<PAGE>
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 Section 240.14a-11(c) or Section 240.14a-12
PREMIER LASER SYSTEMS, INC.
- --------------------------------------------------------------------------------
(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:
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(4) Date Filed:
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<PAGE>
PREMIER LASER SYSTEMS, INC.
3 MORGAN
IRVINE, CALIFORNIA 92718
----------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON THURSDAY, AUGUST 28, 1997
----------------
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of Premier
Laser Systems, Inc. (the "Company") will be held at 3 Morgan, Irvine,
California, on Thursday, August 28, 1997 at 2:00 p.m. for the following
purposes:
(1) To elect members of the Board of Directors to serve until the next
annual meeting of shareholders;
(2) To approve and adopt a Stock Option Plan providing for the issuance of
options for up to 500,000 shares of Common Stock to eligible employees,
officers, directors and consultants of the Company and its
subsidiaries; and
(3) To transact such other business as may properly come before the meeting
or any adjournments and postponements thereof.
The Board of Directors has fixed the close of business on July 24, 1997 as
the record date for the determination of stockholders entitled to notice of
and to vote at the meeting. Only holders of the Company's Class A Common
Stock, Class E-1 Common Stock and Class E-2 Common Stock at the close of
business on the record date are entitled to vote at the meeting. Shareholders
attending the meeting whose shares are held in the name of a broker or other
nominee should bring with them a proxy or letter from that firm confirming
their ownership of shares.
Accompanying this Notice are a Proxy and Proxy Statement. IF YOU WILL NOT BE
ABLE TO ATTEND THE MEETING TO VOTE IN PERSON PLEASE SIGN AND DATE THE
ACCOMPANYING PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE. The Proxy
may be revoked at any time prior to its exercise at the meeting.
IF YOU OWN BOTH CLASS A AND CLASS E COMMON STOCK, PLEASE SIGN AND RETURN
BOTH PROXY CARDS.
By Order of the Board of Directors,
Ronald Higgins, Secretary
Irvine, California
July 24, 1997
YOUR VOTE IS IMPORTANT
YOU ARE CORDIALLY INVITED TO ATTEND THE ANNUAL MEETING. HOWEVER, EVEN IF
YOU DO PLAN TO ATTEND, PLEASE PROMPTLY COMPLETE, SIGN, DATE AND MAIL THE
ENCLOSED PROXY IN THE ENVELOPE PROVIDED. RETURNING A SIGNED PROXY WILL NOT
PREVENT YOU FROM VOTING IN PERSON AT THE ANNUAL MEETING, IF YOU SO DESIRE,
BUT WILL HELP THE COMPANY SECURE A QUORUM AND REDUCE THE EXPENSE OF
ADDITIONAL PROXY SOLICITATION.
<PAGE>
PREMIER LASER SYSTEMS, INC.
3 MORGAN
IRVINE, CALIFORNIA 92718
----------------
ANNUAL MEETING OF SHAREHOLDERS
THURSDAY, AUGUST 28, 1997
----------------
PROXY STATEMENT
INTRODUCTION
This Proxy Statement is furnished to the shareholders of Premier Laser
Systems, Inc., a California corporation, in connection with the solicitation
of proxies by and on behalf of the Board of Directors of the Company. The
proxies solicited hereby are to be voted at the Annual Meeting of Shareholders
of the Company to be held at 2:00 p.m. on August 28, 1997, at the Company's
offices at 3 Morgan, Irvine, California 92618, and at any and all adjournments
and postponements thereof (the "Annual Meeting"). This Proxy Statement and the
accompanying form of proxy are being mailed to all shareholders on or about
July 28, 1997.
A form of proxy is enclosed for your use. The shares represented by each
properly executed unrevoked proxy will be voted as directed by the shareholder
with respect to the matters described therein. If no direction is made, the
shares represented by each properly executed proxy will be voted FOR
management's nominees for the Board of Directors and FOR the proposed Stock
Option Plan.
Any proxy given may be revoked at any time prior to the exercise thereof by
filing with the Secretary of the Company an instrument revoking such proxy or
by the filing of a duly executed proxy bearing a later date. Any shareholder
present at the meeting who has given a proxy may withdraw it and vote his
shares in person if such shareholder so desires.
PLEASE NOTE THAT THERE ARE SEPARATE PROXY CARDS FOR CLASS A AND CLASS E
COMMON STOCK. IF YOU OWN BOTH CLASSES OF SHARES, PLEASE SIGN AND RETURN BOTH
PROXY CARDS.
It is contemplated that the solicitation of proxies will be made primarily
by mail. The Company will make arrangements with brokerage houses and other
custodians, nominees and fiduciaries to send proxies and proxy material to the
beneficial owners of the shares and will reimburse them for their expenses in
so doing. Should it appear desirable to do so in order to ensure adequate
representation of shares at the meeting, officers, agents and employees of the
Company may communicate with shareholders, banks, brokerage houses and others
by telephone or in person to request that proxies be furnished. All expenses
incurred in connection with this solicitation will be borne by the Company.
The Company has no present plans to hire special employees or paid solicitors
to assist in obtaining proxies, but reserves the option of doing so if it
should appear that a quorum otherwise might not be obtained.
Only holders of record of the Company's Class A Common Stock, Class E-1
Common Stock or Class E-2 Common Stock (collectively, the "Common Stock") at
the close of business on July 24, 1997 are entitled to notice of and vote at
the Annual Meeting. As of July 23, 1997, the Company had issued and
outstanding 10,761,323 shares of Class A Common Stock, 1,257,178 shares of
Class E-1 Common Stock and 1,257,178 shares of Class E-2 Common Stock. Each
share of Common Stock issued and outstanding on the record date of July 24,
1997 is entitled to one vote at the Annual Meeting.
The holders of a majority of the shares of stock of the Company issued and
outstanding and entitled to vote at the Annual Meeting, present in person or
represented by proxy, shall constitute a quorum. Except with respect to the
election of directors or as otherwise provided by statute, all matters coming
before the Annual Meeting shall be decided by the vote of the holders of a
majority of the stock present in person or represented by proxy at the Annual
Meeting and entitled to vote thereat. Votes cast at the Annual Meeting will be
tabulated by the persons appointed by the Company to act as inspectors of
election for the Annual Meeting.
1
<PAGE>
The inspectors of election will treat shares of voting stock represented by
a properly signed and returned proxy as present at the Annual Meeting for
purposes of determining a quorum, without regard to whether the proxy is
marked as casting a vote or abstaining. Likewise, the inspectors of election
will treat shares of voting stock represented by "broker non-votes" (i.e.,
shares of voting stock held in record name by brokers and nominees concerning
which (i) instructions have not been received from the beneficial owners or
persons entitled to vote; (ii) the broker or nominee does not have
discretionary voting power under applicable rules or the instrument under
which it serves in such capacity; or (iii) the record holder has indicated on
the proxy card or has executed a proxy and otherwise notified the Company that
it does not have authority to vote such shares on that matter) as present for
purposes of determining a quorum. Abstentions or broker non-votes will have no
effect in the election of Directors. Except as otherwise provided by statute,
all other matters to come before the Annual Meeting require the approval of a
majority of the shares of voting stock present and entitled to vote thereat.
Therefore, abstentions concerning a particular proposal will have the same
effect as votes against such proposal.
At the Annual Meeting, each shareholder will have cumulative voting rights
with respect to the election of Directors, provided that such shareholder has
given notice at the Annual Meeting prior to the voting for Directors of the
shareholder's intention to cumulate votes. If any one shareholder has given
such notice, all shareholders may cumulate their votes. Management presently
intends to cumulate votes at the Annual Meeting for all shares for which it
holds proxies. If cumulative voting rights are exercised, in voting for
Directors each share will have that number of votes which equals the number of
Directors which may be elected (five). Such votes may be cast for one nominee
or allocated among two or more nominees. In the event that the Board of
Directors deems it appropriate, proxies may be cumulated and distributed
unequally among the five nominees identified herein in order to ensure the
election of the maximum number of such nominees. The five nominees receiving
the highest number of votes at the Annual Meeting will be elected.
ELECTION OF DIRECTORS
NOMINEES
Directors are elected at each annual meeting of shareholders and hold office
until the next annual meeting of shareholders or until their respective
successors are elected and qualified. THE BOARD OF DIRECTORS IS OF THE OPINION
THAT THE ELECTION TO THE BOARD OF DIRECTORS OF THE PERSONS IDENTIFIED BELOW,
ALL OF WHOM ARE CURRENTLY SERVING AS DIRECTORS OF THE COMPANY AND HAVE
CONSENTED TO CONTINUE TO SERVE IF ELECTED, WOULD BE IN THE BEST INTERESTS OF
THE COMPANY. The names of such nominees are as follows: Colette Cozean, Ph.D.,
Patrick J. Day, Grace Ching-Hsin Lin, G. Lynn Powell, D.D.S., and E. Donald
Shapiro, J.D.
Management proxies will be voted FOR the election of the above-named
nominees unless the shareholders indicate that the proxy shall not be voted
for all or any one of the nominees. If for any reason a nominee should, prior
to the Annual Meeting, become unavailable for election as a Director, an event
not now anticipated, the proxies will be voted for such substitute nominee if
any, as may be recommended by management. In no event, however, shall the
proxies be voted for a greater number of persons than the number of nominees
named.
MANAGEMENT OF THE COMPANY
Set forth below is certain information with respect to the nominees of the
Board of Directors of the Company.
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Colette Cozean............... 39 Director, Chairman, Chief Executive Officer
President and Director of Research
Patrick J. Day............... 70 Director
Grace Chin-Hsin Lin.......... 47 Director
G. Lynn Powell............... 56 Director
E. Donald Shapiro............ 65 Director
</TABLE>
2
<PAGE>
COLETTE COZEAN, PH.D., is a founder of the Company and has been Chairman of
the Board of Directors, Chief Executive Officer, President and Director of
Research of the Company since it commenced operations in August 1991. From
April 1987 to August 1991, Dr. Cozean served as Director of Research and
Development, Regulatory Affairs and Clinical Programs at Pfizer Laser Systems,
a division of Pfizer Hospital Products Group, Inc. ("Pfizer Laser") and in
such capacities managed the development of the laser technologies which were
acquired by the Company from Pfizer Laser. Prior to April 1987, Dr. Cozean
held various research positions at Baxter Edwards, a division of Baxter
Healthcare Corporation ("Baxter"), and American Technology and Ventures, a
division of American Hospital Supply Company ("American Hospital"). Baxter and
American Hospital are manufacturers and suppliers of advanced medical
products. Dr. Cozean holds several patents, has published many articles and
has served as a member of the National Institutes of Health ("NIH") grant
review committee. Dr. Cozean holds a Ph.D. in biomedical engineering and an
M.S. in Electrical Engineering from Ohio State University, a B.S. in
biomedical engineering from the University of Southern California, and a B.A.
in physical sciences from Westmont College.
PATRICK J. DAY has served as a director of the Company since August 1991.
Mr. Day owns a CPA firm which he established in 1967 and has served as a
director for several organizations including the First Presbyterian Church of
Hollywood and many private companies. Mr. Day is a Certified Public
Accountant, financial planner and the father of Dr. Cozean, the Company's
Chairman of the Board and President. Mr. Day has a B.A. in accounting from the
University of Idaho.
G. LYNN POWELL, D.D.S. Dr. Powell joined the Board of Directors in January
1997. Dr. Powell has been on the faculty at the University of Utah since 1982,
where he currently serves as the Assistant Dean for Dental Education in the
School of Medicine and Professor in the Department of Pathology. He is a
patent holder who has performed extensive research in the field of dentistry
serving as primary investigator on several funded grants and is author or co-
author of over 45 papers in journals, a majority of which relate to the use of
lasers in dentistry. He serves as a reviewer for three dental and laser
journals, has lectured nationally as well as internationally and routinely
presents his work at research meetings. Dr. Powell is the current President of
the International Society for Lasers in Dentistry. Dr. Powell received his
D.D.S. from the University of Washington and was on the full time faculty in
Restorative Dentistry at that institution for ten years.
E. DONALD SHAPIRO, J.D. joined the Board of Directors in August 1994. Mr.
Shapiro has served as the Joseph Solomon Distinguished Professor of Law at New
York Law School since 1983 where he served as both Dean and Professor of Law
from 1973 to 1983. He is Supernumerary Fellow of St. Cross College at Oxford
University, England and Visiting Distinguished Professor Bar-Ilan University,
Tel-Aviv, Israel. Mr. Shapiro received a J.D. degree at Harvard Law School and
has been conferred honorary degrees from both Oxford University and New York
Law School. He currently serves on the Boards of Directors for several public
companies including Loral Corporation, Eyecare Products PLC, Kranzco Realty
Trust, Group Health Incorporated, Interferon Sciences, Inc., Future Medical
Products, Inc. and MacroChem Corporation. He also serves on the Board of
Directors of Bank Leumi NY. Mr. Shapiro is a Fellow, Institute of Judicial
Administration NY, and American Academy of Forensic Sciences and a life member
of the American Law Institute. He is author or co-author of more than 50
publications including books and journal articles dealing with Medicine,
Forensic Science and the Law.
GRACE CHING-HSIN LIN has served as a director of the Company since February
1992. Ms. Lin has been an agent providing real estate consulting services for
Security Trust Realty since April 1988 and an owner of South Pacific
Investment, an investment management company, since 1989.
MEETINGS OF BOARD AND COMMITTEES
The Board of Directors held nine meetings during the fiscal year ended March
31, 1997. Among the incumbent nominees for membership on the Board of
Directors, no director attended fewer than 75% of the aggregate of the
meetings of the Board and the Committees upon which he or she served.
3
<PAGE>
The Board of Directors has standing Audit and Compensation Committees, but
does not have a Nominating Committee. In practice, the entire Board performs
the function of a Nominating Committee.
The Audit Committee of the Board of Directors held two meetings during the
fiscal year ended March 31, 1997. The Committee's responsibility is to review
and act or report to the Board of Directors with respect to various audit and
accounting matters, including the selection of independent auditors, the
determination of the scope of audit procedures, the nature of the services to
be performed by and the fees to be paid to the Company's independent auditors,
the establishment of the accounting practices of the Company, and the
monitoring of all financial aspects of the Company's operations. The Audit
Committee is composed of Mr. Day, Ms. Lin and Mr. Shapiro.
The Compensation Committee of the Board of Directors held one meeting during
the fiscal year ended March 31, 1997. The Committee is responsible for making
recommendations to the Board concerning such executive compensation
arrangements and plans as it deems appropriate. The Compensation Committee is
composed of Dr. Powell, Ms. Lin and Mr. Shapiro.
DIRECTOR COMPENSATION
All directors are elected annually and hold office until the next annual
meeting of the shareholders and until their successors are duly elected and
qualified. The Company pays to all nonemployee directors $1,000 per Board
meeting attended, $1,000 per committee meeting attended which is not in
conjunction with a Board meeting, $500 per committee meeting attended in
conjunction with a Board meeting, and $500 per telephonic Board or committee
meeting. In addition, directors are reimbursed for their out-of-pocket
expenses incurred in attending meetings of the Board of Directors and its
committees. Mr. Shapiro receives a fee of $1,000 per month as compensation for
additional consulting services relating to one of the Company's pending
litigation matters and to new business issues. The Company has also paid Mr.
Day an aggregate of $12,700 for accounting services rendered between September
1996 and February 1997. See "Certain Transactions."
The Company may also periodically award options or warrants to its
directors, under its existing stock option plans and otherwise. The Company's
outstanding Stock Option Plans include: (i) the 1995 Stock Option Plan which
provides for the granting of "incentive stock options," within the meaning of
Section 422 of the Internal Revenue Code of 1986, as amended ("Incentive Stock
Options"), and nonstatutory options; (ii) the 1996 Stock Option Plan which
also provides for the granting of Incentive Stock Options and nonstatutory
stock options; (iii) the February 1996 Stock Option Plan which provides for
the granting of nonstatutory stock options, and (iv) the 1997 Stock Option
Plan, described below.
The Company's 1997 Stock Option Plan (the "1997 Plan") authorizes the
Company to grant options to purchase shares of the Company's Class A Common
Stock, no par value, to selected officers, directors, key employees and other
providers of service to the Company, with the aggregate number of shares to be
delivered upon exercise not to exceed 1,500,000.
The 1997 Plan terminates in February 2007. Options granted under the 1997
plan will have a term not to exceed ten (10) years and an exercise price in an
amount determined by the Board of Directors or the committee administering the
Plan. As of June 11, 1997, options to purchase an aggregate of 571,500 shares
of the Company's Class A Common Stock had been issued under the 1997 Plan to
the Company's directors and executive officers, at an exercise price of $6.125
per share.
If the Company's 1996 Stock Option Plan, as described herein, is approved by
the Company's shareholders, each person who is or was a member of the
compensation committee of the Board of Directors of the Company on February
23, 1996, 1997 and 1998 will be issued, under that plan, options to purchase
10,000 shares of the Company's Class A Common Stock. These options will have
an exercise price equal to the fair market value of the Company's Class A
Common Stock on the grant dates described above, and a term of ten years. As
of February 23, 1996, the Compensation Committee was composed of Mr. Shapiro
and Ms. Lin. As of February 23, 1997, the Compensation Committee was composed
of Mr. Shapiro, Ms. Lin and Dr. Powell.
4
<PAGE>
The Company's Articles of Incorporation and indemnification agreements
entered into between the Company and certain of the Company's directors and
officers require the Company to indemnify such officers and directors to the
fullest extent permitted by applicable law against liabilities incurred in
connection with their duties as officers and directors of the Company. Such
indemnification rights may extend to liabilities under the Securities Act.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Company, the Company has been advised that in the opinion of the Commission
such indemnification is against public policy as expressed in the Securities
Act, and is, therefore, unenforceable.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth information concerning compensation paid to
the Company's Chief Executive Officer and each other executive officer of the
Company who received an annual salary and bonus of more than $100,000 for
services rendered to the Company during the fiscal year ended March 31, 1997.
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
------------
ANNUAL SECURITIES
COMPENSATION(1) UNDERLYING
FISCAL ---------------- STOCK ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS OPTIONS COMPENSATION
--------------------------- ------ -------- ------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Colette Cozean, President,... 1997 $151,064 $ -- 217,500 $32,300(2)
Chief Executive Officer and
Director of Research 1996 $112,000 $ -- 140,000 $19,800(3)
1995 $ 97,500 $20,000 358,650 $ 4,800(4)
T. Daniel Caruso, Jr......... 1997 $105,625 $10,000 109,500 $ --
Senior Vice President, Sales
and Marketing 1996 $ 90,625 $10,000 95,000 $ --
</TABLE>
- --------
(1) Excludes perquisite and other personal benefits, securities and properties
otherwise categorized as salary or bonuses which in the aggregate, for
each of the named persons did not exceed the lesser of either $50,000 or
10% of the total annual salary reported for such person. The Board has
authorized the Company to enter into Termination Agreements with the above
executive officers which will provide, when executed, that in the event of
a termination of employment following a change in control of the Company,
as defined in such agreement, the named executive officer will receive (i)
a lump sum cash payment equal to two times the highest annual level of
total cash compensation paid to that officer during the three calendar
years prior to the termination; (ii) immediate vesting of all previously
granted stock options; and (iii) continuing health benefits for a period
of 24 months. The Company has also entered into Employment Agreements with
each of the named persons which provide for two to four months of
severance benefits upon their termination of employment. Based upon salary
levels as of July 23, 1997, such severance benefits range from
approximately $36,668 to $55,000 for each of the named persons.
(2) Represents the full amount of premiums paid by the Company ($27,500) for a
split-dollar life insurance policy in the amount of $2 million on the life
of Dr. Cozean and an auto allowance of $4,800.
(3) Represents the full amount of premiums paid by the Company ($15,000) for a
split-dollar life insurance policy in the amount of $2 million on the life
of Dr. Cozean, and an auto allowance for Dr. Cozean ($4,800).
(4) Represents an auto allowance for Dr. Cozean.
OPTIONS GRANTED IN LAST FISCAL YEAR
The following table sets forth certain information concerning stock options
granted to the named executive officers during the fiscal year ended March 31,
1997. This information includes hypothetical potential gains from stock
options granted in fiscal 1997. These hypothetical gains are based entirely on
assumed annual growth rates
5
<PAGE>
of 5% and 10% in the value of the Company's Common Stock price over the 10
year life of the stock options granted in 1997. These assumed rates of growth
were selected by the Securities and Exchange Commission for illustration
purposes only, and are not intended to predict future stock prices, which will
depend upon market conditions and the Company's future performance and
prospects.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE
NUMBER OF PERCENT OF AT ASSUMED ANNUAL RATES OF
SHARES OF TOTAL OPTIONS STOCK PRICE APPRECIATION
COMMON STOCK GRANTED TO EXERCISE OR FOR OPTION TERM
UNDERLYING EMPLOYEES DURING BASE PRICE EXPIRATION ---------------------------
NAME OPTIONS GRANTED FISCAL YEAR PER SHARE(1) DATE 5%($) 10%($)
---- --------------- ---------------- ----------- ---------- ------------ --------------
<S> <C> <C> <C> <C> <C> <C>
Colette Cozean, Ph.D.... 217,500(2) 30.0% $6.125 2007 $ 837,805 $ 2,123,163
T. Daniel Caruso, Jr.... 109,500(2) 15.1% $6.125 2007 $ 421,792 $ 1,068,903
</TABLE>
- --------
(1) The options were granted at an exercise price at least equal to the fair
market value of the Class A Common Stock on the date of grant. The
exercise price may be paid by delivery of cash or already owned shares,
subject to certain conditions.
(2) Such options vest in three equal annual installments commencing March 31,
1998.
AGGREGATED OPTION EXERCISES AND FISCAL YEAR-END OPTION VALUES
The following table sets forth certain information regarding stock options
exercised by the named executive officer during the fiscal year ended March
31, 1997, as well as the number of exercisable and unexercisable in-the-money
stock options and their values at fiscal year-end. An option is in-the-money
if the fair market value for the underlying securities exceeds the exercise
price of the option.
<TABLE>
<CAPTION>
VALUE OF
NUMBER OF UNEXERCISED IN-THE-
UNEXERCISED OPTIONS AT MONEY OPTIONS AT MARCH
SHARES MARCH 31, 1997 31, 1997(1)
ACQUIRED VALUE ------------------------- -------------------------
ON EXERCISE REALIZED EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
----------- -------- ------------------------- -------------------------
<S> <C> <C> <C> <C>
Colette Cozean, Ph.D.... 0 0 141,730/574,420 $97,115/$204,710
T. Daniel Caruso, Jr.... 0 0 29,522/189,500(2) $ 20,000/$37,500
</TABLE>
- --------
(1) Represents the Nasdaq last sale price of underlying securities at fiscal
year end ($5.50 per share), as reported by the Nasdaq National Market,
minus the exercise price of the options.
(2) Excludes options to purchase 4,004 shares of each of Class E-1 Common
Stock and Class E-2 Common Stock, all of which are presently exercisable.
There is no market for the Class E-1 or Class E-2 Common Stock.
CERTAIN TRANSACTIONS
In December 1994, the Company exchanged Mr. Day's outstanding warrants to
purchase 100,000 shares of Series A Preferred Stock for warrants to purchase
9,044 shares of Class A Common Stock, and 8,008 shares of each of Class E-1
Common Stock and Class E-2 Common Stock for an aggregate purchase price of
$100,000. The Board of Directors subsequently agreed to extend these warrants
until March 31, 1998.
Mr. Shapiro receives a fee of $1,000 per month as compensation for
additional consulting services relating to one of the Company's pending
litigation matters and to new business issues. The Company has also paid
Mr. Day an aggregate of $12,700 for accounting services rendered between
September 1996 and February 1997.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During the fiscal year ended March 31, 1997, the members of the Compensation
Committee were Grace Ching-Hsin Lin, G. Lynn Powell, D.D.S. and E. Donald
Shapiro, all of whom are non-employee directors of the Company. No member of
the Compensation Committee has a relationship that would constitute an
interlocking relationship with executive officers and directors of another
entity.
6
<PAGE>
BOARD COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors hereby submits its
report concerning the compensation of the Company's executive officers,
including the Chief Executive Officer. The Compensation Committee is
responsible for setting and administering the compensation policies of the
Company with respect to its executive officers.
The Company's executive compensation program is designed to align executive
compensation with the Company's business strategy and performance. The goals
of the executive compensation program are: (i) to attract and retain key
executives critical to the success of the Company; (ii) to provide levels of
compensation which are competitive with other entities in the industry of
similar size; and (iii) to motivate executives to enhance long-term
shareholder value by building appropriate ownership in the Company.
The annual compensation has been considered for the executive officers,
including Dr. Colette Cozean, the Company's President and Chief Executive
Officer, including base salaries, coupled with stock options and other
incentives. Base salaries are the fixed component of the executive officers'
compensation package. Salaries are set and adjusted based upon competitive
standards and individual performance.
The award of any bonuses is based upon the performance of the Company during
the prior year and the contribution of each individual executive officer to
the Company's performance. Among the factors which the Committee has
established to assess the Company's overall performance are: the Company's
performance against budget and targets for sales, expenses and revenue, and
the successful implementation of both short and long-term corporate strategies
for enhancing shareholder value (e.g. strategic acquisitions, divestitures,
facilities expansion, productivity, improvements, etc.) and product
development along with technical advances as well as new patents.
A substantial portion of the compensation of executive officers is based
upon the award of stock options which rely on increases in the value of the
Company's Common Stock. The issuance of options is intended to encourage such
employees to establish a meaningful, long-term ownership interest in the
Company consistent with the interests of the Company's shareholders. Under the
Company's stock option plans, options are granted from time to time to certain
officers, directors and key employees of the Company and its subsidiaries at
the fair market value of the Company's Common Stock at the time of grant.
Because the compensation element of options is dependent on increases over
time in the market value of such shares, stock options represent compensation
that is tied to the Company's long-term performance.
The Committee has reviewed the 1997 base salaries of each of the executive
officers and is of the opinion that such salaries are not at all unreasonable
in view of those paid by the Company's competitors of a similar size. The
Committee also reviewed the stock options awarded in 1997 and is of the
opinion that the option awards are reasonable in view of the officers'
individual performance and positions with the Company.
The Committee has also reviewed Dr. Cozean's base salary for 1997 and is of
the opinion that her salary is not unreasonable in view of those paid to Chief
Executive Officers of the Company's competitors of similar size. Dr. Cozean
received options for the purchase of 217,500 shares of the Company's common
stock all at prices equaling the Company's then current trading price, subject
to a three (3) year vesting schedule, for her past and anticipated services to
the Company, which the Committee believes to be reasonable and appropriate in
light of her individual performance and that of the Company during 1997 based
upon the performance factors discussed above. Dr. Cozean was not paid any cash
bonus for 1997.
COMPENSATION COMMITTEE:
E. Donald Shapiro
Grace Ching-Hsin Lin
G. Lynn Powell, D.D.S.
7
<PAGE>
PERFORMANCE GRAPH
Set forth below is a line graph comparing the cumulative total shareholder
return on the Company's Class A Common Stock, based on its market price, with
the cumulative total return of companies on the Nasdaq Stock Market (U.S.
common stocks) and the Hambrecht & Quist Technology Index, assuming
reinvestment of dividends, for the period beginning December 1, 1994 through
the Company's fiscal year ended March 31, 1997. The Company's Class A Common
Stock was initially offered to the public on November 30, 1994. This graph
assumes that the value of the investment in the Company's Class A Common Stock
and each of the comparison groups was $100 on December 1, 1994.
[PERFORMANCE GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
12/1/94 3/31/95 3/31/96 3/31/97
------- ------- ------- -------
<S> <C> <C> <C> <C>
Premier Laser Systems, Inc..................... $100.00 $ 80.00 $172.50 $110.00
NASDAQ Stock Market (US)....................... $100.00 $109.00 $148.00 $165.00
Hambrecht & Quist Technology Index............. $100.00 $115.00 $156.00 $181.00
</TABLE>
APPROVAL OF 1996 STOCK OPTION PLAN
On February 23, 1996 the Board of Directors adopted, subject to the approval
of the shareholders, the 1996 Stock Option Plan (the "Plan") in order to
strengthen the commonality of interest among management, the Board and
shareholders and to provide incentives for participants in the Plan to remain
in service to the Company.
The following is a general summary of the Plan which is qualified in its
entirety by reference to the full text of the Plan, which is attached to this
Proxy Statement as Exhibit A.
ELIGIBILITY FOR PARTICIPATION
The employees, including officers and Directors who are employees, of the
Company and its subsidiaries (the "Eligible Employees") who are designated by
the Committee (as defined below under the heading "Administration") and
certain consultants to the Company who are designated by the Committee
("Eligible
8
<PAGE>
Consultants") are eligible to receive grants of options to purchase shares of
the Company's Class A Common Stock under the Plan. No determination has been
made concerning the designation of Eligible Employees or Eligible Consultants
who will participate in the Plan in the future nor as to the number of options
to be granted to Eligible Employees or Eligible Consultants under the Plan.
Therefore, it is not possible to state either the number of Eligible Employees
or Eligible Consultants who will receive such grants or the number of options
to be granted. For the same reasons, it is also not possible to state the
number of Eligible Employees or Eligible Consultants, nor the number of
options granted, with respect to the prior fiscal year had the Plan been in
effect. As of July 23, 1997, the Company has 5 persons serving as executive
officers, has 51 full time employees who are not executive officers, and
approximately 50 consultants performing services.
Members of the Board of Directors who are not officers or employees of the
Company or its subsidiaries ("Eligible Directors") are also eligible to
receive grants of certain options under the Plan. As of the close of business
on the date the Plan is approved by the Company's shareholders ("Effective
Date") there are expected to be five Eligible Directors who will be entitled
to receive grants of such options, based on the assumptions that (i) the Plan
is approved by the shareholders at the Annual Meeting, and (ii) all Director
nominees are reelected (such five Eligible Directors being referred to herein
as the "Expected Eligible Directors").
The Eligible Employees, Eligible Consultants and Eligible Directors are
sometimes collectively referred to herein as "Eligible Optionees."
TYPES OF OPTIONS
Options granted under the Plan may be either "incentive stock options"
(which qualify for special tax treatment under section 422 of the Internal
Revenue Code of 1986, as amended (the "Code")) or nonqualified options.
Eligible Employees may be granted either incentive stock options or
nonqualified options while Eligible Consultants and Eligible Directors may
only be granted nonqualified options.
EXERCISE OF OPTIONS
The exercise price of any incentive stock option granted under the Plan may
not be less than the fair market value of the shares of Class A Common Stock
underlying such option, determined as of the date of grant. If an Eligible
Employee owns more than 10% of the shares of Class A Common Stock of the
Company (a "10% Eligible Employee") at the time of grant of an incentive stock
option, the exercise price may not be less than 110% of the fair market value
of the shares of Class A Common Stock underlying such incentive stock option,
determined as of the date of grant. The exercise price of nonqualified options
may be more or less than, or equal to, the fair market value of the underlying
Class A Common Stock. The exercise price of an option may be paid in cash,
through the delivery of other shares of Class A Common Stock or through the
delivery of a combination of such shares of Class A Common Stock and cash. If
any such shares of Class A Common Stock to be delivered in payment of an
exercise price were obtained through the previous exercise of any option
granted under the Plan, such shares must have been held for at least six
months prior to such delivery. The Committee may provide for other methods to
pay for the exercise of an option.
The market value of a share of Class A Common Stock on July 22, 1997 was $10
11/16, based on the last bid price of such stock on the Nasdaq National Market
System.
EXPIRATION OF OPTIONS
No option granted under the Plan may be made exercisable after the
expiration of ten years from the date such option is granted. In addition, any
option granted to a 10% Eligible Employee may not be made exercisable after
the expiration of five years from the date the option is granted.
Before the expiration date of an option, such option is exercisable by an
Eligible Optionee or Eligible Consultant (i) while such person continues to be
employed or is performing consulting services for the Company,
9
<PAGE>
as the case may be, or (ii) so long as such option was then exercisable at the
date of termination of employment for reasons other than death, retirement, or
termination for cause, within three months after the termination of such
employment or consulting relationship. In the event of such termination
because of death while an option is exercisable by an Employee Optionee or
Eligible Consultant, the option will terminate on the earlier of the
expiration date of such option and the expiration of one year after such
death. In the event of such termination because of retirement or disability
while an option is exercisable by an Employee Optionee, or termination because
of disability while an option is exercisable by an Eligible Consultant, the
option will terminate on the earlier of (i) the expiration date of such
option, or (ii) the expiration of three years after termination of employment
due to retirement or disability, or termination of the consulting relationship
due to disability. In the event of termination for cause, the option will
terminate as of such date of termination even if such option was then
exercisable.
With respect to nonqualified options granted to an Eligible Director: (i) in
the event of such termination of directorship for reasons other than death,
disability or termination for certain causes, the nonqualified option is
exercisable by an Eligible Director until the earlier of the expiration date
of such option and the date three months after such termination, (ii) in the
event of such termination because of death, the nonqualified option will
terminate on the earlier of the expiration date of such option and the date
one year after such death, (iii) in the event of such termination because of
disability, the nonqualified option will terminate on the earlier of the
expiration date of such option and the date three years after termination of
directorship due to disability, and (iv) in the event of termination for
certain causes, the nonqualified option will expire as of such date of
termination.
Options which are not exercisable by an Eligible Employee or Eligible
Consultant at the time of termination of employment or consulting relationship
will terminate as of the date of the Eligible Employee's termination of
employment or Eligible Consultant's termination of relationship.
GRANTS OF NONQUALIFIED OPTIONS TO MEMBERS OF THE COMPENSATION COMMITTEE
Subject to receipt of shareholder approval of the Plan, as set forth herein,
nonqualified options to purchase 10,000 shares Class A Common Stock will be
issued to all directors serving on the Board's Compensation Committee on each
of February 23, 1996, February 23, 1997 and February 23, 1998. All of such
options will have an exercise price equal to the fair market value of the
Company's Class A Common Stock on the grant dates described above and a term
of 10 years. As of February 23, 1996 the Compensation Committee was composed
of Mr. Shapiro and Ms. Lin. As of February 23, 1997, the Compensation
Committee was composed of Mr. Shapiro, Ms. Lin and Dr. Powell.
CORPORATE CHANGE
Upon a Corporate Change (as defined in the Plan, and generally relating to
the acquisition of liquidation of the Company), all outstanding options,
including options which are then not exercisable, will become exercisable in
full; provided that the consent of a holder of an accelerated incentive stock
option is required if such acceleration will cause such incentive stock option
not to be treated as an incentive stock option under the Code.
LIMITATION ON SHARES AVAILABLE UNDER STOCK OPTION PLAN
Subject to certain adjustments permitted under the Plan, the aggregate
number of shares of Class A Common Stock to be delivered upon exercise of all
options granted under the Plan may not exceed 500,000 shares of the Company's
Class A Common Stock as now constituted. The shares of Class A Common Stock
issuable upon exercise of options granted under the Plan may be authorized and
unissued shares or reacquired shares. If the number of shares to be delivered
upon the exercise in full of any option granted under the Plan is reduced for
any reason whatsoever or if any option granted under the Plan for any reason
shall expire or shall terminate unexercised as to all or any shares covered
thereby, the number of shares no longer subject to any such option will be
released from such option and will be available to be re-optioned under the
Plan, subject to certain limitations concerning incentive stock options.
10
<PAGE>
LIMITATION ON GRANTS TO ELIGIBLE EMPLOYEES
There are statutory limits on the number of shares of Class A Common Stock
for which incentive stock options may be granted to certain employees in any
calendar year. Currently, the aggregate fair market value of such shares
(determined at the time the incentive stock option is granted) may not exceed
$100,000 for all shares covered by incentive stock options awarded to certain
employees which become exercisable for the first time in any calendar year.
ADMINISTRATION
The Plan will be administered by the Compensation Committee or such other
committee of the Board of Directors which succeeds to the functions and
responsibilities of the Compensation Committee (the "Committee"). The
Committee will have the authority to (i) determine the individuals to whom
options will be granted under the Plan and the terms and provisions of such
options, (ii) interpret the Plan and all options granted under the Plan, (iii)
adopt, amend or rescind such rules as it deems necessary for the proper
administration of the Plan, (iv) make all other determinations necessary or
advisable for the administration of the Plan, and (v) correct any defect or
supply any omission or reconcile any inconsistency in the Plan or in any
option granted under the Plan in the manner and to the extent that the
Committee deems desirable to carry the Plan or any option into effect.
In determining which Eligible Employees and Eligible Consultants will be
granted options under the Plan, the Committee may consider such factors as the
office or position of an Eligible Employee or Eligible Consultant, the degree
of responsibility for, and contribution to, the growth and success of the
Company by such Eligible Employee or Eligible Consultant, the length of
service, promotions, and potential of such Eligible Employee or Eligible
Consultant as well as any other factors which the Committee may deem relevant.
AMENDMENTS
The Board of Directors may amend, suspend or terminate the Plan; provided,
however, that each such amendment of the Plan (i) extending beyond ten years
the period within which options may be granted thereunder, (ii) increasing the
aggregate number of shares of Class A Common Stock to be optioned under the
Plan except as otherwise permitted in the Plan, (iii) materially modifying the
requirements as to eligibility of Eligible Employees or Eligible Consultants
or changing the class of Eligible Employees or Eligible Consultants to whom
options may be granted, (iv) materially increasing the benefits to optionees
under the Plan, (v) modifying the provisions relating to the granting of
nonqualified options to Eligible Directors, or (vi) granting options to
Eligible Directors other than pursuant to the provisions referred to in clause
(v), will, in each case, be subject to approval by the shareholders of the
Company; provided, further, however, that no amendment, suspension or
termination of the Plan may cause the Plan to fail to meet the requirements of
Rule 16b-3 ("Rule 16b-3") under the Exchange Act, or may, without the consent
of the holder of an option, terminate such option or adversely affect such
person's rights in any material respect (except as set forth in the Plan). The
Board of Directors may alter, amend, suspend, discontinue or terminate the
Plan and any option granted thereunder, without the approval of the
shareholders of the Company or any holder of any option thereby affected, if
necessary in order to comply with Rule 16b-3 or sections 422 or 162(m) of the
Code.
TERM OF STOCK OPTION PLAN
The Plan will terminate ten years following the effective date of the Plan
(the "Termination Date"), unless terminated by the Board of Directors at an
earlier date. No options will be granted under the Plan after the Termination
Date, although the exercise periods for previously granted options may extend
beyond the Termination Date.
NONTRANSFERABILITY
No option is transferable by the optionee except by will or the laws of
descent and distribution.
11
<PAGE>
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
INCENTIVE STOCK OPTIONS. Upon the grant of an incentive stock option, the
optionee will not recognize any taxable income and the Company will not be
entitled to a tax deduction. Upon the exercise thereof while the optionee is
employed by the Company or a subsidiary or within three months after
termination of employment, the optionee will not recognize taxable income if
certain holding period requirements under the Code are met; however, under
certain circumstances, the excess of the fair market value of the shares of
Class A Common Stock acquired upon such exercise over the exercise price may
be subject to the alternative minimum tax.
If the shares of Class A Common Stock acquired pursuant to the exercise of
an incentive stock option are held for at least two years from the date of
grant and at least 1 year from the date of exercise, the optionee's gain or
loss upon a disposition of such shares of Class A Common Stock will be a long-
term capital gain or loss and the Company will not be entitled to any tax
deduction. If such shares are disposed of prior to the expiration of these
holding periods, the optionee will recognize ordinary income on certain
amounts in excess of the option price and the Company will be entitled to a
corresponding tax deduction.
NONQUALIFIED OPTIONS. Upon the grant of a nonqualified option, the optionee
will not recognize any taxable income. Upon the exercise thereof, the optionee
will recognize taxable income in an amount equal to the difference between (i)
the fair market value of the shares of Common Stock acquired upon such
exercise, and (ii) the exercise price. At that time, the Company will be
entitled to a corresponding tax deduction. Upon a subsequent disposition of
shares of Common Stock acquired upon the exercise of a nonqualified option,
the optionee will recognize long-term or short-term capital gain or loss,
depending on the holding period of such shares.
NEW PLAN BENEFITS
As stated above, the Committee has the authority to determine the amounts,
terms and grant dates of options to be granted to Eligible Employees and
Eligible Consultants under the Plan. To date, no such determinations have been
made and, as a result, it is not possible to state such information.
The following table sets forth the options that would be received in 1997 by
each Expected Eligible Director and by all Expected Eligible Directors as a
group under the Plan, if the Plan is approved by the Company's shareholders.
<TABLE>
<CAPTION>
NAME DOLLAR VALUE(1) NUMBER OF OPTIONS
---- --------------- -----------------
<S> <C> <C>
Each Expected Eligible Director........... $ 0 10,000
All Expected Eligible Directors........... $ 0 30,000
</TABLE>
- --------
(1) The dollar values of the options is assumed to be equal to the difference
between the fair market value of the shares subject to such options on the
date such options are to be issued (February 23, 1997) minus the exercise
price of the options on such date (which exercise price will be equal to
such fair market value). The fair market value of a share of Class A
Common Stock as of July 22, 1997 was $10 11/16.
The affirmative vote of a majority of the shares of Common Stock present in
person or by proxy at the Annual Meeting and entitled to vote on the proposal
to approve the 1996 Plan is required to approve the Plan.
THE BOARD RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" APPROVAL OF THE 1996 PLAN.
PROXIES AND VOTING INSTRUCTIONS WILL BE VOTED IN FAVOR OF THE APPROVAL OF THE
PLAN UNLESS THE SHAREHOLDER SPECIFIES OTHERWISE.
12
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information as of July 23, 1997,
regarding the beneficial ownership of the Company's Common Stock by: (i) all
persons known by the Company to beneficially own more than 5% of the Company's
Common Stock, (ii) each director and executive officer of the Company, and
(iii) all directors and executive officers as a group. The following table
treats the Common Stock, the Class E-1 Common Stock and the Class E-2 Common
Stock as a single class.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF PERCENT OF
NAME AND ADDRESS OF BENEFICIAL OWNER(1) BENEFICIAL OWNERSHIP COMMON STOCK
- --------------------------------------- -------------------- ------------
<S> <C> <C>
Colette Cozean, Ph.D.(2)..................... 318,185 2.4%
Patrick J. Day(3)............................ 242,981 1.8%
E. Donald Shapiro(4)......................... 40,000 *
Ronald E. Higgins(5)......................... 122,820 *
Grace Ching-Hsin Lin(6)...................... 62,801 *
T. Daniel Caruso, Jr.(7)..................... 93,052 *
Michael L. Hiebert(8)........................ 18,000 *
Richard Roemer(9)............................ 20,000 *
G. Lynn Powell, D.D.S.(10)................... 31,501 *
All directors and executive officers as a
group (9 persons)(10)....................... 949,340 6.9%
</TABLE>
- --------
* Less than 1%.
(1) The address of each of Dr. Cozean, Ms. Lin and Messrs. Day, Caruso,
Hiebert, Higgins, Shapiro and Roemer is 3 Morgan, Irvine, California
92618. Unless otherwise noted, the Company believes that all persons named
in the table have sole investment and voting power with respect to all
shares of Class A Common Stock beneficially owned by such person, such
shares, subject to community property laws where applicable.
(2) Includes 49,144 shares of Class A Common Stock, 43,514 shares of Class E-1
Common Stock and 43,514 shares of Class E-2 Common Stock held by Dr.
Cozean and 1,594 shares of Class A Common Stock, 1,412 shares of Class E-1
Common Stock and 1,412 shares of Class E-2 Common Stock held by Dr. Cozean
as custodian for her two minor children. Also includes 177,595 shares of
Class A Common Stock subject to options exercisable within sixty (60)
days.
(3) Includes 54,263 shares of Class A Common Stock, 48,047 shares of Class E-1
Common Stock and 48,047 shares of Class E-2 Common Stock. Also includes
58,992 shares of Class A Common Stock, 16,816 shares of Class E-1 Common
Stock and 16,816 shares of Class E-2 Common Stock subject to warrants and
options exercisable within sixty (60) days.
(4) Includes 40,000 shares of Class A Common Stock subject to warrants and
options exercisable within sixty (60) days.
(5) Includes 24,400 shares of Class A Common Stock, 30,460 shares of Class E-1
Common Stock and 30,460 shares of Class E-2 Common Stock. Also includes
37,500 shares of Class A Common Stock subject to options exercisable
within sixty (60) days.
(6) Includes 6,330 shares of Class A Common Stock, 5,605 shares of Class E-1
Common Stock and 5,605 shares of Class E-2 Common Stock held by Linco
Investments, a limited partnership in which Ms. Lin's husband serves as a
general partner, and 1,899 shares of Class A Common Stock, 1,681 shares of
Class E-1 Common Stock and 1,681 shares of Class E-2 Common Stock held by
the pension plan for Ms. Lin's husband. Also includes 40,000 shares of
Class A Common Stock subject to warrants exercisable within sixty (60)
days.
(7) Includes 13,722 shares of Common Stock, 12,150 shares of Class E-1 Common
Stock and 12,150 shares of Class E-2 Common Stock. Also includes 47,022
shares of Class A Common Stock, 4,004 shares of Class E-1 Common Stock and
4,004 shares of Class E-2 Common Stock subject to options exercisable
within sixty (60) days.
(8) Includes 18,000 shares of Class A Common Stock subject to warrants and
options exercisable within sixty (60) days.
13
<PAGE>
(9) Includes 20,000 shares of Class A Common Stock subject to warrants and
options exercisable within sixty (60) days.
(10) Includes 31,501 shares of Class A Common Stock subject to warrants and
options exercisable within sixty (60) days.
(11) Includes 151,352 shares of Class A Common Stock, 142,869 shares of Class
E-1 Common Stock and 142,869 shares of Class E-2 Common Stock. Also
includes 470,610 shares of Class A Common Stock, 20,820 shares of Class
E-1 Common Stock and 20,820 shares of Class E-2 Common Stock subject to
warrants and options exercisable within sixty (60) days.
COMPLIANCE WITH SECTION 16(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934, and the regulations
thereunder, require the Company's directors, executive officers and persons
who own more than 10% of a registered class of the Company's equity securities
to file with the Securities and Exchange Commission initial reports of
ownership and reports of changes in ownership of Common Stock and other equity
securities of the Company, and to furnish the Company with copies of all
Section 16(a) forms they file. To the Company's knowledge, based solely on
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 March 31, 1997, all Section 16(a) filing requirements applicable to the
Company's officers, directors and greater than 10% beneficial owners were
complied with, except that G. Lynn Powell, D.D.S., who was appointed to the
Company's Board of Directors in January 1997, failed to file on a timely basis
an Initial Statement of Beneficial Ownership of Securities on Form 3.
SUBMISSION OF SHAREHOLDER PROPOSALS
Shareholders are advised that any shareholder proposal intended for
consideration at the next Annual Meeting must be received by the Company at
the address set forth on the first page of this Proxy Statement no later than
March 30, 1998 to be included in the proxy material for the 1998 Annual
Meeting. It is recommended that shareholders submitting proposals direct them
to the Secretary of the Company and utilize certified mail, return-receipt
requested in order to ensure timely delivery.
CHANGE IN ACCOUNTANT
In December 1996, the Company requested its accountant, Price Waterhouse
LLP, and several other accounting firms to provide a proposal concerning the
terms and conditions of its engagement as independent accountant to the
Company for future periods. The decision to request proposals for
reappointment from Price Waterhouse LLP and other accountants was approved by
the Company's Audit Committee. Price Waterhouse LLP subsequently declined to
provide such a proposal on the terms outlined by the Company, thereby
effectively declining to stand for reappointment as the Company's independent
accountants. Therefore, effective February 21, 1997 the Company elected to
retain Ernst & Young LLP to replace Price Waterhouse LLP. The Company
authorized Price Waterhouse LLP to respond fully to the inquiries of Ernst &
Young LLP as the successor accountant. The decision to change accountants was
recommended and approved by both the Board of Directors and Audit Committee of
the Company.
The report on financial statements issued by Price Waterhouse LLP for the
Company for the past two fiscal years contained an explanatory paragraph
referring to the Company's recurring losses from operations and stating the
accountant's substantial doubt as to the Company's ability to continue as a
going concern. However, to the Company's knowledge, there have been no
disagreements between the Company and Price Waterhouse LLP on any matter of
accounting principles or practices, financial statement disclosure or auditing
scope or procedure which, if not resolved to Price Waterhouse's satisfaction,
would have caused it to make a reference to the subject matter of the
disagreement in connection with its report.
14
<PAGE>
ANNUAL REPORT
A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K, AS AMENDED, FOR THE
FISCAL YEAR ENDED MARCH 31, 1997, AS FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION, IS AVAILABLE WITHOUT CHARGE BY WRITING TO: CORPORATE SECRETARY,
PREMIER LASER SYSTEMS, INC., 3 MORGAN, IRVINE, CALIFORNIA 92718.
OTHER MATTERS
The Board of Directors knows of no matter to come before the Annual Meeting
other than as specified herein. If other business should, however, be properly
brought before such meeting the persons voting the proxies will vote them in
accordance with their best judgement.
THE SHAREHOLDERS ARE URGED TO COMPLETE, SIGN AND RETURN PROMPTLY THE
ACCOMPANYING PROXY CARD IN THE ENCLOSED ENVELOPE.
By Order of the Board of Directors
Ronald Higgins, Secretary
Irvine, California
July 25, 1997
15
<PAGE>
EXHIBIT A
1996 STOCK OPTION PLAN
OF
PREMIER LASER SYSTEMS, INC.
ARTICLE I
GENERAL PROVISIONS
1.1 Purpose. Premier Laser Systems, Inc. (the "Company") proposes to grant
to selected key employees (including officers and directors who are employees)
of the Company (hereinafter referred to as "Eligible Employees") and to key
persons performing services as independent contractors and not as employees or
members of the Board of Directors ("Eligible Consultants") options to purchase
shares of Class A common stock, no par value, of the Company ("Common Stock")
for the purposes of (i) furnishing to such Eligible Employees and Eligible
Consultants incentives to improve operations and increase profits of the
Company, (ii) encouraging such Eligible Employees to accept or continue
employment with the Company and its subsidiaries, and (iii) encouraging
Eligible Consultants to begin or continue providing services to the Company.
Such options will be granted pursuant to the plan herein set forth, which
shall be known as the 1996 Stock Option Plan of Premier Laser Systems, Inc.
(herein referred to as the "Plan").
The Company also proposes to grant to members of the Board of Directors of
the Company (the "Board of Directors") who are not officers or employees of
the Company at the time of a grant (hereinafter referred to as "Non-Employee
Directors") options to purchase shares of Common Stock pursuant to the Plan.
The purpose of such grants is to (i) provide incentives for highly qualified
individuals to stand for election to the Board of Directors and continue
service on the Board of Directors, (ii) provide incentives to promote long-
term shareholder value, and (iii) promote a greater identity of interest
between Non-Employee Directors and the Company's shareholders.
Eligible Employees, Eligible Consultants and Non-Employee Directors who are
granted options pursuant to the Plan are sometimes collectively referred to
herein as "Optionees."
1.2 Shares Subject to the Plan. Subject to adjustment as provided in Section
1.4 and Section 1.12.3 (the "Adjustment Provisions"), the aggregate number of
shares of Common Stock to be delivered upon exercise of all options granted
under the Plan shall not exceed 500,000 shares. The shares of Common Stock
issuable upon exercise of options granted under the Plan may be authorized and
unissued shares or reacquired shares. In the event the number of shares to be
delivered upon the exercise in full of any option granted under the Plan is
reduced for any reason whatsoever or in the event any option granted under the
Plan for any reason shall expire or shall terminate unexercised as to all or
any shares covered thereby, the number of shares no longer subject to any such
option shall thereupon be released from such option and shall thereafter be
available to be re-optioned under the Plan, subject to the limitations, if
any, imposed by the Internal Revenue Code of 1986, as amended (the "Code") on
the availability for regrant of options previously granted pursuant to Article
III. The Compensation Committee of the Board of Directors or such other
committee of the Board of Directors which shall succeed to the functions and
responsibilities of the Compensation Committee (the "Committee") shall have
the authority to effect, at any time and from time to time, (i) the repricing
of any outstanding options under the Plan, and/or (ii) with the consent of the
affected holders of options, the cancellation of any outstanding options under
the Plan and the grant in substitution therefor of new options under the Plan
pursuant to terms consistent therewith, covering the same or different numbers
of shares of stock, provided, however, that no option granted pursuant to
Article III shall be repriced or regranted on terms that would constitute a
"modification" within the meaning of Section 424(h)(3) of the Code which would
disqualify such option as an incentive stock option described in Section 422
of the Code unless the Company and the holder of such option shall so agree.
Shares issued pursuant to the exercise of options granted under the Plan shall
be fully paid and nonassessable.
A-1
<PAGE>
1.3 Administration of the Plan. Subject to the provisions of the Plan, the
Committee shall have the authority to (a) determine the provisions of the
options to be granted under the Plan, (b) interpret the Plan and all options
granted under the Plan, (c) adopt, amend or rescind such rules as it deems
necessary for the proper administration of the Plan, (d) make all other
determinations necessary or advisable for the administration of the Plan, and
(e) correct any defect or supply any omission or reconcile any inconsistency
in the Plan or in any option granted under the Plan in the manner and to the
extent that the Committee deems desirable to carry the Plan or any option into
effect. The Board of Directors shall have the power to add or remove members
of the Committee from time to time, to fill vacancies thereon arising by
resignation, death, removal, or otherwise, and shall designate a chairman from
among the members of the Committee, which chairman shall preside at all
meetings of the Committee. Meetings shall be held at such times and places as
shall be determined by the Committee. A majority of the members of the
Committee shall constitute a quorum for the transaction of business, and the
vote of a majority of those members present at any meeting shall decide any
question brought before that meeting. The actions of the Committee in
exercising all of the rights, powers and authorities set out in the Plan, when
performed in good faith and in its sole judgment, shall be final and
conclusive. When appropriate, the Plan shall be administered in order to
qualify certain of the options granted hereunder as "incentive stock options"
described in section 422 of the Code.
The Committee shall consist of at least two members of the Board of
Directors. Other than options granted to Non-Employee Directors pursuant to
Article IV, no options may be granted under the Plan to any member of the
Committee during such member's term of membership on the Committee. No person
shall be eligible to serve on the Committee unless such person is then a
"disinterested person" within the meaning of Rule 16b-3 ("Rule 16b-3")
promulgated under the Securities Exchange Act of 1934, as amended (the "Act"),
or any similar or successor rule. The members of the Committee shall be solely
"outside directors," within the meaning of section 162(m) of the Code and
applicable interpretive authority thereunder (including the transitional rules
of Proposed Treasury Regulation Section 1.162-27).
Notwithstanding any provision of the Plan, the Committee may not exercise
any discretion with respect to any option granted pursuant to Article IV which
would be inconsistent with the intent that (i) the Plan meet the requirements
of Rule 16b-3 and (ii) any Non-Employee Director who is eligible to receive a
grant or to whom a grant is made pursuant to Article IV will not for such
reason cease to be a "disinterested person" within the meaning of such Rule
16b-3 with respect to the Plan and other stock related plans of the Company or
any of its affiliates. Specifically, in the event of a Corporate Change, as
defined in Section 1.11, the Committee may, with respect to options granted
under Article IV, only exercise such authority as would not violate the
limitations contained in the immediately preceding sentence. If any Plan
provision is found not to be in compliance with Rule 16b-3 or if any Plan
provision would disqualify any Non-Employee Director from remaining a
"disinterested person," that provision shall be deemed amended so that the
Plan does so comply and the Plan participants remain disinterested, to the
extent permitted by law and deemed advisable by the Committee, and in all
events the Plan shall be construed in favor of its meeting the requirements of
Rule 16b-3.
1.4 Amendment and Discontinuance of the Plan. The Board of Directors may
amend, suspend or terminate the Plan; provided, however, that each such
amendment of the Plan (a) extending the period within which options may be
granted under the Plan, (b) increasing the aggregate number of shares of
Common Stock to be optioned under the Plan except as provided in the
Adjustment Provisions, (c) materially modifying the requirements as to
eligibility of employees or consultants receiving options under, or changing
the eligibility of employees or consultants or class of employees or
consultants to whom options may be granted under, Article II or III, as
applicable, (d) materially increasing the benefits to optionees under the
Plan, (e) modifying the provisions of Article IV, or (f) granting options to
Non-Employee Directors other than pursuant to Article IV, shall, in each case,
be subject to approval by the shareholders of the Company; provided, further,
however, that no amendment, suspension or termination of the Plan shall be
made which may cause the Plan to fail to meet the requirements of Rule 16b-3
(including, without limitation, the requirements of Rule 16b-3(c)(2)(i)(A) and
Rule 16b-3(c)(2)(ii)) or may, without the consent of the holder of an option
granted under Article II, III, or IV, terminate such option or adversely
affect such person's rights in any material respect (except as set forth in
the
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Plan). Furthermore, the Board of Directors may alter, amend, suspend,
discontinue or terminate the Plan and any option granted hereunder, without
the approval of the shareholders of the Company or any holder of any option
thereby affected, if necessary in order to (a) enable the Plan and any option
granted hereunder intended to be so qualified, to qualify for (i) the
exemption provided by Rule 16b-3, (ii) the benefits provided under section 422
of the Code, or (iii) the exclusion for qualified performance-based
compensation under Section 162(m) of the Code and the applicable interpretive
authority thereunder (including the transitional rules of Proposed Treasury
Regulation Section 1.62-27), and (b) comply with changes in the Code, the
Employee Retirement Income Security Act or any other applicable law
(including, with respect to any of the foregoing, changes in any rule,
regulation or other interpretive authority). The provisions of Section 4.5
shall also apply with respect to the amendment of options granted under
Article IV hereof.
1.5 Granting of Options to Employees. The Committee shall have authority to
grant, prior to the expiration date of the Plan, to (i) Eligible Employees and
Eligible Consultants options to purchase, on the terms and conditions
hereinafter set forth in Article II, and (ii) Eligible Employees options to
purchase, on the terms and conditions hereinafter set forth in Article III,
authorized but unissued, or reacquired, shares of Common Stock, provided such
grants shall be made only to those Eligible Employees and Eligible
Consultants, in such amounts and at such times as determined in the discretion
of the Committee, and, for this purpose, the Committee may consider the
Eligible Employee's or Eligible Consultant's office or position, degree of
responsibility for, and contribution to, the growth and success of the
Company, length of service, promotions, potential and any other factors which
it may deem relevant. Options granted to Eligible Employees under Section III
shall be "incentive stock options" within the meaning of section 422(b) of the
Code, and are hereinafter referred to as "incentive stock options." All other
options granted to Eligible Employees and all options granted to Eligible
Consultants under the Plan shall be granted pursuant to Article II, and are
hereinafter referred to as "nonqualified options."
1.6 Granting of Options to Non-Employee Directors. All options granted to
Non-Employee Directors shall be options to purchase, on the terms and
conditions hereinafter set forth in Article IV, authorized but unissued, or
reacquired, shares of Common Stock and shall be nonqualified options.
1.7 Option Agreements. Each option granted under the Plan shall be evidenced
by a written agreement between the Company and the applicable optionee and
shall contain such terms and conditions, and may be exercisable for such
periods, as may be approved by the Committee, which terms and conditions need
not be identical but which must be in compliance with the terms and provisions
hereof.
1.8 Effective Date. The Plan shall become effective as of the date the Plan
is approved by the shareholders of the Company (the "Effective Date"). Except
with respect to options then outstanding, if not sooner terminated under
Section 1.4, the Plan shall terminate upon, and no further options shall be
granted after, the expiration of ten years from the Effective Date.
1.9 Rule 16b-3 Compliance. The Company intends:
(a) that the Plan meet the requirements of Rule 16b-3;
(b) that participation by Non-Employee Directors under Article IV will
not prohibit them from being "disinterested persons" within the meaning of
Rule 16b-3 with respect to administration of the Plan or with respect to
administration of any other plan of the Company;
(c) that transactions of the type specified in the first paragraph of
Rule 16b-3 by Non-Employee Directors pursuant to Article IV will be exempt
from the operation of Section 16(b) of the Act; and
(d) that transactions of the type specified in the first paragraph of
Rule 16b-3 by officers of the Company (whether or not they are directors)
pursuant to the Plan will be exempt from the operation of Section 16(b) of
the Act. In all cases, the terms, provisions, conditions and limitations of
the Plan shall be construed and interpreted consistent with the Company's
intent as stated in this Section 1.9.
1.10 Recapitalization or Reorganization. If at any time or from time to time
after the grant of any option hereunder there is a capital reorganization of
the Common Stock, then the Optionee shall be entitled to receive
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upon the exercise of an option, in lieu of the Common Stock, the number of
shares of stock or other securities or property of the Company to which a
holder of the number of shares of Common Stock deliverable upon exercise of
such option would have been entitled as a result of such capital
reorganization. If the Company shall merge with another corporation and the
Company is the surviving corporation in such merger and under the terms of
such merger the Common Stock outstanding immediately prior to the merger
remain outstanding and unchanged, any option granted hereunder shall continue
to apply to the Common Stock thereto and shall also pertain and apply to any
additional securities and other property, if any, to which a holder of the
number of shares of Common Stock deliverable upon exercise of such option
would have been entitled as a result of the merger. If (i) the Company shall
not be the surviving entity in any merger, consolidation or other
reorganization (or survives only as a subsidiary of an entity other than a
previously wholly-owned subsidiary of the Company), (ii) the Company sells,
leases or exchanges all or substantially all of its assets to any other person
or entity (other than a wholly-owned subsidiary of the Company), (iii) the
Company is to be dissolved and liquidated, or (iv) any person or entity,
including a "group" as contemplated by Section 13(d)(3) of the Act, acquires
or gains ownership or control (including, without limitation, power to vote)
of more than 50% of the outstanding shares of the Company's voting stock
(based upon voting power), (each such event is referred to herein as a
"Corporate Change"), then all options granted hereunder, including that
portion not then otherwise vested, shall become exercisable in full effective
immediately prior to the consummation of the Corporate Change, provided that
the exercise of any such option that would not have been vested in the absence
of the Corporate Change shall be conditioned upon the occurrence of the
Corporate Change (i.e., so that if the Corporate Change does not subsequently
occur, the unvested portion of the option shall vest according to its original
terms), and provided further, however, in no event shall any incentive stock
option, without the consent of the holder thereof, first become exercisable
pursuant hereto if the result would be to cause such option, when granted, not
to be treated as an incentive stock option (whether or not by reason of the
possible future violation of the annual limitation set forth in Section 3.3.3
or otherwise).
1.11 Foreign Options and Rights. The Committee may grant options to Eligible
Employees, Eligible Consultants and Non-Employee Directors who are subject to
the tax laws of nations other than the United States, which options may have
terms and conditions as determined by the Committee as necessary to comply
with applicable foreign laws. The Committee may take any action which it deems
advisable to obtain approval of any such option by the appropriate foreign
governmental entity; provided, however, that no such option may be granted
pursuant to this Section 1.11 and no action may be taken which would result in
a violation of the Act, the Code or any other applicable law.
1.12 General Terms and Conditions of Options. Options granted under the Plan
shall be subject to the following terms and conditions and may contain such
additional terms and conditions, not inconsistent with law or the Article
pursuant to which such option was granted, as the Committee shall deem
desirable:
1.12.1 Manner of Exercise. In order to exercise all or a portion of any
option granted under the Plan, an Optionee shall deliver to the Company
payment in full of the shares then being purchased, together with any
required withholding tax. The payment of such exercise price and any
required withholding tax shall either be in cash or through delivery to the
Company of shares of Common Stock, or by any combination of cash or shares;
provided that if any such shares of Common Stock so delivered were obtained
through the previous exercise of any option granted under the Plan, such
shares must have been held for at least six months prior to such delivery.
The value of each share of Common Stock so delivered shall be deemed to be
equal to the per share price of the last sale of Common Stock on the
trading day immediately preceding the date the option is exercised (or the
closing bid if no sales were reported), based on the composite transactions
in the Common Stock as reported in The Wall Street Journal (or any
successor publication thereto). If the Committee so requires, such person
or persons shall also deliver a written representation that all shares
being purchased are being acquired for investment and not with a view to,
or for resale in connection with, any distribution of such shares. An
option agreement may, in the discretion of the Committee, provide for other
methods to pay for, or otherwise exercise, an option. An option agreement
also may, in the discretion of the Committee, provide for the withholding
of Federal, state or local income tax upon exercise of an option from any
cash or stock remuneration (from the Plan or otherwise) then or
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thereafter payable by the Company to the Optionee. To the extent provided
by the terms of an option agreement, the Optionee may, at the discretion of
the Committee, satisfy any mandatory federal, state or local tax
withholding obligation relating to the exercise or acquisition of stock
under an option by any of the following means or by a combination of such
means: (1) tendering cash payment; (2) authorizing the Company to withhold
shares from the shares of the Common Stock otherwise issuable to the
Optionee as a result of the exercise or acquisition of stock under the
option provided that such arrangement will not result in a charge to the
Company's reported earnings in excess of that which the Company is willing
to accept; or (3) delivering to the Company owned and unencumbered shares
of the Common Stock of the Company that have been held for the greater of
(i) six months, or (ii) the period required to avoid a charge to the
Company's reported earnings in excess of that which the Company is willing
to accept. The exercise of the option may be conditioned upon the receipt
by the Company of satisfactory evidence of the Optionee's satisfaction of
any withholding obligations.
1.12.2 Options not Transferable. No option granted under the Plan shall
be transferable otherwise than by will or by the laws of descent and
distribution and, during the lifetime of the Optionee, such option shall be
exercisable only by the Optionee. Any attempt to transfer, assign, pledge,
hypothecate or otherwise dispose of, or to subject to execution, attachment
or similar process, any option granted under the Plan, or any right
thereunder, contrary to the provisions hereof, shall be void and
ineffective, shall give no right to the purported transferee, and shall, at
the sole discretion of the Committee, result in forfeiture of the option
with respect to the shares involved in such attempt.
1.12.3 Adjustment of Shares. In the event that at any time after the
Effective Date the outstanding shares of Common Stock are changed into or
exchanged for a different number or kind of shares of the Company or other
securities of the Company by reason of merger, consolidation,
recapitalization, reclassification, stock split, stock dividend, or
combination of shares, the Committee shall make an appropriate and
equitable adjustment in the number and kind of shares subject to the Plan
(including shares as to which all outstanding options granted under the
Plan, or portions thereof then unexercised, shall be exercisable), to the
end that after such event the shares subject to the Plan and each
Optionee's proportionate interest shall be maintained as if such Optionee
had exercised the option before the occurrence of such event. Such
adjustment in an outstanding option granted under the Plan shall be made
without change in the total price applicable to such option or the
unexercised portion of such option (except for any change in the aggregate
price resulting from rounding-off of share quantities or prices) and with
any necessary corresponding adjustment in exercise price per share. Any
such adjustment made by the Committee shall be final, conclusive and
binding upon all Optionees, the Company, and all other interested persons.
Any adjustment of an incentive stock option pursuant to this Section 1.12.3
shall be made in such manner as not to constitute a "modification" within
the meaning of Section 424(h)(3) of the Code.
1.12.4 Listing and Registration of Shares. Each option granted under the
Plan shall be subject to the requirement that if at any time the Committee
determines, in its discretion, that the listing, registration, or
qualification of the shares subject to such option upon any securities
exchange or under any state or Federal law, or the consent or approval of
any governmental regulatory body, is necessary or desirable as a condition
of, or in connection with, the issue or purchase of shares thereunder, such
option may not be exercised in whole or in part unless such listing,
registration, qualification, consent or approval shall have been effected
or obtained and the same shall have been free of any conditions not
acceptable to the Committee.
1.12.5 Amendments. The Committee may, with the consent of the person or
persons entitled to exercise any outstanding option granted under the Plan,
amend such option; provided, however, that any such amendment shall be
subject to shareholder approval when required in Section 1.4. The Committee
may at any time or from time to time, in its discretion, in the case of any
option previously granted under the Plan (other than an option granted to a
Non-Employee Director) which is not then immediately exercisable in full,
accelerate the time or times at which such option may be exercised to any
earlier time or times. Any adjustment of an incentive stock option pursuant
to this Section 1.12.5 shall be made in such manner as not to constitute a
"modification" within the meaning of Section 424(h)(3) of the Code.
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1.12.6 Miscellaneous.
(a) The person or persons entitled to exercise, or who have
exercised, any option granted under the Plan shall not be entitled to
any rights as a shareholder of the Company with respect to any shares
subject to such option until such person shall have become the
beneficial owner of such shares.
(b) No nonqualified option granted under the Plan shall be construed
as limiting any right which the Company or any subsidiary of the
Company may have to terminate at any time, with or without cause, the
employment of any person to whom such nonqualified option has been
granted.
(c) Notwithstanding any provision of the Plan or the terms of any
option granted under the Plan, the Company shall not be required to
issue any shares hereunder or thereunder if such issuance would, in the
judgment of the Committee, constitute a violation of any state or
Federal law or of the rules or regulations of any governmental
regulatory body.
(d) The Committee may require any person who exercises an incentive
stock option to give prompt notice to the Company of any disposition of
shares of Common Stock acquired upon exercise of an incentive stock
option within one year after the transfer of shares to such person.
ARTICLE II
NONQUALIFIED OPTIONS
2.1 Eligible Employees. All Eligible Employees and Eligible Consultants
shall be eligible to receive nonqualified options under this Article II.
2.2 Calculation of Exercise Price. The exercise price to be paid for each
share of Common Stock deliverable upon exercise of each nonqualified option
granted under Article II shall be determined by the Committee and may be more
or less than, or equal to, the fair market value per share of Common Stock at
the time of grant as determined by the Committee. The exercise price for each
nonqualified option shall be subject to adjustment as provided in the
Adjustment Provisions.
2.3 Terms and Conditions of Options. Nonqualified options granted under this
Article II shall be in such form as the Committee may from time to time
approve, shall be subject to the following terms and conditions and may
contain such additional terms and conditions, not inconsistent with this
Article II, as the Committee shall deem desirable:
2.3.1 Option Period and Conditions and Limitations on Exercise. Subject
to Section 1.12.5, no nonqualified option shall be exercisable by an
Eligible Employee or Eligible Consultant later than the date which is the
date determined by the Committee upon the grant thereof (the "Nonqualified
Option Expiration Date") which shall be no later than ten years after the
date of grant. To the extent not prohibited by other provisions of the
Plan, each nonqualified option granted to an Eligible Employee or Eligible
Consultant shall be exercisable at such time or times as the Committee in
its discretion may determine at or prior to the time such option is
granted. In the event the Committee makes no such determination, each
nonqualified option granted to an Eligible Employee or Eligible Consultant
shall be exercisable from time to time, in whole or in part, at any time
prior to the Nonqualified Option Expiration Date.
2.3.2 Termination of Employment or Relationship as Eligible Consultant;
Death. For purposes of this Article II and each nonqualified option granted
under this Article II, an Eligible Employee's employment and a Eligible
Consultant's relationship with the Company shall be deemed to have
terminated at the close of business on the day preceding the first date on
which such Eligible Employee or Eligible Consultant no longer for any
reason whatsoever (including the death of such Eligible Employee or
Eligible Consultant) is employed by, or has a relationship with, the
Company or a subsidiary of the Company. An Eligible Employee shall be
considered to be in the employment of the Company or a subsidiary of the
Company as long as such Eligible Employee remains an employee of the
Company or a subsidiary of the
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Company, whether active or on any authorized leave of absence. An Eligible
Consultant shall be considered to have a relationship with the Company as
long as such Eligible Consultant has an executory assignment from Company
personnel authorized to make such an assignment. Any question as to whether
and when there has been a termination of such employment or relationship,
and the cause of such termination, shall be determined by the Committee and
its determination shall be final and conclusive. If an Eligible Employee's
employment or a Eligible Consultant's relationship is terminated for any
reason whatsoever (including the death of such Eligible Employee or
Eligible Consultant), each nonqualified option thereunto granted under this
Article II and all rights thereunder shall wholly and completely terminate
as follows:
(a) With respect to nonqualified options not then exercisable, at the
time the Eligible Employee's employment or a Eligible Consultant's
relationship is terminated; and
(b) With respect to nonqualified options then exercisable:
(i) At the time the Eligible Employee's employment or a Eligible
Consultant's relationship is terminated if the Eligible Employee's
employment or the Consultant's relationship is terminated because
such person has committed fraud, theft or embezzlement against the
Company or a subsidiary, affiliated entity or customer of the
Company, or for conflict of interest (other than legitimate
competition); or
(ii) At the expiration of a period of one year after the Eligible
Employee's or Eligible Consultant's death (but in no event later
than the Nonqualified Option Expiration Date) if the Eligible
Employee's employment or Eligible Consultant's relationship is
terminated by reason of such person's death. Any such nonqualified
option may be exercised by the Eligible Employee's or Eligible
Consultant's estate or by the person or persons who acquire the
right to exercise such nonqualified option by bequest or
inheritance; or
(iii) At the expiration of a period of three years (but in no
event later than the Nonqualified Option Expiration Date) after the
Eligible Employee's employment is terminated because of retirement
or the Eligible Employee's employment or the Eligible Consultant's
relationship is terminated because of disability, if the Eligible
Employee's employment has terminated because of retirement or
disability or the Eligible Consultant's relationship has terminated
because of disability; or
(iv) At the expiration of a period of three months after the
Eligible Employee's or Eligible Consultant's employment or
relationship is terminated (but in no event later than the
Nonqualified Option Expiration Date) if the Eligible Employee's
employment or Eligible Consultant's relationship is terminated for
any reason other than the reasons specified in
Section 2.3.2(b)(i)-(iii).
ARTICLE III
INCENTIVE STOCK OPTIONS
3.1 Eligible Employees. All Eligible Employees shall be eligible to receive
incentive stock options under this Article III.
3.2 Calculation of Exercise Price. The exercise price to be paid for each
share of Common Stock deliverable upon exercise of each incentive stock option
granted hereunder shall be equal to the fair market value per share of Common
Stock at the time of grant as determined by the Committee, based on the
composite transactions in the Common Stock as reported by The Wall Street
Journal (or any successor publication thereto), and shall be equal to the per
share price of the last sale of Common Stock on the trading day immediately
preceding the date of grant of such incentive stock option (or the closing bid
if no sales were reported); provided, however, that in the case of an Eligible
Employee who, at the time such incentive stock option is granted, owns more
than 10% of the total combined voting power of all classes of stock of the
Company or any subsidiary
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corporation, within the meaning of section 422(b)(6) of the Code (a "10%
Eligible Employee"), the exercise price per share shall be at least 110% of
the fair market value per share of Common Stock at the time of grant. The
exercise price for each incentive stock option shall be subject to adjustment
as provided in Section 1.12.5.
3.3 Term and Conditions of Options. Incentive stock options shall be in such
form as the Committee may from time to time approve, shall be subject to the
following terms and conditions and may contain such additional terms and
conditions, not inconsistent with this Article III, as the Committee shall
deem desirable:
3.3.1 Option Period and Conditions and Limitations on Exercise. Subject
to Section 3.4, no incentive stock option shall be exercisable with respect
to any of the shares subject to such incentive stock option later than the
date which is the date determined by the Committee upon the grant thereof
(the "ISO Expiration Date"), which shall be no later than ten years after
the date of grant; provided, however, that in the case of any 10% Eligible
Employee, the ISO Expiration Date of any incentive stock option granted
thereto shall not be later than five years after the date of such grant. To
the extent not prohibited by other provisions of the Plan, each incentive
stock option shall be exercisable at such time or times as the Committee in
its discretion may determine at or prior to the time such incentive stock
option is granted. In the event the Committee makes no such determination,
each incentive stock option shall be exercisable from time to time, in
whole or in part, subject to the monetary limitations set forth in Section
3.3.3, at any time prior to the ISO Expiration Date.
3.3.2 Termination of Employment; Death. For purposes of this Article III
and each incentive stock option granted hereunder, an Eligible Employee's
employment shall be deemed to have terminated at the close of business on
the day preceding the first date on which such Eligible Employee is no
longer for any reason whatsoever (including the death of such Eligible
Employee) employed by the Company or a subsidiary of the Company. An
Eligible Employee shall be considered to be in the employment of the
Company or a subsidiary of the Company as long as such Eligible Employee
remains an employee of the Company or a subsidiary of the Company, whether
active or on any authorized leave of absence. Any question as to whether
and when there has been a termination of such employment, and the cause of
such termination, shall be determined by the Committee and its
determination shall be final and conclusive. If an Eligible Employee's
employment is terminated for any reason whatsoever (including the death of
such Eligible Employee), each incentive stock option thereunto granted
hereunder and all rights thereunder shall wholly and completely terminate
as follows:
(a) With respect to incentive stock options not then exercisable, at
the time the Eligible Employee's employment is terminated; and
(b) With respect to incentive stock options then exercisable:
(i) At the time the Eligible Employee's employment is terminated
if his employment is terminated because he is discharged for fraud,
theft or embezzlement committed against the Company or a subsidiary,
affiliated entity or customer of the Company, or for conflict of
interest (other than legitimate competition); or
(ii) At the expiration of a period of one year after the Eligible
Employee's death (but in no event later than the ISO Expiration
Date) if the Eligible Employee's employment is terminated by reason
of his death. An incentive stock option granted under this Article
III may be exercised by the Eligible Employee's estate or by the
person or persons who acquire the right to exercise such incentive
stock option by bequest or inheritance; or
(iii) At the expiration of a period of three years (but in no
event later than the ISO Expiration Date) after the Eligible
Employee's employment is terminated if the Eligible Employee's
employment has terminated because of retirement or disability ; or
(iv) At the expiration of a period of three months after the
Eligible Employee's employment is terminated (but in no event later
than the ISO Expiration Date) if the Eligible Employee's employment
is terminated for any reason other than the reasons specified in
Section 3.3.2(b)(i)-(iii).
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In the event and to the extent that an incentive stock option granted
under this Article III is not exercised (i) within three months after
the Eligible Employee's employment is terminated because of retirement
or disability not within the meaning of section 22(e)(3) of the Code,
or (ii) within one year after the Eligible Employee's employment is
terminated because of disability within the meaning of section 22(e)(3)
of the Code, such option shall be taxed as a nonqualified option.
3.3.3 Limitation on Amount. Notwithstanding any other provision of the
Plan, the aggregate fair market value (determined as of the time an
incentive stock option is granted, based upon the calculation of the
exercise price as provided in Section 3.2) of the Common Stock with respect
to which incentive stock options are exercisable for the first time by an
Eligible Employee, under all incentive stock option plans of the Company
and its subsidiaries, during any calendar year cannot exceed $100,000 or
such other maximum amount permitted under section 422(d) of the Code. If
the date on which one or more of such incentive stock options could first
be exercised would be accelerated pursuant to any provision of the Plan or
any option agreement, and the acceleration of such exercise date would
result in a violation of the monetary restriction set forth in the
preceding sentence, then, notwithstanding any such provision, but subject
to the provisions of the next succeeding sentence, the exercise dates of
such incentive stock options shall be accelerated only to the date or
dates, if any, that do not result in a violation of such restriction and,
in such event the exercise date of the incentive stock options with the
lowest option prices shall be accelerated to the earliest such dates. The
Committee may, in its discretion, authorize the acceleration of the
exercise date of one or more incentive stock options even if such
acceleration would violate the monetary restriction set forth in the first
sentence of this Section 3.3.3 and even if such incentive stock options
were thereby converted in whole or in part to nonqualified options.
ARTICLE IV
NON-EMPLOYEE DIRECTOR OPTIONS
4.1 Eligible Persons. Non-Employee Directors shall be eligible to receive
options under, and solely under, this Article IV and any such options shall be
nonqualified options.
4.2 Formula Grant of Nonqualified Options to Non-Employee Directors. Subject
to receipt of shareholder approval of this Plan at the Company's 1996 Annual
Meeting of Shareholders, nonqualified options to purchase 10,000 shares Class
A Common Stock will be issued on each of February 23, 1996, February 23, 1997
and February 23, 1998 to all nonemployee directors who are members of the
compensation committee of the Board of Directors on those dates. All of such
options will have a term of 10 years. If shareholder approval of this Plan is
not obtained as required by this Section 4.2, the options previously granted
under this Section 4.2 shall terminate.
4.3 Calculation of Exercise Price. The exercise price to be paid for each
share of Common Stock deliverable upon exercise of each nonqualified option
granted under this Article IV shall be equal to the fair market value per
share of Common Stock at the time of grant, based on the composite
transactions in the Common Stock as reported by The Wall Street Journal (or
any successor publication thereto), and shall be equal to the per share price
of the last sale of Common Stock on the trading day immediately preceding the
date of grant of such nonqualified option (or the closing bid if no sales were
reported). The exercise price for each option granted under this Article IV
shall be subject to adjustment as provided in the Adjustment Provisions.
4.4 Terms and Conditions of Nonqualified Options. Subject to the following
provisions of this Section 4.4, nonqualified options granted under this
Article IV shall be in such form as the Committee may from time to time
approve. Nonqualified options granted under this Article IV shall be subject
to the following terms and conditions:
4.4.1 Option Period and Conditions and Limitations on Exercise. Each
nonqualified option granted under this Article IV shall be exercisable from
time to time, in whole or in part, at any time after the date of grant and
prior to the date (the "Option Expiration Date"), which is ten years after
the date of grant.
A-9
<PAGE>
4.4.2 Termination of Directorship; Death. For purposes of this Article IV
and each nonqualified option granted under this Article IV, a Non-Employee
Director's directorship shall be deemed to have terminated at the close of
business on the day preceding the first date on which he ceases to be a
member of the Board of Directors for any reason whatsoever (including the
death of such Non-Employee Director). If a Non-Employee Director's
directorship is terminated for any reason (including the death of such Non-
Employee Director), each nonqualified option thereunto granted under this
Article IV and all rights thereunder shall wholly and completely terminate
as follows:
(a) At the time the Non-Employee Director's directorship is
terminated if his directorship is terminated as a result of his removal
from the Board of Directors for cause (other than disability); or
(b) At the expiration of a period of one year after the Non-Employee
Director's death (but in no event later than the Option Expiration
Date) if the Non-Employee Director's directorship is terminated by
reason of his death. A nonqualified option granted under this Article
IV may be exercised by the Non-Employee Director's estate or by the
person or persons who acquire the right to exercise such nonqualified
option by bequest or inheritance; or
(c) At the expiration of a period of three years after the Non-
Employee Director's directorship is terminated as a result of such
person's resignation or removal from the Board of Directors because of
disability (but in no event later than the Option Expiration Date); or
(d) At the expiration of a period of three months after the Non-
Employee Director directorship is terminated (but in no event later
than the Option Expiration Date) if the Non-Employee Director's
directorship is terminated for any reason other than the reasons
specified in Section 4.4.2(a)-(c).
4.5 Certain Amendments Prohibited. With respect to those options which may
be granted under Section 4.2 above, the formula for the granting of options
thereunder may not be amended more often than once every six months, other
than to comport with changes in the Internal Revenue Code, the Employee
Retirement Income Security Act, or the rules thereunder.
A-10
<PAGE>
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS
PREMIER LASER SYSTEMS, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned appoints Ronald Higgins and Michael Hiebert, and each of
them, with full power of substitution, to vote all shares of Class A Common
Stock of Premier Laser Systems, Inc. ("Premier") held of record by the
undersigned as of July 24, 1997, at the Annual Meeting of Shareholders of
Premier to be held at 3 Morgan, Irvine, California, on Thursday August 28, 1997
at 2:00 p.m. local time, and at all adjournments thereof, (the "Annual Meeting")
upon the following matters, which are described in Premier's Proxy Statement for
the Annual Meeting.
(CONTINUED AND TO BE SIGNED ON REVERSE SIDE)
<PAGE>
Please date, sign and mail your
proxy card back as soon as possible!
Annual Meeting of Shareholders
PREMIER LASER SYSTEMS, INC.
CLASS A COMMON STOCK
August 28, 1997
| Please Detach and Mail in the Envelope Provided |
v v
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
|
Please mark your |
A [X] vote as in this |_____
example.
<TABLE>
<CAPTION>
FOR all
nominees WITHHOLD
listed at AUTHORITY
right to vote
(except as for all
referred to nominees
the contrary listed at
below) right FOR AGAINST ABSTAIN
<S> <C> <C> <C> <C> <C> <C> <C>
1. ELECTION Nominees: Colette Cozean 2. For approval of 1996 Stock Option [ ] [ ] [ ]
OF [ ] [ ] Plan
DIRECTORS E. Donald Shapiro
Patrick J. Day 3. In accordance with the discretion [ ] [ ] [ ]
of the proxy holder, to act upon
Grace Ching-Hsin Lin all matters incident to the
conduct of the meeting and upon
G. Lynn Powell other matters as may properly
come before the meeting.
</TABLE>
<TABLE>
<S> <C>
(INSTRUCTIONS: To withhold authority to vote for any THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE
individual nominee, write the nominee's name on the MANNER DIRECTED HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF ANY
line immediately below.) NOMINEE NAMED ABOVE DECLINES OR IS UNABLE TO SERVE AS A
DIRECTOR, THE PERSONS NAMED AS PROXIES SHALL HAVE FULL
- ---------------------------------------------------- DISCRETION TO VOTE FOR ANY OTHER PERSON WHO MAY BE NOMINATED.
PLEASE DATE, SIGN, MAIL AND RETURN THIS PROXY IN THE ENCLOSED
ENVELOPE.
</TABLE>
SIGNATURE(S)_____________________________________________ DATE__________________
Note: Please sign exactly as your name appears hereon. If the stock is
registered in the name of two or more persons, each should sign.
Executors, administrators, trustees, guardians, attorneys and corporate
officers should add their titles.
<PAGE>
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS
PREMIER LASER SYSTEMS, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned appoints Ronald Higgins and Michael Hiebert, and each of
them, with full power of substitution, to vote all shares of Class E-1 and Class
E-2 Common Stock of Premier Laser Systems, Inc. ("Premier") held of record by
the undersigned as of July 24, 1997, at the Annual Meeting of Shareholders of
Premier to be held at 3 Morgan, Irvine, California, on Thursday August 28, 1997
at 2:00 p.m. local time, and at all adjournments thereof, (the "Annual Meeting")
upon the following matters, which are described in Premier's Proxy Statement for
the Annual Meeting.
(CONTINUED AND TO BE SIGNED ON REVERSE SIDE)
<PAGE>
Please date, sign and mail your
proxy card back as soon as possible!
Annual Meeting of Shareholders
PREMIER LASER SYSTEMS, INC.
CLASS E-1 AND CLASS E-2 COMMON STOCK
August 28, 1997
| Please Detach and Mail in the Envelope Provided |
v v
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
|
Please mark your |
A [X] vote as in this |_____
example.
<TABLE>
<CAPTION>
FOR all
nominees WITHHOLD
listed at AUTHORITY
right to vote
(except as for all
referred to nominees
the contrary listed at
below) right FOR AGAINST ABSTAIN
<S> <C> <C> <C> <C> <C> <C> <C>
1. ELECTION Nominees: Colette Cozean 2. For approval of 1996 Stock Option [ ] [ ] [ ]
OF [ ] [ ] Plan
DIRECTORS E. Donald Shapiro
Patrick J. Day 3. In accordance with the discretion [ ] [ ] [ ]
of the proxy holder, to act upon
Grace Ching-Hsin Lin all matters incident to the
conduct of the meeting and upon
G. Lynn Powell other matters as may properly
come before the meeting.
</TABLE>
<TABLE>
<S> <C>
(INSTRUCTIONS: To withhold authority to vote for any THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE
individual nominee, write the nominee's name on the MANNER DIRECTED HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF ANY
line immediately below.) NOMINEE NAMED ABOVE DECLINES OR IS UNABLE TO SERVE AS A
DIRECTOR, THE PERSONS NAMED AS PROXIES SHALL HAVE FULL
- ---------------------------------------------------- DISCRETION TO VOTE FOR ANY OTHER PERSON WHO MAY BE NOMINATED.
PLEASE DATE, SIGN, MAIL AND RETURN THIS PROXY IN THE ENCLOSED
ENVELOPE.
</TABLE>
SIGNATURE(S)_____________________________________________ DATE__________________
Note: Please sign exactly as your name appears hereon. If the stock is
registered in the name of two or more persons, each should sign.
Executors, administrators, trustees, guardians, attorneys and corporate
officers should add their titles.
