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Section 240.14a-101 Schedule 14A.
Information required in proxy statement.
Schedule 14A Information
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
(Amendment No. )
Filed by the Registrant [ ]
Filed by a party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted
by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
ECHOCATH, INC.
.................................................................
(Name of Registrant as Specified In Its Charter)
.................................................................
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11
(1) Title of each class of securities to which transaction
applies:
............................................................
(2) Aggregate number of securities to which transaction
applies:
.......................................................
(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (set forth the amount
on which the filing fee is calculated and state how it was
determined):
.......................................................
(4) Proposed maximum aggregate value of transaction:
.......................................................
(5) Total fee paid:
.......................................................
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for
which the offsetting fee was paid previously. Identify the
previous filing by registration statement number, or the
Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
.......................................................
(2) Form, Schedule or Registration Statement No.:
.......................................................
(3) Filing Party:
.......................................................
(4) Date Filed:
.......................................................
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ECHOCATH, INC.
4326 U.S. ROUTE 1
MONMOUTH JUNCTION, NEW JERSEY 08852
------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON MARCH 5, 1998
------------------------
NOTICE IS HEREBY GIVEN to the Shareholders of ECHOCATH, INC., a New Jersey
corporation (the 'Company'), that the Annual Meeting of Shareholders (the
'Meeting') will be held at the offices of Rubin Baum Levin Constant & Friedman,
the Company's counsel, 30 Rockefeller Plaza, 29th Floor, New York, New York
10112 at 10:00 a.m., New York time, on March 5, 1998 for the following purposes:
1. To elect a board of five (5) directors to serve until the next
Annual Meeting of Shareholders or until their respective successors are
elected and qualified;
2. To approve and ratify the adoption of an amendment to the Company's
1995 Stock Option Plan, as amended, increasing the total number of shares
of the Company's Class A Common Stock, no par value per share, for which
options may be granted from 620,000 to 1,020,000 shares of Class A Common
Stock;
3. To ratify the selection of KPMG Peat Marwick LLP as the Company's
independent public accountants for the fiscal year ending August 31, 1998;
and
4. To transact such other and further business as may properly come
before the Meeting or any postponement or adjournment thereof.
Only Shareholders of record at the close of business on January 15, 1998
are entitled to notice of and to vote at the Meeting or any adjournment thereof.
The stock transfer books of the Company will not be closed.
A copy of the Company's Annual Report on Form 10-KSB for the fiscal year
ended August 31, 1997 accompanies this notice.
By Order of the Board of Directors,
IRWIN M. ROSENTHAL
Secretary
Monmouth Junction, New Jersey
February 3, 1998
RETURN OF PROXIES
A proxy and a self-addressed envelope are enclosed for your use. Whether or
not you plan to attend the Meeting, the Board of Directors of the Company
requests that you execute and return your proxy in the enclosed envelope in
order that your shares will be represented and may be voted in accordance with
your wishes at the Meeting. Any proxy given by a shareholder may be revoked by
the shareholder at any time prior to the voting of the proxy.
<PAGE>
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ECHOCATH, INC.
---------------------------------
PROXY STATEMENT
---------------------------------
ANNUAL MEETING OF SHAREHOLDERS
The enclosed proxy ('Proxy') is solicited by the Board of Directors (the
'Board') of ECHOCATH, INC., a New Jersey corporation (the 'Company'), for use at
the Company's Annual Meeting of Shareholders (the 'Meeting') to be held at the
offices of Rubin Baum Levin Constant & Friedman, the Company's counsel, 30
Rockefeller Plaza, 29th Floor, New York, New York 10112 on March 5, 1998 at
10:00 a.m., New York time. Any shareholder giving a Proxy has the power to
revoke it at any time before it is voted by executing another proxy bearing a
later date or by giving written notice of revocation to the Company, addressed
to the Secretary, prior to the Meeting or by oral or written notice at the
Meeting.
The mailing address of the Company's principal executive office is 4326
U.S. Route 1, Monmouth Junction, New Jersey 08852, Telephone No. (609) 987-8400.
The approximate date on which this Proxy Statement and form of Proxy are first
being sent or given to shareholders is February 3, 1998.
SOLICITATION OF PROXIES
The persons named as proxies are Messrs. Daniel Mulvena and Frank
DeBernardis, both of whom are presently directors of the Company. Shares of
stock represented at the Meeting by the enclosed Proxy will be voted in the
manner specified by the shareholder executing the same. In the absence of
specification, the shares of stock will be voted (i) FOR the election of
each of the five persons nominated by the Board of the Company to serve as
directors, (ii) FOR the approval and ratification of the adoption of an
amendment to the Company's 1995 Stock Option Plan, as amended (the 'Option
Plan') to increase the total number of shares of Class A Common Stock for which
options may be granted from 620,000 to 1,020,000, (iii) FOR the ratification of
the selection of KPMG Peat Marwick LLP as the Company's independent public
accountants for the fiscal year ending August 31, 1998, and (iv) in the
discretion of the proxies, on such other business which may properly come
before the Meeting.
The cost of preparing, assembling and mailing the Notice of Annual Meeting,
the Proxy, this Proxy Statement and the other material enclosed will be borne by
the Company. In addition to the solicitation of proxies by use of the mails,
officers and employees of the Company may solicit proxies by telephone, telegram
or other means of communication. The Company will request brokerage houses,
banking institutions, and other custodians, nominees and fiduciaries, with
respect to shares held of record in their names or in the names of their
nominees, to forward the proxy material to the beneficial owners of such shares
of stock and will reimburse them for their reasonable expenses in forwarding the
proxy material.
SHARES OUTSTANDING AND VOTING RIGHTS
Only holders of shares of Class A Common Stock, no par value ('Class A
Shares' or 'Class A Common Stock'), Class B Common Stock, no par value ('Class B
Shares' or 'Class B Common Stock'; and together with the Class A Shares, the
'Common Stock'), and Series B Cumulative Convertible Preferred Stock, no par
value (the 'Series B Preferred Stock'), of record as at the close of business on
January 15, 1998 (the 'Record Date') are entitled to vote at the Meeting, or any
postponement or adjournment thereof. On the Record Date there were issued and
outstanding 2,316,759 Class A Shares, 1,207,277 Class B Shares and 280,000
shares of Series B Preferred Stock. Each Class A Share and each Series B
Preferred Stock Share is entitled to one vote and each Class B Share is entitled
to five votes on all matters to be voted upon.
The presence in person or by properly executed proxy of the holders of a
majority of the outstanding shares of Common Stock entitled to vote at the
Meeting is necessary to constitute a quorum. Directors are elected by a majority
of the votes present in person or by proxy at the Meeting
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and voting on such proposal. The affirmative vote of a majority of the votes
present in person or by proxy at the Meeting is required for amendment of the
Option Plan.
Shareholders of the Company vote at the Meeting by casting ballots (in
person or by proxy) which are tabulated by a person who is appointed by the
Board before the Meeting to serve as the inspector of election at the Meeting
and who has executed and verified an oath of office. For purposes of determining
the number of votes cast with respect to a particular matter, only those cast
'For' or 'Against' are included. Abstentions and broker non-votes are counted
only for purposes of determining whether a quorum is present at the Meeting.
The stock transfer books of the Company will not be closed. Shareholders
who do not expect to attend the Meeting, but wish to have their shares of stock
voted at the Meeting, are urged to complete, sign, date and return the enclosed
Proxy as promptly as possible.
PROPOSAL NO. I -- ELECTION OF DIRECTORS
Five directors of the Company are to be elected to serve until the next
annual meeting of Shareholders or until the election and qualification of their
respective successors. Each of the nominees named below currently serves as a
director of the Company. The persons named in the accompanying Proxy intend to
vote (unless authority to vote for directors is withheld in such Proxy) all duly
executed Proxies unrevoked at the time of the exercise thereof for the election
to the Board of all of the nominees named below, each of whom consented to be
named herein and to serve as a director if elected at the Meeting. In the event
that any nominee should become unavailable prior to the Meeting, the Proxy will
be voted for a substitute nominee designated by the Board if a substitute
nominee is designated. Listed below is certain information with respect to each
current nominee for election as a director. For information concerning the
number of shares of Common Stock beneficially owned by each nominee, see
'Principal Shareholders.'
THE BOARD RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR EACH OF THE NOMINEES
LISTED BELOW.
NOMINEES FOR DIRECTORS
<TABLE>
<CAPTION>
NAME AGE POSITION WITH THE COMPANY
- ------------------------------------------ --- ---------------------------------------------------------------
<S> <C> <C>
Frank A. DeBernardis(2)................... 55 Chief Executive Officer, President and Director
David Vilkomerson......................... 57 Executive Vice President, Director of Research and Development,
Assistant Secretary and Director
Daniel M. Mulvena(1)(2)................... 49 Chairman of the Board of Directors
Anthony J. Dimun(1)(3).................... 54 Director
Irwin M. Rosenthal(1)(3).................. 69 Secretary and Director
</TABLE>
- ------------
(1) Member of the Audit Committee.
(2) Member of the Executive Committee.
(3) Member of the Compensation and Stock Option Committee.
------------------------
Frank DeBernardis, a founder of the Company, has served as Chief Executive
Officer, President and a director of the Company since its inception. From 1989
to 1992, Mr. DeBernardis served as President and was the sole shareholder of
Implemed, Inc. ('Implemed'), a privately-held corporation which provided
consulting services in the area of medical device manufacturing. Mr. DeBernardis
is also a founder of the American College of Physician Inventors.
David Vilkomerson, PhD., a founder of the Company, has served as Executive
Vice President, Vice President - Research and Development, Assistant Secretary
and a director of the Company since its inception. Dr. Vilkomerson is a founder
of Ultramed Inc. ('Ultramed') and served as President and Chairman of the Board
of Ultramed from March 1982 to September 1992. Dr. Vilkomerson has authored or
coauthored approximately 30 technical papers and received over 30 United States
patents.
2
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Daniel Mulvena has served as Chairman of the Board since September 1997 and
was Co-Chairman of the Board together with Terence D. Wall from August 1995 to
September 1997. Mr. Mulvena is President of Commodore Associates, a private firm
providing consulting services. From February 1992 through April 1995, Mr.
Mulvena served as Vice-President and General Manager of the Mansfield Division
of Boston Scientific Corporation, a publicly-traded corporation which
manufactures and sells minimally invasive medical products. From July 1992 to
May 1995, Mr. Mulvena served as Vice Chairman of the Board of Directors of Life
Medical Sciences, Inc. ('Life Medical'), a corporation engaged in the research
and development of technologies for use in medical applications. Since May 1997,
Mr. Mulvena has served on the Board of Directors of Thoratec Laboratories
Corporation, a publicly held corporation. Mr. Mulvena currently also serves on
the boards of several privately-held companies.
Anthony J. Dimun has served as a director of the Company since inception.
He served as Secretary of the Company since inception until August 1995 and as a
Vice President and Treasurer of the Company since inception until November 1996.
Mr. Dimun has been a certified public accountant since 1968. Mr. Dimun has
served as the Chief Financial Officer and Executive Vice President of Vital
Signs, Inc. ('Vital Signs') since March 1991, its Secretary and Treasurer since
December 1991, and as a director of Vital Signs since August 1987.
Irwin M. Rosenthal has served as a director of the Company since August
1995 and as Secretary of the Company since September 1995. Mr. Rosenthal is a
co-founder of Life Medical, and has served as Secretary, Treasurer and a
director of Life Medical since its inception in 1990. Mr. Rosenthal is an
attorney and since 1960 has specialized in securities law. He is currently a
senior partner at Rubin Baum Levin Constant & Friedman. Mr. Rosenthal serves as
Secretary and as a director of Magar Inc. a private investment firm, of which he
is a principal shareholder. He is also a director of Magna-Lab, Inc., a
publicly-traded medical technology company, and Symbollon Corporation, a
publicly-traded chemical and medical technology company, and is a general
partner of Alliance Partners ('Alliance'), a partnership which invests in
companies and may take on a management role in such companies. See 'Certain
Relationships and Related Transactions.'
PRINCIPAL SHAREHOLDERS
The following table sets forth, as of January 15, 1998, certain information
as to the number of shares of Class A Common Stock, the Class B Common Stock
or the Series B Preferred Stock, beneficially owned by (i) each person (or
groups of persons) known or believed by the Company to be the beneficial owner
of more than five percent (5%) of the Class A, Class B Common Stock or Series
B Preferred Stock, (ii) the Named Executives (as defined below), (iii) each
current director or nominee for director of the Company, and (iv) all executive
officers, directors, nominees for director of the Company as a group.
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF
BENEFICIAL PERCENT OF
NAME AND ADDRESS OF OWNERSHIP PERCENT OF VOTING
BENEFICIAL OWNER TITLE OF CLASS (1)(2)(3) CLASS(4) POWER(4)
- ---------------------------------------------------- ----------------------------------- ---------- ----------
<S> <C> <C> <C> <C>
Medtronic, Inc.(5) ................................. Class A Common Stock 363,636 15.7% 4.2%
7000 Central Ave. N.E.
Minneapolis, Minnesota 55482
Terence D. Wall(6) ................................. Class A Common Stock 50,000 2.1% 26.6%
c/o Vital Signs, Inc. Class B Common Stock 451,560 37.4%
20 Campus Road
Totowa, New Jersey 07512
Vital Signs, Inc.(7) ............................... Class B Common Stock 311,953 25.8% 18.1%
20 Campus Road
Totowa, New Jersey 07512
Cathtech Corp.(7) .................................. Class B Common Stock 311,953 25.8% 18.1%
c/o Vital Signs, Inc.
20 Campus Road
Totowa, New Jersey 07512
</TABLE>
(table continued on next page)
3
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<PAGE>
(table continued from previous page)
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF
BENEFICIAL PERCENT OF
NAME AND ADDRESS OF OWNERSHIP PERCENT OF VOTING
BENEFICIAL OWNER TITLE OF CLASS (1)(2)(3) CLASS(4) POWER(4)
- ---------------------------------------------------- ----------------------------------- ---------- ----------
<S> <C> <C> <C> <C>
Anthony Dimun(8) ................................... Class A Common Stock 50,000 2.1% *
c/o Vital Signs, Inc. Class B Common Stock 4,366 *
20 Campus Road
Totowa, New Jersey 07512
Ultramed, Inc.(9) .................................. Class B Common Stock 234,544 19.5% 13.6%
c/o Frank Joworisak
EchoCath, Inc.
P.O. Box 7224
Princeton, New Jersey 08543
David Vilkomerson(10) .............................. Class A Common Stock 90,000 3.8% 3.6%
c/o EchoCath, Inc. Class B Common Stock 44,068 3.7%
P.O. Box 7224
Princeton, New Jersey 08543
Frank DeBernardis(11) .............................. Class A Common Stock 12,000 * 2.7%
c/o EchoCath, Inc. Class B Common Stock 44,362 3.7%
P.O. Box 7224
Princeton, New Jersey 08543
Guidant Corporation ................................ Class B Common Stock 95,400 7.9% 5.5%
111 Monument Circle
Suite 2900
Indianapolis, IN 46204
Attn: General Counsel
Herbert Moskowitz(12)(13)(14) ...................... Class A Common Stock 66,666 2.8% 4.8%
c/o Irwin Rosenthal Class B Common Stock 70,750 5.9%
30 Rockefeller Plaza
29th Floor
New York, New York 10112
Irwin M. Rosenthal(12)(15) ......................... Class A Common Stock 83,334 3.5% 5.5%
30 Rockefeller Plaza Class B Common Stock 78,750 6.5%
29th Floor
New York, New York 10112
Daniel M. Mulvena(16) .............................. Class A Common Stock 66,000 2.8% *
6 Fuller Lane
Marblehead, Mass. 01945
Bradley Resources Corporation ...................... Class B Common Stock 95,810 7.9% 5.5%
107 John Street
Southport, Ct. 06490
EP MedSystems, Inc. ................................ Series B Preferred Stock 280,000 100% 3.2%
58 Route 46 West
Budd Lake, New Jersey 07828
All officers and directors as a group
(6 persons)(17)................................... Class A Common Stock 364,000 14.6%
Class B Common Stock 246,296 20.4% 8.1%
</TABLE>
- ------------
* Denotes less than 1%.
(1) The Class A Common Stock and the Series B Preferred Stock has one vote per
share and the Class B Common Stock has five votes per share. All shares are
beneficially owned and sole voting and investment power is held by the
persons named, except as otherwise noted.
(2) Certain holders have agreed that up to a portion of his or its shares of
the Class B Common Stock are subject to transfer to the Company for no
consideration upon the failure of certain conditions to occur by certain
dates. So long as such shares are subject to such conditions, the holder
may vote but not dispose of such shares.
(footnotes continued on next page)
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(footnotes continued from previous page)
(3) Does not include shares of Class A Common Stock underlying options not
exercisable within 60 days of the date of this Proxy Statement.
(4) Each beneficial owner's percentage is determined by assuming that (i) all
options, warrants or convertible securities that are held by such person
(but not those held by other persons) and which are exercisable within 60
days of the date of this Proxy Statement have been exercised and converted,
and (ii) 2,316,759 shares of Class A Common Stock, 1,207,277 shares of
Class B Common Stock and 280,000 shares of Series B Preferred Stock,
respectively, are outstanding, before any consideration is given to options
or warrants.
(5) Represents shares of Class A Common Stock held by Medtronic Asset
Management, Inc., a Minnesota corporation and a wholly-owned subsidiary of
Medtronic through which Medtronic holds certain investments. The amount of
shares beneficially owned by Medtronic is based upon a Schedule 13D filed
by Medtronic and Medtronic Asset Management, Inc. on November 10, 1997.
(6) Mr. Terence D. Wall, a former director of the Company, resigned from the
Board in September 1997. Mr. Wall is currently an officer, a director and a
principal shareholder of Vital Signs and an officer and director of
Cathtech, a wholly owned subsidiary of Vital Signs. Such shares include
139,607 shares of Class B Common Stock held directly by Mr. Wall, as
reported in a Schedule 13G filed by Mr. Wall on February 14, 1997, and an
option to purchase 50,000 shares of Class A Common Stock, which option is
exercisable within 60 days of the date of this Proxy Statement. These
shares also include the 311,953 shares of Class B Common Stock owned by
Cathtech.
(7) Cathtech is the beneficial owner of approximately 13% of the common stock
of Ultramed. Vital Signs may be deemed to be a beneficial owner of the
311,953 shares of Class B Common Stock owned by Cathtech. The amount of
shares beneficially owned by Cathtech is based upon a Schedule 13G filed by
Cathtech and Vital Signs on February 14, 1997.
(8) Mr. Dimun is an officer and a director of Vital Signs and Cathtech. These
shares do not include the 311,953 shares of Class B Common Stock owned by
Cathtech, as to which Mr. Dimun disclaims beneficial ownership, since Mr.
Dimun is not a principal shareholder of Vital Signs. These shares include
an option to purchase 50,000 shares of Class A Common Stock, which option
is exercisable within 60 days following the date of this Proxy Statement.
(9) A portion of the shares has been pledged to Vital Signs and a law firm as
collateral for a loan and accounts payable, respectively. The pledgees
disclaim beneficial ownership of such shares. The amount of shares
beneficially owned by Ultramed is based upon a Schedule 13G filed by
Ultramed on February 14, 1997.
(10) Includes (i) options granted by Ultramed to Dr. Vilkomerson to purchase
from Ultramed 7,526 shares of Class B Common Stock, which options are
exercisable within 60 days following the date of this Proxy Statement, and
(ii) an option granted to Dr. Vilkomerson to purchase 90,000 shares of
Class A Common Stock, which option is exercisable within 60 days following
the date of this Proxy Statement. Excludes (i) options granted by Ultramed
to Dr. Vilkomerson to purchase from Ultramed 1,882 shares of Class B Common
Stock of the Company, which options are not exercisable within 60 days
following the date of this Proxy Statement, and (ii) 239,784 shares of
Class B Common Stock owned by Ultramed (of which Dr. Vilkomerson is a
director and officer and of which he owns approximately 13% of the
outstanding stock), as to which Dr. Vilkomerson disclaims beneficial
ownership. Also excludes an option to purchase 150,000 shares of Class A
Common Stock, which option vests as to 50,000 shares on April 29, 1998, as
to 38,750 shares on April 29, 1999, and, subject to shareholder approval of
an amendment to the Option Plan to increase the number of shares available
for grant thereunder, as to 11,250 shares on April 29, 1999 and as to
50,000 shares on April 29, 2000.
(11) Includes options granted by the Company to Mr. DeBernardis to purchase
12,000 shares of Class A Common Stock, which options are exercisable within
60 days following the date of this Proxy Statement. Excludes (i) 10,006
shares of Class B Common Stock held in a trust for the benefit of
(footnotes continued on next page)
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(footnotes continued from previous page)
Mr. DeBernardis' children, as to which Mr. DeBernardis disclaims beneficial
ownership and (ii) options to purchase 8,000 shares of Class A Common Stock
which are not yet vested. Also excludes an option to purchase 150,000
shares of Class A Common Stock, which option vests as to 50,000 shares on
April 29, 1998, as to 38,750 shares on April 29, 1999, and, subject to
shareholder approval of an amendment to the Option Plan to increase the
number of shares available for grant thereunder, as to 11,250 shares on
April 29, 1999, and as to 50,000 shares on April 29, 2000.
(12) Mr. Rosenthal and Dr. Moskowitz are each partners of Alliance, each holding
a 50% ownership interest in such partnership. Shares and options
exercisable within 60 days of the date of this Proxy Statement held by
Alliance are beneficially owned by each of Mr. Rosenthal and Dr. Moskowitz.
Such shares include 50,000 shares of Class A Common Stock held by each of
Mr. Rosenthal and Dr. Moskowitz and an option granted to each of Mr.
Rosenthal and Dr. Moskowitz to purchase 50,000 shares of Class A Common
Stock, which options are exercisable within 60 days following the date of
this Proxy Statement.
(13) Includes 8,333 shares of Class A Common Stock, and an option to purchase
8,333 shares of Class A Common Stock, issued to Dr. Moskowitz in connection
with the Alliance Agreement. The option to purchase 8,333 shares of Class A
Common Stock is exercisable within 60 days following the date of this Proxy
Statement. These shares also include an option to purchase 50,000 shares of
Class A Common Stock, which option is exercisable within 60 days following
the date of this Proxy Statement.
(14) Dr. Herbert Moskowitz who has chosen not to stand for reelection still
serves as a director until the Meeting.
(15) Such shares include 16,667 shares of Class A Common Stock, and an option to
purchase 16,667 shares of Class A Common Stock, issued to Mr. Rosenthal in
connection with the Alliance Agreement. The option to purchase 16,667
shares of Class A Common Stock is exercisable within 60 days following the
date of this Proxy Statement. These shares also include an option to
purchase 50,000 shares of Class A Common Stock, which option is exercisable
within 60 days following the date of this Proxy Statement.
(16) Includes options granted by the Company to Mr. Mulvena to purchase 58,000
shares of Class A Common Stock, which options are exercisable within 60
days following the date of this Proxy Statement and excludes options to
purchase 8,000 shares of Class A Common Stock which are not yet vested.
(17) Includes 176,000 shares of Class A Common Stock and 7,526 shares of Class B
Common Stock issuable upon exercise of options exercisable within 60 days
following the date of this Proxy Statement. Excludes (i) 1,882 shares of
Class B Common Stock underlying options that are not exercisable within 60
days following the date of this Proxy Statement and (ii) options to
purchase 231,500 shares of Class A Common Stock which are not yet vested.
Messrs. DeBernardis and Wall, Dr. Vilkomerson, Ultramed, Implemed and
Cathtech may be deemed to be founders or promoters of the Company as that term
is defined under the Securities Act.
BOARD OF DIRECTORS AND COMMITTEES OF THE BOARD
The Company has established an Audit Committee, an Executive Committee and
a Compensation and Stock Option Committee.
The Board met seven times and did not act by unanimous written consent
during the fiscal year ended August 31, 1997. Each of the directors attended all
the meetings of the Board and of each committee of the Board on which such
directors served, either in person or via telephone.
The Audit Committee, consisting of Messrs. Mulvena, Dimun and Rosenthal,
reviews the engagement of the Company's independent public accountants and the
independence of the accounting firm, the audit and non-audit fees of the
independent public accountants and the adequacy of the Company's
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internal control procedures. The Audit Committee met one time and acted one time
by unanimous written consent during the fiscal year ended August 31, 1997.
The Executive Committee, consisting of Messrs. DeBernardis and Mulvena,
exercises all the power and authority of the Board in the management and affairs
of the Company between meetings of the Board to the extent permitted by law. The
Executive Committee met six times during the fiscal year ended August 31, 1997.
The Compensation and Stock Option Committee, consisting of Messrs. Dimun
and Rosenthal (the 'Committee') makes recommendations to the Board concerning
compensation, including incentive arrangements, of the Company's officers and
key employees and others, administers the Company's Option Plan and determines
the officers, key employees and others to be granted options under the Option
Plan and the number of shares subject to such options. The Compensation and
Stock Option Committee met two times during the fiscal year ended August 31,
1997.
EXECUTIVE OFFICERS AND KEY PERSONNEL
Set forth below is certain information, as of January 15, 1998, regarding
the executive officers and key personnel of the Company.
<TABLE>
<CAPTION>
NAME AGE POSITION WITH THE COMPANY
- ------------------------------------------ --- ---------------------------------------------------------------
<S> <C> <C>
Frank A. DeBernardis...................... 55 Chief Executive Officer, President and Director
David Vilkomerson......................... 56 Executive Vice President, Director of Research and Development,
Assistant Secretary and Director
Daniel M. Mulvena......................... 49 Chairman of the Board of Directors
Anthony J. Dimun.......................... 54 Director
Irwin M. Rosenthal........................ 69 Secretary and Director
David Lyons............................... 49 Vice President of Engineering
</TABLE>
Information with regard to Frank DeBernardis, David Vilkomerson, Daniel
Mulvena, Anthony Dimun and Irwin Rosenthal is set forth under 'Nominees for
Directors'.
David Lyons has been Vice President of Engineering at the Company since
April 1997. Prior to serving in such function, Mr. Lyons served as Manager,
Electronic R&D since 1991 where he was responsible for the Company's design and
development of electronics and software related to real-time three dimensional
ultrasound imaging, ultrasound beacon systems, Doppler blood flow velocity
measurement, and Doppler DSP methods.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following summary compensation table sets forth the aggregate
compensation paid or accrued by the Company for the fiscal years ended August
31, 1997, 1996 and 1995 to Frank A. DeBernardis, the Company's Chief Executive
Officer, David Vilkomerson, the Company's Executive Vice President, and Daniel
M. Mulvena, the Company's Chairman of the Board (the 'Named Executive
Officers'). No other executive officer received annual compensation in excess of
$100,000 for either of the fiscal years ended August 31, 1997, 1996 or 1995.
7
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SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
-------------------------------
AWARDS PAYOUTS
----------- ------------
OTHER SECURITIES
ANNUAL UNDERLYING ALL OTHER
SALARY BONUS COMPENSATION OPTIONS(1) COMPENSATION
NAME AND PRINCIPAL POSITION YEAR ($) ($) ($) (#) ($)
- ------------------------------------ ---- ------- ------ ------------ ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Frank A. DeBernardis ............... 1997 130,000 16,000 -- 150,000(3) --
Chief Executive Officer 1996 151,000(2) 25,000 -- 20,000(4) --
1995 76,000 -- -- -- --
David Vilkomerson .................. 1997 130,000 16,000 -- 150,000(3) --
Executive Vice President 1996 151,000(2) 25,000 -- 90,000(5) --
1995 76,000 -- -- -- --
Daniel M. Mulvena .................. 1997 103,667 -- -- 50,000(6) --
Chairman of the Board 1996 81,333 -- -- 20,000(5) --
1995 4,667 -- -- -- --
</TABLE>
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(1) The security underlying all options is Class A Common Stock.
(2) Includes $26,000 of back pay.
(3) Such option vests as to 50,000 shares on April 29, 1998 and as to 38,750
shares on April 29, 1999; and, subject to shareholder approval of an
amendment to the Option Plan to increase the number of shares available for
grant thereunder, to an additional 11,250 shares on April 29, 1999 and as to
50,000 shares on April 29, 2000.
(4) Such option vests in five equal annual installments commencing in January
1996.
(5) Such option vests in three equal annual installments commencing in January
1996.
(6) Such option vested as to 25,000 shares on April 29, 1997, and as to the
remaining 25,000 shares on December 31, 1997.
STOCK OPTION TABLES
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth the options granted to the Named Executive
Officers during the fiscal year ended August 31, 1997. The Company granted no
stock appreciation rights ("SARs").
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
-------------------------------------------------------------
NUMBER OF PERCENT OF MARKET PRICE
SECURITIES TOTAL OPTIONS AS REPORTED
UNDERLYING GRANTED TO EXERCISE OR ON BULLETIN
OPTIONS EMPLOYEES IN BASE PRICE BOARD ON DATE EXPIRATION
NAME GRANTED(#) FISCAL YEAR(1) ($/SH) OF GRANT DATE
- ---------------------------------------- ----------- --------------- ----------- ------------- ---------------
<S> <C> <C> <C> <C> <C>
Frank A. DeBernardis ................... 150,000(2) 25.34% $ 3.375 $ 3.375 April 29, 2007
Chief Executive Officer
David Vilkomerson ...................... 150,000(2) 25.34% $ 3.375 $ 3.375 April 29, 2007
Executive Vice President
Daniel M. Mulvena ...................... 50,000(3) 8.44% $ 3.375 $ 3.375 April 29, 2007
Chairman of the Board
David Lyons ............................ 25,000(4) 4.22% $ 3.375 $ 3.375 April 29, 2007
Vice President of Engineering
</TABLE>
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(1) In the fiscal year ended August 31, 1997, the Company granted a total of
592,500 options under the Option Plan. Such number was used in calculating
the percentages above.
(footnotes continued on next page)
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(footnotes continued from previous page)
(2) Incentive stock options granted under the Option Plan. Such option vests as
to 50,000 shares on April 29, 1998 and as to 38,750 shares on April 29,
1999. Each option vests as to an additional 11,250 shares on April 29, 1999,
and as to 50,000 shares on April 29, 2000, subject to shareholder approval
of an amendment to the Option Plan to increase the number of shares
available for grant thereunder.
(3) Incentive stock option granted under the Option Plan. Such option vested as
to 25,000 shares on April 29, 1997, the date of grant, and as to the
remaining 25,000 shares on December 31, 1997.
(4) Incentive stock option granted under the Option Plan. Such option vests as
to 5,000 shares on each anniversary of the date of grant, commencing on
April 29, 1998.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
The following table sets forth information (on an aggregate basis)
concerning each exercise of stock options during the fiscal year ended August
31, 1997 by each of the Named Executive Officers and the final year-end value of
unexercised options. The table reflects options exercisable within 60 days of
the date of this Proxy Statement.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS 'IN-THE-MONEY' OPTIONS
AT FISCAL YEAR-END AT FISCAL YEAR END(3)
SHARES ACQUIRED VALUE ---------------------------- ----------------------------
ON EXERCISE(1) REALIZED(2) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
--------------- ------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Frank DeBernardis ....... 0 $0 8,000 162,000 $ 0 $ 0
Chief Executive Officer
David Vilkomerson ....... 0 0 60,000 180,000 0 0
Executive Vice
President
Daniel Mulvena .......... 0 0 8,000 58,000 0 0
Chairman of the Board
David Lyons ............. 0 0 0 25,000 0 0
Vice President of
Engineering
</TABLE>
- ------------
(1) As of the date of this Proxy Statement, none of the Named Executive Officers
have exercised any of their options.
(2) Value realized is the closing market price of the stock on the date of
exercise less the option price, multiplied by the number of shares acquired
on exercise.
(3) Options are 'in-the-money' at the fiscal year-end if the fair market vale of
the underlying securities on such date exceeds the exercise price of the
option. The sales price of the securities underlying the options on August
31, 1997 was $2 5/32 per share, and the exercise price of the applicable
options has been reset from $5.00 per share to $3.375 per share on April 29,
1997.
COMPENSATION OF DIRECTORS
The Company pays all outside directors $500 for each board or committee
meeting attended. Outside directors may also be reimbursed for expenses incurred
by them in acting as a director or as a member of any committee of the Board.
In April 1997, the Company granted to each of Messrs. Mulvena, Rosenthal,
Dimun and Wall and to Dr. Moskowitz options under the Option Plan to acquire up
to 50,000 shares of Class A Common Stock at an exercise price per share equal to
the fair market value of a share of Class A Common Stock on the date of the
grant $3.375 per share. Each option vested as to 25,000 shares immediately for
the
9
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first year's service of each non-employee director as a member of the Board of
Directors and as to the remaining 25,000 shares on December 31, 1997, and
expires ten (10) years from the date of grant of such options.
EMPLOYMENT AGREEMENTS
The Company entered into employment agreements with Mr. Frank DeBernardis,
to serve as President and Chief Executive Officer of the Company, and Dr. David
Vilkomerson, to serve as Director and Executive Vice President - Research and
Development of the Company, which expired in November 1996. Pursuant to such
agreements, Mr. DeBernardis and Dr. Vilkomerson received a base salary of
$130,000 at the time of expiration of the agreements. The employment agreements
provided that each such agreement could be terminated by the Company only if
such executive officer had materially breached his obligations under the
agreement, engaged in willful misconduct against the Company or was found guilty
of a felony by a court of competent jurisdiction which, in the discretion of the
Board, would interfere with the performance of such executive officer's duties
and responsibilities or would materially adversely affect the Company. The
agreements also contained confidentiality and non-competition provisions. It is
anticipated that each of Mr. DeBernardis and Dr. Vilkomerson will enter into new
employment agreements with the Company on substantially similar terms.
The Company entered into a consulting agreement with Mr. Mulvena which
expired on June 30, 1997. Pursuant to such agreement, Mr. Mulvena provided
consulting services to the Company from July 1, 1995 through June 30, 1997, for
up to 27 days per quarter, at a rate of $1,000 per day. The agreement provided
for Mr. Mulvena to be reimbursed for his reasonable expenses and to be provided
with Company benefits. The agreement also contained confidentiality and
non-compete provisions. An extension of such consulting agreement is currently
being negotiated and it is anticipated that Mr. Mulvena will enter into a new
consulting agreement on substantially similar terms.
All of the employment agreements which have expired are currently being
negotiated. The Company expects that the new employment agreements will be
entered into in spring 1998. During the time of such negotiations, both the
Company and the employees comply with their obligations under the expired
agreements.
REPORT ON REPRICING OF OPTIONS
In April 1997, the Board determined that the purposes of the Option Plan
were not being adequately achieved with respect to those employees holding
options that were above current market value and that it was essential to the
best interests of the Company and the Company's shareholders that the Company
retain and motivate such employees. The Board concluded that such retention was
particularly important given the Company's financial situation at that time and
that a cost-effective approach to retention and motivation was required. The
Board further determined that it would be in the best interests of the Company
and the Company's shareholders to provide such optionees the opportunity to
exchange their above market value options for options exercisable at the current
market value. As of April 29, 1997, upon approval by the Board, the Company
offered such optionees the opportunity to exchange such options for new options
at an exercise price of $3.375 per share. The last sales price of a share of
Class A Common Stock quoted on the Nasdaq that day was $3.375. Any holder
accepting this offer was required to give up existing options.
In April 1997, each of Messrs. DeBernardis and Mulvena and Dr. Vilkomerson
agreed to the termination of 20,000, 20,000 and 90,000, respectively, of their
existing options to purchase Class A Common Stock at $5.00 per share in exchange
for 20,000, 20,000 and 90,000, respectively, of new options of Class A Common
Stock with an exercise price of $3.375 per share. Mr. DeBernardis' existing
options had been fully vested with respect to 8,000 shares and the remaining
12,000 options had an additional approximately eight months to 2.7 years
remaining, Dr. Vilkomerson's existing options had been fully vested with respect
to 60,000 shares and the remaining 30,000 options had an additional
approximately eight months remaining and Mr. Mulvena's options had been fully
vested with respect to 8,000 shares and the remaining 12,000 options had an
additional approximately eight months to 2.7 years remaining. The new options
have the same vesting and expiration terms as the original options.
10
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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Since October 1, 1992, Vital Signs has provided certain management services
to the Company and incurred certain out-of-pocket expenses on behalf of the
Company. In January 1996, the Company paid Vital Signs approximately $82,000 for
such services and costs incurred. Management believes that the fees incurred by
the Company did not exceed fees that would have been charged by unrelated
parties for similar services.
As of October 30, 1997, the Company amended certain provisions of the
Alliance Agreement, dated July 7. Under the terms of the Alliance Agreement, the
Company had agreed, among other things, to pay $750,000 to Alliance upon the
receipt by the Company of $23,040,000 in proceeds from the exercise of the
Company's outstanding Class B Warrants. The $750,000 contingent payment is
reflected on the Company's balance sheet as a capital contribution subject to
repayment. Under the terms of the Amendment to the Alliance Agreement, Alliance
has agreed to release and discharge the Company from making the contingent
payment and the Company has agreed to issue to Alliance (i) 50,000 shares of
Class A Common Stock and (ii) a six-year option to purchase 50,000 shares of
Class A Common Stock at an exercise price of $2.00 per share. Upon the closing
of the Amendment, the contingent payment was reclassified as equity of the
Company.
Irwin M. Rosenthal, a director of the Company, is a partner of Alliance.
Irwin M. Rosenthal is also a partner of Rubin Baum Levin Constant & Friedman,
counsel to the Company. Other than Mr. Rosenthal, certain attorneys associated
with such firm own less than one percent (1%) of shares of Common Stock of the
Company.
PROPOSAL NO. II -- AMENDMENT TO THE 1995 STOCK OPTION PLAN
At a meeting held on December 19, 1997, the Board, subject to shareholder
approval, adopted an amendment to the Option Plan increasing the number of
shares of Class A Common Stock for which options and SARs may be granted under
the Option Plan from 620,000 to 1,020,000.
The following summary of the Option Plan, including the proposed amendment,
is qualified in its entirety by the specific language of the Option Plan, a copy
of which is attached to this Proxy Statement for shareholder review as Exhibit
A.
GENERAL
In August 1995, the Board of Directors adopted and in January 1996 the
shareholders approved the Option Plan. The Option Plan provides for the grant of
incentive stock option ('ISOs') (within the meaning of Section 422 of the
Internal Revenue Code of 1986, as amended (the 'Code')), and non-qualified stock
options ( 'NQSOs') to certain directors, officers and employees of the Company.
The Option Plan further provides for the grant of NQSOs and 'SARs' to directors
and agents of, and consultants to, the Company, whether or not employees of the
Company. The purpose of the Option Plan is to attract and retain employees,
agents, consultants and directors. Options and SARs granted under the Option
Plan may not be exercisable for terms in excess of 10 years from the date of
grant. In addition, no options or SARs may be granted under the Option Plan
later than 10 years after the Option Plan's effective date. The total number of
shares of Class A Common Stock with respect to which options and SARs will be
granted under the Option Plan is currently 620,000. The shares subject to and
available under the Option Plan may consist, in whole or in part, of authorized
but unissued stock or treasury stock not reserved for any other purpose. Any
shares subject to an option or SAR that terminates, expires or lapses for any
reason, and any shares purchased pursuant to an option and subsequently
repurchased by the Company pursuant to the terms of the option, shall again be
available for grant under the Option Plan.
If an optionee retires, all options held by him on the date of his
retirement terminate on the earlier of the option's expiration or the first
anniversary of the day of his retirement.
If an optionee dies, his option may be exercised, to the extent of the
number of shares with respect to which he could have exercised it on the date of
his death, by his estate, personal representative or beneficiary who acquires
the option by will or by the laws of descent and distribution, at any time prior
11
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to the earlier of the option's expiration or the first anniversary of the
optionee's death. On the earlier of such dates, the option terminates.
If an optionee ceases, other than by reason of death or retirement, to be
employed by the Company or a subsidiary, all options granted to him and
exercisable on the date of his termination of employment terminate on the
earlier of such options' expiration or 90 days after the day his employment ends
or as otherwise determined by the Committee. Any installments not exercisable on
the date of such termination lapse and are thenceforth unexercisable.
No option is assignable or transferable by the optionee except by will or
by laws descent and distribution, and during the lifetime of the optionee the
option may be exercised only by him. At the request of an optionee, shares of
Common Stock purchased on exercise of an option may be issued in or transferred
to the name of the optionee and another person jointly with the right of
survivorship.
The number and price of shares of Common Stock covered by each option, the
total number of shares that may be sold under the Option Plan, and the maximum
number of shares that may be sold, issued or transferred to an employee, will be
proportionately adjusted to reflect, as deemed equitable and appropriate by the
Committee, any stock dividend, stock split or share combination of the Common
Stock or recapitalization of the Company. To the extent deemed equitable and
appropriate by the Committee, subject to any required action by shareholders, in
any merger, consolidation, reorganization, liquidation or dissolution, any
option granted under the Option Plan pertains to the securities and other
property to which a holder of the number of shares of Common Stock covered by
the option would have been entitled to receive in connection with such event.
The Board may discontinue the Option Plan at any time and may amend it from
time to time. No amendment or discontinuation of the Option Plan may adversely
affect any award previously granted without the optionee's written consent.
Amendments may be made without shareholder approval except as required to
satisfy Rule 16b-3 under the Securities Exchange Act of 1934, as amended (the
'Exchange Act') or other regulatory requirements.
The specific future benefits or amounts to be received by directors,
officers and employees under the Option Plan as proposed to be amended is not
determinable. For the benefits and amounts received during the years ended
August 31, 1997 by the Named Executive Officers, see the 'Options in Last Fiscal
Year' table, above. During that year, options to purchase an aggregate of
592,500 shares of Class A Common Stock were granted under the Option Plan, all
of which remain outstanding. Current executive officers as a group received
options for an aggregate of 350,000 shares, directors who are not executive
officers received options for an aggregate of 200,000 shares and all employees
other than executive officers, together with any other individuals, received
options for an aggregate of 42,500 shares.
ADMINISTRATION
The Option Plan is administered by the Board which will determine, in its
discretion, among other things, the recipients of grants, whether a grant will
consist of ISOs, NQSOs or SARs, or a combination thereof, and the number of
shares of Class A Common Stock to be subject to such options or SARs. In
accordance with the discretion granted it under the terms of the Option Plan,
the Board has delegated its power, duties and responsibilities under the Option
Plan to the Committee, which consists of two or more directors who are
'disinterested persons' within the meaning of Rule 16b-3 promulgated under the
Exchange Act. Until the 1998 Annual Meeting of Shareholders on March 5, 1998,
the Committee is composed of Mr. Anthony Dimun and Dr. Herbert Moskowitz. The
exercise price of options granted under the Plan shall not be less than the fair
market value per share on the date of grant, as determined by the Board.
LIMITATIONS
The Option Plan contains certain limitations applicable only to ISOs
granted thereunder. To the extent that the aggregate fair market value, as of
the date of grant, of the shares to which ISOs become exercisable for the first
time by an optionee during the calendar year exceeds $100,000, the ISO will be
treated as a NQSO. In addition, if an optionee owns more than 10% of the
Company's stock at the time
12
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the individual is granted an ISO, the option price per share cannot be less than
110% of the fair market value per share and the term of the option cannot exceed
five years.
GRANTS
In the fiscal years ended August 31, 1996 and August 31, 1997,
respectively, the Company granted under the Option Plan options to purchase an
aggregate of 150,000 and 592,500 shares of Class A Common Stock, respectively.
In April 1997, the Company granted to each of Messrs. Mulvena, Rosenthal,
Dimun and Wall and to Dr. Moskowitz options under the Option Plan to acquire up
to 50,000 shares of Class A Common Stock at an exercise price per share equal to
the fair market value of a share of Class A Common Stock on the date of the
grant ($3.375 per share). Each option vested as to 25,000 shares immediately for
the first year's service of each non-employee director as a member of the Board
and as to the remaining 25,000 shares on December 31, 1997, and expires ten
(10) years from the date of grant of such options.
In April 1997, the Company further granted to each of Mr. DeBernardis and
Dr. Vilkomerson an option to purchase 150,000 shares of Class A Common Stock at
an exercise price of $3.375 per share equal to the fair market value of such
share on the date of grant. Each option vests as to 50,000 shares on April 29,
1998, as to 38,750 shares on April 29, 1999, and, subject to approval of the
amendment of the Option Plan to increase the number of shares available for
grant thereunder, as to 11,250 shares on April 29, 1999 and as to 50,000 shares
on April 29, 2000.
In April 1997, the Company granted to David Lyons, Alex Colleoni and Tom
Chilipka an option to acquire up to 25,000, 12,500 and 5,000 shares of Class A
Common Stock, respectively, at an exercise price of $3.375, which option shall
vest as to 20% of such shares each year, commencing April 29, 1998, and which
options shall expire ten years from the date of vesting.
As of the date hereof none of these options have been exercised and no
additional options have been granted. Giving effect to the proposed amendment to
the Option Plan, there remain 277,500 shares of Class A Common Stock available
for issuance upon the exercise of options to be granted pursuant to the Option
Plan.
On January 27, 1998, the closing sales price for the Class A Common Stock
on the Nasdaq Small Cap Market'tm' was $2 3/8.
FEDERAL INCOME TAX CONSEQUENCES
The following summary is intended only as a general guide as to the federal
income tax consequences under current law with respect to participation in the
Option Plan and does not attempt to describe all possible federal or other tax
consequences of such participation. Furthermore, the tax consequences of options
are complex and subject to change, and a taxpayer's particular situation may be
such that some variation of the described rules is applicable. Optionees should
consult their own tax advisors prior to the exercise of any option and prior to
the disposition of any Common Stock acquired upon the exercise of an option.
Options granted under the Option Plan may be either ISOs or NQSOs. ISOs are
those that are intended to be treated as 'incentive stock options' within the
meaning of Section 422 of the Code. Under the Code as currently in effect, and
under Treasury Regulations specifying that an option does not have a readily
ascertainable fair market value unless it meets certain conditions not met here,
the grant of either an ISO or a NQSO under the Option Plan is not taxed at the
time of grant.
When a NQSO is exercised, the excess of the fair market value of the shares
received over the option price is taxable as ordinary income to the option
holder. Special rules may apply to exercises by officers and directors.
The holder of an ISO generally will not be taxed when the option is
exercised and, provided the Common Stock received upon exercise is not disposed
of within one year of receipt of the shares upon exercise or two years of the
date on which the option is granted, the gain on the subsequent disposition will
receive long-term capital gains treatment.
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For a NQSO, the Company generally will be entitled to a deduction at the
same time and in the same amount that the option holder recognizes ordinary
income, to the extent that such income is considered reasonable compensation
under the Code. For an ISO, the Company will not be entitled to a deduction upon
the exercise of the option. However, if an ISO holder disposes of the stock
within the holding periods described above, he may recognize ordinary income and
the Company generally would be entitled to a deduction in an equivalent amount.
PROPOSED AMENDMENT
The Board resolved on December 19, 1997 to propose to the Annual Meeting of
Shareholders to amend Section 2(a) of the Company's 1995 Stock Option Plan to
read in its entirety as follows:
'2. Stock Subject to the Plan.
a. The total number of shares of the authorized but unissued or
treasury shares of the Class A common stock, no par value per share, of the
Company (the 'Common Stock') for which options (the 'Options') and stock
appreciation rights ('SARs') may be granted under the Plan shall be
1,020,000, subject to adjustment as provided in Section 14 hereof.'
THE BOARD RECOMMENDS A VOTE FOR PROPOSAL NO. II.
PROPOSAL NO. III -- RATIFICATION OF SELECTION OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board has selected the accounting firm of KPMG Peat Marwick LLP to
serve as its independent accountants to audit the financial statements of the
Company for the fiscal year ending August 31, 1998. KPMG Peat Marwick LLP also
served as the independent accountants for the Company during its 1997, 1996 and
1995 fiscal years. Management recommends that this decision be ratified by the
shareholders. Should the holders of a majority of the shares of Stock
represented at the Meeting in person or by proxy not approve the selection
of KPMG Peat Marwick LLP, the Company will interpret this as an instruction
to seek other auditors.
Representatives from KPMG Peat Marwick LLP are expected to be present at
the Meeting. They will have an opportunity to make a statement at the Meeting if
they so desire, and are expected to be available to respond to appropriate
questions.
Unless otherwise specified, shares of Stock represented by proxies will be
voted for ratification of KPMG Peat Marwick LLP as independent public
accountants.
THE BOARD RECOMMENDS A VOTE FOR PROPOSAL NO. III.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Each of Mr. Frank DeBernardis, Chief Executive Officer, President and a
director of the Company, and Dr. David Vilkomerson, Executive Vice President and
a director of the Company, failed to timely report a transaction on Form 5 for
the month of April 1997. Mr. Terence Wall, who was a director and Co-Chairman of
the Board of the Company in April 1997 and who is a beneficial owner of more
than ten percent of Common Stock of the Company, failed to timely report an
transaction on Form 5 for the month of April 1997. Each of Messrs. Anthony
Dimun, Treasurer and director of the Company, Irwin Rosenthal, Secretary and a
director of the Company, Daniel Mulvena, Chairman of the Board and a director of
the Company, Dr. Herbert Moskowitz, a director of the Company, failed to timely
report a transaction on Form 5 for the month of April 1997. The Company is not
aware of any other late filings pursuant to Section 16(a) of the Exchange Act.
PROPOSALS OF SECURITY HOLDERS
Proposals of security holders intended to be presented at the next Annual
Meeting of Shareholders to be held during 1999 must be received by the Company
before September 25, 1998 for inclusion in the Company's proxy and proxy
statement relating to said meeting. The Company has received no proposals from
shareholders for consideration at the Annual Meeting of Shareholders to be
held on March 5, 1998.
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OTHER MATTERS
The management of the Company knows of no business other than that referred
to in the foregoing Notice of Annual Meeting of Shareholders and Proxy Statement
which may come before the Meeting. Should any other matters come before the
Meeting, it is the intention of the persons named in the accompanying Proxy to
vote such Proxy in accordance with their judgment on such matters.
The Company's Annual Report on Form 10-KSB, which includes the Company's
audited financial statements for the fiscal year ended August 31, 1997, is being
mailed concurrently herewith to all of the Company's shareholders of record.
By Order of the Board of Directors
Irwin M. Rosenthal
Secretary
15
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EXHIBIT A
ECHOCATH, INC.
1995 STOCK OPTION PLAN
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<C> <S> <C>
1. Purpose of the Plan.................................................................................... 1
2. Stock Subject to the Plan.............................................................................. 1
3. Administration of the Plan............................................................................. 1
4. Type of Options........................................................................................ 2
5. Eligibility............................................................................................ 2
6. Restrictions on Incentive Stock Options................................................................ 2
7. Option and SAR Agreements.............................................................................. 3
8. Option Price........................................................................................... 3
9. Manner of Payment; Manner of Exercise.................................................................. 4
10. Exercise of Options and SARs........................................................................... 4
11. Term of Options and SARs; Exercisability............................................................... 4
12. Options and SARs Not Transferable...................................................................... 5
13. Terms and Conditions of SARs........................................................................... 5
14. Recapitalization, Reorganizations and the Like......................................................... 6
15. No Special Employment Rights........................................................................... 7
16. Withholding............................................................................................ 7
17. Restrictions on Issuance of Shares..................................................................... 7
18. Purchase for Investment; Rights of Holder on Subsequent Registration................................... 8
19. Loans.................................................................................................. 8
20. Modification of Outstanding Options and SARs........................................................... 8
21. Approval of Stockholders............................................................................... 8
22. Termination and Amendment of Plan...................................................................... 8
23. Limitation of Rights in the Option Shares.............................................................. 9
24. Notices................................................................................................ 9
</TABLE>
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<PAGE>
ECHOCATH, INC.
1995 STOCK OPTION PLAN
1. PURPOSE OF THE PLAN
The purpose of the Echocath, Inc., 1995 Stock Option Plan (the 'Plan') is
to advance the interests of Echocath, Inc., a New Jersey corporation (the
'Company'), by providing an opportunity for ownership of the stock (or, in the
case of SARs, as defined below, the appreciation of the value of the stock) of
the Company by employees, agents and directors of, and consultants to, the
Company and its subsidiaries. By providing such opportunity, the Company seeks
to attract and retain such qualified personnel, and otherwise to provide
additional incentive for grantees to promote the success of its business.
2. STOCK SUBJECT TO THE PLAN
(a) The total number of shares of the authorized but unissued or treasury
shares of the Class A common stock, no par value per share, of the Company (the
'Common Stock') for which options (the 'Options') and stock appreciation rights
('SARs') may be granted under the Plan shall be 620,000, subject to adjustment
as provided in Section 14 hereof.
(b) If an Option granted or assumed hereunder shall expire or terminate for
any reason without having been exercised in full, the unpurchased shares subject
thereto shall again be available for subsequent Option grants under the Plan;
provided, however, that shares as to which an Option has been surrendered in
connection with the exercise of a related SAR will not again be available for
subsequent Option or SAR grants under the Plan.
(c) Stock issuable upon exercise of an Option may be subject to such
restrictions on transfer, repurchase rights or other restrictions as shall be
determined by the Board of Directors of the Company (the 'Board').
3. ADMINISTRATION OF THE PLAN
(a) The Plan shall be administered by the Board. No member of the Board
shall act upon any matter exclusively affecting any Option or SAR granted or to
be granted to himself or herself under the Plan. A majority of the members of
the Board shall constitute a quorum, and any action may be taken by a majority
of those present and voting at any meeting. The decision of the Board as to all
questions of interpretation and application of the Plan shall be final, binding
and conclusive on all persons. The Board, in its sole discretion, may grant
Options to purchase shares of Common Stock and may grant SARs, as provided in
the Plan. The Board shall have authority, subject to the express provisions of
the Plan, to construe the respective Option and SAR agreements and the Plan, to
prescribe, amend and rescind rules and regulations relating to the Plan, to
determine the terms and provisions of the respective Option and SAR agreements,
which may but need not be identical, and to make all other determinations in the
judgment of the Board necessary or desirable for the administration of the Plan.
The Board may correct any defect or supply any omission or reconcile any
inconsistency in the Plan or in any Option or SAR agreement in the manner and to
the extent it shall deem expedient to implement the Plan and shall be the sole
and final judge of such expediency. No director shall be liable for any action
or determination made in good faith. The Board, in its discretion, may delegate
its power, duties and responsibilities to a committee, consisting of two or more
members of the Board, all of whom are 'disinterested persons' (as hereinafter
defined). If a committee is so appointed, all references to the Board herein
shall mean and relate to such committee, unless the context otherwise requires.
For the purposes of the Plan, a director or member of such committee shall be
deemed to be 'disinterested' only if such person qualified as a 'disinterested
person' within the meaning of paragraph (c)(2) of Rule 16b-3 promulgated under
the Securities Exchange Act of 1934, as amended (the 'Exchange Act'), as such
term is interpreted from time to time.
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4. TYPE OF OPTIONS
Options granted pursuant to the Plan shall be authorized by action of the
Board and may be designated as either incentive stock options meeting the
requirements of Section 422 of the Internal Revenue Code of 1986, as amended
(the 'Code'), or non-qualified options which are not intended to meet the
requirements of such Section 422 of the Code, the designation to be in the sole
discretion of the Board. Options designated as incentive stock options that fail
to continue to meet the requirements of Section 422 of the Code shall be
redesignated as non-qualified options automatically without further action by
the Board on the date of such failure to continue to meet the requirements of
Section 422 of the Code.
5. ELIGIBILITY
Options designated as incentive stock options may be granted only to
officers and key employees of the Company or of any subsidiary corporation
(herein called 'subsidiary' or 'subsidiaries'), as defined in Section 424(f) of
the Code and the Income Tax Regulations (the 'Regulations') promulgated
thereunder. Directors who are not otherwise employees of the Company or a
subsidiary shall not be eligible to be granted incentive stock options pursuant
to the Plan. Options designated as non-qualified options may be granted to (i)
officers and key employees of the Company or of any of its subsidiaries, or (ii)
agents, directors of and consultants to the Company, whether or not otherwise
employees of the Company.
In determining the eligibility of an individual to be granted an Option or
SAR, as well as in determining the number of shares to be subject to any such
Option or SAR, the Board shall take into account the position and
responsibilities of the individual being considered, the nature and value to the
Company or its subsidiaries of his or her service and accomplishments, his or
her present and potential contribution to the success of the Company or its
subsidiaries, and such other factors as the Board may deem relevant.
6. RESTRICTIONS ON INCENTIVE STOCK OPTIONS
Incentive stock options (but not non-qualified options) granted under the
Plan shall be subject to the following restrictions:
(a) Limitation on Number of Shares. Ordinarily, the aggregate fair
market value of the shares of Common Stock with respect to which incentive
stock options are granted (determined as of the date the incentive stock
options are granted), exercisable for the first time by an individual
during any calendar year shall not exceed $100,000. If an incentive stock
option is granted pursuant to which the aggregate fair market value of
shares with respect to which it first becomes exercisable in any calendar
year by an individual exceeds such $100,000 limitation, the portion of such
option which is in excess of the $100,000 limitation shall be treated as a
non-qualified option pursuant to Section 422(d)(1) of the Code. In the
event that an individual is eligible to participate in any other stock
option plan of the Company or any subsidiary of the Company which is also
intended to comply with the provisions of Section 422 of the Code, such
$100,000 limitation shall apply to the aggregate number of shares for which
incentive stock options may be granted under the Plan and all such other
plans.
(b) Ten Percent (10%) Shareholder. If any employee to whom an
incentive stock option is granted pursuant to the provisions of the Plan is
on the date of grant the owner of stock (as determined under Section 424(d)
of the Code) possessing more than ten percent (10%) of the total combined
voting power of all classes of stock of the Company or any subsidiary of
the Company, then the following special provisions shall be applicable to
the incentive stock options granted to such individual:
(i) The Option price per share subject to such incentive stock
options shall be not less than 110% of the fair market value of the
stock determined at the time such Option was granted. In determining the
fair market value under this clause (i), the provisions of Section 8
hereof shall apply.
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(ii) The incentive stock option by its terms shall not be
exercisable after the expiration of five (5) years from the date such
Option is granted.
7. OPTION AND SAR AGREEMENTS
Each Option and SAR shall be evidenced by an agreement (the 'Agreement')
duly executed on behalf of the Company and by the grantee to whom such Option or
SAR is granted, which Agreement shall comply with and be subject to the terms
and conditions of the Plan. The Agreement may contain such other terms,
provisions and conditions which are not inconsistent with the Plan as may be
determined by the Board; provided that Options designated as incentive stock
options shall meet all of the conditions for incentive stock options as defined
in Section 422 of the Code. No Option or SAR shall be granted within the meaning
of the Plan and no purported grant of any Option or SAR shall be effective until
the Agreement shall have been duly executed on behalf of the Company and the
grantee. More than one Option and SAR may be granted to an individual, subject,
if applicable, to the limitations of Section 6 hereof.
8. OPTION PRICE
(a) Subject to the conditions set forth in Section 8(d) hereof, the option
price or prices of shares of the Common Stock for Options designated as
non-qualified stock options shall be as determined by the Board; provided,
however, that such option price shall be not less than the fair market value of
the shares subject to such Option, determined as of the date of grant of such
Option.
(b) Subject to the conditions set forth in Sections 6(b) and 8(d) hereof,
the option price or prices of shares of the Company's Common Stock for incentive
stock options shall be at least the fair market value of such Common Stock at
the time the Option is granted as determined by the Board in accordance with the
Regulations promulgated under Section 422 of the Code.
(c) If such shares are then listed on any national securities exchange, the
fair market value shall be the mean between the high and low sales prices, if
any, on the largest such exchange on the date of the grant of the Option or, if
none, shall be determined by taking a weighted average of the means between the
highest and lowest sales prices on the nearest date before and the nearest date
after the date of grant in accordance with Section 25.2512-2 of the Regulations.
If the shares are not then listed on any such exchange, the fair market value of
such shares shall be the mean between the closing 'Bid' and the closing 'Ask'
prices, if any, as reported in the National Association of Securities Dealers
Automated Quotation System ('NASDAQ') for the date of the grant of the Option,
or, if none, shall be determined by taking a weighted average of the means
between the highest and lowest sales prices on the nearest date before and the
nearest date after the date of grant in accordance with Section 25.2512-2 of the
Regulations. If the shares are not then either listed on any such exchange or
quoted in NASDAQ, the fair market value shall be the mean between the average of
the 'Bid' and 'Ask' prices on the National Daily Quotation Service for the date
of the grant of the Option, or, if none, shall be determined by taking a
weighted average of the means between the highest and lowest sales prices on the
nearest date before and the nearest date after the date of grant in accordance
with Section 25.2512-2 of the Regulations. If the fair market value cannot be
determined under the preceding three sentences, it shall be determined in good
faith by the Board.
(d) Prior to the effective date of the Company's contemplated initial
public offering, the Company may not grant options to purchase more than 120,000
shares of Common Stock. Such options, if any, so granted must be granted at an
exercise price per share of not less than the per share initial public offering
price of the Common Stock (without giving any value to warrants which may be
issued in conjunction with Common Stock in such initial public offering).
'Initial public offering' means an initial public offering underwritten by D.H.
Blair Investment Banking Corp. on a firm commitment basis pursuant to an
effective registration statement under the Securities Act of 1933, as amended
('1933 Act'), covering the offer and sale of equity securities of and for the
account of the Company.
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9. MANNER OF PAYMENT; MANNER OF EXERCISE
(a) Options granted under the Plan may provide for the payment of the
option price by delivery of (i) cash or a check payable to the order of the
Company in an amount equal to the option price of such Options, (ii) shares of
Common Stock owned by the grantee having a fair market value equal in amount to
the option price of the Options being exercised, or (iii) any combination of (i)
and (ii); provided, however, that payment of the option price by delivery of
shares of Common Stock owned by such grantee may be made only upon the condition
that such payment does not result in a charge to earnings for financial
accounting purposes as determined by the Board, unless such condition is waived
by the Board. The fair market value of any shares of Common Stock which may be
delivered as payment upon exercise of an Option shall be determined by the Board
in accordance with Section 8 hereof.
(b) To the extent that the right to purchase shares under an Option has
accrued and is in effect, Options may be exercised in full at one time or in
part from time to time, by giving written notice, signed by the person or
persons exercising the Option, to the Company, stating the number of shares with
respect to which the Option is being exercised, accompanied by payment in full
for such shares as provided in Section 9(a) hereof. Upon such exercise, delivery
of a certificate for paid-up non-assessable shares shall be made at the
principal office of the Company to the person or persons exercising the Option
at such time, during ordinary business hours, after thirty (30) days but not
more than ninety (90) days from the date of receipt of the notice by the
Company, as shall be designated in such notice, or at such time, place and
manner as may be agreed upon by the Company and the person or persons exercising
the Option.
10. EXERCISE OF OPTIONS AND SARS
Each Option and SAR granted under the Plan shall, subject to Section 11(b)
and Section 14 hereof, be exercisable at such time or times and during such
period as shall be set forth in the Agreement; provided, however, that no Option
or SAR granted under the Plan shall have a term in excess of ten (10) years from
the date of grant. To the extent that an Option or SAR is not exercised by a
grantee when it becomes initially exercisable, it shall not expire but shall be
carried forward and shall be exercisable, on a cumulative basis, until the
expiration of the exercise period. No partial exercise may be made for less than
one hundred (100) full shares of Common Stock. The exercise of an Option shall
result in the cancellation of any related SAR with respect to the same number of
shares of Common Stock as to which the Option was exercised.
11. TERM OF OPTIONS AND SARS; EXERCISABILITY
(a) Term.
(i) Each Option and SAR shall expire on a date determined by the Board
which is not more than ten (10) years from the date of the granting
thereof, except (a) as otherwise provided pursuant to the provisions of
Section 6(b) hereof, and (b) for earlier termination as herein provided.
(ii) Except as otherwise provided in this Section 11, an Option or SAR
granted to any grantee whose employment, by the Company or any of its
subsidiaries, is terminated, shall terminate on the earlier of (i) ninety
(90) days after the date such grantee's employment, for the Company or any
such subsidiary, is terminated, or (ii) the date on which the Option or SAR
expires by its terms.
(iii) If the employment of a grantee is terminated by the Company or
any of its subsidiaries for cause or because the grantee is in breach of
any employment agreement or because the grantee voluntarily terminates such
employment, such Option or SAR will terminate on the date the grantee's
employment is terminated by the Company or any such subsidiary, unless the
Board determines, at the time of such option, to extend such option for a
specified period (but not beyond the period described in Section
11(a)(ii)).
(iv) If the employment of a grantee is terminated by the Company or
any of its subsidiaries because the grantee has become permanently disabled
(within the meaning of Section 22(e)(3) of the Code), such Option or SAR
shall terminate on the earlier of (i) one (1) year after the date such
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grantee's employment, by the Company or any such subsidiary, is terminated,
or (ii) the date on which the Option or SAR expires by its terms.
(v) In the event of the death of any grantee, any Option or SAR
granted to such grantee shall terminate one (1) year after the date of
death, or on the date on which the Option or SAR expires by its terms,
whichever occurs first.
(b) Exercisability.
(i) An Option or SAR granted to a grantee whose employment, by the
Company or any of its subsidiaries, is terminated, for whatever reason,
including, without limitation, death or disability, shall be exercisable
only to the extent that such Option or SAR has accrued and is in effect on
the date such grantee's employment, by the Company or any such subsidiary,
is terminated.
(ii) Neither an SAR nor an Option granted in connection with an SAR to
a person subject to Section 16(b) of the Exchange Act may be exercised
before six (6) months after the date of grant.
12. OPTIONS AND SARS NOT TRANSFERABLE
The right of any grantee to exercise any Option or SAR granted to him or
her shall not be assignable or transferable by such grantee other than by will
or the laws of descent and distribution, or the rules thereunder, and any such
Option or SAR shall be exercisable during the lifetime of such grantee only by
him or her. Any Option or SAR granted under the Plan shall be null and void and
without effect upon the bankruptcy of the grantee to whom the Option or SAR is
granted, or upon any attempted assignment or transfer, except as herein
provided, including without limitation, any purported assignment, whether
voluntary or by operation of law, pledge, hypothecation or other disposition,
attachment, trustee process or similar process, whether legal or equitable, upon
such Option or SAR.
13. TERMS AND CONDITIONS OF SARS
(a) An SAR may be granted separately or in connection with an Option
(either at the time of grant or at any time during the term of the Option).
(b) The exercise of an SAR shall result in the cancellation of the Option
to which it relates with respect to the same number of shares of Common Stock as
to which the SAR was exercised.
(c) An SAR granted in connection with an Option shall be exercisable or
transferable only to the extent that such related Option is exercisable or
transferable.
(d) Upon the exercise of an SAR related to an Option, the holder will be
entitled to receive payment of an amount determined by multiplying:
(i) The difference obtained by subtracting the option price of a share
of Common Stock specified in the related Option from the fair market value
of a share of Common Stock on the date of exercise of such SAR (as
determined by the Board), by
(ii) The number of shares as to which such SAR is exercised.
(e) An SAR granted without relationship to an Option shall be exercisable
as determined by the Board, but in no event after ten (10) years from the date
of grant.
(f) An SAR granted without relationship to an Option will entitle the
holder, upon exercise of the SAR, to receive payment of an amount determined by
multiplying:
(i) The difference obtained by subtracting the fair market value of
the a share of Common Stock on the date the SAR was granted from the fair
market value of a share of Common Stock on the date of exercise of such SAR
(as determined by the Board), by
(ii) The number of shares as to which such SAR is exercised.
(g) Notwithstanding Sections 13 (d) and 13 (f) hereof, the Board may limit
the amount payable upon exercise of an SAR. Any such limitation shall be
determined as of the date of grant and noted on the instrument evidencing the
SAR granted.
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(h) At the discretion of the Board, payment of the amount determined under
Sections 13 (d) and 13 (f) hereof may be made solely in whole shares of Common
Stock valued at their fair market value on the date of exercise of the SAR (as
determined by the Board), or solely in cash, or in a combination of cash and
shares. If the Board decides to make full payment in shares of Common Stock and
the amount payable results in a fractional share, payment for the fractional
share shall be made in cash.
14. RECAPITALIZATION, REORGANIZATIONS AND THE LIKE
In the event that the outstanding shares of the Common Stock are changed
into or exchanged for a different number or kind of shares or other securities
of the Company or of another corporation by reason of any reorganization,
merger, consolidation, recapitalization, reclassification, stock split-up,
combination of shares, or dividends payable in capital stock, appropriate
adjustment shall be made in the number and kind of shares as to which Options
and SARs may be granted under the Plan and as to which outstanding Options,
SARs, or portions thereof then unexercised, shall be exercisable, to the end
that the proportionate interest of the grantee shall be maintained as before the
occurrence of such event; such adjustment in outstanding Options and SARs shall
be made without change in the total price applicable to the unexercised portion
of such Options and SARs and with a corresponding adjustment in the option price
per share.
In addition, unless otherwise determined by the Board in its sole
discretion, in the case of any (i) sale or conveyance to another entity of all
or substantially all of the property and assets of the Company or (ii) Change in
Control (as hereinafter defined) of the Company, the purchaser(s) of the
Company's assets or stock, in his, her or its sole discretion, may deliver to
the grantee the same kind of consideration that is delivered to the shareholders
of the Company as a result of such sale, conveyance or Change in Control, or the
Board may cancel all outstanding Options in exchange for consideration in cash
or in kind, which consideration in both cases shall be equal in value to the
value of those shares of stock or other securities the grantee would have
received had the Option been exercised (but only to the extent then exercisable)
and had no disposition of the shares acquired upon such exercise been made prior
to such sale, conveyance or Change in Control, less the option price therefor.
Upon receipt of such consideration, all Options (whether or not then
exercisable) shall immediately terminate and be of no further force or effect.
The value of the stock or other securities the grantee would have received if
the Option had been exercised shall be determined in good faith by the Board,
and in the case of shares of Common Stock, in accordance with the provisions of
Section 8 hereof.
The Board shall also have the power and right to accelerate the
exercisability of any Option, notwithstanding any limitations in this Plan or in
the Agreement upon such a sale, conveyance or Change in Control. Upon such
acceleration, any Option or portion thereof originally designated as an
incentive stock option that no longer qualifies as an incentive stock option
under Section 422 of the Code as a result of such acceleration shall be
redesignated as a non-qualified stock option without the necessity of further
Board action.
A 'Change in Control' shall be deemed to have occurred if any person, or
any two (2) or more persons acting as a group, and all affiliates of such person
or persons, who prior to such time owned less than fifty percent (50%) of the
then outstanding Common Stock, shall acquire such additional shares of Common
Stock in one (1) or more transactions, or series of transactions, such that
following such transaction or transactions, such person or group and affiliates
beneficially own fifty percent (50%) or more of the Common Stock outstanding.
Upon dissolution or liquidation of the Company, all Options and SARs
granted under this Plan shall terminate, but each grantee (if at such time in
the employ of or otherwise associated with the Company or any of its
subsidiaries as a director, agent or consultant) shall have the right,
immediately prior to such dissolution or liquidation, to exercise his or her
Option or SAR to the extent then exercisable.
If by reason of a corporate merger, consolidation, acquisition of property
or stock, separation, reorganization, or liquidation, the Board shall authorize
the issuance or assumption of a stock option or stock options in a transaction
to which Section 424(a) of the Code applies, then, notwithstanding any other
provision of the Plan, the Board may grant an option or options upon such terms
and conditions
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as it may deem appropriate for the purpose of assumption of the old Option, or
substitution of a new option for the old Option, in conformity with the
provisions of such Section 424(a) of the Code and the Regulations thereunder,
and any such option grant shall not reduce the number of shares otherwise
available for issuance under the Plan.
No fraction of a share shall be purchasable or deliverable upon the
exercise of any Option, but in the event any adjustment hereunder in the number
of shares covered by the Option shall cause such number to include a fraction of
a share, such fraction shall be adjusted to the nearest smaller whole number of
shares.
15. NO SPECIAL EMPLOYMENT RIGHTS
Nothing contained in the Plan or in any Option or SAR granted under the
Plan shall confer upon any grantee any right with respect to the continuation of
his or her employment by the Company or any subsidiary or interfere in any way
with the right of the Company or any subsidiary, subject to the terms of any
separate employment agreement to the contrary, at any time to terminate such
employment or to increase or decrease the compensation of the Option or SAR
holder from the rate in existence at the time of the grant of an Option or SAR.
Whether an authorized leave of absence, or absence in military or government
service, shall constitute termination of employment shall be determined by the
Board at the time of such occurrence pursuant to uniform nondiscriminatory
criteria.
16. WITHHOLDING
The Company's obligation to deliver shares upon the exercise of any
non-qualified Option granted under the Plan, or cash upon the exercise of an SAR
granted under the Plan, shall be subject to the grantee's satisfaction of all
applicable Federal, state and local income and employment tax withholding
requirements. The Company and grantee may agree to withhold shares of Common
Stock purchased upon exercise of an Option to satisfy the above-mentioned
withholding requirements; provided, however, that no such agreement may be made
by a grantee who is an 'officer' or 'director' within the meaning of Section 16
of the Exchange Act, except pursuant to a standing election to so withhold
shares of Common Stock purchased upon exercise of an Option, such election to be
made not less than six (6) months prior to such exercise and which election may
be revoked only upon six (6) months prior written notice.
17. RESTRICTIONS ON ISSUANCE OF SHARES
(a) Notwithstanding the provisions of Section 9 hereof, the Company may
delay the issuance of shares covered by the exercise of an Option and the
delivery of a certificate for such shares until one of the following conditions
shall be satisfied:
(i) The shares with respect to which such Option has been exercised
are at the time of the issue of such shares effectively registered or
qualified under applicable Federal and state securities acts now in force
or as hereafter amended; or
(ii) Counsel for the Company shall have given an opinion, which
opinion shall not be unreasonably conditioned or withheld, that such shares
are exempt from registration and qualification under applicable Federal and
state securities acts now in force or as hereafter amended.
(b) It is intended that all exercises of Options shall be effective, and
the Company shall use its reasonable efforts to bring about compliance with the
above conditions within a reasonable time, except that the Company shall be
under no obligation to qualify shares or to cause a registration statement or a
post-effective amendment to any registration statement to be prepared for the
purpose of covering the issue of shares in respect of which any Option may be
exercised, except as otherwise agreed to by the Company in writing in its sole
discretion.
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18. PURCHASE FOR INVESTMENT; RIGHTS OF HOLDER ON SUBSEQUENT REGISTRATION
Unless and until the shares to be issued upon exercise of an Option granted
under the Plan have been effectively registered under the 1933 Act, as now in
force or hereafter amended, the Company shall be under no obligation to issue
any shares covered by any Option or SAR unless the person who exercises such
Option or SAR, in whole or in part, shall give a written representation and
undertaking to the Company which is satisfactory in form and scope to counsel
for the Company and upon which, in the opinion of such counsel, the Company may
reasonably rely, that he or she is acquiring the shares issued pursuant to such
exercise of the Option or SAR for his or her own account as an investment and
not with a view to, or for sale in connection with, the distribution of any such
shares, and that he or she will make no transfer of the same except in
compliance with any rules and regulations in force at the time of such transfer
under the 1933 Act, or any other applicable law, and that if shares are issued
without such registration, a legend to this effect may be endorsed upon the
securities so issued.
In the event that the Company shall, nevertheless, deem it necessary or
desirable to register under the 1933 Act or other applicable statutes any shares
with respect to which an Option shall have been exercised, or to qualify any
such shares for exemption from the 1933 Act or other applicable statutes, then
the Company may take such action and may require from each grantee such
information in writing for use in any registration statement, supplementary
registration statement, prospectus, preliminary prospectus or offering circular
as is reasonably necessary for such purpose and may require reasonable indemnity
to the Company and its officers and directors from such holder against all
losses, claims, damages and liabilities arising from such use of the information
so furnished and caused by any untrue statement of any material fact therein or
caused by the omission to state a material fact required to be stated therein or
necessary to make the statements therein not misleading in the light of the
circumstances under which they were made.
19. LOANS
At the discretion of the Board, the Company may loan to the grantee some or
all of the option price of the shares acquired upon exercise of an Option.
20. MODIFICATION OF OUTSTANDING OPTIONS AND SARS
Subject to any applicable limitations contained herein, the Board may
authorize the amendment of any outstanding Option or SAR with the consent of the
grantee when and subject to such conditions as are deemed to be in the best
interests of the Company and in accordance with the purposes of the Plan.
21. APPROVAL OF STOCKHOLDERS
The Plan shall become effective upon adoption by the Board; provided,
however, that the Plan shall be submitted for approval by the stockholders of
the Company no later than twelve (12) months after the date of adoption of the
Plan by the Board. Should the stockholders of the Company fail to approve the
Plan within such twelve-month period, all Options granted thereunder shall be
and become null and void.
22. TERMINATION AND AMENDMENT OF PLAN
Unless sooner terminated as herein provided, the Plan shall terminate ten
(10) years from the date upon which the Plan was duly adopted by the Board. The
Board may at any time terminate the Plan or make such modification or amendment
thereof as it deems advisable; provided, however, that (i) the Board may not,
without the approval of the stockholders of the Company obtained in the manner
stated in Section 21 hereof, increase the maximum number of shares for which
Options and SARs may be granted or change the designation of the class of
persons eligible to receive Options and SARs under the Plan, and (ii) any such
modification or amendment of the Plan shall be approved by a majority of the
stockholders of the Company to the extent that such stockholder approval is
necessary to comply with applicable provisions of the Code, rules promulgated
pursuant to Section 16 of the Exchange Act (if applicable), applicable state
law, or applicable NASD or exchange listing requirements. Termination
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or any modification or amendment of the Plan shall not, without the consent of a
grantee, affect his or her rights under an Option or SAR theretofore granted to
him or her.
23. LIMITATION OF RIGHTS IN THE OPTION SHARES
A grantee shall not be deemed for any purpose to be a stockholder of the
Company with respect to any of the Options except to the extent that the Option
shall have been exercised with respect thereto and, in addition, a certificate
shall have been issued theretofore and delivered to the grantee.
24. NOTICES
Any communication or notice required or permitted to be given under the
Plan shall be in writing, and mailed by registered or certified mail or
delivered by hand, if to the Company, to the attention of the Chief Executive
Officer at the Company's principal place of business; and, if to a grantee, to
his or her address as it appears on the records of the Company.
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APPENDIX 1
ECHOCATH, INC.
4326 U.S. ROUTE 1, MONMOUTH JUNCTION, NEW JERSEY 08852
PROXY FOR THE ANNUAL MEETING OF STOCKHOLDERS -- MARCH 5, 1998
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
The undersigned hereby appoints DANIEL MULVENA and FRANK DEBERNARDIS, as
Proxies, each with the power to appoint his substitute, and hereby authorizes
them to represent and to vote, as designated below, all of the shares of Class A
Common Stock, no par value ('Class A Shares'), all of the shares of Class B
Common Stock, no par value ('Class B Shares') and all of the shares of Series B
Preferred Stock, of ECHOCATH, INC. held of record by the undersigned on
January 15, 1998 at the Annual Meeting of Shareholders (the 'Meeting') of
ECHOCATH, INC., on March 5, 1998 at 10:00 a.m., New York time, or at any
adjournment or postponement thereof.<PAGE>
<PAGE>
[X] Please mark your
votes as in this
example
<TABLE>
<S> <C> <C> <C>
WITHHOLD AUTHORITY INSTRUCTION
to vote for all To withhold authority to vote or an
FOR nominees listed below individual nominee, write such
1. ELECTION OF [ ] [ ] nominees's name in the spece below.
DIRECTORS.
Nominees: Frank A. DeBernardis
FOR all nominees Withhold authority for Anthony J. Dimun
listed below (except the followint nominees: Daniel M. Mulvena
as indicated otherwise Irwin M. Rosenthal
below) David Vilkomerson
- ---------------------- ----------------------- FOR AGAINST ABSTAIN
2. To approve and ratify the adoption of an amendment to [ ] [ ] [ ]
the Company's 1995 Stock Option Plan, increasing the
total number of shares for which options may be granted
of the Company's Class A Common Stock, no par value
per share, from 620,000 to 1,020,000.
3. To ratify the selection of KPMG Peat Marwick LLP as [ ] [ ] [ ]
independent public accountants for the Company for
the fiscal year ending August 31, 1998.
4. In their discretion, the Proxies are authorized to vote [ ] [ ] [ ]
upon such other business as may properly come
before the meeting or any adjournments thereof.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN ACCORDANCE WITH
THE INSTRUCTIONS GIVEN ABOVE.
Date: ________________________________________________________,1998
Stockholder:_______________________________________________________
___________________________________________________________________
Signature (Signatures if held jointly)
Please mark, sign, date and return the Proxy promptly using the enclosed envelope.
NOTE: Please sign exactly as name appears hereon. When shares are held by joint tenants,
both should sign. When signing as attorney, executor, administrator, trustee or guardian,
please indicate the capacity in which signing. When a proxy is given by a corporation,
please give your full corporation name and have the proxy signed by the president or
other authorized officer. If a partnership, please sign in partnership name by
authorized person.
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