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
JULY 21, 1998
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, July 21, 1998 at 9:30 a.m., local time, at the offices of the
Company's counsel, Duane, Morris & Heckscher LLP, 4200 One Liberty Place, 1650
Market Street, Philadelphia, Pennsylvania 19103, for the following purposes:
1. To elect five directors to serve until the 1999 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 January 3,
1999; 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 June 1, 1998 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
28, 1997 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
June 15, 1998
<PAGE>
SURGICAL LASER TECHNOLOGIES, INC.
PROXY STATEMENT FOR 1998 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, July 21, 1998 at 9:30 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
LLP, 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 June 15, 1998
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 June 1, 1998 are entitled to
receive notice of and to vote at the Annual Meeting. At the record date,
9,889,323 shares of the Company's Common Stock, par value $.01 per share (the
"Common Stock") were issued and outstanding.
As of June 1, 1998, 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>
Kennedy Capital Management, Inc...................................... 710,484(1) 7.18%
10829 Olive Boulevard
St. Louis, MO 63141
Kontron Instruments Holding N.V...................................... 695,652 7.03%
Julianaplein 22
Curacao, Netherlands Antilles
</TABLE>
- --------------
(1) Information furnished by stockholder as of February 10, 1998.
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.
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.
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<PAGE>
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 1999 Annual Meeting of Stockholders must be received by
the Company no later than February 25, 1999 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.
2
<PAGE>
The names of the nominees, and certain information about them as of June 1,
1998, are set forth below.
<TABLE>
<CAPTION>
DIRECTOR
NAME OF NOMINEE AGE PRINCIPAL OCCUPATION SINCE
--------------- --- -------------------- -------
<S> <C> <C> <C>
Richard J. DePiano................. 56 Chairman of the Board of Directors of the Company 1986
Managing Director, The Sandhurst Venture Fund
W. Keith Stoneback................. 43 President and Chief Executive Officer of the Company 1996
Sheldon M. Bonovitz................ 61 Chairman and Partner, Duane, Morris & Hecksher LLP, 1985
Counsel to the Company
Jay L. Federman.................... 60 Attending Surgeon and Co-Director of Research, 1987
Wills Eye Hospital
Vincenzo Morelli................... 43 Chief Executive Officer, Kontron Instruments Holding N.V. 1995
</TABLE>
Nominees elected as directors will serve until the 1999 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 LLP, Philadelphia, Pennsylvania, since 1969, where he also serves as
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 at Wills Eye Hospital,
Philadelphia, Pennsylvania, since 1980 and an ophthalmologist in private
practice since 1968. 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.
3
<PAGE>
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 June 1, 1998 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>
Richard J. DePiano................................................ 312,250(1) 3.11%
Jay L. Federman................................................... 302,703(2) 3.04%
Sheldon M. Bonovitz............................................... 241,131(3) 2.42%
W. Keith Stoneback................................................ 120,000(4) 1.20%
Michael R. Stewart................................................ 108,796(5) 1.09%
Davis Woodward.................................................... 101,447(6) 1.02%
Vincenzo Morelli.................................................. 50,000(7) *
Glenn H. Stahl.................................................... 33,000(8) *
All directors and executive officers as a group (8 persons)....... 1,269,327(9) 12.05%
</TABLE>
- ------------
* Less than one percent.
(1) Includes 147,250 shares which Mr. DePiano has the right to acquire under
outstanding stock options exercisable within 60 days after June 1, 1998.
Also includes 90,000 shares owned by Mr. DePiano's wife. Mr. DePiano
disclaims beneficial ownership of such 90,000 shares.
(2) Includes 68,500 shares which Dr. Federman has the right to acquire under
outstanding stock options exercisable within 60 days after June 1, 1998
and 12,499 shares owned by Dr. Federman's child. Dr. Federman disclaims
beneficial ownership of such 12,499 shares.
(3) Includes 87,250 shares which Mr. Bonovitz has the right to acquire under
outstanding stock options exercisable within 60 days after June 1, 1998,
25,027 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. Also includes 25,500 shares
owned by a pension trust of which Mr. Bonovitz is the beneficiary.
(4) Includes 100,000 shares which Mr. Stoneback has the right to acquire under
outstanding stock options exercisable within 60 days after June 1, 1998.
(5) Includes 102,366 shares which Mr. Stewart has the right to acquire under
outstanding stock options exercisable within 60 days after June 1, 1998.
(6) Includes 86,533 shares which Mr. Woodward has the right to acquire under
outstanding stock options exercisable within 60 days after June 1, 1998.
(7) 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 30,000 shares
which Mr. Morelli has the right to acquire under outstanding stock options
exercisable within 60 days after June 1, 1998.
(8) Represents 8,000 shares owned jointly with his spouse and includes 25,000
shares which Mr. Stahl has the right to acquire under outstanding stock
options exercisable within 60 days after June 1, 1998.
(9) Includes 646,899 shares which such persons have the right to acquire under
stock options exercisable within 60 days after June 1, 1998.
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<PAGE>
BOARD MEETINGS AND COMMITTEES
The Board of Directors of the Company held a total of seven meetings during the
fiscal year ended December 28, 1997. Except for Mr. Morelli who attended two
meetings, 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
held two meetings in the fiscal year ended December 28, 1997.
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 28, 1997.
The Compensation Committee currently consists of directors Bonovitz, DePiano and
Federman. The Compensation Committee is responsible for administering 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, when requested by the Board of Directors, establishes
methods of compensation. The Compensation Committee did not meet during the
fiscal year ended December 28, 1997.
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 the Second Amended and Restated 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. There are currently 28,000 shares available for grant in the
Outside Director Plan.
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
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<PAGE>
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 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
348,000 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 28,
1997, December 29, 1996 and December 31, 1995 to the chief executive officer of
the Company and the other three executive officers of the Company whose annual
salary and bonus in 1997 exceeded $100,000.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long-Term
Compensation
Annual Compensation Awards
------------------------- ---------- All Other
Name & Principal Position Year Salary ($) Bonus ($) Options (#) Compensation ($)(1)
- ------------------------- ---- ---------- --------- ----------- -------------------
<S> <C> <C> <C> <C> <C>
W. Keith Stoneback(2) 1997 $225,000 $ - 50,000(6) $38,275(3)
President, Chief Executive 1996 101,539 - 300,000 18,298(4)
Officer and Director 1995 - - - -
Michael R. Stewart 1997 143,843 - 25,000(6) 643
Vice President Finance and 1996 123,119 - 50,000(7) 643
Chief Financial Officer 1995 118,023 24,380 30,000(8) 643
Glenn H. Stahl(5) 1997 122,500 - 75,000 -
Vice President Sales and 1996 - - - -
Marketing 1995 - - - -
Davis Woodward 1997 119,664 - 20,000(6) 643
Vice President, Legal & 1996 112,638 - 25,000(7) 1,285
Tax Affairs 1995 109,296 - 30,000(8) 1,285
</TABLE>
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(1) Except as noted in footnotes 3 and 4, 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 $32,314 in moving and relocation payments made by the Company to
Mr. Stoneback pursuant to the terms of his Employment Agreement.
(4) Includes $18,054 in moving and relocation payments made by the Company to
Mr. Stoneback pursuant to the terms of his Employment Agreement.
(5) Mr. Stahl joined the Company as Vice President, Sales and Marketing in
January 1997.
(6) These options were granted in 1998 for services rendered in 1997.
(7) These options were granted in 1997 for services rendered in 1996.
(8) These options were granted in 1996 for services rendered in 1995.
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<PAGE>
The following table sets forth information with respect to options granted
during the fiscal year ended December 28, 1997 to the persons named in the
Summary Compensation Table above.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
% of Total Potential Realizable Value
Options at Assumed Annual Rates
Granted of Stock Price Appreciation
to Employees for Option Term
Options in Fiscal Exercise ----------------------------
Name Granted(#) Year Price Expiration Date 5% 10%
- ---- ---------- ----------- ----- --------------- ------ -------
<S> <C> <C> <C> <C> <C> <C>
W. Keith Stoneback - - - - - -
Michael R. Stewart 50,000 13.2% 1.438 January 24, 2007 45,202 114,550
Glenn H. Stahl 75,000 19.7% 1.438 January 24, 2007 67,803 171,825
Davis Woodward 25,000 6.6% 1.438 January 24, 2007 22,601 57,275
</TABLE>
The following table sets forth information with respect to options held at
December 28, 1997 by the persons named in the Summary Compensation Table above.
No options were exercised by such persons during the fiscal year ended December
28, 1997.
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 100,000 200,000 - -
Michael R. Stewart 74,900 84,800 1,500 9,125
Glenn H. Stahl - 75,000 - 4,688
Davis Woodward 66,600 60,600 1,500 7,563
</TABLE>
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. No bonus was paid for services under the 1997 bonus program. Under
the 1998 bonus program, Mr. Stoneback will be entitled to a bonus opportunity of
50% of base salary. 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 under the agreement 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, other insurance benefits as are available to the
Company's other senior executive officers and an automobile allowance and
vacation benefits. 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.
In June 1992, the Company adopted a severance benefits program for certain key
employees, including Messrs. 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.
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
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<PAGE>
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 Executive
Committee and the Compensation Committee, is a partner of Duane, Morris &
Heckscher LLP, which serves as the Company's primary legal counsel.
REPORT ON EXECUTIVE COMPENSATION
The Company's executive compensation program is reviewed and administered by the
whole Board of Directors. This report reflects the Company's compensation
philosophy as endorsed by the Board and resulting compensation actions taken by
the Company.
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 Compensation 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, and Mr. Stahl, whose employment with the
Company commenced in January 1997, the base salary increases for the named
executives effective for 1997 averaged 11.8%.
Effective for 1997, the Company adopted a bonus program which is based entirely
on objective criteria. Under this program, certain management personnel,
including executive officers, are entitled to a bonus only if the Company
achieves 100% of its budgeted 1997 operating income, which was reviewed and
approved by the Board of Directors at the beginning of the fiscal year. The
amount of any bonus would be a percentage of base salary that is fixed based on
the participant's position. For 1997, the Committee did not award any bonuses to
the named executives under the Executive Staff Bonus Program due to the
Company's failure to achieve its budgeted operating income.
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. Stoneback were as follows:
o No bonus was awarded for services rendered in fiscal year 1997.
o Mr. Stoneback received a grant of options to purchase 50,000 shares
on January 23, 1998 based on services rendered for fiscal year
1997.
o Mr. Stoneback's 1997 base salary of $225,000 was unchanged from
his 1996 base salary.
8
<PAGE>
While the Company's results of operations continue to be adversely affected by
external market conditions, the Company did not achieve its budgeted operating
income in either 1996 or 1997 and, as a result, the Company has not modified Mr.
Stoneback's salary since his commencement date of August 1996, nor has it paid
him any bonuses. Notwithstanding the results of operations, however, and
consistent with the Company's goal of focusing management's attention on the
Company from the perspective of a stockholder, the Company did award Mr.
Stoneback options to purchase 50,000 shares for his performance in 1997. These
options were awarded based on Mr. Stoneback's positive efforts in refocusing the
Company's growth strategy by concentrating direct sales and marketing efforts in
the ENT market, actively seeking partners to expand the use of the Company's
products in other surgical specialties and leveraging the Company's resources
and expertise to manufacture products for other companies. The Board of
Directors believes that Mr. Stoneback was instrumental in the successful
consummation of the agreements with CorMedica and MedTREK and in the settlement
of the Company's outstanding litigation with C.R. Bard, all of which took place
during 1997.
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 1997. 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 Board of Directors:
<TABLE>
<S> <C> <C> <C> <C>
Sheldon M. Bonovitz, Esq. Richard J. DePiano Jay L. Federman, M.D.
Vincenzo Morelli W.Keith Stoneback
</TABLE>
PERFORMANCE GRAPH
The following graph sets forth a comparison of cumulative total return since
January 1, 1993 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. 92 100 100 100
Dec. 93 43.32 114.10 85.33
Dec. 94 37.78 130.19 55.71
Dec. 95 22.22 127.30 86.08
Dec. 96 27.77 179.88 96.68
Dec. 97 26.12 208.67 89.22
- -----------
(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., Arrhythmia 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.
9
<PAGE>
CERTAIN TRANSACTIONS
Kontron Instruments Holding N.V., which owns more than 5% of the Company's
outstanding Common Stock, has affiliates that have served as the Company's
distributors throughout most of Europe. In March 1997, the Company and Kontron
Instruments agreed to terminate the distribution agreement entered into in 1993,
under which Kontron Instruments had been the Company's distribution
representative for most of Europe. Kontron Instruments has agreed to continue to
represent the Company in certain countries in Europe until successor
distribution partners are identified by Registrant. During 1997, total sales by
the Company to such affiliates were $112,000. 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 January 3, 1999. 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: June 15, 1998
10
<PAGE>
SURGICAL LASER TECHNOLOGIES, INC.
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS JULY 21, 1998
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 LLP, 4200 One
Liberty Place, 1650 Market Street, Philadelphia, Pennsylvania 19103 on Tuesday,
July 21, 1998, at 9:30 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.
<TABLE>
<S> <C> <C> <C>
FOR all WITHHOLD Nominees: Sheldon M. Bonovitz
nominees listed AUTHORITY Richard J. DePiano
at right to vote for Jay L. Federman
except as marked all nominees Vincenzo Morelli
to the contrary listed at right W. Keith Stoneback
[ ] [ ]
</TABLE>
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.
<TABLE>
<S> <C> <C> <C> <C>
2. PROPOSAL TO RATIFY appointment FOR AGAINST ABSTAIN
of Arthur Andersen LLP as the [ ] [ ] [ ]
Company's independent accountants
for the fiscal year ending
January 3, 1999.
</TABLE>
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___________________________, 1998
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.
