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ESCALON MEDICAL CORP.
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[ESCALON(R) LOGO] Escalon Medical Corp.
575 East Swedesford Road, Suite 100
Wayne, PA 19087
Tel.610-688-6830 - Fax. 610-688-3641
--------------------------------------------------------------------------------
NOTICE OF 2004 ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD DECEMBER 1, 2004
To the Shareholders of Escalon Medical Corp.:
The annual meeting of shareholders of Escalon Medical Corp. will be held at
10:00 a.m., local time, on December 1, 2004, at the offices of Duane Morris LLP,
One Liberty Place, 1650 Market Street, 42nd Floor, Philadelphia, Pennsylvania at
9:00 a.m., local time. At our annual meeting, our shareholders will act on the
following matters:
1. Election of two Class II directors, each for a term of three years and
until their respective successors have been elected;
2. To consider a proposal to approve the Escalon Medical Corp. 2004 Equity
Incentive Plan; and
3. Any other matters that properly come before our annual meeting.
All shareholders of record as of the close of business on September 30,
2004 are entitled to vote at our annual meeting.
Our 2004 Annual Report is being mailed to shareholders together with this
Notice.
It is important that your shares be voted at our annual meeting. Please
complete, sign and return the enclosed proxy card in the envelope provided
whether or not you expect to attend our annual meeting in person.
By Order of the Board of Directors,
(-s- Richard J. DePiano)
Richard J. DePiano
Chairman and Chief Executive Officer
October 26, 2004
Wayne, Pennsylvania
ESCALON MEDICAL CORP.
PROXY STATEMENT
This proxy statement contains information relating to the annual meeting of
shareholders of Escalon Medical Corp. to be held on December 1, 2004, at the
offices of Duane Morris LLP, One Liberty Place, 1650 Market Street, 42nd Floor,
Philadelphia, Pennsylvania at 9:00 a.m., local time, and at any adjournment,
postponement or continuation of the annual meeting. This proxy statement and the
accompanying proxy are first being mailed to shareholders on or about October
26, 2004. Unless the context indicates otherwise, all references in this proxy
statement to "we," "us," "our" "Escalon" or the "Company" mean Escalon Medical
Corp. and its subsidiaries.
CONTENTS
PAGE
----
ABOUT OUR ANNUAL MEETING.................................... 1
What is the purpose of our annual meeting?................ 1
VOTING...................................................... 1
Who is entitled to vote at our meeting?................... 1
What are the voting rights of our shareholders?........... 1
Who can attend our annual meeting?........................ 1
What constitutes a quorum?................................ 1
How do I vote?............................................ 1
May I change my vote after I return my proxy card?........ 1
What are our Board's recommendations?..................... 2
What vote is required to approve each matter?............. 2
Who will pay the costs of soliciting proxies on behalf of
our Board of Directors?................................ 2
STOCK OWNERSHIP............................................. 3
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE..... 3
ELECTION OF DIRECTORS....................................... 3
ITEM 1 -- ELECTION OF CLASS II DIRECTORS.................... 3
INTRODUCTION................................................ 3
Governance and Nominating Procedures...................... 4
Actions Taken By Our Governance and Nominating
Committee.............................................. 4
Candidates for Election................................... 4
Directors Continuing in Office............................ 5
CORPORATE GOVERNANCE........................................ 6
Our Board of Directors and Its Committees................. 6
Director -- Shareholder Communication..................... 7
COMPENSATION OF DIRECTORS................................... 7
EXECUTIVE OFFICERS OF THE COMPANY........................... 8
EXECUTIVE COMPENSATION...................................... 8
Summary Compensation Table................................ 8
Options Grants in Last Fiscal Year........................ 9
Options Exercised in the Last Fiscal Year & Values For
Fiscal Year 2004....................................... 9
Employment Agreement...................................... 9
i
PAGE
----
AUDIT AND NON-AUDIT FEES.................................... 9
Report of the Audit Committee............................. 10
ITEM 2 -- ADOPTION OF THE ESCALON MEDICAL CORP. 2004 EQUITY
INCENTIVE PLAN............................................ 11
Introduction.............................................. 11
Shares Available for Issuance............................. 11
Administration and Eligibility............................ 12
Awards.................................................... 12
Amendment of the 2004 Plan................................ 13
Termination of the 2004 Plan.............................. 13
Committee's Right to Modify Awards........................ 13
Acceleration of Vesting or Lapsing of Restrictions........ 14
Adjustments............................................... 14
Substitution and Assumption of Awards..................... 14
Reusage................................................... 14
Federal Income Tax Consequences........................... 15
Million Dollar Deduction Limit............................ 16
Miscellaneous............................................. 16
Approval by Shareholders.................................. 16
Recommendation of the Board............................... 16
EQUITY COMPENSATION PLAN INFORMATION........................ 16
SHAREHOLDER PROPOSALS....................................... 16
OTHER MATTERS............................................... 17
APPENDICES:
A - AUDIT COMMITTEE CHARTER................................. A-1
B - GOVERNANCE AND NOMINATING COMMITTEE CHARTER............. B-1
C - COMPENSATION COMMITTEE CHARTER.......................... C-1
ii
ABOUT OUR ANNUAL MEETING
WHAT IS THE PURPOSE OF OUR ANNUAL MEETING?
At our annual meeting, shareholders will act upon the matters outlined in
the notice of meeting on the cover page of this proxy statement, including the
election of two Class II directors and the approval of Escalon Medical Corp.
2004 Equity Incentive Plan (the "2004 Plan"). In addition, our management will
report on our performance during 2004 and respond to appropriate questions from
shareholders.
VOTING
WHO IS ENTITLED TO VOTE AT OUR MEETING?
Holders of common stock of record at the close of business on the record
date, September 30, 2004, are entitled to receive notice of and to vote at our
annual meeting, and any adjournment, postponement or continuation of our annual
meeting.
WHAT ARE THE VOTING RIGHTS OF OUR SHAREHOLDERS?
As of the record date, 5,915,008 shares of common stock were outstanding,
each of which is entitled to one vote with respect to each matter to be voted on
at our annual meeting.
WHO CAN ATTEND OUR ANNUAL MEETING?
All shareholders as of the record date, or their duly appointed proxies,
may attend our annual meeting. Even if you currently plan to attend our annual
meeting, we recommend that you also submit your proxy as described below so that
your vote will be counted if you later decide not to attend our annual meeting.
If you hold your shares in "street name" (that is, through a broker or
other nominee), you will need to bring a copy of a brokerage statement
reflecting your stock ownership as of the record date and check in at the
registration desk at our annual meeting.
WHAT CONSTITUTES A QUORUM?
The presence at our annual meeting, in person or by proxy, of the holders
of a majority of the shares of our common stock outstanding on the record date
will constitute a quorum, permitting the conduct of business at our annual
meeting. Proxies received but marked as abstentions and broker non-votes will be
included in the calculation of the number of shares present at our annual
meeting.
HOW DO I VOTE?
If you or your duly authorized attorney-in-fact complete, properly sign and
return the accompanying proxy card to us, it will be voted as you direct. If you
are a registered shareholder and attend our annual meeting, you may deliver your
completed proxy card in person. "Street name" shareholders who wish to vote at
our annual meeting will need to obtain a signed proxy from the institution that
holds their shares.
MAY I CHANGE MY VOTE AFTER I RETURN MY PROXY CARD?
Yes. Even after you have submitted your proxy, you may change your vote at
any time before the proxy is exercised by filing with our Secretary either a
notice of revocation or a duly executed proxy bearing a later date. The powers
of the proxy holders will be revoked if you attend our annual meeting in person
and request that your proxy be revoked, although attendance at our annual
meeting will not by itself revoke a previously granted proxy.
1
WHAT ARE OUR BOARD'S RECOMMENDATIONS?
Unless you give other instructions on your proxy card, the persons named as
proxy holders on the proxy card will vote in accordance with the recommendations
of our Board of Directors. Our Board of Directors recommends a vote:
- FOR election of the nominated Class II directors (see pages 3 through 6),
and
- FOR the approval of the 2004 Plan (see pages 11 through 16).
WHAT VOTE IS REQUIRED TO APPROVE EACH MATTER?
Election of Class II Directors. The two persons receiving the highest
number of "FOR" votes cast by the holders of our common stock for election as
Class II directors will be elected. A properly executed proxy marked "WITHHOLD
AUTHORITY" with respect to the election of one or more directors will not be
voted with respect to the director or directors indicated, although the proxy
will be counted for purposes of determining whether a quorum is present.
Abstentions and shares held by brokers or nominees as to which voting
instructions have not been received from the beneficial owner of or persons
otherwise entitled to vote the shares and as to which the broker or nominee does
not have discretionary voting power, i.e., broker non-votes, will not be taken
into account in determining the outcome of the election. We do not permit
cumulative voting in the election of directors.
Approval of the 2004 Plan. The affirmative vote of a majority of the votes
cast on the proposal will be required to approve the 2004 Plan. Abstentions and
broker non-votes do not constitute votes cast and therefore will not effect the
outcome of the vote.
Other Matters. The affirmative vote of a majority of the votes cast by the
holders of our common stock on the proposal will be required to approve any
other matters that properly come before our annual meeting. Abstentions and
broker non-votes do not constitute votes cast and therefore will not effect the
outcome of the vote.
If you sign your proxy card or broker voting instruction card with no
further instructions, your shares will be voted in accordance with the
recommendations of our Board, i.e., FOR the election of our nominees for Class
II directors and FOR the approval of the 2004 Plan.
WHO WILL PAY THE COSTS OF SOLICITING PROXIES ON BEHALF OF OUR BOARD OF
DIRECTORS?
We are making this solicitation and will pay the cost of soliciting proxies
on behalf of our Board of Directors, including expenses of preparing and mailing
this proxy statement. In addition to mailing these proxy materials, the
solicitation of proxies or votes may be made in person or by telephone or
telegram by our regular officers and employees, none of whom will receive
special compensation for such services. Upon request, we will also reimburse
brokers, nominees, fiduciaries and custodians and persons holding shares in
their names or in the names of nominees for their reasonable expenses in sending
proxies and proxy material to beneficial owners.
2
STOCK OWNERSHIP
The following table shows the amount and percentage of our outstanding
common stock beneficially owned by each director, each nominee for director,
each executive officer named in the Summary Compensation Table and all of our
executive officers and directors as a group as of September 30, 2004. We do not
believe that any one person or group beneficially owns more than 5% of our
outstanding common stock.
BENEFICIAL OWNERSHIP TABLE
AMOUNT
OF
AMOUNT OF BENEFICIAL AMOUNT
BENEFICIAL OWNERSHIP OF
OWNERSHIP OF OF SHARES AGGREGATE AGGREGATE
NAME AND ADDRESS OUTSTANDING PERCENT UNDERLYING BENEFICIAL PERCENT
OF BENEFICIAL OWNER SHARES(1) OF CLASS OPTIONS OWNERSHIP OF CLASS
------------------- ------------ -------- ---------- ---------- ---------
Richard J. DePiano......................... 31,778 0.6% 262,522 294,300 4.2%
Harry M. Rimmer............................ 3,000 0.1% 42,583 45,583 0.7%
Jay L. Federman, M.D. ..................... 12,072 0.2% 25,000 37,072 0.4%
Jeffrey F. O'Donnell....................... -- 0.0% 30,000 30,000 0.5%
William L.G. Kwan.......................... -- 0.0% 30,000 30,000 0.5%
Anthony J. Coppola......................... -- 0.0% 5,000 5,000 *
Lisa A. Napolitano......................... -- 0.0% 2,000 2,000 *
All directors and executive officers as a
group (7 persons)........................ 46,850 1.0% 397,105 443,955 6.3%
---------------
* Less than .1%
(1) Information furnished by each individual named. This table includes shares
that are owned jointly, in whole or in part with the person's spouse, or
individually by his or her spouse.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 (the "Exchange Act")
requires that our officers and directors, as well as persons who own 10% or more
of a class of our equity securities, file reports of their ownership of our
securities, as well as statements of changes in such ownership, with us and the
Securities and Exchange Commission (the "SEC"). Based upon written
representations received by us from our officers, directors and 10% or greater
shareholders, and our review of the statements of beneficial ownership changes
filed with us by our officers, directors and 10% or greater shareholders during
2004, the following officers and directors filed a late report on Form 4
relating to annual stock awards received in August 2004 due to an administrative
oversight by the Company: Anthony J. Coppola, Richard J. DePiano, Jay L.
Federman, M.D., William L.G. Kwan, Lisa A. Napolitano, Jeffrey F. O'Donnell and
Harry M. Rimmer.
ELECTION OF DIRECTORS
ITEM 1 - ELECTION OF CLASS II DIRECTORS
INTRODUCTION
The election of our directors by our shareholders is governed by the
Pennsylvania Business Corporation Law and our Bylaws. The following discussion
summarizes these provisions and describes the process our Governance and
Nominating Committee will follow in connection with the nomination of candidates
for election as directors by the holders of our common stock.
3
GOVERNANCE AND NOMINATING PROCEDURES
Our Governance and Nominating Committee is responsible for recommending to
the Board of Directors candidates to stand for election to the Board of
Directors at the annual meeting. Our Governance and Nominating Committee will
also consider director candidates recommended by shareholders in accordance with
the advance notice procedures in Section 2.3 of our Bylaws. These procedures are
described under "Shareholder Proposals" in this proxy statement. The Governance
and Nominating Committee may also consider director candidates proposed by our
management. We have not utilized third-party executive search firms to identify
candidates for director.
With the exception of applicable rules of the SEC and the Nasdaq Stock
Market(SM) ("Nasdaq"), our Governance and Nominating Committee does not have any
specific, minimum qualifications for candidates for election to our Board of
Directors, and our Governance and Nominating Committee may take into account
such factors as it deems appropriate. Our Governance and Nominating Committee
examines the specific attributes of candidates for election to our Board of
Directors and also considers the judgment, skill, diversity, business
experience, the interplay of the candidate's experience with the experience of
the other members of our Board of Directors and the extent to which the
candidate would contribute to the overall effectiveness of our Board of
Directors.
Our Governance and Nominating Committee will utilize the following process
in identifying and evaluating candidates for election as members of our Board of
Directors:
- Evaluation of the performance and qualifications of the members of our
Board of Directors whose term of office will expire at the forthcoming
annual meeting of shareholders and determination of whether they should
be nominated for re-election.
- Consideration of the suitability of the candidates for election,
including incumbent directors.
- Review of the qualifications of any candidates proposed by shareholders
in accordance with our Bylaws, candidates proposed by management and
candidates proposed by individual members of our Board of Directors.
- After such review and consideration, our Governance and Nominating
Committee meets and proposes to the Board of Directors a slate of
candidates for election at the forthcoming annual meeting of
shareholders.
ACTIONS TAKEN BY OUR GOVERNANCE AND NOMINATING COMMITTEE
Our Governance and Nominating Committee did not meet this year, and our
entire Board of Directors performed the functions of the Governance and
Nominating Committee. The Board of Directors met on August 17, 2004 for the
purpose of nominating candidates for election as directors by our shareholders
at our 2004 annual meeting of shareholders, and nominated the persons described
below. On August 17, 2004, our Board of Directors approved the persons named
below.
CANDIDATES FOR ELECTION
Our Board of Directors currently consists of six members, four of whom are
considered independent for purposes of the applicable Nasdaq rules. The current
independent directors are Anthony J. Coppola, Jay L. Federman M.D., Lisa A.
Napolitano and William L. G. Kwan. Each director is elected for a three-year
term and until his successor has been duly elected. The current three-year terms
of our directors expire in the years 2004, 2005 and 2006, respectively.
Two Class II directors are to be elected at our annual meeting. Unless
otherwise instructed, the proxies solicited by our Board of Directors will be
voted for the election of the nominees named below. The two Class II nominees
are currently directors.
If any of the nominees becomes unavailable for any reason, the proxies
intend to vote for a substitute nominee designated by our Board of Directors.
Our Board of Directors has no reason to believe the nominees
4
named will be unable to serve if elected. Any vacancy occurring on our Board of
Directors for any reason may be filled by a majority of our directors then in
office until the expiration of the term of the class of directors in which the
vacancy exists.
OUR BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF THE NOMINEES NAMED
BELOW.
The names of the nominees for Class II directors and the Class I directors
and Class III directors who will continue in office after our annual meeting
until the expiration of their respective terms, together with certain
information regarding them, are as follows:
NOMINEES FOR
CLASS II DIRECTORS
------------------ DIRECTOR YEAR TERM PRINCIPAL OCCUPATIONS DURING PAST FIVE
NAME OF DIRECTOR SINCE WILL EXPIRE AGE YEARS AND CERTAIN DIRECTORSHIPS
---------------- -------- ----------- --- --------------------------------------
Lisa A. Napolitano...... 2003 2007* 41 Tax Manager, Global Tax Management, Inc., a
provider of compliance support services for
both federal and state taxes, since 1998.
Jeffrey F. O'Donnell.... 1999 2007* 43 Mr. O'Donnell joined PhotoMedex in 1999 as
President and CEO and has served as a
member of the Board of Directors since that
date. Prior to PhotoMedex, he joined
Radiance Medical Systems (originally
Cardiovascular Dynamics) as VP of Sales and
Marketing from 1995 to 1997 and then from
1997 to 1999 served as its President and
CEO and subsequently assumed a role as
non-executive chairman of the board.
Previously, from 1994 to 1995 Mr. O'Donnell
held the position of President and CEO of
Kensey Nash Corporation. Additionally, he
has held several senior sales and marketing
management positions at Boston Scientific,
Guidant and Johnson & Johnson Orthopedic.
In addition to sitting on the Board of
Directors for PhotoMedex, Mr. O'Donnell is
currently an outside Board Member of
Endologix, Inc., Cardiac Science, Inc. and
Replication Medical, Inc.
---------------
* If elected at the Annual Meeting.
DIRECTORS CONTINUING IN OFFICE
NAME OF DIRECTOR DIRECTOR YEAR TERM PRINCIPAL OCCUPATIONS DURING PAST FIVE
CLASS III SINCE WILL EXPIRE AGE YEARS AND CERTAIN DIRECTORSHIPS
---------------- -------- ----------- --- --------------------------------------
Richard J. DePiano.... 1996 2005 63 Chairman and CEO of Escalon Medical Corp.
since March 1997. CEO of the Sandhurst
Company, L.P. and Managing Director of the
Sandhurst Venture Fund since 1986; Chairman
of the Board of Directors of PhotoMedex,
Inc.
5
NAME OF DIRECTOR DIRECTOR YEAR TERM PRINCIPAL OCCUPATIONS DURING PAST FIVE
CLASS III SINCE WILL EXPIRE AGE YEARS AND CERTAIN DIRECTORSHIPS
---------------- -------- ----------- --- --------------------------------------
Jay L. Federman, 1996 2005 65 Chief of the Division of Ophthalmology at
M.D................. the Medical College of Pennsylvania and
Drexel University School of Medicine and
Co-Director of the Retina Service at Wills
Eye Hospital in Philadelphia, Chairman of
the Board of Directors, of Escalon Medical
Corp. from February 1996 to March 1997.
NAME OF DIRECTOR DIRECTOR YEAR TERM PRINCIPAL OCCUPATIONS DURING PAST FIVE
CLASS I SINCE WILL EXPIRE AGE YEARS AND CERTAIN DIRECTORSHIPS
---------------- -------- ----------- --- --------------------------------------
William L.G. Kwan..... 1999 2006 63 Retired; Vice President of Business
Development of Alcon Laboratories, Inc. a
medical products company, from October 1996
to 1999, and Vice President of International
Surgical Instruments from November 1989 to
October 1999
Anthony J. Coppola.... 2000 2006 66 Principal and operator of The Historic Town
of Smithville, Inc., a real estate and
commercial property company from 1988 to
present; Retired Division President of SKF
Industries, a manufacturing company, from
1963 to 1986
CORPORATE GOVERNANCE
The SEC and Nasdaq have adopted new regulations and listing requirements
that relate to our corporate governance. Our Board of Directors has adopted new
standards and practices in order to comply with those regulations that apply to
us. The Company has adopted a Code of Ethics, which can be accessed on the
Company's web site at www.escalonmed.com. Our independent directors will meet at
regularly scheduled meetings at which only independent directors are present.
OUR BOARD OF DIRECTORS AND ITS COMMITTEES
Our Board of Directors met seven times in 2004. Our Board of Directors has
an Executive Committee, an Audit Committee, a Governance and Nominating
Committee and a Compensation Committee.
AUDIT COMMITTEE
Our Audit Committee consists of Anthony J. Coppola, William L.G. Kwan and
Lisa A. Napolitano. The Committee met four times in 2003. Each member of the
Audit Committee is independent within the meaning of the rules of Nasdaq and of
the SEC. Consistent with the Sarbanes-Oxley Act of 2002 ("Sarbanes-Oxley"), the
Audit Committee has responsibility for:
- the selection of our independent public accountants;
- reviewing the scope and results of the audit;
- reviewing related-party transactions; and
- reviewing the adequacy of our accounting, financial, internal and
operating controls.
Our Audit Committee operates pursuant to a written charter, the full text
of which is included as Appendix A to this proxy statement.
6
GOVERNANCE AND NOMINATING COMMITTEE
Our Governance and Nominating Committee consists of Anthony J. Coppola,
Lisa A. Napolitano and Jay L. Federman, M.D. Each member of the Governance and
Nominating Committee is independent within the meaning of the rules of Nasdaq
and of the SEC. Our Governance and Nominating Committee has responsibility for:
- developing and recommending to the Board corporate governance guidelines,
establishing procedures to ensure effective functioning of the board;
- reviewing of director compensation;
- identifying of individuals believed to be qualified to become members of
our Board of Directors and to recommend to our Board of Directors
nominees to stand for election as directors; and
- identifying of members of our Board of Directors qualified to serve on
the various committees of our Board of Directors.
Our Governance and Nominating Committee operates pursuant to a written
charter, the full text of which is included as Appendix B to this proxy
statement.
COMPENSATION COMMITTEE
Our Compensation Committee consists of Anthony J. Coppola and Jay L.
Federman, M.D. and the Committee met two times in 2004. Each member of the
Compensation Committee is independent within the meaning of the rules of Nasdaq
and of the SEC. Our Compensation Committee has responsibility for:
- the annual review and determination of the compensation of our executive
officers;
- providing annual compensation recommendations to our Board of Directors
for all of our officers;
- determining the employees who participate in our equity incentive plans
and the provision of recommendations to our Board of Directors as to
individual stock option grants and other awards; and
- the general oversight of our employee benefit plans.
Our Compensation Committee operates pursuant to a written charter, the full
text of which is included as Appendix C to this proxy statement.
DIRECTOR -- SHAREHOLDER COMMUNICATIONS
Our shareholders may communicate with our Board of Directors through our
Secretary. Shareholders who wish to communicate with any of our directors may do
so by sending their communication in writing addressed to a particular director,
or in the alternative, to "Non-management Directors" as a group, in care of our
Secretary at our headquarters, 575 East Swedesford Road, Suite 100, Wayne, PA
19087. All such communications that are received by our Secretary will be
promptly forwarded to the addressee or addressees set forth in the
communication.
We actively encourage our directors to attend our annual meetings of
shareholders because we believe director attendance at our annual meetings
provides our shareholders with an opportunity to communicate with the members of
our Board of Directors. All of our directors, with the exception of Mr. Kwan,
attended our annual meeting of shareholders in 2003 and intend to be in
attendance at the 2004 annual meeting.
COMPENSATION OF DIRECTORS
None of the Company's directors were paid any directors fees by the Company
during the fiscal year ended June 30, 2004. On August 17, 2004, each
non-employee director was issued stock options to purchase 10,000 shares of the
Company's common stock. The exercise price for each of these options was $6.185
per share. Each option expires ten years after the date of grant and is
exercisable in full on the grant date. In addition, directors are reimbursed for
expenses incurred in connection with attending meetings.
7
EXECUTIVE OFFICERS OF THE COMPANY
NAME AGE POSITION
---- --- --------
Richard J. DePiano.................... 63 Chairman and Chief Executive Officer
Harry M. Rimmer....................... 57 Senior Vice President, Finance,
Secretary and Treasurer
Mr. DePiano has been a director of the Company since February 1996 and has
served as Chairman and Chief Executive Officer of the Company since March 1997.
Mr. DePiano has been the Chief Executive Officer of the Sandhurst Company, L.P.
and Managing Director of the Sandhurst Venture Fund since 1986. Mr. DePiano also
serves Chairman of the Board of Directors of PhotoMedex, Inc.
Mr. Rimmer was appointed Vice President, Corporate Development of the
Company in March 2000. In August 2000 his role was expanded to include Vice
President, Finance and Secretary. In August 2001 he became Senior Vice
President, Finance, Secretary and Treasurer. From 1996 until 1999 Mr. Rimmer
served as the Finance Director for Irving Tissue, Inc., a manufacturing and
marketing company based in Philadelphia. In 1995 Mr. Rimmer was the Finance
Officer for a division of Scott Paper, and for the first eight months of 1996
Mr. Rimmer was employed by the Kimberly Clark organization in connection with
the divestiture of a business unit.
EXECUTIVE COMPENSATION
The following table shows the compensation paid during each of the three
fiscal years ended June 30, 2004 for services rendered in all capacities to our
Chief Executive Officer and our other most highly compensated executive officer
whose compensation exceeded $100,000 in the fiscal year ended June 30, 2004.
SUMMARY COMPENSATION TABLE
LONG-TERM
COMPENSATION AWARDS
-------------------------
ANNUAL COMPENSATION SECURITIES
-------------------------- OTHER ANNUAL UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION OPTIONS COMPENSATION(1)
--------------------------- ---- -------- -------- ------------ ---------- ---------------
Richard J. DePiano.................. 2004 $261,375 $200,000 $ -- 25,000 $33,148.00
Chairman and Chief 2003 $256,250 $169,000 $ -- 50,000 $19,600.00
Executive Officer 2002 $250,000 $ 93,000 $ -- 50,000 $36,324.00
Harry M. Rimmer..................... 2004 $125,460 $ 75,000 $ -- 20,000 $ 7,200.00
Senior Vice President 2003 $123,000 $ 50,000 $ -- 25,000 $ 3,600.00
Finance, Secretary and 2002 $120,000 $ 15,000 $ -- 25,000 $ 0.00
Treasurer
---------------
(1) Includes payment by the Company of (i) in the case of Mr. DePiano, (a) an
automobile allowance and (b) insurance premiums paid for life insurance; and
(ii) in the case of Mr. Rimmer, an automobile allowance.
8
During 2004, we granted the following stock options to the persons named in
the Summary Compensation Table:
OPTION GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS
--------------------------------------------------
% OF TOTAL
NUMBER OF OPTIONS
SECURITIES GRANTED TO
UNDERLYING EMPLOYEES EXERCISE
OPTIONS IN FISCAL PRICE EXPIRATION
NAME GRANTED YEAR (PER SHARE) DATE
---- ---------- ---------- ----------- ----------
Richard J. DePiano...................... 25,000 21.99% $6.94 11/11/2013
Harry M. Rimmer......................... 20,000 17.59% $6.94 11/11/2013
---------------
(1) These options were granted under the Company's 1999 Equity Incentive Plan
and have a term of ten years, subject to earlier termination in certain
events. See "Employment Agreement." The options of Mr. Rimmer vest monthly
over a five-year period. The options of Mr. DePiano vest monthly over a two-
year period.
The following table shows information with respect to options exercised
during the year ended June 30, 2004 and held on June 30, 2004 by the persons
named in the Summary Compensation Table and the status of their options at June
30, 2004.
OPTIONS EXERCISED IN THE LAST FISCAL YEAR AND VALUES AT FISCAL YEAR END 2004
VALUE OF UNEXERCISED
NUMBER OF UNEXERCISED IN-THE-MONEY OPTIONS
SHARES OPTIONS AT JUNE 30, 2004 AT JUNE 30, 2004
ACQUIRED ON VALUE --------------------------- ---------------------------
NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ---------- ----------- ------------- ----------- -------------
Richard J. DePiano... 235,603 $2,593,919 262,522 21,875 $1,897,526 $ 83,031
Harry M. Rimmer...... 32,000 $ 299,750 42,583 60,417 $ 258,103 $364,855
No awards were made to any named executive officer during such fiscal year
under any long-term incentive plan. The Company does not sponsor any defined
benefit or actuarial plans at this time.
EMPLOYMENT AGREEMENT
On May 12, 1998, the Company entered into an employment agreement with
Richard J. DePiano as the Chairman and Chief Executive Officer of the Company.
The initial term of the employment agreement commenced on May 12, 1998 and
continued through June 30, 2001. The employment agreement renews on July 1 of
each year for successive terms of three years unless either party notifies the
other party at least 30 days prior to such date of the notifying party's
determination not to renew the agreement. The current base salary provided under
the agreement, as adjusted for yearly cost of living adjustments, is $261,375
per year, and the agreement provides for additional incentive compensation in
the form of a cash bonus to be paid by the Company to Mr. DePiano at the
discretion of the Board of Directors. The agreement also provides for health and
long-term disability insurance and other fringe benefits as well as an
automobile allowance of $800 per month.
AUDIT AND NON-AUDIT FEES
Our Audit Committee approves the fees and other significant compensation to
be paid to our independent public accountants for the purpose of preparing or
issuing an audit report or related work. We provide appropriate funding, as
determined by our Audit Committee, for payment of fees and other significant
compensation to our independent public accountants. Our Audit Committee also
preapproves all auditing services and permitted non-audit services, including
the fees and terms thereof, to be performed for us by our independent public
accountants, subject to the de minimis exceptions for non-audit services
described in the
9
Exchange Act. The Audit Committee does not delegate its responsibilities to
pre-approve services performed by the independent public auditors to management,
but may delegate pre-approval authority to one or more of its members. The
member or members to whom such authority is delegated is required to report any
pre-approval decisions to the Audit Committee at its next scheduled meeting.
Our Audit Committee reviewed and discussed with its independent public
accountants, Parente Randolph, LLC ("Parente Randolph"), the following fees for
services rendered for the 2004 fiscal year and considered the compatibility of
non-audit services with Parente Randolph's independence.
Audit Fees. Parente Randolph, our independent public accountants, billed
us $78,772 and $64,575 in total for the fiscal years ended June 30, 2004 and
2003, respectively, in connection with (i) the audit of our annual consolidated
financial statements for the fiscal years ended June 30, 2004 and 2003, and (ii)
the reviews of our consolidated financial statements included in our Form 10-Q
quarterly reports.
Audit-Related Fees. We did not pay any audit-related fees to Parente
Randolph during 2004 or 2003.
Tax Fees. The aggregate fees billed by Parente Randolph for tax services
were $5,000 and $10,750 during the fiscal years ended June 30, 2004 and 2003.
All Other Fees. The total fees billed by Parente Randolph for all other
services were $6,000 during the fiscal year ended June 30, 2004 for services
relating to our Form S-3 during the fiscal year. No fees were billed by Parente
Randolph for all other services for the fiscal year ended June 30, 2003.
REPORT OF THE AUDIT COMMITTEE
The following report of our Audit Committee shall not be deemed proxy
solicitation material, and shall not be deemed filed with the SEC or
incorporated by reference into any of our filings under the Exchange Act or the
Securities Act of 1933.
The Audit Committee of our Board of Directors was established in accordance
with Section 3(a)(58)(A) of the Exchange Act and reviews the financial reporting
process, including the overview of our financial reports and other financial
information we provide to governmental or regulatory bodies, the public and
others who rely thereon, our systems of internal accounting and financial
controls, the selection, evaluation and retention of our independent public
accountants and the annual independent audit of our financial statements. Each
of our Audit Committee members satisfies the independence requirements of
Exchange Act Rule 10A-3 and Nasdaq Rule 4200(a)(15) and complies with the
financial literacy requirements thereof. Our Board of Directors has determined
that all members of Audit Committee, Anthony J. Coppola, Lisa A. Napolitano and
William L. G. Kwan, satisfy the financial expertise requirements and have the
requisite experience as defined by the SEC's rules. Our Board of Directors
adopted a written charter for our Audit Committee on May 9, 2000 and amended
such charter on July 8, 2004 to comply with new Nasdaq rules. The full text of
the Audit Committee Charter as currently in effect is included as Appendix A to
this proxy statement. Our Audit Committee reviews and reassesses the adequacy of
the charter on an annual basis.
Our Audit Committee has reviewed our audited consolidated financial
statements and discussed those statements with management. Our Audit Committee
has also discussed with Parente Randolph our independent public accountants
during 2004, the matters required to be discussed by Statement of Auditing
Standards No. 61 (Communication with Audit Committees, as amended).
Our Audit Committee received from Parente Randolph and reviewed the written
disclosures required by Independence Standards Board Standard No. 1
(Independence Discussions with Audit Committees) and discussed with Parente
Randolph matters relating to its independence. Our Audit Committee also
considered the compatibility of the provision of non-audit services by Parente
Randolph with the maintenance of Parente Randolph's independence.
Our Audit Committee has determined that the provision of the non-audit
services to us by Parente Randolph is compatible with maintaining Parente
Randolph's independence.
10
On the basis of these reviews and discussions, our Audit Committee
recommended to the Board of Directors that our audited consolidated financial
statements be included in our Annual Report on Form 10-K for the fiscal year
ended June 30, 2004 and be filed with the SEC.
Submitted by:
Audit Committee
Anthony J. Coppola
William L.G. Kwan
Lisa A. Napolitano
October 22, 2004
ITEM 2 - ADOPTION OF THE ESCALON MEDICAL CORP.
2004 EQUITY INCENTIVE PLAN
INTRODUCTION
The Board has adopted the 2004 Plan and is recommending that shareholders
approve the 2004 Plan at the annual meeting. The 2004 Plan is integral to the
Company's compensation strategies and programs. The purpose of the 2004 Plan is
to provide a means by which certain employees and directors of, and others
providing services to or having a relationship with, the Company and its
subsidiaries may be given an opportunity to acquire shares of the Company's
common stock. The Company intends that the 2004 Plan will promote the interests
of the Company by encouraging stock ownership on the part of such individuals,
by enabling the Company and its subsidiaries to secure and retain services of
highly qualified persons and by providing such individuals with an additional
incentive to advance the success of the Company and its subsidiaries.
The 2004 Plan will permit stock option grants, stock grants, restricted
stock grants, restricted stock unit grants, stock appreciation rights grants
("SARs") and cash awards. Shareholder approval of the 2004 Plan will permit the
performance-based awards discussed below to qualify for deductibility under
Section 162(m) of the Internal Revenue Code (the "Code").
Awards and grants under the 2004 Plan are referred to as "Awards." Those
eligible for Awards under the 2004 Plan are referred to as "Participants."
Participants include employees, directors and consultants of the Company and its
subsidiaries.
As of September 30, 2004, 93,979 shares were available for new grants under
the Company's existing stock incentive plans, and there were 772,056 shares
subject to outstanding stock option grants under these plans. While the existing
stock incentive plans will remain in place, the Board does not believe that they
provide sufficient shares for future awards.
A summary of the principal features of the 2004 Plan is provided below, but
is qualified in its entirety by reference to the full text of the 2004 Plan that
was filed electronically with this proxy statement with the SEC. Such text is
not included in the printed version of this proxy statement. A copy of the 2004
Plan is available from the Company's Secretary at Escalon Medical Corp., 575
East Swedesford Road, Suite 100, Wayne, Pennsylvania 19087; telephone (610)
688-6830.
SHARES AVAILABLE FOR ISSUANCE
The aggregate number of shares of common stock that may be issued under the
2004 Plan will not exceed 550,000 shares (subject to the adjustment provisions
discussed below). The 550,000 new shares represent approximately 9.3% of the
currently outstanding shares of common stock.
11
ADMINISTRATION AND ELIGIBILITY
The 2004 Plan will be administered by a Committee of the Board (the
"Committee") consisting of two or more directors, each of whom will satisfy the
requirements established for administrators acting under plans intended to
qualify for exemption under Rule 16b-3 under the Exchange Act, for outside
directors acting under plans intended to qualify for exemption under Section
162(m) of the Code and with any applicable requirements established by Nasdaq.
The Committee will approve the aggregate Awards and the individual Awards for
Participants. The 2004 Plan provides for indemnification of Committee and Board
Members with respect to the administration of the 2004 Plan.
No Participant may receive in any calendar year Awards relating to more
than 125,000 shares of the Company's common stock.
AWARDS
STOCK OPTIONS
Grants of Stock Options
The Committee is authorized to grant stock options to Participants
("Optionees"), which may be either incentive stock options ("ISOs") or
nonqualified stock options ("NSOs"). NSOs and ISOs are collectively referred to
as "Stock Options." The exercise price of any ISO must be equal to or greater
than 100% of the fair market value of the shares on the date of the grant. In
the case of ISOs granted to an Optionee who owns more than 10% of the voting
power of all classes of stock of the Company, the exercise price must not be
less than 110% of the fair market value of the common stock on the date of
grant. The exercise price of any NSO must be equal to or greater than 85% of the
fair market value of the shares on the date of the grant. The aggregate fair
market value of common stock with respect to which ISOs are first exercisable by
any employee during any calendar year under all plans of the Company and its
subsidiaries may not exceed $100,000. The term of a Stock Option cannot exceed
ten years, and the term of an ISO granted to an Optionee who owns more than 10%
of the voting power of all classes of stock of the Company cannot exceed five
years. ISOs may not be granted more than ten years after the date that the 2004
Plan was adopted by the Board. The maximum number of shares that may be subject
to ISO's is 550,000 shares.
For purposes of the 2004 Plan, fair market value shall be determined in
such manner as the Committee may deem equitable, within the requirements of any
applicable law or regulation. Generally, fair market value means the closing
price on the last trading day preceding the day of the transaction, as reported
on Nasdaq.
Exercisability and Termination
At the time of grant, the Committee in its sole discretion will determine
when Stock Options are exercisable and when they expire. The Committee has the
power to permit the exercise of unvested Stock Options, or portions thereof, for
the purchase of shares of restricted stock subject to a repurchase right in
favor of the Company and to accelerate previously established exercise terms, in
each case upon such circumstances and subject to such terms and conditions as
the Committee determines.
Payment of Stock Option Exercise Price
Payment for shares purchased upon exercise of a Stock Option must be made
in full at the time of purchase. Payment may be made in cash, or, in the
discretion of the Committee, by the transfer to the Company of shares owned by
the Participant (held at least six months if the Company is accounting for Stock
Options using APB Opinion 25 or purchased on the open market) having a fair
market value on the date of transfer equal to the option exercise price or in
such other manner as may be authorized by the Committee.
SARS
The Committee has the authority to grant SARs to Participants and to
determine the number of shares subject to each SAR, the term of the SAR, the
time or times at which the SAR may be exercised, and all
12
other terms and conditions of the SAR. A SAR is a right, denominated in shares,
to receive, upon exercise of the right, in whole or in part, without payment to
the Company an amount, payable in shares, in cash or a combination thereof, that
is equal to the excess of: (i) the fair market value of common stock on the date
of exercise of the right over (ii) the fair market value of common stock on the
date of grant of the right multiplied by the number of shares for which the
right is exercised. The Committee also may, in its discretion, substitute SARs
that can be settled only in common stock for outstanding Stock Options at any
time when the Company is subject to fair value accounting. The terms and
conditions of any substitute SAR shall be substantially the same as those
applicable to the Stock Option that it replaces and the term of the substitute
SAR may not exceed the term of the Stock Option that it replaces.
RESTRICTED STOCK AND RESTRICTED STOCK UNITS
Restricted Stock consists of shares that transferred or sold by the Company
to a Participant, but are subject to substantial risk of forfeiture and to
restrictions on their sale or other transfer by the Participant. Restricted
Stock Units are the right to receive shares at a future date in accordance with
the terms of such grant upon the attainment of certain conditions specified by
the Committee, which may include substantial risk of forfeiture and restrictions
on their sale or other transfer by the Participant. The Committee determines the
eligible Participants to whom, and the time or times at which, grants of
Restricted Stock or Restricted Stock Units will be made, the number of shares or
units to be granted, the price to be paid, if any, the time or times within
which the shares covered by such grants will be subject to forfeiture, the time
or times at which the restrictions will terminate, and all other terms and
conditions of the grants. Restrictions or conditions could include, but are not
limited to, the attainment of performance goals (as described below), continuous
service with the Company, the passage of time or other restrictions or
conditions.
PERFORMANCE GOALS
Awards under the 2004 Plan may be made subject to the attainment of
performance goals relating to one or more business criteria within the meaning
of Section 162(m) of the Code, including, but not limited to: cash flow; cost;
ratio of debt to debt plus equity; profit before tax; economic profit; earnings
before interest and taxes; earnings before interest, taxes, depreciation and
amortization; earnings per share; operating earnings; economic value added;
ratio of operating earnings to capital spending; free cash flow; net profit; net
sales; sales growth; price of the common stock; return on net assets, equity, or
shareholders' equity; market share; or total return to shareholders
("Performance Criteria").
Any Performance Criteria may be used to measure the performance of the
Company as a whole or any business unit of the Company and may be measured
relative to a peer group or index. Any Performance Criteria may be adjusted to
include or exclude special items as identified in the Company's quarterly or
annual earnings releases.
AMENDMENT OF THE 2004 PLAN
The Board or the Committee has the right and power to amend the 2004 Plan;
provided, however, neither the Board nor the Committee may amend the 2004 Plan
in a manner that would impair or adversely affect the rights of the holder of an
Award without the holder's consent. No material amendment of the Plan shall be
made without shareholder approval.
TERMINATION OF THE 2004 PLAN
The Board may terminate the 2004 Plan at any time. Termination will not in
any manner impair or adversely affect any Award outstanding at the time of
termination.
COMMITTEE'S RIGHT TO MODIFY AWARDS
The Committee may grant Awards on terms and conditions different than those
specified in the 2004 Plan to comply with the laws and regulations of any
foreign jurisdiction, or to make the Awards more effective under such laws and
regulations.
13
The Committee may permit or require a Participant to have amounts or shares
of common stock that otherwise would be paid or delivered to the Participant as
a result of the exercise or settlement of an award under the 2004 Plan credited
to a deferred compensation or stock unit account established for the Participant
by the Committee on the Company's books of account.
Neither the Board nor the Committee may cancel any outstanding Stock Option
for the purpose of reissuing the option to the Participant at a lower exercise
price, or to reduce the option price of an outstanding option.
ACCELERATION OF VESTING OR LAPSING OF RESTRICTIONS
The Committee will have the discretion at the time of grant of an Award or
at any time, under such circumstances and upon such terms and conditions as
shall be established by the Committee, to authorize the acceleration of the
vesting or exercisability of an Award, or that all or part of the restrictions
to which an Award is subject shall lapse, or that an Award shall be paid out or
delivered on an accelerated basis.
ADJUSTMENTS
If there is any change in the common stock by reason of any stock split,
stock dividend, spin-off, split-up, spin-out, recapitalization, merger,
consolidation, reorganization, combination, or exchange of shares, the total
number of shares available for Awards, the maximum number of shares that may be
subject to an Award in any calendar year and the number of shares subject to
outstanding Awards, and the price of each of the foregoing, as applicable, will
be equitably adjusted by the Committee in its discretion.
In the event of a proposed sale of all or substantially all of the assets
of the Company, or the merger of the Company with or into another corporation,
the Committee, in the exercise of its sole discretion, may take such action as
it deems desirable, including, but not limited to: (i) causing a Stock Option to
be assumed or an equivalent option to be substituted by the successor
corporation or a parent or subsidiary of such successor corporation, (ii)
providing that a Stock Option holder shall have the right to exercise the Stock
Option as to all of the shares of common stock covered by the Stock Option,
including shares as to which the Stock Option would not otherwise be
exercisable, or (iii) declaring that a Stock Option shall terminate at a date
fixed by the Committee provided that the Stock Option holder is given notice and
opportunity to exercise the then exercisable portion of the Stock Option prior
to such date.
SUBSTITUTION AND ASSUMPTION OF AWARDS
Without affecting the number of shares reserved or available under the 2004
Plan, either the Board or the Committee may authorize the issuance of Awards in
connection with the assumption of, or substitution for, outstanding benefits
previously granted to individuals who become employees of the Company or any
subsidiary as the result of any merger, consolidation, acquisition of property
or stock, or reorganization, upon such terms and conditions as it deems
appropriate.
REUSAGE
If a Stock Option granted under the 2004 Plan expires or is terminated,
surrendered or canceled without having been fully exercised or if Restricted
Stock, Restricted Stock Units or SARs granted under the 2004 Plan are forfeited
or terminated without the issuance of all of the shares subject thereto, the
shares covered by such Awards will again be available for use under the 2004
Plan. Shares covered by an Award granted under the 2004 Plan would not be
counted as used unless and until they are actually issued and delivered to a
Participant. Any shares of common stock covered by a SAR shall be counted as
used only to the extent shares are actually issued to the Participant upon
exercise of the SAR. Shares covered by an Award granted under the 2004 Plan that
is settled in cash will not be counted as used.
14
FEDERAL INCOME TAX CONSEQUENCES
The federal income tax consequences as they relate to Awards are as
follows:
ISOS
An Optionee does not generally recognize taxable income upon the grant or
upon the exercise of an ISO. Upon the sale of ISO shares, the Optionee
recognizes income in an amount equal to the difference, if any, between the
exercise price of the ISO shares and the fair market value of those shares on
the date of sale. The income is taxed at long-term capital gains rates if the
Optionee has not disposed of the stock within two years after the date of the
grant of the ISO and has held the shares for at least one year after the date of
exercise and the Company is not entitled to a federal income tax deduction. The
holding period requirements are waived when an Optionee dies.
The exercise of an ISO may in some cases trigger liability for the
alternative minimum tax.
If an Optionee sells ISO shares before having held them for at least one
year after the date of exercise and two years after the date of grant, the
Optionee recognizes ordinary income to the extent of the lesser of: (i) the gain
realized upon the sale; or (ii) the difference between the exercise price and
the fair market value of the shares on the date of exercise. Any additional gain
is treated as long-term or short-term capital gain depending upon how long the
Optionee has held the ISO shares prior to disposition. In the year of
disposition, the Company receives a federal income tax deduction in an amount
equal to the ordinary income that the Optionee recognizes as a result of the
disposition.
NSOS
An Optionee does not recognize taxable income upon the grant of an NSO.
Upon the exercise of such a Stock Option, the Optionee recognizes ordinary
income to the extent the fair market value of the shares received upon exercise
of the NSO on the date of exercise exceeds the exercise price. The Company
receives an income tax deduction in an amount equal to the ordinary income that
the Optionee recognizes upon the exercise of the Stock Option.
RESTRICTED STOCK
A Participant who receives an award of Restricted Stock does not generally
recognize taxable income at the time of the award. Instead, the Participant
recognizes ordinary income in the first taxable year in which his or her
interest in the shares becomes either: (i) freely transferable; or (ii) no
longer subject to substantial risk of forfeiture. The amount of taxable income
is equal to the fair market value of the shares less the cash, if any, paid for
the shares.
A Participant may elect in writing under Section 83(b) of the Code to
recognize income at the time he or she receives Restricted Stock in an amount
equal to the fair market value of the Restricted Stock (less any cash paid for
the shares) on the date of the award. Any such election must be made by the
Participant within 30 days after the award date.
The Company receives a compensation expense deduction in an amount equal to
the ordinary income recognized by the Participant in the taxable year in which
restrictions lapse (or in the taxable year of the award if, at that time, the
Participant had filed a timely election to accelerate recognition of income).
RESTRICTED STOCK UNITS
A Participant who receives an Award of a Restricted Stock Unit will
generally recognize ordinary income in an amount equal to the fair market value
of any shares received on the date of delivery of the shares. In that taxable
year, the Company will receive a federal income tax deduction in an amount equal
to the ordinary income that the Participant has recognized.
15
OTHER AWARDS
In the case of an exercise of a SAR or an Award of Restricted Stock Units
or common stock or cash, the Participant will generally recognize ordinary
income in an amount equal to any cash received and the fair market value of any
shares received on the date of payment or delivery. In that taxable year, the
Company will receive a federal income tax deduction in an amount equal to the
ordinary income which the Participant has recognized.
MILLION DOLLAR DEDUCTION LIMIT
The Company may not deduct compensation of more than $1,000,000 that is
paid to an individual who, on the last day of the taxable year, is either the
Company's chief executive officer or is among one of the four other most
highly-compensated officers for that taxable year as reported in the Company's
proxy statement. The limitation on deductions does not apply to certain types of
compensation, including qualified performance-based compensation. The Company
believes that Awards in the form of Stock Options, SARs, performance-based
Restricted Stock and Restricted Stock Units constitute qualified
performance-based compensation and, as such, will be exempt from the $1,000,000
limitation on deductible compensation.
MISCELLANEOUS
A new benefits table is not provided because no grants have been made under
the 2004 Plan and all Awards are discretionary. On October 22, 2003, the closing
price of the common stock was $9.60.
APPROVAL BY SHAREHOLDERS
In order to be approved, the 2004 Plan must be approved by the holders of
shares representing a majority of votes cast on the proposal at the Annual
Meeting.
RECOMMENDATION OF THE BOARD
The Board of Directors recommends a vote FOR the adoption of the 2004 Plan.
Unless otherwise indicated on the proxy, the shares will be voted FOR the
adoption of the 2004 Plan.
EQUITY COMPENSATION PLAN INFORMATION
The following table summarizes the Company's equity compensation plan
information as of June 30, 2004. The table does not include information about
the proposed 2004 Plan that is being submitted for shareholders approval at the
Annual Meeting. No grants have been made under the 2004 Plan.
WEIGHTED-
AVERAGE EXERCISE
NUMBER OF SECURITIES PRICE OF NUMBER OF SECURITIES
TO BE ISSUED UPON OUTSTANDING REMAINING AVAILABLE
EXERCISE OF OPTIONS, FOR FUTURE ISSUANCE
OUTSTANDING OPTIONS WARRANTS AND UNDER EQUITY
WARRANTS AND RIGHTS RIGHTS COMPENSATION PLANS
-------------------- ---------------- --------------------
Equity Compensation Plans Approved
by Security Holders.............. 618,706 $3.40 247,329
Equity Compensation Plans Not
Approved by Security Holders..... -- -- --
SHAREHOLDER PROPOSALS
Any shareholder who, in accordance with and subject to the provisions of
Rule 14a-8 of the proxy rules of the SEC, wishes to submit a proposal for
inclusion in our proxy statement for our 2005 annual meeting of shareholders
must deliver such proposal in writing to our Secretary at our principal
executive offices at 575 East Swedesford Road, Suite 100, Wayne, PA 19087 no
later than June 28, 2005.
16
Pursuant to Section 2.3 of our Bylaws, if a shareholder wishes to present
at our 2005 annual meeting of shareholders (i) a proposal relating to
nominations for and election of directors for consideration by the Governance
and Nominating Committee of our Board of Directors or (ii) a proposal relating
to a matter other than nominations for and election of directors, otherwise than
pursuant to Rule 14a-8 of the proxy rules of the SEC, the shareholder must
comply with the provisions relating to shareholder proposals set forth in our
Bylaws, which are summarized below. Written notice of any such proposal
containing the information required under our Bylaws, as described herein, must
be delivered in person, by first class United States mail postage prepaid or by
reputable overnight delivery service to the Governance and Nominating Committee
to the attention of our Secretary, for nomination proposals only, or to the
attention of our Secretary for all other matters, at our principal executive
offices at 575 East Swedesford Road, Suite 100, Wayne, PA 19087 during the
period commencing on June 28, 2005 and ending on July 28, 2005.
A written proposal of nomination for a director must set forth:
- the name and address of the shareholder who intends to make the
nomination (the "Nominating Shareholder");
- the name, age, business address and, if known, residence address of each
person so proposed;
- the principal occupation or employment of each person so proposed for the
past five years;
- the number of shares of our capital stock beneficially owned within the
meaning of SEC Rule 13d-3 by each person so proposed and the earliest
date of acquisition of any such capital stock;
- a description of any arrangement or understanding between each person so
proposed and the Nominating Shareholder with respect to such person's
proposal for nomination and election as a director and actions to be
proposed or taken by such person as a director;
- the written consent of each person so proposed to serve as a director if
nominated and elected as a director; and
- such other information regarding each such person as would be required
under the proxy rules of the SEC if proxies were to be solicited for the
election as a director of each person so proposed.
Only candidates nominated by shareholders for election as a member of our
Board of Directors in accordance with our Bylaw provisions as summarized herein
will be eligible for consideration by the Governance and Nominating Committee to
be nominated for election as a member of our Board of Directors at our 2005
annual meeting of shareholders, and any candidate not nominated in accordance
with such provisions will not be considered or acted upon for election as a
director at our 2005 annual meeting of shareholders.
A written proposal relating to a matter other than a nomination for
election as a director must set forth information regarding the matter
equivalent to the information that would be required under the proxy rules of
the SEC if proxies were solicited for shareholder consideration of the matter at
a meeting of shareholders. Only shareholder proposals submitted in accordance
with the Bylaw provisions summarized above will be eligible for presentation at
our 2005 annual meeting of shareholders, and any matter not submitted to our
Board of Directors in accordance with such provisions will not be considered or
acted upon at our 2005 annual meeting of shareholders.
OTHER MATTERS
Our Board of Directors does not know of any matters to be presented for
consideration at our annual meeting other than the matters described in the
notice of annual meeting, but if any matters are properly presented, proxies in
the enclosed form returned to us will be voted in accordance with the
recommendation of our Board of Directors or, in the absence of such a
recommendation, in accordance with the judgment of the proxy holder.
17
APPENDIX A
ESCALON MEDICAL CORP.
AUDIT COMMITTEE CHARTER
PURPOSE
The primary purposes of the Audit Committee of the Board of Directors (the
"Board") of Escalon Medical Corp. (the "Company") shall be to oversee the
Company's accounting and financial reporting processes, including the overview
of the financial reports and other financial information provided by the Company
to any governmental or regulatory body, the public and others who rely thereon;
the Company's systems of internal accounting and financial controls; the
selection, evaluation and retention of the Company's independent auditors; the
qualifications and independence of the Company's independent auditors; the
annual independent audit of the Company's financial statements under generally
accepted accounting principles; and compliance by the Company with legal and
regulatory requirements.
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 Rules of the Nasdaq Stock Market, the Securities Exchange Act of
1934 (the "Exchange Act") and the rules and regulations of the Securities and
Exchange Commission (the "Commission"). Accordingly, all of the members of the
Committee shall be directors:
- who have no relationship to the Company that may interfere with the
exercise of their independence from management and the Company;
- who do not accept directly or indirectly any consulting, advisory or
other compensatory fees from the Company or any subsidiary of the
Company, other than in the member's capacity as a member of the Board or
any Board committee of the Company or the affiliates of the Company;
- who are not "affiliated persons" of the Company or any subsidiary of the
Company, as defined by the Commission; and
- who are financially literate.
In addition, at least one member of the Committee shall be an "audit committee
financial expert," as defined by the Commission. The members of the Committee
shall be appointed by the Board, and Committee members may be replaced by the
Board.
ROLE OF THE COMMITTEE
The Committee's role is one of oversight, and the Board recognizes that the
Company's management is responsible for the preparation and publication of the
Company's financial statements and that the independent auditors are responsible
for auditing those financial statements. In addition, the Board recognizes that
the Company's financial management personnel, as well as the independent
auditors, because of the nature of their relationship with the Company, are in a
position to devote more time and acquire greater 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 independent auditors'
work.
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, all at the expense of the
Company. The
A-1
Committee shall have the authority to engage, and determine funding for,
independent counsel and other advisors to the Committee.
PRIMARY RESPONSIBILITIES
- The Committee shall be directly responsible for the appointment,
determination of funding for, compensation, retention and oversight of
the work of the Company's independent auditors for purposes of preparing
or issuing an audit report or related work or performing other audit,
review or attest services for the Company, including the resolution of
disagreements between management and the auditors regarding financial
reporting.
- The Committee shall approve, in advance, all auditing services and all
non-audit services, including the fees and terms thereof, to be performed
by the independent auditors that are permitted under Section 10A of the
Exchange Act and the rules and regulations of the Commission thereunder,
subject to the de minimis exceptions under such rules for permissible
non-audit services that are nonetheless approved by the Committee prior
to the completion of the audit. The Committee may form, and delegate
authority to, subcommittees consisting of one or more members of the
Committee when appropriate, including the authority to grant preapprovals
of audit and permissible non-audit services, provided that decisions of
such subcommittee to grant preapprovals shall be presented to the
Committee at its next ensuing meeting.
- The Committee shall establish procedures for the receipt, retention and
treatment of complaints received by the Company regarding accounting,
internal accounting controls or auditing matters and for ensuring that
complaints are treated confidentially and anonymously.
- The Committee shall be responsible for reviewing reports and disclosures
of all related-party transactions. A "related-party transaction" is a
transaction that is required to be reported by the Company under Item 404
of Regulation S-K of the Commission. All related-party transactions are
subject to the approval of the Committee.
- The following functions shall be performed on an ongoing basis by the
Committee in carrying out its oversight function. These functions are set
forth as a guide, with the understanding that the Committee shall have
the discretion to conduct activities in addition to those listed herein
as it deems appropriate given the circumstances.
- The Committee shall review and discuss with management and the
independent auditors the audited financial statements and disclosures
made in management's discussion and analysis 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 independent auditors the matters
required to be discussed by Statement of Auditing Standards No. 61 ("SAS
No. 61").
- The Committee shall recommend to the Board whether the annual audited
financial statements should be included in the Company's Form 10-K.
- The Committee shall review on a quarterly basis with the independent
auditors any matters required to be discussed by SAS No. 61.
- The Committee shall review and discuss with management and the
independent auditors the Company's quarterly financial statements prior
to the Company's filing of its Form 10-Q, including the results of the
review by the independent auditors of the quarterly financial
statements.
- The Committee shall discuss with management and the independent auditors
the quality and adequacy of the Company's internal controls.
- The Committee shall discuss with management the Company's earnings press
releases, including the use of "pro forma" or "adjusted" non-GAAP
information, as well as financial information and earnings guidance
provided to analysts and rating agencies. Such discussion may be done
generally,
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consisting of discussing the types of information to be disclosed and
the types of presentations to be made.
- The Committee shall discuss with management and the independent auditors
the effect of regulatory and accounting initiatives as well as
off-balance sheet structures on the Company's financial statements.
- The Committee shall discuss with management the Company's major
financial risk exposures and the steps management has taken to monitor
and control such exposures, including the Company's risk assessment and
risk management policies.
- The Committee shall:
- request from the independent auditors annually a formal written
statement delineating all relationships between the auditors and the
Company consistent with Independence Standards Board Standard No. 1
and the rules and regulations of the Commission.
- discuss with the independent auditors any such disclosed relationship
and the impact thereof on the independent auditors' independence.
- take appropriate action to oversee the independence of the independent
auditors.
As adopted by the Board of Directors as of July 8, 2004.
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APPENDIX B
ESCALON MEDICAL CORP.
GOVERNANCE AND NOMINATING COMMITTEE
The purpose of the Governance and Nominating Committee (the "Committee")
shall be to assist the board in identifying qualified individuals to become
board members, in determining the composition of the board of directors and its
committees and in reviewing and implementing the Company's corporate governance
guidelines.
The Committee shall be comprised of at least two independent members of the
Company's board of directors, all of whom, in the judgment of the board, shall
be independent in accordance with Rule 4200(a) (15) of the listed standards of
the Nasdaq Stock Market, Inc.
In furtherance of this purpose, the Committee shall have the following
authority and responsibilities:
1. To lead the search for individuals qualified to become members of
the board of directors and to select director nominees to be presented for
shareholder approval at the annual meeting. The Committee shall select
individuals as director nominees who shall have the highest personal and
professional integrity, who shall have demonstrated exceptional ability and
judgment and who shall be most effective, in conjunction with the other
nominees to the board, in collectively serving the long-term interests of
the shareholders.
2. To review the board of directors' committee structure and to
recommend to the board for its approval directors to serve as members of
each committee. The Committee shall review and recommend committee slates
annually and shall recommend additional committee members to fill vacancies
as needed.
3. To develop and recommend to the board of directors for its approval
a set of corporate governance guidelines. The Committee shall review the
guidelines on an annual basis, or more frequently if appropriate, and
recommend change as necessary.
4. To review on an annual basis director compensation and benefits.
The Committee shall have the authority to delegate any of its
responsibilities to subcommittees as the Committee may deem appropriate in its
sole discretion.
The Committee shall have the authority to retain any search firm engaged to
assist in identifying director candidates, and to retain outside counsel and any
other advisors as the Committee may deem appropriate in its sole discretion. The
Committee shall have sole authority to approve related fees and retention terms.
The Committee shall report its actions and recommendations to the board
after each Committee meeting. The Committee shall review at least annually the
adequacy of this charter and recommend any proposed change to the board for
approval.
Adopted by the Board on: August 17,
2004
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APPENDIX C
ESCALON MEDICAL CORP.
COMPENSATION COMMITTEE CHARTER
PURPOSE
The Compensation Committee (the "Committee") shall be responsible for
reviewing and making decisions under a delegation of authority from the Board of
Directors with respect to salaries, bonuses, stock options and other benefits
for executive officers of Escalon Medical Corp. (the "Company"). In performing
this function, it shall be the objective of the Committee to: (i) encourage the
achievement of the Company's long-range objectives by providing compensation
which directly relates to the performance of the individual and the achievement
of internal strategic objectives; (ii) establish compensation policies and
guidelines that will attract and retain qualified personnel through an overall
level of compensation opportunity that is competitive within the Company's
industry; and (iii) promote a direct relationship between compensation and the
Company's performance by facilitating executive officer stock ownership through
restricted stock and stock option awards.
COMPOSITION OF THE COMMITTEE
All of the members of the Committee shall be independent directors, meeting
the requirements of the Nasdaq Stock Market, Inc. and appointed by the Board of
Directors on the recommendation of the Governance and Nominating Committee. At
least two of the directors appointed to serve on the Committee shall be
"non-employee directors" (within the meaning of Rule 16b-3 promulgated under the
Securities Exchange Act of 1934, as amended) and "outside directors" (within the
meaning of Section 162(m) of the Internal Revenue code of 1986, as amended, and
the regulations thereunder). The Chairman of the committee shall be designated
by the Board of Directors. In the absence of the Chairman, the members of the
Committee may designate a chairman by majority vote. The Board of Directors may
at any time remove one or more directors as members of the Committee.
AUTHORITY AND RESPONSIBILITIES
The Committee is authorized to fix the compensation of executive offices of
the Company, including the Chief Executive Officer, and to administer the equity
incentive plans of the Company as may from time to time be acquired or adopted.
To that end, the Committee shall have and may exercise all the powers and
authority of the Board of Directors to the extent permitted under Pennsylvania
Corporation Law. The Chief Executive Officer shall not be present during the
Committee's voting and deliberations on the compensation of the Chief Executive
Officer.
To the extent permitted by the Pennsylvania law, the Committee may delegate
to one or more officers of the Company the power to (i) designate the employees
of the Company or any of its subsidiaries who will receive grants of restricted
shares or options to purchase from the Company shares of the Company's capital
stock, and to (ii) determine the number of restricted shares or options to be
received by them. Such delegation must be made by a resolution that specifies
the total number of restricted shares or options that may be granted under the
delegated authority, and no officer may be delegated the power to designate an
executive officer as a recipient of restricted shares or options.
The Committee may determine, from time to time, the advisability of
retaining a compensation consultant to assist in the evaluation of Chief
Executive Officer or other executive officer compensation. The Committee has the
authority to retain, at Company expense, and terminate a compensation
consultant, including sole authority to approve the consultant's fees and other
retention terms.
The Committee is responsible for making decisions with respect to the
Company's executive compensation policies. In addition, pursuant to authority
granted by the Board of Directors, the Committee shall review and approve
corporate goals and objectives relevant to the compensation to be paid to the
Chief Executive Officer and each of the other executive officers of the Company.
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The Committee Shall:
1. Annually evaluate the performance of the Chief Executive Officer
in light of the corporate goals and objectives approved and approve base
salary and incentive bonus levels of the Chief Executive Officer of the
Company;
2. Annually review and approve base salary and incentive bonus levels
of the other executive officers of the Company, by considering any
recommendations to the Committee by the Company's Chief Executive Officer;
3. Administer the Company's equity incentive plans as well as any
other stock option, stock purchase, incentive or other benefit plans of the
Company, fulfilling such duties and responsibilities as are set forth in
such plans;
4. Review and approve awards under the Company's equity incentive
plans, as such are recommended to the Committee by the Company's Chief
Executive Officer;
5. Make regular reports to the Board of Directors concerning the
activities of the Committee; and
COMMITTEE MEETINGS
The Committee May establish its own schedule for meetings throughout the
year and shall determine the number of meetings necessary and proper for the
conduct of the committee's business.
Adopted by the Board on August 17,
2004
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ESCALON MEDICAL CORP.
2004 EQUITY INCENTIVE PLAN
1. PURPOSE. The purpose of the Escalon Medical Corp. 2004 Equity
Incentive Plan (the "Plan") is to enhance the ability of Escalon Medical Corp.
(the "Company") and its subsidiaries to attract and retain the best available
personnel for positions of substantial responsibility, to provide compensation
and additional incentives to such personnel and to promote the success of the
Company.
2. ADMINISTRATION.
(a) COMPOSITION OF THE COMMITTEE. The Plan will be
administered by a Committee (the "Committee") of the Company's Board of
Directors (the "Board") consisting of two or more directors as the Board may
designate from time to time, each of whom shall satisfy such requirements as:
(i) the Securities and Exchange Commission may establish for administrators
acting under plans intended to qualify for exemption under Rule 16b-3 or its
successor under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"); (ii) the Nasdaq Stock Market may establish pursuant to its rule-making
authority; and (iii) the Internal Revenue Service may establish for outside
directors acting under plans intended to qualify for exemption under Section
162(m) of the Internal Revenue Code of 1986, as amended, or any amendment or
substitute thereto or regulations thereunder (the "Code").
(b) AUTHORITY OF THE COMMITTEE. The Committee shall have
full and final authority, in its sole discretion, to construe and interpret the
Plan and any awards ("Awards") granted under the Plan, to establish and amend
rules for Plan administration, to change the terms and conditions of Awards at
or after grant, and to make all other determinations that it deems necessary or
advisable for the administration of the Plan. The Committee shall have the
authority to adopt, amend and rescind such rules, regulations and procedures as,
in its opinion, may be advisable in the administration of the Plan, including,
without limitation, rules, regulations and procedures that: (i) deal with
satisfaction of a participant's tax withholding obligations pursuant to Section
15 hereof, and (ii) include arrangements that provide for the payment of some or
all of exercise price of a stock option ("Stock Option"), by delivery of
previously owned shares of the Company's common stock ("Common Stock") or other
property and/or by withholding some of the shares of Common Stock being acquired
upon exercise of a Stock Option. The determinations of the Committee shall be
made in accordance with its judgment as to the best interests of the Company and
its shareholders and in accordance with the purposes of the Plan. A majority of
the members of the Committee shall constitute a quorum, and all determinations
of the Committee shall be made by a majority of its members. Any determination
of the Committee under the Plan may be made without notice or meeting of the
Committee, in writing signed by all the Committee members. All decisions,
determinations and interpretations of the Committee shall be final and binding
on all optionees and all other participants granted under the Plan.
(c) AUTHORITY OF THE BOARD. Notwithstanding anything to
the contrary set forth in the Plan, all authority granted hereunder to the
Committee may be exercised at any time
and from time to time by the Board. All decisions, determinations and
interpretations of the Board shall be final and binding on all optionees and all
participants under the Plan.
3. PARTICIPANTS. Participants may consist of employees,
non-employee directors and consultants of the Company and its subsidiaries,
except that non-employee directors and consultants shall not be eligible to be
awarded Incentive Stock Options, as defined in Section 6 of the Plan. Any
corporation or other entity in which a 50% or greater interest is at the time
directly or indirectly owned by the Company, and, in the case of an Incentive
Stock Option grant, which otherwise satisfies the definition of "subsidiary"
under Section 424(f) of the Code, shall be a subsidiary for purposes of the
Plan. Designation of a participant in any year shall not require the Committee
to designate that person to receive an Award in any other year or to receive the
same type or amount of Award as granted to the participant in any other year or
as granted to any other participant in any year. The Committee shall consider
all factors that it deems relevant in selecting participants and in determining
the type and amount of their respective Awards.
4. SHARES AVAILABLE UNDER THE PLAN. Subject to Section 12 of the
Plan, there is hereby reserved for issuance under the Plan an aggregate of
550,000 shares of Common Stock. If there is a lapse, expiration, termination or
cancellation of any Stock Option issued under the Plan prior to the issuance of
shares thereunder or if shares of Common Stock are issued under the Plan and
thereafter are reacquired by the Company, the shares subject to those Stock
Options and the reacquired shares shall be added to the shares available for
Awards under the Plan. Shares covered by an Award granted under the Plan shall
not be counted as used unless and until they are actually issued and delivered
to a participant. Any shares covered by a Stock Appreciation Right ("SAR"),
shall be counted as used only to the extent shares are actually issued to the
participant upon exercise of the right. All shares issued under the Plan may be
either authorized and unissued shares or issued shares reacquired by the
Company. Notwithstanding anything to the contrary set forth in the Plan, the
maximum number of shares of Common Stock for which awards may be granted to any
participant in any calendar year under the Plan shall be 125,000 shares. The
maximum number of shares of Common Stock that may be subject to Incentive Stock
Options shall be 550,000 shares.
5. TYPES OF AWARDS. Awards under the Plan shall consist of Stock
Options, SARS, restricted stock ("Restricted Stock"), restricted stock units
("Restricted Stock Units") and other stock or cash awards, all as described
below.
6. STOCK OPTIONS.
(a) TYPE OF STOCK OPTION. Stock Options may be granted to
participants, at any time as determined by the Committee. The Committee shall
determine the number of shares subject to each Stock Option and whether the
Stock Option is intended to qualify as an incentive stock option ("Incentive
Stock Option") within the meaning of Section 422 of the Code or not intended to
so qualify ("Non-Qualified Stock Option").
(b) STOCK OPTION PRICE. The Stock Option price for each
Incentive Stock Option shall be determined by the Committee but shall not be
less than 100% of the fair market value of the Common Stock on the date the
Stock Option is granted, and the Stock Option price
2
for each Non-Qualified Stock Option shall be determined by the Committee but
shall not be less than 85% of the fair market value of the Common Stock on the
date the Stock Option is granted.
(c) EXERCISE TERM. Each Stock Option shall expire at such
time as the Committee shall determine at the time of grant. Stock Options shall
be exercisable at such time and subject to such terms and conditions as the
Committee shall determine; provided, however, that no Stock Option shall be
exercisable later than the tenth anniversary of its grant. Subject to the
requirements set forth in the Plan, the Committee shall have the power to
permit: (a) the exercise of unvested Stock Options, or portions thereof, for the
purchase of shares of restricted Common Stock subject to a repurchase right in
favor of the Company, with the repurchase price being equal to the lesser of (x)
the original purchase price or (y) the fair market value of the shares on the
date of repurchase, and/or to any other restrictions as the Committee deems to
be appropriate, and (b) the acceleration of previously established exercise
terms, in each case upon such circumstances and subject to such terms and
conditions as the Committee shall determine.
(d) EXERCISE AND PAYMENT FOR SHARES. The Stock Option
price, upon exercise of any Stock Option, shall be payable to the Company in
full by (i) cash payment or its equivalent; (ii) in the discretion of the
Committee, tendering previously acquired shares (held for at least six months if
the Company is accounting for Stock Options using APB Opinion 25 or purchased on
the open market) having a fair market value at the time of exercise equal to the
Stock Option price; (iii) delivery of a properly executed exercise notice,
together with irrevocable instructions to a broker to promptly deliver to the
Company the amount of sale proceeds from the Stock Option shares to pay the
exercise price and any withholding taxes due to the Company; and (iv) such other
methods of payment as the Committee, at its discretion, deems appropriate.
Subsequent to its grant, except with respect to adjustments under Section 12 of
the Plan, no Stock Option shall be repriced, regranted or amended so as to
effect a decrease in the exercise price of the Stock Option without the approval
of the Company's shareholders.
(e) OPTION AGREEMENTS. Stock Options for the purchase of
Common Stock shall be evidenced by written agreements in such form not
inconsistent with the Plan as the Committee shall approve from time to time. The
Stock Options granted hereunder may be evidenced by a single agreement or by
multiple agreements, as determined by the Committee in its sole discretion. Each
agreement shall contain in substance terms and conditions not inconsistent with
the Plan as the Committee, in its sole discretion, may determine.
(f) INCENTIVE STOCK OPTION PROVISIONS. In the case of an
Incentive Stock Option, each option agreement shall contain such other terms,
conditions and provisions as the Committee determines necessary or desirable in
order to qualify such Stock Option as a tax-favored Incentive Stock Option,
including without limitation, each of the following, except that any of these
provisions may be omitted or modified if it is no longer required in order to
have a Stock Option qualify as a tax-favored Incentive Stock Option within the
meaning of Section 422 of the Code:
(i) The aggregate fair market value (determined
as of the date the Stock Option is granted) of Common Stock with respect to
which Incentive Stock Options are first exercisable by any employee during any
calendar year (under all plans of the Company and its subsidiaries) shall not
exceed $100,000.
3
(ii) No Incentive Stock Options shall be granted
to any employee if, at the time the Stock Option is granted, the employee owns
stock possessing more than 10% of the total combined voting power of all classes
of stock of the Company or its parent or its subsidiaries unless, at the time
such Stock Option is granted, the Stock Option price is at least 110% of the
fair market value of the stock subject to the Stock Option and, by its terms,
the Stock Option is not exercisable after the expiration of five years from the
date of grant.
(iii) Except as otherwise provided in Section 6(g)
below, no Incentive Stock Option shall be exercisable more than three months (or
one year, in the case of an employee who dies or becomes disabled within the
meaning of Section 22(e)(3) of the Code ("Disabled" or "Disability")) after
termination of employment.
(g) RIGHTS UPON TERMINATION OF SERVICE. In the event that
an optionee ceases to be a consultant, director, officer or employee of the
Company or any subsidiary, for any reason other than death, retirement, as
hereinafter defined, or Disability, the optionee shall have the right to
exercise the Stock Option during its term within a period of three months after
such termination to the extent that the Stock Option was exercisable at the time
of termination, or within such other period, and subject to such terms and
conditions as may be specified by the Committee. In the event that an optionee
dies, becomes Disabled or, in the case of any employee, retires prior to the
expiration of his or her Stock Option and without having fully exercised the
Stock Option, the optionee or the optionee's successor shall have the right to
exercise the Stock Option during its term within a period of one year after
termination of service due to death, Disability or, in the case of an employee,
retirement, in each case only to the extent that the Stock Option was
exercisable at the time of termination, or within such other period, and subject
to such terms and conditions as may be specified by the Committee. As used in
this Section 6, "retirement" means a termination of employment by reason of an
optionee's retirement at or after the optionee's earliest permissible retirement
date pursuant to and in accordance with regular retirement plan or personnel
practices of the optionee's employer. Notwithstanding the provisions of Section
6(f)(iii) hereof, an Incentive Stock Option may be exercised more than three
months after termination of employment due to retirement, as provided in this
Section 6(g), but in that event, the Stock Option shall lose its status as an
Incentive Stock Option and shall be treated as a Non-Qualified Stock Option.
7. STOCK APPRECIATION RIGHTS. SARs may be granted to participants
at any time as determined by the Committee. A SAR may be granted in tandem with
a Stock Option granted under the Plan or on a free-standing basis. The Committee
also may, in its discretion, substitute SARs that can be settled only in stock
for outstanding Stock Options, at any time when the Company is subject to fair
value accounting. The grant price of a tandem or substitute SAR shall be equal
to the exercise price of the related Stock Option. The grant price of a free
standing SAR shall be equal to the fair market value of the Common Stock on the
date of its grant. A SAR may be exercised upon such terms and conditions and for
such term as the Committee in its sole discretion determines; provided, however,
that the term shall not exceed the Stock Option term in the case of a tandem or
substitute SAR or ten years in the case of a free standing SAR and the terms and
conditions applicable to a substitute SAR shall be substantially the same as
those applicable to the Stock Option which it replaces. Upon exercise of a SAR,
the participant shall be entitled to receive payment from the Company in an
amount determined by multiplying the excess of the fair market value of a share
of Common Stock on the date of exercise over the
4
grant price of the SAR by the number of shares with respect to which the SAR is
exercised. The payment may be made in cash or stock, at the discretion of the
Committee, except in the case of a substitute SAR which may be made only in
stock.
8. RESTRICTED STOCK AND RESTRICTED STOCK UNITS.
(a) RESTRICTIONS AND FORFEITURE OF AWARDS. Restricted
Stock consists of shares of Common Stock that are transferred or sold by the
Company to a participant, but are subject to substantial risk of forfeiture or
resale to the Company and to restrictions on their sale or transfer by the
participant. Restricted Stock Units consist of the right to receive shares at a
future date in accordance with the terms of such grant upon the attainment of
certain conditions, which may include substantial risk of forfeiture and
restrictions on sale or transfer by the participant. Restricted Stock and
Restricted Stock Units may be awarded or sold to participants under such terms
and conditions as shall be established by the Committee. Restricted Stock and
Restricted Stock Units shall be subject to such restrictions as the Committee
determines, including, without limitation, any of the following: (i) a
prohibition against sale, assignment, transfer, pledge, hypothecation or other
encumbrance for a specified period; or (ii) a requirement that the holder
forfeit (or in the case of shares or units sold to the participant resell to the
Company at cost) such shares or units in the event of termination of employment
during the period of restriction. All restrictions shall expire at such times as
the Committee shall specify.
(b) ESCROW AND CERTIFICATE LEGEND. The Secretary of the
Company or such other escrow holder as the Committee may appoint shall retain
physical custody of each certificate representing shares of Restricted Stock
until all of the restrictions imposed under the restricted stock agreement with
respect to the shares evidenced by such certificate lapse or shall have been
terminated. Each certificate issued in respect of Restricted Stock awarded under
the Plan shall bear a legend in substantially the following form, with such
modifications as the Committee shall deem appropriate under the circumstances:
"THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE
TERMS AND CONDITIONS (INCLUDING FORFEITURE PROVISIONS AND
RESTRICTIONS AGAINST TRANSFER) CONTAINED IN AN AGREEMENT
BETWEEN ESCALON MEDICAL CORP. AND THE REGISTERED HOLDER, A
COPY OF WHICH IS ON FILE AT THE PRINCIPAL OFFICE OF THE
COMPANY."
9. OTHER STOCK OR CASH AWARDS. In addition to the incentives
described in sections 5 through 8 above, the Committee may grant other
incentives payable in cash or in Common Stock under the Plan as it determines to
be in the best interests of the Company and subject to such other terms and
conditions as it deems appropriate.
10. PERFORMANCE GOALS. Awards may be made subject to the
attainment of performance goals relating to one or more business criteria within
the meaning of Section 162(m) of the Code, including, but not limited to, cash
flow; cost; ratio of debt to debt plus equity; profit before tax; economic
profit; earnings before interest and taxes; earnings before interest, taxes,
depreciation and amortization; earnings per share; operating earnings; economic
value added; ratio of operating earnings to capital spending; free cash flow;
net profit; net sales; sales growth; price of the Common Stock; return on net
assets, equity or shareholders' equity;
5
market share; or total return to shareholders ("Performance Criteria"). Any
Performance Criteria may be used to measure the performance of the Company as a
whole or any business unit of the Company and may be measured relative to a peer
group or index. Any Performance Criteria may include or exclude other special
items as determined by the Committee. In all other respects, Performance
Criteria shall be calculated in accordance with the Company's financial
statements, generally accepted accounting principles, or under a methodology
established by the Committee prior to the issuance of an award which is
consistently applied and identified in the audited financial statements,
including footnotes, or the Management Discussion and Analysis section of the
Company's annual report. However, the Committee may not in any event increase
the amount of compensation payable to an officer who is a "covered employee"
within the meaning of Section 162(m) of the Code upon the attainment of a
performance goal.
11. ACCELERATION OF VESTING AND LAPSE OF RESTRICTIONS. The
Committee shall have the discretion at the time of grant of an Award or at any
other time, under such circumstances and upon such terms and conditions as shall
be established by the Committee, to authorize the acceleration of the vesting or
exercisability of an Award, or that all or part of the restrictions to which an
Award is subject shall lapse, or that an Award shall be paid out or delivered on
an accelerated basis.
12. ADJUSTMENT PROVISIONS.
(a) CHANGES IN CAPITALIZATION. If the Company shall at
any time change the number of issued shares of Common Stock by stock dividend,
stock split, spin-off, split-off, spin-out, recapitalization, merger,
consolidation, reorganization, combination, or exchange of shares, the total
number of shares reserved for issuance under the Plan, the maximum number of
shares which may be made subject to an Award in any calendar year, and the
number of shares covered by each outstanding Award and the price therefor, if
any, shall be equitably adjusted by the Committee, in its sole discretion.
(b) DISSOLUTION OR LIQUIDATION. In the event of the
proposed dissolution or liquidation of the Company, all outstanding Stock
Options will terminate immediately prior to the consummation of such proposed
action, unless otherwise provided by the Committee. The Committee may, in the
exercise of its discretion in such instances, declare that any Stock Option
shall terminate as of the date fixed by the Committee and give each Stock Option
holder the right to exercise his or her Stock Option as to all or any part of
the shares of Common Stock covered by the Option, including shares as to which
the Stock Option would not otherwise be exercisable.
(c) SALE OR MERGER. In the event of a proposed sale of
all or substantially all of the assets of the Company, or the merger of the
Company with or into another corporation, the Committee, in the exercise of its
sole discretion, may take such action as it deems desirable, including, but not
limited to: (i) causing a Stock Option to be assumed or an equivalent option to
be substituted by the successor corporation or a parent or subsidiary of such
successor corporation; (ii) providing that an optionee shall have the right to
exercise the Stock Option as to all of the shares of Common Stock covered by the
Stock Option, including shares as to which the Stock Option would not otherwise
be exercisable; or (iii) declaring that a Stock Option shall terminate at a date
fixed by the Committee provided that the optionee is given notice and
opportunity to exercise the then exercisable portion of the Stock Option prior
to such date.
6
13. SUBSTITUTION AND ASSUMPTION OF BENEFITS. Subject to the
restrictions contained in Section 4 regarding the number of shares reserved or
available hereunder, the Board or the Committee may authorize the issuance of
benefits under the Plan in connection with the assumption of, or substitution
for, outstanding benefits previously granted to individuals who become employees
of the Company or any subsidiary as a result of any merger, consolidation,
acquisition of property or stock, or reorganization, upon such terms and
conditions as the Committee may deem appropriate.
14. NONTRANSFERABILITY. Each Award granted under the Plan shall
not be transferable otherwise than by will or the laws of descent and
distribution and each Stock Option and SAR shall be exercisable during the
participant's lifetime only by the participant or, in the event of Disability,
by the participant's personal representative. In the event of the death of a
participant, exercise of any Award or payment with respect to any Award shall be
made only by or to the executor or administrator of the estate of the deceased
participant or the person or persons to whom the deceased participant's rights
under the Award shall pass by will or the laws of descent and distribution.
Notwithstanding the foregoing, at its discretion, the Committee may permit the
transfer of a Non-Qualified Stock Option by the participant, subject to such
terms and conditions as may be established by the Committee.
15. TAXES. The Company shall be entitled to withhold the amount of
any tax attributable to any amounts payable or shares deliverable under the
Plan, after giving the person entitled to receive such payment or delivery
notice and the Company may defer making payment or delivery as to any Award, if
any such tax is payable until indemnified to its satisfaction. At the sole
discretion of the Committee, the Company may permit a participant to pay all or
a portion of any required withholding taxes arising in connection with the
exercise of a Stock Option or SAR or the receipt or vesting of shares or other
Awards hereunder by electing to have the Company withhold shares of Common
Stock, having a fair market value equal to the amount required to be withheld.
16. AMENDMENT AND TERMINATION. The Board or the Committee may
amend the Plan from time to time or terminate the Plan at any time. However, no
such action shall reduce the amount of any existing Award or change the terms
and conditions thereof without the participant's consent. No material amendment
of the Plan, including but not limited to the class of employees eligible to
participate or the maximum number of shares that may be issued under Incentive
Stock Options, shall be made without shareholder approval.
17. FAIR MARKET VALUE. The fair market value of the Common Stock
at any time shall be determined in such manner as the Committee may deem
equitable, within the requirements of any applicable law or regulation.
18. OTHER PROVISIONS.
(a) OTHER TERMS AND CONDITIONS. The Award of any benefit
under the Plan may also be subject to other terms and conditions (whether or not
applicable to the benefit awarded to any other participant) as the Committee
determines appropriate, including provisions intended to comply with federal or
state securities laws and stock exchange or quotation system requirements,
understandings or conditions as to the participant's employment, requirements or
7
inducements for continued ownership of Common Stock after exercise or vesting of
Awards, forfeiture of Awards in the event of termination of employment shortly
after exercise or vesting, or breach of noncompetition or confidentiality
agreements following termination of employment, or provisions permitting the
deferral of the receipt of a benefit for such period and upon such terms as the
Committee shall determine.
(b) NON-U.S. EMPLOYEES. In the event any Award under the
Plan is granted to an employee who is employed or providing services outside the
United States and who is not compensated from a payroll maintained in the United
States, the Committee may, in its sole discretion, modify the provisions of the
Plan as they pertain to such individuals to comply with applicable law,
regulation or accounting rules.
(c) DEFERRAL OF AWARDS. The Committee, in its sole
discretion, may permit or require a participant to have amounts or shares of
Common Stock that otherwise would be paid or delivered to the participant as a
result of the exercise or settlement of an Award under the Plan credited to a
deferred compensation or stock unit account established for the participant by
the Committee on the Company's books of account.
(d) RIGHT TO TERMINATE SERVICES. Nothing contained in the
Plan or in any agreement entered into pursuant to the Plan shall confer upon any
participant the right to continue in the service of the Company or any
subsidiary or affect any right that the Company or any subsidiary may have to
terminate the services of any participant.
(e) COMPLIANCE WITH SECURITIES LAWS. Shares of Common
Stock shall not be issued pursuant to an Award or exercise thereof unless the
offer, purchase, issuance and delivery of such shares shall comply with all
relevant provisions of law, including, without limitation, the Securities Act of
1933, as amended (the "Securities Act"), the Exchange Act, the rules and
regulations promulgated thereunder, and the requirements of any stock exchange
upon which Common Stock of the Company may then be listed, and shall be further
subject to the approval of counsel for the Company with respect to such
compliance.
(f) INVESTMENT REPRESENTATIONS. As a condition to the
exercise of a Stock Option or SAR or the receipt of shares of Restricted Stock
or any other Award, the Company may require the participant to represent and
warrant that the shares of Common Stock are being purchased only for investment
and without any present intention to sell or distribute such shares.
19. RESERVATION OF SHARES. The Company, during the term of the
Plan, will at all times reserve and keep available such number of shares as
shall be sufficient to satisfy the requirements of the Plan. Inability of the
Company to obtain authority from any regulatory body having jurisdiction, which
authority is deemed by the Company's counsel to be necessary to the lawful
issuance and sale of any shares hereunder, shall relieve the Company of any
liability in respect of the failure to issue or sell such shares as to which
such requisite authority shall not have been obtained.
20. EFFECT ON OTHER PLANS. Participation in the Plan shall not
affect a participant's eligibility to participate in any other benefit or
incentive plan of the Company. Any Award
8
under the Plan shall not be used in determining the benefits provided under any
other plan of the Company unless specifically provided.
21. DURATION OF THE PLAN. The Plan shall remain in effect until
all restrictions applicable to Awards and all Stock Option and SAR grants have
been satisfied by the issuance of shares or cash or terminated in accordance
with the terms of the Awards, but no Incentive Stock Option shall be granted
more than ten years after the date of adoption of the Plan by the Board;
provided, however, that the terms and conditions applicable to any Stock Option
granted on or before such date may thereafter be amended or modified by mutual
agreement between the Company and the participant, or such other person as may
then have an interest therein, subject to the prohibition on repricing set forth
in Section 6.
22. FORFEITURE FOR DISHONESTY. Notwithstanding anything to the
contrary in the Plan, if the Committee finds, by a majority vote, after full
consideration of the facts presented on behalf of both the Company and any
participant, that the participant has been engaged in fraud, embezzlement,
theft, commission of a felony or dishonest conduct in the course of the
participant's employment or retention by the Company or any subsidiary that
damaged the Company or any subsidiary or that the participant has disclosed
trade secrets of the Company or any subsidiary, the participant shall forfeit
all unexercised Stock Options and SARs, all Restricted Stock for which the
restrictions have not yet expired and all unvested Awards of any kind held by
the participant. The decision of the Committee in interpreting and applying the
provisions of this Section 22 shall be final. No decision of the Committee,
however, shall affect the finality of the discharge or termination of such
optionee by the Company or any subsidiary in any manner.
23. NO PROHIBITION ON CORPORATE ACTION. No provision of the Plan
shall be construed to prevent the Company or any officer or director from taking
any corporate action deemed by the Company or such officer or director to be
appropriate or in the Company's best interest, whether or not such action could
have an adverse effect on the Plan or any Awards hereunder, and no participant
or participant's estate, personal representative or beneficiary shall have any
claim against the Company or any officer or director as a result of the taking
of such action.1.
24. INDEMNIFICATION. With respect to the administration of the
Plan, the Company shall indemnify each present and future member of the
Committee and the Board against, and each member of the Committee and the Board
shall be entitled without further action on the part of such person to indemnity
from the Company for all expenses (including the amount of judgments and the
amount of approved settlements made with a view to the curtailment of costs of
litigation, other than amounts paid to the Company itself) reasonably incurred
by such person in connection with or arising out of, any action, suit or
proceeding in which such person may be involved by reason of such person's being
or having been a member of the Committee and the Board, whether or not such
person continues to be such member at the time of incurring such expenses;
provided, however, that such indemnity shall not include any expenses incurred
by any such member of the Committee or the Board (i) in respect of matters as to
which such person shall be finally adjudged in any such action, suit or
proceeding to have been guilty of gross negligence or willful misconduct in the
performance of his or her duty as such member of the Committee or the Board; or
(ii) in respect of any matter in which any settlement is effected for an
9
amount in excess of the amount approved by the Company on the advice of its
legal counsel; and provided further that no right of indemnification under the
provisions set forth herein shall be available to or enforceable by any such
member of the Committee and the Board unless, within 60 days after institution
of any such action, suit or proceeding, such member shall have offered the
Company in writing the opportunity to handle and defend the matter at its own
expense. The foregoing right of indemnification shall inure to the benefit of
the heirs, executors or administrators of each such member of the Committee and
the Board and shall be in addition to all other rights to which such member may
be entitled as a matter of law, contract or otherwise.2.
25. GOVERNING LAW. The Plan and any actions taken in connection
herewith shall be governed by and construed in accordance with the laws of the
Commonwealth of Pennsylvania (without regard to applicable Pennsylvania
principles of conflict of laws).
26. MISCELLANEOUS PROVISIONS.
(a) COMPLIANCE WITH PLAN PROVISIONS. No participant or
other person shall have any right with respect to the Plan, the Common Stock
reserved for issuance under the Plan or in any Award until a written Stock
Option or Award agreement (as the case may be) shall have been executed by the
Company and the participant and all the terms, conditions and provisions of the
Plan and the Award applicable to such participant (and each person claiming
under or through such participant) have been met.
(b) APPROVAL OF COUNSEL. In the discretion of the
Committee, no shares of Common Stock, other securities or property of the
Company, or other forms of payment shall be issued hereunder with respect to any
Award unless counsel for the Company shall be satisfied that such issuance will
be in compliance with applicable federal, state, local and foreign legal,
securities exchange and other applicable requirements.
(c) COMPLIANCE WITH RULE 16B-3. To the extent that Rule
16b-3 under the Exchange Act applies to the Plan or any Award under the Plan, it
is the intention of the Company that the Plan comply in all respects with the
requirements of Rule 16b-3, that any ambiguities or inconsistencies in
construction of the Plan be interpreted to give effect to such intention and
that, if the Plan shall not so comply, whether on the date of adoption or by
reason of any later amendment to or interpretation of Rule 16b-3, the provisions
of the Plan shall be deemed to be automatically amended so as to bring them into
full compliance with such rule.
(d) EFFECT OF ACCEPTANCE OF AWARD. By accepting an Award
under the Plan, each participant and each person claiming under or through a
participant shall be conclusively deemed to have indicated such person's
acceptance and ratification of, and consent to, any action taken under the Plan
by the Company, the Board and/or the Committee or its delegates.
(e) Lock-Up Period. If so requested by the Company or any
representative of the underwriters (the "Managing Underwriter") in connection
with any underwritten offering of securities of the Company under the Securities
Act, a participant (including any successor or assigns) shall not sell or
otherwise transfer any shares or other securities of the Company received under
the Plan during the 30-day period preceding and the 180-day period following the
effective date of a registration statement of the Company filed under the
Securities Act for such
10
underwriting (or such shorter period as may be requested by the Managing
Underwriter and agreed to by the Company) (the "Market Standoff Period"). The
Company may impose stop-transfer instructions with respect to securities subject
to the foregoing restrictions until the end of such Market Standoff Period.
27. SHAREHOLDER APPROVAL. The Company shall submit the Plan to the
shareholders entitled to vote hereon for approval within twelve months after the
date of adoption by the Board in order to meet the requirements of Section 422
of the Code, Section 162(m) of the Code and the Nasdaq Stock Market.
ESCALON MEDICAL CORP.
ANNUAL MEETING OF SHAREHOLDERS TO BE HELD DECEMBER 1, 2004
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Richard J. DePiano and Harry M. Rimmer, or
either of them acting alone in the absence of the other, the attorneys, agents
and proxies of the undersigned, with full powers of substitution (the
"Proxies"), to attend and act as proxy or proxies of the undersigned at the
Annual Meeting of Shareholders (the "Annual Meeting") of Escalon Medical Corp.
(the "Company") to be held at the offices of Duane Morris LLP, One Liberty
Place, 1650 Market Street, Philadelphia, PA 19103-7396, on December 1, 2004 at
9:00 a.m. or any adjournment or continuation thereof, and to vote as specified
herein the number of shares which the undersigned, if personally present, would
be entitled to vote.
(CONTINUED AND TO BE SIGNED ON THE REVERSE SIDE)
ANNUAL MEETING OF STOCKHOLDERS OF
ESCALON MEDICAL CORP.
DECEMBER 1, 2004
Please date, sign and mail your proxy card in the
envelope provided as soon as possible.
Please detach along perforated line and mail in the envelope provided.
--------------------------------------------------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ELECTION OF DIRECTORS AND
"FOR" PROPOSAL 2. PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED
ENVELOPE. PLEASE MARK YOUR VOTE IN BLUE OR BLACK INK AS SHOWN HERE [x]
1. ELECTION OF CLASS II DIRECTORS :
[ ] FOR ALL NOMINEES
[ ] WITHHOLD AUTHORITY
FOR ALL NOMINEES
[ ] FOR ALL EXCEPT
(See instructions below)
NOMINEES:
( ) Lisa A. Napolitano
( ) Jeffrey F. O'Donnell
INSTRUCTION: To withhold authority to vote for any individual nominee(s), mark
"FOR ALL EXCEPT" and fill in the circle next to each nominee you wish to
withhold, as shown here: (X)
--------------------------------------------------------------------------------
To change the address on your account, please check the box at right and
indicate your new address in the address space above. Please note that changes
to the registered name(s) on the account may not be submitted via this method.
[ ]
FOR AGAINST ABSTAIN
2. PROPOSAL TO APPROVE THE ESCALON MEDICAL CORP. [ ] [ ] [ ]
2004 EQUITY INCENTIVE PLAN.
3. OTHER BUSINESS. In their discretion, the Proxies are authorized to vote upon
such other business as may come before the Annual Meeting and any
adjournment, past, present or unlimited thereof.
IMPORTANT - PLEASE SIGN AND DATE BELOW AND RETURN THE PROXY CARD PROMPTLY USING
THE ENCLOSED ENVELOPE.
This Proxy when properly executed will be voted as specified. If no instruction
is specified with respect to a matter to be acted upon, the shares represented
by the Proxy will be voted "FOR" each nominee for Class II Director, and "FOR"
the approval of the Escalon Medical Corp. 2004 Equity Incentive Plan. If any
other business is presented at the meeting, this Proxy confers authority to and
shall be voted in accordance with the recommendations of the Board of Directors.
This Proxy is solicited on behalf of the Board of Directors and may be revoked
prior to its exercise by filing with the Secretary of the Company a duly
executed proxy bearing a later date or an instrument revoking this Proxy, or by
attending the meeting and electing to vote in person.
Please mark here if you plan to attend the Annual Meeting [ ]
--------------------------------------------- ------------------------------
Signature of Stockholder Date:
--------------------------------------------- ------------------------------
Signature of Stockholder Date:
NOTE: Please sign exactly as your name or names appear on this Proxy. When
shares are held jointly, each holder should sign. When signing as executor,
administrator, attorney, trustee or guardian, please give full title as such. If
the signer is a corporation, please sign full corporate name by duly authorized
officer, giving full title as such. If signer is a partnership, please sign in
partnership name by authorized person.