<PAGE> 1
[ ]SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act
of 1934
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 Section 240.14a-11(c) or Section 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 FEBRUARY 5, 1999
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"), will be held on
Friday, February 5, 1999 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 2000 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, 1999.
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 7, 1998,
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/ PAUL P. WICKMAN, JR.
Paul P. Wickman, Jr.
Secretary
San Diego, California
January 8, 1999
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 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
FEBRUARY 5, 1999
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, February 5, 1999, 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 January 8, 1999,
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
7, 1998 will be entitled to notice of and to vote at the Annual Meeting. At the
close of business on December 7, 1998, the Company had outstanding and entitled
to vote 8,398,455 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 2000 Annual Meeting of Stockholders must be received by the Company
not later than October 9, 1999 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.
Unless a stockholder who wishes to bring a matter that will not be included
in the proxy statement before the stockholders at the Company's 2000 Annual
Meeting notifies the Company of such matter prior to November 17, 1999,
management will have discretionary authority to vote all shares for which it has
proxies in opposition to such matter.
PROPOSAL 1
ELECTION OF DIRECTORS
There are seven nominees for the seven Board positions currently 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, except Mr. Sharman and Mr. Perkins who were elected by the Board
pursuant to the Company's Bylaws to fill vacancies on the Board.
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>
Robert G. Klimasewski 54 Chairman of the Board
Dick Sharman 64 Chief Executive Officer and Director
William G. Fredrick 57 Director
Richard C. Laird 51 Director
Robert P. Perkins 46 Director
John C. Stiska 55 Director
Douglas H. Tanimoto, Ph.D. 57 President, Research Division and Director
</TABLE>
2.
<PAGE> 5
ROBERT G. KLIMASEWSKI has served as a director of the Company since 1980
and as Chairman of the Board of Directors of the Company since December 1998.
Mr. Klimasewski has served as the Chairman of the Board, President and Chief
Executive Officer of Transmation, Inc., an electronic instrumentation
manufacturer, since 1994 and as Vice Chairman of Burleigh Instruments, Inc., a
scientific instrument and laser manufacturer, since 1972.
DICK SHARMAN has served as a director of the Company since February 1998
and as Chief Executive Officer of the Company since December 1998. Mr. Sharman
was Chairman of the Board, President and Chief Executive Officer of EMI
Acquisition Corp. ("EMI") from 1993 until February 1998 and Chairman of the
Board of Exotic Materials, Inc. ("Exotic"), a wholly owned subsidiary of EMI,
from 1988 until February 1998. From 1988 until June 1996 and from June 1997
until November 1997, Mr. Sharman also served as President and Chief Executive
Officer of Exotic.
WILLIAM G. FREDRICK has served as a director of the Company since 1980. Mr.
Fredrick has served as president of Laser Mechanisms, Inc. ("LMI"), a laser
device and accessory manufacturer, since 1980, and Oxid Corporation, a laser
device and accessory manufacturer, since 1986.
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 sales
organization for metals refined by related companies in Europe, in 1980 and
currently serves as Executive Vice President and director of Union Miniere, Inc.
ROBERT P. PERKINS has served as a director of the Company since February
1998. Mr. Perkins has been a private investor and self-employed business
consultant since 1991. From 1991 to February 1998, Mr. Perkins served as a
director of Exotic. From June 1993 until February 1998, Mr. Perkins also served
as a director of EMI and Vice President and Chief Financial Officer of both EMI
and Exotic.
JOHN C. STISKA has served as a director of the Company since 1987. He is
Chairman of Commercial Bridge Capital, LLC, a secured bridge loan fund in
formation, and is Of Counsel to the law firm of Latham & Watkins. From February
1996 until February 1998, Mr. Stiska was a Corporate Senior Vice President and
General Manager of the Technology Applications Division of QUALCOMM
Incorporated, a wireless communications company. 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., First World Communications, Inc. and Eaton Vorad, Inc.
DOUGLAS H. TANIMOTO, PH.D., has served as President of the Research
Division since 1988 and has served as a director of the Company since 1984.
BOARD COMMITTEES AND MEETINGS
The Company's Board of Directors has an Audit Committee, a Compensation
Committee and a Committee on Directors.
The Audit Committee currently 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 September 30, 1998.
The Compensation Committee currently consists of Messrs. Fredrick, Olson
and Stiska. The Compensation Committee makes recommendations regarding the
Company's 1997 Equity Incentive Plan and Employee Stock Purchase Plan as well as
decisions concerning salaries and incentive compensation for officers and
employees of the Company. The Compensation Committee met two times during the
fiscal year ended September 30, 1998.
3.
<PAGE> 6
In 1998, the Company formed the Committee on Directors, which currently
consists of Messrs. Sharman, Olson and Klimasewski. The Committee on Directors
makes recommendations on characteristics, skills and functional needs required
of directors, nominates directors and reviews the performance of directors.
During the fiscal year ended September 30, 1998, the Board of Directors
held seven meetings, and each director attended 75% or more of the aggregate of
the meetings of the Board and of the committees on which he served, which were
held during the period for which he was a director or committee member,
respectively.
Mr. Olson has resigned from the Board of Directors and each Committee of
the Board on which he serves effective as of the Annual Meeting. The board
intends to reconstitute each of the Committees following the Annual Meeting.
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, 1999 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. The Company expects
representatives of Ernst & Young LLP to be present at the Annual Meeting. These
representatives 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
EXECUTIVE COMPENSATION
COMPENSATION OF DIRECTORS
As consideration for service on the Company's Board of Directors,
non-employee directors receive $4,000 per year. In addition, 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 and are reimbursed for
reasonable out-of-pocket expenses in connection with attendance at Board and
committee meetings. In fiscal 1998, the total compensation paid to non-employee
directors was $51,000.
During fiscal 1998, the Company granted options covering 25,000 shares to
the following non-employee directors: William G. Frederick, Jr., 5,000 shares;
Robert G. Klimasewski, 5,000 shares; Kenneth E. Olson, 5,000 shares; Richard C.
Laird, 5,000 shares; and John C. Stiska, 5,000 shares. All such options are
exercisable within 60 days of December 5, 1998 at an exercise price per share of
$4.94. No options granted by the Company to its non-employee directors were
exercised in fiscal 1998.
In fiscal 1998, the Company paid Mr. Perkins and Mr. Sharman $20,000 and
$130,000, respectively, as employees of EMI, the Company's wholly owned
subsidiary.
5.
<PAGE> 8
COMPENSATION OF EXECUTIVE OFFICERS
The following table sets forth for the fiscal years ended September 30,
1998 and August 31, 1997 and 1996 compensation awarded or paid to, or earned by,
the Company's former Chief Executive Officer, the four highest compensated
executive officers of the Company who earned more than $100,000 in the fiscal
year ended September 30, 1998 and one former executive officer (Mr. Scherer) who
was not serving as an executive officer at the end of fiscal 1998 (collectively,
the "Named Executive Officers"):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
---------------------------- ------------
SECURITIES
NAME AND PRINCIPAL UNDERLYING ALL OTHER
POSITION YEAR SALARY(1) BONUS OPTIONS COMPENSATION(2)
- ------------------------- ---- -------- ------- ---------- ---------------
<S> <C> <C> <C> <C> <C>
Glenn H. Sherman, Ph.D. . 1998 $195,865 -- -- $34,715
Former Chairman of the 1997 $184,771 $23,500 26,666 $22,036
Board and Chief 1996 $170,600 $25,000 10,000 $25,600
Executive Officer(3)
Douglas H. Tanimoto, 1998 $150,961 -- -- $26,279
Ph.D. ................. 1997 $149,904 $14,000 -- $19,208
President, Research 1996 $145,500 $14,500 6,666 $19,800
Division and Director
Dean T. Hodges, Ph.D. ... 1998 $147,019 -- -- $20,946
President, Microlasers 1997 $144,904 $10,000 -- $11,728
Division 1996 $140,500 $24,000 6,666 $15,200
Richard P. Scherer....... 1998 $ 65,002(4) -- -- $79,504
Former President, 1997 $147,164 $15,000 -- $ 8,820
Optics Division 1996 $139,000 $18,000 6,666 $12,300
Thomas Brawley........... 1998 $149,004 -- -- $ 4,973
President and Chief 1997 -- -- -- --
Executive Officer, 1996 -- -- -- --
Exotic Materials,
Inc.; President,
Precision Optics Group
Paul P. Wickman, Jr. .... 1998 $129,712 -- 25,000 $19,460
Senior Vice President 1997 $119,808 $15,000 26,666 $11,585
and Chief Financial 1996 $110,400 $16,000 6,666 $13,900
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 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 surrender value or the cumulative payments made by the
Company on their behalf. The insurance premium payments for Messrs. Sherman,
Tanimoto, Hodges, Scherer and Wickman amounted to (i) in fiscal 1996
$23,400, $17,400, $14,800, $12,300 and $11,600, respectively, (ii) in fiscal
1997 $22,036, $15,521, $9,903, $8,820 and $7,954, respectively and (iii) in
fiscal 1998 $29,691, $21,191, $18,146, $3,254 and $14,765, respectively.
Also includes 401(k) Plan employer matching contributions for Messrs.
Sherman, Tanimoto, Hodges, Scherer and Wickman
6.
<PAGE> 9
of (i) in fiscal 1996, $2,304 $2,530, $425, $0 and $2,504, respectively,
(ii) in fiscal 1997 $3,836, $3,687, $1,825, $0 and $3,631, respectively and
(iii) in fiscal 1998 $5,024, $5,088, $2,800, $0 and $4,695, respectively.
Includes a payment of $4,973 to Mr. Brawley for a 401(k) Plan employer
matching contribution. Also includes a payment of $76,250 made to Mr.
Scherer in connection with Mr. Scherer's separation with the Company.
(3) Dr. Sherman resigned as Chief Executive Officer, Chairman of the Board of
Directors and director of the Company on December 4, 1998.
(4) Mr. Scherer would have made $152,500 in salary had he remained with the
Company for the entire fiscal year.
STOCK OPTION GRANTS AND EXERCISES
The Company currently grants options to its executive officers under the
1997 Plan. As of December 1, 1998, 660,310 shares remained available for grant
thereunder to all employees of the Company, including executive officers. On
occasion, the Company may also grant options to its executive officers outside
of its stock option plans. As of December 1, 1998, options to purchase 126,143
shares were outstanding and held by executive officers of the Company outside of
the Company's stock option plans.
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth each grant of stock options made during the
fiscal year ended September 30, 1998 to each of the Named Executive Officers:
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL
------------------------------------------------- REALIZABLE VALUE
PERCENTAGE AT ASSUMED ANNUAL
OF TOTAL RATES OF STOCK PRICE
NUMBER OF OPTIONS APPRECIATION
SECURITIES GRANTED TO FOR OPTION TERM(3)
UNDERLYING EMPLOYEES EXERCISE -------------------
OPTIONS IN FISCAL PRICE EXPIRATION
NAME GRANTED(1) YEAR(%)(2) ($/SHARE) DATE 5% 10%
- ---- ---------- ---------- --------- ---------- ------ ------
<S> <C> <C> <C> <C> <C> <C>
Glenn H. Sherman, Ph.D. -- -- -- -- -- --
Douglas H. Tanimoto,
Ph.D. ................ -- -- -- -- -- --
Dean T. Hodges, Ph.D. .. -- -- -- -- -- --
Richard P. Scherer...... -- -- -- -- -- --
Thomas J. Brawley....... 275,000 60.6% $3.25 06/06/08 $563,063 $1,421,063
Paul P. Wickman, Jr. ... 25,000 5.5% $7.00 12/08/07 $110,250 $ 278,250
</TABLE>
- ----------
(1) Options granted under the 1997 Plan generally become exercisable over a
4-year period with 25% vesting on the first anniversary of the date of grant
and the remainder vesting monthly thereafter. 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 453,800 shares granted to employees in fiscal
1998, 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
7.
<PAGE> 10
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.
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
September 30, 1998 and the number and value of securities underlying unexercised
options held by the Named Executive Officers as of September 30, 1998:
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS AT IN-THE-MONEY OPTIONS AT
SHARES SEPTEMBER 30, 1998(2) SEPTEMBER 30, 1998(3)
ACQUIRED ON VALUE --------------------------------------------------------
NAME EXERCISE REALIZED(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Glenn H. Sherman, Ph.D. . -- -- 77,999 25,333 $ 0 $ 0
Douglas H. Tanimoto, Ph.D. -- -- 204,000 2,666 $ 0 $ 0
Dean T. Hodges, Ph.D. ... -- -- 164,000 42,666 $ 0 $ 0
Richard P. Scherer...... 200,000 $400,000 -- -- -- --
Thomas J. Brawley....... -- -- -- 275,000 -- $ 0
Paul P. Wickman, Jr. ... -- -- 62,665 62,332 $ 0 $ 0
</TABLE>
- ----------------------
(1) Value realized is based on the fair market value of the Company's Common
Stock on the date of exercise minus the exercise price (or the actual sales
price if the shares were sold by the optionee simultaneously with the
exercise) without taking into account any taxes that may be payable in
connection with the transaction.
(2) 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.
(3) Based on the fair market value of the Common Stock as of September 30, 1998.
Amounts reflected are based on the fair market value minus the exercise
price and do not indicate that the optionee sold such stock.
EMPLOYMENT AGREEMENTS
The Company has entered into employment agreements with the following
executive officers: (1) Dean T. Hodges, Ph.D., President, Microlasers Division,
(2) Douglas H. Tanimoto, Ph.D., President, Research Division and (3) Paul P.
Wickman, Jr., Senior Vice President and Chief Financial Officer. Pursuant to
such employment agreements, Messrs. Hodges, Tanimoto, and Wickman are to receive
annual salaries of $145,000, $150,000 and $120,000, respectively, subject to
adjustment in the discretion of the Board of Directors. 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 of the parties. 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.
8.
<PAGE> 11
The Company has entered into a Separation Agreement with Dr. Sherman
pursuant to which Dr. Sherman shall receive $16,667 per month and certain other
benefits until December 4, 2000 for his services to the Company as a consultant.
In the event the Company materially breaches this Separation Agreement, Dr.
Sherman is entitled to accelerate the payments of all amounts to be paid to him
pursuant to the Separation Agreement.
Exotic entered into an agreement with Dick Sharman pursuant to which Mr.
Sharman continues to provide consulting services to Exotic and the Company
related to the integration of the operations of the two companies. The term of
the agreement expires on the date which Mr. Sharman reaches the age of 65,
unless earlier terminated pursuant to its provisions. Pursuant to the agreement,
Mr. Sharman is paid a salary of $199,200 per annum, subject to adjustment. The
agreement can be terminated earlier by Exotic under certain conditions.
Exotic has also entered into an employment agreement with Thomas Brawley,
pursuant to which Mr. Brawley is employed as the President and Chief Executive
Officer of Exotic. The agreement is without any definite term, and can be
terminated at any time by either party, with or without cause. The agreement
provides for a salary of $165,000 per annum, subject to adjustments, plus
certain other benefits. If Exotic terminates Mr. Brawley without cause, on or
before the first anniversary of the Agreement, Mr. Brawley shall be entitled to
an amount equal to three times his monthly salary at the time of termination; if
Exotic terminates Mr. Brawley without cause after the first anniversary of the
agreement, Mr. Brawley shall be entitled to an amount equal to six times his
monthly salary at the time of termination.
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 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 1998, 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. The Chief Executive Officer's
base salary for fiscal 1998 was determined in this manner to be $195,865. 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
- ------------
(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.
9.
<PAGE> 12
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.
No cash bonuses were awarded to the Company's executive officers for fiscal
1998.
LONG TERM INCENTIVES
The final portion of the executive officers' compensation during fiscal
1998 consisted of 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
Dr. Glenn H. Sherman served as the Company's Chief Executive Officer for
all of fiscal 1998. During fiscal 1998, the Company's Chief Executive Officer
was eligible to participate in the same executive compensation plans as were
available to other executive officers of the Company, including the Incentive
Plan and the 1997 Plan. Based on the performance of the Company in fiscal 1997
and the Board's assessment of Dr. Sherman's ongoing personal performance in the
position of Chief Executive Officer, Dr. Sherman received a salary increase
during fiscal 1998. Among the factors considered by the Board in its
consideration of Dr. Sherman's performance were progress in the development of
the Company's technologies and product lines, the successful completion of the
Company's initial public offering and the further strengthening of the Company's
infrastructure.
On December 4, 1998, Dr. Sherman tendered his resignation as Chief
Executive Officer, Chairman of the Board, director and all other positions he
held with the Company or any of its subsidiaries. The Company has entered into a
Separation Agreement with Dr. Sherman pursuant to which Dr. Sherman shall
receive $16,667 per month and certain other benefits until December 4, 2000 for
his services to the Company as a consultant. In the event the Company materially
breaches this Separation Agreement, Dr. Sherman is entitled to accelerate the
payments of all amounts to be paid to him pursuant to the Separation Agreement.
The Board has elected Dick Sharman to succeed Dr. Sherman as the Company's Chief
Executive Officer and Robert Klimasewski to succeed Dr. Sherman as Chairman of
the Company's Board of Directors.
10.
<PAGE> 13
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 will be treated as
"performance-based compensation."
The Board of Directors:
Robert G. Klimasewski
Dick Sharman
Douglas H. Tanimoto
William G. Fredrick
Richard C. Laird
Kenneth E. Olson
John C. Stiska
Robert Perkins
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
As noted above, the Company's Compensation Committee consists of Messrs.
Fredrick, Olson and Stiska. No member of the Compensation Committee has at any
time been an officer or employee of the Company. LMI, a company of which Mr.
Fredrick is a director and officer, has engaged in certain transactions with the
Company. The Company purchases a number of products for resale from LMI. In
addition, LMI purchases laser optics from the Company. LMI's sales to Laser
Power in fiscal 1998 were approximately $726,000. The Company's sales to LMI
in fiscal 1998 were approximately $237,000. The Company believes that such
transactions between the Company and LMI are on terms as favorable to the
Company as such terms would have been if negotiated between the Company and
unaffiliated persons.
11.
<PAGE> 14
SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information with respect to the
beneficial ownership of the Common Stock of the Company as of December 5, 1998
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) the Named
Executive Officers, (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 15.2%
9440 Carroll Park
San Diego, CA 92121-2298
Richard C. Laird(2)................................. 924,178 10.5
Union Miniere Inc.(3)............................... 914,713 10.4
13847 West Virginia Dr.
Lakewood, CO 80228
Glenn H. Sherman, Ph.D.(4).......................... 669,648 7.9
1103 Luneta Drive
Del Mar, CA 92014
Wellington Capital Management....................... 437,000 5.2
75 State Street
Boston, MA 02109
Dick Sharman........................................ 391,805 4.7
William G. Fredrick, Jr.(5)......................... 370,422 4.4
Douglas H. Tanimoto, Ph.D.(6)....................... 286,600 3.3
Robert P. Perkins................................... 206,062 2.5
Richard P. Scherer.................................. 200,000 2.4
Dean T. Hodges, Ph.D.(7)............................ 163,999 1.9
John C. Stiska (8).................................. 157,564 1.9
Paul P. Wickman, Jr.(9)............................. 79,396 *
Robert G. Klimasewski(10)........................... 74,491 *
Kenneth E. Olson(11)................................ 30,798 *
Thomas J. Brawley................................... -- --
All directors and officers as a group (11 persons)(12) 2,685,315 28.6%
</TABLE>
- ----------
* Less than one percent.
(1) This table is based upon information supplied by executive officers,
directors and principal stockholders and Schedules 13D and 13G filed with
the Securities and Exchange Commission (the "SEC"). 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 8,398,455 shares of Common Stock
outstanding on December 5, 1998, adjusted as required by rules promulgated
by the SEC.
12.
<PAGE> 15
(2) Includes 5,000 shares subject to warrants exercisable within 60 days of
December 5, 1998. Includes 914,713 shares beneficially owned by Union
Miniere Inc., of which Mr. Laird is Executive Vice President and a
director.
(3) Includes 358,918 shares issuable upon conversion of debentures and 70,000
shares subject to warrants exercisable within 60 days of December 5, 1998.
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.
(4) Includes 82 shares held by Inamaria Sherman, Dr. Sherman's wife, 1,333
shares held by Martina Sherman, Dr. Sherman's daughter, 103,332 shares
subject to options exercisable within 60 days of December 5, 1998. Excludes
150 shares held by Mrs. Sherman, for the benefit of Margoth Klein, Mrs.
Sherman's mother.
(5) Includes 10,666 shares held of record by LMI of which Mr. Fredrick is the
President, and 28,332 shares subject to warrants exercisable within 60 days
of December 5, 1998.
(6) Includes 6,084 owned by Jani Cullinan, Dr. Tanimoto's daughter, 6084 owned
by Craig Tanimoto, Dr. Tanimoto's son and 204,000 shares subject to options
exercisable within 60 days of December 5, 1998.
(7) Includes 163,999 shares subject to options exercisable within 60 days of
December 5, 1998.
(8) Includes 28,332 shares subject to warrants exercisable within 60 days of
December 5, 1998.
(9) Includes 72,996 shares subject to options exercisable within 60 days of
December 5, 1998.
(10) Includes 28,332 shares subject to warrants exercisable within 60 days of
December 5, 1998.
(11) Includes 28,332 shares subject to warrants exercisable within 60 days of
December 5, 1998.
(12) Includes 440,995 shares issuable upon exercise of options exercisable
within 60 days of December 5, 1998 and 188,328 shares issuable upon
exercise of warrants exercisable within 60 days of December 5, 1998. Also
includes 485,795 shares and 358,918 shares issuable upon conversion of
debentures held by Union Miniere Inc., a company of which Mr. Laird is the
Executive Vice President and a director.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended ("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 September 30, 1998, all
Section 16(a) filing requirements applicable to its officers, directors and
greater than 10% beneficial owners were complied with.
13.
<PAGE> 16
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 September 30, 1998. The graph
assumes that all dividends have been reinvested.
COMPARISON OF CUMULATIVE TOTAL RETURN
PERFORMANCE GRAPH
<TABLE>
<CAPTION>
6/19/97 9/30/97 12/31/97 3/31/97 6/30/98 9/30/98
------- ------- -------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
LASER POWER CORP. 100 127.47 156.04 87.91 69.78 30.77
SIC CODE INDEX 100 119.95 97.36 95.57 82.7 53.47
NASDAQ MARKET INDEX 100 116.59 109.24 128.03 131.34 118.37
</TABLE>
ASSUMES $100 INVESTED ON JUNE 19, 1997
- ----------
(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.
CERTAIN TRANSACTIONS
The Company has entered into indemnity agreements with certain officers and
directors which provide, among other things, that the Company will indemnify
such officer or director, under the circumstances and to the extent provided for
therein, for expenses, damages, judgments, fines and settlements he may be
required to pay in actions or proceedings which he is or may be made a party by
reason of his position as a director, officer or other agent of the Company, and
otherwise to the full extent permitted under Delaware law and the Company's
Bylaws.
The Company has entered into certain additional transactions with its
directors and officers, as described under the caption "Executive Compensation."
In September 1, 1991, the Company acquired substantially all of the assets
of Burleigh Northwest Optical, Inc. In consideration for the assets acquired,
the Company executed a secured promissory note in the amount of
14.
<PAGE> 17
$150,000 payable to Burleigh Instruments, Inc., an entity of which Robert G.
Klimasewski is a director and 50% stockholder. The note bears interest at 8.25%
per annum and is payable in 120 equal monthly installments. As of September 30,
1998, the outstanding balance on such note was approximately $75,000.
In January 1994, the Company entered into a Cooperative Development and
License Agreement with Proxima which provides Proxima with certain rights to
display technology developed by the Company so long as Proxima continues to
provide funding to the Company or aggressively markets products using such
technology. Further, Proxima has a right of first refusal regarding other
technologies developed by the Company relating to the video display market.
LMI, a company of which Mr. Fredrick is a director and officer, has engaged
in certain transactions with the Company, as described under the caption
"Compensation Committee Interlocks and Insider Participation."
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/ PAUL P. WICKMAN, JR.
Paul P. Wickman, Jr.
Secretary
January 8, 1999
A COPY OF THE COMPANY'S ANNUAL REPORT TO THE SECURITIES AND EXCHANGE COMMISSION
ON FORM 10-K FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 1998 IS AVAILABLE WITHOUT
CHARGE UPON WRITTEN REQUEST TO: PAUL P. WICKMAN, JR., SECRETARY, LASER POWER
CORPORATION, 12777 HIGH BLUFF DRIVE, SAN DIEGO, CALIFORNIA 92130.
15.
<PAGE> 18
LASER POWER CORPORATION
PROXY SOLICITED BY THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON FEBRUARY 5, 1999
The undersigned hereby appoints DICK SHARMAN and PAUL P. WICKMAN, Jr., and
each of them, as attorneys and proxies of the undersigned, with full power of
substitution, to vote all of the shares of stock of Laser Power Corporation
which the undersigned may be entitled to vote at the Annual Meeting of
Stockholders of Laser Power Corporation to be held at 12777 High Bluff Drive,
San Diego, California, on Friday, February 5, 1999 at 6:00 p.m. (local time),
and at any and all postponements, continuations and adjournments thereof, with
all powers that the undersigned would possess if personally present, upon and in
respect of the following matters and in accordance with the following
instructions, with discretionary authority as to any and all other matters that
may properly come before the meeting.
UNLESS A CONTRARY DIRECTION IS INDICATED, THIS PROXY WILL BE VOTED FOR THE
NOMINEES LISTED IN PROPOSAL 1 AND FOR PROPOSAL 2, AS MORE SPECIFICALLY DESCRIBED
IN THE PROXY STATEMENT. IF SPECIFIC INSTRUCTIONS ARE INDICATED, THIS PROXY WILL
BE VOTED IN ACCORDANCE THEREWITH.
(CONTINUED AND TO BE SIGNED ON OTHER SIDE)
[SEE REVERSE SIDE]
<PAGE> 19
[X] PLEASE MARK YOUR
VOTES AS IN THIS
EXAMPLE
PROPOSAL 1: To elect the following nominees as directors to hold office until
the 2000 Annual Meeting of Stockholders.
Nominees: Robert G. Klimasewski, Dick Sharman, William G. Fredrick, Richard C.
Laird, Robert P. Perkins, John C. Stiska and Douglas H. Tanimoto
[ ] FOR ALL NOMINEES
[ ] WITHHELD FROM ALL NOMINEES
[ ] _______________________________________
For all nominees except as noted above
MANAGEMENT RECOMMENDS A VOTE FOR EACH NOMINEE LISTED ABOVE.
PROPOSAL 2: To ratify the selection of ERNST & YOUNG LLP as independent auditors
of the Company for its fiscal year ending September 30, 1999.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
MANAGEMENT RECOMMENDS A VOTE FOR PROPOSAL 2.
PLEASE VOTE, DATE AND PROMPTLY RETURN THIS PROXY IN THE ENCLOSED RETURN ENVELOPE
WHICH IS POSTAGE PREPAID IF MAILED IN THE UNITED STATES.
SIGNATURE(S)____________________________________________ DATED__________________
____________________________________________ DATED__________________
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.
