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: ________________________________________________________
<PAGE>
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
JULY 20, 1999
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 20, 1999 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 2000 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 2, 2000; 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 May 31, 1999 are
entitled to notice of and to vote at the meeting and any adjournment thereof.
A copy of the Company's Annual Report for its fiscal year ended January 3,
1999 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 16, 1999
<PAGE>
SURGICAL LASER TECHNOLOGIES, INC.
PROXY STATEMENT FOR 1999 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 20, 1999 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 16,
1999 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 May 31, 1999 are
entitled to receive notice of and to vote at the Annual Meeting. At the record
date, 1,977,879 shares of the Company's Common Stock, par value $.01 per share
(the "Common Stock") were issued and outstanding.
As of May 31, 1999, 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
NAME AND ADDRESS SHARES OF CLASS
---------------- --------- --------
<S> <C> <C>
Steven T. Newby.................................. 180,000(1) 9.10%
6116 Executive Blvd.
Rockville, MD 20852
Kontron Instruments Holding N.V.................. 139,130 7.03%
Julianaplein 22
Curacao, Netherlands Antilles
</TABLE>
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(1) Information furnished by stockholder as of January 3, 1999.
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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<PAGE>
VOTING AND SOLICITATION
On all matters presented to the Company's stockholders for a vote, the
holders of Common Stock vote as a single class, and the holder of each share of
Common Stock is entitled to one vote per share. The holders of Common Stock do
not have cumulative voting rights in the election of directors.
The affirmative vote of the holders of a plurality of the shares of the
Company's Common Stock present, in person or by proxy, and entitled to vote at
the Annual Meeting is required for the election of each director. The
affirmative vote of the holders of a majority of the shares of the Company's
Common Stock present, in person or by proxy, and entitled to vote at the Annual
Meeting is required for the ratification of the appointment of the independent
auditors (the "Proposal").
Abstention from voting will have the practical effect of voting against the
Proposal since an abstention represents one less vote for the Proposal. Broker
non-votes will have no effect on the Proposal since they will not represent
shares entitled to vote thereon at the Annual Meeting. Abstentions and broker
non-votes on the election of directors will have no effect since they will not
represent votes cast at the Annual Meeting for the purpose of electing
directors.
The cost of this solicitation will be borne by the Company. The Company may
reimburse brokerage firms and other persons representing beneficial owners of
shares for their expenses in forwarding solicitation material to such beneficial
owners. Proxies may also be solicited on behalf of the Company by certain of the
Company's directors, officers and regular employees, without additional
compensation, personally or by telephone or telegram.
DEADLINE FOR RECEIPT OF STOCKHOLDER PROPOSALS
Proposals of stockholders of the Company which are intended to be presented
by such stockholders at the 2000 Annual Meeting of Stockholders must be received
by the Company no later than February 17, 2000 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.
In addition, the persons named as proxies on the form of proxy to be mailed
in connection with the solicitation of proxies on behalf of the Company's Board
of Directors for use at the 2000 Annual Meeting of Stockholders will be
authorized to vote in their discretion on any stockholder proposal not included
in the Company's Proxy Statement if the Company does not receive written notice
of such proposal by May 2, 2000. Such proxy holders' authority to vote in their
discretion on stockholder proposals as to which the Company does not receive
notice by May 2, 2000 will be determined in accordance with the rules of the
Securities and Exchange Commission.
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<PAGE>
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.
The names of the nominees, and certain information about them as of May 31,
1999, are set forth below.
<TABLE>
<CAPTION>
DIRECTOR
NAME OF NOMINEE AGE PRINCIPAL OCCUPATION SINCE
--------------- --- -------------------- --------
<S> <C> <C> <C>
Richard J. DePiano........................... 57 Chairman of the Board of 1986
Directors of the Company and
Chief Executive Officer of
Escalon Medical Corporation
W. Keith Stoneback........................... 45 President and Chief Executive 1996
Officer of the Company
Sheldon M. Bonovitz.......................... 62 Chairman and Partner, Duane, 1985
Morris & Hecksher LLP, Counsel to
the Company
Jay L. Federman.............................. 61 Ophthalmologist and attending 1987
Surgeon and Co-Director Director
of Research, Wills Eye Hospital
and Chief of Ophthalmology at
Medical College of Pennsylvania
Vincenzo Morelli............................. 44 Private investor 1995
</TABLE>
Nominees elected as directors will serve until the 2000 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. Since March 1997, Mr. DePiano has served as
Chairman and Chief Executive Officer of Escalon Medical Corp., of which he is
also a director. 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.
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
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<PAGE>
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.
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. and Chief of
Ophthalmology at the Medical College of Pennsylvania.
Vincenzo Morelli served as Chief Executive Officer of Kontron Instruments
Holding N.V. from 1993 until December 1998. Mr. Morelli is presently pursuing
various personal business and investment interests.
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 May 31, 1999 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............................... 64,450(1) 3.21%
Jay L. Federman.................................. 62,539(2) 3.14%
Sheldon M. Bonovitz.............................. 50,223(3) 2.51%
W. Keith Stoneback............................... 47,333(4) 2.34%
Michael R. Stewart............................... 28,558(5) 1.42%
Davis Woodward................................... 26,888(6) 1.34%
Vincenzo Morelli................................. 12,000(7) *
All directors and executive officers as a group
(7 persons)...................................... 291,991(8) 13.61%
</TABLE>
- ------------------
* Less than one percent.
(1) Includes 31,450 shares which Mr. DePiano has the right to acquire under
outstanding stock options exercisable within 60 days after May 31, 1999.
Also includes 18,000 shares owned by Mr. DePiano's wife. Mr. DePiano
disclaims beneficial ownership of such 18,000 shares.
(2) Includes 15,700 shares which Dr. Federman has the right to acquire under
outstanding stock options exercisable within 60 days after May 31, 1999 and
2,499 shares owned by Dr. Federman's child. Dr. Federman disclaims
beneficial ownership of such 2,499 shares.
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<PAGE>
(3) Includes 19,450 shares which Mr. Bonovitz has the right to acquire under
outstanding stock options exercisable within 60 days after May 31, 1999,
5,005 shares owned by Mr. Bonovitz' wife and 5,846 shares owned by trusts of
which Mr. Bonovitz is trustee for the benefit of Mr. Bonovitz' children. Mr.
Bonovitz disclaims beneficial ownership of the 10,851 shares owned by his
wife and such trusts. Also includes 5,823 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 5,823
shares. Also includes 5,100 shares owned by a pension trust of which Mr.
Bonovitz is the beneficiary.
(4) Includes 43,333 shares which Mr. Stoneback has the right to purchase under
outstanding stock options exercisable within 60 days after May 31, 1999.
(5) Includes 27,272 shares which Mr. Stewart has the right to purchase under
outstanding stock options exercisable within 60 days after May 31, 1999.
(6) Includes 22,106 shares which Mr. Woodward has the right to purchase under
outstanding stock options exercisable within 60 days after May 31, 1999.
(7) Includes 3,000 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 8,000 shares
which Mr. Morelli has the right to purchase under outstanding stock options
exercisable within 60 days after May 31, 1999.
(8) Includes 167,311 shares which such persons have the right to purchase under
stock options exercisable within 60 days after May 31, 1999.
BOARD MEETINGS AND COMMITTEES
The Board of Directors of the Company held a total of seven meetings during
the fiscal year ended January 3, 1999. Except for Mr. Morelli who attended three
meetings, no director attended fewer than 87% 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 January 3, 1999.
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 January 3, 1999.
5
<PAGE>
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 January 3, 1999.
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 for
each three years of service, the Outside Director will be granted options to
purchase 6,000 shares, provided that if the Outside Director served as Chairman
throughout such three-year period, the option will be for 9,000 shares, and each
person who hereafter becomes an Outside Director will receive options to
purchase 6,000 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 9,000 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
after May 26, 1994 are or will be exercisable in three equal consecutive annual
installments commencing one year from the date of grant. Notwithstanding the
foregoing, all options granted under the Outside Director Plan become fully
exercisable upon consummation of any business combination transaction involving
the sale of all or substantially all of the assets of the Company to, or the
acquisition of shares of the Company's Common Stock representing more than 50%
of the votes which all stockholders of the Company are entitled to cast by, any
person not affiliated with the Company, directly or indirectly, through one or
more affiliates, or any other transaction or series of transactions having a
similar effect.
An aggregate 77,000 shares of Common Stock are currently reserved for
issuance under the Outside Director Plan, of which 1,800 shares have been issued
and 69,600 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
January 3, 1999, December 28, 1997 and December 29, 1996 to the chief executive
officer of the Company and the other three executive officers of the Company
whose annual salary and bonus in 1998 exceeded $100,000.
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<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL AWARDS ALL OTHER
COMPENSATION OPTIONS COMPENSATION
NAME & PRINCIPAL POSITION YEAR SALARY($) (#)(1) ($)(2)
------------------------- ---- ------------ ------------ ------------
<S> <C> <C> <C> <C>
W. Keith Stoneback(3)....................... 1998 $229,327 -- 4,905
President, Chief Executive 1997 225,000 10,000(4) 38,275(5)
Officer and Director 1996 101,539 60,000 18,298(6)
Michael R. Stewart.......................... 1998 153,932 -- 643
Vice President Finance and 1997 143,843 5,000(4) 643
Chief Financial Officer 1996 123,119 10,000(7) 643
Glenn H. Stahl(8)........................... 1998 132,500 -- 10,583(9)
Vice President, Sales and 1997 122,500 15,000 --
Marketing 1996 -- -- --
Davis Woodward.............................. 1998 127,392 -- 1,285
Vice President, Legal & 1997 119,664 4,000(4) 1,285
Tax Affairs 1996 112,638 5,000(7) 1,285
</TABLE>
- ------------------
(1) Restated for the effect of the one-for-five reverse Common Stock split
implemented on January 8, 1999.
(2) Except as noted in footnotes 5, 6 and 9, represents payments of premiums for
certain supplementary life insurance coverage.
(3) Mr. Stoneback joined the Company as President, Chief Executive Officer and a
director in August 1996.
(4) These options were granted in 1998 for services rendered in 1997.
(5) Includes $32,314 in moving and relocation payments made by the Company to
Mr. Stoneback pursuant to the terms of his Employment Agreement.
(6) Includes $18,054 in moving and relocation payments made by the Company to
Mr. Stoneback pursuant to the terms of his Employment Agreement.
(7) These options were granted in 1997 for services rendered in 1996.
(8) Mr. Stahl served as Vice President, Sales and Marketing from January 1997
until January 1999.
(9) Represents severance pay related to Mr. Stahl's termination in January 1999.
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<PAGE>
The following table sets forth information with respect to options granted
during the fiscal year ended January 3, 1999 to the persons named in the Summary
Compensation Table above. All information presented in the following table is
restated for the effect of the one-for-five reverse Common Stock split
implemented on January 8, 1999.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
% OF ANNUAL RATES OF
TOTAL STOCK PRICE
OPTIONS APPRECIATION FOR
GRANTED TO OPTION TERM
EMPLOYEES --------------------
OPTIONS IN FISCAL EXERCISE
NAME GRANTED(#) YEAR PRICE EXPIRATION DATE 5% 10%
- ---- ---------- ---------- -------- --------------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
W. Keith Stoneback................ 10,000 23.1% 7.03 January 23, 2008 $44,211 $112,040
Michael R. Stewart................ 5,000 11.6% 7.03 January 23, 2008 22,106 56,020
Davis Woodward.................... 4,000 9.3% 7.03 January 23, 2008 17,685 44,816
</TABLE>
The following table sets forth information with respect to options held at
January 3, 1999 by the persons named in the Summary Compensation Table above. No
options were exercised by such persons during the fiscal year ended January 3,
1999. No outstanding options were in the money at January 3, 1999. All
information presented in the following table is restated for the effect of the
one-for-five reverse Common Stock split implemented on January 8, 1999.
FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF UNEXERCISED
OPTIONS AT FISCAL YEAR END
------------------------------
NAME EXERCISABLE UNEXERCISABLE
---- ----------- -------------
<S> <C> <C>
W. Keith Stoneback........................... 40,000 30,000
Michael R. Stewart........................... 21,673 15,267
Glenn H. Stahl............................... 5,000 --
Davis Woodward............................... 18,506 10,934
</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 1998 bonus program. 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,
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<PAGE>
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
60,000 shares, restated for the effect of the one-for-five reverse Common Stock
split implemented on January 8, 1999, 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.
Effective January 1999, the Company terminated the employment of Mr. Stahl,
Vice President of Sales and Marketing. Mr. Stahl received as severance benefits
his base salary, health and disability insurance until January 29, 1999.
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 coverage 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.
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<PAGE>
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, the base salary increases for the named
executives effective for 1998 averaged 2.7%.
Effective for 1997, the Company adopted an executive staff Bonus Program
which is based entirely on objective criteria. Under this program, certain
management personnel, including executive officers, were entitled to a bonus
only if the Company achieves 100% of its budgeted 1998 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 1998, the Committee did not
award any bonuses to the named executives under the bonus program due to the
Company's failure to achieve its budgeted operating income.
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<PAGE>
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 1998.
o Mr. Stoneback's 1998 base salary of $225,000 was unchanged from his 1997
base salary.
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 1998 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.
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 1998. 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:
Sheldon M. Bonovitz, Esq. Richard J. DePiano Jay L. Federman, M.D.
Vincenzo Morelli W. Keith Stoneback
11
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PERFORMANCE GRAPH
The following graph sets forth a comparison of cumulative total return
since January 1, 1994 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, 1994 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 following plot points.
Surgicial
Laser
Tech Peer Nasdaq
Inc. Group Composite
Dec. 93 100 100 100
Dec. 94 87.2 97.78 94.85
Dec. 95 51.29 138.17 136.98
Dec. 96 64.1 169.95 145.76
Dec. 97 60.28 197.15 157.09
Dec. 98 14.11 293.83 100.63
- ------------------
(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., Laser Industries Ltd., (used
through December 31, 1997), 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.
12
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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 pursuant to a 1993 distribution
agreement. In March, 1997, the Company and Kontron Instruments agreed to
terminate the distribution agreement. Kontron Instruments has agreed to continue
to represent the Company in certain countries in Europe until successor
distribution partners are identified by the Company. During 1998, total sales by
the Company to such affiliates were $53,000. Vincenzo Morelli, a director of the
Company, served as the Chief Executive Officer of Kontron Instruments until
December 1998.
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 2, 2000. 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 16, 1999
13
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SURGICAL LASER TECHNOLOGIES, INC.
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS JULY 20, 1999
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 20, 1999, at 9:30 a.m., local time, and at any adjournment thereof as
follows:
(Continued and to be signed on other side)
2
Please mark your
| X | votes as in this
example.
1. For the election
of five directors,
to serve until
their succes-
sors are duly elected, as described in the accompany-
ing Proxy Statement.
INSTRUCTIONS: To withhold authority to vote for any individual nominee, strike a
line through that nominee's name.
- ------------------------------------------------------------------------------
FOR all nominees listed
at right except as marked to the contrary
| |
| |
WITHHOLD AUTHORITY
to vote for all
nominees listed at right
| |
| |
Nominees: Sheldon M. Bonovitz
Richard J. DePiano
Jay L. Federman
Vincenzo Morelli
W. Keith Stoneback
FOR
| |
| |
AGAINST
| |
| |
ABSTAIN
| |
| |
2.PROPOSAL TO RATIFY appointment of Arthur Andersen LLP as the Company's
independent accountants for the fiscal year ending January 2, 2000.
The Board of Directors recommends a vote FOR the election of the nominees
listed 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 ______________, 1999
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.
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