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-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)(1) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
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pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
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/_/ Fee paid previously with preliminary materials.
/_/ Check box if any part of the fee is offset as provided by the Exchange
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was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid: _________________________________________
2) Form, Schedule or Registration Statement No.: ___________________
3) Filing Party: ___________________________________________________
4) Date Filed: _____________________________________________________
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
JULY 17, 2001
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 17, 2001 at 9:00 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 2002 Annual Meeting and
until their respective successors are elected;
2. To ratify the appointment of Grant Thornton LLP as independent
accountants of the Company for the fiscal year ending December 30,
2001; 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 25, 2001 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
31, 2000 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 14, 2001
SURGICAL LASER TECHNOLOGIES, INC.
PROXY STATEMENT FOR 2001 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 17, 2001 at 9:00 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
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 14, 2001
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 25, 2001 are entitled to
receive notice of and to vote at the Annual Meeting. At the record date,
2,327,965 shares of the Company's Common Stock, par value $.01 per share (the
"Common Stock") were issued and outstanding.
As of May 25, 2001, the following persons were known to the Company to be the
beneficial owners of more than 5% of the Company's Common Stock:
NUMBER OF PERCENT OF
NAME AND ADDRESS SHARES CLASS
Steven T. Newby........................... 221,400 9.50%
6116 Executive Blvd.
Rockville, MD 20852
Robert L. Crutchfield..................... 150,000(1) 6.42%
1003 23rd Avenue, Suite B
Tuscaloosa, AL 35401
Kontron Instruments Holding N.V........... 139,130 5.98%
Julianaplein 22
Curacao, Netherlands Antilles
- -------------
(1) Includes 10,000 shares which Mr. Crutchfield has the right to purchase
under outstanding stock options exercisable within 60 days after May 25,
2001.
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 and
voting 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 2002 Annual Meeting of Stockholders must be received by
the Company no later than February 14, 2002 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 2002 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 April 30, 2002. Such proxy holders' authority to vote in their
discretion on stockholder proposals as to which the Company does receive notice
by April 30, 2002 will be determined in accordance with the rules of the
Securities and Exchange Commission.
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. Each of the nominees is now a director of
the Company with a term expiring at the Annual Meeting. 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 25,
2001, are set forth below.
NAME OF DIRECTOR AGE PRINCIPAL OCCUPATION DIRECTOR SINCE
- ---------------- --- -------------------- --------------
Richard J. DePiano 59 Chairman and Chief Executive Officer of Escalon 1986
Medical Corp.
Sheldon M. Bonovitz 64 Chairman and Partner, Duane, Morris & Heckscher LLP, 1985
Counsel to the Company
Jay L. Federman 63 Ophthalmologist and attending Surgeon and Co-Director 1987
of Research, Wills Eye Hospital and Chief of
Ophthalmology at Medical College of Pennsylvania
Michael R. Stewart 44 President and Chief Executive Officer of the Company 1999
James Lee Stafford 60 Certified Public Accountant and Managing Partner of Watkins, 2000
Ward and Stafford, PLLC
Directors will serve until the 2002 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. Mr. DePiano is also a Director of PhotoMedex, Inc.
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 eResearchTechnology, Inc.
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.
Michael R. Stewart has served as President and Chief Executive Officer of the
Company since July 1999. Prior to Mr. Stewart's appointment as President and
Chief Executive Officer, he served as the Company's Vice President and Chief
Financial Officer for nearly nine years.
James Lee Stafford, CPA has been a partner in the regional accounting firm of
Watkins, Ward and Stafford PLLC, since 1968, where he also serves as Managing
Partner and Chairman of the Executive Committee.
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 25, 2001 by each director and nominee for director, each
executive officer named in the Summary Compensation Table 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.
Shares Beneficially Owned
-------------------------
Name Number Percent
- ---- ------ -------
Robert L. Crutchfield ............................................ 150,000(1) 6.42%
James Lee Stafford................................................ 105,000 4.51%
Davis Woodward ................................................... 68,348(2) 2.89%
Jay L. Federman .................................................. 66,072(3) 2.81%
Michael R. Stewart ............................................... 54,852(4) 2.30%
Richard J. DePiano ............................................... 50,900(5) 2.15%
Sheldon M. Bonovitz .............................................. 27,333(6) 1.16%
All directors and executive officers as a group (7 persons)....... 522,505(7) 20.84%
- ------------
(1) Includes 10,000 shares with Mr. Crutchfield has the right to purchase
under outstanding stock options exercisable within 60 days after May 25,
2001.
(2) Includes 38,566 shares which Mr. Woodward has the right to purchase under
outstanding stock options exercisable within 60 days after May 25, 2001.
(3) Includes 19,233 shares which Dr. Federman has the right to acquire under
outstanding stock options exercisable within 60 days after May 25, 2001 and
2,499 shares owned by Dr. Federman's child. Dr. Federman disclaims
beneficial ownership of such 2,499 shares.
(4) Includes 53,566 shares which Mr. Stewart has the right to purchase under
outstanding stock options exercisable within 60 days after May 25, 2001.
(5) Includes 35,900 shares which Mr. DePiano has the right to acquire under
outstanding stock options exercisable within 60 days after May 25, 2001.
(6) Represents 22,233 shares which Mr. Bonovitz has the right to acquire under
outstanding stock options exercisable within 60 days after May 25, 2001 and
5,100 shares owned by a pension trust of which Mr. Bonovitz is the
beneficiary.
(7) Includes 179,498 shares which such persons have the right to purchase under
stock options exercisable within 60 days after May 25, 2001.
BOARD MEETINGS AND COMMITTEES
The Board of Directors of the Company held a total of four meetings during the
fiscal year ended December 31, 2000. All directors attended at least 75% of the
meetings held during 2000 of the Board of Directors and 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, if so requested by the Board of
Directors, also serves as the Nominating Committee.
The Executive Committee currently consists of directors Stewart, DePiano and
Bonovitz. 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 31, 2000.
The Executive Committee, in its capacity as Nominating Committee, or the Board
of Directors, 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, Federman and
Stafford. 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 four meetings in the fiscal year ended
December 31, 2000.
The Compensation Committee currently consists of directors Bonovitz, DePiano and
Federman. When requested by the Board of Directors, the Compensation Committee
administers the Company's 2000 Equity Incentive Plan, reviews other compensation
plans and establishes methods of compensation. The Compensation Committee did
not meet during the fiscal year ended December 31, 2000.
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 maintains the 2000 Equity Incentive Plan (the "Plan"). Pursuant to
the terms of the Plan, each person who is or becomes a director of the Company
and is neither an officer of nor otherwise employed by the Company or any
subsidiary (an "Outside Director") is entitled to receive nonqualified options
("Director Options") under the Plan. Individuals who first became Outside
Directors after adoption of the Plan will receive Options to purchase 10,000
shares on the 15th day after first being elected to the Board, with the number
increasing to 15,000 if the individual is elected to serve as Chairman. Each
Outside Director is also entitled to receive Options to purchase 10,000 shares
upon completion of three years of service since the most recent grant of options
under the Plan or under the Company's Second Amended and Restated Stock Option
Plan for Outside Directors (the "Outside Director Plan"). The number of options
increases to 15,000 if the Outside Director has served as Chairman during the
three-year period.
The exercise price for all Director Options is 100% of the fair market value of
the Common Stock on the date of grant. Director Options are exercisable in three
equal consecutive annual installments commencing one year from the date of
grant, but all Director Options become immediately exercisable upon the
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 that 50% of the votes
which all stockholders of the Company are entitled to cast by, any person not
presently an affiliate of the Company. Director Options terminate upon the
earliest to occur of: (a) ten years from the grant date; (b) one year after the
Outside Director's death if such death occurs while the optionee is an Outside
Director or within the three-month or three-year period specified in the next
two clauses; (c) three months after the optionee ceases to serve as an Outside
Director for any reason other than death or disability, except as noted in
clause (b) above; or (d) three years after the optionee ceases to serve as an
Outside Director due to disability, except as noted in clause (b) above.
An aggregate 250,000 shares of Common Stock were reserved for issuance under the
Plan, of which 45,000 shares are subject to outstanding options to Outside
Directors. The Outside Director Plan expired in May 2000 with respect to future
grants; 50,700 options granted to Outside Directors remain outstanding
thereunder.
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 31,
2000, January 2, 2000 and January 3, 1999 to the chief executive officer of the
Company and the other executive officers of the Company whose annual salary and
bonus in 2000 exceeded $100,000.
SUMMARY COMPENSATION TABLE
Long-Term
Compensation
Annual ------------
Compensation Awards
------------ ------ All Other
Name & Principal Position Year Salary ($) Bonus($) Options Compensation
- ------------------------- ---- ---------- -------- ------- ------------
(#) ($)
--- ---
Michael R. Stewart (1) 2000 187,784 23,125 50,000(4) 3,140(6)
President, Chief Executive 1999 169,507 - 50,000 643(7)
Officer and Director 1998 153,932 - - 643(7)
Davis Woodward (2) 2000 136,379 13,434 20,000(4) 3,073(8)
Vice President, Chief Financial 1999 132,384 - 27,500(5) 1,285(7)
Officer 1998 127,392 - - 1,285(7)
Robert L. Crutchfield (3) 2000 112,823 30,000 30,000 2,419(9)
Vice President of Business
Development
- ------------
(1) Mr. Stewart was appointed President and Chief Executive Officer in July
1999. Prior to his appointment as President and Chief Executive Officer,
Mr. Stewart served as the Company's Vice President and Chief Financial
Officer.
(2) Mr. Woodward was appointed Vice President and Chief Financial Officer in
October 1999. Prior to his appointment as Chief Financial Officer, Mr.
Woodward served as the Company's Vice President, Legal and Tax Affairs.
(3) Mr. Crutchfield was appointed Vice President of Business Development in
June 2000.
(4) These options were granted in 2001 for services rendered in 2000.
(5) These options were granted in 2000 for services rendered in 1999.
(6) Represents $2,497 in contributions to Mr. Stewart's defined contribution
plan and $643 in premiums for certain supplementary life insurance
coverage.
(7) Represents payments of premiums for certain supplementary life insurance
coverage.
(8) Represents $1,788 in contributions to Mr. Woodward's defined contribution
plan and $1,285 in premiums for certain supplementary life insurance
coverage.
(9) Represents payments for contributions to Mr. Crutchfield's Simple IRA Plan.
The following table sets forth information with respect to options granted
during the fiscal year ended December 31, 2000 to the persons named in the
Summary Compensation Table above.
OPTION GRANTS IN LAST FISCAL YEAR
% of Total Potential Realizable Value
Options at Assumed Annual Rates
Granted to of Stock Price Appreciation
Employees for Option Term
Options In Fiscal Exercise ---------------------------
Name Granted(#) Year Price Expiration Date 5% 10%
- ---- ---------- ---- ----- --------------- --- ---
Davis Woodward 27,500 27.3% $2.94 January 18, 2010 $50,812 $128,766
Robert L. Crutchfield 30,000 29.8% $2.00 June 1, 2010 $37,734 $ 95,625
The following table sets forth information with respect to options held at
December 31, 2000 by the persons named in the Summary Compensation Table above.
No options were exercised by such persons during the fiscal year ended December
31, 2000. No outstanding options were in the money at December 31, 2000.
FISCAL YEAR-END OPTION VALUES
Number of Unexercised Options
at Fiscal Year End
-----------------------------------
Name Exercisable Unexercisable
---- ----------- -------------
Michael R. Stewart 50,739 36,207
Davis Woodward 26,906 30,034
Robert L. Crutchfield - 30,000
EMPLOYMENT AND OTHER AGREEMENTS
In October 1999, the Company entered into an employment agreement with Michael
R. Stewart pursuant to which Mr. Stewart serves as the Company's President and
Chief Executive Officer for successive one-year terms expiring December 31
absent at least three months' prior written notice of termination by either
party. Mr. Stewart's minimum annual base salary under the agreement is $185,000
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. Mr. Stewart
was awarded a $23,125 bonus for fiscal 2000. If Mr. Stewart'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. Stewart 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 for a period equal to
the lesser of: (1) one year from the date of termination for all options granted
after 1996 and five years from the date of termination for all options granted
before 1997 or (2) the original term of such options. If Mr. Stewart's
employment is terminated without cause within two years following a change in
control or if Mr. Stewart resigns his employment within two years after a change
in control following (a) the relocation of Mr. Stewart's principal business
location by more than 35 miles, (b) a significant reduction in Mr. Stewart's
duties and responsibilities from those existing prior to the change in control
or (c) a reduction in Mr. Stewart's then-current base salary, Mr. Stewart will
be entitled to severance benefits equal to continuation of his base salary and
his health, disability and life insurance for a one-year period and the right to
exercise any options granted under the agreement which are not otherwise
exercisable for a period equal to the lesser of: (1) one year from the date of
termination for all options granted after 1996 and five years from the date of
termination for all options granted before 1997 or (2) the original term of such
options. Mr. Stewart was also granted under the agreement options to purchase
50,000 shares of the Company's Common Stock at the market price. The Company is
obligated to provide long-term disability insurance equal to 60% of Mr.
Stewart'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. Stewart 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.
The Company maintains a severance benefits program for certain key employees,
including Mr. Woodward and Mr. Crutchfield. 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. Mr. Woodward and
Mr. Crutchfield are 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,
Mr. Woodward's employment is terminated without cause or he 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, he 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 period of 12 months. In addition, under such
circumstances, Mr. Woodward is also entitled to continue receiving the
aforementioned insurance coverages for a period of 12 months, and all unvested
options which he holds 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
The Company's Compensation Committee currently consists of Sheldon M. Bonovitz,
Richard J. DePiano and Jay L. Federman. Mr. Bonovitz is Chairman and 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 primarily in the form of stock options and
benefits typically offered to executives.
Base salaries for executives are targeted to be competitive with other
technology-based companies with revenues of $10-$50 million. Individual salaries
are considered for adjustment annually; adjustments are based upon the general
movement in external salary levels, individual performance and potential, and/or
changes in duties and responsibilities. Excluding the chief executive officer,
whose compensation is discussed in greater detail below, the base salary
increase for Mr. Woodward effective for 2000 was 3%. Mr. Crutchfield become an
executive officer of the Company as of June 1, 2000. His base salary was set at
$150,000 per year.
Under the Company's bonus program, certain management personnel, including
executive officers, were entitled to receive a bonus based upon the achievement,
or over-achievement, by the Company of its budgeted 2000 operating income, and
certain non-executive management personnel could be awarded, at any level of
operating income, a portion of the potential bonus based on personal performance
and other subjective criteria. The bonus program was reviewed and approved by
the Board of Directors at the beginning of the fiscal year. The amount of bonus
would be a percentage of base salary that is fixed based on the participant's
position. The amount of bonus subject to subjective criteria would be an amount
of up to twenty-five percent of the participant's potential bonus. For 2000, the
Committee awarded a $13,434 bonus to Mr. Woodward. Mr. Crutchfield was paid a
bonus of $30,000 under a guarantee which was made in connection with the
acquisition of Surgical Innovations & Services, Inc. ("SIS") and which was
applicable only to fiscal year 2000.
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. Stewart were as follows:
Pursuant to his employment agreement, Mr. Stewart is entitled to a minimum
annual base salary of $185,000 and was granted options to purchase 50,000 shares
of Common Stock at the market price. Mr. Stewart is also entitled to a bonus of
50% of his base salary under a bonus program developed by the Board of Directors
based on the Company achieving objective operating targets. A bonus of $23,125
was awarded to Mr. Stewart for services rendered in 2000.
The Board of Directors believes that Mr. Stewart's base salary and option grant
represent a competitive compensation package. At the same time, the Board of
Directors 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 bonus program.
Compliance with Internal Revenue Code Section 162(m)
Section 162(m) of the Internal Revenue Code limits the deductibility for
corporate income tax purposes of compensation paid to certain executive
officers. The Board of Directors has carefully considered the impact of this
provision on the compensation awarded to those executive officers during 2000.
The Board of Directors 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.
James Lee Stafford Michael R. Stewart
PERFORMANCE GRAPH
The following graph sets forth a comparison of cumulative total return since
January 1, 1996 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, 1996 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. 95 100.00 100.00 100.00
Dec. 96 124.96 123.03 106.41
Dec. 97 117.52 150.68 114.68
Dec. 98 27.50 212.47 73.46
Dec. 99 26.00 394.84 112.54
Dec. 00 20.00 237.36 71.76
(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.
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: 4-D Neuroimaging (Formerly Biomagnetic Technologies,
Inc.), American Medical Technologies, Inc., Arrhythmia Research Technology,
Inc., ATL Ultrasound Inc., Bio-Logic Systems Corp., Candela Corp., Criticare
Systems Inc., Fonar Corp., Imatron Inc., Laser Industries Ltd., (used through
December 31, 1997), 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., and Work
Recovery, Inc.
REPORT OF AUDIT COMMITTEE
The Audit Committee members are Richard J. DePiano, Jay L. Federman and James
Lee Stafford. The Audit Committee assists the Board of Directors in monitoring
the integrity of the Company's financial statements, the Company's compliance
with legal requirements and the Company's external auditors. All Audit Committee
Members are independent of the Company within the meaning of Rule 4200(a)(14) of
the National Association of Securities Dealers, Inc. listing standards. The
Audit Committee is governed by a written Charter, a copy of which is attached as
Exhibit A to this Proxy Statement.
The Audit Committee has reviewed and discussed the Company's audited
consolidated balance sheets as of December 31, 2000 and January 2, 2000 and
consolidated statements of income, cash flows and stockholders' equity for the
three years ended December 31, 2000 with the Company's management. The Audit
Committee has discussed with Grant Thornton LLP, the Company's independent
accountants, the matters required to be discussed by Statement of Auditing
Standards No. 61 (concerning the accounting methods used in financial
statements).
The Audit Committee has also received and reviewed written disclosures and a
letter from Grant Thornton LLP required by Independence Standards Board Standard
No.1 (concerning matters that may affect an auditor's independence) and has
discussed with Grant Thornton LLP their independence. Based on the foregoing
review and discussions, the Audit Committee recommended to the Board of
Directors that the audited financial statements be included in the Company's
Annual Report on Form 10-K for the year ended December 31, 2000 for filing with
the Securities and Exchange Commission.
This report of the Audit committee shall not be deemed proxy solicitation
material and shall not be deemed incorporated by reference by any general
statement incorporating by reference this proxy statement into any filing under
the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934,
as amended, except to the extent the Company specifically incorporates this
report by reference, and shall not otherwise be deemed filed under such acts.
Submitted by the Audit Committee
Richard J. DePiano Jay L. Federman James Lee Stafford
RATIFICATION OF APPOINTMENT OF INDEPENDENT ACCOUNTANTS
The Board of Directors has selected Grant Thornton LLP, independent accountants,
to audit the financial statements of the Company for the fiscal year ending
December 30, 2001. 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 Grant Thornton LLP. The shares represented
by the enclosed proxy will be voted as directed. If no choice is specified in
the proxy, the shares represented by the enclosed proxy will be voted "FOR" the
selection of Grant Thornton LLP, as the Company's independent accountants. 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.
On June 12, 2000, at the recommendation of the Audit Committee and with the
approval of the Executive Committee, the Company removed Arthur Andersen LLP
("AA") as its independent accounting firm and appointed Grant Thornton LLP
("Grant Thornton") to replace AA. Accordingly, Grant Thornton examined the
financial statements of the Company and its subsidiaries for the fiscal year
ending December 31, 2000.
AA's audit reports on the Company's financial statements for the fiscal years
ended January 2, 2000 and January 3, 1999 contained no adverse opinion or
disclaimer of opinion, nor were they qualified or modified as to uncertainties,
audit scope or accounting principles.
There were no disagreements between the Company and AA on any matter of
accounting principles or practices, financial statement disclosure, or auditing
scope or procedure, which disagreements, if not resolved to the satisfaction of
AA, would have caused them to make reference thereto in their reports on the
Company's financial statements for the fiscal years ended January 2, 2000 and
January 3, 1999. Representatives of Grant Thornton 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. In addition to audit services, Grant Thornton also provided certain
non-audit services to the Company in 2000. The Audit Committee has considered
whether the provision of these additional services is compatible with
maintaining the independence of Grant Thornton. The following table sets forth
the fees incurred by the Company for the services of Grant Thornton in
connection with its audit of the Company's financials statements for the fiscal
year ended December 31, 2000, and for all other services of Grant Thornton in
2000.
Financial Information Systems
Audit Fees Design and Implementation Fees All Other Fees
---------- ------------------------------ --------------
$35,425 - $32,292 *
--------
* Consisted primarily of fees in connection with the December 31, 1998 audit
related to the acquisition of SIS.
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 14, 2001
SURGICAL LASER TECHNOLOGIES, INC.
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS JULY 17, 2001
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby constitutes and appoints Michael R. Stewart 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 17, 2001, at 9:00 a.m., local time, and at any adjournment thereof as
follows:
(Continued and to be signed on other side)
[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 all nominees James Lee Stafford
to the contrary listed at right Michael R. Stewart
[ ] [ ]
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 Grant Thornton LLP as the [ ] [ ] [ ]
Company's independent accountants
for the fiscal year ending
December 30, 2001.
The Board of Directors recommends a vote FOR the election of the nominees
listed and FOR the proposal to ratify the appointment of Grant Thornton LLP
as the Company's independent accountants.
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 the proposal
to notify the appointment of Grant Thornton LLP as the Company's independent
accountants.
PLEASE, MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED
PRE-PAID ENVELOPE.
SIGNATURE__________________________ DATE_________________________
___________________________________ DATE_________________________, 2001
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.
Exhibit A
SURGICAL LASER TECHNOLOGIES, INC.
AUDIT COMMITTEE CHARTER
PURPOSE
The primary purpose of the Audit Committee (the "Committee") is to assist the
Board of Directors (the "Board") in fulfilling its responsibility to oversee
management's conduct of the Company's financial reporting process, including by
overviewing the financial reports and other financial information provided by
the Company to any governmental or regulatory body, the public or other users
thereof, the Company's systems of internal accounting and financial controls,
and the annual independent audit of the Company's financial statements.
In discharging its oversight role, the Committee is empowered to investigate any
matter brought to its attention with full access to all books, records,
facilities and personnel of the Company and to retain outside counsel, auditors
or other experts to advise the Committee. The Board and the Committee are in
place to represent the Company's stockholders; accordingly, the outside auditors
are ultimately accountable to the Board and the Committee.
The Committee shall review the adequacy of this Charter on an annual basis and
recommend any proposed changes to the Board.
MEMBERSHIP
The Committee shall be comprised of not fewer than three members of the Board,
and the Committee's composition shall satisfy the requirements of the Audit
Committee Policy of The Nasdaq Stock Market. Accordingly, all of the members
shall be directors:
who have no relationship to the Company that may interfere with the
exercise of their independence from management and the Company; and
who are financially literate or who become financially literate within
a reasonable period of time after appointment to the Committee.
In addition, at least one member of the Committee shall have accounting or
related financial management expertise.
KEY RESPONSIBILITIES
The Committee's job is one of oversight, and the Committee recognizes that the
Company's management is responsible for preparing the Company's financial
statements and that the outside auditors are responsible for auditing those
financial statements. Additionally, the Committee recognizes that financial
management, as well as the outside auditors, have more time, more knowledge and
more detailed information regarding the Company than do Committee members;
consequently, in carrying out its oversight responsibilities, the Committee
shall not be deemed to provide any expert or special assurance as to the
Company's financial statements or any professional certification as to the
outside auditors' work.
The following functions shall be the common recurring activities of the
Committee in carrying out its oversight function. These functions are set forth
as a guide, with the understanding that the Committee may diverge from this
guide as it deems appropriate given the circumstances.
The Committee shall review with management and the outside auditors
the audited financial statements to be included in the Company's
Annual Report on Form 10-K (or the Annual Report to Shareholders if
distributed prior to the filing of the Form 10-K) and shall review and
consider with the outside auditors the matters required to be
discussed by Statement of Auditing Standards No. 61 ("SAS No. 61").
As a whole, or through the Committee chair, the Committee shall review
with the outside auditors the Company's interim financial results to
be included in the Company's Quarterly Reports on Form 10-Q and the
matters required to be discussed by SAS No. 61.
The Committee shall discuss with management and the outside auditors
the quality and adequacy of the Company's internal controls.
The Committee shall:
request from the outside auditors annually a formal written
statement delineating all relationships between the auditors and
the Company consistent with Independence Standards Board Standard
No. 1;
discuss with the outside auditors any such disclosed relationship
and their impact on the outside auditor's independence; and
recommend that the Board take appropriate action to oversee the
independence of the outside auditor.
The Committee, subject to any action that may be taken by the full
Board, shall have the ultimate authority and responsibility to select
(or nominate for stockholder approval), evaluate and, where
appropriate, replace the outside auditors.
Adopted by the Board of Directors on May 25, 2000