SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE
SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only
(as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or 240.14a-12
SURGICAL LASER TECHNOLOGIES, INC.
- - --------------------------------------------------------------------------------
(Name of Registrant as Specified in its Charter)
SURGICAL LASER TECHNOLOGIES, INC.
- - --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[X] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1),
14a-6(i)(2) or Item 22(a)(2) of Schedule 14A.
[ ] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
[ ] 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:
- - --------------------------------------------------------------------------------
[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by registration
statement number, or the form or schedule and the date of its filing.
(1) Amount Previously Paid:
- - --------------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
- - --------------------------------------------------------------------------------
(3) Filing Party:
- - --------------------------------------------------------------------------------
(4) Date Filed:
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<PAGE>
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
MAY 25, 1995
TO THE STOCKHOLDERS:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of
Surgical Laser Technologies, Inc., a Delaware corporation (the 'Company'), will
be held on Thursday, May 25, 1995 at 10:00 a.m., local time, at the Company's
headquarters, 200 Cresson Boulevard, Oaks, Pennsylvania 19456-0880, for the
following purposes:
1. To elect seven directors to serve until the 1996 Annual Meeting and
until their respective successors are elected;
2. To ratify the appointment of Arthur Andersen LLP as independent
accountants of the Company for the fiscal year ending December 31, 1995;
and
3. To transact such other business as may properly come before the
meeting and any adjournment thereof.
Only stockholders of record at the close of business on April 20, 1995
are entitled to notice of and to vote at the meeting and any adjournment
thereof.
A copy of the Company's Annual Report for its fiscal year ended January
1, 1995 is being mailed to stockholders with this Notice.
All stockholders are cordially invited to attend the meeting in person.
However, to assure your representation at the meeting, you are urged to mark,
sign, date and return the enclosed proxy as promptly as possible in the
postage-prepaid envelope enclosed for that purpose. Any stockholder attending
the meeting may vote in person even if he has returned a proxy.
By Order of the Board of Directors,
Davis Woodward
Secretary
Oaks, Pennsylvania
April 25, 1995
<PAGE>
SURGICAL LASER TECHNOLOGIES, INC.
PROXY STATEMENT FOR 1995 ANNUAL MEETING OF STOCKHOLDERS
INFORMATION CONCERNING SOLICITATION AND VOTING
GENERAL
The enclosed proxy is solicited on behalf of the Board of Directors of
Surgical Laser Technologies, Inc. (the 'Company') for use at the Annual Meeting
of Stockholders to be held Thursday, May 25, 1995 at 10:00 a.m., local time, and
at any adjournment thereof (the 'Annual Meeting'), for the purposes set forth in
the accompanying Notice of Annual Meeting of Stockholders. The Annual Meeting
will be held at the Company's executive offices, located at 200 Cresson
Boulevard, Oaks, Pennsylvania 19456-0880. The Company's telephone number at that
location is (610) 650-0700.
These proxy solicitation materials were first mailed on or about April 25,
1995 to all stockholders entitled to vote at the Annual Meeting.
RECORD DATE AND PRINCIPAL SHARE OWNERSHIP
Stockholders of record at the close of business on April 20, 1995 are
entitled to receive notice of and to vote at the Annual Meeting. At the record
date, 9,849,167 shares of the Company's Common Stock, par value $.01 per share
(the 'Common Stock') were issued and outstanding.
As of April 20, 1995, the following persons were known to the Company to be
the beneficial owners of more than 5% of the Company's Common Stock:
<TABLE>
<CAPTION>
NUMBER OF PERCENT OF
NAME AND ADDRESS SHARES CLASS
- - ------------------------------------------------------------------- ----------- -----------
<S> <C> <C>
State of Wisconsin Investment Board................................ 884,700(1) 8.98%
121 East Wilson Street
Madison, WI 53703
Kontron Instruments Holding N.V.................................... 695,652 7.06%
Julianaplein 22
Curacao, Netherlands Antilles
</TABLE>
- - ------------------
(1) Information furnished by stockholder as of April 11, 1995.
REVOCABILITY OF PROXIES
Any proxy given pursuant to this solicitation may be revoked by the person
giving it at any time before its use by delivering to the Secretary of the
Company a written notice of revocation or a duly executed proxy bearing a later
date or by attending the Annual Meeting and voting in person. Any such notice of
revocation should be sent to: Surgical Laser Technologies, Inc., P.O. Box 880,
200 Cresson Boulevard, Oaks, Pennsylvania 19456-0880, attention: Davis Woodward,
Secretary.
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<PAGE>
VOTING AND SOLICITATION
On all matters presented to the Company's stockholders for a vote, the
holders of Common Stock vote as a single class, and the holder of each share of
Common Stock is entitled to one vote per share. The holders of Common Stock do
not have cumulative voting rights in the election of directors.
The affirmative vote of the holders of a plurality of the shares of the
Company's Common Stock present, in person or by proxy, and entitled to vote at
the Annual Meeting is required for the election of each director. The
affirmative vote of the holders of a majority of the shares of the Company's
Common Stock present, in person or by proxy, and entitled to vote at the Annual
Meeting is required for the ratification of the appointment of the independent
auditors (the 'Proposal').
Abstention from voting will have the practical effect of voting against the
Proposal since an abstention represents one less vote for the Proposal. Broker
non-votes will have no effect on the Proposal since they will not represent
shares entitled to vote thereon at the Annual Meeting. Abstentions and broker
non-votes on the election of directors will have no effect since they will not
represent votes cast at the Annual Meeting for the purpose of electing
directors.
The cost of this solicitation will be borne by the Company. The Company may
reimburse brokerage firms and other persons representing beneficial owners of
shares for their expenses in forwarding solicitation material to such beneficial
owners. Proxies may also be solicited on behalf of the Company by certain of the
Company's directors, officers and regular employees, without additional
compensation, personally or by telephone or telegram.
DEADLINE FOR RECEIPT OF STOCKHOLDER PROPOSALS
Proposals of stockholders of the Company which are intended to be presented
by such stockholders at the 1996 Annual Meeting of Stockholders must be received
by the Company no later than December 26, 1995 in order that they may be
included, subject to compliance with applicable federal securities laws and
regulations, in the proxy statement and form of proxy relating to that meeting.
ELECTION OF DIRECTORS
NOMINEES
Seven directors are to be elected at the Annual Meeting. Unless otherwise
instructed, the proxy holders will vote the proxies received by them for the
Company's seven nominees named below, all of whom are currently directors of the
Company. In the event that any nominee of the Company is unable or declines to
serve as a director at the time of the Annual Meeting, the proxies will be voted
for any nominee designated by the present Board of Directors to fill the
vacancy. The Company is not aware of any nominee who will be unable or will
decline to serve as a director.
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<PAGE>
The names of the nominees, and certain information about them, are set
forth below.
<TABLE>
<CAPTION>
DIRECTOR
NAME OF NOMINEE AGE PRINCIPAL OCCUPATION SINCE
- - ------------------------------------------------ --- ------------------------------------------------ -----------
<S> <C> <C> <C>
Sheldon M. Bonovitz............................. 57 Chairman of the Board of Directors of the 1985
Company; Vice Chairman and Partner, Duane,
Morris & Heckscher, Counsel to the Company
James R. Appleby, Jr............................ 49 President and Chief Executive 1990
Officer of the Company
Richard J. DePiano.............................. 53 Managing Director, The Sandhurst 1986
Venture Fund
Jay L. Federman................................. 57 Attending Surgeon and Co-Director of 1987
Research, Wills Eye Hospital
Terry A. Fuller, Ph.D........................... 47 Executive Vice President and Chief Operating 1994
Officer of the Company
John L. Long, Jr................................ 35 Vice President, Southwest Venture Management 1989
Company
Vincenzo Morelli................................ 40 Chief Executive Officer, Kontron Instruments 1995
Holding N.V.
</TABLE>
Nominees elected as directors will serve for a term of one year or until
the due election of their respective successors.
Except as set forth below, each of the nominees has been engaged in his
principal occupation described above for the past five years. Except as noted
below, there are no family relationships among directors or officers of the
Company.
Sheldon M. Bonovitz has served as Chairman of the Board of Directors since
March 1994. Mr. Bonovitz has been a partner in the law firm of Duane, Morris &
Heckscher, Philadelphia, Pennsylvania, since 1969, where he also serves as Vice
Chairman and a member of the management committee. Mr. Bonovitz also serves as a
director of Comcast Corporation and Castle Energy Corporation. Mr. Bonovitz has
also taught at the University of Pennsylvania Law School.
James R. Appleby, Jr. has served as President of the Company since May
1990. Since October 1991, Mr. Appleby has also served as Chief Executive
Officer. From May 1990 until October 1991, he served as Chief Operating Officer
of the Company. From January 1988 until joining the Company in May 1990, Mr.
Appleby was Vice President and Chief Financial Officer of Decision Data Inc.,
where he also served on the Executive Management Committee. Mr. Appleby is the
brother-in-law of Ewald Lehrmann, the Company's Vice President and Managing
Director of International Operations.
Richard J. DePiano has served as the Chief Executive Officer of The
Sandhurst Company, L.P. and the Managing Director of The Sandhurst Venture Fund
since 1986.
Jay L. Federman, M.D. has been an attending surgeon and Co-Director of
Research of Wills Eye Hospital, Philadelphia, Pennsylvania, since 1980. Dr.
Federman was a founder of SITE Microsurgical Systems, Inc.
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<PAGE>
Terry A. Fuller, Ph.D. has served as Executive Vice President and Chief
Operating Officer of the Company since June 1993. From August 1990 until June
1993, Dr. Fuller served as the Company's Executive Vice President of Technology
and Manufacturing, assuming responsibility for the Company's education programs
in November 1992. From July 1990 until August 1990, he served as Vice President
of Technology and New Business Development of the Company. From 1988 until
joining the Company in July 1990, Dr. Fuller served as Vice President, Research,
Development and Engineering for Johnson & Johnson's IOLAB/SITE Microsurgical
Systems, Inc.
John L. Long, Jr. has been a partner of BMG Partners, which is the General
Partner of Southwest Venture Partners II, since 1986 and Vice President of
Southwest Venture Management Company since 1983.
Vincenzo Morelli has served as Chief Executive Officer and a director of
Kontron Instruments Holding N.V. since 1993. From 1990 through 1992, Mr. Morelli
served as Executive Vice President of New Holland (ex-Geotech), a joint venture
of Fiat and Ford Motor Company. From 1985 until 1990, Mr. Morelli served as
President and Chief Operating Officer of General Electric Company's European
Medical Division.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE 'FOR' THE
NOMINEES LISTED ABOVE.
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth the beneficial ownership of the Common Stock
of the Company as of April 20, 1995 by each director, each executive officer
named in the Summary Compensation Table below and by all directors and executive
officers as a group. The persons named in the table below have sole voting and
investment power with respect to all shares of Common Stock shown as
beneficially owned by them, subject to community property laws where applicable
and the information contained in the table and notes thereto.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY
OWNED
--------------------------
NAME NUMBER PERCENT
- - ---------------------------------------------------------------------- ----------- -----------
<S> <C> <C>
John L. Long, Jr...................................................... 338,030(1) 3.42%
Jay L. Federman....................................................... 310,203(2) 3.13%
James R. Appleby, Jr.................................................. 246,050(3) 2.45%
Richard J. DePiano.................................................... 207,250(4) 2.10%
Sheldon M. Bonovitz................................................... 142,131(5) 1.44%
Terry A. Fuller....................................................... 97,933(6) *
Ewald Lehrmann........................................................ 44,382(7) *
Michael R. Stewart.................................................... 41,363(8) *
Davis Woodward........................................................ 37,647(9) *
Vincenzo Morelli...................................................... 20,000(10) *
All directors and executive officers as a group (10 persons).......... 1,484,989(11) 14.21%
</TABLE>
- - ------------------
* Less than one percent.
(1) Includes 38,500 shares which Mr. Long has the right to acquire under
outstanding stock options exercisable within 60 days after April 20, 1995.
Also includes 299,530 shares owned of record by Southwest Venture Partners
II. Mr. Long is a partner in BMG Partners, the managing general
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<PAGE>
partner of Southwest Venture Partners II. Mr. Long disclaims beneficial
ownership of such 299,530 shares.
(2) Includes 76,000 shares which Dr. Federman has the right to acquire under
outstanding stock options exercisable within 60 days after April 20, 1995
and 12,499 shares owned by Dr. Federman's child. Dr. Federman disclaims
beneficial ownership of such 12,499 shares.
(3) Includes 206,700 shares which Mr. Appleby has the right to acquire under
outstanding stock options exercisable within 60 days after April 20, 1995
and 10,000 shares owned jointly with his wife.
(4) Includes 42,250 shares which Mr. DePiano has the right to acquire under
outstanding stock options exercisable within 60 days after April 20, 1995.
Also includes 90,000 shares owned by Mr. DePiano's wife. Mr. DePiano
disclaims beneficial ownership of such 90,000 shares.
(5) Includes 47,250 shares which Mr. Bonovitz has the right to acquire under
outstanding stock options exercisable within 60 days after April 20, 1995,
19,027 shares owned by Mr. Bonovitz' wife and 29,238 shares owned by trusts
of which Mr. Bonovitz is trustee for the benefit of Mr. Bonovitz' children.
Mr. Bonovitz disclaims beneficial ownership of the 48,265 shares owned by
his wife and such trusts. Also includes 29,119 shares owned by the Marital
Trust Under the Will of Robert H. Fleisher, Deceased. Mr. Bonovitz is one
of the four trustees of such trust and disclaims beneficial ownership of
such 29,119 shares.
(6) Includes 86,533 shares which Dr. Fuller has the right to purchase under
outstanding stock options exercisable within 60 days after April 20, 1995.
(7) Includes 39,735 shares which Mr. Lehrmann has the right to purchase under
outstanding stock options exercisable within 60 days after April 20, 1995.
(8) Includes 34,933 shares which Mr. Stewart has the right to purchase under
outstanding stock options exercisable within 60 days after April 20, 1995.
(9) Includes 28,133 shares which Mr. Woodward has the right to purchase under
outstanding stock options exercisable within 60 days after April 20, 1995.
(10) Includes 15,000 shares held of record by Olive Branch Corp., a Liberian
corporation controlled by members of Mr. Morelli's family. Mr. Morelli
disclaims beneficial ownership of such shares.
(11) Includes 600,032 shares which such persons have the right to acquire under
stock options exercisable within 60 days after April 20, 1995.
All the persons shown in the table above have advised the Company that they
currently intend to vote all of their shares in favor of the election to the
Company's Board of Directors of the nominees set forth under 'Election of
Directors' above, and to vote all such shares in favor of each of the other
matters submitted for stockholder approval at the Annual Meeting.
BOARD MEETINGS AND COMMITTEES
The Board of Directors of the Company held a total of six meetings during
the fiscal year ended January 1, 1995. No director attended fewer than 75% of
the total of all such meetings of the Board of Directors and meetings of the
committees upon which such director served.
The Board of Directors has an Executive Committee, an Audit Committee and a
Compensation Committee. The Executive Committee also serves as the Nominating
Committee.
The Executive Committee currently consists of directors Appleby, Bonovitz
and DePiano. The Executive Committee exercises the full authority of the Board
of Directors between meetings of the
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<PAGE>
Board of Directors. The Executive Committee held one meeting in the fiscal year
ended January 1, 1995.
The Executive Committee, in its capacity as Nominating Committee, will
consider stockholder nominations of candidates for director provided that the
nominating stockholder furnishes the Secretary of the Company, not less than 120
days prior to the first anniversary of the immediately preceding annual meeting
of stockholders, written information about such candidate equivalent to the
information concerning the candidates nominated by the Company's Board of
Directors contained in the Company's proxy statement for the immediately
preceding annual meeting of stockholders.
The Audit Committee currently consists of directors DePiano and Long. The
Audit Committee reviews and evaluates the Company's accounting principles and
its systems of internal accounting controls, addresses specific financial issues
and takes action relating to the financial reporting of the Company. The Audit
Committee held two meetings in the fiscal year ended January 1, 1995.
The Compensation Committee currently consists of directors Bonovitz,
DePiano and Federman. The Compensation Committee administers the Company's 1986
Incentive Stock Option Plan, 1986 Non-Qualified Stock Option Plan and Equity
Incentive Plan. The Compensation Committee also reviews other compensation plans
and establishes methods of compensation. The Compensation Committee held six
meetings in the fiscal year ended January 1, 1995.
DIRECTOR COMPENSATION
Each director of the Company who is not an officer or employee of the
Company (an 'Outside Director') receives an annual retainer of $15,000 and a fee
of $500 for each committee meeting attended other than meetings held in
conjunction with meetings of the Board of Directors.
The Company also maintains a Stock Option Plan for Outside Directors (the
'Outside Director Plan'), pursuant to which: (a) on May 11, 1990, each Outside
Director on such date received options to purchase 9,000 shares of Common Stock;
(b) on May 11, 1990, each Outside Director who was a member of the Executive
Committee on such date received options to purchase an additional 3,750 shares
of Common Stock; (c) each Outside Director who had completed three years of
service as an Outside Director on or before April 30, 1992 received options to
purchase 4,500 shares of Common Stock on such date; (d) each Outside Director
who had completed at least three years of service as an Outside Director on May
26, 1994 (the '1994 Grant Date') was granted options to purchase 45,000 shares,
provided that if the Outside Director served as Chairman on the 1994 Grant Date,
the option granted was for 60,000 shares; (e) each Outside Director who had not
completed three years of service as an Outside Director on the 1994 Grant Date
will, on the last trading day coinciding with or immediately following the
completion of such three years of service, be granted options to purchase 30,000
shares, provided that if the Outside Director serves as Chairman throughout such
three-year period, such option will be for 45,000 shares; (f) for each three
years of service after the 1994 Grant Date since the most recent grant of
options to an Outside Director, the Outside Director will be granted options to
purchase 30,000 shares, provided that if the Outside Director served as Chairman
throughout such three-year period, the option will be for 45,000 shares and (g)
each person who becomes an Outside Director in the future will receive options
to purchase 30,000 shares of Common Stock on the fifteenth day after election as
an Outside Director, provided that if the Outside Director is elected to serve
as Chairman, the option granted will be for 45,000 shares. All such options are
exercisable at 100% of the fair market value of the Common Stock on the date of
grant and remain exercisable to the
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<PAGE>
extent vested until the earliest to occur of the expiration of ten years from
the date of grant, three years from cessation of service as a director due to
disability, one year from cessation of service as a director due to death or
three months from cessation of service as a director for any other reason.
Options granted on May 11, 1990 were fully exercisable when granted. Options
granted on the 1994 Grant Date were exercisable 15,000 shares on the date of
grant, with the balance exercisable in three equal consecutive annual
installments commencing one year from the 1994 Grant Date. All other options
granted under the Outside Director Plan are or will be exercisable in three
equal consecutive annual installments commencing one year from the date of
grant. Notwithstanding the foregoing, all options granted under the Outside
Director Plan become fully exercisable upon consummation of any business
combination transaction involving the sale of all or substantially all of the
assets of the Company to, or the acquisition of shares of the Company's Common
Stock representing more than 50% of the votes which all stockholders of the
Company are entitled to cast by, any person not affiliated with the Company,
directly or indirectly, through one or more affiliates, or any other transaction
or series of transactions having a similar effect.
An aggregate of 385,000 shares of Common Stock are currently reserved for
issuance under the Outside Director Plan, of which 9,000 shares have been issued
and 256,500 shares are subject to outstanding options.
EXECUTIVE COMPENSATION
The following table sets forth certain information with respect to
compensation paid by the Company during each of the three fiscal years ended
January 1, 1995, January 2, 1994 and January 3, 1993 to the chief executive
officer of the Company and the other four most highly compensated executive
officers of the Company.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
AWARDS
ANNUAL COMPENSATION -------------------------- ALL OTHER
NAME AND -------------------- RESTRICTED OPTIONS/ COMPENSATION
PRINCIPAL POSITION YEAR SALARY($) BONUS($) STOCK AWARDS($) SAR'S(#) ($)(1)
- - ---------------------------------------- --------- --------- --------- --------------- --------- -----------------
<S> <C> <C> <C> <C> <C> <C>
James R. Appleby, Jr. 1994 $ 265,346 $ 58,520 $ 0 30,000(2) $ 2,190
President, Chief Executive 1993 257,067 51,500(3) 9,088(3) 150,000(4) 2,190
Officer and Director 1992 244,068 25,000(3) 4,411(3) 40,000(5) 6,949
Terry A. Fuller 1994 175,492 38,709 0 20,000(2) 46,102(6)(7)
Executive Vice President 1993 169,671 27,200(3) 2,400(3) 100,000(4) 32,071(7)
and Chief Operating Officer 1992 161,786 40,000(3) 2,588(3) 20,000(5) 36,435(7)
Ewald Lehrmann 1994 138,329 30,512 0 15,000(2) 1,038
Vice President and 1993 133,769 10,720(3) 946(3) 25,000(4) 1,014
Managing Director of 1992 124,510 10,400(3) 1,830(3) 6,000(5) 3,983
International Operations
Michael R. Stewart 1994 110,528 24,380 0 15,000(2) 643
Vice President and Chief 1993 106,533 17,131(3) 1,511(3) 25,000(4) 628
Financial Officer 1992 95,894 11,734(3) 2,066(3) 9,000(5) 628
Davis Woodward 1994 99,102 21,859 0 15,000(2) 1,285
Assistant General Counsel 1993 95,835 15,360(3) 2,711(3) 25,000(4) 1,255
and Director of Tax Planning 1992 92,250 11,173(3) 1,972(3) 13,000(5) 3,689
</TABLE>
7
<PAGE>
- - ------------------
(1) Includes Company matching contributions under the 401(k) Retirement Savings
Plan and payments of premiums for certain supplementary life insurance
coverage as follows:
<TABLE>
<CAPTION>
NAME YEAR 401(K) CONTRIBUTION LIFE INSURANCE PREMIUM
- - -------------------------------- --------- ------------------- -----------------------
<S> <C> <C> <C>
James R. Appleby, Jr. 1994 $ 0 $ 2,190
1993 0 2,190
1992 4,364 2,585
Terry A. Fuller 1994 0 1,341
1993 0 1,310
1992 4,364 1,310
Ewald Lehrmann 1994 0 1,038
1993 0 1,014
1992 2,969 1,014
Michael R. Stewart 1994 0 643
1993 0 628
1992 0 628
Davis Woodward 1994 0 1,285
1993 0 1,255
1992 2,434 1,255
</TABLE>
(2) These options were granted in January 1995 for services rendered in 1994.
(3) In January 1994 and 1993, the Compensation Committee awarded performance
bonuses for services rendered in 1993 and 1992, respectively, and determined
to pay such bonuses in the form of restricted stock at a per share price
equal to 85% of the fair market value of the Common Stock on the date of
grant, except that: (a) in 1994, the Compensation Committee determined to
pay the named executive officers other than Messrs. Appleby and Woodward 50%
of their respective bonus in cash and the balance in shares of restricted
stock and (b) in 1993, the Compensation Committee determined to pay Dr.
Fuller's bonus $25,337.50 in cash and the balance in shares of restricted
stock. A portion of such shares awarded in 1993 and 1994 was subject to
forfeiture if the officer's employment was terminated other than without
cause within six months after the grant date (except in certain
circumstances involving a change of control in the Company), with the number
of shares subject to forfeiture equal to (a) the product of (i) the number
of restricted shares awarded multiplied by (ii) the fair market value on the
date of forfeiture minus (b) the amount of the bonus listed under 'Bonus' in
the above table divided by (c) the fair market value on the date of
forfeiture. The difference between the aggregate market value of the
restricted shares on the grant date and the amount of the bonus approved by
the Compensation Committee is set forth in the above table under the caption
'Long-Term Compensation Awards -- Restricted Stock Awards.'
(4) These options were granted in January 1994 for services rendered in 1993.
(5) These options were granted in January 1993 for services rendered in 1992.
(6) Includes $14,000 in royalties paid by the Company to Fuller Research
Corporation pursuant to a License Agreement between those parties. Terry A.
Fuller is the President and principal stockholder of Fuller Research
Corporation.
(7) Includes $30,761 in lease payments by the Company to Fuller Research
Laboratories, a sole proprietorship owned by Dr. Fuller, pursuant to a Lease
Agreement between those parties relating to certain equipment.
The following table sets forth information with respect to options granted
during the fiscal year ended January 1, 1995 to the persons named in the Summary
Compensation Table above.
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<PAGE>
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE
AT ASSUMED ANNUAL RATES OF
% OF TOTAL STOCK PRICE APPRECIATION FOR
OPTIONS GRANTED OPTION TERM
OPTIONS TO EMPLOYEES IN EXERCISE EXPIRATION ----------------------------
NAME GRANTED(#)(1) FISCAL YEAR PRICE DATE 5% 10%
- - ------------------------ ------------ ----------------- ----------- ---------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
James R. Appleby, Jr. 150,000 38.9% $ 2.50 January 18, 2004 $ 235,835 $ 597,653
Terry A. Fuller 100,000 25.9 2.50 January 18, 2004 157,224 398,436
Ewald Lehrmann 25,000 6.5 2.50 January 18, 2004 39,306 99,609
Michael R. Stewart 25,000 6.5 2.50 January 18, 2004 39,306 99,609
Davis Woodward 25,000 6.5 2.50 January 18, 2004 39,306 99,609
</TABLE>
- - ------------------
(1) All of these options are exercisable in three equal consecutive annual
installments commencing one year from the date of grant (January 18, 1994),
subject to acceleration of exercisability under certain circumstances
following a change of control in the Company.
The following table sets forth information with respect to options held at
January 1, 1995 by the persons named in the Summary Compensation Table above. No
options were exercised by such persons during the fiscal year ended January 1,
1995. None of the options held at fiscal year-end set forth below were in the
money at January 1, 1995.
FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF UNEXERCISED
OPTIONS
AT FISCAL YEAR END (1)
----------------------------
NAME EXERCISABLE UNEXERCISABLE
- - ------------------------------- ------------ --------------
<S> <C> <C>
James R. Appleby, Jr. 166,641 196,059
Terry A. Fuller 43,200 129,500
Ewald Lehrmann 30,200 39,000
Michael R. Stewart 24,800 39,900
Davis Woodward 17,200 40,000
</TABLE>
- - ------------------
(1) The average weighted exercise price for the aggregate unexercised options
set forth in the table above is as follows for each of the named persons:
Mr. Appleby--$5.45; Dr. Fuller--$4.02; Mr. Lehrmann--$4.90; Mr.
Stewart--$4.76; and Mr. Woodward--$4.54.
EMPLOYMENT AGREEMENTS
Mr. Appleby has an employment agreement pursuant to which he serves as the
Company's President and Chief Executive Officer for successive one-year terms
ending December 31 of each year, absent at least three months prior written
notice of termination by either party. Effective as of the beginning of 1995,
Mr. Appleby's base salary under the agreement was increased to $281,960, and he
is eligible for a bonus under the Company's Executive Staff Bonus Program. See
'Compensation Committee Report.' If the Company terminates Mr. Appleby's
employment at the expiration of any renewal term of the agreement, Mr. Appleby
is entitled to severance benefits equal to one year's base salary, 50% of the
incentive bonus which would have been payable for the succeeding year and
9
<PAGE>
hospital, medical, disability and life insurance coverage for a period of one
year. If Mr. Appleby's employment is terminated by the Company without cause
during the term of the agreement or Mr. Appleby is removed as Chief Executive
Officer (except following a change in control as described below), Mr. Appleby
is entitled to identical severance benefits, except that with respect to the
incentive bonus, he is entitled to the full amount of such bonus for the period
through termination. Under certain circumstances following a change in control
of the Company after which Mr. Appleby no longer serves as an executive officer
of the Company in a capacity he determines to be acceptable or is asked to
relocate his principal business location, Mr. Appleby is entitled to severance
benefits equal to eighteen months' base salary, the amount of the incentive
bonus for the period through termination of employment with the Company and
hospital, medical, disability and life insurance coverage for a period of
eighteen months, all unvested options become exercisable in full and all
outstanding options remain exercisable for the lesser of five years after the
change in control or the remaining scheduled term thereof. The Company provides
long-term disability insurance equal to 60% of Mr. Appleby's base salary, a $1
million life insurance policy and automobile, vacation and other insurance
benefits as are available to the Company's senior executive officers. During the
term of the agreement and for a period of one year thereafter (or while
receiving any severance payments as described above), Mr. Appleby is prohibited
from competing with the Company in any respect, interfering with the Company's
business relationships or soliciting business from the Company's customers.
In June 1992, the Company adopted a severance benefits program for certain
key employees, including Messrs. Fuller, Lehrmann, Stewart and Woodward. Under
the terms of this program, a participant whose employment is terminated by the
Company other than for cause and other than following a change in control is
entitled to continue receiving his then-current base salary and coverage under
the medical, dental, supplemental life and supplemental disability insurance
policies, if any, being provided at the time of termination for a specified
period, with the obligation to provide such insurance coverage terminating in
the event the participant is provided substantially the same coverage from a new
employer. Each of Messrs. Fuller, Lehrmann, Stewart and Woodward is entitled to
continue receiving such base salary and insurance coverage for a period of 12
months under the foregoing circumstances. In addition, if, within two years
following a change in control of the Company, a participant's employment is
terminated without cause or the participant resigns following (a) the relocation
of his principal business location, (b) a significant reduction in the duties or
responsibilities from those existing prior to the change in control or (c) a
reduction in his then-current base salary, then, in any such event, the
participant is also entitled to continue receiving his then-current base salary
and coverage under the aforementioned insurance program (subject to the
restriction described above) for a specified period. Messrs. Fuller and Lehrmann
are entitled to continue receiving their respective base salaries for a period
of 18 months under such circumstances and Messrs. Stewart and Woodward are
entitled to continue receiving their respective base salaries for a period of 12
months under such circumstances. In addition, under such circumstances, each of
Messrs. Fuller, Lehrmann, Stewart and Woodward is also entitled to continue
receiving the aforementioned insurance coverages for a period of 12 months, and
all unvested options which they hold become exercisable in full and all
outstanding options remain exercisable for the lesser of five years or the
remaining scheduled term thereof.
10
<PAGE>
COMPENSATION COMMITTEE REPORT
The Company's executive compensation program is administered by the
Compensation Committee, a committee of the Board of Directors composed of the
three outside directors listed at the end of this report. None of the members of
the Compensation Committee has any interlocking relationships with Company
executives that would call into question their independence as Committee
members.
This report reflects the Company's compensation philosophy as endorsed by
the Board of Directors and the Committee and resulting compensation actions
taken by the Company. The Committee approves all compensation awarded to the
chief executive officer and the four other named executive officers.
Compensation Philosophy and Objectives
The Company's executive compensation program has been designed to:
o support a pay-for-performance philosophy that differentiates compensation
amounts based on both corporate and individual performance;
o provide market-competitive compensation opportunities;
o reward executives for long-term strategic management and the enhancement
of stockholder value through delivering appropriate ownership in the
Company; and
o attract top talent and retain and motivate key executives whose abilities
are critical to the long-term success and competitiveness of the Company.
Executive Compensation Components
To meet the above-stated compensation objectives, the Company has
structured a compensation program comprised of base salary, annual incentive
opportunities, long-term incentive opportunities in the form of stock options
and restricted stock, and benefits typically offered to executives.
Base salaries for executives are targeted to be very competitive with other
technology-based companies with revenues of $50-$100 million. Individual
salaries are considered for adjustment annually; adjustments are based upon the
general movement in external salary levels, individual performance and
potential, and/or changes in duties and responsibilities. The base salary
increases for the named executives effective for 1995 averaged 6.6%. Included in
that average salary increase was an increase of 10% for Davis Woodward, in part
to reflect his promotion to the position of Vice President of Legal Affairs and
Tax Planning.
The annual incentive awards, as governed by the Executive Staff Bonus
Program adopted in November 1991, are dependent primarily upon the financial
performance of the Company relative to pre-established targets and secondarily
on the personal performance of the executive. Specifically, executives are
eligible to receive a bonus (the 'Bonus Opportunity') calculated as a percentage
of their base salaries. The percentage of base salary which determines the Bonus
Opportunity is determined by multiplying the percentage of budgeted operating
income attained at year-end by a percentage, based on the executive officer's
position, ranging from 30% to 50%. Of the Bonus Opportunity, 60% is paid if the
Company attains at least 70% of the budgeted operating income and 40% is payable
at the discretion of the Committee, in consultation with the chief executive
officer, based on an assessment of the personal performance of the executive
during the year. The Committee, without the chief executive officer's
consultation, assesses the personal performance of the chief
11
<PAGE>
executive officer. The budgeted operating income goal is reviewed and approved
by the Board of Directors at the beginning of the fiscal year.
For 1994, the Committee in its discretion awarded cash bonuses to the named
executives under the Executive Staff Bonus Program. An assessment was made of
the personal performance and value to the business of each executive both with
respect to the executive's normal responsibilities and relative to a set of key
strategic initiatives and tactical projects.
The long-term incentive opportunities are designed to link the interests of
the executive with those of the stockholders. Stock option grants provide an
incentive that focuses the executive's attention on managing the Company from
the perspective of an owner with an equity stake in the business. The value of
these stock options is tied to the future performance of the Company's stock.
The Committee has approved a plan of targets for annual stock option grants
for the executive staff through 1996. The actual grants are based on the
Company's financial performance and an assessment of the individual executive's
performance. However, the Committee retains the flexibility to vary from the
targets in the event it believes it appropriate to do so.
Chief Executive Officer Compensation
The specific compensation actions for Mr. Appleby were as follows:
o A cash bonus of $58,520 was awarded for services rendered in fiscal year
1994.
o Mr. Appleby received a grant of incentive stock options to purchase
30,000 shares on January 18, 1995 based on services rendered for fiscal
year 1994.
o Effective for 1995, an increase of 6.0% was made to Mr. Appleby's base
salary.
Irrespective of the negative market conditions and the overall performance
of the Company, the Committee determined that Mr. Appleby performed very
competently relative to several strategic initiatives and is critical to the
long-term success and competitiveness of the Company.
Under Mr. Appleby's leadership, the Company's executives worked on key
alliances with C.R. Bard, Inc. and Kontron Instruments Holding N.V., the latter
of which resulted in Kontron Instruments' investment of $2,000,000 for an
approximately 7% ownership interest in the Company. Mr. Appleby and the other
executives under his supervision were also successful in settling various
litigation and have continued to pursue other strategic alternatives. In
addition, Mr. Appleby was instrumental in expanding SLT's international presence
by continuing to enhance its worldwide distribution networks.
Compliance with Internal Revenue Code Section 162(m)
Section 162(m) of the Internal Revenue Code placed limits on corporate tax
deductibility for compensation paid to certain executive officers. The
Compensation Committee has carefully considered the impact of this provision to
the compensation awarded to those executive officers during 1994. The Committee
has determined that compensation paid to executive officers under current plans
would be less than the $1 million limit and, therefore, deductible for Federal
income tax purposes.
Submitted by the Compensation Committee:
Sheldon M. Bonovitz, Esq. Richard J. DePiano Jay L. Federman, M.D.
12
<PAGE>
PERFORMANCE GRAPH
The following graph sets forth a comparison of cumulative total return
since January 1, 1990 among the Company, the NASDAQ Composite Index and a peer
group selected by the Company. The comparison of total return on investment
(change in year-end stock price plus reinvested dividends) for each of the
periods assumes that $100 was invested on January 1, 1990 in each of the
Company, the NASDAQ Composite Index and a weighted index of the issuers in the
peer group described below.
[ GRAPH INSERTION POINT ]
TOTAL RETURN TO SHAREHOLDERS
REINVESTED DIVIDENDS
<TABLE>
<CAPTION>
1989 1990 1991 1992 1993 1994
------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
SURGICAL LASER TECH INC. 100 260 75 80 40 30
CRSP NASDAQ INDEX 100 80 125 155 175 170
PEER GROUP 100 105 125 100 80 60
</TABLE>
- - ------------------
(1) In 1993, the Company defined its peer group for purposes of this performance
graph to be all publicly traded companies with a Standard Industrial
Classification Code of 3845 (electromedical apparatus) having market
capitalization as of December 31, 1992 ranging from $20 million to $100
million, with the exception of three such companies--Future Medical
Products, Inc., Biocontrol Technology, Inc. and Microterra, Inc.--whose
performance in 1991 reflected an extreme fluctuation. Management of the
Company believes that inclusion of these three companies would have reduced
the meaningfulness of the comparative data presented in the performance
graph. The Company continues to use as its peer group the companies that met
the criteria set forth above, which are: Advanced NMR Systems, Inc.,
American Medical Electronics, Inc., American Dental Laser Inc., Arrythmia
Research Technology, Inc., Bio-Logic Systems Corp., Biomagnetic
Technologies, Inc., Birtcher Medical Systems Inc., Candela Laser Corp.,
Criticare Systems Inc., Cytocare, Inc., Fonar Corp., Imatron Inc., Interspec
Inc., Laser Industries Ltd., Laser Photonics Inc., Laserscope, Lunar
Corporation, Non-Invasive Monitoring Systems, Inc., Q-Med, Inc., Somanetics
Corporation, Trimedyne, Inc., Valley Forge Scientific Corp., Vital Heart
Systems Inc. and Work Recovery, Inc.
13
<PAGE>
CERTAIN TRANSACTIONS
Sheldon M. Bonovitz, a director of the Company, is a partner of Duane,
Morris & Heckscher, which serves as the Company's primary legal counsel.
Kontron Instruments Holding N.V., which owns more than 5% of the Company's
outstanding Common Stock, has affiliates that serve as the Company's
distributors in France, Italy, Spain, Portugal, the United Kingdom, Eire,
Switzerland, the Benelux Countries, Turkey and Greece. During 1994, total sales
by the Company to such affiliates were $1,100,000.
RATIFICATION OF APPOINTMENT OF INDEPENDENT ACCOUNTANTS
The Board of Directors has selected Arthur Andersen LLP, independent
accountants, to audit the financial statements of the Company for the fiscal
year ending December 31, 1995. The affirmative vote of the holders of a majority
of the outstanding Common Stock present in person or by proxy at the Annual
Meeting is required to ratify the appointment of Arthur Andersen LLP. THE BOARD
OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE 'FOR' RATIFICATION OF SUCH
APPOINTMENT. In the event of a negative vote on such ratification, the Board of
Directors will reconsider its selection.
Arthur Andersen LLP was engaged by the Company in 1988 and has audited the
Company's financial statements for each fiscal year since the fiscal year ended
January 1, 1989. Representatives of Arthur Andersen LLP are expected to be
present at the Annual Meeting and will have an opportunity to make a statement
if they desire to do so, and are expected to be available to respond to
appropriate questions.
OTHER MATTERS
The Company knows of no other matters to be submitted to the Annual
Meeting. If any other matters properly come before the Annual Meeting, it is the
intention of the persons named in the enclosed form of Proxy to vote the shares
they represent as the Board of Directors may recommend.
It is important that your stock be represented at the Annual Meeting,
regardless of the number of shares which you hold. You are, therefore, urged to
execute and return, at your earliest convenience, the accompanying proxy in the
envelope which has been enclosed.
By Order of the Board of Directors,
Davis Woodward
Secretary
Dated: April 25, 1995
14
<PAGE>
SURGICAL LASER TECHNOLOGIES, INC.
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS, MAY 25, 1995
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby constitutes and appoints James R. Appleby and Davis
Woodward, and each or either of them, proxies of the undersigned, with full
power of substitution, to vote all of the shares of Common Stock of Surgical
Laser Technologies, Inc. (the "Company") which the undersigned may be entitled
to vote at the Annual Meeting of Stockholders of the Company to be held at the
Company's offices, 200 Cresson Boulevard, Oaks, Pennsylvania 19456-0880 on
Thursday, May 25, 1995, at 10:00 A.M. local time, and at any adjournments
thereof, as follows:
(Continued and to be signed on other Side)
<PAGE>
[X] Please mark your
votes as in this
example.
<TABLE>
<S> <C> <C> <C>
FOR all nominees listed WITHHOLD AUTHORITY
at right except as marked to vote for the
to the contrary nominees listed at right Nominees: James R. Appleby, Jr.
Sheldon M. Bonovitz
Richard J. DePiano
1. For the election of [ ] [ ] Jay L. Federman
seven directors, to Terry A. Fuller
serve until their John L. Long, Jr.
successors are duly Vincenzo Morelli
elected, as described
in the accompanying
Proxy Statement.
</TABLE>
INSTRUCTIONS: To withhold authority to vote for
any individual nominee, strike a line through that
nominee's name.
- - --------------------------------------------------
FOR AGAINST ABSTAIN
2. PROPOSAL TO RATIFY appointment of Arthur [ ] [ ] [ ]
Andersen LLP as the Company's independent
accountants for the fiscal year ending
December 31, 1995.
The Board of Directors recommends a vote FOR the election of the nominees
listed at left and FOR proposal 2.
In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the meeting and any adjournment thereof.
This proxy will be voted as specified. If a choice is not specified, the
proxy will be voted FOR the election of the nominees for director and
FOR proposal 2.
PLEASE, MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY
USING THE ENCLOSED PRE-PAID ENVELOPE.
SIGNATURE _______________ DATE _____ _________________________ DATE _____, 1995
SIGNATURE IF HELD JOINTLY
Note: This proxy should be dated and signed by the stockholder exactly as his
name appears hereon. When shares are held by joint tenants, both should
sign. When signing as an attorney, executor, administrator, trustee or
guardian, please give full title as such. If a corporation, please sign
in full corporate name by President or other authorized officer. If a
partnership, please sign in partnership name by authorized person.
