the Company agreed to submit to its stockholders a proposal which, if approved,
would reduce the exercise price of the Existing Warrants from $5.91 to $2.753
per share.
<PAGE>
The Company also agreed to present to the Company's stockholders for
approval an amendment to the Company's Certificate of Designation which would
amend the fixed component of the Series B Stock conversion price (currently
$6.68) to equal the lesser of $6.68 or 110% of the average closing bid prices of
the Common Stock during the 20-trading day period ending on September 14, 1998.
Amendment of Certificate of Designation
The Board of Directors has unanimously adopted a resolution to submit to
the stockholders a proposal to amend the Company's Certificate of Designation to
provide that the fixed conversion price component of the Series B Preferred
Stock will equal the lower of (A) $6.68 (its current level) or (B) 110% of the
average closing bid prices of the Common Stock during the 20 trading days ending
on September 14, 1998.
The full text of Section III F. of the Company's Certificate of
Designation, if amended as proposed, would read as follows:
F. "Fixed Conversion Price" means either (i) $6.68 (subject to equitable
adjustment for any stock splits, stock dividends, reclassifications or
similar events during such twenty (20) trading day period), or (ii) if the
Extended Restricted Period (as defined herein) is not terminated prior to
September 14, 1998, the lesser of (A) $6.68, or (B) 110% of the average
Closing Bid Prices of the Common Stock (as reported by Bloomberg Financial
Markets) for the twenty (20) consecutive trading days ending on the last
day of the Extended Restricted Period (subject to equitable adjustment for
any stock splits, stock dividends, reclassifications or similar events
during such twenty (20) trading day period)), and shall be subject to
adjustment as provided herein. For purposes hereof, "Extended Restricted
Period" shall have the meaning given thereto in that certain Series B
Preferred Stock Agreement, dated March 13, 1998, among the Holders and the
Company.
Except as set forth above, the relative rights and limitations of the Series B
Preferred Stock would remain unchanged.
The following table summarizes the terms of the Series B Preferred Stock
and the warrants held or to be held by the Series B Holders, as such terms
presently exist and as they will be modified depending on whether or not the
Company's stockholders approve the Series B Proposal:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
If Proposal If Proposal
Present Terms Is Approved Is Not Approved
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Series B Warrants -- amount 750,000 shares @ $5.91 per 750,000 shares @ $2.753 per Total of 1,500,000 shares:
and exercise price share share
750,000 shares @ $5.91 per
share
750,000 shares @ $2.753 per
share
- ----------------------------------------------------------------------------------------------------------------------------
<PAGE>
Series B Preferred Stock -- Lower of: Lower of: Same as present terms.
conversion price
(A) the average of the (A) the average of the
lowest three closing bid lowest three closing bid
prices during the 30 trading prices during the 30 trading
days preceding a conversion days preceding a conversion
date, or date, or
(B) $6.68 per share. (B) $6.68 per share or, if
less, 110% of the average
closing bid prices during the
20 trading days before
9/14/98.
- ----------------------------------------------------------------------------------------------------------------------------
Series B Preferred Stock -- Into no more than 1.0 million 1.0 million share ceiling Share ceiling expires
when convertible common shares between continues until 9/14/98. 6/12/98.
3/13/98 and 6/12/98.(1)
- ----------------------------------------------------------------------------------------------------------------------------
Series B Preferred Stock -- Through 6/12/98, at a 20% Company's repurchase option Company's repurchase option
Company's repurchase op- premium. continues until 9/14/98. expires 6/12/98.
tion(2)
- ----------------------------------------------------------------------------------------------------------------------------
<FN>
(1) As of April 27, 1998, 989,586 of such 1.0 million shares had been issued.
(2) The Company's loan agreement with Foothill Capital Corporation, the
Company's secured lender ("Foothill"), does not permit the Company to
repurchase any of the Series B Preferred Stock without Foothill's consent so
long as any of the Company's Foothill indebtedness remains outstanding. In
addition, any significant repurchases of Series B Preferred Stock could
require the Company to obtain new financing. There can be no assurance as to
whether or on what terms either of these conditions can be satisfied.
</FN>
</TABLE>
<PAGE>
The Conversion Limitation and Purchase Option may be terminated by the
Series B Holders under any of the following circumstances:
o As of the end of any month, the Company's current ratio (current assets
divided by current liabilities) falls below 1.1 to 1.
o As of the end of the first or second quarter of 1998, the Company's
income or loss from operations for such quarter has not improved
relative to the Company's results for the prior quarter. (The Company
expects that its loss from operations for the first quarter of 1998
will be less than the Company's loss from operations for the fourth
quarter of 1997.)
o At any time, the Company undergoes or announces a material adverse
change in its financial condition, operating results, assets,
liabilities, operations or business prospects which is material to the
Company and its subsidiaries taken as a whole. The agreement does not
specify any criteria for determining whether such a change qualifies
under this "material adverse" standard.
If the Conversion Limitation is terminated prior to June 12, 1998 due to
the occurrence of one or more of these circumstances, then the Company will be
required to issue the Additional Warrants.
Factors Considered by the Board of Directors
The factors that Board of Directors considered as positive in its decision
to enter into the Series B Agreement included:
o The Conversion Limitation may prevent the further depression of the
market price of the Company's Common Stock price at a time when such
price was already at historically low levels.
o The Initial Purchase Option and the Extended Purchase Option, if
exercised by the Company, would prevent further dilution of the
Company's existing stockholders and the potentially adverse impact of
additional shares of Common Stock entering the market.
o If the Company's stock market price increases by June 12, 1998 or
September 14, 1998, the number of shares of Common Stock issuable upon
conversion will be less than if converted at the conversion prices in
effect during March and April 1998 of approximately $2.00.
The factors that Board of Directors considered as negative in its decision
to enter into the Series B Agreement included:
o If the Company's stockholders do not approve the Series B Proposal, the
issuance of the Additional Warrants, if exercised, would reduce the
percentage ownership of the current stockholders and dilute their
interest in the Company's operating results.
o If the market price of the Company's Common Stock continues trading at
its current levels, and if after September 14, 1998, the market price
for the Company's Common Stock increased so that the average of the
lowest three closing bid prices during the 30 trading days preceding a
conversion date would have exceeded $6.68, the decrease in the fixed
component of the conversion price may result in the issuance of more
conversion shares than would have been required to be issued if the
Amendment to the Certificate of Designation had not been approved.
o If the market price of the Common Stock exceeds $5.91 per share during
the life of the Existing Warrants and the Company's stockholders
approve the Series B Proposal, the reduction in the exercise price of
the Existing Warrants from $5.91 to $2.753 would reduce the potential
proceeds to the Company from the exercise of the Existing Warrants by
approximately $2.4 million.
The Board of Directors determined that, taken as a whole, the positive
factors outweighed these negative factors.
Possible Disadvantages of Approving the Series B Proposal
Potential for Increased Dilution of Common Stockholders. If the Company's
stockholders do approve the Series B Proposal, the number of shares of Common
Stock that may be ultimately issued upon the conversion of the Series B Stock
may be greater than if the Series B Proposal had not been approved. For example,
if the market price of the Company's Common Stock continues trading at its
current levels, and if after September 14, 1998, the market price for the
Company's Common Stock increased so that the average of the lowest three closing
bid prices during the 30 trading days preceding a conversion date would have
<PAGE>
exceeded $6.68, the decrease in the fixed component of the conversion price may
result in the issuance of more conversion shares than would have been required
to be issued if the Amendment to the Certificate of Designation had not been
approved. The issuance of such additional shares would reduce the percentage
ownership of the current stockholders and dilute their interest in the Company's
operating results.
Decrease in Proceeds Resulting From Exercise of Existing Warrants. If the
market price of the Common Stock exceeds $5.91 per share during the life of the
Existing Warrants, the reduction in the exercise price of the Existing Warrants
from $5.91 to $2.753 would reduce the potential proceeds to the Company from the
exercise of the Existing Warrants by approximately $2.4 million.
Consequences if Stockholder Approval is Not Obtained
If for any reason the Company's common stockholders do not approve the
Series B Proposal, the Company will be required to issue to the Series B Holders
750,000 additional warrants (the "Additional Warrants") to purchase Common Stock
at a price equal to $2.753 per share (115% of an average closing bid price of
the Common Stock during the five trading days following March 16, 1998). The
Additional Warrants would be exercisable at any time through August 29, 2002 and
would not be subject to the Conversion Limitation.
Issuance of the Series B Preferred Stock and Existing Warrants
In a private placement completed on August 29, 1997, the Company sold to
four institutional investors (the "Series B Holders") a total of 1,600 shares of
Series B Preferred Stock, and issued to such investors the Existing 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.(3) 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").
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 received
an aggregate of approximately $800,000 from Visx and Summit Technology for the
year ended December 31, 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.
- -------------------------
(3) These amounts included $800,000 paid to the Company's placement agent and
approximately $400,000 for legal, accounting, and other expenses.
<PAGE>
In February 1998, the Company transferred to Nidek Co., Ltd., a Japanese
surgical and diagnostic products company ("Nidek") all rights in those IBM
Patents which have been issued in countries outside the United States (the
"Non-U.S. Patents"). The Company received from Nidek a payment of $7.5 million
in cash (of which $200,000 was withheld for Japanese taxes) and an exclusive
license to use and sublicense the Non-U.S. Patents in all fields other than
ophthalmic, cardiovascular and vascular. The Company retained ownership of the
IBM Patents issued in the United States (the "U.S. Patents"), and granted Nidek
a non-exclusive license to use the U.S. Patents. The Nidek transaction brings to
approximately $12.3 million the total amount of lump-sum and periodic cash
payments (before transaction expenses and withholding taxes) that the Company
has received to date as a result of its acquisition of the IBM Patents.
The Company continues to hold the following rights relating to the IBM
Patents:
o A nonexclusive license to use (subject to the payment of a per unit
royalty) the Non-U.S. Patents in the ophthalmic field in all countries
that issued them.
o An exclusive license to use and sublicense the Non-U.S. Patents in all
fields other than the ophthalmic, cardiovascular and vascular areas
(subject to a 2% royalty in certain countries).
o The ownership of the U.S. Patents, subject to non-exclusive licenses
granted to Nidek and five ophthalmic laser system producers and to an
exclusive license to use the IBM Patents in the vascular and
cardiovascular fields.
o The right to receive royalties from Visx and Summit Technology equal to
2% of their U.S. revenue from the sale of laser systems that rely on
the IBM Patents.
The Company's management believes that these rights offer the Company
substantial future opportunity.
Redemptions and Conversions of Series B Preferred Stock
A portion of the 1,600 shares of Series B Preferred Stock issued in August
1997 have been redeemed, repurchased or converted as follows:
<TABLE>
<CAPTION>
Number Balance
Month Transaction of Shares Outstanding
----- ----------- --------- -----------
<S> <C> <C> <C>
10/97 Redemption (at a 4% premium) 305 1,295
2/98 & 3/98 Repurchases (at a 20% premium) 351 944
3/98 & 4/98 Conversions (at $1.739583 per share) 350 594
4/98 Conversions (at $1.75 per share) 8 560
4/98 Conversions (at $1.802083 per share) 17 543
4/98 Conversions (at $1.979167 per share) 10 533
4/98 Conversions (at $1.989583 per share) 8 525
</TABLE>
All such redemptions and repurchases have been funded from a blocked account
established for the exclusive benefit of the Series B Holders, as required by
the agreements the Company entered into with such holders in August 1997.
There is no limit on the number of shares of Common Stock potentially
issuable in connection with conversions of Series B Preferred Stock. As
<PAGE>
illustrated in the table below, the number of shares of Common Stock issuable
upon such conversions (the "Series B Conversion Shares") depends on the market
price of the Common Stock at the time of conversions:
Assumed Number of As % of Common Shares
Conversion Series B Conversion Assumed Outstanding
Price (1) Shares Issuable (2)(3) After Conversion (4)
--------- ---------------------- --------------------
$0.50 10,500,000 45.2%
$1.00 5,250,000 29.2%
$2.00 2,625,000 17.1%
$2.270833 (5) 2,311,927 15.4%
$3.00 1,750,000 12.1%
$4.00 1,312,500 9.4%
$5.00 1,050,000 7.6%
$6.00 875,000 6.4%
$6.68 (6) 785,928 5.8%
- ----------------------------
(1) Equals the lesser of (A) $6.68 or (B) the average of the three lowest
closing bid prices of the Common Stock during the 30 trading days
immediately preceding the applicable conversion date.
(2) Excludes an aggregate of 2,392,220 Series B Conversion Shares that have
been issued in connection with conversions through April 27, 1998.
(3) Based on an agreement between the Company and the holders of the Series
B Preferred Stock, no more than 10,414 additional Series B Conversion
Shares may be issued before June 12, 1998 or, if the Series B Proposal
is approved by the Company's common stockholders, September 14, 1998.
This agreement can be terminated by the preferred stockholders under
certain circumstances. See "Summary of Series B Preferred Stock
Agreement."
(4) Equals the 12,712,712 shares of Common Stock outstanding on April 27,
1998 plus the number of Series B Conversion Shares issuable upon the
conversion (at a conversion price indicated in the table) of all 560
shares of Series B Preferred Stock outstanding as of such date.
(5) Equals the conversion price in effect as of April 27, 1998.
(6) Currently, under the terms of the Series B Preferred Stock, the
conversion price cannot exceed $6.68, regardless of the market price of
the Common Stock. If the Company's stockholders approve the Series B
Proposal, this maximum conversion price will be adjusted to equal the
lesser of $6.68 or 110% of the average closing bid prices of the Common
Stock during the 20-trading day period ending on September 14, 1998.
Failure to receive such approval on or before June 12, 1998 will
require the Company to issue to the Series B Holders warrants to
purchase up to 750,000 shares of Common Stock at a price of $2.753 per
share. "Summary of Series B Preferred Stock Agreement."
Vote Required
If the Series B Proposal is approved by the holders of a majority of the
outstanding shares of Common Stock, the reduction to the exercise price of the
Existing Warrants shall be effective immediately and the adjustment of the fixed
component of the conversion price of the Series B Stock will become effective
<PAGE>
upon the filing by the Company of an amendment to the Company's Certificate of
Designation 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 Series B
Proposal. The directors and officers of the Company intend to vote their shares
in favor of this Proposal.
PROPOSAL NO. 3:
AMENDMENT TO EQUITY INCENTIVE PLAN
The Equity Incentive Plan was approved by the Company's stockholders in
June 1996. The Board of Directors has unanimously approved an amendment and
restatement of the Equity Incentive Plan (as so amended and restated, the
"Amended and Restated Equity Incentive Plan"), subject to the approval of the
Company's stockholders. As described in more detail below, the principal change
reflected in the Amended and Restated Equity Incentive Plan is an increase in
the aggregate number of shares of Common Stock available for delivery under the
Amended and Restated Equity Incentive Plan from 750,000 to 1,250,000. As of
April 28, 1998 only 216,000 shares remained available for future grants and
awards under the Equity Incentive Plan. The number of options granted under the
Equity Incentive Plan during 1996 and 1997 was 268,000 and 191,000,
respectively, and 75,000 shares have been granted under the Equity Incentive
Plan during the first quarter of 1998.
If the Amended and Restated Equity Incentive Plan is not approved by the
Company's stockholders, awards will continue to be automatically granted in
accordance with the terms of the current Equity Incentive Plan.
The summary of the Amended and Restated Equity Incentive Plan that appears
below is qualified in its entirety by reference to the full text of the plan
document, a copy of which is available upon request from the Company's
secretary.
Purpose of Plan. The Amended and Restated Equity Incentive Plan is intended
to allow employees and consultants to acquire or increase equity ownership in
the Company, thereby strengthening their commitment to the success of the
Company and stimulating their efforts on behalf of the Company, and to assist
the Company in attracting new employees and consultants and retaining existing
employees and consultants.
Types of Awards. Under the Amended and Restated Equity Incentive Plan, a
committee of outside directors (the "Committee") would be authorized to grant
nonqualified stock options, incentive stock options, stock appreciation rights,
limited stock appreciation rights ("LSARs"), shares of restricted Common Stock
("restricted shares"), performance shares, and shares of Common Stock awarded as
a bonus (all of the foregoing collectively, "Awards").
Eligibility. All employees (including officers) and consultants of the
Company are eligible to receive Awards. No employee may receive Awards covering
an aggregate of more than 250,000 shares of Common Stock during any year. The
Committee is authorized, subject to certain limits specified in the Amended and
Restated Plan, to determine to whom and on what terms and conditions Awards
shall be made.
Number of Shares Issuable. The Amended and Restated Equity Incentive Plan
would provide for the issuance of up to 1,250,000 shares of Common Stock, as
compared to the current limit of 750,000 shares, subject to anti-dilution
adjustments.
Stock options. Options must be granted at an exercise price of no less than
100% of the fair market value of a share of Common Stock on the date of grant.
Unless otherwise specified by the Committee, options will become exercisable in
<PAGE>
four annual installments of 25% beginning on the first anniversary of the grant
date. The option exercise price may be paid by any one or more of the following
methods: (i) cash or (ii) a "cashless" exercise pursuant to a sale through a
broker of a portion of the shares covered by the option. Options may be granted
as either (i) nonstatutory options upon exercise of which grantees would
recognize ordinary taxable income, and the Company would be entitled to a
compensation expense deduction or (ii) as incentive stock options (ISOs) which,
subject to certain conditions, would not result in the recognition of taxable
income by the grantee upon exercise, nor a compensation deduction to the Company
until the shares are disposed of by the grantee.
SARs. An award of a stock appreciation right ("SAR") entitles the grantee
to receive a payment equal to the appreciation in value of the Common Stock over
the strike price. The strike price will equal either (i) at least 100% of the
fair market value of the Common Stock on the grant date of the stock
appreciation right, or (ii) if the stock appreciation right is linked to an
option, the exercise price of such option. The amount of appreciation will be
payable in cash or Common Stock.
Restricted shares. Restricted shares will be forfeited if the conditions
set by the Committee have not been satisfied or waived. The Committee will
determine whether or not a grantee shall be required to pay for such restricted
shares and, if so, what the price shall be.
Performance shares. To the extent that the performance goals specified by
the Committee (including without limitation stock price, market share, sales,
earnings per share, and return on equity) in a grant of performance shares have
been achieved, then a benefit shall be paid after the end of the
performance-measuring period specified by the Committee. The amount of the
benefit is based upon the percentage attainment of the performance goals
multiplied by the value of a share of Common Stock at the end of the performance
period. No benefit will be payable if the minimum performance goals have not
been met.
LSARs. LSARs may in the discretion of the Compensation Committee be granted
with any option or stock appreciation right, either in connection with the
original grant or at any later date. Each LSAR held by a person who is subject
to potential "short swing" trading liability under Section 16(b) of the
Securities Exchange Act of 1934 will be automatically exercised upon a change of
control of the Company, resulting in a cash payment to the grantee equal to the
difference between (i) the market value of the Common Stock on date of the
change of control and (ii) the exercise price of the underlying option or the
strike price of the underlying stock appreciation right, as applicable.
Termination of employment. If a grantee's employment is terminated for
cause, all unexercised options (and any associated LSARs) and SARs will
immediately terminate and unvested restricted shares and performance shares will
be forfeited. In the event of death or permanent disability, any restricted
shares will be vested, any unexercised options (and any associated LSARs) or
SARs (whether or not previously exercisable) may be exercised by a beneficiary
for six months after the date of death or disability, and any unexercised
performance shares may be exercised for one year thereafter, provided that if a
performance-measuring period has not ended, the benefit will be pro-rated. If a
grantee terminates for any other reason, restricted shares will be forfeited,
any unexercised option (and any associated LSARs) or SARs may be exercised for
30 days following the date of termination, and any unexercised performance
shares may be exercised only as determined by the Committee.
Other. Options and SARs will have a maximum term of 10 years. In the event
of a Change of Control (as defined in the Amended and Restated Equity Incentive
Plan) of the Company, restricted shares will become nonforfeitable, all other
Awards will become exercisable. The Amended and Restated Equity Incentive Plan
may be amended by the Board without stockholder approval unless stockholder
<PAGE>
approval is required by federal securities law or the listing requirements of a
securities exchange on which any of the Company's equity securities are listed.
The Amended and Restated Equity Incentive Plan will terminate on January 19,
2006.
Tax Implications. Under present law, the following are the federal tax
consequences generally arising with respect to awards granted under the Amended
and Restated Equity Incentive Plan. The grant of an option or an SAR will create
no tax consequences for the grantee or the Company. The grantee will have no
taxable income upon exercising an ISO (except that the alternative minimum tax
may apply) and the Company will recognize no deduction when the ISO is
exercised. Upon exercising a non-qualified option or SAR, the grantee must
recognize ordinary income equal to the difference between (i) the exercise price
of the option or the strike price for an SAR, as applicable, and (ii) and the
fair market value of the Common Stock on the date of exercise; the Company will
be entitled to a deduction for the same amount. With respect to other Awards
under the Amended and Restated Equity Incentive Plan that are either
transferable or not subject to a substantial risk of forfeiture, the grantee
must recognize ordinary income equal to the fair market value of the shares or
other property received. With respect to awards that are settled in stock or
other property that is restricted as to transferability and subject to a
substantial risk of forfeiture, the grantee recognizes ordinary income when the
shares or other property become transferable or not subject to a substantial
risk of forfeiture, whichever occurs first.
The Board of Directors Recommends that stockholders
vote "FOR" the Amended and Restated
Equity Incentive Plan.
PROPOSAL NO. 4:
INDEPENDENT AUDITORS
The Board of Directors recommends that stockholders ratify the appointment
of KPMG Peat Marwick LLP by voting "FOR" ratification of KPMG Peat Marwick LLP
as the Company's auditors for the 1998 fiscal year. In the event such selection
is not ratified, the Board of Directors will reconsider its selection.
KPMG Peat Marwick LLP has audited the Company's financial statements for
fiscal years 1995, 1996 and 1997. Representatives of KPMG Peat Marwick LLP are
expected to be present at the meeting with the opportunity to make a statement
if they desire to do so, and are expected to be available to respond to
appropriate questions.
The Board of Directors recommends that
stockholders vote "FOR" the Auditor Ratification Proposal
OTHER MATTERS
The Board of Directors of the Company is not aware that any matter other than
those listed in the Notice of Meeting is to be presented for action at the
Annual Meeting. If any of the Board's nominees is unavailable for election as a
Director or any other matter should properly come before the meeting, it is
intended that votes will be cast pursuant to the Proxy in respect thereto in
accordance with the best judgment of the person or persons acting as proxies.
<PAGE>
INFORMATION CONCERNING SOLICITATION AND VOTING
Revocability of Proxies. Any stockholder who executes and returns a Proxy
may revoke it at any time before it is exercised by filing with the Secretary of
the Company written notice of such revocation or a duly executed proxy bearing a
later date, or by attending the Annual Meeting and voting in person. Attendance
at the Annual Meeting will not in and of itself constitute revocation of a
Proxy.
Record Date; Voting. Stockholders of record as of the close of business on
May 15, 1998 (the "Record Date") are entitled to notice of and to vote at the
Annual Meeting. At the Record Date, [12,712,712] shares of common stock, $.001
par value (the "Common Stock"), of the Company were outstanding, each of which
is entitled to one vote upon each of the matters to be presented at the Annual
Meeting. The presence of holders of a majority of the outstanding shares of
Common Stock, whether in person or by proxy, will constitute a quorum at the
Annual Meeting. The Company's Certificate of Incorporation does not provide for
cumulative voting. Abstentions will be considered present for purposes of
determining whether a quorum exists. Votes withheld for director nominees will
be disregarded. "Broker non-votes" (that is, shares represented at the Annual
Meeting which are held by a broker or nominee and as to which (i) instructions
have not been received from the beneficial owner or the person entitled to vote
and (ii) the broker or nominee does not have discretionary voting power) are
considered not entitled to vote, and thus they do not count towards a quorum
(However, if they are voted with respect to any item or if a proxy is signed and
returned, even if it is not marked with respect to any vote, they will count
towards a quorum.) A plurality of the votes of the shares present (either in
person or by proxy) and entitled to vote on the election at the Annual Meeting
is required to elect directors. The affirmative vote of the holders of a
majority of the shares of Common Stock present (either in person or by proxy)
and entitled to vote at the Annual Meeting is required to approve the Auditor
Ratification Proposal. The affirmative vote of a majority of the outstanding
shares of Common Stock is required for the approval of the Series B Proposal. In
accordance with Delaware law and the Company's Certificate of Incorporation and
Bylaws, (i) for the election of directors, which requires a plurality of the
votes present, votes withheld and broker non-votes will not be counted, and (ii)
for the adoption of all other proposals, which require a majority of the shares
of the Common Stock present in person or by proxy and entitled to vote, broker
non-votes will not be considered present, but abstentions will have the effect
of a vote against such proposals.
Solicitation. The cost of soliciting proxies will be borne by the Company.
In addition, the Company may reimburse brokerage firms and other persons
representing beneficial owners of shares for their expenses in forwarding
solicitation material to such beneficial owners. Proxies may also be solicited
by certain of the Company's directors, officers and regular employees, without
additional compensation, personally or by telephone.
Deadline for Receipt of Stockholder Proposals. Proposals of stockholders
which are intended to be presented by such stockholders at the Company's next
annual meeting of stockholders to be held in 1999 must be received by the
Company no later than January 21, 1999 in order that they may be included in the
proxy statement and form of proxy relating to that meeting.
May __, 1998
<PAGE>
LASERSIGHT INCORPORATED
PROXY
ANNUAL MEETING OF STOCKHOLDERS, JUNE 12, 1998
This Proxy is solicited on behalf of the Board of Directors
The undersigned hereby (i) appoints Michael R. Farris 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 Annual Meeting of
Stockholders of the Company, to be held on Friday, June 12, 1998 at 10:00 a.m.
EDT, 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, 3 and 4.
(1) ELECTION OF DIRECTORS. J. Richard Crowley; Michael R. Farris; Terry A.
Fuller, PhD.; Richard C. Lutzy; Francis E. O'Donnell, Jr., M.D.; David T.
Pieroni; Thomas Quinn; and Richard L. Stensrud.
[ ] FOR all nominees listed [ ] WITHHOLD AUTHORITY
(except as marked to the to vote for the nominees listed
contrary below)
(INSTRUCTION: To withhold authority to vote for any individual nominee,
write that nominee's name on the following line.)
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(2) Approve Amendment to Certificate
of Designation and Reduction of
Exercise Price of Existing
Warrants [ ] FOR [ ] AGAINST [ ] ABSTAIN
(3) Approve Amendment to Equity
Incentive Plan [ ] FOR [ ] AGAINST [ ] ABSTAIN
(4) Ratify appointment of
independent auditors [ ] FOR [ ] AGAINST [ ] ABSTAIN
(5) In their discretion to act on any other matters which may properly come
before the Annual Meeting.
Please date, sign and return promptly
in the accompanying envelope.
Dated: ________________________, 1998
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(If held jointly)
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.
The Board of Directors Recommends You Vote FOR the Above Proposals.
