SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[ X ] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934. For the quarterly period ended September 30,
1999.
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934. For the Transition period from
------------------------------ to ----------------------------------.
Commission File Number: 0-19671
LASERSIGHT INCORPORATED
(Exact name of registrant as specified in its charter)
Delaware 65-0273162
-------- ----------
(State of Incorporation) (IRS Employer Identification No.)
3300 University Blvd., Suite 140, Winter Park, Florida 32792
------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(407) 678-9900
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
-----
The Number of shares of the registrant's Common Stock outstanding as of
November 12, 1999 is 17,803,802.
1
<PAGE>
LASERSIGHT INCORPORATED AND SUBSIDIARIES
Except for the historical information contained herein, the discussion in this
Report contains forward-looking statements (within the meaning of Section 21E of
the Exchange Act) that involve risks and uncertainties. The Company's actual
results could differ materially from those discussed here. Factors that could
cause or contribute to such differences include, but are not limited to, those
discussed in the sections entitled "Management's Discussion and Analysis of
Financial Condition and Results of Operations - Risk Factors and Uncertainties"
in this report. LaserSight undertakes no obligation to update any such factors
or to publicly announce the results of any revisions to any of the
forward-looking statements contained herein to reflect any future events or
developments.
PART I. FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements
Condensed Consolidated Balance Sheets as of September 30,
1999 and December 31, 1998
Condensed Consolidated Statements of Operations for the
Three Month Periods and Nine Month Periods Ended September
30, 1999 and 1998
Condensed Consolidated Statements of Comprehensive Loss for
the Three Month Periods and Nine Month Periods Ended
September 30, 1999 and 1998
Condensed Consolidated Statements of Cash Flows for the
Nine Month Periods Ended September 30, 1999 and 1998
Notes to Condensed Consolidated Financial Statements
Independent Auditors' Review Report
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Item 3. Management's Quantitative and Qualitative Disclosures about
Market Risk
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Item 2. Changes in Securities
Item 3. Defaults Upon Senior Securities
Item 4. Submission of Matters to a Vote of Security Holders
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
2
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
LASERSIGHT INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
September 30, December 31,
1999 1998
------------- -------------
CURRENT ASSETS ASSETS (Unaudited)
<S> <C> <C>
Cash and cash equivalents $14,684,196 4,437,718
Accounts receivable - trade, net 6,513,358 4,611,834
Notes receivable - current portion, net 4,029,800 4,805,831
Inventories 8,012,671 8,517,636
Deferred tax assets 154,059 184,997
Other current assets 498,737 159,057
------------- ------------
TOTAL CURRENT ASSETS 33,892,821 22,717,073
Restricted cash 192,000 194,000
Notes receivable, less current portion, net 2,924,103 2,880,358
Property and equipment, net 1,920,292 1,502,339
Patents, net 3,953,934 4,432,428
Pre-market approval application, net 2,981,662 3,663,466
Goodwill, net 6,159,392 6,552,863
Other assets, net 1,682,644 1,930,456
------------- ------------
$53,706,848 43,872,983
============= ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $2,812,775 2,220,045
Accrued expenses 3,795,353 3,224,369
Accrued commissions 1,485,371 1,451,180
Income tax payable -- 9,239
Deferred revenue 962,752 937,602
------------- ------------
TOTAL CURRENT LIABILITIES 9,056,251 7,842,435
Refundable deposits 192,000 194,000
Accrued expenses, less current portion 689,335 642,880
Deferred royalty revenue, less current portion 133,333 433,333
Deferred income taxes 154,059 184,997
Long-term obligations 97,730 560,000
Commitments and contingencies
Stockholders' equity:
Convertible preferred stock:
Series C - par value $.001 per share; authorized 2,000,000 shares;
2,000,000 issued and outstanding at September 30, 1999 and
December 31, 1998, respectively 2,000 2,000
Series D - par value $.001 per share; authorized 2,000,000 shares;
2,000,000 issued and outstanding at September 30, 1999 and
December 31, 1998, respectively 2,000 2,000
Common stock - par value $.001 per share; authorized 40,000,000 shares;
17,667,130 and 13,332,835 shares issued at September 30, 1999 and
December 31, 1998, respectively 17,677 13,333
Additional paid-in capital 78,565,376 59,407,392
Stock subscription receivable (1,140,000) (1,140,000)
Accumulated deficit (33,541,829) (23,748,303)
Less treasury stock, at cost; 140,200 common shares at
September 30, 1999 and December 31, 1998 (521,084) (521,084)
------------- ------------
43,384,140 34,015,338
------------- ------------
$53,706,848 43,872,983
============= ============
See accompanying independent auditors' review report and notes to the condensed
consolidated financial statements.
</TABLE>
3
<PAGE>
LASERSIGHT INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
----------------------------------- ----------------------------------
1999 1998 1999 1998
------------- ------------- ------------- -------------
REVENUES:
<S> <C> <C> <C> <C>
PRODUCTS $ 6,108,109 4,826,834 15,343,959 13,130,919
ROYALTIES 753,928 295,000 1,463,928 816,917
SERVICES 79,530 138,780 283,535 504,977
------------- ------------ ------------- -------------
6,941,567 5,260,614 17,091,422 14,452,813
COST OF REVENUE:
PRODUCT COST 2,764,541 1,444,653 7,091,528 4,334,274
COST OF SERVICES 34,992 61,063 124,755 222,190
------------- ------------ ------------- -------------
GROSS PROFIT 4,142,034 3,754,898 9,875,139 9,896,349
RESEARCH, DEVELOPMENT AND
REGULATORY EXPENSES 766,514 923,850 2,256,684 2,485,194
OTHER GENERAL AND ADMINSTRATIVE
EXPENSES 4,349,144 3,239,836 12,147,427 8,073,145
SELLING RELATED EXPENSES 1,634,967 1,421,818 3,828,488 3,385,971
AMORTIZATION OF INTANGIBLES 634,071 542,577 1,902,213 1,677,598
------------- ------------ ------------- -------------
6,618,182 5,204,231 17,878,128 13,136,714
------------- ------------ ------------- -------------
LOSS FROM OPERATIONS (3,242,662) (2,373,183) (10,259,673) (5,725,559)
OTHER INCOME AND EXPENSES
Interest and dividend income 247,662 224,525 541,832 450,823
Interest expense (27,500) (1,272) (75,685) (721,813)
Gain on sale of subsidiaries and securities -- -- -- 364,452
------------- ------------ ------------- -------------
NET LOSS BEFORE INCOME TAXES (3,022,500) (2,149,930) (9,793,526) (5,632,097)
INCOME TAX EXPENSE -- -- -- 232,213
------------- ------------ ------------- -------------
NET LOSS (3,022,500) (2,149,930) (9,793,526) (5,864,310)
CONVERSION DISCOUNT ON
PREFERRED STOCK -- -- -- (858,872)
PREFERRED STOCK ACCRETION AND
DIVIDEND REQUIREMENTS -- -- -- (2,751,953)
------------- ------------ ------------- -------------
LOSS ATTRIBUTABLE TO COMMON
SHAREHOLDERS $(3,022,500) (2,149,930) (9,793,526) (9,475,135)
============= ============ ============= =============
LOSS PER COMMON SHARE
Basic and Diluted: $ (0.17) (0.17) (0.62) (0.79)
============= ============= ============= =============
WEIGHTED AVERAGE NUMBER OF SHARES
OUTSTANDING
Basic and Diluted: 17,455,000 12,935,000 15,691,000 11,969,000
============= ============= ============= =============
See accompanying independent auditors' review report and notes to condensed consolidated financial statements
</TABLE>
4
<PAGE>
LASERSIGHT INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
--------------------------------- ---------------------------------
1999 1998 1999 1998
------------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
NET LOSS $(3,022,500) (2,149,930) (9,793,526) (9,475,135)
OTHER COMPREHENSIVE LOSS:
Reversal of unrealized gain on marketable
securities (net of tax of $353,675 for the nine
month period ended September 30, 1998) -- -- -- (577,048)
Reclassification adjustment for gains
included in net loss (net of tax of $16,825 for
the nine month period ended September 30, 1998)
-- -- -- (27,452)
------------- ------------ ------------ ------------
COMPREHENSIVE LOSS $(3,022,500) (2,149,930) (9,793,526) (10,079,635)
============= ============ ============ ============
See accompanying independent auditors' review report and notes to condensed consolidated financial statements.
</TABLE>
5
<PAGE>
LASERSIGHT INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
(Unaudited)
<TABLE>
<CAPTION>
1999 1998
-------------- -------------
CASH FLOW FROM OPERATING ACTIVITIES
<S> <C> <C>
Net loss $ (9,793,526) (5,864,310)
Adjustments to reconcile net loss to net cash used in operating activities:
Gain on sale of subsidiaries and securities -- (364,452)
Depreciation and amortization 2,430,890 2,559,904
Warrants and options issued in conjunction with consulting agreements 187,192 --
Increase in accounts and notes receivable (1,169,238) (4,676,783)
Decrease (increase) in inventories 81,701 (1,647,853)
Increase (decrease) in accounts payable 592,730 (95,132)
Increase (decrease) in accrued expenses 651,630 (88,520)
Increase (decrease) in income taxes (9,239) (873,582)
Increase (decrease) in deferred revenue (274,850) 933,333
Other (425,192) 466,003
-------------- -------------
NET CASH USED IN OPERATING ACTIVITIES (7,727,902) (9,651,392)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment, net (493,827) (459,753)
Proceeds from sale of investments -- 6,527,452
Net proceeds from exclusive license of patents -- 6,170,000
Transfer to restricted cash account -- (4,200,000)
Acquisition of other intangible assets -- (989,874)
Proceeds from restricted cash account -- 4,228,000
-------------- -------------
NET CASH PROVIDED BY (USED IN) INVESTING
ACTIVITIES (493,827) 11,275,825
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of common stock 8,850,000 --
Repurchase of preferred stock -- (10,512,000)
Net proceeds from exercise of stock options and warrants 9,637,866 482,072
Repayments of notes payable -- (2,000,000)
Repayment of capital lease obligation (19,659) --
Proceeds from issuance of preferred stock -- 15,819,555
-------------- -------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 18,468,207 3,789,627
-------------- -------------
INCREASE IN CASH AND CASH EQUIVALENTS 10,246,478 5,414,060
CASH AND CASH EQUIVALENTS,
BEGINNING OF PERIOD 4,437,718 3,858,400
-------------- -------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $14,684,196 9,272,460
============== =============
See accompanying independent auditors' review report and notes to the condensed consolidated financial statements.
</TABLE>
6
<PAGE>
LASERSIGHT INCORPORATED AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Nine Month Periods Ended September 30, 1999 and 1998
NOTE 1 BASIS OF PRESENTATION
The accompanying unaudited, condensed consolidated financial
statements of LaserSight Incorporated and subsidiaries (the
Company) as of September 30, 1999, and for the three and nine
month periods ended September 30, 1999 and 1998, have been
prepared in accordance with generally accepted accounting
principles for interim financial information and with the
instructions to Form 10-Q and Rule 10-01 of Regulation S-X.
Accordingly, they do not include all of the information and
note disclosures required by generally accepted accounting
principles for complete financial statements. These condensed
consolidated financial statements should be read in
conjunction with the consolidated financial statements and
notes thereto included in the Company's annual report on Form
10-K for the year ended December 31, 1998. In the opinion of
management, the condensed consolidated financial statements
include all adjustments necessary for a fair presentation of
consolidated financial position and the results of operations
and cash flows for the periods presented. The results of
operations for the three and nine month periods ended
September 30, 1999 are not necessarily indicative of the
operating results for the full year. The report of KPMG LLP,
independent auditors, commenting upon their review accompanies
the condensed consolidated financial statements included in
Item 1 of Part I.
NOTE 2 PER SHARE INFORMATION
Basic loss per common share is computed using the weighted
average number of common shares and contingently issuable
shares (to the extent that all necessary contingencies have
been satisfied). Diluted loss per common share is computed
using the weighted average number of common shares,
contingently issuable shares, and common share equivalents
outstanding during each period. Common share equivalents
include options, warrants to purchase Common Stock, and
convertible Preferred Stock and are included in the
computation using the treasury stock method if they would have
a dilutive effect.
NOTE 3 INVENTORIES
Inventories, which consist primarily of excimer and erbium
laser systems, and related parts and components, are stated at
the lower of cost or market. Cost is determined using the
first-in, first-out method. The components of inventories at
September 30, 1999 and December 31, 1998 are summarized as
follows:
<TABLE>
<CAPTION>
September 30, 1999 December 31, 1998
------------------ -----------------
<S> <C> <C>
Raw materials $5,290,200 5,226,146
Work-in process 1,417,434 1,837,460
Finished goods 865,923 1,046,756
Test equipment - clinical trials 439,114 407,274
------------ -----------
$8,012,671 8,517,636
============ ===========
</TABLE>
7
<PAGE>
NOTE 4 CAPITAL LEASES
During the quarter ended March 31, 1999, LaserSight entered
into a capital lease agreement for blade manufacturing
equipment. During the quarter ended September 30, 1999,
LaserSight sold the equipment to its contract blade
manufacturer, who assumed all liability associated with the
capital lease, which approximated the net book value of the
equipment.
NOTE 5 STOCKHOLDERS' EQUITY
Private Placement
On March 23, 1999, LaserSight closed a transaction for the
sale of 2,250,000 shares of Common Stock to a total of six
investors, including Pequot Capital Management, Inc. (Pequot)
and TLC Laser Eye Centers Inc. (TLC), in exchange for
LaserSight receiving $9 million in cash. In addition, the
investors received a total of 225,000 warrants to purchase
Common Stock at $5.125 each, the Common Stock closing price on
March 22, 1999.
During the nine months ended September 30, 1999, LaserSight
received approximately $9.6 million from the exercise of
warrants and stock options, resulting in the issuance of
2,094,295 shares of Common Stock.
NOTE 6 SEGMENT INFORMATION
The Company operates principally in three operating segments:
refractive products, patent services and health care services.
Refractive product operations primarily involve the
development, manufacture, and sale of ophthalmic lasers and
related devices for use in vision correction procedures.
Patent services involve the revenues and expenses generated
from the ownership of certain refractive laser procedure
patents, and health care services provides health and vision
care consulting services to hospital, managed care companies
and physicians.
Operating profit is total revenue less operating expenses. In
determining operating profit for industry segments, the
following items have not been considered: general corporate
expenses; expenses attributable to LaserSight Centers, Inc.
(Centers), a developmental stage company; non-operating
income; and the income tax expense (benefit). Identifiable
assets by industry segment are those that are used by or
applicable to each industry segment. General corporate assets
consist primarily of cash, marketable equity securities and
income tax accounts.
8
<PAGE>
The table below summarizes information about reported segments
as of and for the three months ended September 30, 1999 and
1998:
<TABLE>
<CAPTION>
Depreciation
Operating Operating and Capital
Revenues Profit (Loss) Assets Amortization Expenditures
--------- ------------- ------- ------------ ------------
1999
Operating profit segments:
<S> <C> <C> <C> <C> <C>
Refractive products
related 6,108,109 (3,074,993) 28,782,268 534,087 * 563,838
Patent services 753,928 623,645 3,432,118 129,330 --
Health care services 79,530 (218,076) 3,711,357 70,731 805
General corporate -- (504,064) 14,944,756 2,227 6,845
Developmental stage
company - LaserSight
Centers, Inc. -- (69,174) 2,836,349 69,174 --
----------- ----------- ------------ ------------ -----------
Consolidated total 6,941,567 (3,242,662) 53,706,848 805,549 571,488
=========== =========== ============ ============ ===========
1998
Operating profit segments:
Refractive products
related 4,826,834 (1,751,850) 29,238,737 401,090 155,031
Patent services 295,000 97,159 3,809,062 129,330 --
Health care services 138,780 (101,980) 4,039,481 78,333 10,251
General corporate -- (547,338) 9,405,047 687 5,030
Developmental stage
company - LaserSight
Centers, Inc. -- (69,174) 3,104,837 69,174 --
----------- ----------- ------------ ------------ -----------
Consolidated total 5,260,614 (2,373,183) 49,597,164 678,614 170,312
=========== =========== ============ ============ ===========
* Includes $423,264 reclassified from inventory related to laser systems used
for training and other internal activities.
</TABLE>
9
<PAGE>
The table below summarizes information about reported segments
as of and for the nine months ended September 30, 1999 and 1998:
<TABLE>
<CAPTION>
Depreciation
Operating Operating and Capital
Revenues Profit (Loss) Assets Amortization Expenditures
-------- ------------ ------- ------------ ------------
1999
Operating profit segments:
<S> <C> <C> <C> <C> <C>
Refractive products
related 15,343,959 (9,099,390) 28,782,268 1,617,364 ** 904,945
Patent services 1,463,928 1,074,985 3,432,118 387,990 --
Health care services 283,535 (486,314) 3,711,357 212,193 805
General corporate -- (1,541,432) 14,944,756 5,821 11,341
Developmental stage
company - LaserSight
Centers, Inc. -- (207,522) 2,836,349 207,522 --
----------- ----------- ------------ ------------ -----------
Consolidated total 17,091,422 (10,259,673) 53,706,848 2,430,890 917,091
=========== =========== ============ ============ ===========
1998
Operating profit segments:
Refractive products
related 13,130,919 (3,824,696) 29,238,737 1,143,487 424,496
Patent services 816,917 222,121 3,809,062 437,857 --
Health care services 504,977 (442,759) 4,039,481 233,276 30,228
General corporate -- (1,472,703) 9,405,047 2,061 5,030
Developmental stage
company - LaserSight
Centers, Inc. -- (207,522) 3,104,837 207,522 --
----------- ----------- ------------ ------------ -----------
Consolidated total 14,452,813 (5,725,559) 49,597,164 2,024,203 459,754
=========== =========== ============ ============ ===========
** Includes $423,264 reclassified from inventory related to laser systems used
for training and other internal activities.
</TABLE>
Amortization of deferred financing costs and accretion of
discount on note payable of $535,701 for the nine months ended
September 30, 1998 is included as interest expense in the
accompanying condensed consolidated statement of operations.
NOTE 7 LINE OF CREDIT
Revolving Credit Agreement
On June 29, 1999, LaserSight established a $2.5 million
revolving line of credit (Credit Agreement) with The
Huntington National Bank (Huntington). Under the Credit
Agreement, LaserSight has the option to borrow amounts at a
rate per annum equal to one half of one percent (1/2%) above
the Prime Rate. Borrowings are intended for short term working
capital needs or such other purposes as may be approved by
Huntington. The Credit Agreement requires LaserSight to
maintain a specific liquidity level and minimum tangible net
worth. The terms of the Credit Agreement extend to June 30,
2000. At September 30, 1999, LaserSight had no outstanding
borrowings under the Credit Agreement.
10
<PAGE>
NOTE 8 SUBSEQUENT EVENT
Technology Development and License Agreement
On October 23, 1999, LaserSight entered into a technology
development and exclusive license agreement with Quadrivium,
L.L.C. covering patents and patent applications related to a
corneal reshaping procedure that achieves a refractive
correction utilizing low levels of infrared energy, or
photothermal keratoplasty (PTK). LaserSight issued 200,000
common shares to Quadrivium. Such shares, valued at
approximately $3.0 million, were placed into escrow. If
LaserSight determines the technology is capable of producing a
commercially viable system in accordance with the agreement,
half of the shares will be released from escrow. Otherwise,
all shares will be returned to LaserSight. On the date that
clinical trials using this technology are completed, if
LaserSight determines that the international commercialization
of the PTK system is viable, the remaining shares will be
released from escrow. Otherwise, the remaining shares will be
returned to LaserSight.
11
<PAGE>
Independent Auditors' Review Report
-----------------------------------
The Board of Directors
LaserSight Incorporated:
We have reviewed the condensed consolidated balance sheet of LaserSight
Incorporated and subsidiaries as of September 30, 1999, and the related
condensed consolidated statements of operations, comprehensive loss, and cash
flows for the three-month and nine-month periods ended September 30, 1999 and
1998. These condensed consolidated financial statements are the responsibility
of the Company's management.
We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical procedures to financial
data and making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in accordance
with generally accepted auditing standards, the objective of which is the
expression of an opinion regarding the financial statements taken as a whole.
Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the condensed consolidated financial statements referred to above for
them to be in conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet of LaserSight Incorporated and
subsidiaries as of December 31, 1998, and the related consolidated statements of
operations, comprehensive loss, stockholders' equity, and cash flows for the
year then ended (not presented herein); and in our report dated March 25, 1999,
we expressed an unqualified opinion on those consolidated financial statements.
In our opinion, the information set forth in the accompanying condensed
consolidated balance sheet as of December 31, 1998, is fairly stated, in all
material respects, in relation to the consolidated balance sheet from which it
has been derived.
/s/ KPMG LLP
St. Louis, Missouri
October 22, 1999
12
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
LaserSight is principally engaged in the manufacture and supply of
narrow beam scanning excimer laser systems, keratomes, keratome blades and other
related products used to perform procedures that correct common refractive
vision disorders such as nearsightedness, farsightedness and astigmatism. Since
1994, we have marketed our laser systems commercially in over 30 countries
worldwide and currently have an installed base of over 250 laser systems outside
the U.S., including approximately 80 of our LaserScan LSX (TM)laser systems.
Results of Operations
The following table sets forth for the periods indicated information
derived from our statements of operations for those periods expressed as a
percentage of net sales, and the percentage change in such items from the
comparable prior year period. Any trends illustrated in the following table are
not necessarily indicative of future results.
<TABLE>
<CAPTION>
Percent Increase (Decrease)
Over Prior Periods
Three Months Nine Months Three Months Nine Months
Ended Ended Ended Ended
September 30, September 30, September 30, September 30,
1999 1998 1999 1998 1999 vs. 1998 1999 vs. 1998
---- ---- ---- ---- ------------- -------------
Revenues
<S> <C> <C> <C> <C> <C> <C>
Refractive Products 88.0% 91.8% 89.8% 90.9% 26.5% 16.9%
Royalties 10.9 5.6 8.6 5.7 155.6 79.2
Health Care Services 1.1 2.6 1.6 3.5 (42.7) (43.9)
----- ----- ----- -----
Net Revenues 100.0 100.0 100.0 100.0 32.0 18.3
Cost of Revenue 40.3 28.6 42.2 31.5 85.9 58.4
----- ----- ----- -----
Gross Profit 59.7 71.4 57.8 68.5 10.3 (0.2)
R&D & Regulatory 11.0 17.6 13.2 17.2 (17.0) (9.2)
Other G&A 62.7 61.6 71.1 55.9 34.2 50.5
Selling Related 23.6 27.0 22.4 23.4 15.0 13.1
Amortization of Intangibles 9.1 10.3 11.1 11.6 16.9 13.4
----- ----- ----- -----
Loss from Operations (46.7) (45.1) (60.0) (39.6) 36.6 79.2
</TABLE>
(1) As a percentage of net revenues, the gross profit for products only for
each of the three months ended September 30, 1999 and 1998, and the
nine months ended September 30, 1999 and 1998, were 55%, 70%, 54%, and
67%, respectively.
(2) As a percentage of refractive product net sales, research, development
and regulatory expenses for each of the three months ended September
30, 1999 and 1998, and the nine months ended September 30, 1999 and
1998, were 13%, 19%, 15% and 19%, respectively.
(3) As a percentage of refractive product net sales, selling-related
expenses for each of the three months ended September 30, 1999 and
1998, and the nine months ended September 30, 1999 and 1998, were 27%,
29%, 25% and 26%, respectively.
13
<PAGE>
NINE MONTHS ENDED SEPTEMBER 30, 1999 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30,
1998
Revenues. Net revenues for the nine months ended September 30, 1999
increased by $2.6 million, or 18%, to $17.1 million from $14.5 million for the
comparable period in 1998.
During the nine months ended September 30, 1999, refractive products
revenues increased $2.2 million, or 17%, to $15.3 million from $13.1 million for
the comparable period in 1998. This revenue increase was primarily the result of
increased sales of its higher priced LaserScan LSX excimer laser system,
resulting in an increased level of laser system sales. During the nine months
ended September 30, 1999, excimer laser system sales accounted for approximately
$13.9 million in revenues compared to $12.3 million in revenues over the same
period in 1998. During the nine months ended September 30, 1999 and 1998,
respectively, LaserScan LSX system sales accounted for 90% and 55%,
respectively, of total excimer laser system sales. During the nine months ended
September 30, 1999, 52 laser systems were sold compared to 42 system sales over
the comparable period in 1998. The 52 systems sold during the first nine months
of 1999 include 42 system sales to new customers and 10 LaserScan LSX excimer
laser systems sold to existing customers to replace older laser systems. The
latter systems were sold at discounted prices at a positive gross margin, though
at a lower gross margin than sales to new customers. Additional improvements in
refractive products related revenues during the nine months ended September 30,
1999 are attributable to an increase in the level of service contract revenues
and increased revenues generated from our aesthetic product line, which was
acquired in the second quarter of 1998. These increases were slightly offset by
a reduction in revenues generated from miscellaneous part sales for the nine
months ended September 30, 1999 compared to the nine months ended September 30,
1998.
Net revenues from patent services for the nine months ended September
30, 1999 increased approximately $0.6 million, or 79%, to $1.5 million from $0.9
million for the comparable period in 1998, due to increased licensing fees.
Net revenues from health care services for the nine months ended
September 30, 1999 decreased approximately $0.2 million, or 44%, to $0.3 million
from $0.5 million for the comparable period in 1998. This decrease was primarily
attributable to a reduction in consulting services provided and was accompanied
by a reduction in expenses of approximately $0.1 million over the nine months
ended September 30, 1998. Such revenue and expense reductions are primarily the
result of staffing reductions instituted during mid-1998 to more closely match
the cost structure of this segment with anticipated revenues going forward.
Cost of Revenue; Gross Profits. For the nine months ended September 30,
1999 and 1998, gross profit margins were 58% and 68%, respectively. The gross
margin decrease during the nine months ended September 30, 1999 was primarily
attributable to higher raw material costs relating to the LaserScan LSX excimer
laser system of $1.4 million, an increase in manufacturing overhead of $0.3
million, an increase in our inventory obsolescence reserve of $0.7 million, and
an increase of $0.2 million in raw materials relating our aesthetics division,
which was acquired in April 1998.
Research, Development and Regulatory Expense. Research, development and
regulatory expenses for the nine months ended September 30, 1999 decreased by
$0.2 million, or 9%, to $2.3 million from $2.5 million for the comparable period
in 1998. We continued to develop our keratome systems, excimer laser systems and
continued to pursue protocols in our effort to attain FDA approval. As a result
of a continuation of these efforts plus the anticipated development of new
product ideas, we expect research and development expenses during the remainder
of 1999 to increase over levels incurred during the first three quarters of
1999. Regulatory expenses are expected to increase as a result of our continued
pursuit of FDA approval, protocols added during 1999 related to the potential
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use of our laser systems for treatments utilizing the LASIK procedure and the
possible development of additional pre-market approval supplements and future
protocols for submission to the FDA.
Other General and Administrative Expenses. Other general and
administrative expenses for the nine months ended September 30, 1999 increased
$4.0 million, or 50%, to $12.1 million from $8.1 million for the comparable
period in 1998. This increase was due to an increase in expenses related to our
refractive products subsidiary of approximately $4.4 million over the comparable
period in 1998. These included enhancements to the customer support and
training, quality assurance, marketing, software development and engineering
departments of $1.8 million, $0.4 million of costs relating to our efforts to
develop our blade manufacturing operation, $0.4 million of higher depreciation
and lease costs (including the second Orlando area facility and larger office
space), $0.3 million of salaries, primarily resulting from staffing additions to
accounting, information systems and human resources departments, and bad debt
expense of $1.2 million, which represented a general increase in reserves. See
"Risk Factors--Financial and Liquidity Risks--If our uncollectible receivables
exceed our reserves we will incur additional unanticipated expenses, and we may
experience difficulty collecting restructured receivables with extended payment
terms." The total increase was partially offset by a $0.1 million reduction in
the expenses of our TFG subsidiary and $0.1 million of expenses related to our
patent services from the comparable period in 1998.
Selling-Related Expenses. Selling-related expenses consist of those
items directly related to sales activities, including commissions on sales,
royalty or license fees, warranty expenses, and costs of shipping and
installation. Commissions and royalties, in particular, can vary significantly
from sale to sale or period to period depending on the location and terms of
each sale. Selling-related expenses for the nine months ended September 30, 1999
increased $0.4 million, or 13%, to $3.8 million from $3.4 million during the
comparable period in 1998. This increase was primarily attributable to an $0.8
million expense on warranty estimates being accrued resulting from higher sales
and an increase in the per system estimate to provide annual warranty coverage
from the comparable 1998 period. This increase was partially offset by a $0.4
million decrease in sales commissions. The levels of royalty fees, system
installation and shipping costs were virtually unchanged.
Amortization of Intangibles. During the nine months ended September 30,
1999, costs relating to the amortization of intangible assets increased by $0.2
million, or 13%, to $1.9 million from $1.7 million for the comparable period in
1998. Items directly related to the amortization of intangible assets are
acquired technologies, patents, license agreements and goodwill.
Loss From Operations. The operating loss for the nine months ended
September 30, 1999 was $10.3 million compared to the operating loss of $5.7
million for the same period in 1998. This increase in the loss from operations
was primarily due to the increase in other general and administrative expenses
related to the sale of our refractive products and the decrease in our gross
profit margin, partially offset by an improvement in the operating gain
generated by our patent services subsidiary.
Other Income and Expense. Interest and dividend income for the nine
months ended September 30, 1999 was $0.6 million compared to $0.5 million for
the comparable period in 1998. Interest and dividend income was earned from the
investment of cash and cash equivalents and the collection of long-term
receivables related to laser system sales. Interest expense for the nine months
ended September 30, 1999 was $0.1 million compared to interest expense of $0.7
million for the comparable period in 1998. Interest expense incurred during the
nine months ended September 30, 1999 related primarily to an adjustment to the
fair value of the warrant issued to Foothill Capital Corporation and interest
paid on a capital lease obligation during the first half of 1999. Interest
expense incurred during the nine months ended September 30, 1998 related
primarily to the credit facility established with Foothill on April 1, 1997
which was repaid in full in June 1998. In addition to interest paid on the
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outstanding note payable balance, interest expense in 1998 included the
amortization of deferred financing costs, the accretion of the discount on the
note payable, and fees associated with amendments to the original loan
agreement. During the nine months ended September 30, 1998, LaserSight
recognized gains on the sale of subsidiaries and securities of $0.4 million
resulting from the sale of marketable equity securities which were received in
December 1997 in exchange for the sale of two health care subsidiaries.
Income Taxes. For the nine months ended September 30, 1999, LaserSight
had no income tax expense while income tax expense of $0.2 million was
recognized during the nine months ended September 30, 1998. The net expense for
the nine months ended September 30, 1998 is primarily the result of the payment
of Japanese taxes in connection with a licensing transaction.
Net Loss. Net loss for the nine months ended September 30, 1999, was
$9.8 million compared to a net loss of $5.9 million for the comparable period in
1998. The increase in net loss for the nine months ended September 30, 1999 can
be attributed to the increase in other general and administrative expenses
related to our refractive products operations and the decrease in our gross
profit margin, partially offset by an improvement in the operating gain
generated by our patent services subsidiary.
Loss Attributable to Common Shareholders. The loss attributable to
common shareholders for the nine months ended September 30, 1998 was impacted by
the $1.1 million premium paid on the repurchase of the 525 remaining shares of
Series B Preferred Stock, the accretion of $0.6 million of financing costs
related to such shares, the $0.8 million value of the conversion discount on the
Series C Preferred Stock and Series D Preferred Stock, the impact of the $0.7
million premium paid on the first quarter 1998 repurchase of 351 shares of
Series B Preferred Stock and the accretion of $0.4 million of financing costs
related to such shares. The comparable period in 1999 was not impacted by any
such adjustments.
Loss Per Share. The loss per basic and diluted share decreased to $0.62
for the nine months ended September 30, 1999, compared to $0.79 for the
comparable period in 1998. Of the basic and diluted losses per share for the
nine months ended September 30, 1998, $0.30 was a result of the value of the
conversion discount on preferred stock in accordance with EITF Topic D-60 and
accretion and dividend requirements on the Series B Preferred Stock. During the
nine months ended September 30, 1999, the weighted average shares of common
stock outstanding increased primarily due to the exercise of options and
warrants and the private placement completed in March 1999.
THREE MONTHS ENDED SEPTEMBER 30, 1999 COMPARED TO THREE MONTHS ENDED
SEPTEMBER 30, 1998
Revenues. Net revenues for the three months ended September 30, 1999
increased by $1.6 million, or 32%, to $6.9 million from $5.3 million for the
comparable period in 1998.
During the three months ended September 30, 1999, refractive products
revenues increased $1.3 million, or 27%, to $6.1 million from $4.8 million for
the comparable period in 1998. This revenue increase was primarily the result of
increased sales of its higher priced LaserScan LSX excimer laser system and an
increased level of laser system sales. During the three months ended September
30, 1999, excimer laser system sales accounted for approximately $5.7 million in
revenues compared to $4.5 million in revenues over the same period in 1998.
During the three months ended September 30, 1999 and 1998, respectively,
LaserScan LSX system sales accounted for 100% and 92%, respectively, of total
excimer laser system sales. During the three months ended September 30, 1999, 19
laser systems were sold compared to 13 system sales over the comparable period
in 1998. The 19 systems classified as sales in the third quarter of 1999 include
16 system sales to new customers and three LaserScan LSX excimer laser systems
sold to existing customers to replace older laser systems. The latter systems
were sold at discounted prices at a positive gross margin, though at a lower
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gross margin than sales to new customers. Additional improvements in refractive
products related revenues during the three months ended September 30, 1999
compared to the third quarter of 1998 are attributable to an increase in the
level of service contract revenues and revenues generated from the introduction
of our blade products in July 1999, partially offset by a reduction in revenues
associated with our aesthetic product line and miscellaneous part sales.
Net revenues from patent services for the three months ended September
30, 1999 increased approximately $0.5 million, or 156%, to $0.8 million from
$0.3 million for the comparable period in 1998, due to increased licensing fees.
Net revenues from health care services for the three months ended
September 30, 1999 decreased approximately $60,000, or 43%, to $80,000 from
$140,000 for the comparable period in 1998. This decrease was primarily
attributable to a reduction in consulting services provided. Decreased revenues
have resulted in staffing reductions since mid-1998 to more closely match the
cost structure of this segment with anticipated revenues going forward. During
the third quarter of 1999, two senior level consultants were added with the
expectation that they will generate additional revenues and improved operating
results for the health care services segment.
Cost of Revenue; Gross Profits. For the three months ended September
30, 1999 and 1998, gross profit margins were 60% and 71%, respectively. The
gross margin decrease during the three months ended September 30, 1999 was
primarily attributable to higher raw material costs relating to the LaserScan
LSX excimer laser system of $0.8 million, an increase in manufacturing overhead
of $0.2 million and an increase in our inventory obsolescence reserve of $0.3
million.
Research, Development and Regulatory Expense. Research, development and
regulatory expenses for the three months ended September 30, 1999 decreased by
$0.1 million, or 17%, to $0.8 million from $0.9 million for the comparable
period in 1998. We continued to develop our keratome systems, excimer laser
systems and continued to pursue protocols in our effort to attain FDA approval.
As a result of a continuation of these efforts plus the anticipated development
of new product ideas, we expect research and development expenses during the
fourth quarter of 1999 to increase over levels incurred during the first three
quarters of 1999. Regulatory expenses are expected to increase as a result of
our continued pursuit of FDA approval, protocols added during 1999 related to
the potential use of our laser systems for treatments utilizing the LASIK
procedure and the possible development of additional pre-market approval
supplements and future protocols for submission to the FDA.
Other General and Administrative Expenses. Other general and
administrative expenses for the three months ended September 30, 1999 increased
$1.1 million, or 34%, to $4.3 million from $3.2 million for the comparable
period in 1998. This increase was due to an increase in expenses incurred at our
refractive products subsidiary of approximately $1.2 million over the comparable
period in 1998. These included enhancements to the customer support and
training, quality assurance, marketing, software development, manufacturing and
engineering departments of $0.6 million, higher depreciation and lease costs
(including the second Orlando area facility and larger office space) of $0.1
million, $0.1 million of salaries, primarily resulting from staffing additions
to accounting, information systems and human resources departments and $0.4
million of bad debt expense, which represented a general increase in reserves.
See "Risk Factors--Financial and Liquidity Risks--If our uncollectible
receivables exceed our reserves we will incur additional unanticipated expenses,
and we may experience difficulty collecting restructured receivables with
extended payment terms."
Selling-Related Expenses. Selling-related expenses consist of those
items directly related to sales activities, including commissions on sales,
royalty or license fees, warranty expenses, and costs of shipping and
installation. Commissions and royalties, in particular, can vary significantly
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from sale to sale or period to period depending on the location and terms of
each sale. Selling-related expenses for the three months ended September 30,
1999 increased $0.2 million, or 15%, to $1.6 million from $1.4 million during
the comparable period in 1998. This increase was primarily attributable to a
$0.5 million expense on warranty estimates being accrued resulting from higher
sales and an increase in the per system estimate to provide annual warranty
coverage from the third quarter of 1998. This increase was partially offset by a
$0.3 million decrease in sales commissions.
Amortization of Intangibles. During the three months ended September
30, 1999, costs relating to the amortization of intangible assets increased by
$0.1 million, or 17%, to $0.6 million from $0.5 million for the comparable
period in 1998. Items directly related to the amortization of intangible assets
are acquired technologies, patents, license agreements and goodwill.
Loss From Operations. The operating loss for the three months ended
September 30, 1999 was $3.2 million compared to the operating loss of $2.4
million for the same period in 1998. This increase in the loss from operations
was primarily due to the increase in other general and administrative expenses
related to the sale of our refractive products and the decrease in our gross
profit margin, partially offset by an improvement in the operating gain
generated by our patent services subsidiary.
Other Income and Expense. Interest and dividend income for the three
months ended September 30, 1999 was $0.2 million, approximately the same as for
the comparable period in 1998. Interest and dividend income was earned from the
investment of cash and cash equivalents and the collection of long-term
receivables related to laser system sales. Interest expense for the three months
ended September 30, 1999 and 1998 was not material.
Income Taxes. For the three months ended September 30, 1999 and 1998,
LaserSight had no income tax expense.
Net Loss. Net loss for the three months ended September 30, 1999, was
$3.0 million compared to a net loss of $2.1 million for the comparable period in
1998. The increase in net loss for the three months ended September 30, 1999 can
be attributed to the increase in other general and administrative expenses
related to our refractive products operations and the decrease in our gross
profit margin, partially offset by an improvement in the operating gain
generated by our patent services subsidiary.
Loss Per Share. The loss per basic and diluted share was $0.17 for the
three months ended September 30, 1999 and the comparable period in 1998. During
the three months ended September 30, 1999, the weighted average shares of common
stock outstanding increased primarily due to the exercise of options and
warrants.
LIQUIDITY AND CAPITAL RESOURCES
Our principal sources of funds have historically been from sales of
preferred stock and common stock, sales of subsidiaries and patent rights and,
to a lesser extent, our operating cash flows. We issued securities totaling
approximately $14.8 million in 1997, $15.8 million in 1998 and $8.9 million in
the first nine months of 1999, and received proceeds from the exercise of stock
options and warrants of approximately $98,000 in 1997, $0.5 million in 1998 and
$9.6 million in the first nine months of 1999. In addition, we sold subsidiaries
and various patent rights, resulting in proceeds to us of approximately $10.5
million in 1997 and $12.7 million in 1998. We have principally used these
capital resources to fund operating losses, working capital requirements,
capital expenditures, acquisitions and retirement of debt. At September 30,
1999, we had an accumulated deficit of $33.5 million.
We entered into a $2.5 million revolving credit facility with The
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Huntington National Bank in June 1999. We may borrow amounts under this credit
facility at an annual rate equal to 0.5% above the prime rate for short-term
working capital needs or for such other purposes as may be approved by
Huntington. The credit agreement with Huntington expires on June 30, 2000 and
requires us to maintain a specified liquidity level and tangible net worth
levels. At September 30, 1999, we had no outstanding borrowings under this
credit facility.
Our working capital increased $9.9 million from $14.9 million at
December 31, 1998 to $24.8 million as of September 30, 1999. This increase in
working capital resulted primarily from the March 1999 private placement of
common stock and warrants for gross proceeds of $8.9 million and the aggregate
exercise price of $9.6 million received upon the exercise of stock options and
warrants, offset primarily by cash used in operating activities of $7.7 million.
Operating activities used net cash of $7.7 million during the first
nine months of 1999, compared to $9.7 million of net cash used during the same
period in 1998, and $14.3 million during the year ended December 31, 1998. We
expect to incur a loss and a deficit in cash flow from operations for the fourth
quarter of 1999 and the first quarter of 2000. There can be no assurance that we
can regain or sustain profitability or positive operating cash flow in any
subsequent fiscal period. Net cash used in investing activities of $0.5 million
during the first nine months of 1999 can be attributed primarily to the purchase
of furniture, equipment and leasehold improvements. As of September 30, 1999, we
had no material commitments for capital expenditures. Net cash provided from
financing activities during the first nine months of 1999 of $18.5 million
resulted from the issuance of 2,250,000 shares of common stock and 225,000
warrants in a private placement to six investors for gross proceeds of $8.9
million (including $2.0 million each from TLC and Pequot Funds) and from the
aggregate exercise price of $9.6 million received upon the exercise of stock
options and warrants.
We believe that our existing balances of cash and cash equivalents,
together with our cash flows from operations, should be sufficient to fund our
anticipated working capital requirements for the next 12 months in accordance
with our current business plan. Our belief regarding future working capital
requirements is based on various factors and assumptions including the
commercial acceptance of our UltraEdge(TM) keratome blades, UniShaper(TM)
single-use keratomes, LaserScan LSX excimer laser system and UltraShaper(TM)
durable keratomes, the anticipated timely collection of receivables, and the
absence of unanticipated product development and marketing costs. These factors
and assumptions are subject to certain contingencies and uncertainties, some of
which are beyond our control. Similarly, our long-term liquidity will be
dependent on the successful entrance into the U.S. market with our laser
systems, the successful entrance into U.S. and international markets of our
keratome products, and our ability to collect our receivables on a timely basis.
We may seek additional debt or equity financing in the future to implement our
business plan or any changes thereto in response to future developments or
unanticipated contingencies. Other than the $2.5 million credit facility signed
in June 1999 with The Huntington National Bank, we currently do not have any
commitments for additional financing.
CUSTOMER PAYMENT TERMS
Our sales have historically been and are expected to continue to be
denominated in U.S. dollars. The EU's conversion to a common currency, the Euro,
is not expected to have a material impact on our pricing, financial condition or
results of operations.
Laser system sales in international markets are generally to hospitals
or established and licensed ophthalmologists. Unless a letter of credit or other
acceptable security has been obtained, a significant down payment or deposit is
generally required at or before installation, and we maintain regular contact
with customers as routine maintenance work must be provided by LaserSight
personnel or our distributors. Maintenance services can be withheld should
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payment terms not be met. At September 30, 1999, we were the payee on letters of
credit with foreign financial institutions aggregating approximately $1.3
million (compared to approximately $2.5 million at December 31, 1998).
On occasion, it is necessary to meet a competitor's more liberal terms
of payment. In those and other cases, we may provide term financing. Our
internally-financed sales with repayment periods exceeding 18 months (measured
from the installation date) decreased from 13 systems in both 1996 and 1997, to
10 systems in 1998 and consisted of three systems during the nine months ended
September 30, 1999. There can be no assurance as to the terms or amount of
third-party financing, if any, that our customers may obtain in the future. In
our experience, sales of major capital equipment such as excimer laser systems
in certain areas, including much of South and Central America, often require
payment terms ranging from 12 to 24 months. See "Risk Factors--Financial and
Liquidity Risks--If our uncollectible receivables exceed our reserves we will
incur additional unanticipated expenses, and we may experience difficulty
collecting restructured receivables with extended payment terms."
We expect to benefit from the favorable payment terms associated with
keratome products. Direct sales will be handled with payment in cash or by
credit card at time of shipment of product. Distributor orders will be secured
with letters of credit, prepayment, or up to 30-day terms. The relatively low
product price and the prospect of repeat orders necessitates such payment terms,
rather than extended terms often offered for higher cost capital equipment.
YEAR 2000 COMPLIANCE
As many computer systems, software programs and other equipment with
embedded chips or processors use only two digits rather than four to define the
applicable year, they may be unable to process accurately certain data, during
or after the year 2000. As a result, LaserSight as well as other business and
governmental entities are at risk for possible miscalculations or systems
failures which could cause material disruptions in business operations. This is
commonly known as the Year 2000 ("Y2K") issue. The Y2K issue concerns not only
information systems and technology used by LaserSight, but also concerns third
parties, such as our customers, vendors and distributors, using information
systems and technology that may interact with or affect our operations.
We have implemented a Y2K readiness program with the objective of
having all of our significant information systems and technology functioning
properly with respect to Y2K before January 1, 2000. We have developed a
comprehensive plan to assess the actual and potential Y2K impact on our
operations, both in information technology ("IT") areas and non-information
technology ("Non-IT") areas, as well as our product offerings. Our assessment
included our manufacturing and operating systems and the readiness of vendors
and other third parties upon whom we rely.
IT Systems. Our IT systems are microcomputer-based and consist of
standard software purchased from outside vendors. All software has been
identified and assessed to determine the extent of modification
required in order to be Y2K compliant. We believe our hardware and
software, except the financial and accounting software described below,
has been made Y2K compliant through vendor-provided updates or
replacement with other Y2K compliant hardware and software. We, as has
been planned for some time, are also replacing our financial and
accounting software, and expect to have the new software implemented in
November 1999. The vendors of our financial and accounting software
have represented to us that the software is Y2K compliant. Our IT
inventory related to Y2K compliance is substantially complete, the
remediation assessment of problem areas is substantially complete, an0
testing, including validation of compliance, is substantially complete.
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Non-IT Systems. For our Non-IT systems, we have identified third
parties with which we have a significant relationship that, in the
event of a Y2K failure, could have a material impact on our
business, financial condition or results of operations. The third
parties include utility suppliers, material and supply vendors,
communication vendors and our significant distributors. Some of these
relationships, especially those associated with certain suppliers, are
material to us and a Y2K failure by one or more of these parties could
have a material adverse effect on our business, financial condition and
results of operations. We are corresponding with these business
partners and service providers to assess their ability to support our
operations with respect to each of their Y2K issues. The issues that
are identified as part of this process are being prioritized in order
of significance to our operations and we will take corrective action as
appropriate. We have contacted all of our significant vendors,
business partners and service providers. We have received and assessed
responses from over 95% of such persons, and are continuing to monitor
the Y2K compliance of critical vendors, business partners and service
providers on an ongoing basis.
Products. We believe our current production model, the LaserScan LSX
excimer laser system, will not suffer Y2K problems as all applicable
components and the software have been validated and tested. Older
models, generally manufactured in the first half of 1998 and earlier,
may require upgraded software and/or hardware in order to function. We
are notifying affected users and generally offer such upgrades at
additional cost to the user. Such upgrades are currently available and,
in addition to resolving potential Y2K problems, also provide for more
efficient system performance.
We have developed contingency plans for Y2K issues which, if not timely
resolved, could have a significant impact on our operations. These plans are
intended to minimize the impact of failure to achieve Y2K compliance. Such
contingency plans are substantially complete although we will continue to
monitor our plans as a result of future events and circumstances.
We estimate the costs to address Y2K issues will total $125,000, of which
approximately $90,000 has been incurred to date. Such costs will be expensed as
incurred, and will exclude the costs of our new financial and accounting
software. Y2K compliance related costs are estimated to be 50% of our total IT
expense budget through the end of 1999. No material IT projects are expected to
be delayed. The costs and time necessary to complete the Y2K modification and
testing processes are based on our best estimates, which were derived utilizing
numerous assumptions of future events including the continued availability of
certain resources, third party modification plans and other factors. Our Y2K
readiness program is an ongoing process and the estimates of costs and
completion dates for various components of the Y2K readiness program described
above are subject to change.
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RISK FACTORS AND UNCERTAINTIES
The business, results or operations and financial condition of LaserSight and
the market price of it's Common Stock may be adversely affected by a variety of
factors, including the factors listed below:
Industry and Competitive Risks
WE CANNOT ASSURE YOU THAT OUR LASERSCAN LSX LASER SYSTEM WILL ACHIEVE
MARKET ACCEPTANCE IN THE U.S.
We only recently received, the Food & Drug Administration approval
necessary for the commercial sale of our LaserScan LSX excimer laser system in
the U.S. and expect our first commercial shipments to U.S. customers to occur
during the first quarter of 2000. Our previous experience marketing and selling
our LaserScan LSX excimer laser system in the U.S. has been limited to sales to
refractive surgeons participating in our FDA clinical trials. We continue to
consider strategic marketing alliances and licensing arrangements to assist us
in marketing our products. We can not provide assurance as to the terms, timing
or occurrence of such alliances or arrangements.
THE VISION CORRECTION INDUSTRY CURRENTLY CONSISTS OF A FEW ESTABLISHED
PROVIDERS WITH SIGNIFICANT MARKET SHARES AND WE MAY ENCOUNTER DIFFICULTIES
COMPETING IN THIS HIGHLY COMPETITIVE VISION CORRECTION INDUSTRY.
The vision correction industry is subject to intense, increasing
competition, and we do not know if we will be able to compete successfully
against our current and future competitors. Many of our competitors have
established products, distribution capabilities and customer service networks in
the U.S. marketplace, are substantially larger and have greater brand
recognition and greater financial and other resources than we do. VISX,
Incorporated, the current industry leader for excimer laser system sales in the
U.S., sold laser systems which performed a significant majority of the laser
vision correction procedures performed in the U.S. in 1998. Similarly, Bausch &
Lomb sold a significant majority of the keratomes used by refractive surgeons in
the U.S. in 1998. Two of our other competitors, Summit Technology, Inc. and
Autonomous Technology Corporation, merged in April 1999. The merger resulted in
a combined entity with enhanced market presence, technology base and
distribution capabilities and provided Summit with a narrow beam laser
technology platform which will enable Summit to compete more directly with our
narrow beam LaserScan LSX excimer laser system. In addition, as a result of the
merger, the combined entity will be able to sell narrow beam laser systems under
a royalty-free license to certain VISX patents.
MANY OF OUR COMPETITORS RECEIVED EARLIER REGULATORY APPROVALS
THAN US AND MAY HAVE A COMPETITIVE ADVANTAGE OVER US DUE TO THE SUBSEQUENT
EXPANSION OF THEIR REGULATORY APPROVALS AND THEIR SUBSTANTIAL EXPERIENCE IN THE
U.S. MARKET.
We received the FDA approval necessary for the commercial sale of our
LaserScan LSX excimer laser system in the U.S. in November 1999, and expect our
first commercial shipments to customers in the U.S. to occur during the first
quarter of 2000. Our direct competitors include large corporations such as VISX
and Summit, each of whom received FDA approval of excimer laser systems more
than three years ago and has substantial experience manufacturing, marketing and
servicing laser systems in the U.S. In addition to VISX, Summit, and Nidek
which have already received approval to sell their laser systems in the U.S.,
Bausch & Lomb is expected to obtain FDA approval for their laser system in the
near future.
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In the U.S., a manufacturer of excimer laser vision correction
systems gains a competitive advantage by having its systems approved by the FDA
for a wider range of treatments. Initial FDA approvals of excimer laser vision
correction systems historically have been limited to PRK treatment of low to
moderate nearsightedness, with additional approvals for other and broader
treatments granted only as a result of subsequent FDA applications and clinical
trials. Our LaserScan LSX is currently approved only for the PRK treatment of
low to moderate nearsightedness (up to -6.0 diopters) without astigmatism using
a pulse repetition rate of 100 Hz, and its use for the treatment of higher
levels of nearsightedness (up to -10.0 diopters) is allowed only if the
refractive surgeon deems it to be reasonable. Currently, excimer laser vision
correction systems manufactured by VISX, Summit and Nidek have been approved for
higher levels of nearsightedness than the LaserScan LSX and are also approved
for the treatment of nearsightedness with astigmatism for which the LaserScan
LSX currently does not have approval. The VISX and Summit excimer laser systems
are also approved for the treatment of moderate farsightedness. Although we have
submitted applications to the FDA for approval for the treatment of
nearsightedness with astigmatism and we expect to file a PMA supplement in the
near future which would permit our laser systems sold to customers in the U.S.
to operate at a 200 Hz pulse rate, if the FDA does not approve our pending and
expected applications in a timely manner or at all, our ability to compete
effectively in the U.S. may be severely impaired.
Summit's Apex Plus Excimer Laser Workstation recently received FDA
approval for the LASIK treatment of nearsightedness with or without
astigmatism. The approval is for the correction of myopia in the range of 0D to
- -14.0D with or without astigmatism in the range of -0.5D to -5.0D. The Summit
laser system is currently the only laser system commercially available in the
U.S. with FDA approval for use in LASIK. Laser systems manufactured by other
companies approved by FDA for PRK, including VISX, Nidek, and LaserSight, are
routinely used off-label to perform LASIK. A physician may decide, as part of
the practice of medicine, to use a medical device outside of its FDA-approval
indications for an unapproved or "off-label" use. Prior to Summit's approval,
all LASIK procedures performed in the U.S. with commercially available lasers
were performed as the practice of medicine. Summit's receipt of LASIK-specific
FDA regulatory approval could be a significant competitive advantage which could
impede our ability to successfully introduce our LaserScan LSX system in the
United States or discourage physicians from using our or other manufacturers'
lasers off-label. Our failure to successfully effect our product introduction
in a timely manner could have a material adverse effect on our business,
financial condition and results of operations.
We have developed both a single use, disposable keratome product,
the UniShaper, formerly known as the A*D*K (TM), and a multiple use durable
keratome product, the UltraShaper. The keratome is a surgical instrument used
during LASIK procedures to produce a corneal flap for this procedure. Based on
reports of industry analysts and our observations, we believe that during 1998,
LASIK captured a majority of refractive laser surgery cases and has emerged as
many surgeon's and patient's choice for laser refractive surgery both in the
U.S. and internationally. FDA clearance for keratome systems is significantly
simpler than the approval process for laser systems and generally takes 90 days
or less.We have received FDA clearance on the UniShaper and, based our
interactions with the FDA, believe it is reasonable to expect clearance on the
UltraShaper in the fourth quarter of 1999. However, we can not be certain as to
the receipt or the timing of receipt of such clearance. The use of our keratome
products is not required to perform LASIK procedures.
All of our principal competitors in the keratome business, including
current market leader Bausch & Lomb, received FDA clearance prior to the
commercialization of our keratome products and have substantial experience
marketing their keratome products. The established market presence in the U.S.
of previously-approved laser systems and keratome products, as well as the entry
of new competitors into the market upon receipt of new or expanded regulatory
approvals, could impede our ability to successfully introduce our LaserScan LSX
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system in the U.S. and our keratome products worldwide and may have a material
adverse effect on our business, financial condition and results of operations.
WE CANNOT ASSURE YOU THAT OUR KERATOME PRODUCTS WILL ACHIEVE MARKET
ACCEPTANCE, AND WE ARE SIGNIFICANTLY DEPENDENT UPON OUR MARKETING ALLIANCE WITH
BECTON DICKINSON WITH RESPECT TO SALES OF OUR KERATOME PRODUCTS.
We began to roll out our MicroShape family of keratome products only
recently with the commercial launch of our UltraEdge keratome blades in July
1999 and anticipate the first shipments of our UniShaper single-use keratomes
and control consoles before the end of 1999. Keratomes are surgical devices used
to create a corneal flap immediately prior to LASIK laser vision correction
procedures. We anticipate the commercial launch of our UltraShaper durable
keratomes in late 1999 or the first quarter of 2000 after completion of clinical
testing and the validation and receipt of necessary FDA clearance. We cannot
assure as to the timing of receipt of FDA clearance, if at all, or that there
will not be unanticipated delays in the launch of our UltraShaper durable
keratome. Our UniShaper single-use keratome is the first disposable keratome
product to be commercially marketed, and we cannot assure you that refractive
surgeons, including in particular refractive surgeons who perform a large volume
of LASIK procedures, will accept our UniShaper product as a replacement for or a
supplement to the durable keratomes traditionally used to create corneal flaps.
Our UltraShaper durable keratome incorporates the features found in the
Automated Corneal Shaper keratome previously marketed by Bausch & Lomb with new
enhancements and features. However, Bausch & Lomb has not aggressively marketed
or serviced the ACS since 1997 when we licensed the rights to commercially
market keratomes based on the same technology and has successfully transitioned
a large number of refractive surgeons from the ACS to its Hansatome durable
keratome product. We believe that many refractive surgeons learned to perform
the LASIK procedure using the ACS and prefer that surgical technique, which is
also used to operate our UltraShaper durable keratome, to that required to
operate the Hansatome keratome product. However, we cannot assure you that we
will be successful in achieving broad market acceptance of our UltraShaper
durable keratome or our other keratome products.
Successful implementation of our keratome product sales strategy is
significantly dependent upon our marketing alliance with Becton Dickinson.
Pursuant to our October 1999 distribution agreement, Becton Dickinson will be,
subject to limited exceptions, the exclusive distributor of our keratomes and
keratome related products in the U.S., the U.K., Ireland and Japan, and will
have a non-exclusive right to distribute kits including keratome products in
other countries. While our distribution agreement with Becton Dickinson has a
five year term, it is subject to early termination in certain circumstances,
including if Becton Dickinson does not achieve minimum sales levels. If we
cannot successfully market and sell our keratome products or our marketing
alliance with Becton Dickinson fails to benefit us as expected, we may not be
able to execute our business plan, which would have a material adverse effect on
our business, financial condition and results of operations. See "--Company and
Business Risks -- Required minimum payments under our UniShaper license
agreement may exceed our gross profits from sales of our UniShaper product."
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BECAUSE THE SALE OF OUR PRODUCTS IS DEPENDENT ON CONTINUED MARKET
ACCEPTANCE OF LASER-BASED REFRACTIVE EYE SURGERY USING THE LASIK PROCEDURE, THE
LACK OF BROAD MARKET ACCEPTANCE WOULD HURT OUR BUSINESS.
We believe that whether we achieve profitability and growth will
depend, in part, upon continued acceptance of laser vision correction using the
LASIK procedure in the U.S. and other countries. We cannot be certain that laser
vision correction will continue to be accepted by either the refractive surgeons
or the public at large as an alternative to existing methods of treating
refractive vision disorders. The acceptance of laser vision correction and,
specifically, the LASIK procedure may be adversely affected by:
o possible concerns relating to safety and efficacy, including
the predictability and stability of results;
o the public's general resistance to surgery;
o the effectiveness and lower cost of alternative methods of
correcting refractive vision disorders;
o the lack of long-term follow-up data;
o the possibility of unknown side effects;
o the cost of the procedure;
o the lack of third-party reimbursement for the procedures; and
o possible future unfavorable publicity involving patient
outcomes from the use of laser vision correction.
Unfavorable side effects and potential complications which may result
from the use of laser vision correction systems manufactured by any manufacturer
may broadly affect market acceptance of laser-based vision correction surgery.
Potential patients may not distinguish between our scanning narrow beam
technology and the laser technology incorporated by our competitors in their
laser systems, and customers may not differentiate laser systems and procedures
that have not received FDA approval from FDA-approved systems. Any adverse
consequences resulting from procedures performed with a competitor's systems or
an unapproved laser system could adversely affect consumer acceptance of laser
vision correction in general. In addition, because laser vision correction is an
elective procedure which is not typically covered by insurance and which
involves more significant immediate expense than eyeglasses or contact lenses,
adverse changes in the U.S. or international economy may cause consumers to
reassess their spending choices and to select lower-cost alternatives for their
vision correction needs. Any such shift in spending patterns could reduce the
volume of LASIK procedures performed which would, in turn, reduce our revenues
from per procedure fees and sales of single-use products such as our UniShaper
keratome and our UltraEdge keratome blades.
The failure of laser vision correction to achieve continued market
acceptance could have a material adverse effect on our business prospects. Even
if laser vision correction achieves and sustains market acceptance, sales of our
keratome products could be adversely impacted if a laser procedure which does
not require the creation of a corneal flap were to emerge as the procedure of
choice.
NEW PRODUCTS OR TECHNOLOGIES COULD ERODE DEMAND OF OUR PRODUCTS OR
MAKE THEM OBSOLETE, AND OUR BUSINESS COULD BE HARMED IF WE CANNOT KEEP PACE WITH
ADVANCES IN TECHNOLOGY.
In addition to competing with eyeglasses and contact lenses, excimer
laser vision correction competes or may compete with newer technologies such as
intraocular lenses, corneal rings and surgical techniques using different or
more advanced types of lasers. Two products that may become competitive within
the near term are intraocular lenses, which are pending FDA approval, and
corneal rings, which were recently approved by the FDA. Both of these procedures
involve lens implants, and their ultimate market acceptance is unknown at this
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time. To the extent that any of these or other new technologies are perceived to
be clinically superior or economically more attractive than currently marketed
excimer laser vision correction procedures or techniques, they could erode
demand for our excimer laser and keratome products, cause a reduction in selling
prices of such products or render such products obsolete. In addition, if one or
more competing technologies achieve broader market acceptance or render laser
vision correction procedures obsolete, it would have a material adverse effect
on our business, financial condition and results of operations.
As is typical in the case of new and rapidly evolving industries, the
demand and market for recently-introduced products and technologies is
uncertain, and we cannot be certain that our LaserScan LSX laser system,
UniShaper single-use keratome, UltraShaper durable keratome, UltraEdge keratome
blades or future new products and enhancements will be accepted in the
marketplace. In addition, announcements or the anticipation of announcements of
new products, whether for sale in the near future or at some later date, may
cause customers to defer purchasing our existing products.
If we cannot adapt to changing technologies, our products may become
obsolete, and our business could suffer. Because the refractive vision
correction market is characterized by rapid technological change, we may be
unable to anticipate changes in our current and potential customers'
requirements that could make our existing technology obsolete. Our success will
depend, in part, on our ability to continue to enhance our existing products,
develop new technology that addresses the increasingly sophisticated needs of
our customers, license leading technologies and respond to technological
advances and emerging industry standards and practices on a timely and
cost-effective basis. The development of our proprietary technology entails
significant technical and business risks. We may not be successful in using new
technologies effectively or adapting our proprietary technology to evolving
customer requirements or emerging industry standards.
Company and Business Risks
WE WILL BE REQUIRED TO SIGNIFICANTLY EXPAND OUR U.S. MANUFACURING
OPERATIONS TO MEET OUR BUSINESS PLAN AND MUST COMPLY WITH STRINGENT REGULATION
OF OUR MANUFACTURING OPERATIONS.
We intend to manufacture our LaserScan LSX laser systems for sale in
the U.S. at our manufacturing facility in Winter Park, Florida, and to continue
to manufacture our laser systems for sale in international markets at our
manufacturing facility in Costa Rica. We have only limited experience
manufacturing laser systems at our Florida facility. We cannot assure you that
we will not encounter difficulties in scaling up production of our laser systems
at our Florida facility, including problems involving production delays, quality
control or assurance, component supply and lack of qualified personnel. In
addition, we may move our U.S. manufacturing operations to another location in
Winter Park, Florida leased by us, which could result in unanticipated problems
and production delays.
Any products manufactured or distributed by us pursuant to FDA
clearances or approvals are subject to extensive regulation by the FDA,
including recordkeeping requirements and reporting of adverse experience with
the use of the product. Our manufacturing facilities are subject to periodic
inspection by the FDA, certain state agencies and international regulatory
agencies. We require that our key suppliers comply with recognized standards as
well as our own quality standards, and regularly test the components and
sub-assemblies supplied to us. Any failure by us or our suppliers to comply with
applicable regulatory requirements, including the FDA's Good Manufacturing
Practice, or QSR/GMP, regulations, could cause production and distribution of
our products to be delayed or prohibited, either of which could have a material
adverse effect on our business, financial condition and results of operations.
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REQUIRED MINIMUM PAYMENTS UNDER OUR UNISHAPER LICENSE AGREEMENT MAY
EXCEED OUR GROSS PROFITS FROM SALES OF OUR UNISHAPER PRODUCT.
In addition to the risk that the UniShaper single-use keratome or
UltraShaper durable keratome will not be accepted in the marketplace, we are
required to make certain minimum payments to the licensors under our keratome
limited exclusive license agreement. Under this agreement, we are required to
provide an excimer laser system and pay a total of $300,000 in two equal
installments due six and 12 months after the date of our acceptance of the
production molds. We provided the laser system to the licensor during the
quarter ended June 30, 1998, and our acceptance of the molds will be upon
quality inspection of the first batch of product manufactured for commercial
shipment to our specifications. We anticipate that commercial shipments of our
UniShaper single-use keratome will commence in November or December 1999. In
addition, beginning seven months after the first commercial shipment, we will be
required to make royalty payments equal to 50% of our defined gross profits from
the sale of our UniShaper and UltraShaper keratomes, with a minimum royalty of
$400,000 per calendar quarter for a period of eight quarters. As a result of our
obligations under this license arrangement, the minimum royalty payments we are
required to make to the licensor may exceed our gross profits from sales of our
UniShaper and UltraShaper keratomes. We are currently seeking to restructure
this arrangement, but we can provide no assurance this effort will be
successful.
OUR FAILURE TO TIMELY OBTAIN OR EXPAND REGULATORY APPROVALS FOR
PRODUCTS AND TO COMPLY WITH REGULATORY REQUIREMENTS COULD ADVERSELY AFFECT OUR
BUSINESS.
Our excimer laser systems and keratome products are subject to strict
governmental regulations which materially affect our ability to manufacture and
market these products and directly impact our overall business prospects. FDA
regulations impose design and performance standards, labeling and reporting
requirements, and submission conditions in advance of marketing for all medical
laser products in the U.S. New product introductions, expanded treatment types
and levels for approved products, and significant design or manufacturing
modifications require a premarket clearance or approval by the FDA prior to
commercialization in the U.S. The FDA approval process, which is lengthy and
uncertain, requires underlying clinical studies and substantial commitments of
financial and management resources. Failure to obtain or maintain regulatory
approvals and clearances in the U.S. and other countries, or significant delays
in obtaining these approvals and clearances, could prevent us from marketing our
products for either approved or expanded indications or treatments, which could
substantially decrease our future revenues. Additionally, product and procedure
labeling and all forms of promotional activities are subject to examination by
the FDA, and current FDA enforcement policy prohibits the marketing by
manufacturers of approved medical devices for unapproved uses. Noncompliance
with these requirements may result in warning letters, fines, injunctions,
recall or seizure of products, suspension of manufacturing, denial or withdrawal
of PMAs, and criminal prosecution. Laser products marketed in foreign countries
are often subject to local laws governing health product development processes,
which may impose additional costs for overseas product development. Future
legislative or administrative requirements, in the U.S. or elsewhere, may
adversely affect our ability to obtain or retain regulatory approval for our
products. The failure to obtain required or expanded approvals on a timely basis
could have a material adverse effect on our business, financial condition and
results of operations.
OUR BUSINESS DEPENDS ON OUR INTELLECTUAL PROPERTY RIGHTS, AND IF WE ARE
UNABLE TO PROTECT THEM, OUR COMPETITIVE POSITION MAY BE ADVERSELY AFFECTED.
Our business plan is predicated on our proprietary systems and
technology, including our scanning narrow beam laser systems. We protect our
proprietary rights through a combination of patent, trademark, trade secret and
copyright law, confidentiality agreements and technical measures. We generally
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enter into non-disclosure agreements with our employees and consultants and
limit access to our trade secrets and technology. We cannot assure you that the
steps we have taken will prevent misappropriation of our intellectual property.
Misappropriation of our intellectual property would have a material adverse
effect on our competitive position. In addition, we may have to engage in
litigation or other legal proceedings in the future to enforce or protect our
intellectual property rights or to defend against claims of invalidity. These
legal proceedings may consume considerable resources, including management time
and attention, which would be diverted from the operation of our business, and
the outcome of any such legal proceeding is inherently uncertain.
PATENT INFRINGEMENT ALLEGATIONS MAY IMPAIR OUR ABILITY TO MANUFACTURE
AND MARKET OUR PRODUCTS.
There are a number of U.S. and foreign patents covering methods and
apparatus for performing corneal surgery that we do not own or have the right to
use. If we were found to infringe a patent in a particular market, LaserSight
and its customers may be enjoined from making, using and selling that product in
the market and be liable for damages for any past infringement of such rights.
In order to continue using such rights, we would be required to obtain a
license, which may require us to make royalty, per procedure or other fee
payments. We cannot be certain if we or our customers will be successful in
securing licenses, or that if we obtain licenses, such licenses will be on
acceptable terms. Alternatively, we might be required to redesign the infringing
aspects of these products. Any redesign efforts that we undertake could be
expensive and might require regulatory review. Furthermore, the redesign efforts
could delay the reintroduction of these products into certain markets, or may be
so significant as to be impractical. If redesign efforts were impractical, we
could be prevented from manufacturing and selling the infringing products, which
would have a material adverse effect on our business, financial and results of
operations.
While we are not currently involved in any material patent litigation,
we have been the subject of patent infringement allegations in the past and such
allegations are common in our industry. In 1992, Summit and Visx formed a U.S.
partnership, Pillar Point Partners, to pool certain of their patents related to
corneal sculpting technologies. As part of their agreement to dissolve Pillar
Point in June 1998, Summit and Visx granted each other a worldwide, royalty free
cross-license whereby each party will have full rights to license all existing
patents owned by either company relating to laser vision correction for use with
their systems. In connection with our March 1996 settlement of litigation with
Pillar Point regarding alleged infringement by our lasers of certain U.S.
patents, we agreed to notify Pillar Point before we begin manufacturing or
selling our laser systems in the U.S. While we are not contractually obligated
to anyone to obtain a license prior to selling our lasers in the U.S., one or
more of our competitors may assert that such a license is required. As of the
date of this report, we have not obtained a U.S. license from either Summit or
Visx, and the terms of any license, if such license is granted, have not been
determined.
While we do not believe our laser systems or keratome products infringe
any patents held by VISX, Summit or any other person, we can not assure you that
one or more of our competitors will not assert that our products infringe their
intellectual property, or that we will not in the future be deemed to infringe
one or more patents owned by them or some other party. We could incur
substantial costs and diversion of management resources defending any
infringement claims. Furthermore, a party making a claim against us could secure
a judgment awarding substantial damages, as well as injunctive or other
equitable relief that could effectively block our ability to market one or more
of our products. In addition, we cannot assure you that licenses for any
intellectual property of third parties that might be required for our products
will be available on commercially reasonable terms, or at all.
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WE ARE SUBJECT TO CERTAIN RISKS ASSOCIATED WITH OUR INTERNATIONAL
SALES.
Our international sales accounted for 70% and 87% of our total revenues
during the nine months ended September 30, 1999 and the year ended December 31,
1998, respectively. In the future, we expect sales to international accounts
will represent a lower percentage of our total sales [after the anticipated
receipt of / as a result of our recent] regulatory approval to market our
LaserScan LSX laser system in the U.S., the recent commercial launch of our
UltraEdge keratome blades and our anticipated launch of the UniShaper single-use
keratome. The majority of our international revenues for the nine months ended
September 30, 1999 were to customers in Canada, Spain, Mexico, Italy, Belgium,
France and Portugal, and for the year ended December 31, 1998 were to customers
in Canada, China, Brazil, Mexico, Italy, Argentina, South Africa, and Turkey.
International sales of our products may be limited or disrupted by:
o the imposition of government controls;
o export license requirements;
o economic or political instability;
o trade restrictions;
o difficulties in obtaining or maintaining export licenses;
o changes in tariffs; and
o difficulties in staffing and coordinating communications among and
managing international operations.
Our sales have historically been and are expected to continue to be
denominated in U.S. dollars. The European Economic Union's conversion to a
common currency, the Euro, is not expected to have a material impact on our
business. However, due to our significant export sales, we are subject to
exchange rate fluctuations in the U.S. dollar, which could increase the
effective price in local currencies of our products. This could result in
reduced sales, longer payment cycles and greater difficulty in collecting
receivables relating to our international sales.
OUR SUPPLY OF CERTAIN CRITICAL COMPONENTS AND SYSTEMS MAY BE
INTERRUPTED BECAUSE OF OUR RELIANCE ON A LIMITED NUMBER OF SUPPLIERS.
We currently purchase certain components used in the production,
operation and maintenance of our laser systems and keratome products from a
limited number of suppliers and certain key components are provided by a single
vendor. For example, all of our keratome blades are manufactured exclusively by
Becton Dickinson pursuant to our agreement with them, all of our UniShaper
single-use keratome products are manufactured exclusively by Frantz Medical
Development Ltd. pursuant to our agreement with them. We do not have written
long-term contracts with providers of some key laser system components,
including TUI Lasertechnik und Laserintegration GmbH, which currently is a
single source supplier for the laser heads used in our LaserScan LSX excimer
laser system. Any interruption in the supply of critical laser or keratome
components could have a material adverse effect on our business, financial
condition and results of operations. If any of our key suppliers cease providing
us with products of acceptable quality and quantity in a timely fashion, we
would have to locate and contract with a substitute supplier. If substitute
suppliers cannot be located and qualified in a timely manner or could not
provide required products on commercially reasonable terms, it would have a
material adverse effect on our business, financial condition and results of
operations.
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THE LOSS OF KEY PERSONNEL COULD ADVERSELY AFFECT OUR BUSINESS.
Our ability to maintain our competitive position depends in part upon
the continued contributions of our executive officers and other key employees,
especially Michael R. Farris, our president and chief executive officer, Michael
P. Dayton, our senior vice president and chief technical officer and J. Richard
Crowley, our chief operating officer and the president and chief operating
officer of our LaserSight Technologies subsidiary. A loss of one or more such
officers or key employees could have a material adverse effect on our business.
We do not carry "key person" life insurance on any other officers or key
employees.
As we continue the clinical development of our excimer lasers and other
products and prepare for regulatory approvals and other commercialization
activities, we will need to continue to implement and expand our operational,
financial and management resources and controls. While to date we haven't
experienced problems recruiting or retaining the personnel necessary to
implement such actions, we cannot be certain that such problems won't arise in
the future. If we fail to attract and retain qualified individuals for necessary
positions, and if we are unable to effectively manage growth in our domestic and
international operations, it could have a material adverse effect on our
business, financial condition and results of operations.
FAILURE IF OUR Y2K COMPLIANCE EFFORTS, LACK OF COMPLIANCE BY OUR
MATERIAL SUPPLIERS AND OTHER UNCERTAINTIES RELATED TO THE Y2K ISSUE COULD
ADVERSELY AFFECT OUR BUSINESS.
As many computer systems, software programs and other equipment with
embedded chips or processors use only two digits rather than four to define the
applicable year, they may be unable to process accurately certain data, during
or after the year 2000. As a result, LaserSight as well as other business and
governmental entities are at risk for possible miscalculations or systems
failures attributed to the Year 2000, or Y2K, issue which could cause material
disruptions in business operations. The Y2K issue concerns not only information
systems and technology used by LaserSight, but also concerns third parties, such
as our customers, vendors and distributors, using information systems and
technology that may interact with or affect our operations. While we expect our
Y2K compliance efforts to reduce significantly our level of uncertainty about
the impact of Y2K issues affecting information technology and non-information
technology systems and our product offerings, we cannot be certain that lack of
compliance and/or costs related to the lack of Y2K compliance of third parties,
business interruptions, litigation and other liabilities related to Y2K issues
will not have a material adverse effect on our business, financial condition and
results of operations. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations - Year 2000 Compliance."
INADEQUACY OR UNAVAILABILITY OF INSURANCE MAY EXPOSE US TO SUBSTANTIAL
PRODUCT LIABILITY CLAIMS.
Our business exposes us to potential product liability risks that are
inherent in the development, testing, manufacture, marketing and sale of medical
devices for human use. We have agreed in the past, and we will likely agree in
the future, to indemnify certain medical institutions and personnel who conduct
and participate in our clinical studies. While we maintain product liability
insurance, we cannot be certain that any such liability will be covered by our
insurance or that damages will not exceed the limits of our coverage. Even if a
claim is covered by insurance, the costs of defending a product liability,
malpractice, negligence or other action, and the assessment of damages in excess
of insurance coverage, could have a material adverse effect on our business,
financial condition and results of operations. Further, product liability
insurance may not continue to be available, either at existing or increased
levels of coverage, on commercially reasonable terms.
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Financial and Liquidity Risks
WE HAVE EXPERIENCED SIGNIFICANT LOSSES AND OPERATING CASH FLOW DEFICITS
AND WE EXPECT THAT OPERATING CASH FLOW WILL CONTINUE THROUGH AT LEAST THE FIRST
QUARTER OF 2000.
We experienced significant net losses and deficits in cash flow from
operations for the nine months ended September 30, 1999, and the fiscal years
ended December 31, 1998 and 1997, as set forth in the following table. We cannot
be certain that we will be able to achieve or sustain profitability or positive
operating cash flow.
Year Ended December 31, Nine Months
1997 1998 Ended September 30, 1999
---- ---- ------------------------
Net Loss $ 7.3 million $ 11.9 million $ 9.8 million
Deficit in Cash Flow
from Operations $ 4.4 million $ 14.3 million $ 7.7 million
As of September 30, 1999, we had an accumulated deficit of $33.5
million. We expect to report a loss and deficit in cash flow from operations for
the fourth quarter of 1999 and the first quarter of 2000.
IF OUR UNCOLLECTIBLE RECEIVABLES EXCEED OUR RESERVES WE WILL INCUR
ADDITIONAL UNANTICIPATED EXPENSES, AND WE MAY EXPERIENCE DIFFICULTY COLLECTING
RESTRUCTURED RECEIVABLES WITH EXTENDED PAYMENT TERMS.
Although we monitor the status of our receivables and maintain a
reserve for estimated losses, we cannot be certain that our reserves for
estimated losses, which were approximately $3.8 million at September 30, 1999,
will be sufficient to cover the amount of our actual write-offs over time. At
September 30, 1999, our net trade accounts and notes receivable totaled
approximately $13.5 million, and accrued commissions, the payment of which
generally depends on the collection of such net trade accounts and notes
receivable, totaled approximately $2.0 million. Actual write-offs that exceed
amounts reserved could have a material adverse effect on our consolidated
financial condition and results of operations. Total expense relating to
uncollectible accounts during the first nine months of 1999 was approximately
$1.7 million. The amount of any loss that we may have to recognize in connection
with our inability to collect receivables is principally dependent on our
customer's ongoing financial condition, their ability to generate revenues from
our laser systems, and our ability to obtain and enforce legal judgments against
delinquent customers. Approximately 92% of our net receivables at September 30,
1999, related to international accounts.
Our ability to evaluate the financial condition and revenue generating
ability of our prospective customers located outside of the U.S., and our
ability to obtain and enforce legal judgments against non-U.S. customers, is
generally more limited than for our customers located in the U.S. Our agreements
with our international customers typically provide that the contracts are
governed by Florida law. We have not determined whether or to what extent courts
or administrative agencies located in foreign countries would enforce our right
to collect such receivables or to recover laser systems from customers in the
event of a customer's payment default. When a customer is not paying according
to established terms, we attempt to communicate and understand the underlying
causes and work with the customer to resolve any issues we can control or
influence. In most cases, we have been able to resolve the customer's issues and
continue to collect our receivable, either on the original schedule or under
restructured terms. If such issues are not resolved, we evaluate our legal and
other alternatives based on existing facts and circumstances. In most such
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cases, we have concluded that the account should be written off as
uncollectible. We have generally been successful in recovering the laser systems
in such cases.
At September 30, 1999, we had extended the original payment terms of
laser customer accounts totaling approximately $1.7 million by periods ranging
from 12 to 60 months. Such restructured receivables represent approximately 10%
of our gross receivables as of that date. Our liquidity and operating cash flow
would be adversely affected if additional extensions become necessary in the
future. In addition, it would be more difficult to collect laser system
receivables if the payment schedule extends beyond the expected or actual
economic life of the system, which we estimate to be approximately five to seven
years. To date, we do not believe any payment schedule extends beyond the
economic life of the applicable laser system.
WE COULD REQUIRE ADDITIONAL FINANCING WHICH MIGHT NOT BE AVAILABLE IF
WE NEED IT.
During the nine months ended September 30, 1999, and the year ended
December 31, 1998, we experienced $7.7 million and $14.3 million in deficits in
cash flow from operations, respectively. We believe that our existing balances
of cash and cash equivalents and our cash flows from operations, should be
sufficient to fund our anticipated working capital requirements for the next 12
months in accordance with our current business plan. Our belief regarding future
working capital requirements is based on various factors and assumptions
including the commercial acceptance of our LaserScan LSX excimer laser system,
our UltraEdge keratome blades, our UniShaper single-use keratomes and our
UltraShaper durable keratomes, the anticipated timely collection of receivables,
and the absence of unanticipated product development and marketing costs. These
factors and assumptions are subject to certain contingencies and uncertainties,
some of which are beyond our control. If we do not collect a material portion of
current receivables in a timely manner, or experience less market demand for our
products than we anticipate, our liquidity could be materially and adversely
affected.
We may seek additional debt or equity financing in the future to
implement our business plan or any changes thereto in response to future
developments or unanticipated contingencies. Other than the $2.5 million credit
facility signed in June 1999 with The Huntington National Bank, we currently do
not have any commitments for additional financing. We cannot be certain that
additional financing will be available in the future to the extent required or
that, if available, it will be on commercially acceptable terms. If we raise
additional funds by issuing equity or convertible debt securities, the terms of
the new securities could have rights, preferences and privileges senior to those
of our common stock. If we raise additional funds through debt financing, the
terms of the debt could require a substantial portion of our cash flow from
operations to be dedicated to the payment of principal and interest and may
render us more vulnerable to competitive pressures and economic downturns.
Common Stock Risks
VARIATIONS IN OUR SALES AND OPERATING RESULTS MAY CAUSE OUR STOCK
PRICE TO FLUCTUATE.
Our operating results have fluctuated in the past, and may continue to
fluctuate in the future, as a result of a variety of factors, many of which are
outside of our control. For example, historically a significant portion of our
laser system orders for a particular quarter have been received and shipped near
the end of the quarter. As a result, our operating results for any quarter often
depend on the timing of the receipt of orders and the shipment of our laser
systems. Other factors that may cause our operating results to fluctuate
include:
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o timing of regulatory approvals and the introduction or delays of
new products;
o reductions, cancellations or fulfillment of major orders;
o the addition or loss of significant customers;
o the relative mix of our business;
o changes in pricing by us or our competitors;
o costs related to expansion of our business; and
o increased competition.
As a result of these fluctuations, we believe that period-to-period
comparisons of our operating results cannot be relied upon as indicators of
future performance. In some quarters our operating results may fall below the
expectations of securities analysts and investors due to any of the factors
described above.
THE MARKET PRICE OF OUR COMMON STOCK MAY CONTINUE TO EXPERIENCE
EXTREME FLUCTUATIONS DUE TO MARKET CONDITIONS THAT ARE UNRELATED TO OUR
OPERATING PERFORMANCE.
The stock market, and in particular the securities of technology
companies such as LaserSight, could experience extreme price and volume
fluctuations unrelated to operating performance. Our stock price has
historically been volatile. Factors such as announcements of technological
innovations or new products by us or our competitors, changes in domestic or
foreign governmental regulations or regulatory approval processes, developments
or disputes relating to patent or proprietary rights, public concern as to the
safety and efficacy of the procedures for which the laser system is used, and
changes in reports and recommendations of securities analysts, have and may
continue to have a significant impact on the market price of our common stock.
THE SIGNIFICANT NUMBER OF SHARES ELIGIBLE FOR FUTURE SALE AND DILUTIVE
STOCK ISSUANCES MAY ADVERSELY AFFECT OUR STOCK PRICE.
Sales, or the possibility of sales, of substantial amounts of our
common stock in the public market could adversely affect the market price of our
common stock. Substantially all of our 17,803,802 shares of common stock
outstanding at November 12, 1999 were freely tradable without restriction or
further registration under the Securities Act of 1933, except to the extent such
shares are held by "affiliates" of LaserSight as that term is defined in Rule
144 under the Securities Act or subject only to the satisfaction of a prospectus
delivery requirement.
Shares of common stock which we may issue in the future in connection
with acquisitions or financings or pursuant to outstanding warrants or
agreements could also adversely affect the market price of our common stock and
cause significant dilution in our earnings per share and net book value per
share. As of the date of this report, we may be required to issue more than 8
million additional shares of common stock upon the conversion of outstanding
preferred stock (4 million shares), the exercise of outstanding warrants and
stock options (3.4 million shares), and the satisfaction of certain contingent
contractual obligations (0.6 million shares).
The anti-dilution provisions of certain of our existing securities and
obligations require us to issue additional shares if we issue shares of common
stock below specified price levels. If a future share issuance triggers these
adjustments, the beneficiaries of such provisions effectively receive some
33
<PAGE>
protection from declines in the market price of our common stock, while our
other stockholders incur additional dilution of their ownership interest. We may
include similar anti-dilution provisions in securities issued in connection with
future financings.
ANTI-TAKEOVER PROVISIONS UNDER DELAWARE LAW AND IN OUR CERTIFICATE OF
INCORPORATION, BY-LAWS AND STOCKHOLDER RIGHTS PLAN MAY MAKE AN ACQUISITION OF
LASERSIGHT MORE DIFFICULT AND COULD PREVENT YOU FROM RECEIVING A PREMIUM OVER
THE MARKET PRICE OF OUR STOCK.
Certain provisions of our certificate of incorporation, by-laws,
stockholder rights plan and Delaware law could delay or frustrate the removal of
incumbent directors, discourage potential acquisition proposals and delay, defer
or prevent a change in control of LaserSight, even if such events could be
beneficial, in the short term, to the interests of our stockholders. For
example, our certificate of incorporation allows us to issue preferred stock
with rights senior to those of the common stock without stockholder action, and
our bylaws require advance notice of director nominations or other proposals by
stockholders. LaserSight also is subject to provisions of Delaware corporation
law that prohibit a publicly-held Delaware corporation from engaging in a broad
range of business combinations with a person who, together with affiliates and
associates, owns 15% or more of the corporation's common stock (an interested
stockholder) for three years after the person became an interested stockholder,
unless the business combination is approved in a prescribed manner. We also have
adopted a stockholder rights agreement and declared a dividend distribution of
one preferred share purchase right for each share of common stock. The rights
would cause substantial dilution to a person or group that attempts to acquire
15% or more of our common stock on terms not approved by our board of directors.
Acquisition Risks
PAST AND POSSIBLE FUTURE ACQUISITIONS THAT ARE NOT SUCCESSFULLY
INTEGRATED WITH OUR EXISTING OPERATIONS MAY ADVERSELY AFFECT OUR BUSINESS.
We have made several significant acquisitions since 1994, and we may in
the future selectively pursue strategic acquisitions of, investments in, or
enter into joint ventures or other strategic alliances with, companies whose
business or technology complement our business. We may not be able to identify
suitable candidates to acquire or enter into joint ventures or other
arrangements with entities, and we may not be able to obtain financing on
satisfactory terms for such activities. In addition, we could have difficulty
assimilating the personnel, technology and operations of the acquired company,
which would prevent us from realizing expected synergies, and may incur
unanticipated liabilities and contingencies. This could disrupt our ongoing
business and distract our management and other resources.
AMORTIZATION AND CHARGES RELATING TO OUR SIGNIFICANT INTANGIBLE ASSETS
COULD ADVERSELY AFFECT OUR STOCK PRICE AND REPORTED NET INCOME OR LOSS.
Of our total assets at September 30, 1999, approximately $14.4 million
or 27% were goodwill or other intangible assets. Any reduction in net income or
increase in net loss resulting from the amortization of goodwill and other
intangible assets resulting from future acquisitions by us may have an adverse
impact upon the market price of our common stock. In addition, in the event of a
sale of LaserSight or our assets, we cannot be certain that the value of such
intangible assets would be recovered.
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In accordance with SFAS 121, we review intangible assets for impairment
whenever events or changes in circumstances, including a history of operating or
cash flow losses, indicate that the carrying amount of an asset may not be
recoverable. If we determine that an intangible asset is impaired, a noncash
impairment charge would be recognized. We continue to assess the current results
and future prospects of MRF, Inc., d/b/a The Farris Group (TFG), our subsidiary
which provides health care and vision care consulting services, in view of the
substantial reduction in the subsidiary's operating results in 1996 and 1997.
Though TFG's operating results improved in 1998 when compared to 1996 and 1997,
operating losses similar to those incurred during the first nine months of 1998
have continued during the first nine months of 1999. If TFG is unsuccessful in
continuing to improve its financial performance, some or all of the carrying
amount of goodwill recorded, $3.5 million at September 30, 1999, may be subject
to an impairment adjustment.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
LaserSight believes that its exposure to market risk for changes in
interest and currency rates is not significant. LaserSight's investments are
limited to highly liquid instruments with maturities of three months or less. At
September 30, 1999, LaserSight had approximately $13.7 million of short-term
investments classified as cash and equivalents. All of LaserSight's transactions
with international customers and suppliers are denominated in U.S. dollars.
35
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PART II - OTHER INFORMATION
ITEM 1 LEGAL PROCEEDINGS
Jui-Teng Lin
On June 24, 1999, Jui-Teng Lin, a former president and director
of LaserSight, filed an action in the Circuit Court of the
Ninth Judicial Circuit, in and for Orange County, Florida,
against the Company. This action asserts that LaserSight is
currently in default on a promissory note executed in June
1991, and payable to Mr. Lin in the principal amount of
$1,180,000. LaserSight believes that the allegations made by
the plaintiff against the Company are without merit and it
intends to vigorously defend the action. Management believes
that LaserSight has satisfied its obligations under the
promissory note and that this action will not have a material
adverse effect on the Company's financial condition or results
of operations.
Certain other legal proceedings against LaserSight are described in
Item 3 (Legal Proceedings) of LaserSight's Form 10-K for the
year ended December 31, 1998.
ITEM 2 CHANGES IN SECURITIES
Not applicable.
ITEM 3 DEFAULTS UPON SENIOR SECURITIES
Not applicable.
ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
ITEM 5 OTHER INFORMATION
Not applicable.
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ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits
INDEX TO EXHIBITS
Exhibit
Number Description
- ------ -----------
2.1 See Exhibits 10.1, 10.2, 10.6, 10.7, 10.16, 10.22, 10.25, 10.26, 10.30
and 10.31.
3.1 Certificate of Incorporation, as amended (incorporated by reference
to Exhibit 1 of Form 8-A/A Amendment No. 4) filed by the Company on
June 25, 1998*).
3.2 Bylaws, as amended (filed as Exhibit 3 to the Company's Form 10-K
for the year ended December 31, 1992*).
3.3 Rights Agreement, dated as of July 2, 1998, between LaserSight
Incorporated and American Stock Transfer & Trust Company, as
Rights Agent, which includes (i) as Exhibit A thereto the form
of Certificate of Designation of the Series E Junior
Participating Preferred Stock, (ii) as Exhibit B thereto the
form of Right Certificate (separate certificates for the
Rights will not be issued until after the Distribution Date)
and (iii) as Exhibit C thereto the Summary of Stockholder
Rights Agreement (incorporated by reference to Exhibit 99.1 to
the Form 8-K filed by the Company on July 8, 1998*).
3.4 First Amendment to Rights Agreement, dated as of March 22,
1999, between LaserSight Incorporated and American Stock
Transfer & Trust Company, as Rights Agent (incorporated by
reference to Exhibit 2 to Form 8-A/A filed by the Company on
March 29, 1999*).
4.1 See Exhibits 3.1, 3.2, 3.3, 3.4, 10.19, 10.23, 10.28, 10.29, 10.36,
10.37, 10.38 and 10.39.
10.1 Agreement for Purchase and Sale of Stock by and among LaserSight
Centers Incorporated, its stockholders and LaserSight Incorporated
dated January 15, 1993 (filed as Exhibit 2 to the Company's Form 8-K/A
filed on January 25, 1993*).
10.2 Amendment to Agreement for Purchase and Sale of Stock by and
among LaserSight Centers Incorporated, its stockholders, and
LaserSight Incorporated dated April 5, 1993 (filed as Exhibit 2 to the
Company's Form 8-K/A filed on April 19, 1993*).
10.3 Royalty Agreement by and between LaserSight Centers Incorporated and
LaserSight Partners dated January 15, 1993 (filed as Exhibit 10.5 to
the Company's Form 10-K for the year ended December 31, 1995*).
10.4 Exchange Agreement dated January 25, 1993 between LaserSight
Centers Incorporated and Laser Partners (filed as Exhibit 10.6 to
the Company's Form 10-K for the year ended December 31, 1995*).
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10.5 Stipulation and Agreement of Compromise, Settlement and Release
dated April 18, 1995 among James Gossin, Francis E. O'Donnell, Jr.,
J.T. Lin, Wen S. Dai, Emanuela Dobrin-Charlton, C.H. Huang, W.
Douglas Hajjar, and LaserSight Incorporated (filed as Exhibit 10.7
to the Company's Form 10-K for the year ended December 31, 1995*).
10.6 Agreement for Purchase and Sale of Stock dated December 31,
1993, among LaserSight Incorporated, MRF, Inc., and Michael R. Farris
(filed as Exhibit 2 to the Company's Form 8-K filed on December 31,
1993*).
10.7 First Amendment to Agreement for Purchase and Sale of Stock by and
among MRF, Inc., Michael R. Farris and LaserSight Incorporated
dated December 28, 1995 (filed as Exhibit 10.9 to the
Company's Form 10-K for the year ended December 31, 1995*).
10.8 LaserSight Incorporated 1995 Stock Option Plan (filed as Exhibit
10.5 to the Company's Form 10-Q for the quarter ended September 30,
1995*).
10.9 Modified Promissory Note between LaserSight Incorporated, EuroPacific
Securities Services, GmbH and Co. KG and Wolf Wiese (filed as Exhibit
10.6 to the Company's Form 10-Q for the quarter ended
September 30, 1995*).
10.10 Patent License Agreement dated December 21, 1995 by and between
Francis E. O'Donnell, Jr. and LaserSight Centers, Inc.(filed as Exhibit
10.21 to the Company's Form 10-K for the year ended December 31,
1995*).
10.11 LaserSight Incorporated Amended and Restated 1996 Equity Incentive
Plan (filed as Exhibit 10.12 to the Company's Form 10-Q/A for the
quarter ended June 30, 1998*).
10.12 LaserSight Incorporated Amended and Restated Non-Employee Directors
Stock Option Plan (filed as Exhibit B to the Company's definitive proxy
statement dated May 19, 1997*).
10.13 Agreement dated September 18, 1996 between David T. Pieroni and
LaserSight Incorporated (filed as Exhibit 10.35 to the Company's Form
10-K for the year ended December 31, 1996*).
10.14 Agreement dated January 1, 1997, between International Business
Machines Corporation and LaserSight Incorporated (filed as Exhibit
10.37 to the Company's Form 10-K for the year ended December 31,
1996*).
10.15 Addendum dated March 7, 1997 to Agreement between International
Business Machines Corporation and LaserSight Incorporated (filed
as Exhibit 10.38 to the Company's Form 10-K for the year ended
December 31, 1996*).
10.16 Second Amendment to Agreement for Purchase and Sale of Stock by and
among LaserSight Centers Incorporated, its stockholders and LaserSight
Incorporated dated March 14, 1997 (filed as Exhibit 99.1 to the
Company's Form 8-K filed on March 27, 1997*).
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10.17 Amendment to Royalty Agreement by and between LaserSight Centers
Incorporated, Laser Partners and LaserSight Incorporated dated
March 14, 1997 (filed as Exhibit 99.2 to the Company's Form 8-K filed
on March 27, 1997*).
10.18 Employment Agreement dated September 16, 1996 by and between
LaserSight Incorporated and Richard L. Stensrud (filed as
Exhibit 10.41 to the Company's Form 10-Q filed on May 9, 1997*).
10.19 Warrant to purchase 500,000 shares of Common Stock dated
March 31, 1997 by and between LaserSight Incorporated and
Foothill Capital Corporation (filed as Exhibit 10.44 to the
Company's Form 10-Q filed on August 14, 1997*).
10.20 License Agreement dated May 20, 1997 by and between Visx
Incorporated and LaserSight Incorporated (filed as Exhibit
10.45 to the Company's Form 10-Q filed on August 14, 1997*).
10.21 Patent Purchase Agreement dated July 15, 1997 by and between
LaserSight Incorporated and Frederic B. Kremer, M.D. (filed as
Exhibit 2.(i) to the Company's Form 8-K filed on August 13, 1997*).
10.22 Agreement and Plan of Merger dated July 15, 1997 by and among
LaserSight Incorporated, Photomed Acquisition, Inc., Photomed,
Inc., Frederic B. Kremer, M.D., Linda Kremer, Robert Sataloff,
Trustee for Alan Stewart Kremer and Robert Sataloff, Trustee for
Mark Adam Kremer (filed as Exhibit 2.(ii) to the Company's Form 8-K
filed on August 13, 1997*).
10.23 Warrant to purchase 750,000 shares of Common Stock dated
August 29, 1997 by and between LaserSight Incorporated and purchasers
of Series B Convertible Participating Preferred Stock of
LaserSight Incorporated (filed as Exhibit 10.39 to the
Company's Form 10-Q filed on November 14, 1997*).
10.24 Independent Contractor Agreement by and between Byron Santos, M.D. and
LaserSight Technologies, Inc. (filed as Exhibit 10.42 to the Company's
Form 10-Q filed on November 14, 1997*).
10.25 Stock Purchase Agreement, dated December 30, 1997, by and among
LaserSight Incorporated, LSI Acquisition, Inc., MEC Health Care,
Inc. and Vision Twenty-One, Inc. (filed as Exhibit 2.(i) to the
Company's Form 8-K filed on January 14, 1998*).
10.26 Stock Distribution Agreement, dated December 30, 1997, by and
among LaserSight Incorporated, LSI Acquisition, Inc., MEC
Health Care, Inc. and Vision Twenty-One, Inc. (filed as
Exhibit 2.(ii) to the Company's Form 8-K filed on January 14, 1998*).
10.27 Agreement dated April 1, 1992 between International Business
Machines Corporation and LaserSight Incorporated (filed as Exhibit
10.1 on Form 10-K for the year ended December 31, 1995*).
10.28 Securities Purchase Agreement, dated June 5, 1998, by and between
LaserSight Incorporated and TLC The Laser Center, Inc. (filed as
Exhibit 99.1 to the Company's Form 8-K filed on June 25, 1998*).
39
<PAGE>
10.29 Securities Purchase Agreement, dated June 12, 1998, by and
between LaserSight Incorporated and Pequot Funds (filed as
Exhibit 99.5 to the Company's Form 8-K filed on June 25, 1998*).
10.30 Letter Agreement dated September 11, 1998, amending the
Agreement and Plan of Merger dated July 15, 1997, by and among
LaserSight Incorporated, Photomed Acquisition, Inc., Photomed,
Inc., Frederic B. Kremer, M.D., Linda Kremer, Robert Sataloff,
Trustee for Alan Stewart Kremer and Robert Sataloff, Trustee
for Mark Adam Kremer (filed as Exhibit 10.31 to the Company's
Form 10-Q filed on November 16, 1998*).
10.31 Exclusive License Agreement dated August 20, 1998, by and between
LaserSight Technologies, Inc. and TLC The Laser Center Patents Inc.
(filed as Exhibit 10.32 to the Company's Form 10-Q filed on
November 16, 1998*).
10.32 Purchase Agreement, dated June 9, 1997, by and between LaserSight
Technologies, Inc. and TUI Lasertechnik Und Laserintegration GmbH
(filed as Exhibit 10.1 to the Company's Form S-3,
Pre-Effective Amendment No. 1 filed on February 1, 1999*).
10.33 License and Royalty Agreement, dated September 10, 1997, by
and between LaserSight Technologies, Inc. and Luis A. Ruiz, M.D. and
Sergio Lenchig (filed as Exhibit 10.2 to the Company's Form S-3,
Pre-Effective Amendment No. 1 filed on February 1, 1999*).
10.34 Manufacturing Agreement, dated September 10, 1997, by and between
LaserSight Technologies, Inc. and Frantz Medical Development Ltd.
(filed as Exhibit 10.3 to the Company's Form S-3,
Pre-Effective Amendment No. 1 filed on February 1, 1999*).
10.35 Employment Agreement by and between LaserSight Incorporated
and Michael R. Farris dated October 30, 1998 (filed as Exhibit
10.37 to the Company's Form 10-K filed on March 31, 1999*).
10.36 Securities Purchase Agreement by and between LaserSight
Incorporated and purchasers of Common Stock dated March 22, 1999
(filed as Exhibit 10.38 to the Company's Form 10-K filed on March
31, 1999*).
10.37 Warrant to purchase 225,000 shares of Common Stock dated March
22, 1999 by and between LaserSight Incorporated and purchasers
of Common Stock of LaserSight Incorporated (filed as Exhibit 10.39 to
the Company's Form 10-K filed on March 31, 1999*).
10.38 Warrant to purchase 67,500 shares of Common Stock dated
February 22, 1999 by and between LaserSight Incorporated and Guy
Numann (filed as Exhibit 10.40 to the Company's Form 10-Q filed
on May 17, 1999*).
10.39 Revolving Credit Agreement, dated June 29, 1999, by and between
LaserSight Incorporated and The Huntington National Bank (filed as
Exhibit 10.39 to the Company's Form 10-Q filed on August 11, 1999*).
40
<PAGE>
10.40 Manufacturing and Marketing Agreement, and Addendum thereto, dated
May 14, 1999, by and between LaserSight Technologies, Inc. and
Becton, Dickinson and Company (filed as Exhibit 10.40 to the
Company's Form 10-Q filed on August 11, 1999*)**.
10.41 First Amendment to Manufacturing and Marketing Agreement, dated
October 23, 1999, by and between LaserSight Technologies, Inc. and
Becton, Dickinson and Company (filed as Exhibit 10.1 to the Company's
8-K, filed on October 27, 1999*)**.
10.42 Distribution Agreement, dated October 23, 1999, by and between
LaserSight Technologies, Inc. and Becton, Dickinson and Company
(filed as Exhibit 10.2 to the Company's 8-K, filed on October 27,
1999*)**.
10.43 Employment Agreement, by and between LaserSight Technologies, Inc.
and J. Richard Crowley, dated as of July 3, 1997.
10.44 Employment Agreement, by and between LaserSight Incorporated and
Michael P. Dayton, dated November 10, 1998.
10.45 Relocation Agreement, by and between LaserSight Incorporated and
Gregory L. Wilson, dated October 13, 1999.
10.46 Technology Development and License Agreement, dated October 23, 1999,
by and between LaserSight Technologies, Inc. and Quadrivium, L.L.C.
10.47 Employment Agreement, by and between LaserSight Technologies, Inc.
and Jack T. Holladay, dated October 27, 1999.
11 Statement of Computation of Loss Per Share
15 Copy of letter from independent accountants' regarding unaudited
interim financial information.
27 Financial Data Schedule.
b) Reports on Form 8-K
No reports on Form 8-K were filed during the three months
ended September 30, 1999.
- -----------------------------
* Incorporated herein by reference. File No. 0-19671.
** Confidential treatment has been requested for portions of this document.
The redacted material has been filed separately with the Commission
pursuant to an application for confidential treatment.
41
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SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934,
the undersigned have duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
LaserSight Incorporated
Dated: November 15, 1999 By: /s/ Michael R. Farris
---------------------
Michael R. Farris,
Chief Executive Officer
Dated: November 15, 1999 By: /s/ Gregory L. Wilson
---------------------
Gregory L. Wilson,
Chief Financial Officer
42
EXHIBIT 10.43
EMPLOYMENT AGREEMENT
--------------------
THIS EMPLOYMENT AGREEMENT ("Agreement") is made and entered into as of
July 3, 1997, by and between LaserSight Technologies, Inc., a Delaware
corporation (the "Company"), and J. Richard Crowley, an individual residing, at
the time of entering into this Agreement, in the State of Florida (the
"Executive").
RECITALS
--------
Whereas, Executive desires to be employed as the Chief Operating Officer of the
Company with a title to be conferred immediately upon assuming the duties of the
position; and
Whereas, the Company desires to retain the Executive as its Chief Operating
Officer of the Company upon the terms and conditions herein set forth.
NOW, THEREFORE, in consideration of the foregoing recitals, the mutual covenants
of the parties hereinafter set forth and other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
1. Employment of the Executive. Subject to the terms and conditions of
this Agreement, the Company hereby employs the Executive, and the Executive
hereby accepts such employment and agrees to perform the services specified
herein.
2. Duties. The Executive shall report to the President of the Company
and have authority and responsibility, in accordance with policies of the
Company, for the operations of the various subsidiaries and departments of the
Company. During the term of his employment hereunder, the Executive shall:
(a) Perform to the best of his ability, those duties
reasonably assigned to him from time to time by the Chief Executive
Officer and the Board of Directors of the Company, provided, however,
that such duties shall be reasonably related to the positions held by
the Executive pursuant hereto;
(b) Devote his full time and first priority business efforts
to the Company's business, provided that nothing herein shall prohibit
Executive from spending reasonable amounts of time for personal
affairs, including, without limitation, serving as a director of
companies, and managing his personal investments, provided Executive
devotes an average minimum of forty (40) hours per week to performing
his duties hereunder; and
(c) Carry out Company policies and directives in a manner
which promotes and develops the Company's best interests.
3. Salary. The Company shall pay Executive an initial base salary
("Base Salary") at an annual rate of One Hundred Twenty Five Thousand Dollars
($125,000.00) which shall be payable in equal installments in accordance with
the Company's customary method of salary payments for senior executives of the
<PAGE>
Company (but not less than monthly). The Company may adjust the Base Salary from
time to time.
4. Additional Compensation. Immediately upon execution of this
Agreement, or if later, the date the Executive becomes employed by the Company,
the Executive will be granted Incentive Stock Options (as defined in Section 422
of the Internal Revenue Code) for 80,000 shares of the Company's common stock at
an option price per share equal to the Fair Market Value per share, as defined
in the LaserSight Incorporated ("LSI") 1996 Equity Incentive Plan (the "1996
Equity Incentive Plan"), on the date of grant which shall be July 3, 1997. Such
Incentive Stock Options shall be granted to Executive pursuant to that certain
1996 Equity Incentive Plan. The options for said 80,000 shares shall vest as
follows: (a) 20,000 shares on July 3, 1997, (b) 20,000 shares on July 3, 1998,
(c) 20,000 shares on July 3, 1999, and (d) 20,000 shares on July 3, 2000. Should
Executive's employment end for any reason prior to the time all options are
vested, any and all non-vested options shall terminate and thereafter be
considered null and void.
5. Fringe Benefits. During the term of his employment hereunder, the
Executive shall be entitled to all fringe benefits and perquisites which that
Company from time to time makes available to other senior executives of the
Company, on such terms and levels as are at least commensurate with those
provided to such other senior executives, including, without limitation, health
insurance, vacation, sick days 401K pension contributions and any Local, State
and Federal contributions.
6. Terms of Employment: Severance.
(a) The term of this Agreement shall begin on the date hereof
and shall continue for a period of two (2) years, unless terminated as
provided in this Section 6.
(b) Notwithstanding the foregoing, the Executive's employment
hereunder may be terminated by the Company at any time for Cause (as
defined in Section 9). Company also may terminate Executive's
employment at any time with or without Cause or advance notice.
(c) Notwithstanding the foregoing, the Executive's employment
hereunder shall terminate in the event of his death or Disability (as
defined in Section 9).
(d) Notwithstanding the foregoing, the Executive's employment
hereunder may be terminated by the Executive at any time for Good
Reason (as defined in Section 9) upon prior written notice to the
Company specifying therein the grounds for termination and the
effective date of termination.
(e) In addition to all other rights of Executive and
obligations of the Company described herein which arise or continue
upon termination of Executive's employment, the following shall apply:
Upon termination of the Executive's employment hereunder for any reason
<PAGE>
whatsoever, the Company shall pay to the Executive all salary,
benefits, bonuses and other Compensation (as defined in Section 10)
(including reimbursements) earned through the effective date of
termination.
(f) If the Executive's employment hereunder is terminated by
the Company without Cause, Company shall continue to pay Executive his
Base Salary at its then-current level, for a period of six (6) months
after termination. In addition, Executive shall be entitled to receive
a lump sum payment in an amount equal to the total of Executive's Base
Salary and any bonus compensation received during the immediately
preceding twelve (12) month period if (i) Executive's employment is
terminated for Good Reason pursuant to Section 9(e)(iv), or (ii)
Executive's employment is involuntarily terminated within twelve months
after a Change in Control (as defined herein) or a Change in Ownership
(as defined herein). For purposes of this Agreement, Change in Control
shall mean a change in the composition of the Board of Directors of LSI
which results in a majority of the members thereof being persons who
were not nominated for election as directors by the stockholders at the
prior annual meeting of LSI or a change in the Chief Executive Officer
of LSI and Change in Ownership shall mean that LSI ceases to own at
least a majority of the Company's outstanding voting securities.
7. Restriction Against Competition.
(a) The Executive agrees that while he is employed by the
Company pursuant to this Agreement and during the twelve (12) month
period following the effective date of termination of this Agreement
for any reason, the Executive shall not, directly or indirectly, as a
partner, officer, director, agent, consultant, employee, or otherwise:
(i) engage in any business that competes with
the business of the Company (herein to mean
all Subsidiaries, divisions, and assigns of
the Company) as conducted by the Company as
of the effective date of the termination of
this Agreement in any state where the
Company is conducting business;
(ii) purposefully interfere or attempt to interfere
with any of the Company's contracts or business
relationships or advantages existing and in effect as of
the effective date of termination of this Agreement;
(iii) solicit for employment, either directly or
indirectly, for himself or for another, any of the
technical or professional employees employed by the
Company, except that with respect to the twelve (12)
month period following the effective date of termination
of this Agreement, such restriction shall apply only to
such employees employed by Company on the effective date
of termination of this Agreement or within six (6)
months prior thereto;
<PAGE>
(iv) purposefully interfere with the business relationship
of or solicit the business or orders of (a) a customer of
the Company, except that with respect to the twelve (12)
month period following the effective date of termination
of this Agreement, such restriction shall apply only to
such customers existing on the effective date of
termination of this Agreement, or within sixty (60)
days prior thereto, or (b) a prospective or potential
customer of the Company, except that with respect to the
two-year period following the effective date of
termination of this Agreement, such restriction shall
apply only to prospective or potential customers (i)
to whom the Company has submitted a formal quotation
within the past one year prior to the effective date of
termination of this Agreement, or (ii) that have been
previously listed or identified in writing by the Company
as a business prospect at any time during the twelve (12)
months preceding the effective date of termination of
this Agreement.
(b) The parties agree that if the Executive commits a breach
of the covenants of this Section 7, the Company shall have the right to seek and
obtain all appropriate injunctive and other equitable remedies therefor, in
addition to any other rights and remedies that may be available at law, it being
acknowledged and agreed that such breach would cause irreparable injury to the
parties and that money damages would not provide an adequate remedy therefor.
8. Protection of Confidential Information and Trade Secrets of the
Company.
(a) Confidentiality. During the term of this Agreement and for
a period of twelve (12) months after any termination or expiration
thereof, Executive agrees that he will not use for himself or others or
divulge or convey to others any secrets or confidential information,
knowledge or data of the Company obtained by the Executive during his
employment with the Company. The term "secret or confidential
information, knowledge or data" shall not be deemed to include
information that is published, information that is generally known
throughout the industry or which generally is available to the industry
without restriction through no fault of the Executive.
(b) Injunctive Relief. The Executive agrees that the Company's
remedies at law for any breach or threat of breach by him of the
provisions of paragraph (a) of this Section 8 will be inadequate, and
that the Company shall be entitled to an injunction or injunctions to
prevent breaches of the provision of paragraph (a) of this Section 8
and to enforce specifically the terms and provisions thereof, in
addition to any other remedy to which the Company may be entitled to by
law or equity.
(c) Return of Document and Other Property. Upon the termination
of the Executive's employment with the Company, or any time upon the
request of the Company, the Executive shall deliver to the
Company (i) all documents and materials containing secret or
confidential information, knowledge or data relating to the Company's
business and affairs, and (ii) all documents, materials and other
<PAGE>
property belonging to the Company, which in either case are in the
possession or under the control of the Executive.
9. Certain Defined Terms. For the purposes of this Agreement, the
following definitions shall apply:
(a) "Affiliate" shall mean with respect to any Person, (i) any
Person which directly, or indirectly through one or more
intermediaries, controls, or is controlled by, or is under common
control with, such Person or (ii) any Person who is a director or
executive officer (A) of such Person, (B) of an Subsidiary of such
Person or (C) of any Person described in the foregoing clause(i). For
purposes of this definition, "control" of a Person shall mean the
power, direct or indirect, (1) to vote or direct the voting of more
than 20% of the outstanding voting securities of such Person, or (2) to
direct or cause the direction of the management and policies of such
Person, whether by contract or otherwise.
(b) "Cause" shall mean any of the following:
(i) The Executive's conviction (including a plea
of nolo contendere) of any crime involving
moral turpitude, the theft or willful
destruction of money or other property of
the Company or any customer or his
conviction of any felony crime.gs;
(ii) The Executive's continuous inability to
perform his responsibilities due to his
habitual abuse of alcohol or prescribed
drugs or any use of illegal drugs;
(iii) The Executive's commission of theft,
embezzlement or fraud against the Company;
(iv) The Executive's willful damage of the Company's
property, business reputation, or good will;
(v) The Executive's deliberate neglect of duty, or
material breach of this Agreement;
(vi) The Executive's refusal to perform any reasonable order
of the Company; or
(vii) The Executive's misrepresentation or concealment of
a material fact for the purpose of securing or
maintaining this Agreement.
The term "Cause" shall not mean any act or omission believed by the Executive to
have been in or not opposed to the best interests of the Company, any act or
omission lacking the intent of the Executive to gain a profit to which he is not
legally entitled, or any other matter not specifically described in clauses (i)
through (vii) above.
<PAGE>
(c) "Compensation" shall mean, with respect to any Person, all
payments and accruals, if any, commonly considered to be compensation,
including, without limitation, all wages, salary, deferred payment
arrangements, bonus payments and accruals, profit sharing arrangement,
payments in respect of equity options or phantom equity options or
similar arrangements, equity appreciation rights or similar rights,
incentive payments, pension or employment benefit contributions or
similar payments, made to or accrue for the account of such Person
otherwise for the direct or indirect benefit of such Person, plus auto
benefits provided to such Person, if any.
(d) "Disability" shall mean the inability by reason of illness
or other incapacity, of the Executive to perform the essential
functions of his then regular employment with the Company.
(e) "Good Reason" shall mean:
(i) any material breach or default by the Company of any
material obligation of this Agreement;
(ii) any material change by the Chief Executive Officer or
Board of Directors of the Company in the duties to be
performed or titles to be held by the Executive pursuant
hereto without his prior written consent, which consent
may be reasonably withheld;
(iii) any material reduction in the Executive's salary,
benefits, bonuses or other Compensation pursuant to this
Agreement, unless similar reductions are also made to
the salary, benefits, bonuses or other compensation, as
applicable, payable to other executive officers of the
Company or any Subsidiary or Affiliate thereof and such
reductions are made for justifiable business reasons; or
(iv) within one year after a Change in Control or a Change in
Ownership any of the following occur: (A) Executive's
Base Salary is reduced, (B) any bonus plan in which
Executive participates is discontinued or not continued
in substantially the same form,(C)Executive is assigned
to duties inconsistent with his duties or
responsibilities prior to a Change in Control or Change
in Ownership, or (D)Executive experiences the
discontinuance or reduction of any material fringe
benefits which were in effect before the Change in
Control or Change in Ownership.
(f) "Person" shall mean an individual or corporation,
association, partnership, joint venture, organization, business,
individual, trust, or any other entity or organization, including
a government or any subdivision or agency thereof.
<PAGE>
(g) "Subsidiary" shall mean as to any Person a corporation,
partnership or other entity of which 25% of outstanding shares of
voting stock or other equity ownership are at the time owned, directly
or indirectly through one or more intermediaries, or both, by such
Person and shall include any such entity which becomes a Subsidiary of
such Person after the date hereof. Consolidated Subsidiary shall mean
any Subsidiary of which 51% or more of the outstanding shares or voting
stock or other equity ownership are at the time owned, directly or
indirectly through one or more intermediaries, or both, by such Person
and shall include any such entity which becomes a Subsidiary of such
Person after the date hereof.
10. Payment. Except as specifically provided herein, all amounts
payable pursuant to this Agreement shall be paid without reduction regardless of
any amounts of salary, compensation or other amounts paid or payable to the
Executive form any source and regardless of any amounts of salary, compensation
or other amounts which would have been payable to Executive had Executive sought
other employment; provided that the Company shall be permitted to make all
payments pursuant to this Agreement net of any legally required tax
withholdings. The Executive shall not be required to seek other employment, and
there shall be no offset to amounts due hereunder as a result of any salary,
compensation or other amount the Executive may be paid from other sources. The
Company shall not be entitled to offset any claim it may have against the
Executive pursuant to the Stock Option Agreement or otherwise against its
obligations to the Executive hereunder.
11. Expenses. In the event of any litigation between the parties
relating to this Agreement and their rights hereunder, the prevailing party, if
any, shall be entitled to recover all litigation costs and reasonable attorney's
fees and expenses from the non-prevailing party.
12. Entire Agreement. This Agreement and the Stock Option Agreement
comprises the entire agreement between the parties hereto and as of the date of
this Agreement, supersedes, cancels and annuls any and all prior agreements
between the parties hereto with respect to the Executive's employment by the
Company.
13. Severability. If all or any part of this Agreement is declared by
any court or governmental authority to be unlawful or invalid, such unlawfulness
or invalidity shall not serve to invalidate any portion of this Agreement not
declared to be unlawful or invalid. Any portion so declared to be invalid shall,
if possible, be construed in a manner which will give effect to the terms of
such portion to the fullest extent possible while remaining lawful.
14. Successors and Assigns. This Agreement shall be binding upon, and
inure to the benefit of the parties hereto and their respective heirs,
successors, assigns and personal representatives. The Executive may not assign,
pledge, or encumber his interest in this Agreement, or any part thereof, without
the written consent of the Company; provided, however, that Executive may,
without the Company's prior consent, assign his rights to payment hereunder.
15. Notice. Any notice required or permitted pursuant to the provisions
of this Agreement shall be deemed to have been properly given if in writing and
<PAGE>
when received by certified and registered United States mail, postage prepaid,
by overnight courier, telecopy or when personally delivered, addressed as
follows:
If to the Company:
LaserSight Technologies, Inc.
12249 Science Drive
Orlando, Florida 32826
Fax No.: (407) 382-2701
with a copy to: LaserSight Incorporated
12249 Science Drive
Orlando, Florida 32826
Fax No.: (407) 382-2701
If to the Executive:
J. Richard Crowley
8516 Summerville Place
Orlando, Florida 32819
Each party shall be entitled to specify a different address for the receipt of
subsequent notices by giving written notice thereof to the other party; in
accordance with this Section. Telecopy notices must be followed up with the
original by certified mail, postmarked within one (1) business date of the
telecopy.
16. Amendments and Waivers. Any provision of this Agreement may be
amended or waived only with the prior written consent of the Company and the
Executive. No failure or delay on the part of either party to this Agreement in
the exercise of any provision or right, and no course of dealing between the
parties hereto, shall operate as a waiver of such power or right.
The signatories affirm that they have the authority to execute this Agreement
and do so willingly.
LASERSIGHT TECHNOLOGIES, INC.
/s/Michael R. Farris
- ---------------------------------
Executed November 9, 1999
By: Chief Executive Officer
------------------------------
/s/J. Richard Crowley
- ---------------------------------
J. Richard Crowley
EXHIBIT 10.44
EMPLOYMENT AGREEMENT
--------------------
THIS AGREEMENT made and is effective this 10th day of November, 1998 by
and between LASERSIGHT INCORPORATED, a Delaware corporation (the "Corporation"),
whose address for notice purposes is 3300 University Boulevard, Suite 140,
Winter Park, Florida 32792 and MICHAEL DAYTON (the "Employee") whose address for
notice purposes is 14802 Hadleigh Way, Tampa, Florida 33624. In consideration of
the employment of Employee, the compensation to be paid hereunder and other good
and valuable consideration, Corporation agrees to hire Employee and Employee
agrees to work for Corporation upon the following terms and conditions:
PARAGRAPH 1: DUTIES OF EMPLOYEE
-------------------------------
1.01 Acceptance of Employment. Employee is employed by Corporation on a
full-time basis to render services on behalf of Corporation as its Senior Vice
President and Chief Technical Officer. Employee shall provide services in the
areas of:
(a) Regulatory Affairs; with the responsibility and authority
to assure the Corporation's conformance with U.S. and international government
health authority regulations, as relating to the manufacture, sale and
distribution of the Corporation's products.
(b) Quality Assurance; with the responsibility and authority
for assuring Corporation compliance with U.S. and international quality system
requirements for the Corporation's medical manufacturing facilities;
(c) Clinical Research; with the responsibility and authority
for conducting clinical trials research for the purpose of supporting product
approval applications for submission to government health authorities.
(d) Employee shall, at the request of the Corporation's Chief
Executive Officer (the "CEO"), participate in meetings of the Corporations'
Board of Directors by providing such Board with information regarding the
Corporation's regulatory affairs, quality assurance and clinical research
activities as described in this Section 1.01. In addition, upon receipt of
approval from the Corporation's Board of Directors to the formation of a
Regulatory Compliance Committee, the Employee shall serve as a member of such
committee during the term of this Agreement.
Employee hereby accepts such full-time employment and shall devote the necessary
skill, energy and attention to the business of the Corporation, and shall
perform his duties, for the purpose of advancing the business of the
Corporation. Employee shall report to the CEO.
1.02 Limitation on Authority. Without the consent of the CEO, Employee
shall have no actual, apparent, express or implied authority to:
(a) Pledge the credit of Corporation or any of its other employees;
<PAGE>
(b) Release or discharge any debt due Corporation unless
Corporation has received the full amount thereof;
(c) Sell, mortgage, transfer or otherwise dispose of any assets of
Corporation; or
(d) Perform, on behalf of the Corporation, any other action
that is outside the scope of Employee's duties described in Section 1.01.
PARAGRAPH 2: COMPENSATION
-------------------------
2.01 Salary. Corporation shall pay to Employee as compensation for
Employee's services an annual base salary of $150,000.00 ("Employee's Salary"),
payable biweekly. Employee shall receive a $20,000.00 bonus that will be paid in
connection with the Corporation's first regularly scheduled payroll date
following the date of this Agreement. All salary payments shall be subject to
withholding, social security and other applicable taxes.
2.02 Stock Options.
(a) Upon the first day of employment under this Agreement,
employee will be granted stock options (the "Options") pursuant to the
Corporation's Amended and Restated 1996 Equity Incentive Plan, as amended (the
"Plan"), for the acquisition of 75,000 shares of the Corporation's common stock
with such shares to be registered and freely tradable on NASDAQ immediately upon
exercise of the Options. As more fully set forth in the Award Agreement attached
hereto as Exhibit "A", the Options will be granted at a price equal to the
NASDAQ closing price on the effective date of this Agreement. 40,000 of the
options shall be exercisable on or after January 1, 1999 and 35,000 of the
options shall be exercisable on or after January 1, 2000.
(b) In the event of a Change of Control (as defined in the
Plan) all of the Options will immediately vest and be exercisable upon the date
of such Change of Control.
(c) If this Agreement is terminated without Cause (as defined
in Paragraph 5), then the Options which have not previously vested will
terminate and be of no further force and effect and the Employee will have
twelve (12) months immediately after the date of such termination to exercise
any Options which had previously vested. If the Options previously vested are
not exercised on or before twelve (12) months immediately following the date of
such termination, then such Options will terminate and be of no further force
and effect.
(d) If this Agreement is terminated for Cause (as defined in
Paragraph 5), then the Options not previously vested will terminate and be of no
further force and effect and the Employee will have thirty (30) days immediately
after the date of such termination to exercise any Options which had previously
vested. If the Options previously vested are not exercised on or before the 30th
<PAGE>
day immediately following the date of termination, then such Options will
terminate and be of no further force and effect.
PARAGRAPH 3: BENEFITS
---------------------
Upon commencement of full-time employment with the Corporation,
Corporation shall pay for and provide Employee with the fringe benefits, at a
minimum level equal to other of the Corporation's employees, including, but not
limited to, the following:
3.01 Medical Insurance Policy. Corporation shall purchase at its
expense a major non-HMO medical insurance policy insuring Employee and his
dependents, which policy shall be reasonably acceptable to Employee, provided
that if the Corporation does not provide this type of medical insurance for any
other Corporation employee, then at the Employee's option (i) the Corporation
will provide Employee with the health insurance provided to other Corporation
employees, or (ii) Employee may elect not to receive health insurance coverage
from the Corporation and in such event the Corporation shall pay the Employee in
cash on a monthly basis up to $450.00 as reimbursement for Employee's expenses
incurred in connection with the purchase of health insurance for Employee and
his dependents.
3.02 Life Insurance. Corporation shall provide life insurance covering
Employee's life in an amount consistent with other Corporation employees, but in
no event less than two and one-half (2 1/2) times Employee's salary, subject to
a maximum of $300,000. Benefits under such policy will be payable to the
beneficiary or beneficiaries designated in writing by Employee.
3.03 Vacation and Time Off. Employee shall be entitled to three weeks
of paid vacation annually.
3.04 Death During Employment. If the Employee dies during the
Employment Term, the Corporation shall pay to the estate of Employee the
compensation that would otherwise be payable to the Employee through the last
date on which Employee worked.
3.05 Automobile. Employee shall receive from the Corporation a monthly
car allowance payment of $650.00 per month.
3.06 401(k) Plan. Upon meeting eligibility requirements, Employee shall
participate in the Corporation's qualified pension plans, including any profit
sharing and 401(k) plan.
3.07 Disability Insurance. Corporation shall purchase at its expense, a
long term disability insurance policy covering Employee which shall provide the
same coverage as is supplied to other employees of the Corporation.
<PAGE>
PARAGRAPH 4: TERM
-----------------
The Employment Term shall be as of the date of execution of this
Agreement and it shall remain effective and continue in force and effect for a
period of two years and thereafter, at the end of the second year and each
subsequent year, shall be automatically renewed for an additional year, unless
either party gives written notice of its intent not to renew this Agreement at
least 60 days prior to the end of the then current term. Notwithstanding the
foregoing, Employee's salary specified above shall only be effective through the
end of the first year of employment, and the same may be renegotiated in the
last month of each year of employment for the following year until this
Agreement is terminated. Employee's salary shall not be reduced without the
written consent of Employee.
PARAGRAPH 5: TERMINATION OF EMPLOYMENT
--------------------------------------
Corporation may terminate this Agreement at any time for "Cause", which
shall mean situations where the Employee does not satisfactorily render services
to the Corporation due to intoxication from or habitual use of alcohol or
illegal drugs, gross neglect of Employee's duties which are within Employee's
control (which is not cured within ten days after written notice of such neglect
is delivered to Employee), personal dishonesty or conviction of a felony. Such
termination shall be effective upon the delivery of a written notice thereof to
Employee or at such later time as may be designated in said notice, and Employee
shall vacate the offices of Corporation on or before such effective date.
Employee may terminate this Agreement only upon the Corporation's bankruptcy,
insolvency or dissolution, or upon the Corporation's breach of the terms of this
Agreement. Employee or Corporation may terminate this Agreement without cause
upon 60 days prior written notice. In the event Corporation terminates this
Agreement for any reason (other than for Cause or non-renewal pursuant to
Paragraph 4), Corporation shall be obligated to pay Employee (in accordance with
Corporation's standard payroll practices) a severance allowance equal to one (1)
years salary and health insurance benefits, less all amounts required to be
withheld and deducted. In addition, if allowed under the terms of Corporation's
then effective group life insurance and group disability insurance plans,
Employee shall continue to receive Corporation's standard life insurance and
disability insurance benefits during the one year severance period.
PARAGRAPH 6: REIMBURSABLE EXPENSES
----------------------------------
Except as herein otherwise provided, Corporation will reimburse
Employee, and Employee is entitled to charge to Corporation, all expenses
incurred by Employee, in and about the regular course of Corporation's business.
Such expenses shall include, but not be limited to:
6.01 Travel. Employee's necessary travel, hotel and entertainment
expenses incurred in connection with overnight, out-of-town trips for
educational, professional or other related meetings or in connection with other
events that contribute to the benefit of Corporation which are paid by Employee
and are in accordance with established corporate policy, or as specifically
authorized by the Board of Directors. If Employee travels on any international
<PAGE>
flights, Employee shall fly and be reimbursed for Business Class seating.
6.02 Moving Expenses. The actual costs of moving the Employee's
principal residence, furniture and personal belongings from Tampa, Florida to
Orlando, Florida not to exceed $20,000.00.
6.03 Interim Living Expenses. For a period ending on or before November
30, 1999, the Corporation will reimburse Employee for Employee's "interim living
expenses" associated with Employee's relocating activities. These interim living
expenses will include, but not be limited to, the cost of any transportation,
apartment, utilities, electric and telephone incurred by Employee while
searching for a permanent residence. In no event will the Corporation's
obligations under this Section 6.03 exceed $25,000.00 without the Corporation's
prior written consent.
6.04 Professional Fees. License fees, membership dues and professional
organizations and subscriptions to professional journals that are approved as
part of the Corporation's annual budget.
6.05 Cellular Telephone Expenses. Cellular telephone expenses incurred
by Employee in connection with Employee's duties as an Employee of the
Corporation.
PARAGRAPH 7: INVENTIONS/INDEMNIFICATION
---------------------------------------
7.01 Inventions. The parties agree that any invention in the field of
ophthalmology and/or refractive surgery invented by Employee during the term of
this Agreement shall become the sole property of Corporation in exchange for
consideration paid to Employee in an amount to be reasonably agreed upon by the
parties based on the market value of such invention and other consideration paid
to employees for inventions developed by such employees.
7.02 Indemnification. To the fullest extent permitted by law, the
Corporation's Certificate of Incorporation and the Corporation's bylaws the
Corporation hereby agrees to protect, defend, indemnify and hold Employee
harmless from any and all liability, loss or damages (including, but not limited
to, attorneys fees and costs of settlement, trial and appeal) which Employee may
suffer as a result of any claims, demands, allegations of fraud or criminal
wrongdoing (provided Employee had either reasonable cause to believe his conduct
was lawful or had no reasonable cause to believe his conduct was unlawful),
costs or judgments against Employee predicated upon or arising out of Employee's
services rendered by Employee to the Corporation. This indemnification
obligation shall survive any termination of this Agreement.
PARAGRAPH 8: NON-COMPETTION/CONFIDENTIALITY
-------------------------------------------
8.01 Restriction Against Competition. The Employee agrees that while he
is employed by the Corporation pursuant to this Agreement, and for each month
following the effective date of termination of this Agreement for which the
Corporation pays to Employee a sum equivalent to one month of Employee's Salary
<PAGE>
(collectively, the "Restricted Period"), Employee shall not, directly or
indirectly, as a partner, officer, director, agent, consultant or otherwise:
(a) engage in any business that competes with the business of
the Corporation (herein to mean all subsidiaries, divisions, and assigns of the
Corporation) as conducted by the Corporation as of the effective date of the
termination of this Agreement in any state where the Corporation is conducting
business;
(b) purposefully interfere or attempt to interfere with any of
the Corporation's contracts or business relationships or advantages existing and
in effect as of the effective date of termination of this Agreement;
(c) solicit for employment, either directly or indirectly, for
himself or for another, any of the technical or professional employed by the
Corporation, provided that with regard to the period after the termination of
this Agreement such restriction shall apply only to such employees employed by
the Corporation during the six (6) months prior to the expiration of the
Restricted Period;
(d) purposefully interfere with the business relationship of
or solicit the business or orders of (a) customers of the Corporation, provided
that with regard to the period after the termination of this Agreement such
restriction shall apply only to such parties who were customers during the 60
days prior to the expiration of the Restricted Period; or (b) a prospective or
potential customer of the Corporation, such restriction shall apply only to
prospective or potential customers (i) to whom the Corporation has submitted a
formal quotation within the immediately preceding one year period, or (ii) that
have been previously listed or identified in writing by the Corporation as a
business prospect at any time during the immediately preceding one year period.
The parties agree that if the Employee commits a
breach of the covenants of Section 8.01 of this Agreement, the Corporation
shall have the right to seek and obtain all appropriate injunctive and
other equitable remedies therefor, in addition to any other rights and
remedies that may be available at law, it being acknowledged and agreed that
such breach would cause irreparable injury to the parties and that money
damages would not provide adequate remedy therefor.
8.02 Protection of Confidential Information.
(a) Confidentiality. During the term of this Agreement and for
a period of twelve (12) months after any termination or expiration thereof,
Employee agrees that he will not use for himself or others or divulge or convey
to others any secrets or confidential information, knowledge or data of the
Corporation obtained by the Employee during his employment with the Corporation.
The term "secret or confidential information, knowledge or data" shall not be
deemed to include information that is published, information that is generally
known throughout the industry or which generally is available to the industry
without restriction through no fault of the Employee.
(b) Injunctive Relief. The Employee agrees that the
Corporation's remedies at law for any breach or threat of breach by him of the
provisions of paragraph (a) of this Section 8.02 will be inadequate, and that
<PAGE>
the Corporation shall be entitled to an injunction to prevent breaches of the
provision of paragraph (a) of this Section 8.02 and to enforce specifically the
terms and provisions thereof, in addition to any other remedy to which the
Corporation may be entitled to by law or equity.
(c) Return of Documents and Other Property. Upon termination
of the Employee's employment with the Corporation, or anytime upon the request
of the Corporation, the Employee shall deliver to the Corporation (i) all
documents and materials containing secret or confidential information, knowledge
or data relating to the Corporation's business and affairs, and (ii) all
documents, materials and other property belonging to the Corporation, which in
either case are in the possession or under the control of the Employee.
PARAGRAPH 9: GENERAL PROVISIONS
-------------------------------
9.01 Attorney's Fees. In connection with any litigation, including
appellate proceedings arising out of this Agreement, the prevailing party shall
be entitled to recover costs and attorneys' fees. Costs and attorneys' fees
shall include any and all attorneys' fees incurred in preparation for trial, a
trial, on appeal or in bankruptcy proceedings and shall also include paralegal
expenses and all reasonable travel, copying and transmission costs of the
attorneys, expert witness fees, the costs of investigation and proof of facts,
and the costs of any sales, services, value added or similar tax imposed upon
amounts relating to any services or costs described in this sentence.
9.02 No Waiver. The failure of any party at any time to require
performance by another party of any provision hereof shall not affect in any way
the full right to require such performance at any time thereafter; nor shall the
waiver by any party of a breach of any provision hereof be taken or held to be a
waiver of the provision itself.
9.03 Captions. The headings contained herein are merely for the
convenience of the parties, and the context of such paragraphs shall control the
respective meanings. The masculine, feminine and neuter general and the singular
and plural shall each be deemed to include the other whenever the context so
indicates.
9.04 Invalid Provision. In case any one or more provisions contained in
this Agreement shall, for any reason, be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect any other provision hereof, and this Agreement shall be
construed as if such invalid, illegal or unenforceable provision had not been
contained herein.
9.05 Modifications. This Agreement may be modified or amended only by
the written consent of the parties hereto.
9.06 Construction and Venue. This Agreement shall be construed and
enforced in accordance with the laws of the State of Florida. Any action, by any
party, to enforce or interpret any terms of this Agreement, or any dispute
arising out of or related to this Agreement, shall be exclusively commenced,
brought before, and decided by the Circuit Court for Hillsborough County,
Florida, in the case of state actions or the Federal District Court for the
<PAGE>
Middle District of Florida, in the case of Federal actions. The parties hereby
consent and agree to the above-described venue and jurisdiction of such courts
and actions.
9.07 Entire Agreement. This writing contains the entire agreement of
the parties, and no representations or agreements, oral or otherwise, between
the parties prior or subsequent to the signing of this Agreement not embodied
herein shall be of any force and effect.
9.08 Interpretation - No Presumption. It is acknowledged by the parties
that this Agreement is the result of negotiated suggestions of all parties, and
therefore, no presumptions shall arise favoring any party by virtue of the
authorship of any of the provisions herein or the modification, addition or
deletion of provisions in prior drafts hereof.
9.09 Notices. Any notice or other communication to any party shall be
sent by certified or registered mail or via receipted express mail, to such
party's respective address set forth in the first paragraph of this Agreement,
or to such other address as such party may designated from time to time by
written notice to the other.
IN WITNESS WHEREOF, the undersigned have caused this Agreement to be
executed the day and year first above written.
LASERSIGHT INCORPORATED
a Delaware corporation
By: /s/Michael R. Farris
------------------------
/s/Michael P. Dayton
------------------------
MICHAEL P. DAYTON
EXHIBIT 10.45
RELOCATION AGREEMENT
--------------------
THIS RELOCATION AGREEMENT ("Agreement") is made and entered into as
of the 13th day of October, 1999 and is dated and effective as of April 16, 1998
(the "Effective Date"), by and between LASERSIGHT INCORPORATED, a Delaware
corporation (the "Company"), and GREGORY L. WILSON, an individual residing in
the State of Florida (the "Executive").
RECITALS
--------
WHEREAS, the Executive is the Secretary and Chief Financial Officer of
the Company;
WHEREAS, the Company has determined that it would be in the best
interests of the Company to induce the Executive to relocate his principal
residence from the St. Louis, Missouri metropolitan area to the Orlando, Florida
metropolitan area and to remain in the employ of the Company by entering into
this Agreement; and
WHEREAS, on or about April 16, 1998, the Company's Executive
Compensation and Stock Option Committee approved the terms and conditions set
forth in this Agreement.
NOW, THEREFORE, the parties hereto agree as follows:
1. Severance. If the Executive's employment is terminated by the
Company without Cause, the Executive shall be entitled to receive, in addition
to all other damages and remedies available to him at law or in equity, a lump
sum severance payment payable within ten (10) business days of such termination
in an amount equal to the Executive's then current annual compensation.
For purposes of this Agreement, the term "Cause" shall mean any of the
following:
(a) the Executive's conviction of or plea of no contest to any
crime involving moral turpitude, the theft or willful
destruction of money or other property of the Company or his
conviction of or plea of no contest to any felony crime;
(b) the Executive's inability to perform his responsibilities due
to his abuse or misuse of alcohol or prescribed drugs or any
use of illegal drugs;
(c) the Executive's commission of theft, embezzlement or fraud against
the Company;
(d) the Executive has willfully damaged the Company's property,
business reputation, or good will; or
(e) the Executive's incompetence, deliberate neglect of duty, or
material breach of this Agreement that is not cured within
thirty (30) days after the Executive is notified of such
incompetence, neglect or breach.
The term "Cause" shall not mean the Executive's bad judgment or negligence, any
act or omission believed by the Executive to have been in or not opposed to the
best interests of the Company, any act or omission lacking the intent of the
Executive to gain a profit to which he is not legally entitled, or any other
matter not specifically described in clauses (a) through (e) above.
<PAGE>
2. Employment Relationship. The Company and the Executive
acknowledge and agree that this Agreement shall not be construed as a contract
for employment and that there is not, nor will there be, unless contained in a
separate writing signed by both the Company and the Executive, any express or
implied agreement as to the continued employment of the Executive by the
Company.
3. Payments. Except as specifically provided herein, all amounts
payable pursuant to this Agreement shall be paid without reduction regardless of
any amounts of salary, compensation or other amounts which may be paid or
payable to the Executive from any source or which the Executive could have
obtained upon seeking other employment; provided that the Company shall be
permitted to make all payments pursuant to this Agreement net of any legally
required tax withholdings. The Executive shall not be required to seek other
employment, and there shall be no offset to amounts due hereunder as a result of
any salary, compensation or other amounts the Executive may be paid from other
sources.
4. Expenses. In the event of any litigation between the parties
relating to this Agreement and their rights hereunder, the prevailing party
shall be entitled to recover all litigation costs and reasonable attorneys' fees
and expenses from the non-prevailing party.
5. Entire Agreement. This Agreement comprises the entire
agreement between the parties hereto and as of the Effective Date of this
contract, supersedes, cancels and annuls any and all prior agreements between
the parties hereto with respect to the subject matter hereof.
6. Successors and Assigns. This Agreement shall be binding upon, and
inure to the benefit of the parties hereto and their respective heirs,
successors, assigns and personal representatives. The Company may assign this
Agreement to any successor or assignee to its business without the written
consent of the Executive. The Executive may not assign, pledge, or encumber his
interest in this Agreement, or any part thereof, without the written consent of
the Company; provided, however, that the Executive may, without the Company's
prior consent, assign his rights to payment hereunder.
7. Notices. Any notice required or permitted pursuant to the
provisions of this Agreement shall be deemed to have been properly given if in
writing and when received by certified or registered United States mail,
postage prepaid, by overnight courier, telecopy or when personally delivered,
addressed as follows:
If to the Company:
LaserSight Incorporated
3300 University Boulevard, Suite 140
Orlando, Florida 32792
Attn: President and Chief Executive Officer
Fax No.: (407) 678-9982
If to the Executive:
Gregory L. Wilson
11661 Swift Water Circle
Orlando, Florida 32817
<PAGE>
Each party shall be entitled to specify a different address for the receipt of
subsequent notices by giving written notice thereof to the other party in
accordance with this Section 7. Telecopy notices must be followed up with the
original by certified mail, postmarked within one (1) business day of the date
of the telecopy.
8. Amendments and Waivers. Any provision of this Agreement may be
amended or waived only with the prior written consent of the Company and the
Executive. No failure or delay on the part of either party to this Agreement in
the exercise of any power or right, and no course of dealing between the parties
hereto, shall operate as a waiver of such power or right, nor shall any single
or partial exercise of any power or right preclude any further or other exercise
thereof or the exercise of any other power or right. The remedies provided for
herein are cumulative and not exclusive of any remedies which may be available
to either party at law or in equity. Any waiver of any provision of this
Agreement, and any consent to any departure by either party from the terms of
any provision hereof, shall be effective only in the specific instance and for
the specific purpose for which given. Nothing contained in this Agreement and no
action or waiver by any party hereto shall be construed to permit any violation
of any other provision of this Agreement or any other document or operate as a
waiver by such party of any of his or its rights under any other provision of
this Agreement or any other document.
9. Controlling Law. This Agreement shall be construed in accordance
with the laws of the State of Florida, except for its choice of law provisions.
The parties do hereby irrevocably submit themselves to the personal jurisdiction
of the United States Federal Court for the Middle District of Florida and do
hereby irrevocably agree to service of such Court's process on them.
10. Headings. Section headings herein are for convenience only and
shall not affect the meaning or interpretation of the contents hereof.
11. Counterparts. This Agreement may be executed in counterparts, each
of which is deemed to be an original /and all of which taken together constitute
one and the same agreement.
IN WITNESS WHEREOF, the Company has caused this Agreement to be
executed on its behalf by a duly authorized officer and the Executive has
executed this Agreement, all as of the Effective Date.
LASERSIGHT INCORPORATED EXECUTIVE
By: /s/Michael R. Farris /s/Gregory L. Wilson
------------------------------------ --------------------------------
Michael R. Farris Gregory L. Wilson
President and Chief Executive Officer
EXHIBIT 10.46
TECHNOLOGY DEVELOPMENT AND LICENSE AGREEMENT
This Technology Development and License Agreement ("Agreement"), is
made and entered into as of October 23, 1999 (the "Effective Date"), by and
between LASERSIGHT TECHNOLOGIES, INC., a Delaware corporation ("LaserSight") and
QUADRIVIUM, L.L.C., an Arizona limited liability company ("Quadrivium").
WHEREAS, Quadrivium is developing proprietary technology for a corneal
reshaping procedure that achieves a refractive correction utilizing low levels
of infrared energy, such procedure is commonly referred to as photothermal
keratoplasty ("PTK");
WHEREAS, Quadrivium is the owner of the entire, right, title and
interest in and to certain U.S. letters patent, foreign patents and patent
applications, as identified on Schedule A attached hereto and made a part
hereof, pertaining to PTK (collectively, the "Licensed Patents");
WHEREAS, Quadrivium has certain know-how and confidential technical and
proprietary information directed to the Licensed Patents and PTK, as identified
on Schedule B attached hereto and made a part hereof (collectively, the "PTK
Technology");
WHEREAS, Quadrivium and LaserSight desire to enter into certain
agreements relating to the development, enhancement and refinement of the PTK
Technology;
WHEREAS, LaserSight desires to acquire a world-wide, exclusive license
to exploit the PTK Technology and the Licensed Patents in the ophthalmic field
(collectively, the "Licensed Technology"), in accordance with the terms and
conditions provided herein;
WHEREAS, Quadrivium is willing to grant such a license to LaserSight in
accordance with the terms and conditions provided herein;
NOW, THEREFORE, in consideration of the mutual promises and valuable
consideration set forth herein, the parties agree as follows:
1. Term. The term of this Agreement (the "Term") shall commence and be
effective as of the Effective Date and shall continue thereafter until the date
on which the last of the Licensed Patents expires, unless sooner terminated
pursuant to the terms of this Agreement.
2. Development of the PTK Technology.
2.1 Technical Feasibility Demonstration ("Phase I").
Commencing on the Effective Date and continuing immediately thereafter
for a period of 120 days (the "Phase I Determination Period"),
Quadrivium, Edward Yavitz, M.D. ("Yavitz") and Michael Berry, Ph.D.
("Berry") shall continue and complete their research and development of
the Licensed Technology which shall include, without limitation, the
following activities:
(i) the manufacture of one or more prototype PTK systems;
<PAGE>
(ii) performing animal eye experiments (both in vitro
and in vivo) together with pilot human eye experiments in at
least two sets of pre-clinical studies; and
(iii) the development of protocols and treatment
algorithms to determine dose/response behavior and to optimize
treatment parameters for correction of hyperopia and
presbyopia.
At the conclusion of the Phase I Determination Period,
LaserSight shall determine, in its sole discretion, whether the
Licensed Technology is capable of producing a commercially viable PTK
system. If LaserSight determines that the Licensed Technology is
capable of producing a commercially viable PTK system, the parties
shall proceed to Phase II (as described in Section 2.2), otherwise this
Agreement shall terminate in accordance with Section 6. The date on
which such determination is made by LaserSight shall be referred to
herein as the "Phase I Determination Date." Notwithstanding the
foregoing, LaserSight, in its sole discretion, shall have the option to
extend the Phase I Determination Period for an additional period not to
exceed 90 days to continue the Phase I development activities.
2.2 Additional Clinical Studies and Commercialization ("Phase
II"). Unless this Agreement is otherwise terminated in accordance with
Section 6, commencing on the Phase I Determination Date and continuing
thereafter until the Phase II Completion Date (as defined herein),
LaserSight, with assistance from Quadrivium, Yavitz and Berry (which
Quadrivium, Yavitz and Berry shall provide when reasonably requested by
LaserSight), shall conduct clinical studies of the PTK system in
Germany, Canada, Japan and other foreign countries that are reasonably
designated by LaserSight after consultation with Quadrivium.
The Phase II clinical studies shall be performed for the
purposes of (i) testing and refining the clinical protocols and
treatment algorithms on that number of international patients that is
established by LaserSight after consultation with Quadrivium, and (ii)
capturing necessary post-treatment follow-up data. The Phase II
clinical studies shall be conducted in accordance with the clinical
protocols developed during the Phase I development activities and such
other protocols which may be approved in writing by LaserSight.
Upon the completion of the Phase II clinical studies,
LaserSight may pursue regulatory approval for selling a PTK system in
such countries as LaserSight reasonably determines, and Quadrivium
shall assist LaserSight in any reasonable manner necessary for
LaserSight to receive such approval or approvals. The date on which
LaserSight, or its designee, commences commercial shipments of the PTK
system shall be referred to herein as the "Phase II Completion Date."
If upon completion of the Phase II clinical studies, LaserSight
determines, in its sole discretion, that the Licensed Technology is not
capable of producing a commercially viable PTK system, this Agreement
shall terminate in accordance with Section 6.
<PAGE>
It is anticipated that if LaserSight commences commercial
shipments of a PTK system outside of the United States, then LaserSight
will pursue regulatory approval for a PTK system within the United
States. When requested by LaserSight, Quadrivium shall assist in any
reasonable manner necessary for LaserSight to receive such approval in
the United States.
2.3 PTK Technology Development Cost and Budget. Prior to the
expiration of the 30-day period immediately following the Effective
Date, Quadrivium shall present to LaserSight, for LaserSight's
approval, a detailed budget (the "Technology Development Budget") which
itemizes the resources to be expended during the Phase I and Phase II
clinical development activities and sets forth a timeline during which
such resources shall be expended. No material changes shall be made to
the Technology Development Budget without the prior written approval of
LaserSight and Quadrivium.
On a monthly basis during the Phase I and Phase II development
periods, as applicable, Quadrivium will submit a written notice to
LaserSight (each an "Advance Notice") that sets forth an itemized list
of expenses that will be incurred during the next month together with a
brief description of the anticipated timing and purposes of such
expenditures. Provided that such expenditures are reflected in the
Technology Development Budget and the advance limits described below
have not been exceeded, LaserSight shall pay to Quadrivium the amounts
requested in the Advance Notice within 15 business days of LaserSight's
receipt thereof. Quadrivium agrees to use any such payments made by
LaserSight for the purposes described in the relevant Advance Notice.
Notwithstanding anything set forth in this Agreement to the
contrary, in no event shall LaserSight be required to make advances to
Quadrivium which in the aggregate exceed (i) $300,000 for all costs and
expenses associated with the Phase I development activities, and (ii)
$2,000,000 for all costs and expenses associated with the Phase II
development activities.
Within 30 days after the end of each of LaserSight's fiscal
quarters during the Phase I and Phase II, if applicable, development
period, Quadrivium will provide LaserSight with an itemized statement
(the "Technology Development Reconciliation") setting forth the total
amounts LaserSight advanced pursuant to Advance Notices delivered
during the prior fiscal quarter in connection with the Phase I
development activities or Phase II development activities, as the case
may be, and a description of how such advances were utilized, together
with such other supporting documentation as may be reasonably requested
by LaserSight. Unless LaserSight disputes the amount reflected in the
Technology Development Reconciliation within 15 business days after
LaserSight's receipt thereof, all amounts reflected shall be deemed to
have been expended in accordance with the Technology Development
Budget. If it is determined that Quadrivium has made expenditures not
in accordance with the Technology Development Budget, Quadrivium shall
be required to reimburse LaserSight for any such amounts. Any dispute
arising in connection with any quarterly Technology Development
<PAGE>
Reconciliation shall be resolved in accordance with the dispute
resolution procedures described in Section 4(b) of this Agreement.
3. Grant of License.
(a) Quadrivium hereby grants to LaserSight and its Affiliated
Companies (as defined herein) during the Term a world-wide, exclusive
right and license to exploit the Licensed Technology in the ophthalmic
field. As used herein, the term Licensed Technology shall include those
patents and patent applications listed on Schedule A, and any reissues,
reexaminations, divisionals, continuations, and continuations-in-part
thereof and any foreign counterparts thereof and all of the PTK
Technology identified on Schedule B from time to time. If subsequent to
the Effective Date, any of Quadrivium, or its members, officers, agents
or affiliates is issued a new patent or receives a license for a new
patent that relates to PTK Technology (other than the Licensed
Patents), Quadrivium shall notify LaserSight in writing of such patent.
For a period of 90 days from such notification, LaserSight shall have
the right to notify Quadrivium in writing that it intends to add such
patent to the list of Licensed Patents on Schedule A hereto. If
LaserSight elects to add such patent to the list of Licensed Patents,
the patent will be included in the license granted under this Agreement
without any additional compensation being due. Any such added patents
shall be deemed to be Licensed Patents for purposes of this Agreement.
(b) Upon the execution of this Agreement, Quadrivium shall
promptly disclose in writing and deliver to LaserSight all
information it possesses relating to the Licensed Technology.
(c) All past, present and future discoveries, inventions,
technology, know-how, enhancements, improvements, modifications or
other developments directly relating to the Licensed Technology and
PTK, whether or not patented or patentable in any country, shall be
promptly disclosed in writing to LaserSight by Quadrivium revising
Schedule B and providing a copy of such schedule to LaserSight, and
once such items are so disclosed, such items shall be deemed part of
the Licensed Technology owned by Quadrivium and licensed by LaserSight
under this Agreement. If LaserSight disagrees that items disclosed in
accordance with this Section 3(c) directly relate to PTK, then such
dispute shall be resolved in accordance with the dispute resolution
procedures described in Section 4(b) of this Agreement.
(d) Quadrivium further grants to LaserSight and any of its Affiliated
Companies the right to sublicense the Licensed Technology to Users (as
defined herein) under the exclusive license granted hereunder.
For purposes of this Agreement the term "Affiliated Companies" shall
mean any person or entity controlling, controlled by or under common
control with another person. For purposes of this definition, "control"
(including, with correlative meaning, the terms "controlled by" and
"under common control with"), as used with respect to any person or
entity, shall mean the possession, directly or indirectly, of the power
to direct and cause the direction of the management and policies of
<PAGE>
such person or entity, whether through the ownership of voting
securities, by contract or otherwise. For purposes of this Agreement,
the term "Users" shall mean any party which utilizes any PTK Apparatus
(as defined herein).
4. Consideration.
(a) LaserSight Incorporated Common Stock. LaserSight shall issue
and deliver 200,000 shares of LaserSight Incorporated common stock, $.001 par
value per share ("Common Stock"), as follows:
(i) On the date this Agreement is signed by each of
the parties hereto, LaserSight shall send its transfer agent an
irrevocable letter of direction to issue two stock certificates each
representing 100,000 shares of Common Stock in the name of Quadrivium.
The certificates representing the shares of Common Stock issued in
accordance with this Section 4(a) (collectively, the "Quadrivium
Shares") shall be delivered to and held in escrow by LaserSight
Incorporated. The parties acknowledge and agree that during the period
the Quadrivium Shares, or any part thereof, are being held in escrow,
Quadrivium is entitled to (A) exercise any and all voting and other
consensual rights pertaining to the Quadrivium Shares or any part
thereof, and (B) receive and retain any and all dividends and other
distributions paid in respect of the Quadrivium Shares. The Quadrivium
Shares shall be released from escrow upon the occurrence of the events
described in Section 4(a)(ii) and (iii) below. The issuance of the
Quadrivium Shares shall be contingent on and subject to LaserSight's
receipt from Quadrivium and Yavitz and Berry, as applicable, of (A)
stock powers duly executed by Quadrivium in blank, in form and
substance satisfactory to LaserSight (such stock powers will be held in
escrow by LaserSight Incorporated), (B) an Investors Certificate, the
form of which is attached hereto as Exhibit 1, and (C) a fully executed
Assignment of TradeMark Option Agreement whereby Quadrivium would grant
to LaserSight an option, during the 24-month period immediately
following the Effective Date, to acquire all right, title and interest
in and to the trademarks "The Best Value in Sight" and "NIR Vision
Correction", the form of which is attached hereto as Exhibit 2.
(ii) If (A) on the Phase I Determination Date LaserSight
determines, in its sole discretion, that the Licensed Technology is
capable of producing a commercially viable PTK system, or (B) on or
before the Phase I Determination Date Quadrivium exercises its right to
terminate this Agreement in accordance with Section 6.1(a), (c) or (f)
of this Agreement (in which case this Agreement shall terminate in
accordance with Section 6 hereof), LaserSight Incorporated, within five
business days of such determination or notice of such termination, as
applicable, shall release (X) 100,000 of the Quadrivium Shares to
Quadrivium if such release was triggered by events described in Section
4(a)(ii)(A) hereof, or (Y) all of the Quadrivium Shares if such release
was triggered by events described in Section 4(a)(ii)(B) above.
Alternatively, if (A) on the Phase I Determination Date
LaserSight determines, in its sole discretion, that the Licensed
Technology is not capable of producing a commercially viable PTK
system, or (B) on or before the Phase I Determination Date LaserSight
<PAGE>
exercises its right to terminate this Agreement in accordance with
Section 6.1(a), (d) or (f) of this Agreement, this Agreement shall
terminate in accordance with Section 6 of this Agreement, and the
Quadrivium Shares shall be released from escrow and LaserSight
Incorporated is hereby directed to endorse the stock powers that
accompanied the Quadrivium Shares in order to transfer the ownership of
the Quadrivium Shares from Quadrivium to LaserSight Incorporated.
(iii) Within five business days after (A) the Phase II
Completion Date, or (B) the date on which Quadrivium provides notice to
LaserSight that Quadrivium is exercising its right to terminate this
Agreement in accordance with Section 6.1(a), (c) or (f) (in which case
this Agreement shall terminate in accordance with Section 6 hereof),
LaserSight Incorporated shall release the remaining Quadrivium Shares
to Quadrivium. If (A) upon completion of the Phase II clinical studies
it is determined by LaserSight that the international commercialization
of the PTK system is not viable, or (B) on or before the Phase II
Completion Date LaserSight exercises its right to terminate this
Agreement in accordance with Section 6.1(a), (d) or (f), this Agreement
shall terminate in accordance with Section 6 of this Agreement, and the
remaining Quadrivium Shares shall be released from escrow and
LaserSight Incorporated is hereby directed to endorse the stock powers
that accompanied the remaining Quadrivium Shares in order to transfer
the ownership of the Quadrivium Shares from Quadrivium to LaserSight
Incorporated.
(b) Royalty Payments. During the period commencing on the Phase
II Completion Date and continuing during the Term, LaserSight shall pay
Quadrivium: (i) a per procedure royalty equal to $35 (as adjusted pursuant to
this Section 4(b)) for each PTK procedure (the "Per Procedure Fee") that
substantially utilizes the PTK Technology in connection with the performance of
such procedure or is performed utilizing an infrared device (the "PTK
Apparatus") that is covered by the claims contained in the Licensed Patents and
manufactured by or for, and sold by, LaserSight; and (ii) a one time product
royalty (the "Product Royalty") in an amount equal to 10% of the sales price of
any PTK Apparatus that is sold by or on behalf of LaserSight, less bona fide
charges with respect to packaging, transportation, insurance, installation,
training, duties, commissions, taxes, discounts and allowance for returns. The
sales price shall not include the price of service contracts, replacement or
ancillary components that may be sold to LaserSight's customers from time to
time that are not themselves a PTK Apparatus. In addition, LaserSight shall not
be required to pay the Product Royalty for any PTK Apparatus that is placed in
service without any initial charge to the User. The Per Procedure Fee shall be
adjusted on the fourth anniversary of the Effective Date and every four years
thereafter to reflect the cumulative percentage increase or decrease in the
Consumer Price Index for All Urban Consumers (the "CPI-U") as published by the
Bureau of Labor Statistics or any successor thereto. Such cumulative percentage
increase or decrease in the CPI-U shall be (i) determined by using October 1999
as the base period, (ii) applied to the base amount of $35 to determine the
amount of increase or decrease, as applicable, to the Per Procedure Fee, and
(iii) added to or subtracted from, as applicable, $35.
Notwithstanding anything set forth in this Section 4(b) to the
contrary, if LaserSight is required to pay a royalty or other fee or assessment
to any third party as a result of LaserSight or a User performing PTK procedures
(collectively, a "Third Party Royalty"), the Per Procedure Fee shall be
<PAGE>
decreased by the Reduction Amount (as defined herein). For purposes of this
Agreement, the "Reduction Amount" shall mean the amount resulting from
multiplying the Per Procedure Fee then in effect by a fraction (i) the numerator
of which shall be total amount of per procedure royalties (other than the Per
Procedure Fee) that LaserSight is required to pay as a result of its or a User's
performance of a PTK procedure, and (ii) the denominator of which shall be the
then current amount being charged by LaserSight to User's for each PTK procedure
that is performed using a PTK Apparatus. If LaserSight is required to pay a
Third Party Royalty which is not in the form of a per procedure fee, LaserSight
shall use it best efforts to convert the amount of such Third Party Royalty to a
per procedure fee for purposes of calculating the Reduced Amount.
LaserSight and Quadrivium acknowledge and agree that any amount paid by
LaserSight to any Affiliated Companies shall not be considered a Third Party
Royalty.
Any dispute, controversy or claim arising out of this Section 4(b), or
the breach hereof, that cannot be settled through negotiation shall be settled
(i) first, by the parties trying in good faith to settle the dispute by
mediation under the Commercial Mediation Rules of the American Arbitration
Association (the "AAA") (such mediation session to be held in Winter Park,
Florida, and to commence within 15 days of the appointment of the mediator by
the AAA), and (ii) second, by binding arbitration administered by the AAA under
its Commercial Arbitration Rules (such arbitration to be held in Winter Park,
Florida, and to commence within 15 days of the appointment of a single
arbitrator by the AAA), and judgment on the award rendered by the arbitrator may
be entered in any court having jurisdiction thereof.
(c) Terms of Payments. Within 45 days after the end of each of
LaserSight's fiscal quarters which commence after the Phase II Completion Date,
LaserSight will (i) provide Quadrivium with a statement setting forth the number
of PTK procedures that were performed utilizing a PTK Apparatus, and the number
of PTK Apparatus sold, during the prior fiscal quarter and cumulative for all
prior applicable periods, and (ii) deliver to Quadrivium, a LaserSight check in
the amount of the aggregate Per Procedure Fees and Product Royalties then due
with respect to the immediate prior quarter.
LaserSight shall keep, maintain and preserve during the Term, and for a
period of one (1) year immediately thereafter (or such longer time, if
applicable, until any existing dispute regarding the Per Procedure Fee and the
Product Royalty is finally resolved, without further right of appeal), books,
accounts, records and other materials used to calculate the royalty payments
described in Section 4(b) in a manner such that the information contained in the
statements referred to in this Section 5(b)Section 4(c) may be readily
determined. Quadrivium and/or its duly authorized representatives, shall have
the right to inspect and audit the books, accounts, records and other materials
used to calculate the royalty payments described in this Section 4(c) during
reasonable business hours and upon at least five business days notice by
Quadrivium and/or its representatives.
5. Restricted Shares. Quadrivium acknowledges and agrees that the
Quadrivium Shares (i) are authorized but previously unissued Common Stock
which have not been registered under the Securities Act of 1933, as amended
("the Act") or any state securities laws, (ii) have been acquired for
<PAGE>
investment purposes and not with a view to distribution or resale, (iii)
may not be sold or transferred unless such shares have been registered under
the Act, or unless an exemption from registration is available, and (iv) the
certificates representing such shares shall bear substantially the following
legend:
THE SHARES OF COMMON STOCK REPRESENTED BY THIS CERTIFICATE
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "ACT"), OR ANY APPLICABLE STATE SECURITIES LAW AND MAY NOT BE
TRANSFERRED UNTIL (I) A REGISTRATION STATEMENT UNDER THE ACT AND SUCH
APPLICABLE STATE SECURITIES LAWS SHALL HAVE BECOME EFFECTIVE WITH
REGARD THERETO, OR (II) IN THE OPINION OF COUNSEL ACCEPTABLE TO THE
COMPANY, REGISTRATION UNDER SUCH SECURITIES ACTS AND SUCH APPLICABLE
STATE SECURITIES LAWS IS NOT REQUIRED IN CONNECTION WITH SUCH PROPOSED
TRANSFER.
The Quadrivium Shares have those registration rights that are more fully
described in that certain Registration Rights Agreement, dated as of the date
hereof, between Quadrivium and LaserSight Incorporated, the form of which is
attached hereto as Exhibit 3.
6. Termination.
6.1 Termination Events. During the Term, this Agreement may be
terminated as follows:
(a) Either party may terminate this Agreement upon the occurrence of
a default or material breach of the terms hereof by the other party,
provided that such right to terminate may not be exercised unless such
default or breach has not been cured within 10 days after written
notice of such default or breach has been supplied to the defaulting or
breaching party.
(b) This Agreement shall terminate as of the Phase I Determination
Date or the Phase II Completion Date if LaserSight determines, in its
sole discretion, that the Licensed Technology is not capable of
producing a commercially viable product.
(c) Provided that there is no current dispute relating to a
quarterly Technology Development Reconciliation that is in the process
of being resolved in accordance with the terms of this Agreement, this
Agreement may be terminated by Quadrivium, if LaserSight fails to make
any advances as contemplated by the Technology Development Budget and
required in accordance with Section 2.3 hereof, and such failure has
not been cured within 10 days after written notice of such failure has
been supplied to LaserSight by Quadrivium.
(d) LaserSight may terminate this Agreement if any of Quadrivium,
Yavitz or Berry fails to assist in the Phase I or Phase II studies as
contemplated by this Agreement.
<PAGE>
(e) This Agreement may be terminated at any time by mutual agreement
of the parties.
(f) If either party goes into liquidation, has a receiver appointed
for all or any portion of its property or estate, is adjudged bankrupt
or insolvent, files a voluntary petition of bankruptcy, has a petition
in bankruptcy filed against it or makes an assignment for the benefit
of its creditors, and whether any such event is the outcome of the
voluntary act of such party or otherwise, the other party, at its
option, may terminate this Agreement immediately by providing notice of
such termination.
6.2 Obligations Upon Termination. Upon termination of this
Agreement neither party shall have any further obligation to the other
under this Agreement except for (i) obligations accruing prior to the date of
termination; and (ii) obligations, promises or covenants in this
Agreement which are expressly intended to extend beyond the term of this
Agreement. Quadrivium acknowledges and agrees that the term of any sublicense
which has been granted by LaserSight or any of its Affiliated Companies to a
User shall not terminate upon the termination of this Agreement, but
rather, the term of any such sublicense shall continue in accordance with the
terms and conditions set forth in such sublicense.
6.3 Rights to Future Developments. If after the termination of
this Agreement for any reason, Quadrivium intends to (i) grant a license
covering the Licensed Technology in the ophthalmic field to any third party, or
(ii) exploit the Licensed Technology for its own benefit, Quadrivium shall give
written notice to LaserSight of its intention to grant such license (the "Grant
Notice") or to exploit the Licensed Technology (the "Exploitation Notice"). The
Grant Notice, in addition to stating the fact that Quadrivium intends to grant
the license shall state (i) that the notice is being given as required by this
Agreement, (ii) the nature of the license to be granted, (iii) the name,
occupations and business and residence addresses of the proposed licensee, and
(iv) a brief description of the terms and conditions under which the license is
to be granted. The Exploitation Notice shall describe the manner in which
Quadrivium intends to exploit the Licensed Technology. Upon receipt of the Grant
Notice or the Exploitation Notice, LaserSight for a period of 30 days, may
exercise an option to enter into a license agreement with Quadrivium for a term
which shall expire on the date of the last to expire of the Licensed Patents and
upon the same terms and conditions as described in this Agreement. The
obligations of Quadrivium described in this Section 6.3 shall survive the
termination of this Agreement, and this Agreement shall inure to the benefit of
and be binding on any successor or assign of the Licensed Technology. Quadrivium
shall require any successor (whether direct or indirect, by reason of a
purchase, merger, consolidation, or otherwise) to the Licensed Technology to
expressly assume and agree to perform this Agreement in the same manner and to
the same extent that Quadrivium is required to perform under this Agreement.
7. Representations and Warranties.
(a) Quadrivium. Quadrivium represents, warrants and covenants:
(i) that it is the sole and exclusive owner of
the Licensed Technology and that it has full
legal capacity, power and authority to (A)
<PAGE>
enter into this Agreement, (B) fully perform
all of its obligations hereunder, and (C)
grant the license concerning the Licensed
Technology to LaserSight;
(ii) that to its knowledge all of the Licensed
Technology known to it has been or will be
promptly disclosed and delivered to
LaserSight and included in the license
granted hereunder;
(iii) that it shall maintain accurate logs and
records of technical information concerning
the Licensed Technology and any developments, enhancements
or refinements thereof. Upon request by LaserSight,
Quadrivium shall provide access to or copies
of such logs and records to LaserSight;
(iv) that Schedule A represents a complete and
accurate list of all jurisdictions and registration
numbers related to such jurisdictions where those
patents owned by or licensed to Quadrivium that
pertain to PTK have been registered, and there are no
other jurisdictions where such patents have
been registered or an application for
registration has been made;
(v) that Schedule B represents a complete and accurate
list of all PTK Technology and that Quadrivium shall
update Schedule B from time to time to reflect additional
developments, enhancements or refinements to the PTK
Technology.
(vi) it has not previously licensed or used the
Licensed Patents or any part thereof anywhere in
the world, and will not do so during the Term; provided
that nothing contained herein shall preclude Quadrivium
from licensing the Licensed Patents for uses other than in
the ophthalmic field;
(vii) it has not licensed, used or disclosed
(except for disclosure to those parties identified on
Schedule C hereto, which parties have entered into a
valid, binding and enforceable agreement with Quadrivium
not to disclose the PTK Technology to any third party or
use the PTK Technology for its own or any third party's
commercial advantage or otherwise) the PTK Technology
or any part thereof anywhere in the world, and will not do
so during the Term;
(viii) that to its knowledge no part of the Licensed
Technology is being infringed anywhere in the world;
(ix) that to its knowledge each of the Licensed
Patents are valid and enforceable, and that to its
knowledge neither LaserSight's practice of the Licensed
Technology as contemplated by this Agreement nor any part
<PAGE>
of the Licensed Technology will infringe the rights of any
third parties; and
(x) Yavitz and Berry are the owners of all of the
membership interests of Quadrivium that are currently
issued and outstanding and there are no outstanding
options, rights or commitments of any kind relating to
membership interests in Quadrivium.
(b) LaserSight. LaserSight represents, warrants and covenants:
(i) that it has the full legal power and
authority to enter into this Agreement and to fully
perform all of its obligations hereunder; and
(ii) that its performance hereunder will comply with all
applicable laws, ordinances, regulations and codes.
8. Maintenance of the Licensed Patents. Quadrivium shall be
obligated to pay all fees and costs necessary to maintain the Licensed Patents
in the United States, as applicable, for the respective full term of each
Licensed Patent. If Quadrivium is unwilling to pay all fees and costs necessary
to maintain the Licensed Patents in the United States, as applicable, LaserSight
shall have an option to pay such costs and make such payments. If LaserSight
exercises its option to make such payments Quadrivium agrees to assign to
LaserSight all of Quadrivium's right, title and interest in each such Licensed
Patent in the ophthalmic field, and LaserSight may deduct the amount of such
payments from amounts, if any, which have accrued prior to such assignment and
are payable to Quadrivium pursuant to this Agreement.
9. Additional Filings; Approvals . If LaserSight (i) desires to
obtain patent protection relating to any further discoveries, inventions,
technology, know-how, enhancements, improvements, modifications or other
developments relating to the Licensed Technology in any country where such
patent protection may be granted and has not been granted as of the Effective
Date, or (ii) is required to file with any governmental or other licensing
agency any form or application related to the Licensed Technology, Quadrivium,
without additional consideration, shall provide all assistance reasonably
necessary to enable LaserSight to obtain such regulatory approval, licensing
approval or patent protection, as the case may be. The costs of obtaining all
relevant approvals or protection shall be borne solely by LaserSight.
10. Patent Enforcement/Defense.
10.1 Enforcement. Upon learning of the infringement of any of
the Licensed Patents in the ophthalmic field by third parties, each
party shall inform the other in writing of that fact, and shall supply
the other with any evidence available pertaining to the infringement.
LaserSight may, at its own discretion and at its own expense, take
whatever steps are necessary to stop the infringement of said Licensed
Patent in the ophthalmic field and, with respect to said Licensed
Patent which LaserSight is enforcing, LaserSight shall have the sole
right to recover damages and/or settlement proceeds from the resolution
of such an infringement claim; provided, however, that notwithstanding
<PAGE>
anything to the contrary herein that in any enforcement action brought
by LaserSight involving its rights under this Agreement, Quadrivium and
such other person having rights in the Licensed Patents, shall in its
sole discretion, be entitled to enter such action as a third party and
defend any counterclaims, cross claims or other claims in connection
with the validity or enforcement of the Licensed Patents. If Quadrivium
or such other party having rights in the Licensed Patents elects to
enter such action, Quadrivium or such other party shall pay all of its
legal costs and expenses, including attorneys' fees and costs and
experts' fees in connection with the patent enforcement or validity
issues. LaserSight will not compromise or settle any claim, action or
proceeding involving the Licensed Patents, where such action would
impact the validity or enforceability of the Licensed Patents, without
the prior written approval of Quadrivium and such other person having
rights in the Licensed Patents, which approval shall not be
unreasonably withheld. This Section 10.1 shall survive expiration or
other termination, for any reason, of this Agreement.
10.2 Quadrivium as Party. In the event of the initiation of
legal proceedings under Section 10.1, Quadrivium or Quadrivium's
assignee of the applicable Licensed Patent, at LaserSight's request and
at LaserSight's expense, shall agree to become a named party in such
litigation if, in LaserSight's sole discretion and opinion, Quadrivium
or Quadrivium's assignee's appearance in such action is necessary and
prudent to adjudicate the disputed rights in such action. In the event
Quadrivium or Quadrivium's assignee appears in such action pursuant to
this Section 10.2, LaserSight shall indemnify Quadrivium and
Quadrivium's assignee for all reasonable attorney fees paid by
Quadrivium or Quadrivium's assignee for attorneys chosen by Quadrivium
and Quadrivium's assignee, in its own discretion.
10.3 Patent Defense. Should any litigation by a third party
against LaserSight alleging that LaserSight's or any User's practice of
the Licensed Technology as contemplated by this Agreement or the
manufacture, use or sale of the PTK system infringes any patent or
rights under a patent of such third party arise, LaserSight shall
promptly notify Quadrivium of such litigation, and LaserSight shall
defend and/or settle such litigation at its sole cost and expense. If
requested by LaserSight, Quadrivium shall, and Quadrivium shall cause
its officers, members, employees and agents to, cooperate and
participate with LaserSight in such litigation.
11. Confidentiality. LaserSight and Quadrivium shall not, and shall
not permit their respective officers, employees or affiliates to, make any
disclosures concerning this Agreement until such time as the parties have
mutually agreed upon the language and timing of a press release or until such
time as LaserSight determines, based on advice of counsel, that a public
announcement is required by law, in which case LaserSight may make a public
announcement.
12. Nondisclosure of Confidential Information. Each of
Quadrivium, Yavitz and Berry acknowledge and agree that they may have access to
LaserSight's and its affiliates' confidential business plans, patents,
copyrights, trademarks, tradenames, trade secrets, methods of operations,
performance standards, pricing policies, marketing strategies, records and other
information about LaserSight's and its affiliates' operations and business of a
confidential
<PAGE>
nature (collectively, the "Confidential Information"), and none of Quadrivium,
Yavitz or Berry shall in any manner, directly or indirectly, disclose or divulge
the Confidential Information to any other person, firm, corporation or other
third party, whether directly or indirectly, in competition with LaserSight for
any use or purpose, except as required by law or with the prior express written
authorization of LaserSight.
The parties agree that the Confidential Information may be disclosed to
Quadrivium's directors, officers, managers, members, employees or agents who
need to know such information solely for purposes of performing Quadrivium's
obligations under this Agreement (it being agreed that such directors, officers,
managers, members, employees and agents shall be informed by Quadrivium of the
confidential nature of the Confidential Information and that by receiving such
information such parties are agreeing to be bound by the terms of this Section
12).
13. Independent Contractor. This Agreement does not in any way
create the relationship of principal and agent or employer and employee between
Quadrivium and LaserSight, and under no circumstances shall LaserSight be
considered to be the agent or employee of Quadrivium. Neither party shall act or
attempt to act, or represent itself directly or by implication, as agent or
employee of the other party or in any manner assume or create, or attempt to
assume or create, any obligation on behalf of or in the name of the other party
and will not make any representations, guarantees or warranties on behalf of, or
in the name of the other party with respect to the Licensed Technology.
14. Notice. Any notice or other communication required or
permitted hereunder shall be deemed given on the date delivered if delivered
personally or by facsimile with proper evidence of transmission, or five days
after deposit in the United States mail, by registered or certified mail,
postage prepaid, addressed:
If to Quadrivium:
Quadrivium, L.L.C.
973 Featherstone Road
Suite 350
Rockford, Illinois 61107
Attention: Edward Yavitz, M.D.
Facsimile: (815) 394-4311
If to LaserSight:
LaserSight Technologies, Inc.
3300 University Boulevard
Suite 140
Winter Park, Florida 32792
Attention: President
Facsimile: (407) 678-9982
<PAGE>
With a copy to:
The Lowenbaum Partnership, LLC
222 South Central Avenue
Suite 901
St. Louis, Missouri. 63105
Attention: Timothy L. Elliott, Esq.
Facsimile: (314) 746-4848
15. Waiver. Neither waiver by either party of any breach or
default under this Agreement by the other party, nor the failure of either party
to exercise promptly its rights in the event of such breach or default, shall be
construed as a waiver of any subsequent breach or default or of any term,
condition or provision of this Agreement.
16. Attorneys Fees. In the event that either party incurs costs
and fees, including attorneys' fees, in enforcing its or their rights under this
Agreement, the party substantially prevailing in any suit or action, including
any appeal, shall be entitled to recover from the other such costs and
attorneys' fees.
17. Severability. Each provision hereof is intended to be severable
and the invalidity or illegality of any portion of this Agreement shall not
affect the validity or legality of the remainder hereof.
18. Governing Law. The validity, formulation, interpretation
and performance of this Agreement shall be governed by the laws of the State of
Florida, without giving effect to choice of law principles. The parties do
hereby irrevocably submit themselves to the personal jurisdiction of the United
States District Court for the Middle District of Florida and do hereby
irrevocably agree to service of such court's process upon them.
19. Entire Agreement. This Agreement, including the schedules
and exhibits hereto, which are incorporated herein by this reference, represent
the entire agreement between the parties hereto with respect to the subject
matter hereof, and supersedes all prior or contemporaneous understandings
between the parties. This Agreement may not be amended, supplemented or modified
except by a subsequent written agreement signed by both parties hereto.
20. Assignment. Neither this Agreement nor any rights hereunder
or interest herein may be assigned by either party without the prior specific
written consent of the other party.
21. Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original and all of which
shall be deemed one and the same instrument.
22. Captions. The captions contained herein are intended
for convenience of reference only and shall not be used to interpret any of the
terms or provisions hereof.
<PAGE>
23. Additional Documents. The parties hereto agree to
execute, acknowledge and deliver such further documents as may be necessary or
proper to carry out the purpose and intent of this Agreement.
24. Availability of Personnel. Quadrivium agrees to make the
services of Berry available to LaserSight and Quadrivium acknowledges and agrees
that Berry's performance of his obligations under this Agreement will not
violate the terms and conditions of that certain Consulting Agreement dated
March 17, 1997 between Quadrivium and Antropix Corporation. Berry and Yavitz
agree that they each shall take all actions reasonably necessary to assist
Quadrivium in satisfying its obligations under this Agreement.
25. Obligations Upon the Occurrence of a Change in Control. If prior
to the Phase I Determination Date or the Phase II Completion Date a Change of
Control (as defined herein) occurs, and after the Change of Control is effected,
LaserSight or its successor, as the case may be, shall materially breach its
obligations hereunder, and if such breach is not cured within 30 days after
written notice of such breach from Quadrivium to LaserSight or its successor, as
the case may be, then the Quadrivium Shares that have not been released from
escrow in accordance with the terms and conditions of Section 4(a), shall be
immediately delivered to Quadrivium.
For purposes of this Agreement "Change of Control" shall mean:
(i) the acquisition by any person or entity of 80% or more of the
then-outstanding Common Stock; provided, however, that no Change of Control
shall occur solely by reason of any such acquisition by a corporation with
respect to which, after such acquisition, more than 60% of the then-outstanding
common shares of such corporation are then beneficially owned, directly or
indirectly, by the persons who were the beneficial owners of the Common Stock
immediately before such acquisition in substantially the same proportions as
their respective ownership, immediately before such acquisition, of the
then-outstanding Common Stock; or (ii) approval by the stockholders of
LaserSight Incorporated of a merger, reorganization or consolidation
("Transaction") with respect to which persons who were the respective beneficial
owners of the Common Stock immediately before the Transaction do not,
immediately thereafter, beneficially own, directly or indirectly, more than 60%
of the then-outstanding common shares of the corporation resulting from the
Transaction.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
QUADRIVIUM, L.L.C. LASERSIGHT TECHNOLOGIES, INC.
By: /s/Edward Yavitz, M.D. By: /S/Michael R. Farris
------------------------------- -------------------------------
Its: President Its: Chief Executive Officer
------------------------------- -------------------------------
Solely for the purpose of acknowledging
their respective obligations pursuant to
Sections 2.1, 2.2, 12 and 24 of this Agreement:
/s/Michael Berry
- -------------------------------------
Michael Berry
/s/Edward Yavitz
- -------------------------------------
Edward Yavitz
<PAGE>
SCHEDULE A
----------
Licensed Patents
----------------
Patent/Patent Application Description
- ------------------------- -----------
U.S. Patent No. 5,820,624 System for altering corneal
tissue
U.S. Patent Application No. 09/364,955 Disposable light source for
photothermal treatment of
human tissue
U.S. Patent Application No. 09/078,368 System for altering tissue
beneath an outer layer of
tissue
U.S. Patent Application (being prepared) System for infrared molding
of the cornea
<PAGE>
SCHEDULE B
----------
Last Updated on: 10/22/99
--------
PTK Technology
--------------
1. U.S. Patent No. 5,820,624.
2. Method and apparatus disclosed in patent application titled "Disposable
Light Source for Photothermal Treatment of Human Tissue" related to a
non-laser infrared energy source for shrinking corneal tissue either
under a "LASIK" flap or through deuterium-treated epithelium.
3. All proprietary technical information included in the "Shaper
Vision" Business Plan provided to LaserSight in August 1999.
<PAGE>
SCHEDULE C
----------
Parties to Which PTK Technology Has Been Disclosed
1. Alcon received a copy of U.S. Patent No. 5,820,624.
2. Johnson & Johnson received a copy of U.S. Patent No. 5,820,624 and
participated in a meeting in Jacksonville, Florida.
3. CIBAVISION received a copy of U.S. Patent No. 5,820,624 and mention of
non-laser light source without specifics.
EXHIBIT 10.47
EMPLOYMENT AGREEMENT
--------------------
THIS EMPLOYMENT AGREEMENT ("Agreement") is made and entered into and
effective as of October 27, 1999 (the "Effective Date"), by and between
LASERSIGHT TECHNOLOGIES, INC., a Delaware corporation (the "Company"), and JACK
HOLLADAY, M.D., M.S.E.E. an individual residing in the State of Texas
(the "Employee").
RECITALS
--------
A. The Employee desires to be employed by the Company with a
title to be conferred immediately upon assuming the duties of the position for
which the Employee is employed.
B. The Company desires to retain the Employee upon the terms
and conditions herein set forth.
NOW, THEREFORE, the parties hereto agree as follows:
1. Employment of the Employee. Subject to the terms and conditions of
this Agreement, the Company hereby employs the Employee, and the Employee hereby
accepts such employment and agrees to perform the services specified herein.
2. Duties. The Employee shall hold the title of and serve as Medical
Director of the Company and have authority and responsibility in accordance with
policies and practices of the Company. The Employee shall report to and be
subject to the direction of the Chief Executive Officer of the Company or such
person's designee. During the term of employment hereunder, the Employee shall:
(a) Perform, to the best of the Employee's ability, those duties
reasonably assigned to the Employee from time to time;
(b) Devote the Employee's full time and first priority
business efforts to the Company's business, provided that nothing
herein shall prohibit the Employee from spending reasonable amounts of
time for personal affairs, including, without limitation, managing his
personal investments, current consulting relationships pursuant
to Exhibit A; and
(c) Carry out the Company's policies and directives in a
manner that will promote and develop the Company's best interests.
3. Base Salary. In consideration of the Employee satisfying the
Employee's obligation under this Agreement, the Employee will receive a base
salary (the "Base Salary") which will be calculated at an annual rate of Two
Hundred Thousand Dollars ($200,000). The Base Salary shall be payable in equal
<PAGE>
installments in accordance with the Company's customary mode of salary payments
for employees of the Company and shall be subject to the Company's standard
withholdings for applicable taxes and benefit contributions. If the Company
establishes a refractive laser center in the Orlando area, Employee and the
Company shall review Employee's compensation in light of services to be provided
by the Employee at such center.
4. Stock Options. The Employee will be granted options to purchase
200,000 shares of the Company's common stock (the "Stock Options") on the last
to occur of the following dates (such date to be referred to as the "Approval
Date"): (i) October 14, 1999, the date on which the Company's Board of Directors
approved the grant of the Stock Options, and (ii) the date on which this
Agreement is executed by both the Company and the Employee. The Stock
Options shall be granted pursuant to and shall be governed by the terms of the
Company's 1996 Equity Incentive Plan, as amended and restated (the "Equity
Incentive Plan") and the award agreement to be delivered to the Employee
pursuant to the Equity Incentive Plan. The Stock Options shall be granted at an
option price per share equal to the Fair Market Value per share (as defined in
the Equity Incentive Plan) on the Approval Date and shall vest as set forth
in Exhibit B.
5. Fringe Benefits. During the term of employment hereunder, the
Employee shall be entitled to those fringe benefits and perquisites set forth on
Exhibit A hereto.
6. Expenses. The Company shall reimburse the Employee for reasonable
costs and expenses, including, but not limited to, expenses for travel, lodging
and meals, incurred in connection with the performance of the Employee's duties
hereunder. In order for the Employee to be eligible for reimbursement, the
Employee shall comply with the Company's relevant policies, procedures and
guidelines established and implemented from time to time by the Company.
7. Terms of Employment; Severance.
(a) The term of this Agreement shall begin on the date hereof
and shall continue for the three year period immediately thereafter,
unless sooner terminated as provided in this Section 7 (the "Initial
Term"). Unless either party shall give notice of intent not to renew
this Agreement to the other party at least 60 days prior to the end of
the Initial Term or any Renewal Term (as defined herein), the term of
this Agreement shall, on each such anniversary date, be automatically
extended for successor terms of one year each (each a "Renewal Term").
(b) Notwithstanding the foregoing, the Employee's employment
hereunder may be terminated by the Company at any time for Cause. Such
termination shall be effective upon the Company providing written
notice to the Employee as to the effective date of termination.
(c) Notwithstanding the foregoing, the Employee's employment
hereunder shall terminate in the event of the Employee's death or
Disability (as defined in Section 10).
(d) Notwithstanding the foregoing, the Employee's employment
hereunder may be terminated by the Company at any time for Good Reason
(as defined in Section 10) upon prior written notice to the Company
specifying therein the grounds for termination and the effective
date of termination.
<PAGE>
(e) In addition to all other rights of the Employee and obligations
of the Company described herein which arise or continue upon
termination of the Employee's employment hereunder for any reason
whatsoever, the Company shall pay to the Employee all salary and
benefits earned through the effective date of termination.
8. Restriction Against Competition.
a) In consideration of the Compensation to be received
hereunder, the Employee agrees that while he is employed by the Company
pursuant to this Agreement, and during the eighteen months period
following the effective date of termination of this Agreement, for any
reason, the Employee shall not, directly or indirectly, as a
stockholder, partner, officer, director, agent, consultant, employee,
or otherwise:
(i) engage in any business that competes with the
business of the Company ("Company" defined in Sections 8, 9
and 10(b) herein to mean all Subsidiaries, Affiliates,
divisions, successors, and assigns of the Company and any of
their Subsidiaries or Affiliates) anywhere within the United
States and such other countries that the Company is then
conducting its business; provided, however, that the foregoing
shall not prohibit the Employee's ownership of up to 1% of the
outstanding shares of capital stock of any corporation whose
securities are publicly traded on a national or regional stock
exchange;
(ii) purposefully interfere or attempt to interfere
with any of the Company's contracts (regardless of whether
these contracts are in writing or verbal) or business
relationships or advantages existing and in effect as of the
effective date of termination of this Agreement;
(iii) solicit for employment, either directly or
indirectly, for himself or for another, any of the technical
or professional employees who are or were employed by the
Company during the eighteen month period following the termination
of this Agreement; and
(iv) purposefully interfere with the business
relationship of or solicit the business or orders of Persons
(a) who are the Company's customers on the effective date of
termination of this Agreement, or one year prior thereto, or
(b) a prospective or potential customer of the Company, except
that with respect to the eighteen month period following the
effective date of termination of this Agreement, such
restriction shall apply only to prospective or potential
customers (1) to whom the Company has submitted a formal
quotation within the one year prior to the effective date of
termination of this Agreement, or (2) that have been
previously listed or identified by the Company as a business
prospect at any time during the six months preceding the
effective date of termination.
(b) The parties agree that if the Employee commits or
threatens to commit a breach of the covenants of this Section 8, the
Company shall have the right to seek and obtain all appropriate
injunctive and other equitable remedies therefor, in addition to any
<PAGE>
other rights and remedies that may be available at law, it being
acknowledged and agreed that any such breach would cause irreparable
injury to the parties and that money damages may not provide an
adequate remedy therefor.
9. Protection of Confidential Information and Trade Secrets of the
Company.
(a) Confidentiality. During the term of this Agreement and for
a period of three years after any termination or expiration thereof,
the Employee agrees that the Employee will not use for the Employee or
others or divulge or convey to others any secret or confidential
information, knowledge or data of the Company obtained by the Employee
during his employment with the Company. Such information, knowledge or
data includes but is not limited to secret or confidential matters: (i)
of a technical nature such as, but not limited to, methods, know-how,
formulae, compositions, processes, discoveries, machines, inventions,
intellectual property, computer programs and similar items or research
projects; (ii) of a business nature such as, but not limited to,
information about the cost, purchasing, profits, markets, sales or
customers; and (iii) pertaining to future developments such as, but not
limited to, research and development, future marketing or merchandising
plans and future expansion plans. The term "secret or confidential
information, knowledge or data" shall not be deemed to include
information that is published, information that is generally known
throughout the industry, or which generally is available to the
industry without restriction through no fault of the Employee.
(b) Injunctive Relief. The Employee agrees that the Company's
remedies at law for any breach or threat of breach by him of the
provisions of paragraph (a) of this Section 9 will be inadequate, and
that the Company shall be entitled to an injunction or injunctions to
prevent breaches of the provisions of paragraph (a) of this Section 9
and to enforce specifically the terms and provisions thereof, in
addition to any other remedy to which the Company may be entitled at
law or equity.
(c) Return of Documents and Other Property. Upon the
termination of the Employee's employment with the Company, or at any
time upon the request of the Company, the Employee shall deliver to the
Company (i) all documents and materials containing secret or
confidential information, knowledge or data relating to the Company's
business and affairs, and (ii) all documents, materials and other
property belonging to the Company, which in either case are in the
possession or under the control of the Employee.
(d) Intellectual Property Rights. The Employee acknowledges
and agrees that in consideration for his employment with the Company
and in exchange for the consideration to be paid to the Employee in
connection with such employment, all creative works The Employee
produces in connection with his employment by the Company which relate
to the Company's actual or demonstrably anticipated research or
development, including, without limitation, any invention, formula,
pattern, compilation, computer program (and related documentation and
source code), device, method, technique, drawing, process or other
intellectual property or property right (collectively, "Intellectual
Property"), shall be considered to have been prepared for the Company
as a part of and pursuant to the Employee's employment with the
<PAGE>
Company. The Employee shall disclose to the Company the existence of
such Intellectual Property when he becomes aware of its existence, and
the Employee agrees that any such Intellectual Property shall be owned
by the Company regardless of whether it would otherwise be considered a
work made for hire. The Employee agrees to execute any documents which
the Company deems necessary to protect the Company's interest,
including assignments, and further agrees to give evidence and
testimony and take any other reasonable actions as may be necessary, to
secure and enforce the Company's rights.
Notwithstanding anything set forth in this Section 9(d) to the
contrary, the parties acknowledge and agree that any Intellectual
Property that the Employee (i) has developed or was in the process of
developing prior to the Effective Date or which he develops during the
Term, and (ii) has not used any of the Company's resources (whether
materials, equipment, supplies, or other employees, contractors or
consultants of the Company) in connection with such development, shall
be owned by the Employee (the "Employee Intellectual Property");
provided, however, the Employee shall promptly notify (the "Development
Notice") the Company of the existence of such Employee Intellectual
Property. The Development Notice shall completely describe the Employee
Intellectual Property and the applications for such Employee
Intellectual Property. If within 30 days after the Company's receipt of
the Development Notice Company notifies the Employee that the Company
would like to purchase or license the item of Employee Intellectual
Property which is the subject of the Development Notice, then the
Company and the Employee shall negotiate in good faith for the purchase
or license of such item of Employee Intellectual Property. The Employee
agrees that he will not directly or indirectly disclose the existence
of the Employee Intellectual Property to any third party unless the
Company either notifies the Employee in writing that the Company does
not elect to purchase or license the Employee Intellectual Property or
the Company fails to notify the Employee of its intent with regard to
the purchase or license of the Employee Intellectual Property within 30
days after the date of the Company's receipt of the Development Notice.
10. Certain Defined Terms. For purposes of this Agreement, the
following definitions shall apply:
(a) "Affiliate" shall mean with respect to any Person, (i) any
Person which directly, or indirectly through one or more
intermediaries, controls, or is controlled by, or is under common
control with, such Person or (ii) any Person who is a director or
officer (A) of such Person, (B) of any Subsidiary of such Person, or
(C) of any Person described in the foregoing clause (i). For purposes
of this definition, "control" of a Person shall mean the power, direct
or indirect, (i) to vote or direct the voting of more than 20% of the
outstanding voting securities of such Person, or (ii) to direct or
cause the direction of the management and policies of such Person,
whether by contract or otherwise.
(b) "Cause" shall mean any of the following:
<PAGE>
(i) The Employee's conviction of or plea of no
contest to any crime involving moral turpitude, the theft or
willful destruction of money or other property of the Company
or his conviction of or plea of no contest to any felony
crime;
(ii) The Employee's inability to perform his
responsibilities due to his abuse or misuse of alcohol or
prescribed drugs or any use of illegal drugs;
(iii) The Employee's commission of theft,
embezzlement or fraud against the Company;
(iv) The Employee has willfully damaged the Company's
property, business reputation, or good will;
(v) Unsatisfactory performance by the Employee of
his job or duties hereunder that is not cured within 10 days
after the Employee is notified of such unsatisfactory
performance; or
(vi) The Employee's insubordination or other
misconduct as determined by the Company in its sole and
absolute discretion.
(c) "Compensation" shall mean, with respect to any Person, all
payments and accruals, if any, commonly considered to be compensation,
including, without limitation, all wages, salary, deferred payment
arrangements, bonus payments and accruals, profit sharing arrangements,
payments in respect of equity options or phantom equity options or
similar arrangements, equity appreciation rights or similar rights,
incentive payments, pension or employment benefit contributions or
similar payments, made to or accrued for the account of such Person or
otherwise for the direct or indirect benefit of such Person, plus auto
benefits provided to such Person, if any.
(d) "Disability" shall mean the inability, by reason of
illness or other incapacity, of the Employee substantially to perform
the duties of his then regular employment with the Company, which
inability is reasonably determined by the Company and continues for at
least 90 consecutive days, or for shorter periods aggregating 120 days
during any consecutive twelve-month period.
(e) "Good Reason" shall mean any material breach or default by
the Company that is not cured within 30 days after the Company is
notified of such breach.
(f) "Person" shall mean an individual or a corporation,
association, partnership, joint venture, organization, business,
individual, trust, or any other entity or organization, including a
government or any subdivision or agency thereof.
(g) "Subsidiary" shall mean as to any Person a corporation,
partnership or other entity of which 25% or more of the outstanding
shares of voting stock or other equity ownership are at the time owned,
directly or indirectly through one or more intermediaries, or both, by
such Person and shall include any such entity which becomes a
Subsidiary of such Person after the date hereof. Consolidated
<PAGE>
Subsidiary shall mean any Subsidiary of which 51% or more of the
outstanding shares or voting stock or other equity ownership are at the
time owned, directly or indirectly through one or more intermediaries,
or both, by such Person and shall include any such entity which becomes
a Subsidiary of such Person after the date hereof.
11. Payments. Except as specifically provided herein, all amounts
payable pursuant to this Agreement shall be paid without reduction regardless of
any amounts of salary, compensation or other amounts which may be paid or
payable to the Employee from any source or which the Employee could have
obtained upon seeking other employment; provided that the Company shall be
permitted to make all payments pursuant to this Agreement net of any legally
required tax withholdings.
12. Expenses. In the event of any litigation between the parties
relating to this Agreement and their rights hereunder, the prevailing party
shall be entitled to recover all litigation costs and reasonable attorneys' fees
and expenses from the non-prevailing party.
13. Entire Agreement. This Agreement comprises the entire agreement
between the parties hereto and as of the date of this contract, supersedes,
cancels and annuls any and all prior agreements between the parties hereto with
respect to the Employee's provision of services to the Company, including,
without limitation, any consulting arrangement between Employee and the Company.
14. Severability. If all or any part of this Agreement is declared by
any court or governmental authority to be unlawful or invalid, such unlawfulness
or invalidity shall not serve to invalidate any portion of this Agreement not
declared to be unlawful or invalid. Any portion so declared to be unlawful or
invalid shall, if possible, be construed in a manner that will give effect to
the terms of such portion to the fullest extent possible while remaining lawful
and valid.
15. Successors and Assigns. This Agreement shall be binding upon, and
inure to the benefit of the parties hereto and their respective heirs,
successors, assigns and personal representatives. The Company may assign this
Agreement to any successor or assignee to its business without the written
consent of the Employee. The Employee may not assign, pledge, or encumber his
interest in this Agreement, or any part thereof, without the written consent of
the Company.
16. Notices. Any notice required or permitted pursuant to the
provisions of this Agreement shall be deemed to have been properly given if in
writing and when received by certified or registered United States mail, postage
prepaid, by overnight courier, telecopy or when personally delivered, addressed
as follows:
If to the Company:
LaserSight Technologies, Inc.
3300 University Boulevard
Suite 140
Winter Park, Florida 32792
Attn: President
Fax No.: (407) 678-9982
<PAGE>
If to the Employee:
Jack Holladay, M.D., M.S.E.E.
5108 Braeburn Drive
Bellaire, Texas 77401
Fax No.: (713) 669-9153
Each party shall be entitled to specify a different address for the receipt of
subsequent notices by giving written notice thereof to the other party in
accordance with this Section. Telecopy notices must be followed up with the
original by certified mail, postmarked within one business day of the date of
the telecopy.
17. Amendments and Waivers. Any provision of this Agreement may be
amended or waived only with the prior written consent of the Company and the
Employee. No failure or delay on the part of either party to this Agreement in
the exercise of any power or right, and no course of dealing between the parties
hereto, shall operate as a waiver of such power or right, nor shall any single
or partial exercise of any power or right preclude any further or other exercise
thereof or the exercise of any other power or right. The remedies provided for
herein are cumulative and not exclusive of any remedies which may be available
to either party at law or in equity. Any waiver of any provision of this
Agreement, and any consent to any departure by either party from the terms of
any provision hereof, shall be effective only in the specific instance and for
the specific purpose for which given. Nothing contained in this Agreement and no
action or waiver by any party hereto shall be construed to permit any violation
of any other provision of this Agreement or any other document or operate as a
waiver by such party of any of his or its rights under any other provision of
this Agreement or any other document.
18. Controlling Law. This Agreement shall be construed in accordance
with the laws of the State of Florida, except for its choice of law provisions.
The parties do hereby irrevocably submit themselves to the personal jurisdiction
of the United States Federal Court for the Middle District of Florida and do
hereby irrevocably agree to service of such Court's process on them.
19. Headings. Section headings herein are for convenience only and
shall not affect the meaning or interpretation of the contents hereof.
20. Counterparts. This Agreement may be executed in counterparts, each
of which is deemed to be an original and all of which taken together constitute
one and the same agreement.
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Agreement to be executed
on its behalf by a duly authorized officer and the Employee has executed this
Agreement, all as of the first day and year written above.
LASERSIGHT TECHNOLOGIES, INC.
By: /s/Michael R. Farris
-------------------------
Title: Chief Executive Officer
-------------------------
"EMPLOYEE"
/s/Jack Holladay
-----------------------------
Jack Holladay, M.D., M.S.E.E.
<PAGE>
EXHIBIT A
---------
Current Consulting Arrangements
A-Scan and IOL Companies that use the Holladay Formulas - Intraocular Lens
Calculations and Outcomes
Refractive Consulting Group with Dr. Kezirian - Refractive Consultant Software
Program for Multifactorial Regression Analysis
Keravision - Analysis of visual acuity results regarding topography and the need
for a prolate corneal shape
Holladay Consulting - Sub Chapter S Corporation for Software Sales of
the Holladay IOL Consultant and Surgical Outcomes Assessment
Program Software for Intraocular lens power calculations and Outcomes
analysis
<PAGE>
EXHIBIT B
---------
Stock Options Vesting Schedule
1. Fifty Thousand Options vested upon execution of employment agreement.
2. Fifty Thousand Options vested on first year anniversary of employment.
3. Fifty Thousand Options vested on second year anniversary of employment.
4. Fifty Thousand Options vested on third year anniversary of employment.
<PAGE>
EXHIBIT C
---------
Fringe Benefits
See Attached
The following is a brief summary of benefits offered to the Employee by
the Company. Reference should be made to the benefits package supplied by the
Company for a full explanation of each benefit. Each benefit described herein is
subject to the terms, qualifications, limitations and conditions of the
Company's benefit programs, as amended from time to time, and benefits may be
changed, modified, terminated, increased or decreased from time to time. In
order for the Employee to be eligible for certain Company benefits the Employee
may be required to make the contributions required by such benefit plans.
1. Health insurance for the Employee and his eligible dependents.
2. Disability insurance for the Employee.
3. Life insurance for the Employee.
4. Ability to participate in the Company's 401(k) Plan.
5. $6,000 moving expense allowance to be paid to Employee in
monthly payments of $500 during each of the initial 12 months of
the Initial Term.
EXHIBIT 11
LASERSIGHT INCORPORATED
COMPUTATION OF PER SHARE EARNINGS
THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1999 1998 1999 1998
---- ---- ---- ----
BASIC
<S> <C> <C> <C> <C>
Weighted average shares outstanding $17,455,000 12,935,000 15,691,000 11,969,000
============ ============ ============ ============
Net loss (3,022,500) (2,149,930) (9,793,526) (5,864,310)
Conversion discount on preferred stock -- -- -- (858,872)
Preferred stock accretion and dividend requirements -- -- -- (2,751,953)
------------ ------------ ------------ ------------
Loss attributable to common shareholders $(3,022,500) (2,149,930) (9,793,526) (9,475,135)
============ ============ ============ ============
Basic loss per share $ (0.17) (0.17) (0.62) (0.79)
============ ============ ============ ============
DILUTED
Weighted average shares outstanding 17,455,000 12,935,000 15,691,000 11,969,000
============ ============ ============ ============
Net loss $(3,022,500) (2,149,930) (9,793,526) (5,864,310)
Conversion discount on preferred stock -- -- -- (858,872)
Preferred stock accretion and dividend requirements -- -- -- (2,751,953)
------------ ------------ ------------ ------------
Loss attributable to common shareholders $(3,022,500) (2,149,930) (9,793,526) (9,475,135)
============ ============ ============ ============
Diluted loss per share $ (0.17) (0.17) (0.62) (0.79)
============ ============ ============ ============
Loss attributable to common shareholders, above $(3,022,500) (2,149,930) (9,793,526) (9,475,135)
============ ============ ============ ============
Additional adjustment to weighted average number of shares:
Weighted average number of shares as adjusted per
above 17,455,000 12,935,000 15,691,000 11,969,000
Dilutive effect of contingently issuable shares, stock
options, warrants and convertible preferred stock 5,646,000 4,407,000 5,566,000 1,913,000
------------ ------------ ------------ ------------
Weighted average number of shares, as adjusted 23,101,000 17,342,000 21,257,000 13,882,000
============ ============ ============ ============
Diluted loss per share, adjusted (A) $ (0.13) (0.12) (0.46) (0.68)
============ ============ ============ ============
</TABLE>
(A) - This calculation is submitted in accordance with Regulation S-K item
601(b)(11) although it is contrary to paragraph 13-14 of SFAS 128
because it produces an anti-dilutive result.
EXHIBIT 15
ACKNOWLEDGMENT OF INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANTS
REGARDING INDEPENDENT AUDITORS' REVIEW REPORT
---------------------------------------------
The Board of Directors
LaserSight Incorporated:
With respect to the registration statements on Form S-8 (nos. 33-96390,
33-52170, 333-16817, 333-16823, 333-62587, 333-62591, 333-84073 and 333-84075)
and on Form S-3 (nos. 333-2198, 333-25237, 333-36655, 333-36837, 333-59369,
333-68495 and 333-77825) of LaserSight Incorporated, we acknowledge our
awareness of the use therein of our report dated October 22, 1999 related to our
review of interim financial information.
Pursuant to Rule 436(c) under the Securities Act of 1933, such report is not
considered part of a registration statement prepared or certified by an
accountant or a report prepared or certified by an accountant within the meaning
of sections 7 and 11 of the Act.
/s/KPMG LLP
St. Louis, Missouri
November 15, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary information
extracted from the accompanying financial
statements and is qualified in it entirety by
reference to such financial statement.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> SEP-30-1999
<CASH> 14,684,196
<SECURITIES> 0
<RECEIVABLES> 13,713,083
<ALLOWANCES> 3,169,925
<INVENTORY> 8,012,671
<CURRENT-ASSETS> 33,892,821
<PP&E> 3,993,599
<DEPRECIATION> 2,073,307
<TOTAL-ASSETS> 53,706,848
<CURRENT-LIABILITIES> 9,056,251
<BONDS> 0
0
4,000
<COMMON> 17,677
<OTHER-SE> 43,362,463
<TOTAL-LIABILITY-AND-EQUITY> 53,706,848
<SALES> 15,343,959
<TOTAL-REVENUES> 17,091,422
<CGS> 7,091,528
<TOTAL-COSTS> 7,216,283
<OTHER-EXPENSES> 18,415,083
<LOSS-PROVISION> 1,719,729
<INTEREST-EXPENSE> 75,685
<INCOME-PRETAX> (9,793,526)
<INCOME-TAX> 0
<INCOME-CONTINUING> (9,793,526)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (9,793,526)
<EPS-BASIC> (0.62)
<EPS-DILUTED> (0.62)
</TABLE>
