<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant [X]
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Check the appropriate box:
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[ ] 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 Rule 14a-11(c) or Rule 14a-12
SPECTRA-PHYSICS LASERS, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
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<PAGE> 2
LOGO
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 20, 1998
------------------------
TO THE STOCKHOLDERS OF SPECTRA-PHYSICS LASERS, INC.:
NOTICE IS HEREBY GIVEN that the 1998 Annual Meeting of the Stockholders of
SPECTRA-PHYSICS LASERS, INC. will be held in the Holtum Room of Hyatt Rickeys
Hotel, 4219 El Camino Real, Palo Alto, California 94306 on Wednesday, May 20,
1998, at 1:30 p.m., local time, for the purpose of:
(1) electing five directors; and
(2) transacting such other business as may properly come before the
meeting.
The Board of Directors has fixed the close of business on March 25, 1998 as
the record date for determining the stockholders of the Company entitled to
notice of and to vote at the Annual Meeting and any adjournments thereof; only
holders of stock of the Company of record on that date are entitled to notice of
and to vote at the Annual Meeting and any adjournments. A list of stockholders
will be available at the time and place of the meeting, and during the 10 days
prior to the meeting, at the office of the Secretary, Thomas J. Scannell, at
Spectra-Physics Lasers, Inc., 1335 Terra Bella Avenue, Building 7, Mountain
View, California 94043.
It is important that your shares be represented at the meeting regardless
of the number of shares that you own. Please complete and sign the enclosed
proxy card, which is being solicited by the Board of Directors of the Company,
and return it in the enclosed postage pre-paid envelope as soon as you can,
whether or not you expect to attend the Annual Meeting in person.
A proxy statement for your additional information is attached to this
notice.
You are cordially invited to attend the Annual Meeting.
Respectfully,
/s/ Patrick L. Edsell
PATRICK L. EDSELL
Chairman, President and
Chief Executive Officer
April 9, 1998
<PAGE> 3
SPECTRA-PHYSICS LASERS, INC.
1335 TERRA BELLA AVENUE, BUILDING 7
MOUNTAIN VIEW, CALIFORNIA 94043
------------------------
PROXY STATEMENT
------------------------
GENERAL INFORMATION
This proxy statement is furnished by the Board of Directors of
Spectra-Physics Lasers, Inc. (the "Company") in connection with its solicitation
of proxies for use at the Annual Meeting of Stockholders to be held May 20, 1998
and at any adjournments thereof. The Company's annual report to stockholders on
Form 10-K, including financial statements, accompanies this notice and proxy
statement, but is not incorporated as part of the proxy statement and is not to
be regarded as part of the proxy solicitation material. The proxy and this proxy
statement are being mailed to stockholders on or about April 9, 1998.
Proxies are solicited by the Board of Directors of the Company in order to
provide every stockholder an opportunity to vote on all matters scheduled to
come before the meeting, whether or not he or she attends the meeting in person.
When the enclosed proxy card is returned properly signed, the shares represented
thereby will be voted by the proxy holders named on the proxy card in accordance
with the stockholder's directions. You are urged to specify your choices by
marking the appropriate boxes on the enclosed proxy card. If the proxy is signed
and returned without specifying choices, the shares will be voted as recommended
by the Board of Directors.
Solicitation of proxies is made on behalf of the Board of Directors of the
Company, and the cost of preparing, assembling and mailing the notice of Annual
Meeting, proxy statement and form of proxy will be borne by the Company. In
addition to the use of the mail, proxies may be solicited by directors, officers
and regular employees of the Company, without additional compensation, in person
or by telephone or other electronic means. The Company will reimburse brokerage
houses and other nominees for their expenses in forwarding proxy material to
beneficial owners of the Company's stock.
REVOCABILITY OF PROXY
Execution of the enclosed proxy will not affect your right to attend the
Annual Meeting and vote in person. If you do attend, you may, if you wish, vote
by ballot at the meeting, thereby effectively canceling any proxies previously
given. In addition, a stockholder giving a proxy may revoke it at any time
before it is voted at the meeting by filing with the Secretary of the Company
any instrument revoking it, or by filing with the Company a duly executed proxy
bearing a later date.
VOTING AT THE ANNUAL MEETING
Only the holders of shares of Common Stock, par value $.01 per share (the
"Common Stock") of the Company of record at the close of business on March 25,
1998 are entitled to receive notice of, and to vote at, the Annual Meeting. Each
holder of Common Stock entitled to vote will have the right to one vote for each
share held on all matters to come before the meeting. On that date, there were
16,168,043 shares of Common Stock issued and outstanding. The holders of a
majority of the shares of Common Stock entitled to vote must be present in
person or by proxy at the Annual Meeting to constitute a quorum for the purpose
of transacting business at the meeting. Except for the election of directors,
the affirmative vote of the holders of a majority of the shares of Common Stock
present in person or by proxy at the meeting and entitled to vote on a proposal
is required to ratify and approve the proposal. Abstentions are counted in
tabulations of the votes cast by stockholders on the proposals and will have the
effect of a negative vote. Broker non-votes will not be counted for purposes of
determining whether any proposal has been approved. Directors are elected by a
plurality of the votes present or represented by proxy at the meeting and
entitled to vote on the election of directors. Because directors are elected by
a plurality of votes, abstentions and broker non-votes will not have an impact
on their election.
<PAGE> 4
SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of March 31, 1998, certain information
regarding the beneficial ownership of Common Stock of the Company, including
shares of Common Stock as to which a right to acquire ownership within 60 days
exists, of each director, each nominee for director, each executive officer
named in the Summary Compensation Table, of all the directors and executive
officers of the Company as a group, and of each person known to the Company to
have been the beneficial owner of more than 5% of the outstanding Common Stock.
<TABLE>
<CAPTION>
AGGREGATE
NUMBER OF
SHARES
TITLE OF BENEFICIALLY
NAME OF BENEFICIAL OWNER BENEFICIAL OWNER OWNED(1) PERCENT
------------------------ ---------------- ------------ -------
<S> <C> <C> <C>
Patrick L. Edsell(2) Chairman, President and Chief Executive Officer 10,250 *
Leif A. Alexandersson(2) Vice President 5,000 *
George M. Balogh(2) Vice President/General Manager 1,300 *
Shinan S. Sheng(2) Vice President/General Manager 10,000 *
Charles E. Chandler(2) Vice President/General Manager 2,000 *
Lawrence C. Karlson(3) Director 36,000 *
Lennart F. Rappe(4) Director 1,250 *
Lars Spongberg(4) Director, Vice Chairman of the Board of
Directors -- *
Thomas T. van Overbeek(3) Director -- *
All directors and
executive officers as a
group 309,627 1.9%
Spectra-Physics AB
Sturegatan 32, 4th Floor
Stockholm, Sweden 13,000,000 80.4%
</TABLE>
- ---------------
* Less than 1%.
(1) Based on information furnished to the Company by the respective
stockholders. Except as indicated below, the Company is informed that the
beneficial owners have sole voting and investment power over the shares
shown opposite their names.
(2) Pursuant to the 1997 Spectra-Physics Lasers, Inc. Stock Option Plan (the
"1997 Stock Option Plan") adopted by the Company in 1997, Mr. Edsell
received options to acquire 473,100 shares of Common Stock and Messrs.
Alexandersson, Balogh, Sheng and Chandler each received options to acquire
141,930 shares of Common Stock. All of these options have limitations on
exercise, none are currently exercisable, and none are included in the
information set forth in the table above.
(3) Pursuant to the 1997 Stock Option Plan adopted by the Company in 1997,
Messrs. Karlson and van Overbeek have each received options, with
limitations on exercise, to acquire 15,000 shares of Common Stock. None of
these options are currently exercisable, and the options are not included in
the information set forth in the above table.
(4) Messrs. Rappe and Spongberg disclaim beneficial ownership relating to the
shares of Common Stock beneficially held by Spectra-Physics AB.
PROPOSAL 1
ELECTION OF DIRECTORS
The Company's Board of Directors consists of five directors each serving
annual terms. It is proposed that five (5) directors be elected to hold office
until the next annual meeting of stockholders and until their successors have
been elected and qualified. Unless otherwise specified by the stockholders, it
is intended that the shares represented by proxies will be voted for the five
nominees for director listed below. All of the nominees are presently serving as
directors of the Company. Each nominee for director has consented to his
nomination and, so far as the Board of Directors and management are aware, will
serve as a director if elected.
2
<PAGE> 5
However, if any of the nominees should become unavailable prior to the election,
the shares represented by proxies may be voted for the election of such other
persons as the Board of Directors may recommend, unless the Board of Directors
chooses to reduce the number of directors to be elected. There is no family
relationship between any of the directors or nominees. There is no arrangement
or understanding between any director or nominee for director and any other
person(s) pursuant to which he was or is to be selected as a director or
nominee.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE FOR
THE ELECTION OF THE NOMINEES SET FORTH IN THIS PROPOSAL. PROXIES WILL BE SO
VOTED UNLESS STOCKHOLDERS SPECIFY OTHERWISE ON THEIR PROXY CARDS. THE FIVE
NOMINEES RECEIVING THE HIGHEST NUMBER OF AFFIRMATIVE VOTES OF THE SHARES OF
COMMON STOCK PRESENT OR REPRESENTED AND ENTITLED TO BE VOTED SHALL BE ELECTED AS
DIRECTORS.
PATRICK L. EDSELL Age 49 Director since 1997
Patrick L. Edsell has been Chairman, Chief Executive Officer and President
of Spectra-Physics Lasers, Inc. since the reorganization (the "Reorganization")
of the Spectra-Physics Lasers and Optics Group (the "Lasers and Optics Group")
in October 1997. Prior to that, he served as the President of the Lasers and
Optics Group since September 1990. From October 1986 until September 1990, Mr.
Edsell was Vice President, Finance and Chief Financial Officer of
Spectra-Physics AB and its predecessor Pharos AB. He is a member of the board of
directors of FLIR Systems, Inc., a thermal imaging company.
LAWRENCE C. KARLSON Age 54 Director since 1997
Lawrence C. Karlson has been a director of the Company since October 1997.
Since 1990, he has been a private investor in and an advisor to a number of
businesses. He is a member of the board of directors of AmeriSource Health
Corporation, of which he is the non-executive chairman, and CDI Corporation,
each of which is a public corporation. He is also a member of the board of
directors of several private companies.
LENNART F. RAPPE Age 53 Director since 1995
Lennart F. Rappe has been a director of the Company since 1995. He has
served as Senior Vice President and Chief Financial Officer of Spectra-Physics
AB since 1995. From 1990 to 1995, he was Executive Vice President and Chief
Financial Officer of the Esab Group.
LARS SPONGBERG Age 51 Director since 1997
Lars Spongberg has been a director of the Company since October 1997 and
Vice Chairman of the Board of Directors since January 1998. He has served as
President of Spectra-Physics AB since 1996. From 1995 to 1996, he was Senior
Vice President of Autoliv AB, an automotive parts manufacturer, and was
previously President of AB Handel och Industri (1993 - 1995), an investment
bank, and Senior Vice President of Svenska Handelsbanken (1987 - 1993), a
commercial bank. He has been a member of the board of directors of
Spectra-Physics AB since April 1997. Mr. Spongberg is also a member of the board
of directors of FLIR Systems, Inc., a thermal imaging company.
THOMAS T. VAN OVERBEEK Age 48 Director since 1998
Thomas T. van Overbeek has been a director of the Company since January
1998. He has served as President and Chief Executive Officer of Cornerstone
Imaging, Inc., a supplier of display and document recapture technology for the
document imaging processing market since 1988. Mr. van Overbeek is also a member
of the board of directors of Cornerstone Imaging, Inc.
BOARD OF DIRECTORS
The Board of Directors of the Company held three meetings during 1997. Each
of the incumbent directors attended 75% or more of the meetings of the Board of
Directors held during the period in which such director was a member of the
Board of Directors. (Mr. van Overbeek did not attend any of such meetings since
he was elected to the Board of Directors in January 1998.)
3
<PAGE> 6
COMMITTEES OF THE BOARD OF DIRECTORS
The standing committees of the Board of Directors are the Compensation and
Audit Committees.
The Compensation Committee reviews and recommends actions to the Board of
Directors on such matters as salary and other compensation of officers and the
administration of certain benefit plans. The Compensation Committee also has the
authority to administer, grant and award stock and stock options under the
Company's incentive equity plans. The Compensation Committee was formed in
January 1998. The current Chairman of the Compensation Committee is Mr.
Spongberg and its other current member is Mr. van Overbeek.
The Audit Committee meets with management and the Company's independent
auditors to consider the adequacy of the Company's internal controls and other
financial reporting matters. The Audit Committee recommends to the Board of
Directors the engagement of the Company's independent auditors, discusses with
the independent auditors their audit procedures, including the proposed scope of
their audit, the audit results and the accompanying management letters and, in
connection with determining their independence, reviews the services performed
by the independent auditors. The Audit Committee was formed in January 1998. The
current Chairman of the Audit Committee is Mr. Rappe and its other current
members are Messrs. Karlson and van Overbeek.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
Executive Compensation Program. The role of the compensation committee of
the Board of Directors (the "Committee") is to recommend, establish, oversee and
direct the Company's executive compensation policies and programs and to
recommend to the Board of Directors compensation for executive officers. In
carrying out this role, we believe it is important to align executive
compensation with Company values and objectives, business strategies, management
initiatives, business financial performance and enhanced stockholder value.
Since the Company did not complete its initial public offering until December
1997, the Committee was not established until January 1998. All compensation
decisions during 1997 were made by the Board of Directors as it was constituted
prior to the Reorganization.
The following is a summary of policies which the Board of Directors
analyzed in determining the compensation for the officers of the Company in
1997. The Committee intends to follow the same general policies in determining
the compensation for the officers of the Company in 1998, but may, in its
discretion, alter such policies to take into consideration new circumstances at
the time.
Compensation Philosophy. The Committee intends to apply a consistent
philosophy to compensation for all employees, including executive officers,
which is based on the premise that the achievements of the Company result from
the coordinated efforts of all individuals working toward common objectives. The
Company strives to achieve those objectives by meeting the expectations of
customers and stockholders.
Under the supervision of the Board of Directors, the Company has developed
a compensation policy that is designed to:
1. Attract and retain qualified senior executives;
2. Reward executives for actions that result in the long-term enhancement
of stockholder value; and
3. Reward results with respect to the financial and operational goals of
the Company.
The guiding principle of the Committee is to establish a compensation
program that aligns executive compensation with the Company's objectives and
business strategies as well as with operational and financial performance.
Accordingly, each executive officer's compensation package is comprised of three
elements: (a) base salary which reflects an individual's responsibilities,
performance and expertise and is designed to be competitive with salary levels
in effect at high-technology companies of the same size; (b) annual cash bonuses
tied to the Company's achievement of specified goals; and (c) incentive stock
options which strengthen the alignment of interests between the executive
officers and the Company's stockholders.
4
<PAGE> 7
Factors. The principal factors that were considered in establishing the
components of each executive officer's compensation package for 1997 are
summarized below. In its discretion, the Committee may apply different factors
in future years.
Base salary. The Company establishes salaries for the Chief Executive
Officer and other officers on the basis of personal performance and by
considering salaries of officers of comparably sized hightechnology
companies according to data obtained from executive compensation
consultants and from other independent outside sources. The Committee has
reviewed the base salaries of the executive officers for 1997 and is of the
opinion that such salaries are not unreasonable in view of those paid by
comparable high-technology companies.
Annual Cash Bonuses. The Chief Executive Officer can earn up to 100%
of his base salary and each of the other executive officers can earn up to
50% of his base salary based on the achievement by the Company of certain
financial and operational performance goals established for each fiscal
year.
Incentive Stock Options. The Company grants stock options to provide
long-term incentives for the executive officers. The option grants under
the 1997 Stock Option Plan are designed to align the interests of the
executive officers with those of the stockholders and to provide each
individual with a significant incentive to manage the Company from the
perspective of an owner and to remain employed by the Company. The number
of shares subject to each option grant is based on the officer's level of
responsibility and relative position within the Company as well as a review
of grants to similar executives in similar positions in comparable
companies. All of the options granted in 1997 are subject to four-year
vesting schedules and were granted at the initial public offering price to
the public. Accordingly, the options will only provide a return to the
executive officer if he remains in the Company's employ, and then only if
the market price of the Company's common stock appreciates above the
exercise price over the option term. The Committee reviewed the stock
options awarded to the executive officers in 1997 and is of the opinion
that the option awards are reasonable in view of each officer's level of
responsibility and relative position with the Company. The Committee is
also of the opinion that the awards are in line with those generally
granted to executive officers in similar positions in comparable
high-technology companies.
Deductibility of Compensation. Section 162(m) of the Internal Revenue Code
imposes a $1 million limit on the deductibility of compensation paid to certain
executive officers of public companies, unless the compensation meets certain
requirements for "performance-based" compensation. The Compensation Committee
believes that all of the compensation awarded to the Company's executive
officers will be fully deductible in accordance with these rules.
COMPENSATION COMMITTEE
Lars Spongberg, Chairman
Thomas T. van Overbeek
COMPENSATION OF DIRECTORS
Directors not affiliated with the Company or Spectra-Physics AB receive an
annual fee of $10,000 for serving on the Board of Directors, a fee of $1,000 for
attending each Board of Directors meeting and a fee of $500 for attending each
committee meeting not held on the same day as a Board meeting. Directors are
reimbursed for expenses incurred in connection with attendance at meetings of
the Board of Directors or committees thereof. No officer of the Company receives
any additional compensation for serving as a member of the Board of Directors or
any of its committees.
Under the 1997 Stock Option Plan, each director not affiliated with the
Company or Spectra-Physics AB received, on the date on which the Company's
initial public offering was consummated, an initial option grant to purchase
15,000 shares of Common Stock and any director not affiliated with the Company
or Spectra-Physics AB first becoming a director after the Company's initial
public offering received or will receive an initial option grant to purchase
15,000 shares of Common Stock upon his or her election to the Board of
5
<PAGE> 8
Directors. Additionally, each director not affiliated with the Company or
Spectra Physics AB receives an annual option grant to purchase 5,000 shares of
Common Stock. Options granted to such non-affiliated directors have an exercise
price equal to the fair market value of the Common Stock on the date of grant.
During fiscal year 1997, the Company granted options to Mr. Karlson under
the 1997 Stock Option Plan to purchase 15,000 shares of Common Stock at $10.00
per share, which are exercisable beginning on December 11, 1999.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
No member of the Compensation Committee is a former or current officer or
employee of the Company or any of its subsidiaries. To the Company's knowledge,
there were no other relationships involving members of the Compensation
Committee requiring disclosure in this section of this Proxy Statement.
MANAGEMENT
OFFICERS AND KEY EMPLOYEES
The following table sets forth certain information concerning certain
officers and key employees of the Company.
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Patrick L. Edsell 49 Chairman, President and Chief Executive
Officer of Spectra-Physics Lasers, Inc.
Leif A. Alexandersson 45 Vice President, Distribution of
Spectra-Physics Lasers, Inc.
George M. Balogh 46 Vice President and General Manager, Commercial
Systems Group of Spectra-Physics Lasers, Inc.
Charles E. Chandler 44 Vice President and General Manager, OEM
Business Unit of Spectra-Physics Lasers, Inc.
Ken E. Johnson 39 Vice President, Human Resources of
Spectra-Physics Lasers, Inc.
Thomas J. Scannell 47 Vice President, Finance of Spectra-Physics
Lasers, Inc.
Shinan S. Sheng 47 Vice President and General Manager, Industrial
and Scientific Lasers Business Unit of
Spectra-Physics Lasers, Inc.
Mark S. Sobey 38 President of Spectra-Physics Laser Data
Systems, Inc.
John M. Tracy 54 President of Opto Power Corporation
</TABLE>
Patrick L. Edsell has been Chairman, Chief Executive Officer and President
of Spectra-Physics Lasers, Inc. since the Reorganization. Prior to the
Reorganization, he served as the President of the Lasers and Optics Group since
September 1990. From October 1989 until September 1990, Mr. Edsell was Vice
President, Finance and Chief Financial Officer of Spectra-Physics AB and its
predecessor Pharos AB. He is a member of the board of directors of FLIR Systems,
Inc., a thermal imaging company.
Leif A. Alexandersson has been Vice President, Distribution of
Spectra-Physics Lasers, Inc. since the Reorganization. Prior to the
Reorganization, Mr. Alexandersson served as Vice President, Distribution of the
Lasers and Optics Group since March 1993. He joined the Lasers and Optics Group
in March 1992 as Vice President for European Distribution. Mr. Alexandersson was
President of Geotronics of North America, a construction instruments company and
an affiliate of Spectra-Physics AB, from 1988 to 1992.
George M. Balogh has been Vice President and General Manager of the
Commercial Systems Group of Spectra-Physics Lasers, Inc. since the
Reorganization. Prior to the Reorganization, Mr. Balogh served as Vice
6
<PAGE> 9
President and General Manager of the Commercial Systems Group for the Lasers and
Optics Group since June 1991. He joined the Lasers and Optics Group in 1988 as
Operations Manager.
Charles E. Chandler has been Vice President and General Manager of the OEM
Business Unit of Spectra-Physics Lasers, Inc. since the Reorganization. Prior to
the Reorganization, Mr. Chandler served as Vice President and General Manager of
the OEM Business Unit for the Lasers and Optics Group since January 1996. He
joined the Lasers and Optics Group in July 1988 as Manufacturing Manager and
served as OEM Engineering Manager for the three years prior to October 1995.
Ken E. Johnson has been Vice President, Human Resources for Spectra-Physics
Lasers, Inc. since the Reorganization. Prior to the Reorganization, he served as
the Vice President, Human Resources of the Lasers and Optics Group since October
1995. He joined the Lasers and Optics Group in July 1989 and served as Senior
Human Resources Representative, Manager, Compensation and Benefits and Human
Resources Manager prior to 1995.
Thomas J. Scannell has been Vice President, Finance of Spectra-Physics
Lasers, Inc. since the Reorganization. Prior to the Reorganization, Mr. Scannell
served as the Vice President, Finance of the Lasers and Optics Group since July
1996. From 1990 to 1996, he was a Division Controller and Assistant Corporate
Controller at Raychem Inc., a materials science company.
Shinan S. Sheng has been Vice President and General Manager of the
Industrial and Scientific Lasers Business Unit of Spectra-Physics Lasers, Inc.
since the Reorganization. Prior to the Reorganization, Dr. Sheng served as Vice
President and General Manager of the Industrial and Scientific Lasers Business
Unit of the Lasers and Optics Group since April 1995. He joined the Lasers and
Optics Group in 1979 and advanced from laser physicist through a number of
management positions to his current position.
Mark. S. Sobey is President of Spectra-Physics Laser Data Systems, Inc., a
subsidiary of the Company ("Laser Data"). Dr. Sobey has held this position since
Laser Data was founded in January 1996. He joined the Lasers and Optics Group in
1985 and advanced from salesman in the United Kingdom through several management
positions to his current position.
John M. Tracy is President of Opto Power Corporation, a subsidiary of the
Company ("Opto Power"). Dr. Tracy joined the Lasers and Optics Group in
September 1992 as the result of the acquisition of the Advanced Optoelectronics
business unit of Applied Solar Energy Corporation. Opto Power was formed in
September 1992, immediately after the acquisition. Dr. Tracy was Vice President
and General Manager of Advanced Optoelectronics from 1985 to 1992.
7
<PAGE> 10
SUMMARY COMPENSATION OF NAMED EXECUTIVE OFFICERS
The following table sets forth, for the years ended December 31, 1997, 1996
and 1995, certain information regarding the cash compensation paid by the
Company, as well as certain other compensation paid or accrued for such fiscal
years, to the Company's Chief Executive Officer and each of the four other most
highly compensated officers of the Company (the "named executive officers"):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
------------------- ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS(1) COMPENSATION
--------------------------- ---- -------- -------- ------------
<S> <C> <C> <C> <C>
Patrick L. Edsell........................... 1997 $250,016 $177,600 $257,762(2)(3)
Chairman, President and Chief Executive 1996 234,500 80,000 44,819(2)(3)
Officer
1995 207,827 80,385 44,057(2)(3)
Leif A. Alexandersson....................... 1997 192,900 54,256 54,222(4)
Vice President 1996 185,285 75,982 4,584(4)
1995 178,488 58,197 4,416(4)
George M. Balogh............................ 1997 167,325 43,025 96,834(5)
Vice President/General Manager 1996 154,739 62,952 12,139(5)
1995 139,172 45,379 13,004(5)
Shinan S. Sheng............................. 1997 167,325 45,106 47,229(6)
Vice President/General Manager 1996 154,627 62,952 3,732(6)
1995 135,387 45,244 3,250(6)
Charles E. Chandler......................... 1997 145,972 38,087 40,775(7)
Vice President/General Manager 1996 134,435 53,488 3,090(7)
1995 110,067 31,252 2,461(7)
</TABLE>
- ---------------
(1) Cash bonuses earned in 1997, 1996 and 1995, respectively, but paid in 1998,
1997 and 1996, respectively.
(2) Mr. Edsell receives personal benefits in the form of additional payments for
certain medical, dental, disability and life insurance premiums. The
aggregate amount of such personal benefits, however, does not exceed the
lesser of $50,000 or 10% of the total of the annual salary and bonuses
reported for Mr. Edsell.
(3) "All Other Compensation" for Mr. Edsell includes the following: (i) a
$25,000 annual payment in each of 1997, 1996 and 1995 for serving as a
member of the Board of Directors of the Company, which was awarded in lieu
of additional salary, (ii) $5,812, $5,105 and $4,843 in 401(k) matching
contributions made by the Company in 1997, 1996 and 1995, respectively,
(iii) a $12,214 annual payment for a Company-purchased automobile in each of
1997, 1996 and 1995, (iv) $1,850, $2,500 and $2,000 for preparation of
federal and state income tax returns in 1997, 1996 and 1995, respectively,
(v) a $103,125 bonus based on Company operating results and completion of an
initial public offering in 1997 (an additional $34,375 stay-on bonus was
paid in 1998) and (vi) $109,761 realized upon the exercise of
Spectra-Physics AB phantom stock options.
(4) "All Other Compensation" for Mr. Alexandersson includes the following: (i)
$5,472, $4,584 and $4,416 in 401(k) matching contributions made by the
Company in 1997, 1996 and 1995, respectively, and (ii) a $48,750 bonus based
on Company operating results and completion of an initial public offering in
1997 (an additional $16,250 stay-on bonus was paid in 1998).
(5) "All Other Compensation" for Mr. Balogh includes the following: (i) $4,724,
$3,519 and $3,845 in 401(k) matching contributions made by the Company in
1997, 1996 and 1995, respectively, (ii) a $42,505 bonus based on Company
operating results and completion of an initial public offering in 1997 (an
additional $14,168 stay-on bonus was paid in 1998), (iii) loan forgiveness
of $8,260, $8,620 and
8
<PAGE> 11
$9,159 for 1997, 1996 and 1995, respectively, and (iv) $41,345 realized upon
the exercise of Spectra-Physics AB phantom stock options.
(6) "All Other Compensation" for Mr. Sheng includes the following: (i) $4,724,
$3,732 and $3,250 in 401(k) matching contributions made by the Company in
1997, 1996 and 1995, respectively, and (ii) a $42,505 bonus based on Company
operating results and completion of an initial public offering in 1997 (an
additional $14,168 stay-on bonus was paid in 1998).
(7) "All Other Compensation" for Mr. Chandler includes the following: (i)
$3,273, $3,090, and $2,461 in 401(k) matching contributions made by the
Company in 1997, 1996 and 1995, respectively, and (ii) a $37,502 bonus based
on Company operating results and completion of an initial public offering in
1997 (an additional $12,501 stay-on bonus was paid in 1998).
STOCK OPTIONS
OPTION GRANTS IN 1997
The following table sets forth certain information with respect to options
to purchase Common Stock granted to the named executive officers of the Company
during 1997 under the 1997 Stock Option Plan. No options for Common Stock were
exercised during 1997.
INDIVIDUAL GRANTS
<TABLE>
<CAPTION>
NUMBER OF % OF TOTAL
SECURITIES OPTIONS/SARS
UNDERLYING GRANTED TO EXERCISE OR GRANT DATE
OPTIONS/SARS EMPLOYEES IN BASE PRICE PRESENT
NAME GRANTED FISCAL YEAR (PER SHARE)(1) EXPIRATION DATE VALUE(2)
---- ------------ ------------ -------------- --------------- ----------
<S> <C> <C> <C> <C> <C>
Patrick L. Edsell......... 473,100 22.8% $10.00 December 11, 2007 $2,048,523
Leif A. Alexandersson..... 141,930 6.8% $10.00 December 11, 2007 $ 614,557
George M. Balogh.......... 141,930 6.8% $10.00 December 11, 2007 $ 614,557
Shinan S. Sheng........... 141,930 6.8% $10.00 December 11, 2007 $ 614,557
Charles E. Chandler....... 141,930 6.8% $10.00 December 11, 2007 $ 614,557
</TABLE>
- ---------------
(1) Options are exercisable to the extent vested beginning December 11, 1999.
Option vest 25% on December 11, 1998 and 6.25% at the end of each
three-month period thereafter.
(2) Present values were calculated using the Black-Scholes American option
valuation method. The actual value, if any, that an executive officer may
receive is dependent on the excess of the stock price over the exercise
price. Use of this model should not be viewed as a forecast of the future
performance of the Company's stock price. The estimated grant date present
value of each stock option is $4.33 based on the following defined option
terms and assumptions: (a) a stock price of $10.00; (b) an exercise price of
$10.00; (c) an expected life of four years; (d) a risk-free interest rate of
5.70%, which represents the yield on Treasury Bonds with maturity dates
corresponding to that of the options; (e) a dividend yield of 0.0%,
representing the stock's current yield; and (f) a stock price volatility
rate of 0.47, which reflects an estimate of the Common Stock's volatility.
OTHER FORMS OF COMPENSATION
EMPLOYMENT CONTRACTS
The Company is a party to an employment agreement with Patrick L. Edsell
dated January 1, 1991 that provides for the full-time employment of Mr. Edsell
as the Company's President. The agreement had an initial term of three years and
provides for continuing automatic one-year extensions until the agreement is
terminated by either the Company or Mr. Edsell. Mr. Edsell's agreement provides
for an annual salary of $193,000, or such greater amount as may be approved by
the Company's Board of Directors, as well as other benefits. A non-competition
provision requires, for the term of the agreement, that Mr. Edsell not engage
(as a stockholder, with some exceptions, or as an officer, director, employee or
otherwise) in any business that
9
<PAGE> 12
competes directly or indirectly with the Company. The Company may terminate Mr.
Edsell's employment at any time with or without cause or upon the death or
disability of Mr. Edsell. If Mr. Edsell's employment is terminated by the
Company without cause, or as the result of a change in control after which Mr.
Edsell's duties are materially altered, the agreement requires the Company to
make a lump sum payment to Mr. Edsell in an amount equal to the salary he would
have received for the remainder of the current term (and any renewal term not
precluded by a timely termination notice), as well as to provide health and
welfare benefits for the greater of the remainder of the term or one year.
1997 SPECTRA-PHYSICS LASERS, INC. STOCK OPTION PLAN
In connection with its initial public offering in 1997, the Company adopted
the 1997 Spectra-Physics Lasers, Inc. Stock Option Plan which provides for the
granting of non-qualified stock options ("Options") to certain officers, key
employees and non-employee directors of the Company. The 1997 Stock Option Plan
is administered by the Compensation Committee. The aggregate maximum number of
shares of Common Stock available for awards under the 1997 Stock Option Plan is
2,309,721 shares, subject to adjustment to reflect changes in the Company's
capitalization. No awards can be made under the 1997 Stock Option Plan more than
10 years after the date it was adopted.
The exercise price of the Options are determined by the Compensation
Committee in its discretion, provided that the exercise price must be at least
100% of the fair market value of a share of Common Stock on the date the Option
is granted. An Option's term shall not exceed ten years from the date of grant.
No Option may be exercised sooner than six months from the date of grant.
Concurrent with the Company's initial public offering, the Company granted
options to certain officers, directors and employees of the Company to purchase
an aggregate of 2,087,145 shares of the Common Stock under the 1997 Stock Option
Plan at the initial public offering price of $10.00 per share. Mr. Edsell was
granted options to purchase 473,100 shares and Messrs. Alexandersson, Balogh,
Sheng and Chandler were each granted options to purchase 141,930 shares. These
options vest 25% upon the first anniversary of the December 11, 1997 grant date
and 6.25% at the end of each three-month period thereafter. Subject to the terms
of the 1997 Stock Option Plan, these Options are exercisable to the extent
vested beginning two years after the grant date. These Options may not be
exercised following termination of the grantee's employment with the Company,
except that in the event that a grantee's employment terminates due to death,
disability or retirement, options held by such grantee or his estate shall be
exercisable, to the extent vested at the time of termination of employment, for
a period of three months after termination of employment or, if later, the end
of the foregoing two-year period. These Options expire 10 years from the grant
date.
SPECTRA-PHYSICS LASERS, INC. SAVINGS PLUS PLAN
The Company's Savings Plus Plan (the "401(k) Plan"), as amended, is a
savings and retirement plan intended to satisfy the tax qualification
requirements of Sections 401(a), 401(k) and 401(m) of the Internal Revenue Code
of 1986, as amended (the "Code"). Subject to certain terms and conditions of the
401(k) Plan, substantially all of the Company's employees are eligible to
participate in the 401(k) Plan on the first day of the month coinciding with or
next following such employee's first day of employment. Eligible employees may
contribute to the 401(k) Plan up to 15% of their compensation on a pre-tax basis
and up to 5% of their compensation on an after-tax basis, subject to certain
limitations in the Code.
The Company, in its discretion, may (i) make contributions to the 401(k)
Plan each year that match in whole or in part the pre-tax contributions that
employees make to the 401(k) Plan, (ii) make profit sharing contributions each
year and (iii) allocate those profit sharing contributions to employees in equal
amounts to each employee or in a proportionate amount based on the employee's
compensation for the year in relation to all of the employees' compensation for
that year. All Company and employee contributions to the 401(k) Plan are fully
vested and nonforfeitable at all times. Contributions to the 401(k) Plan are
allocated to individual accounts for each employee, and employees may direct the
investment of their accounts into various investment funds. The trustee of the
401(k) Plan is Fidelity Management Trust Company.
10
<PAGE> 13
EXECUTIVE INCENTIVE PLAN
The Company's Executive Incentive Plan provides certain officers of the
Company with annual incentive cash bonus awards based on achievement of certain
pre-established quantitative and qualitative goals. The goals of the Executive
Incentive Plan are to reward executives for superior performance and for
exceeding the Company's predetermined financial and business goals. To be
eligible under the Executive Incentive Plan, a participant must be a full-time
regular employee on the date of payment.
EMPLOYEE BONUS PLAN
The Company's Employee Bonus Plan provides all employees of the Company,
other than employees of Laser Data and employees entitled to participate in the
Executive Incentive Plan, with annual incentive cash bonus awards based on
overall Company profitability. The goal of the Employee Bonus Plan is to provide
a financial incentive for employees to achieve the Company's financial goals.
RESTRICTED STOCK PLAN
In 1994, Opto Power granted certain Opto Power employees options to
purchase, in the aggregate, up to 20% of Opto Power common stock outstanding on
a fully diluted basis. In October 1997, the option holders agreed to cancel
their Opto Power options for initial cash payments in the aggregate amount of
approximately $14.7 million, payable upon execution of the agreements, and the
Company's future obligation to issue an aggregate of 408,043 shares of Common
Stock upon completion of the Company's initial public offering ("Restricted
Stock"). The foregoing cash payments were funded through a capital contribution
to the Company by Spectra-Physics Holdings USA, Inc., a wholly owned subsidiary
of Spectra-Physics AB. The Restricted Stock may not be sold or otherwise
transferred except as follows: 25% of the shares originally received may be
transferred beginning six months following consummation of the offering, and an
additional 25% of the shares becomes transferable every six months thereafter.
CERTAIN OPTIONS TO PURCHASE LASER DATA COMMON STOCK
Laser Data has granted certain of its employees options ("Laser Data
Options") to purchase, in the aggregate, approximately 17% of Laser Data common
stock then outstanding on a fully diluted basis. The unvested portion of the
Options vest equally on December 31, 1998 and December 31, 1999. The Options
fully vest in the event of a change of control of Laser Data prior to December
31, 1999. Laser Data Options are exercisable, to the extent vested, at an
exercise price of $.05 per share, from the effective date of an initial public
offering of Laser Data common stock until the earlier of the first anniversary
of such initial public offering and February 28, 2000, provided that the Laser
Data Options shall not have otherwise become exercisable prior to February 28,
2000 or during the period from February 28, 2000 through December 31, 2002. The
Laser Data Options terminate upon the termination of the employment of the Laser
Data Option holder for cause and certain other wilful acts.
11
<PAGE> 14
STOCKHOLDER RETURN PERFORMANCE
The following graph compares the percentage change in cumulative total
stockholder return on the Company's Common Stock against the cumulative total
return of the Nasdaq Composite Index and the Technology sub-component of the
NationsBanc Montgomery Securities Growth Stock Index 500 (the "Montgomery
Technology Index") from December 12, 1997, the first trading day on which the
Common Stock was registered under Section 12 of the Securities Exchange Act of
1934, as amended (the "Exchange Act") to the close of trading on December 31,
1997. Cumulative total return to stockholders is measured by dividing (x) the
sum of (i) total dividends for the period (assuming dividend reinvestment) plus
(ii) per-share price change for the period by (y) the share price at the
beginning of the period. The graph is based on an investment of $100 in the
Common Stock at the initial public offering price to the public and in each
index at the market close on December 12, 1997.
COMPARISON OF TOTAL RETURN AMONG SPECTRA-PHYSICS LASERS, INC., THE NASDAQ
COMPOSITE INDEX
AND THE MONTGOMERY TECHNOLOGY INDEX
<TABLE>
<CAPTION>
MEASUREMENT PERIOD 'SPECTRA-PHYSICS NASDAQ COMPOSITE MONTGOMERY
(FISCAL YEAR COVERED) LASERS, INC.' INDEX TECHNOLOGY INDEX
<S> <C> <C> <C>
12/12/97 100.00 100.00 100.00
12/31/97 125.00 102.23 106.28
</TABLE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company and Mr. Karlson, a director of the Company, are parties to a
consulting agreement dated June 4, 1993 whereby Mr. Karlson provides consulting
and advisory services to the Company on a daily fixed fee basis. Pursuant to the
agreement, Mr. Karlson is also entitled to reimbursement of out-of-pocket
expenses incurred in connection with his provision of consulting services to the
Company. In 1995, 1996 and 1997, the Company incurred fees payable to Mr.
Karlson of $70,510, $112,464 and $116,033, respectively, for consulting services
rendered to the Company.
INDEPENDENT ACCOUNTANTS
Since 1990, the Company has retained Coopers & Lybrand L.L.P. as its
independent accountants and it intends to retain Coopers & Lybrand L.L.P. for
the current year ending December 31, 1998. Representatives of Coopers & Lybrand
L.L.P. are expected to be present at the Annual Meeting, and such
representatives will
12
<PAGE> 15
have an opportunity at the Annual Meeting to make a statement if they desire to
do so and will be available to respond to appropriate questions.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Company's directors and
executive officers, and persons who own more than 10% of a registered class of
the Company's equity securities (the "10% Stockholders") to file reports of
ownership and changes in ownership of Common Stock and other equity securities
of the Company with the Securities and Exchange Commission (the "SEC") and the
Nasdaq National Market. Officers, directors and 10% Stockholders are required by
SEC regulation to furnish the Company with copies of all forms they file under
Section 16(a). Based solely on its review of the copies of such forms received
by it and written representations from certain reporting persons that no other
reports were required from those persons, the Company believes that during the
period December 11, 1997 through December 31, 1997, its officers, directors and
10% Stockholders complied with all applicable Section 16(a) filing requirements,
except that Mr. Rappe inadvertently filed a Statement of Changes in Beneficial
Ownership on Form 4, reflecting an acquisition of shares of the Company's Common
Stock, after the applicable filing period.
1999 STOCKHOLDER PROPOSALS
In the event that a stockholder desires to have a proposal included in the
proxy statement and form of proxy for the Annual Meeting of Stockholders to be
held in 1999, the proposal must be received by the Company in writing on or
before December 10, 1998, by certified mail, return receipt requested, and must
comply in all respects with applicable rules and regulations of the Securities
and Exchange Commission, the laws of the State of Delaware, and the Bylaws of
the Company relating to such inclusion. Stockholder proposals may be mailed to
the Secretary, Spectra-Physics Lasers, Inc., 1335 Terra Bella Avenue, Building
7, Mountain View, California 94043.
ANNUAL REPORT ON FORM 10-K
A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR ITS FISCAL YEAR
ENDED DECEMBER 31, 1997 ACCOMPANIED THIS PROXY STATEMENT, BUT IS NOT
INCORPORATED AS PART OF THE PROXY STATEMENT AS IT IS NOT TO BE REGARDED AS PART
OF THE PROXY SOLICITATION MATERIAL.
OTHER BUSINESS
The Company is not aware of any other business to be presented at the 1998
Annual Meeting of Stockholders. If any other matter should properly come before
the Annual Meeting, however, the enclosed proxy confers discretionary authority
with respect thereto.
By Order of the Board of Directors,
/s/ Thomas J. Scannell
THOMAS J. SCANNELL
Secretary
Dated: April 9, 1998
Mountain View, California
13
<PAGE> 16
1524-PS-97
<PAGE> 17
SPECTRA-PHYSICS LASERS, INC.
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS
May 20, 1998
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
KNOW ALL MEN BY THESE PRESENTS, that the undersigned stockholder of
SPECTRA-PHYSICS LASERS, INC., a Delaware corporation, does hereby constitute and
appoint Patrick L. Edsell and Thomas J. Scannell, or any one of them, with full
power to act alone and to designate substitutes, the true and lawful attorneys
and proxies of the undersigned for and in the name and stead of the undersigned,
to vote all shares of Common Stock of SPECTRA-PHYSICS LASERS, INC., which the
undersigned would be entitled to vote if personally present at the Annual
Meeting of Stockholders to be held in the Holtum Room of Hyatt Rickeys Hotel,
4219 El Camino Real, Palo Alto, California 94306 on Wednesday, May 20, 1998 at
1:30 p.m. local time, and at any and all adjournments and postponements thereof,
as follows:
(CONTINUED, AND TO BE MARKED, DATED AND SIGNED, ON THE OTHER SIDE)
- FOLD AND DETACH HERE -
<PAGE> 18
20
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ITEM 1.
Please mark your
vote as indicated in /X/
this example
VOTE WITHHELD
Item 1. ELECTION OF DIRECTORS FOR ALL* FOR ALL
Nominees: / / / /
Patrick L. Edsell
Lawrence C. Karlson
Lennart F. Rappe
Lars Spongberg
Thomas T. van Overbeek
*To withhold authority to vote for one or more nominee(s), write the name(s) of
the nominee(s) below:
- ----------
Item 2. OTHER MATTERS
In their discretion, the proxies are authorized to vote upon such other matters
as may properly come before the meeting or at any adjournments thereof.
THIS PROXY WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY THE UNDERSIGNED
STOCKHOLDER. IF NO DIRECTION IS INDICATED, THIS PROXY WILL BE VOTED FOR ITEM 1
AND WILL GRANT DISCRETIONARY AUTHORITY PURSUANT TO ITEM 2.
NOTE: PLEASE DATE THIS PROXY, SIGN YOUR NAME EXACTLY AS IT APPEARS HEREON, AND
RETURN PROMPTLY USING THE ENCLOSED POSTAGE-PAID ENVELOPE. JOINT OWNERS SHOULD
EACH SIGN. WHEN SIGNING AS ATTORNEY, EXECUTOR, ADMINISTRATOR, TRUSTEE OR
GUARDIAN, PLEASE GIVE FULL TITLE AS SUCH.
Signature(s)________________________________________ Date:__________________
- FOLD AND DETACH HERE -
