SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment No. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant /_/
Check the appropriate box:
/ / Preliminary Proxy Statement
/_/ Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
/X/ Definitive Proxy Statement
/_/ Definitive Additional Materials
/_/ Soliciting Material Pursuant to Section 14a-11(c) or Section 14a-12
SURGICAL LASER TECHNOLOGIES, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
________________________________________________________________________________
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required.
/_/ Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
_____________________________________________________________________________
2) Aggregate number of securities to which transaction applies:
_____________________________________________________________________________
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing
fee is calculated and state how it was determined):
_____________________________________________________________________________
4) Proposed maximum aggregate value of transaction:
_____________________________________________________________________________
5) Total fee paid:
_____________________________________________________________________________
/_/ Fee paid previously with preliminary materials.
/_/ Check box if any part of the fee is offset as provided by the
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: _____________________________________________________________
___________
*Set forth the amount on which the filing fee is calculated and state how it was
determined.
<PAGE>
[SLT LOGO]
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
MAY 20, 1997
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 Tuesday, May 20, 1997 at 10:00 a.m., local time, at the offices of
the Company's counsel, Duane, Morris & Heckscher, 4200 One Liberty Place, 1650
Market Street, Philadelphia, Pennsylvania 19103, for the following purposes:
1. To elect five directors to serve until the 1998 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 28, 1997;
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 15, 1997
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 December
29, 1996 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
Montgomeryville, Pennsylvania
April 18, 1997
<PAGE>
SURGICAL LASER TECHNOLOGIES, INC.
PROXY STATEMENT FOR 1997 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 Tuesday, May 20, 1997 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 offices of the Company's counsel, Duane, Morris & Heckscher,
4200 One Liberty Place, 1650 Market Street, Philadelphia, Pennsylvania 19103.
The Company's executive offices are located at 147 Keystone Drive,
Montgomeryville, Pennsylvania 18936. The Company's telephone number at that
location is (215) 619-3600.
These proxy solicitation materials were first mailed on or about April 18,
1997 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 15, 1997 are
entitled to receive notice of and to vote at the Annual Meeting. At the record
date, 9,883,727 shares of the Company's Common Stock, par value $.01 per share
(the "Common Stock") were issued and outstanding.
As of April 15, 1997, 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>
Kontron Instruments Holding N.V.................................... 695,652 7.04%
Julianaplein 22
Curacao, Netherlands Antilles
Kennedy Capital Management, Inc.................................... 615,584(1) 6.23%
10829 Olive Boulevard
St. Louis, MO 63141
</TABLE>
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(1) Information furnished by stockholder as of February 10, 1997.
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., 147 Keystone
Drive, Montgomeryille, Pennsylvania 18936, attention: Davis Woodward, Secretary.
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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 1998 Annual Meeting of Stockholders must be received
by the Company no later than December 20, 1997 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
Five 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 five 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 as of April
15, 1997, are set forth below.
<TABLE>
<CAPTION>
DIRECTOR
NAME OF NOMINEE AGE PRINCIPAL OCCUPATION SINCE
--------------- -- -------------------- --------
<S> <C> <C> <C>
Richard J. DePiano.............................. 55 Chairman of the Board of Directors of the 1986
Company; Managing Director, The Sandhurst
Venture Fund
W. Keith Stoneback.............................. 43 President and Chief Executive 1996
Officer of the Company
Sheldon M. Bonovitz............................. 59 Vice Chairman and Partner, Duane, Morris & 1985
Heckscher, Counsel to the Company
Jay L. Federman................................. 59 Attending Surgeon and Co-Director of 1987
Research, Wills Eye Hospital
Vincenzo Morelli................................ 42 Chief Executive Officer, Kontron Instruments 1995
Holding N.V.
</TABLE>
Nominees elected as directors will serve until the 1998 Annual Meeting and
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. There are no
family relationships among directors or officers of the Company.
Richard J. DePiano has served as the Chairman of the Board of Directors of
the Company since July 1995. Mr. DePiano has been the Chief Executive Officer of
The Sandhurst Company, L.P. and the Managing Director of The Sandhurst Venture
Fund since 1986. Since March 1997, Mr. DePiano also has served as Chief
Executive Officer of Escalon Medical Corp., of which he is also a director.
W. Keith Stoneback has served as President and Chief Executive Officer of
the Company since August 1996. From 1988 until 1994, he served in several senior
management positions for AMSCO International, Inc., a leading manufacturer and
marketer of sterilizers, surgical tables, lights and decontamination equipment
for the hospital and life science markets, most recently as Corporate Vice
President, with responsibility for worldwide manufacturing, marketing and
research and development for the capital equipment and supplies business. From
November 1994 until joining the Company, Mr. Stoneback pursued personal
investment and business-related interests.
Sheldon M. 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 Mediq Incorporated. Mr. Bonovitz has also
taught at the University of Pennsylvania Law School.
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. and serves as a
director of Escalon Medical Corp.
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
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<PAGE>
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 Systems 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 15, 1997 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>
James R. Appleby, Jr..................................................... 450,050(1) 4.39%
Jay L. Federman.......................................................... 330,203(2) 3.31%
Richard J. DePiano....................................................... 302,250(3) 3.02%
Terry A. Fuller.......................................................... 202,200(4) 2.01%
Sheldon M. Bonovitz...................................................... 172,581(5) 1.73%
Michael R. Stewart....................................................... 81,330(6) *
Davis Woodward........................................................... 79,514(7) *
Vincenzo Morelli......................................................... 40,000(8) *
W. Keith Stoneback....................................................... 0 *
All directors and executive officers as a group (8 persons).............. 1,013,878(9) 9.79%
</TABLE>
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* Less than one percent.
(1) Includes 376,700 shares which Mr. Appleby has the right to acquire under
outstanding stock options exercisable within 60 days after April 15, 1997
and 10,000 shares owned jointly with his wife. Information other than stock
options is as of August 11, 1996, the date on which Mr. Appleby resigned as
President, Chief Executive Officer and a director.
(2) Includes 96,000 shares which Dr. Federman has the right to acquire under
outstanding stock options exercisable within 60 days after April 15, 1997
and 12,499 shares owned by Dr. Federman's child. Dr. Federman disclaims
beneficial ownership of such 12,499 shares.
(3) Includes 137,250 shares which Mr. DePiano has the right to acquire under
outstanding stock options exercisable within 60 days after April 15, 1997.
Also includes 90,000 shares owned by Mr. DePiano's wife. Mr. DePiano
disclaims beneficial ownership of such 90,000 shares.
(4) Includes 184,700 shares which Dr. Fuller has the right to purchase under
outstanding stock options exercisable within 60 days after April 15, 1997.
Information other than stock options is as of November 5, 1996, the date on
which Dr. Fuller resigned as Executive Vice President, Chief Operating
Officer and a director.
4
<PAGE>
(5) Includes 77,250 shares which Mr. Bonovitz has the right to acquire under
outstanding stock options exercisable within 60 days after April 15, 1997,
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 74,900 shares which Mr. Stewart has the right to purchase under
outstanding stock options exercisable within 60 days after April 15, 1997.
(7) Includes 66,600 shares which Mr. Woodward has the right to purchase under
outstanding stock options exercisable within 60 days after April 15, 1997.
(8) 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. Also includes 20,000 shares
which Mr. Morelli has the right to purchase under outstanding stock options
exercisable within 60 days after April 15, 1997.
(9) Includes 472,000 shares which such persons have the right to acquire under
stock options exercisable within 60 days after April 15, 1997. Excludes
shares beneficially owned by Messrs. Appleby and Fuller, who were not
executive officers or directors of the Company as of April 15, 1997. See
"Employment and Other Agreements."
BOARD MEETINGS AND COMMITTEES
The Board of Directors of the Company held a total of twelve meetings
during the fiscal year ended December 29, 1996. 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 Stoneback, Bonovitz
and DePiano. The Executive Committee exercises the full authority of the Board
of Directors between meetings of the Board of Directors. The Executive Committee
did not meet in the fiscal year ended December 29, 1996.
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 Federman.
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 one meeting in the fiscal year ended December 29, 1996.
The Compensation Committee currently consists of directors Bonovitz,
DePiano and Federman. The Compensation Committee makes recommendations to the
Board of Directors with respect to
5
<PAGE>
option grants under the Company's 1986 Incentive Stock Option Plan, 1986
Non-Qualified Stock Option Plan and Equity Incentive Plan and otherwise is
responsible for administering such plans. The Compensation Committee also
reviews other compensation plans and establishes methods of compensation. The
Compensation Committee held four meetings in the fiscal year ended December 29,
1996.
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 became an Outside Director after the 1994 Grant Date or
hereafter becomes an Outside Director in the future received or 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 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.
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<PAGE>
An aggregate 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 228,000 shares are subject to outstanding options.
EXECUTIVE OFFICER COMPENSATION
The following table sets forth certain information with respect to
compensation paid by the Company during each of the three fiscal years ended
December 29, 1996, December 31, 1995 and January 1, 1995 to the chief executive
officers of the Company and the other three executive officers of the Company
whose annual salary and bonus in 1996 exceeded $100,000.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS ALL OTHER
NAME AND -------------------- ----------- COMPENSATION
PRINCIPAL POSITION YEAR SALARY($) BONUS($) OPTIONS(#) ($)(1)
- ------------------ --------- --------- --------- ----------- -----------------
<S> <C> <C> <C> <C> <C>
W. Keith Stoneback (2) 1996 $ 101,539 $ 0 300,000 $ 18,298(3)
President, Chief Executive
Officer and Director
James R. Appleby, Jr. (4) 1996 230,918 0 0 2,190
President, Chief Executive 1995 281,960 0 50,000(5) 2,190
Officer and Director 1994 265,346 58,520 30,000(6) 2,190
Terry A. Fuller(4) 1996 192,210 0 0 47,669(7)(8)
Executive Vice President 1995 186,507 0 40,000(5) 25,341(8)
and Chief Operating Officer 1994 175,492 38,709 20,000(6) 46,102(8)(9)
Michael R. Stewart 1996 123,119 0 50,000(10) 643
Vice President and Chief 1995 118,023 0 30,000(5) 643
Financial Officer 1994 110,528 24,380 15,000(6) 643
Davis Woodward 1996 112,638 0 25,000(10) 1,285
Vice President, Legal and 1995 109,296 0 30,000(5) 1,285
Tax Affairs 1994 99,102 21,859 15,000(6) 1,285
</TABLE>
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(1) Except as noted in footnotes 3 and 7-9, represents payments of premiums for
certain supplementary life insurance coverage.
(2) Mr. Stoneback joined the Company as President, Chief Executive Officer and
a director in August 1996.
(3) Includes $18,054 in moving and relocation payments made by the Company to
Mr. Stoneback pursuant to the terms of his Employment Agreement.
(4) Mr. Appleby served as President, Chief Executive Officer and a director
until August 1996. Dr. Fuller served as Executive Vice President and a
director until November 1996.
(5) These options were granted in 1996 for services rendered in 1995.
(6) These options were granted in 1995 for services rendered in 1994.
(7) Includes $12,115 in equipment rental payments paid by the Company to Fuller
Research Laboratories, a sole proprietorship owned by Dr. Fuller, pursuant
to a Property Agreement between those parties.
(8) Includes $34,213, $24,000 and $14,000 in royalties paid by the Company to
Fuller Research Corporation in 1996, 1995 and 1994 respectively, pursuant
to a License Agreement between those parties. Dr. Fuller is the President
and principal stockholder of Fuller Research Corporation.
(9) Includes $30,761 in lease payments by the Company to Fuller Research
Laboratories pursuant to a Lease Agreement between those parties relating
to certain equipment.
(10) These options were granted in 1997 for services rendered in 1996.
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<PAGE>
The following table sets forth information with respect to options granted
during the fiscal year ended December 29, 1996 to the persons named in the
Summary Compensation Table above.
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(#) FISCAL YEAR PRICE DATE 5% 10%
---- ---------- --------------- -------- ------------------ ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
W. Keith Stoneback 300,000(1) 58.9% $2.0625 August 12, 2006 $389,128 $986,128
James R. Appleby, Jr.(2) 50,000 9.8 1.875 December 31, 1997 8,760 17,908
Terry A. Fuller(3) 40,000 7.8 1.25 April 18, 1997 652 1,319
Michael R. Stewart 30,000(4) 5.9 1.25 January 3, 2006 23,584 59,765
Davis Woodward 30,000(4) 5.9 1.25 January 3, 2006 23,584 59,765
</TABLE>
- ------------------
(1) These options are exercisable in three equal consecutive annual installments
commencing one year from the date of grant (August 12, 1996), subject to
acceleration of exercisability under certain circumstances following a
change in control of the Company.
(2) 10,000 of these options became exercisable on December 31, 1996 and will
remain exercisable until December 31, 1997. The remainder of these options
expired on December 31, 1996. The potential realizable value set forth in
the table is measured with respect to the options that had not expired as of
December 31, 1996 for the period through their scheduled expiration date.
The potential realizable value for all 50,000 options from the date of grant
through their original term, without regard to earlier expiration, would
have been $58,959 and $149,413 at 5% and 10% assumed annual rates of
appreciation, respectively.
(3) 8,000 of these options became exercisable on January 3, 1997 and remain
exercisable until April 18, 1997. The remainder of these options expired on
January 18, 1997. The potential realizable value set forth in the table is
measured with respect to the options that had not expired as of January 18,
1997 for the period through their scheduled expiration date. The potential
realizable value for all 40,000 options from the date of grant through their
original term, without regard to earlier expiration, would have been $31,445
and $79,687 at 5% and 10% assumed annual rates of appreciation,
respectively.
(4) These options are exercisable in five equal consecutive annual installments
commencing one year from the date of grant (January 3, 1996), subject to
acceleration of exercisability under certain circumstances following a
change in control of the Company.
The following table sets forth information with respect to options held at
December 29, 1996 by the persons named in the Summary Compensation Table above.
No options were exercised by such persons during the fiscal year ended December
29, 1996.
FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
NUMBER OF UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
AT FISCAL YEAR END AT FISCAL YEAR END
------------------------------ ------------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ------------- --------------- ------------- ---------------
<S> <C> <C> <C> <C>
W. Keith Stoneback 0 300,000 -- --
James R. Appleby, Jr. 302,700 140,000 -- --
Terry A. Fuller 135,366 97,334 -- $ 10,000
Michael R. Stewart 55,766 53,934 -- 7,500
Davis Woodward 46,666 55,534 -- 7,500
</TABLE>
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EMPLOYMENT AND OTHER AGREEMENTS
In August 1996, the Company entered into an employment agreement with W.
Keith Stoneback pursuant to which Mr. Stoneback will serve as the Company's
President and Chief Executive Officer through December 31, 1999 and, thereafter,
for successive one-year terms absent at least three months' prior written notice
of termination by either party. Mr. Stoneback's annual base salary under the
agreement is $225,000, and his agreement provides that he will be eligible for a
bonus of 50% of base salary pursuant to bonus programs developed by the Board of
Directors based on objective criteria related to the Company's results of
operations. In connection with the approval of the 1997 bonus program, as
outlined below, Mr. Stoneback proposed, and the Board agreed, to reduce his
bonus opportunity to 40% of base salary for 1997, to which he will be entitled
if the Company achieves its 1997 operating profit goal. If Mr. Stoneback's
employment is terminated by the Company without cause during the initial or any
renewal term of the agreement (other than following a change in control as
described below), Mr. Stoneback will be entitled to severance benefits equal to
continuation of his base salary, health, disability and life insurance for a
one-year period and the right to exercise options which are not then exercisable
but would have become exercisable on the next anniversary of the agreement. If
Mr. Stoneback's employment is terminated without cause within three months
following a change in control, Mr. Stoneback will be entitled to severance
benefits equal to continuation of his base salary and his health, disability and
life insurance for a period of eighteen months, subject to mitigation in the
last six months of such period, and the right to exercise any options granted
under the agreement which are not otherwise exercisable, which options will
remain exercisable during the period in which he continues to receive the
aforementioned severance benefits. Mr. Stoneback was also granted options to
purchase 300,000 shares of the Company's Common Stock at the market price. The
Company provides long term disability insurance equal to 60% of Mr. Stoneback's
base salary, a $1 million life insurance policy and automobile, vacation and
other insurance benefits as are available to the Company's other senior
executive officers. During the term of the agreement and for a period of one
year thereafter, Mr. Stoneback 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.
Also in August 1996, the Company entered into an agreement with James R.
Appleby, Jr. pursuant to which Mr. Appleby resigned as President, Chief
Executive Officer and a director of the Company, but agreed to remain available
at Mr. Stoneback's request through December 31, 1996. Mr. Appleby continued to
receive his base salary of $225,000 and health, disability and life insurance,
together with the fringe benefits as were made available to the Company's senior
executive officers, through December 31, 1996. Thereafter, for a period of one
year, Mr. Appleby has received and will continue to receive as severance
benefits his base salary and the continuation of his health, disability and life
insurance. In addition, Mr. Appleby as of December 31, 1996 became entitled to
exercise those options which were not then exercisable but which would have
become exercisable by May 11, 1997, the anniversary date of his employment
agreement, and all options which were exercisable as of December 31, 1996 remain
exercisable through December 31, 1997.
In November 1996, the Company and Dr. Fuller entered into an agreement
pursuant to which Dr. Fuller resigned as Executive Vice President, Chief
Operating Officer and a director of the Company, but agreed to remain available
at Mr. Stoneback's request through January 18, 1997. Dr. Fuller continued to
receive his base salary and all fringe benefits through January 18, 1997.
Thereafter, in accordance with the Company's severance program, Dr. Fuller has
been receiving, and will continue to receive until January 17, 1998, as
severance benefits his base salary and, unless and until he becomes entitled to
comparable benefits from a new employer, his health, dental and supplemental
life insurance
9
<PAGE>
coverage. All options held by Dr. Fuller that were exercisable at January 18,
1997 remain exercisable until April 18, 1997; any options that were not
exercisable at January 18, 1997 expired on that date.
In June 1992, the Company adopted a severance benefits program for certain
key employees, including Messrs. Fuller, 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. Stewart and Woodward is entitled to continue receiving such base
salary and insurance coverage for a period of one year under the foregoing
circumstances and, as noted above, Dr. Fuller was likewise entitled to receive
such benefits for a one year period. 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. 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. 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 the remaining scheduled
term thereof or an extended exercise period, which is one year for options
granted after December 1996 and five years for options granted before January
1997.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Sheldon M. Bonovitz, a director of the Company and a member of the
Compensation Committee, is a partner of Duane, Morris & Heckscher, which serves
as the Company's primary legal counsel.
Richard J. DePiano, the Chairman of the Board of Directors and a member of
the Compensation Committee, was granted options under the Company's Equity
Incentive Plan in December 1996 to purchase 75,000 shares of the Company's
Common Stock at the market price in consideration for his services to the
Company in pursuing and evaluating strategic business initiatives.
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. 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 makes recommendations to the Board of Directors regarding option
grants and approves all other compensation awarded to the chief executive
officer and the 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.
Historically, base salaries for executives were targeted to be very
competitive with other technology-based companies with revenues of $50-$100
million. In 1996, the Committee determined to align base salaries to be more
competitive with technology-based companies with revenues comparable to the
Company's. 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. Excluding the chief executive officer, whose compensation is
discussed in greater detail below, the base salary increases for the named
executives effective for 1996 averaged 3.4%.
The annual incentive awards, as governed by the Executive Staff Bonus
Program adopted in November 1991, were 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 were
eligible to receive a bonus (the "Bonus Opportunity") calculated as a percentage
of their base salaries. The percentage of base salary which determined the Bonus
Opportunity was 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% was paid if the
Company attained at least 70% of the budgeted operating income and 40% was
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, assessed the personal performance of the chief executive officer.
The budgeted operating income goal was reviewed and approved by the Board of
Directors at the beginning of the fiscal year. For 1996, the Committee did not
award any bonuses to the named executives under the Executive Staff Bonus
Program due to the Company's overall performance and as part of the Company's
continuing effort to reduce expenditures.
11
<PAGE>
Effective for 1997, the Company has adopted a new bonus program which is
based entirely on objective criteria. Under this program, certain management
personnel, including executive officers, will be entitled to a bonus only if the
Company achieves 100% of its budgeted 1997 operating income. The amount of the
bonus will be a percentage of base salary that is fixed based on the
participant's position.
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.
Chief Executive Officer Compensation
The specific compensation actions for Mr. Appleby were as follows:
o No bonus was awarded for services rendered in fiscal year 1996.
o Mr. Appleby received a grant of options to purchase 50,000 shares on
March 4, 1996 based on services rendered for fiscal year 1995.
o Effective on January 30, 1996, Mr. Appleby's base salary was reduced from
$281,960 to $225,000.
While external market conditions continue to contribute to the Company's
overall performance, the Committee determined to reduce Mr. Appleby's base
salary to a level which it believed to be more competitive with compensation
levels for companies with revenue levels comparable to those of the Company. For
the same reasons, coupled with the Company's continuing effort to reduce
expenditures, no bonus was awarded for 1996. As noted above, Mr. Appleby
resigned as President, Chief Executive Officer and a director in August 1996.
Pursuant to his employment agreement, Mr. Stoneback is entitled to an
annual base salary of $225,000 and was granted options to purchase 300,000
shares of Common Stock at the market price. Mr. Stoneback was originally
entitled to a bonus of 50% of his base salary under a bonus program to be
developed by the Company based on achieving objective operating targets,
although he proposed, and the Board agreed, to reduce his bonus opportunity for
1997 to 40% of base salary as part of the final approval of the 1997 bonus
program described above.
The Committee believes that Mr. Stoneback's initial base salary and option
grant represent a competitive compensation package that was designed to attract
a highly qualified chief executive officer with a strong marketing background.
At the same time, the Committee believes that it limited the Company's cash
compensation obligations, consistent with the Company's operating expense
reduction efforts, while providing a strong incentive to improve the Company's
operating results through a purely objective bonus program.
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 1996. 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, 1992 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, 1992 in each of the
Company, the Nasdaq Composite Index and a weighted index of the issuers in the
peer group described below.
[GRAPHIC]
In the printed version of the document, a line graph
appears which depicts the plot points:
Surgical NASDAQ Peer
Laser Tech Inc. Composite Group
--------------- --------- ------
Dec. 91 100 100 100
Dec. 92 109.76 116.37 74.8
Dec. 93 47.55 132.78 63.51
Dec. 94 41.46 129.83 41.99
Dec. 95 24.39 183.46 64.89
Dec. 96 30.48 225.66 72.87
- ------------------
(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. Except as noted below with respect to certain periods during which
certain companies ceased independent operations or were no longer public
companies, 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. (used through December 31, 1994),
American Dental Technologies, Inc., Arrythmia Research Technology, Inc.,
Bio-Logic Systems Corp., Biomagnetic Technologies, Inc., Birtcher Medical
Systems Inc. (used through December 31, 1994), Candela Corp., Criticare
Systems Inc., Fonar Corp., Imatron Inc., Interspec Inc. (used through
December 31, 1993), Laser Industries Ltd., Laser Photonics Inc. (used
through December 31, 1994), Laserscope, Lunar Corporation, Medstone
International Inc. (formerly Cytocare, Inc.), Non-Invasive Monitoring
Systems, Inc., Q-Med, Inc., Somanetics Corporation, Trimedyne, Inc., Valley
Forge Scientific Corp., Vital Heart Systems Inc. (used through December 31,
1994), and Work Recovery, Inc.
13
<PAGE>
CERTAIN TRANSACTIONS
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 throughout most of Europe. During 1996, total sales by the Company
to such affiliates were $433,000. Vincenzo Morelli, a director of the Company,
is the Chief Executive Officer and a director of Kontron Instruments.
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 28, 1997. 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 18, 1997
14
SURGICAL LASER TECHNOLOGIES, INC.
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS MAY 20, 1997
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby constitutes and appoints W. Keith Stoneback 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 offices of the Company's counsel, Duane, Morris & Heckscher, 4200 One
Liberty Place, 1650 Market Street, Philadelphia, Pennsylvania 19103 on Tuesday,
May 20, 1997, at 10:00 A.M., local time, and at any adjournment thereof as
follows:
(Continued and to be signed on other Side)
<PAGE>
[X] Please mark your
votes as in this
example.
FOR all WITHHOLD Nominees: Sheldon M. Bonovitz
nominees listed AUTHORITY Richard J. DePiano
at right to vote for Jay L. Federman
except as marked the nominees Vincenzo Morelli
to the contrary listed at right W. Keith Stoneback
[ ] [ ]
1. For the election
of five directors,
to serve until
their successors
are duly elected,
as described in
the accompanying
Proxy Statement.
INSTRUCTIONS: To withhold authority
to vote for any individual nominee,
strike a line through that nominee's name.
2. PROPOSAL TO RATIFY appointment FOR AGAINST ABSTAIN
of Arthur Andersen LLP as the [ ] [ ] [ ]
Company's independent accountants
for the fiscal year ending
December 28, 1997.
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 , 1997
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.
