<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF
THE SECURITIES EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only
(as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
LASER POWER CORPORATION
- - --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- - --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE> 2
LASER POWER CORPORATION
12777 HIGH BLUFF DRIVE
SAN DIEGO, CALIFORNIA 92130
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JANUARY 30, 1998
TO THE STOCKHOLDERS OF LASER POWER CORPORATION:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of Laser
Power Corporation, a Delaware corporation (the "Company" or "Laser Power"), will
be held on Friday, January 30, 1998 at 6:00 p.m. local time at the Company's
offices located at 12777 High Bluff Drive, San Diego, California for the
following purposes:
1. To elect directors to hold office until the 1999 Annual Meeting of
Stockholders.
2. To ratify the selection of Ernst & Young LLP as independent auditors of
the Company for its fiscal year ending September 30, 1998.
3. To transact such other business as may properly come before the meeting
or any adjournment or postponement thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice.
The Board of Directors has fixed the close of business on December 19,
1997, as the record date for the determination of stockholders entitled to
notice of and to vote at this Annual Meeting and at any adjournment or
postponement thereof.
By Order of the Board of Directors
/s/ JAMES D. McFARLAND
James D. McFarland
Secretary
San Diego, California
December 30, 1997
ALL STOCKHOLDERS ARE CORDIALLY INVITED TO ATTEND THE MEETING IN PERSON.
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE, DATE, SIGN AND
RETURN THE ENCLOSED PROXY AS PROMPTLY AS POSSIBLE IN ORDER TO ENSURE YOUR
REPRESENTATION AT THE MEETING. A RETURN ENVELOPE (WHICH IS POSTAGE PREPAID IF
MAILED IN THE UNITED STATES) IS ENCLOSED FOR THAT PURPOSE. EVEN IF YOU HAVE
GIVEN YOUR PROXY, YOU MAY STILL VOTE IN PERSON IF YOU ATTEND THE MEETING. PLEASE
NOTE, HOWEVER, THAT IF YOUR SHARES ARE HELD OF RECORD BY A BROKER, BANK OR OTHER
NOMINEE AND YOU WISH TO VOTE AT THE MEETING, YOU MUST OBTAIN FROM THE RECORD
HOLDER A PROXY ISSUED IN YOUR NAME.
<PAGE> 3
LASER POWER CORPORATION
12777 HIGH BLUFF DRIVE
SAN DIEGO, CALIFORNIA 92130
PROXY STATEMENT
FOR ANNUAL MEETING OF STOCKHOLDERS
JANUARY 30, 1998
INFORMATION CONCERNING SOLICITATION AND VOTING
GENERAL
The enclosed proxy is solicited on behalf of the Board of Directors of
Laser Power Corporation, a Delaware corporation (the "Company"), for use at the
Annual Meeting of Stockholders to be held on Friday, January 30, 1998, at 6:00
p.m. local time (the "Annual Meeting"), or at any adjournment or postponement
thereof, for the purposes set forth herein and in the accompanying Notice of
Annual Meeting. The Annual Meeting will be held at the Company's offices located
at 12777 High Bluff Drive, San Diego, California. The Company intends to mail
this proxy statement and accompanying proxy card on or about December 30, 1997
to all stockholders entitled to vote at the Annual Meeting.
SOLICITATION
The Company will bear the entire cost of solicitation of proxies, including
preparation, assembly, printing and mailing of this proxy statement, the proxy
and any additional information furnished to stockholders. Copies of solicitation
materials will be furnished to banks, brokerage houses, fiduciaries and
custodians holding in their names shares of Common Stock beneficially owned by
others to forward to such beneficial owners. The Company may reimburse persons
representing beneficial owners of Common Stock for their costs of forwarding
solicitation materials to such beneficial owners. Original solicitation of
proxies by mail may be supplemented by telephone, telegram or personal
solicitation by directors, officers or other regular employees of the Company.
No additional compensation will be paid to directors, officers or other regular
employees for such services.
VOTING RIGHTS AND OUTSTANDING SHARES
Only holders of record of Common Stock at the close of business on December
19, 1997 will be entitled to notice of and to vote at the Annual Meeting. At the
close of business on December 19, 1997, the Company had outstanding and entitled
to vote 6,101,854 shares of Common Stock.
Each holder of record of Common Stock on such date will be entitled to one
vote for each share held on all matters to be voted upon at the Annual Meeting.
All votes will be tabulated by the inspector of election appointed for the
meeting who will separately tabulate affirmative and negative votes, abstentions
and broker non-votes. Abstentions will be counted towards the tabulation of
votes cast on proposals presented to the stockholders and will have the same
effect as negative votes. Broker non-votes are counted towards a quorum but are
not counted for any purpose in determining whether a matter has been approved.
REVOCABILITY OF PROXIES
Any person giving a proxy pursuant to this solicitation has the power to
revoke it at any time before it is voted. It may be revoked by filing with the
Secretary of the Company at the Company's principal executive office, 12777 High
Bluff Drive, San Diego, California 92130, a written notice of revocation or a
duly executed proxy bearing a later date, or it may be revoked by attending the
meeting and voting in person. Attendance at the meeting will not, by itself,
revoke a proxy.
<PAGE> 4
STOCKHOLDER PROPOSALS
Proposals of stockholders that are intended to be presented at the
Company's 1999 Annual Meeting of Stockholders must be received by the Company
not later than September 1, 1998 in order to be included in the proxy statement
and proxy relating to that annual meeting. Stockholders who wish to submit
proposals to be presented at an annual meeting are also advised to review the
Company's Bylaws, which contain additional requirements with respect to advance
notice of stockholder proposals and director nominations.
PROPOSAL 1
ELECTION OF DIRECTORS
There are seven nominees for the seven Board positions presently authorized
pursuant to the Company's Certificate of Incorporation and Bylaws. Each director
to be elected will hold office until the next annual meeting of stockholders and
until his successor is elected and has qualified, or until such director's
earlier death, resignation or removal. Each nominee listed below is currently a
director of the Company, all such directors having been elected by the
stockholders.
Shares represented by executed proxies will be voted, if authority to do so
is not withheld, for the election of the seven nominees named below. In the
event that any nominee should be unavailable for election as a result of an
unexpected occurrence, such shares will be voted for the election of such
substitute nominee as management may propose. Each person nominated for election
has agreed to serve if elected and management has no reason to believe that any
nominee will be unable to serve.
The seven candidates receiving the highest number of affirmative votes cast
at the meeting will be elected directors of the Company.
THE BOARD OF DIRECTORS RECOMMENDS
A VOTE IN FAVOR OF EACH NAMED NOMINEE.
NOMINEES
The names of the nominees and certain information about them are set forth
below:
<TABLE>
<CAPTION>
NAME AGE POSITION
- - -------------------------------------- --- -------------------------------------------------------
<S> <C> <C>
Glenn H. Sherman, Ph.D................ 54 Chairman of the Board and Chief Executive Officer
Douglas H. Tanimoto, Ph.D............. 57 President, Laser Power Research Division, and Director
Robert G. Klimasewski................. 54 Director
William G. Fredrick................... 57 Director
Richard C. Laird...................... 51 Director
Kenneth E. Olson...................... 61 Director
John C. Stiska........................ 55 Director
</TABLE>
Glenn H. Sherman, Ph.D., the founder of the Company, has served as Chairman
of the Board and Chief Executive Officer of the Company since 1979.
Douglas H. Tanimoto, Ph.D., has served as President of the Laser Power
Research Division since 1988 and has served as a director of the Company since
1984.
William G. Fredrick has served as a director of the Company since 1980. Mr.
Fredrick is the founder and President of Laser Mechanisms, Inc., a laser device
and accessory manufacturer, since 1980, and Oxid Corporation, a laser device and
accessory manufacturer, since 1986.
Robert G. Klimasewski has served as a director of the Company since 1980.
Mr. Klimasewski has been the President and Chief Executive Officer of
Transmation, Inc., an electronic instrumentation manufacturer, since 1994, and
has been Vice Chairman of Burleigh Instruments, Inc., a scientific instrument
and laser manufacturer, since 1972. Mr. Klimasewski is also a director of
Transmation and Burleigh Instruments.
2
<PAGE> 5
Richard C. Laird has served as a director of the Company since 1987. Mr.
Laird joined Union Miniere Inc., a producer of cobalt powder and a sales
organization for metals refined by related companies in Europe, in 1980 and
currently serves as Executive Vice President and director.
Kenneth E. Olson has served as a director of the Company since October
1994. Mr. Olson is Chairman of the Board, acting President and Chief Executive
Officer of Proxima Corporation, a manufacturer of display projectors. Mr. Olson
previously served as President and Chief Executive Officer of Proxima from
December 1990 to January 1996. Mr. Olson is a director of Proxima, Lidak
Pharmaceuticals and Applied Digital Access, Inc.
John C. Stiska has served as a director of the Company since April 1987. In
February 1996, Mr. Stiska joined QUALCOMM Incorporated, a telecommunications
company, as Corporate Senior Vice President and has served as General Manager of
its Technology Applications Division since January 1997. From 1990 to January
1996, Mr. Stiska served as President and Chief Executive Officer of Triton Group
Ltd., an operating-holding company that emerged in 1993 from the Chapter 11
bankruptcy proceedings of Triton Group Ltd. and Intermark, Inc. Mr. Stiska is a
director of Jaymark, Inc. and SpectraNet Interactive, Inc.
BOARD COMMITTEES AND MEETINGS
The Company's Board of Directors has an Audit Committee and a Compensation
Committee.
The Audit Committee consists of Messrs. Laird, Olson and Stiska. The Audit
Committee makes recommendations to the Board of Directors regarding the
selection of independent auditors, reviews the results and scope of the audit
and other services provided by the Company's independent auditors and reviews
and evaluates the Company's audit and control functions. The Audit Committee met
two times during the fiscal year ended August 31, 1997.
The Compensation Committee consists of Messrs. Fredrick, Olson and Stiska.
The Compensation Committee makes recommendations regarding the Company's 1997
Equity Incentive Plan (the "1997 Plan") and Employee Stock Purchase Plan as well
as decisions concerning salaries and incentive compensation for employees and
consultants of the Company. The Compensation Committee met one time during the
fiscal year ended August 31, 1997.
During the fiscal year ended August 31, 1997 the Board of Directors held
eight meetings. During the fiscal year ended August 31, 1997, each Board member
attended 75% or more of the aggregate of the meetings of the Board and of the
committees on which he served, held during the period for which he was a
director or committee member, respectively.
3
<PAGE> 6
PROPOSAL 2
RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS
The Board of Directors has selected Ernst & Young LLP as the Company's
independent auditors for the fiscal year ending September 30, 1998 and has
further directed that management submit the selection of independent auditors
for ratification by the stockholders at the Annual Meeting. Ernst & Young LLP
has audited the Company's financial statements since 1989. Representatives of
Ernst & Young LLP are expected to be present at the Annual Meeting, will have an
opportunity to make a statement if they so desire and will be available to
respond to appropriate questions.
Stockholder ratification of the selection of Ernst & Young LLP as the
Company's independent auditors is not required by the Company's Bylaws or
otherwise. However, the Board is submitting the selection of Ernst & Young LLP
to the stockholders for ratification as a matter of good corporate practice. If
the stockholders fail to ratify the selection, the Audit Committee and the Board
will reconsider whether or not to retain that firm. Even if the selection is
ratified, the Audit Committee and the Board in their discretion may direct the
appointment of different independent auditors at any time during the year if
they determine that such a change would be in the best interests of the Company
and its stockholders.
The affirmative vote of the holders of a majority of the shares present in
person or represented by proxy and voting at the Annual Meeting will be required
to ratify the selection of Ernst & Young LLP.
THE BOARD OF DIRECTORS RECOMMENDS
A VOTE IN FAVOR OF PROPOSAL 2.
4
<PAGE> 7
SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information with respect to the
beneficial ownership of the Common Stock as of November 30, 1997 by (i) each
person (or group of affiliated persons) who is known by the Company to own
beneficially more than 5% of the Company's Common Stock, (ii) each of the
executive officers named in the Summary Compensation Table, (iii) each of the
Company's directors, and (iv) all directors and executive officers as a group:
<TABLE>
<CAPTION>
SHARES BENEFICIALLY OWNED(1)
-----------------------------------
NUMBER OF PERCENT OF
DIRECTORS, OFFICERS AND 5% STOCKHOLDERS SHARES TOTAL
- - ---------------------------------------------------------------- ---------------- ----------------
<S> <C> <C>
Proxima Corporation............................................. 1,276,585 20.9
9440 Carroll Park
San Diego, CA 92121-2298
Union Miniere Inc.(2)........................................... 914,713 14.0
13847 West Virginia Dr.
Lakewood, CO 80228
Glenn H. Sherman, Ph.D.(3)...................................... 637,748 10.3
Laser Power Corporation
12777 High Bluff Road
San Diego, CA 92130
Wellington Capital Management................................... 437,000 7.2
75 State Street
Boston, MA 02109
William G. Fredrick, Jr.(4)..................................... 372,122 6.1
Laser Mechanisms, Inc.
P.O. Box 2064
Southfield, MI 48037
Douglas H. Tanimoto, Ph.D.(5)................................... 285,266 4.5
Dean T. Hodges, Ph.D.(6)........................................ 122,666 2.0
Richard P. Scherer(7)........................................... 202,666 3.2
Paul P. Wickman, Jr.(8)......................................... 56,674 *
Robert G. Klimasewski(9)........................................ 69,491 1.1
Richard C. Laird(10)............................................ 4,465 *
Kenneth E. Olson(11)............................................ 25,798 *
John C. Stiska(12).............................................. 126,564 2.1
All directors and officers as a group (11 persons)(13).......... 4,134,758 56.5
</TABLE>
- - ---------------
* Less than one percent.
(1) This table is based upon information supplied by executive officers,
directors and principal stockholders and the National Association of
Securities Dealers, Inc. Unless otherwise indicated in the footnotes to
this table and subject to community property laws where applicable, the
Company believes that each of the stockholders named in this table has sole
voting and investment power with respect to the shares indicated as
beneficially owned. Applicable percentages of beneficial ownership are
based on 6,101,854 shares of Common Stock outstanding on November 30, 1997,
adjusted as required by rules promulgated by the Securities and Exchange
Commission (the "SEC").
(2) Includes 358,918 shares issuable upon conversion of certain debentures and
70,000 shares subject to warrants exercisable within 60 days of November
30, 1997. Union Miniere, s.a., a Belgian public company, owns approximately
75% of the shares of Union Miniere Inc. Sogem, s.a., owns the remaining
shares of Union Miniere Inc. Union Miniere, s.a. owns virtually all the
shares of Sogem, s.a.
5
<PAGE> 8
(3) Includes 82 shares held by Inamaria Sherman, wife of Dr. Sherman, 1,333
shares held by Martina Sherman, daughter of Dr. Sherman, and 75,999 shares
subject to options exercisable within 60 days of November 30, 1997. Does
not include 150 shares held by Inamaria Sherman, for the benefit of Margoth
Klein, Mrs. Sherman's mother.
(4) Includes 10,666 shares held of record by Laser Mechanisms, Inc. of which
Mr. Fredrick is the President, and 23,332 shares subject to warrants
exercisable within 60 days of November 30, 1997.
(5) Includes 202,666 shares subject to options exercisable within 60 days of
November 30, 1997.
(6) Includes 122,666 shares subject to options exercisable within 60 days of
November 30, 1997.
(7) Includes 2,666 shares subject to options exercisable within 60 days of
November 30, 1997 and 200,000 shares subject to a warrant exercisable
within 60 days of November 30, 1997.
(8) Includes 51,330 shares subject to options exercisable within 60 days of
November 30, 1997.
(9) Includes 23,332 shares subject to warrants exercisable within 60 days of
November 30, 1997.
(10) Does not include 914,713 shares beneficially owned by Union Miniere Inc.,
of which Mr. Laird is Executive Vice President and a director.
(11) Includes 23,332 shares subject to warrants exercisable within 60 days of
November 30, 1997. Does not include 1,276,585 shares held by Proxima
Corporation, of which Mr. Olson is Chairman of the Board and acting
President and Chief Executive Officer.
(12) Includes 23,332 shares subject to warrants exercisable within 60 days of
November 30, 1997.
(13) Includes 495,327 shares issuable upon exercise of options exercisable
within 60 days of November 30, 1997, and 363,328 shares issuable upon
exercise of warrants exercisable within 60 days of November 30, 1997. Also
includes 1,276,585 shares held by Proxima Corporation, of which Mr. Olson
is Chairman of the Board and acting President and Chief Executive Officer;
Mr. Olson disclaims beneficial ownership of such shares. Also includes
485,795 shares and 358,918 shares issuable upon conversion of certain
debentures held by Union Miniere Inc., of which Mr. Laird is the Executive
Vice President and a director; Mr. Laird disclaims beneficial ownership of
such shares.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Company's directors and
executive officers, and persons who own more than 10% of a registered class of
the Company's equity securities, to file with the SEC initial reports of
ownership and reports of changes in ownership of Common Stock and other equity
securities of the Company. Officers, directors and greater than 10% stockholders
are required by SEC regulation to furnish the Company with copies of all Section
16(a) forms they file.
To the Company's knowledge, based solely on a review of the copies of such
reports furnished to the Company and written representations that no other
reports were required, during the fiscal year ended August 31, 1997, all Section
16(a) filing requirements applicable to its officers, directors and greater than
10% beneficial owners were complied with the exception of (i) a late filing by
Arthur P. Minich of a Form 3 when he became an executive officer in June 1997
and (ii) a late filing by Glenn H. Sherman of a Form 4 to report the purchase of
150 shares by his wife for the benefit of her mother in June 1997.
6
<PAGE> 9
EXECUTIVE COMPENSATION
COMPENSATION OF DIRECTORS
As consideration for service on the Company's Board of Directors,
non-employee directors receive a $1,000 fee for their attendance at each Board
meeting and a $500 fee for their attendance at each committee meeting. In fiscal
1997, the total compensation paid to non-employee directors was $51,800.
Non-employee directors are also reimbursed for reasonable out-of-pocket expenses
in connection with attendance at Board and committee meetings. In December 1996,
the Company issued warrants to purchase up to 20,000 shares of the Company's
Common Stock to Union Miniere Inc. and warrants to purchase up to 6,666 shares
of the Company's Common Stock to each of John Stiska, Kenneth Olson, Robert
Klimasewski, William Fredrick and a former director of the Company at exercise
prices of $4.50 per share. Such warrants expire in December 2006 except for the
warrants granted to the former director, all of which expired in July 1997
following his resignation from the Board. Union Miniere's warrant may be
exercised in whole or in part at any time by the holder as long as at least one
representative of Union Miniere remains a member of the Board of Directors.
COMPENSATION OF EXECUTIVE OFFICERS
The following table sets forth for the fiscal years ended August 31, 1997
and 1996 compensation awarded or paid to, or earned by, the Company's Chief
Executive Officer and the four highest compensated executive officers of the
Company who earned more than $100,000 in the fiscal year ended August 31, 1997
(collectively, the "Named Executive Officers"):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
------------
ANNUAL COMPENSATION SECURITIES
------------------------- UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY($)(1) BONUS($) OPTIONS COMPENSATION($)(2)
- - ------------------------------ ---- ------------ -------- ------------ ------------------
<S> <C> <C> <C> <C> <C>
Glenn H. Sherman, Ph.D........ 1997 184,771 23,500 26,666 25,872
Chairman of the Board 1996 170,600 25,000 10,000 25,702
and Chief Executive Officer
Douglas H. Tanimoto, Ph.D..... 1997 149,904 14,000 -- 19,208
President, Laser Power 1996 145,500 14,500 6,666 19,930
Research Division and
Director
Dean T. Hodges, Ph.D.......... 1997 144,904 10,000 -- 11,728
President, Laser Power 1996 140,500 24,000 6,666 15,225
Microlasers Division
Richard P. Scherer............ 1997 147,164 15,000 -- 8,820
President, Laser Power 1996 139,000 18,000 6,666 12,300
Optics Division
Paul P. Wickman, Jr........... 1997 119,808 15,000 26,666 11,585
Senior Vice President 1996 110,400 16,000 6,666 13,900
and Chief Financial Officer
</TABLE>
- - ---------------
(1) In accordance with the rules of the SEC, the compensation described in this
table does not include medical, group life insurance or other benefits
received by the Named Executive Officers which are available generally to
all salaried employees of the Company and certain perquisites and other
personal benefits received by the Named Executive Officers which do not
exceed the lesser of $50,000 or 10% of any such officer's salary and bonus
disclosed in this table.
(2) Includes premium payments made by the Company for split dollar life
insurance policies that are owned by the Named Executive Officers. The
policy owners have assigned to the Company the proceeds from termination of
the policies or from payment of death benefits in an amount equal to the
lesser of the cash
7
<PAGE> 10
surrender value or the cumulative payments made by the Company on their
behalf. The insurance premium payments (i) in fiscal 1997 amounted to
$22,036, $15,521, $9,903, $8,820 and $7,954 and (ii) in fiscal 1996 amounted
to $23,400, $17,400, $14,800, $12,300 and $11,600 for Messrs. Sherman,
Tanimoto, Hodges, Scherer and Wickman, respectively. Also includes 401(k)
Plan employer matching contributions (i) in fiscal 1997 of $3,836, $3,687,
$1,825, $0 and $3,631 and (ii) in fiscal 1996 of $2,304 $2,530, $425, $0 and
$2,504 for Messrs. Sherman, Tanimoto, Hodges, Scherer and Wickman,
respectively.
STOCK OPTION GRANTS AND EXERCISES
The Company grants options to its executive officers under the 1997 Plan.
As of November 30, 1997, options to purchase 15,332 shares were outstanding
under the 1997 Plan and options to purchase 984,668 shares remained available
for grant thereunder.
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth each grant of stock options made during the
fiscal year ended August 31, 1997 to each of the Named Executive Officers:
<TABLE>
<CAPTION>
POTENTIAL
INDIVIDUAL GRANTS REALIZABLE VALUE
-------------------------------------------------------- AT ASSUMED
PERCENTAGE OF ANNUAL RATES
NUMBER OF TOTAL OPTIONS OF STOCK PRICE
SECURITIES GRANTED TO APPRECIATION
UNDERLYING EMPLOYEES IN EXERCISE OR FOR OPTION TERM(3)
OPTIONS FISCAL BASE PRICE EXPIRATION -------------------
NAME GRANTED(1) YEAR(%)(2) ($/SHARE) DATE 5%($) 10%($)
- - ---------------------------- ---------- ------------- ----------- ---------- ------ -------
<S> <C> <C> <C> <C> <C> <C>
Glenn H. Sherman............ 26,666 6.4 4.50 12/07/06 75,465 191,195
Douglas H. Tanimoto......... -- -- -- -- -- --
Dean T. Hodges.............. -- -- -- -- -- --
Richard P. Scherer.......... -- -- -- -- -- --
Paul P. Wickman, Jr......... 26,666 6.4 4.50 12/07/06 75,465 191,195
</TABLE>
- - ---------------
(1) Options become exercisable over a five-year period with 20% vesting each
anniversary of the date of grant. The options will fully vest upon a change
of control, as defined in the Company's option plans, unless the acquiring
company assumes the options or substitutes similar options. The term of the
options is ten years.
(2) Based on options to purchase 415,975 shares granted to employees in fiscal
1997, including to the Named Executive Officers.
(3) The potential realizable value, or gain, is calculated based on the term of
the option at its time of grant (ten years). It is calculated assuming that
the stock price on the date of grant appreciates at the indicated annual
rate, compounded annually for the entire term of the option and that the
option is exercised and sold on the last day of its term for the appreciated
stock price. These amounts represent certain assumed rates of appreciation
only, in accordance with the rules of the SEC, and do not reflect the
Company's estimate or projection of future stock price performance. Actual
gains, if any, are dependent on the actual future performance of the
Company's Common Stock and no gain to the optionee is possible unless the
stock price increases over the option term, which will benefit all
stockholders.
8
<PAGE> 11
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR END OPTION
VALUES
The following table sets forth information with respect to the exercise of
stock options by the Named Executive Officers during the fiscal year ended
August 31, 1997 and the number and value of securities underlying unexercised
options held by the Named Executive Officers as of August 31, 1997:
<TABLE>
<CAPTION>
NUMBER OF VALUE OF
SECURITIES UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS AT OPTIONS AT
SHARES AUGUST 31, 1997(#)(1) AUGUST 31, 1997($)(2)
ACQUIRED ON VALUE --------------------------- ---------------------------
NAME EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- - -------------------------- ----------- -------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Glenn H. Sherman.......... -- -- 68,666 34,666 297,414 99,665
Douglas H. Tanimoto....... -- -- 201,333 5,333 878,832 15,332
Dean T. Hodges............ -- -- 121,333 85,333 348,832 245,332
Richard P. Scherer(3)..... -- -- 161,333 45,333 703,832 190,332
Paul P. Wickman, Jr....... -- -- 41,330 58,667 158,820 178,670
</TABLE>
- - ---------------
(1) Includes both "in-the-money" and "out-of-the-money" options. "In-the-money"
options are options with exercise prices below the market price of the
Company's Common Stock.
(2) Based on the fair market value of the Common Stock as of August 31, 1997.
Amounts reflected are based on the fair market value minus the exercise
price and do not indicate that the optionee sold such stock.
(3) Includes warrants to purchase 200,000 shares issued in September 1992 in
payment for services rendered as a consultant.
EMPLOYMENT AGREEMENTS
The Company has entered into employment agreements with the following
executive officers: (1) Glenn Sherman, Ph.D., Chairman of the Board and Chief
Executive Officer, (2) Dean Hodges, Ph.D., President, Laser Power Microlasers
Division, (3) Richard Scherer, President, Laser Power Optics Division, (4)
Douglas Tanimoto, Ph.D., President, Laser Power Research Division, (5) Arthur
Minich, President, Laser Power Display Division, and (6) Paul Wickman, Jr.,
Senior Vice President and Chief Financial Officer. Pursuant to such employment
agreements, Messrs. Sherman, Hodges, Scherer, Tanimoto, Minich and Wickman
receive annual salaries of $185,000, $145,000, $147,000, $150,000, $150,000 and
$120,000, respectively. Annual bonuses are determined by the Board of Directors.
The term of each employment agreement is three years and may be extended by
mutual written consent. Each employment agreement also provides that if
employment is terminated for cause or the employee voluntarily resigns, the
employee shall receive only the salary payments earned prior to the date of
termination. If employment is terminated without cause, the employee will
receive consulting fees equal to his base salary times the number of months
equal to the number of years he would have been employed at the next anniversary
date of his employment. As consideration for the consulting fees, the employee
will provide consulting services on an as needed basis. In addition, during the
term of employment, and for as long as the employee is receiving consulting
fees, the employee will not, subject to certain limitations, compete with the
Company.
9
<PAGE> 12
REPORT OF THE BOARD OF DIRECTORS
ON EXECUTIVE COMPENSATION(1)
The Company's executive compensation program is administered by the Board
of Directors and the Compensation Committee of the Board of Directors. The
Compensation Committee is appointed by the Board and is comprised of three
non-employee Directors.
OVERALL COMPENSATION POLICY
The Board believes that in order for the Company to succeed it must be able
to attract and retain qualified executives. The objectives of the Board in
determining the type and amount of executive officer compensation are to provide
a compensation package consisting of a base salary, bonus, and long term
incentives in the form of stock options that allows the Company to attract and
retain talented executive officers and to align their interests with those of
stockholders.
BASE SALARY
During fiscal 1997, the base salaries for the executive officers were
intended to be competitive with salaries of similar executive positions in
comparable companies in the Company's industry. Annual adjustments in base
salaries are made effective at the beginning of the fiscal year for which they
are intended to apply and therefore reflect in large part the prior year's
business and individual performance achievements. See "Summary Compensation
Table."
BONUS
Annual incentive bonuses are intended to reflect the Board's belief that a
significant portion of the annual compensation of each executive officer should
be contingent upon the performance of the Company, as well as the individual
contribution of each officer. Accordingly, the executive officers of the
Company, including the Chief Executive Officer, participate in an annual
executive incentive bonus plan ("Incentive Plan") which provides for cash
bonuses based upon the Company's overall financial performance and the
achievement of certain specified levels of profitability and certain other
financial and non-financial objectives and milestones for the fiscal year.
Awards are made by the Board upon receiving the Compensation Committee's
recommendations. The Compensation Committee annually establishes targeted
profitability levels for the ensuing fiscal year in conjunction with the
Company's annual operating plan. Upon the achievement of various increasing
levels of profitability above the minimum target level and based on the timing
and the degree to which certain other financial and non-financial objectives and
milestones are met or exceeded, the Compensation Committee may choose to
increase bonuses accrued to the Incentive Plan. The purpose of the Incentive
Plan is to reward and reinforce executive management's commitment to achieve
levels of profitability and return consistent with increasing stockholder value.
Cash bonuses earned under the Incentive Plan are paid each year upon
completion of the Company's annual audit of the results of operations for the
previous fiscal year by the Company's independent auditors.
LONG TERM INCENTIVES
The final portion of the executive officers' compensation during fiscal
1997 consisted of incentive stock options as listed in this Proxy Statement in
the table entitled "Option Grants in Last Fiscal Year." It is this award that
the Company has utilized to provide long term incentives.
CHIEF EXECUTIVE OFFICER COMPENSATION
During fiscal 1997, Dr. Glenn H. Sherman, Chief Executive Officer and
Chairman of the Board of the Company, was eligible to participate in the same
executive compensation plans as were available to other executive officers of
the Company. Based on the performance of the Company in fiscal 1996 and the
Board's assessment of Dr. Sherman's ongoing personal performance in the position
of Chief Executive Officer,
- - ---------------
(1) The material in this report and under the caption "Performance Measurement
Comparison" are not "soliciting material," are not deemed filed with the SEC
and are not to be incorporated by reference in any filing of the Company
under the Securities Act of 1933, as amended (the "Securities Act"), or the
Exchange Act whether made before or after the date of this Proxy Statement
and irrespective of any general incorporation language therein.
10
<PAGE> 13
Dr. Sherman received a base salary increase during fiscal 1997 to $185,000.
Among the factors considered by the Board in its consideration of Dr. Sherman's
performance were improvement in operating performance of the Company, progress
in the development of the Company's technologies and product lines, and the
further strengthening of the Company's infrastructure.
Dr. Sherman's annual incentive bonus award was earned under the Incentive
Plan and was based substantially on the operating performance of the Company for
fiscal year 1996. On that basis, Dr. Sherman received an annual incentive bonus
award of $25,000.
Dr. Sherman was granted stock options under the 1997 Plan for 26,666 shares
of Common Stock in December 1996, at an option price of $4.50 per share.
The Company entered into an employment agreement and a consulting agreement
with Dr. Sherman in April 1997. The employment agreement provides for an
employment term of three years and for an annual salary of $185,000, subject to
increases and additional bonuses as determined by the Board of Directors. The
employment agreement may be terminated without cause by either party upon 12
months notice, and terminated for cause under certain circumstances. The
consulting agreement requires Dr. Sherman to perform certain consulting services
on an as needed basis following termination of his employment for up to the
number of months equal to the number of years he would have been employed at the
next anniversary date of his employment if such employment is terminated for any
reason other than his death or disability, provided, that the Company may elect
not to engage Dr. Sherman as a consultant if the Company has terminated him for
cause. In his capacity as a consultant, Dr. Sherman is entitled to compensation
in the amount of his annual base salary at the time his employment terminates.
The employment agreement and consulting agreement expire in April 2007.
SECTION 162(m) OF THE INTERNAL REVENUE CODE
Section 162(m) of the Internal Revenue Code of 1986, as amended (the
"Code"), limits the Company to a deduction for federal income tax purposes of no
more than $1 million of compensation paid to certain executive officers in a
taxable year. At this time, the amount of compensation (as defined for Code
Section 162(m) purposes) paid to the Company's executive officers does not
exceed the $1 million pay limit and will most likely not be affected by the
statute and regulations in the near future. Compensation above $1 million may be
deducted if it is "performance-based compensation" within the meaning of the
Code.
The Compensation Committee has determined that stock options granted under
the 1997 Plan with an exercise price at least equal to the fair market value of
the Company's common stock on the date of grant shall be treated as
"performance-based compensation."
The Board of Directors:
Robert G. Klimasewski
William G. Fredrick
Richard C. Laird
Kenneth E. Olson
Glenn H. Sherman
John C. Stiska
Douglas H. Tanimoto
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
As noted above, the Company's Compensation Committee consists of Messrs.
Fredrick, Olson and Stiska. Neither Dr. Sherman nor Dr. Tanimoto participated in
deliberations of the Company's Board of Directors concerning executive officer
compensation. No member of the Compensation Committee was at any time an officer
or employee of the Company or serves as a member of the board of directors or
compensation committee of any entity that has one or more executive officers
serving as a member of the Company's Board of Directors or compensation
committee other than Mr. Olson who is a director of Proxima Corporation, Mr.
Fredrick who is a director of Laser Mechanisms, Inc. and Mr. Laird who is
Executive Vice President and a director of Union Miniere. See "Certain
Transactions."
11
<PAGE> 14
PERFORMANCE MEASUREMENT COMPARISON(1)
The following graph shows a comparison of cumulative total returns for the
Company, the SIC Code Index for companies listed with SIC Code 3827 "Optical
Instruments and Lenses" and the Nasdaq Market Index for the period that
commenced June 19, 1997 (the date on which the Company's Common Stock was first
traded on the Nasdaq National Market) and ended on August 31, 1997. The graph
assumes that all dividends have been reinvested.
COMPARISON OF CUMULATIVE TOTAL RETURNS
(LASER POWER CORPORATION, SIC CODE INDEX, NASDAQ MARKET INDEX)
<TABLE>
<CAPTION>
MEASUREMENT PERIOD
(FISCAL YEAR COVERED) LASER POWER INDUSTRY INDEX BROAD MARKET
<S> <C> <C> <C>
6/19/97 100 100 100
6/30/97 103.3 100 100
7/31/97 104.4 109.33 110.51
8/31/97 129.67 109.44 110.1
</TABLE>
- - ---------------
(1) This Section is not "soliciting material," is not deemed "filed" with the
SEC and is not to be incorporated by reference in any filing of the Company
under the Securities Act or the Exchange Act whether made before or after
the date hereof and irrespective of any general incorporation language in
any such filing.
12
<PAGE> 15
CERTAIN TRANSACTIONS
In November 1987, Union Miniere, s.a. purchased certain debentures in the
aggregate principal amount of $1,660,000 from Laser Power (the "Debentures").
The Debentures are currently held by Union Miniere Inc. The Debentures bear
interest at a rate which is equal to Wells Fargo Bank's prime rate plus 1%;
provided, however, that the rate of interest shall in no event be less than
5 1/2% per annum nor higher than the lesser of 11 1/2% per annum or the maximum
rate then permitted by law. Laser Power has paid interest on the Debentures
semi-annually. The Debentures were originally convertible into Common Stock at
$3.00 per share and were due and payable on October 30, 1992. The original due
date was extended to October 30, 1997. Union Miniere Inc. desired to postpone
the conversion and/or repayment of the Debentures and in March and June 1997,
Laser Power entered into a letter agreement and definitive agreements with Union
Miniere Inc. to extend the maturity date of the Debentures to November 2, 2000
and to increase the conversion price to $4.625 per share, as adjusted in
accordance with such agreements. As a result, 358,918 shares of Common Stock are
now issuable upon conversion of the Debentures. In addition, Union Miniere Inc.
was granted certain registration rights covering all shares of Common Stock now
owned by it or acquired by it upon conversion of the Debentures and exercise of
its warrants, including the right to request that Laser Power register the
resale of such shares no earlier than one year after the closing of Laser
Power's initial public offering. In December 1996, Laser Power issued warrants
to purchase 20,000 shares of Common Stock at an exercise price of $4.50 per
share to Union Miniere Inc. in connection with the service of certain directors
of Laser Power.
On September 1, 1991, Laser Power acquired substantially all of the assets
of Burleigh Northwest Optical, Inc. In consideration for the assets acquired,
Laser Power executed a secured promissory note in the amount of $150,000 payable
to Burleigh Instruments, Inc., an entity of which Robert G. Klimasewski is an
officer, director and stockholder. The note bears interest at 8.25% per annum
and is payable in 120 equal monthly installments. As of November 30, 1997, the
outstanding balance on such note was $71,000.
In May 1993, Proxima purchased 83,333 shares of Common Stock from Laser
Power for $250,000. In January 1994, Laser Power entered into a Stock Purchase
Agreement with Proxima, pursuant to which Proxima has purchased shares of Series
A Preferred Stock for an aggregate purchase price of $6.4 million. The Series A
Preferred Stock could be converted into Common Stock at an effective price of
$6.00 per share. However, under certain circumstances, the effective conversion
price could be reduced to $3.00 per share. In March and June 1997, to ensure the
exchange of the Series A Preferred Stock for Common Stock, Laser Power entered
into a letter agreement and definitive agreements with Proxima, pursuant to
which Proxima exchanged the Series A Preferred Stock for 1,193,252 shares of
Common Stock (a fixed conversion price of $5.40 per share) immediately prior to
the completion of Laser Power's initial public offering. In addition, Proxima
was granted certain registration rights covering all shares of Common Stock now
owned by it or acquired by it in exchange for the Series A Preferred Stock,
including the right to request that Laser Power register the resale of such
shares no earlier than one year after the closing of the initial public
offering. In July 1996, Proxima stated that it had written down a majority of
its investment in Laser Power because the microlaser technology developed by
Laser Power will initially be suited for the higher cost specialty projector
markets that will not be served by Proxima's products.
Laser Power purchases a number of products for resale from Laser
Mechanisms, Inc. ("LMI"). William G. Fredrick, Jr., a director of Laser Power,
is the founder, president and sole stockholder of LMI. In addition, LMI
purchases laser optics from Laser Power. LMI's sales to Laser Power in fiscal
1997 were $114,673. Laser Power's sales to LMI in fiscal 1997 were $384,996.
Laser Power believes that such transactions between Laser Power and LMI are on
terms as favorable to Laser Power as such terms would have been if negotiated
between Laser Power and unaffiliated persons.
13
<PAGE> 16
OTHER MATTERS
The Board of Directors knows of no other matters that will be presented for
consideration at the Annual Meeting. If any other matters are properly brought
before the meeting, it is the intention of the persons named in the accompanying
proxy to vote on such matters in accordance with their best judgment.
By Order of the Board of Directors
/s/ JAMES D. McFARLAND
James D. McFarland
Secretary
December 30, 1997
A COPY OF THE COMPANY'S ANNUAL REPORT TO THE SECURITIES AND EXCHANGE
COMMISSION ON FORM 10-K FOR THE FISCAL YEAR ENDED AUGUST 31, 1997 IS AVAILABLE
WITHOUT CHARGE UPON WRITTEN REQUEST TO: JAMES D. MCFARLAND, SECRETARY, LASER
POWER CORPORATION, 12777 HIGH BLUFF DRIVE, SAN DIEGO, CALIFORNIA 92130.
14
<PAGE> 17
PROXY
LASER POWER CORPORATION
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON JANUARY 30, 1998
The undersigned stockholder of Laser Power Corporation, a Delaware
corporation (the "Company"), hereby acknowledges the receipt of the Notice of
Annual Meeting of Stockholders and Proxy Statement with respect to the Annual
Meeting of Stockholders of Laser Power Corporation to be held at the Company's
offices located at 12777 High Bluff Drive, San Diego, California, on Friday,
January 30, 1998 at 6:00 p.m. and hereby appoints Glenn H. Sherman and Paul P.
Wickman, Jr., and each of them, as attorneys and proxies of the undersigned,
each with power of substitution and revocation, and each with all powers that
the undersigned would possess if personally present to vote the shares of stock
of Laser Power Corporation which the undersigned may be entitled to vote at such
meeting and any and all continuations and adjournments thereof as set forth
below, and in their discretion upon any other matters that may properly come
before the meeting.
THIS PROXY WILL BE VOTED AS SPECIFIED OR IF NO CHOICE IS SPECIFIED, FOR THE
ELECTION OF THE NOMINEES, FOR PROPOSAL 2 AND AS SAID PROXIES DEEM ADVISABLE ON
SUCH OTHER MATTERS AS MAY PROPERLY COME BEFORE THE MEETING.
(IMPORTANT - TO BE VOTED, SIGNED AND DATED ON REVERSE SIDE) [SEE REVERSE SIDE]
<PAGE> 18
[X] Please mark votes as in this example.
1. Election of directors to hold office until the next Annual Meeting of
Stockholders and until their successors are elected.
Nominees: William G. Fredrick, Robert G. Klimasewski, Richard C. Laird, Kenneth
E. Olson, Glenn H. Sherman, Ph.D., John C. Stiska, and Douglas H.
Tanimoto, Ph.D.
[ ] FOR ALL NOMINEES
[ ] WITHHELD FROM ALL NOMINEES
[ ] ________________________
________________________
________________________
For all nominees except as noted above
2. To ratify selection of Ernst & Young LLP as independent auditors for the
fiscal year ending September 30, 1998.
[ ] FOR
[ ] AGAINST
[ ] ABSTAIN
[ ] MARK HERE FOR CHANGE OF ADDRESS AND NOTE AT LEFT
[ ] MARK HERE IF YOU PLAN TO ATTEND THE MEETING
PLEASE VOTE, SIGN, DATE AND PROMPTLY
RETURN THIS CARD.
Please sign exactly as your name
appears hereon. If the stock is
registered in the names of two or more
persons, each should sign. Executors,
administrators, trustees, guardians
and attorneys-in-fact should add their
titles. If signer is a corporation,
please give full corporate name and
have a duly authorized officer sign,
stating title. If signer is a
partnership, please sign in
partnership name by authorized person.
Signature: Date: ________ Signature: Date: ________
