<PAGE> 1
SCHEDULE 14A
(RULE 14a-101)
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 /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement / / Confidential,
for Use of the Commission Only
/X/ Definitive Proxy Statement (as permitted by Rule 14a-6(e)(2))
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
Escalon Medical Corp.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
Escalon Medical Corp.
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box): No Fee Required
/ / $125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2)
or Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transactions applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:(1)
- --------------------------------------------------------------------------------
(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:
- --------------------------------------------------------------------------------
- ---------------
(1) Set forth the amount on which the filing fee is calculated and state
how it was determined.
<PAGE> 2
[LOGO] Escalon Medical Corp.
182 Tamarack Circle
Skillman, New Jersey 08558
Tel. 800-486-4858 - 609-497-9141 - Fax. 609-497-0948
NOTICE OF 1996 ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD DECEMBER 10, 1996
To the Shareholders of Escalon Medical Corp.:
NOTICE IS HEREBY GIVEN that the 1996 Annual Meeting of the
Shareholders of Escalon Medical Corp. (the "Company") will be held at the
offices of Morgan, Lewis & Bockius LLP, 2000 One Logan Square, Philadelphia,
Pennsylvania 19103, on December 10, 1996, at 10:00 A.M., local time, for the
following purposes:
1. To elect five directors;
2. To approve and adopt an amendment to the Company's 1993
Stock Option Plan to (i) increase the number of authorized
shares of Common Stock subject to the Plan by 250,000 to
500,000; (ii) reflect the Company's change of name from
Intelligent Surgical Lasers, Inc. to Escalon Medical Corp.;
and (iii) incorporate recent changes from the Securities
and Exchange Commission's rules relating to the
administration of stock option plans;
3. To ratify the selection of Ernst & Young LLP as the
Company's independent auditors for the fiscal year ending
June 30, 1997; and
4. To transact such other business as may properly come before
the meeting or any adjournments thereof.
The Board of Directors has fixed the close of business on October 21,
1996, as the record date for the determination of shareholders entitled to
notice of, and to vote at, the meeting and any adjournment thereof. A list of
such shareholders will be available for examination by any shareholder, for any
purpose germane to the meeting for ten days prior to the meeting during ordinary
business hours at the Company's executive offices at 182 Tamarack Circle,
Skillman, New Jersey 08558.
Shareholders are cordially invited to attend the Annual Meeting. In
order to constitute a quorum for the conduct of business at the Annual Meeting,
the holders of a majority of all outstanding shares of the Company's Common
Stock must be present in person or be represented by proxy.
By Order of the Board of Directors,
/s/ John T. Rich
-------------------------
John T. Rich
Assistant Secretary
Skillman, New Jersey
October 28, 1996
==============================================================================
EACH SHAREHOLDER IS URGED TO COMPLETE, SIGN AND RETURN THE ENCLOSED PROXY CARD
IN THE ENVELOPE PROVIDED, WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED
STATES. IF A SHAREHOLDER DECIDES TO ATTEND THE MEETING, HE OR SHE MAY, IF SO
DESIRED, REVOKE THE PROXY AND VOTE THE SHARES IN PERSON.
==============================================================================
<PAGE> 3
ESCALON MEDICAL CORP.
182 TAMARACK CIRCLE
SKILLMAN, NEW JERSEY 08558
PROXY STATEMENT
1996 ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON DECEMBER 10, 1996
GENERAL INFORMATION ON THE MEETING
This proxy statement is furnished in connection with the solicitation
of proxies by and on behalf of the Board of Directors of Escalon Medical Corp.,
a California corporation (the "Company"), for use at the 1996 Annual Meeting of
Shareholders of the Company to be held on Tuesday, December 10, 1996, at 10:00
A.M., local time, at the offices of Morgan, Lewis & Bockius LLP, 2000 One Logan
Square, Philadelphia, Pennsylvania 19103, and at any adjournments thereof.
The entire cost of soliciting proxies will be borne by the Company,
including expenses in connection with preparing and mailing proxy solicitation
materials. In addition to the use of the mails, proxies may be solicited by
certain officers, directors and regular employees of the Company, without extra
compensation, by telephone, facsimile transmission or personal interview.
Although there is no formal agreement to do so, the Company will reimburse
brokerage houses and other custodians, nominees and fiduciaries for their
reasonable expenses in sending proxies and proxy material to the beneficial
owners of the Company's Common Stock. This proxy statement and accompanying
proxy are first being sent to the shareholders of the Company on or about
October 28, 1996.
RECORD DATE AND VOTING
Only shareholders of record at the close of business on October 21,
1996 are entitled to notice of, and to vote at, the Annual Meeting and any
adjournment thereof. As of September 23, 1996, 10,518,814 shares of the
Company's Common Stock were issued and outstanding, all of which are entitled to
be voted at the meeting. Each shareholder is entitled to one vote for each share
of Common Stock held on all matters to come before the meeting.
The presence, either in person or by proxy, of persons entitled to
vote a majority of the outstanding shares of the Company's Common Stock is
necessary to constitute a quorum for the transaction of business at the Annual
Meeting. A shareholder giving a proxy may revoke it at any time before it is
voted by filing with the Assistant Secretary of the Company written notice of
revocation or by appearing at the meeting and voting in person. A prior proxy is
automatically revoked by a shareholder delivering a valid proxy to the Assistant
Secretary of the Company bearing a later date. Shares represented by all valid
proxies will be voted in accordance with the instructions contained in the
proxies. In the absence of instructions, shares represented by valid proxies
will be voted for all nominees listed herein under "Election of Directors," for
the approval and adoption of an amendment to the Company's 1993 Stock Option
Plan and for ratification of the selection of Ernst & Young LLP as the Company's
independent auditors for the fiscal year ending June 30, 1997.
The election of directors will be determined by a plurality of the
votes cast, while approval of any other items at the Annual Meeting will require
the affirmative vote of the holders of a majority of the shares present in
person or by proxy and entitled to vote at the meeting. Additionally, in voting
for directors, if any shareholder gives notice at the meeting, prior to voting,
of an intention to cumulate votes, then each shareholder has the right to
cumulate votes and to give any one or more of the nominees whose names have been
placed in nomination prior to voting a number of votes equal to the number of
directors to be elected multiplied by the number of shares which the shareholder
is entitled to vote. Discretionary authority to cumulate votes and distribute
such votes among some or all of the nominees in the event that cumulative voting
is invoked by any shareholder is solicited by the Board of Directors. In the
case of shares that are present at the Annual Meeting for quorum purposes, not
voting those shares
<PAGE> 4
for a particular nominee for director (including by withholding authority on the
proxy) will not operate to prevent the election of that nominee if he or she
otherwise receives affirmative votes; an abstention on any other item will
operate to prevent approval of the item to the same extent as a vote against
approval of such item and a broker "non-vote" on any item (which results when a
broker holding shares for a beneficial owner has not received timely voting
instructions on certain matters from such beneficial owner and those matters are
matters with respect to which the broker has no discretion to vote) will have no
effect on the outcome of the vote on such item.
(PROPOSAL NO. 1)
ELECTION OF DIRECTORS
The Board of Directors of the Company, which currently consists of
six members, shall consist of five members, all of whom are to be elected at the
1996 Annual Meeting. The term of each director will continue until his successor
is elected and has qualified or until his earlier resignation or removal.
The Board of Directors has nominated the following nominees for
election as directors of the Company at the Annual Meeting. Each of the nominees
is now a director of the Company with a term expiring at the Annual Meeting.
Each of the nominees has agreed to serve if elected. Unless an instruction is
given by a shareholder on the proxy card to withhold a vote as to a nominee or
nominees, the proxy holders will vote the proxies received by them for the five
nominees, or, in the unlikely event that any nominee becomes unable to serve as
a director, for other persons designated by the Board of Directors.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR EACH OF THE NOMINEES.
------------------------------------------------------------------------
NOMINEES FOR ELECTION
------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR FIRST BECAME DIRECTOR, PRINCIPAL OCCUPATIONS DURING
NAME OF DIRECTOR AGE PAST FIVE YEARS AND CERTAIN DIRECTORSHIPS
- ---------------- --- -----------------------------------------
<S> <C> <C>
Sterling C. Johnson 56 Mr. Johnson has been a director of the Company since February 1996. Mr.
Johnson has served as the President and Chief Executive Officer of the Company since
February 1996. From 1989 through and including the present, Mr. Johnson has served
as the President and Chief Executive Officer of EOI Corp. ("EOI").
Richard J. DePiano 55 Mr. DePiano has been a director of the Company since February 1996. Mr.
DePiano has been the Chief Executive Officer of the Sandhurst Company, L.P.
and Managing Director of the Sandhurst Venture Fund since 1986. Mr.
DePiano is Chairman of the Board of Directors of Surgical Laser Technologies,
Inc.
Jack M. Dodick, MD 57 Dr. Dodick has been a director of the Company since February 1996. Dr.
Dodick has served as the Chairman of the Department of Ophthalmology at
Manhattan Eye, Ear and Throat Hospital in New York since 1982.
Jay L. Federman, MD 58 Dr. Federman has served as the Chairman of the Board of Directors of the
Company since February 1996. Dr. Federman has served as the Chief of the
Division of Ophthalmology at the Allegheny University Medical College of
Pennsylvania since 1993 and as Co-Director of the Retina Service and
Research Department at Wills Eye Hospital in Philadelphia, Pennsylvania since
1980. Dr. Federman is a director of Surgical Laser Technologies, Inc.
</TABLE>
2
<PAGE> 5
<TABLE>
<CAPTION>
YEAR FIRST BECAME DIRECTOR, PRINCIPAL OCCUPATIONS DURING
NAME OF DIRECTOR AGE PAST FIVE YEARS AND CERTAIN DIRECTORSHIPS
- ---------------- --- -----------------------------------------
<S> <C> <C>
Robert J. Kunze 61 Mr. Kunze has served as a director of the Company since 1988. Mr. Kunze has
been a general partner of H&Q Life Science Ventures and H&Q Life Science Technology
Fund I, venture capital investment funds, since July 1987 and October 1987,
respectively.
</TABLE>
Messrs. Johnson, DePiano, Dodick and Federman currently serve as
directors of EOI, formerly known as Escalon Ophthalmics, Inc. EOI, which is the
beneficial owner of 42.2% of the outstanding Common Stock of the Company, was
formerly engaged in the business of developing, manufacturing and marketing
ophthalmic surgical products and developing novel drug delivery technology. EOI,
is currently engaged in the process of winding up its affairs. See "Securities
Ownership of Certain Beneficial Owners and Management" and "Certain
Relationships and Related Transactions."
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors held nine meetings during the fiscal year
ended June 30, 1996. Each director attended at least 75% of the total number of
meetings of the Board of Directors and the Committees of which they were
members.
The Board of Directors has established two standing committees, the
Audit Committee and the Compensation Committee.
Audit Committee. The Audit Committee has the primary responsibility
for ensuring the integrity of the financial information reported by the Company.
The Committee's functions include: (i) making recommendations concerning the
selection of independent auditors; (ii) reviewing the scope of the annual audit
to be performed by the independent auditors; (iii) reviewing the results of
those audits; and (iv) meeting periodically with management and the Company's
independent auditors to review financial, accounting and internal control
matters. The Audit Committee held one meeting during the fiscal year ended June
30, 1996. The Audit Committee currently consists of three directors, Messrs.
DePiano, Dodick and Kunze.
Compensation Committee. The Compensation Committee reviews and makes
recommendations to the Board of Directors on the compensation and benefits
payable to the officers and key employees of the Company and reviews general
policy matters relating to compensation and benefits of employees of the
Company. The Compensation Committee is also charged with determining candidates
who are eligible for grants of stock options under the Company's stock option
plans. In addition, the Compensation Committee is responsible for administering
and interpreting such plans. The Compensation Committee held six meetings during
the fiscal year ended June 30, 1996. The Compensation Committee currently
consists of three directors, Messrs. DePiano, Federman and Johnson.
COMPENSATION OF DIRECTORS
During fiscal year 1996, directors received no cash compensation for
their services to the Company as directors, but were reimbursed for expenses
actually incurred in connection with attending meetings of the Board of
Directors and its committees. Beginning with the next scheduled meeting of the
Board of Directors, the directors will be paid directors' fees of $2,000 for
each board meeting attended in person and $500 for each Committee meeting or
meeting attended telephonically. In addition, directors will continue to be
reimbursed for expenses incurred in connection with attending meetings. See
"Executive Officers--Executive Compensation."
3
<PAGE> 6
<TABLE>
<CAPTION>
EXECUTIVE OFFICERS OF THE COMPANY
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Sterling C. Johnson 56 President and Chief Executive Officer
John T. Rich, C.P.A. 41 Vice President of Finance and Administration, Assistant Secretary
Ronald L. Hueneke 53 Vice President, General Manager, Trek Division
</TABLE>
Mr. Johnson's employment background is described above under
"Nominees for Election."
Mr. Rich was appointed the Vice President of Finance and
Administration and Assistant Secretary of the Company in February 1996. From
January 1990 until February 1996, Mr. Rich held several senior management
positions with, and continues to serve as a vice president of, EOI. From August
1980 until January 1990, Mr. Rich was employed by Arthur Andersen & Co., an
international public accounting firm.
Mr. Hueneke was appointed a Vice President of the Company and the
General Manager of its Trek division in February 1996. From 1991 until February
1996, Mr. Hueneke held various senior management positions with EOI. Mr. Hueneke
co-founded Trek Medical Products, Inc., a vitreoretinal instrument and equipment
business, in 1983 and served as its President until October 1991 when it was
acquired by EOI.
EXECUTIVE COMPENSATION
The following table sets forth certain compensation paid by the
Company to its Chief Executive Officer and certain other highly compensated
executive officers of the Company for all services rendered in all capacities
for the periods shown. This table includes Heinz R. Gisel and Edward M. Lake,
who resigned their positions with the Company effective March 31, 1996.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
ANNUAL COMPENSATION OTHER AWARDS
ANNUAL ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION OPTIONS COMPENSATION(1)
- --------------------------- ---- ------ ----- ------------ --------- ------------
<S> <C> <C> <C> <C> <C> <C>
Sterling C. Johnson (2)............. 1996 $ 55,677 --- --- --- $ 2,536
President and Chief Executive 1995 --- --- --- --- ---
Officer 1994 --- --- --- --- ---
Heinz R. Gisel...................... 1996 $120,000 --- --- --- $204,542
Former Chairman of the Board 1995 $160,000 --- --- 15,000 ---
and Chief Executive 1994 $155,000 --- --- 25,000 ---
Officer
Edward M. Lake...................... 1996 $100,750 $75,000 --- --- $46,434
Former Executive Vice 1995 $127,500 $10,000 --- 25,000 ---
President, Finance and 1994 $120,000 $50,000 --- 100,000 ---
Administration, Secretary
</TABLE>
(1) Includes: (i) premiums paid by the Company for life insurance on behalf of
Mr. Johnson; (ii) severance payments of $160,000 and $33,750 to Mr. Gisel and
Mr. Lake, respectively; (iii) accrued vacation pay of $24,542 and $12,684 to Mr.
Gisel and Mr. Lake, respectively, paid upon their resignation from the Company;
and (iv) $20,000 paid to Mr. Gisel between March 31, 1996 and June 30, 1996
pursuant to a consulting arrangement between Mr. Gisel and the Company.
(2) Mr. Johnson joined the Company on February 12, 1996. The salary and other
compensation shown above was paid to him between February 12, 1996 and June 30,
1996.
4
<PAGE> 7
AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR END OPTION VALUE
<TABLE>
<CAPTION>
NUMBER OF Value of
UNEXERCISED Unexercised In-the-
OPTIONS AT Money Options at
JUNE 30, 1996 June 30, 1996(1)
------------- -----------------
SHARES ACQUIRED VALUE
NAME ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- --------------- --------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Sterling C. Johnson --- --- --- --- --- ---
Heinz R. Gisel --- --- 119,243 --- $ 78,107 ---
Edward M. Lake (2) --- --- 30,469 --- $ 12,504 ---
--- --- 100,000 --- --- ---
</TABLE>
- ----------------
(1) Potential unrealized value is (i) the fair market value at fiscal
1996 year-end less the option exercise price times (ii) the number of
options. Fair market value as of fiscal 1996 year-end was determined
based on a closing sale price on June 30, 1996 of $2.28.
(2) Includes option to purchase 100,000 Units under a Nonqualified Unit
Option Agreement. Each Unit consists of one share of Common Stock,
one Class A Redeemable Common Stock Purchase Warrant and one Class B
Redeemable Common Stock Purchase Warrant. The option is fully vested
and expires on April 30, 1997.
No options were granted by the Company during the fiscal year ended
June 30, 1996, nor were there any awards made to any named executive officer
during such fiscal year under any long-term incentive plan. The Company does not
sponsor any defined benefit or actuarial plans at this time.
EMPLOYMENT AGREEMENTS
On February 12, 1996, the Company and EOI closed an Assets Sale and
Purchase Agreement pursuant to which EOI transferred substantially all of its
assets and certain liabilities to the Company in consideration of the issuance
to EOI of 4,770,772 shares of the Common Stock of the Company (the "Asset
Acquisition"). In connection with the Asset Acquisition, Heinz R. Gisel (the
former President and Chief Executive Officer of the Company) and Edward M. Lake
(the former Executive Vice President, Finance and Administration and Secretary
of the Company), among others, resigned their respective positions and Sterling
C. Johnson became the new President and Chief Executive Officer of the Company.
Mr. Johnson entered into an employment agreement with EOI in 1989
that, as amended in January 1991 and January 1995, provides for annual
compensation in the amount of $154,000. In connection with the Asset
Acquisition, Mr. Johnson's employment agreement was assumed by the Company,
including EOI's obligation to pay $118,000 in earned but unpaid compensation to
Mr. Johnson. Mr. Johnson's agreement is for a three-year term ending in December
1997 and renews automatically for successive one-year periods unless either
party notifies the other in writing at least 90 days prior to the expiration
date. The agreement provides for health, life and long term disability insurance
and other fringe benefits as well as reimbursement of the costs associated with
the lease of an automobile not in excess of $500 per month. The agreement
provides for severance payments, in the event of termination without cause,
equal to Mr. Johnson's salary and fringe benefits for one year. Mr. Johnson was
granted options to purchase up to 300,000 shares of EOI common stock at an
exercise price per share of $.01. The options are fully vested and currently
exercisable. The Company is obligated to reimburse Mr. Johnson for any
withholding tax obligation and the tax on such reimbursement in the event Mr.
Johnson exercises the options.
Mr. Gisel entered into an employment agreement with the Company in
November 1991, which provided for an annual salary of $150,000. In addition, Mr.
Gisel's employment agreement provided, among other things, that in the event of
termination of employment by the Company other than for willful or gross
misconduct, the Company would be obligated to make a lump sum payment of
$150,000 to Mr. Gisel. In connection with the Asset Acquisition, Mr. Gisel
resigned his position effective March 31, 1996. The Company paid severance to
Mr. Gisel in the amount of $160,000, which included an additional severance
payment of $10,000 agreed upon by the Company and Mr. Gisel.
5
<PAGE> 8
Mr. Lake entered into an employment agreement with the Company in
August 1993 which provided, among other things, for annual base salary of
$120,000. Under the agreement, Mr. Lake was granted options to purchase up to
100,000 Units under a Nonqualified Unit Option Agreement at an exercise price
per Unit of $6.00. The options were fully vested in November 1994 and expire on
April 30, 1997. In September 1995, Mr. Lake's employment contract was modified
to include a bonus of $67,500, one-half of which was payable at the earlier of
(i) the closing of the Asset Acquisition or (ii) December 31, 1995 and one-half
in January 1996. Mr. Lake's employment contract also provided for severance
payments in the amount of six months salary payable if terminated without cause
or if he resigned after December 31, 1995. Under a letter agreement dated March
29, 1996, Mr. Lake's agreement was modified to (i) increase the period over
which severance payments were to be made from six months to seven months and
(ii) provide for the vesting of any unvested options received by Mr. Lake under
a 25,000 option grant in November 1994. In connection with the Asset
Acquisition, Mr. Lake resigned his position effective March 31, 1996. The
Company paid $33,750 in severance to Mr. Lake in fiscal year 1996 and will have
paid the balance of all outstanding severance payments, $45,000, to Mr. Lake by
October 31, 1996.
SECURITIES OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of September 23, 1996, certain
information regarding the beneficial ownership of the Common Stock by (i) each
shareholder known by the Company to be a beneficial owner of more than 5% of the
Common Stock, (ii) each director and nominee for election as director of the
Company, (iii) each of the Named Executive Officers as such term is defined in
Item 402(a)(3) of Regulation S-K and (iv) all directors and executive officers
of the Company as a group. Pursuant to the rules and regulations promulgated
under the Exchange Act the table sets forth the most recent information provided
in filings made with the SEC by the reporting persons.
The information set forth for David A. Blech, and D. Blech & Company,
Incorporated ("Blech") is based on Amendment No. 3 to the Statement on Schedule
13D, dated October 5, 1995, which amends and supplements the Statement on
Schedule 13D relating to the event date of May 6, 1994, filed on behalf of such
persons. The information for EOI is based on a Statement on Schedule 13D, dated
February 12, 1996, and a Form 4, dated September 10, 1996, both filed on behalf
of EOI.
The calculation of percentage ownership as shown for each person in
the following table assumes the exercise of all options and warrants held by
such person but not the exercise of any other person's options or warrants.
Additionally, certain of the reporting persons share beneficial ownership of
certain securities of the Company. Any securities as to which beneficial
ownership is shared are set forth on the table below as beneficially owned by
each person to whom beneficial ownership may be attributed. See the footnotes to
the table for information as to shared beneficial ownership of the Company's
securities.
6
<PAGE> 9
BENEFICIAL OWNERSHIP TABLE
<TABLE>
<CAPTION>
AMOUNT OF
BENEFICIAL
AMOUNT OF OWNERSHIP OF
BENEFICIAL SHARES AMOUNT OF
OWNERSHIP OF UNDERLYING AGGREGATE AGGREGATE
OUTSTANDING PERCENT OF OPTIONS/ BENEFICIAL PERCENT
NAME AND ADDRESS OF BENEFICIAL OWNER SHARES(1)** CLASS WARRANTS*** OWNERSHIP OF CLASS
------------------------------------ ----------- ----- ----------- --------- --------
<S> <C> <C> <C> <C> <C>
EOI Corp. (2)..................................... 4,437,625 42.2 --- 4,437,625 42.2
182 Tamarack Circle
Skillman, NJ 08558
H&Q Life Science Technology Fund I and
H&Q Life Science Ventures (3)..................... 641,454 6.1 10,000 651,454 6.2
One Bush Street
San Francisco, CA 94104
D. Blech and D. Blech & Company,
Incorporated (4).................................. --- --- 3,160,000 3,160,000 23.1
599 Lexington Avenue
New York, NY 10022
Allen & Company Incorporated (5).................. --- --- 832,258 832,258 7.3
711 Fifth Avenue
New York, NY 10022
R.A. Mackie & Co., L.P. (5)....................... --- --- 560,475 560,475 5.1
One Gorham Island
Westport, CT 06880
Sterling C. Johnson............................... --- --- --- --- ---
Heinz R. Gisel (6)................................ 2,800 * 119,243 122,043 1.1
Edward M. Lake (7) ............................... --- --- 330,469 330,469 3.1
Anthony B. Evnin (8).............................. 257,068 2.4 140,000 397,068 3.7
Robert J. Kunze (9) .............................. 641,454 6.1 10,000 651,454 6.2
Richard J. DePiano................................ --- --- --- --- ---
Jack M. Dodick, M.D............................... --- --- --- --- ---
Jay L. Federman, M.D.............................. --- --- --- --- ---
All directors and executive officers as a group
(8 persons) .................................... 901,322 8.6 599,712 1,501,034 13.5
</TABLE>
* Less than 1%.
** Includes outstanding shares owned by the named person but does not
include shares as to which such person has the right to acquire.
*** Represents shares underlying (a) Class A Redeemable Common Stock
Purchase Warrants ("Class A Warrants"), Class B Redeemable Common
Stock Purchase Warrants ("Class B Warrants") and Class C Common Stock
Purchase Warrants ("Class C Warrants"), each of which (i) entitles
the holder thereof to purchase one share of Common Stock at a price
of $6.25, $7.50 and $5.00, respectively, and (ii) was issued in
connection with a November 1993 offering; and (b) certain options,
which in each case are exercisable within 60 days from the date
hereof.
7
<PAGE> 10
(1) Except as indicated in the footnotes to this table and pursuant to
applicable community property laws, where applicable, the persons
named in the table above have sole voting and investment power with
respect to all shares shown as beneficially owned by them.
(2) As reported on Schedule 13D dated February 12, 1996 and a Form 4
dated September 10, 1996. The outstanding share ownership set forth
for EOI consists of shares owned solely by EOI. As set forth in the
Schedule 13D, Messrs. Johnson, DePiano, Dodick, and Federman are
directors of EOI. Additionally, Messrs. Johnson and Rich (the
Company's current Vice President of Finance and Administration and
the Assistant Secretary) serve as the President/Chief Executive
Officer and Secretary/Treasurer/Vice President of Finance and
Administration, respectively, of EOI. Although not currently serving
as an officer of EOI, Ronald L. Hueneke, the Company's Vice
President/General Manager of Trek Division, served in the same
position for EOI prior to the Asset Acquisition. Each of the above
named individuals are also shareholders of EOI.
(3) H&Q Life Science Technology Fund I ("Technology Fund") is a
California limited partnership, the general partner of which is H&Q
LST Managers I, a California limited partnership. H&Q Life Science
Ventures ("Science Ventures") is a California limited partnership,
the general partner of which is H&Q LSV Managers, a California
limited partnership. Mr. Kunze, a director of the Company, is a
general partner of the general partner of each of Technology Fund and
Science Ventures and therefore has shared voting and investment power
with respect to the securities owned by Technology Fund and Science
Ventures. Technology Fund and Science Ventures are the record owners
of 313,892 and 327,562 shares of Common Stock, respectively. In
addition, Technology Fund and Science Ventures each have the right to
acquire shares underlying 2,000 Class A Warrants, 2,000 Class B
Warrants, 1,000 Class C Warrants. The shares held by each of
Technology Fund and Science Ventures may be deemed to be beneficially
owned by both entities. Mr. Kunze disclaims beneficial ownership as
to all of the shares held by Technology Fund and Science Ventures.
(4) As reported on Amendment No. 3 to the Statement on Schedule 13D dated
October 5, 1995. The ownership of shares underlying options and
warrants, as set forth for Mr. Blech, consists entirely of shares
underlying 1,380,000 Class A Warrants and 880,000 Class B Warrants
owned by Blech, and 900,000 shares subject to a Unit Purchase Option
owned by Blech (see discussion under "Certain Relationships and
Certain Transactions").
(5) For Allen & Company Incorporated such figures are as reported on
Schedule 13G dated February 13, 1996. Allen & Company Incorporated's
ownership consists of 59,963 shares of Common Stock and shares
underlying 115,205 Class A Warrants and 657,090 Class B Warrants. For
R.A. Mackie & Co., L.P. such figures are as reported on Schedule 13G
dated February 8, 1996 and represent ownership of shares underlying
43,575 Class A Warrants and 516,900 Class B Warrants.
(6) Represents the record ownership of 2,800 shares of Common Stock by
Mr. Gisel, the former President and Chief Executive Officer of the
Company, and 119,243 shares which he has the right to acquire upon
exercise of options.
(7) Includes 300,000 shares subject to certain Unit options (see footnote
2 to Aggregate Option Exercises in Last Fiscal Year and Fiscal Year
End Option Value table, above) and 30,469 shares which Mr. Lake has
the right to acquire upon exercise of stock options.
(8) Represents shares beneficially owned by Venrock Associates and
Venrock Associates II, L.P. and 800 shares held of record by Mr.
Evnin. Venrock Associates is a New York limited partnership of which
Mr. Evnin, a director of the Company, is a general partner. Mr. Evnin
has shared voting and investment power with respect to the securities
owned by Venrock Associates. Mr. Evnin disclaims beneficial ownership
of the shares owned by Venrock Associates except to the extent of his
partnership interest therein.
(9) Represents shares beneficially owned by Technology Fund and Sciences
Ventures, as reflected above. See footnote 3 for a description of Mr.
Kunze's affiliation with Technology Fund and Sciences Ventures.
8
<PAGE> 11
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On February 12, 1996, the Company acquired substantially all of the
assets and certain of the liabilities of EOI, pursuant to an Assets Sale and
Purchase Agreement, in exchange for 4,770,772 shares of the Company's Common
Stock. The total estimated cost of the acquisition was $8,900,000, including
liabilities assumed (which includes the assumption of costs associated with
certain litigation involving EOI) of $1,016,340 and estimated transaction costs
of approximately $928,000. The acquisition was accounted for using the purchase
method of accounting and included the acquisition of accounts receivable,
inventories, equipment and various other tangible and intangible assets. The
total purchase price over the fair value of net assets acquired approximates
$4,100,000 and is being amortized over a ten-year period. Another $1,000,000 of
the purchase price was assigned to in-process technology and was charged to
operations immediately following the acquisition. As disclosed elsewhere herein,
Messrs. Johnson, DePiano, Dodick and Federman were at the time of the
acquisition, and continue to be, members of the Board of Directors of EOI.
Messrs. Johnson and Rich, the Company's President/Chief Executive Officer and
Vice President, Finance and Administration/Assistant Secretary, respectively,
also serve in similar executive level management positions with EOI. Ronald L.
Hueneke, a Vice President of the Company and General Manager of its Trek
Division, served in the same position with EOI prior to the consummation of the
Asset Acquisition. EOI is the beneficial owner of 42.2% of the outstanding
Common Stock of the Company and each individual named in this paragraph is a
shareholder of EOI.
Jay L. Federman, M.D., the Chairman of the Board of Directors,
together with two individuals unaffiliated with the Company, entered into a
Development, Assignment and License Agreement with the Company dated September
11, 1992. Under this agreement, the Company has agreed to pay royalties to Dr.
Federman and the two unaffiliated individuals on sales of the Company's Iris
Expander and related products. Generally, the agreement provides for quarterly
royalty payments of 10% of net sales, for sales by the Company, and the greater
of 5% of net sales or 50% of royalty payments received by the Company, for sales
by sublicensees of the Company, in countries where a valid patent for the
product has issued. For sales in countries where a valid patent has not issued,
royalty payments equal to one-half of the foregoing rates are required. As of
the date hereof, the Iris Expander is still under development. Therefore, no
royalty payments have been made to Dr. Federman or the other individuals that
are parties to the Development, Assignment and License Agreement.
Commencing November 17, 1994, upon the exercise of any Class A
Redeemable Common Stock Purchase Warrant or Class B Redeemable Common Stock
Purchase Warrant (a "Warrant"), to the extent not inconsistent with the
guidelines of the NASD and the rules and regulations of the Securities and
Exchange Commission (the "Commission"), the Company has agreed to pay D. Blech &
Company, Incorporated ("Blech"), except in certain limited circumstances, a fee
of 5% of the exercise price of such Warrant if (i) the market price of the
Common Stock is greater than the exercise price of such Warrant on the date of
exercise; (ii) on the date of exercise Blech is a registered broker-dealer and
its registration has not been suspended; (iii) such Warrant is not held in a
discretionary account; and (iv) the solicitation of such Warrant was not in
violation of Rule 10b-6 promulgated under the Securities Exchange Act of 1934,
as amended. The Company has agreed not to solicit the exercise of any Warrant
other than through Blech unless Blech is legally unable to solicit such exercise
or is prohibited from doing so by the rules of the NASD or otherwise, in which
event the Company may solicit such exercise, either itself or with the
assistance of a third party.
In November 1993, the Company sold to Blech a transferable option
(the "Unit Purchase Option") to purchase up to 300,000 Units. The Unit Purchase
Option is exercisable for a period of four years, commencing November 17, 1994,
at an initial exercise price equal to $8.00 per Unit. The Units are identical in
all respects to Units issued in an underwritten public offering of Units made in
November and December of 1993, except that (i) while the Warrants comprising
such Units are held by Blech or certain transferees of Blech, they are not
redeemable by the Company and (ii) Warrants comprising such Units are
exercisable for the period commencing on November 17, 1993, and terminating at
the close of business on November 24, 1994. The Unit Purchase Option cannot be
transferred, assigned or hypothecated prior to November 24, 1994, except that it
may be assigned, in whole or in part, to any successor, officer or partner of
Blech. The Unit Purchase Option contains antidilution provisions providing for
appropriate adjustment of the exercise price and the number of Units which may
be purchased upon exercise upon the occurrence of certain events.
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<PAGE> 12
The Company has agreed that it will, at its expense on any one
occasion during the four-year period commencing November 17, 1994, and on any
one additional occasion at the expense of the holders thereof during such
period, register the securities underlying, or issuable upon the exercise of the
securities underlying, the Unit Purchase Option at the request of holders of a
majority of the Units issued or issuable upon exercise of the Unit Purchase
Option (including shares of Common Stock issuable upon exercise of the Warrants
included in those Units). The Company has also agreed, during the seven-year
period commencing November 17, 1994, to register on a "piggyback" basis, on an
unlimited number of occasions, such securities whenever the Company files a
registration statement.
For the life of Unit Purchase Option, the holders are given, at
nominal cost, the opportunity to profit from a rise in the market price for the
securities of the Company without assuming the risk of ownership, with a
resulting dilution in the interest of other securityholders. As long as the Unit
Purchase Option remains unexercised, the terms under which the Company could
obtain additional capital may be adversely affected. Moreover, the holders of
the Unit Purchase Option may be expected to exercise such option at a time when
the Company would, in all likelihood, be able to obtain needed capital by an
offering of its securities on terms more favorable than those provided by the
Unit Purchase Option.
(PROPOSAL NO. 2)
AMENDMENT OF 1993 STOCK OPTION PLAN
At the Annual Meeting, there will be presented to the shareholders a
proposal to approve and adopt an amendment to the Company's 1993 Stock Option
Plan (the "1993 Plan"). On October 4, 1996, the Board of Directors of the
Company approved the proposed amendment to the 1993 Plan subject to shareholder
approval at the Annual Meeting. The amendment will not be effective unless and
until shareholder approval is obtained.
The amendment would increase the number of shares available for
issuance under the Company's 1993 Plan from 250,000 to 500,000 shares of Common
Stock. The Board of Directors believes that the Company's ability to grant
options under the 1993 Plan is a valuable and necessary compensation tool that
aligns the long-term financial interests of employees, consultants and directors
with the financial interests of the Company's shareholders. As of October 15,
1996, options to purchase 66,750 shares of Common Stock were outstanding under
the 1993 Plan; options to purchase 155,912 remain available for future grants.
An increase in the number of shares available for issuance is necessary to meet
the above objectives.
The amendment would also modify the 1993 Plan to reflect (i) the
Company's change of name from Intelligent Surgical Lasers, Inc. to Escalon
Medical Corp. and (ii) recent changes in the Securities and Exchange
Commission's rules relating to the administration of stock option plans. The
Securities and Exchange Commission recently adopted changes to its regulations
under Section 16 of the Securities Exchange Act of 1934 which significantly
liberalize the manner in which stock-based compensation plans, such as the 1993
Plan, are administered. The Board of Directors believes that it is in the
interests of the Company and its shareholders to incorporate such changes into
the 1993 Plan.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR APPROVAL OF
THE AMENDMENT TO THE 1993 PLAN.
THE PROPOSED AMENDMENT TO THE COMPANY'S 1993 STOCK OPTION PLAN IS SET
FORTH AS EXHIBIT A TO THIS PROXY STATEMENT, AND THE DESCRIPTION OF SUCH
AMENDMENT CONTAINED HEREIN IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO EXHIBIT
A.
10
<PAGE> 13
------------------------------------------------------------------------
DESCRIPTION OF THE OPTION PLAN
------------------------------------------------------------------------
SUMMARY OF MATERIAL TERMS OF THE 1993 PLAN
The 1993 Plan was approved, subject to shareholder approval, by the
Board of Directors on September 23, 1993. Subject to certain increases and
adjustments, the 1993 Plan provides for the issuance of an aggregate of 500,000
shares of Common Stock pursuant to options granted under the 1993 Plan. Unless
sooner terminated by the Board of Directors, the 1993 Plan will expire by its
terms on September 22, 2003 and no option may be granted under the 1993 Plan
after that date. As of October 15, 1996, options to purchase 94,088 shares of
Common Stock have been granted under the 1993 Plan.
The 1993 Plan provides for the grant, for no consideration other than
services, of options to purchase shares of the Common Stock of the Company to
certain employees and directors of the Company or its subsidiaries and to
certain other individuals who provide services to the Company or its
subsidiaries. Options granted pursuant to the 1993 Plan may either be "incentive
stock options" as defined in Section 422 of the Internal Revenue Code of 1986,
as amended (the "Code"), which are intended to qualify for special federal
income tax treatment ("ISOs"), or "non-qualified stock options" ("NQSOs").
Capitalized terms not defined below have the same meanings as set forth in the
1993 Plan attached hereto. The 1993 Plan is not subject to the requirements of
the Employee Retirement Income Security Act of 1974, known as "ERISA."
Administration, Modification and Amendment of the 1993 Plan. The 1993
Plan provides that it shall be administered by a committee of the Board of
Directors consisting of at least two and not more than five persons (the
"Committee"). The members of the Committee shall be appointed from time to time
by the Board of Directors of the Company and may, but need not be, directors.
The Committee has the final authority to interpret the 1993 Plan, to determine
which Eligible Employees, as defined below, shall receive options, the times
when such options shall be granted and when they may be exercised, the fair
market value of Common Stock for the purposes of determining exercise prices and
the number of shares to be subject to any option, to determine the terms and
provisions of option agreements, to prescribe, amend and rescind rules and
regulations relating to the 1993 Plan, to construe options under the 1993 Plan,
and to make all other determinations necessary and advisable for proper
administration of the 1993 Plan. All decisions and determinations of the
Committee are final.
The Board of Directors may at any time suspend or terminate the 1993
Plan or may amend it from time to time in such respects as the Board of
Directors may deem advisable either to conform the terms of the 1993 Plan to any
changes in the law or for any other reason that the Board of Directors may deem
to be in the best interests of the Company and its shareholders; provided,
however, (a) that without approval of the shareholders of the Company, no such
amendment may (1) except in certain limited circumstances, materially increase
the number of shares for which options may be granted under the 1993 Plan, (2)
materially modify the requirements as to eligibility for participation in the
1993 Plan, or (3) materially increase the benefits accruing to participants
under the 1993 Plan.
Eligibility and Grants of Options. All full-time, key employees of
the Company are eligible for selection by the Committee to receive ISOs under
the 1993 Plan and all full-time, key employees, directors and any other persons
who perform services for the Company ("Consultants") and who, in the opinion of
the Committee, will contribute to the success of the Company, are eligible to
receive NQSOs under the 1993 Plan (together "Eligible Employees"). The 1993 Plan
provides that the phrase "key employees" includes officers, department heads,
division managers, other employees having supervisory responsibilities, and
those other employees as the Committee may specifically designate from time to
time. Members of the Committee are not eligible to receive grants of options
under the 1993 Plan. The Committee determines and designates from time to time
the number and nature of the options to be granted to any Eligible Employee. The
number of options that may be granted to any particular individual or group is
not determinable until the Committee takes action with respect thereto. As of
October 15, 1996, approximately 20 non-director employees, five directors and
four Consultants were eligible to participate in the 1993 Plan.
11
<PAGE> 14
Term of Options. The term of each option is determined by the
Committee, but no option will be exercisable more than ten years from the date
the option was granted. ISOs granted to a "control person" will not be
exercisable more than five years from the date the option was granted. For
purposes of the 1993 Plan, a "control person" is any person who, as of the date
of an option grant, owned more than 10% of the voting stock of the Company or of
any parent or subsidiary corporation.
Exercise of Options. Options granted under the 1993 Plan are
exercisable by the holder at such rate and times as may be fixed by the
Committee at the time the option is granted. The Committee may, in its
discretion, accelerate or otherwise amend the times any or all outstanding
options are exercisable, including in the event of a Change of Control.
Option Exercise Price. The exercise price of an option is determined
by the Committee at the time the option is granted, although it may not be less
than the Fair Market Value of the shares on the date of grant. With respect to a
"control person" the exercise price of an ISO cannot be less than 110% of the
Fair Market Value on the date of grant. "Fair Market Value" on a specified date
refers to the last sales price or the average of the closing bid and asked
price, as appropriate, per share of the Common Stock on the stock exchange or
market on which the Common Stock is primarily traded or, if there were no trades
or quotations on that date, then on the last previous day on which a trade or
quotation was reported.
Termination of Employment. If an option holder terminates his or her
employment with the Company or a subsidiary for reasons other than retirement,
disability or death, all unexercised options of such holder shall terminate
immediately upon such termination, as determined by the Committee, and such
holder shall have no right thereafter to exercise any unexercised options he or
she might have exercised prior to the date of termination. If an option holder
terminates employment due to retirement on or after attaining the age of 65 (or
such earlier date as shall be permitted), or to a permanent and total
disability, within the meaning of Section 22(e)(3) of the Code, or to death, the
holder or the holder's estate or the holder's heirs may exercise the options
which are unexercised at the time of such retirement, disability or death (but
only to the extent that such options are then exercisable in the case of
disability): (i) within three months after the option holder's retirement, in
the case of an ISO, and within twelve months after the option holder's
retirement, in the case of a NQSOs, or (ii) within twelve months after the
option holder's disability or death. No option may be exercised after its
original expiration date.
FEDERAL INCOME TAX CONSEQUENCES
Non-Qualified Options. Except as described in the following
paragraph, upon the exercise of an NQSO, the amount by which the fair market
value of the shares on the date of exercise exceeds the option price is taxed to
the optionee as ordinary compensation income. In general, the Company is
entitled to a deduction equal to the amount of the ordinary compensation income
realized by the optionee. At such time as the optionee sells shares issued to
him upon exercise of his option, if the shares were held as capital assets, he
will realize capital gain or loss (long-term or short-term, depending on whether
the shares were held for more than one year before sale) in an amount equal to
the difference between his tax basis in the shares and the selling price. The
Company is not entitled to any tax deductions with respect to capital gains
realized by the optionee.
Incentive Stock Options. The holder of an ISO will not be subject to
federal income tax upon the grant or exercise of the ISO, and the Company will
not be entitled to a tax deduction by reason of such exercise. A sale of the
shares received upon the exercise of an ISO which does not occur within one year
after the exercise of the ISO or within two years after the grant of the ISO
will result in the realization of long-term capital gain or loss in the amount
of the difference between the amount realized on the sale and the optionee's tax
basis in such shares if such shares were held as capital assets. Generally, upon
a prior disposition of the shares, the optionee will recognize ordinary
compensation income equal to the lesser of (1) the excess of the fair market
value of the shares on the date of transfer to the optionee over the option
price or (2) the excess of the amount realized on the disposition over the
optionee's tax basis in the shares. In certain circumstances, upon a prior
disposition, such as a disposition by gift or a transfer to a related person,
the amount of ordinary compensation income recognized by the optionee will be
the excess of the fair market value of the shares on the date of transfer to the
optionee over the option price. The Company may claim a tax deduction on a prior
disposition of such shares in the amount of the ordinary compensation income
which is realized by the optionee, and at the time so recognized.
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<PAGE> 15
The excess of the fair market value of the shares at the time of
exercise of an ISO over the option price constitutes an item of tax preference
subject to the alternative minimum tax, unless a subsequent disqualifying
disposition occurs.
Tax Advice Caveat. The preceding discussion is based upon federal tax
laws and regulations in effect on the date of this Proxy Statement, which are
subject to change, and does not purport to be a complete description of the
federal income tax aspects of the 1993 Plan. Optionees also may be subject to
state and local taxes in connection with the grant or exercise of options and
the sale or other disposition of shares acquired upon the exercise thereof. The
Company suggests that optionees consult with their individual tax advisors to
determine the applicability of the tax aspects of options to their personal tax
circumstances.
(PROPOSAL NO. 3)
RATIFICATION OF SELECTION OF AUDITORS
The Board of Directors has appointed the firm of Ernst & Young LLP as
independent public accountants for the year ending June 30, 1996. Ernst & Young
LLP has audited the Company's financial statements since the Company's
inception. The appointment of auditors is approved annually by the Board of
Directors, which is based in part on the recommendations of the Audit Committee.
In making its recommendations, the Audit Committee reviews both the audit scope
and estimated audit fees for the coming year. This appointment will be submitted
to the shareholders for ratification at the Annual Meeting.
Although not required by law or by the By-laws of the Company, the
Board of Directors has determined that it would be desirable to request
ratification of this appointment by the shareholders. If ratification is not
received, the Board will reconsider the appointment. A representative of Ernst &
Young LLP is expected to be available at the Annual Meeting to respond to
appropriate questions and to make a statement if he or she so desires.
The affirmative vote of a majority of the votes cast at the Annual
Meeting by the holders of the outstanding shares of Common Stock is required for
the ratification of this selection.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR
RATIFICATION OF THE SELECTION OF ERNST & YOUNG LLP AS THE COMPANY'S AUDITORS FOR
THE FISCAL YEAR ENDING JUNE 30, 1996.
OTHER MATTERS
The Board of Directors is not aware of any matters not set forth
herein that may come before the meeting. If, however, further business properly
comes before the meeting, the persons named in the proxies will vote the shares
represented thereby in accordance with their judgment.
SHAREHOLDER PROPOSALS FOR THE 1997 ANNUAL MEETING
Shareholders may submit proposals on matters appropriate for
shareholder action at annual meetings in accordance with regulations adopted by
the SEC. To be considered for inclusion in the proxy statement and form of proxy
relating to the 1997 annual meeting, such proposals must be received by the
Company no later than June 30, 1997. Proposals should be directed to the
attention of the Secretary of the Company.
ANNUAL REPORT ON FORM 10-K
THE COMPANY WILL FURNISH WITHOUT CHARGE TO EACH PERSON WHOSE PROXY IS
BEING SOLICITED, UPON THE WRITTEN REQUEST OF SUCH PERSON, A COPY OF THE
COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED JUNE 30, 1996, INCLUDING
THE FINANCIAL STATEMENTS, BUT EXCLUDING EXHIBITS. REQUESTS FOR COPIES OF SUCH
REPORT SHOULD BE DIRECTED TO THE COMPANY, ATTENTION: JOHN T. RICH.
EACH SHAREHOLDER WHO DOES NOT EXPECT TO ATTEND THE ANNUAL MEETING IN
PERSON IS URGED TO EXECUTE THE PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED
ENVELOPE.
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<PAGE> 16
EXHIBIT A
ESCALON MEDICAL CORP.
PROPOSED AMENDMENT TO THE 1993 STOCK OPTION PLAN
FIRST AMENDMENT TO THE
INTELLIGENT SURGICAL LASERS, INC.
1993 STOCK OPTION PLAN
The "Intelligent Surgical Lasers, Inc. 1993 Stock Option Plan" (the
"Plan"), which was effective September 23, 1993, is hereby amended, effective
October 4, 1996, as follows (subject to the obtaining of subsequent approval of
the shareholders of the Company):
I. By changing the name of the Plan to the "Escalon Medical Corp. 1993
Stock Option Plan" and by changing all references to the name of the
Company within the Plan from Intelligent Surgical Lasers, Inc. to
Escalon Medical Corp.
II. By deleting the first paragraph of Section 2 of the Plan and
substituting therefor the following:
The Plan shall be administered by a committee of not less than two
nor more than five persons (the "Committee"). The members of the
Committee shall be appointed from time to time by the Board of
Directors of the Company and may, but need not be, directors. Members
of the Committee shall serve at the pleasure of the Board of
Directors and may resign at any time upon written notice to the Board
of Directors. The Board of Directors shall appoint a member of the
Committee to serve as chairperson of the Committee; the Committee
shall elect a secretary to the Committee, who may be, but need not
be, a member of the Committee or a director.
III. By deleting Section 3 of the Plan and substituting therefor the
following:
3. Shares of Common Stock Subject to the Plan. The aggregate number
of shares of the Common Stock which may be issued upon the exercise
of Options granted under the Plan shall not exceed 500,000 (after
giving effect to the reverse stock split effected on November 8,
1993), subject to adjustment under the provisions of Section 6
hereof. The shares of Common Stock to be issued upon the exercise of
Options may be authorized but unissued shares, shares issued and
reacquired by the Company, or shares purchased by the Company in
privately negotiated or open market transactions for purposes of the
Plan. In the event any Option shall, for any reason, terminate or
expire or be surrendered without having been exercised in full, the
shares subject to such Option but not acquired thereunder shall again
be available for Options to be granted under the Plan.
A-1
<PAGE> 17
APPENDIX
This Appendix is being filed pursuant
to Instruction 3 of Item 10 of Schedule
14A and Rule 14a-6 under the Securities
Exchange Act of 1934. This Appendix
was not included in the Proxy Statement
that was sent to shareholders.
INTELLIGENT SURGICAL LASERS, INC.
1993 STOCK OPTION PLAN
1. Purpose. This 1993 Stock Option Plan (the "Plan") is intended
to advance the interests of INTELLIGENT SURGICAL LASERS, INC., a California
corporation (the "Company"), and its shareholders by providing the Company with
a means of attracting and retaining key personnel and by encouraging and
enabling such key personnel, upon whose judgment, initiative, and effort the
Company is largely dependent for the successful conduct of its business, to
acquire and retain a proprietary interest in the Company by ownership of its
common stock, no par value (the "Common Stock"). The Plan provides for the
grant of options (the "Options") for the acquisition of the Common Stock.
Options granted under the Plan will be either incentive stock options
("ISOs"), intended to qualify as such under the provisions of Section 422 of
the Internal Revenue Code of 1986, as from time to time amended, or any
successor statute of similar purpose (the "Code"), or nonqualified stock
options ("NQSOs"). Options shall be ISOs to the extent, and only to the
extent, that such Options are so identified in writing in the document or
documents evidencing the grant of the Option (the "Option Agreement"). All
Options that are not identified as ISOs in the Option Agreement are intended to
be NQSOs. For purposes of the Plan, the terms "parent" and "subsidiary" shall
mean "parent corporation" and "subsidiary corporation," respectively, as such
terms are defined in Sections 424(e) and (f) of the Code.
2. Administration of Plan. The Plan shall be administered by a
committee of not less than two nor more than five persons (the "Committee").
The members of the Committee shall be appointed from time to time by the Board
of Directors of the Company and may, but need not be, directors. Members of
the Committee shall serve at the pleasure of the Board of Directors and may
resign at any time upon written notice to the Board of Directors. The Board of
Directors shall appoint a member of the Committee to serve as chairperson of
the Committee; the Committee shall elect a secretary to the Committee, who may
be, but need not be, a member of the Committee or a director. The foregoing
notwithstanding, at any time that the Company has a class of equity securities
registered under Section 12 of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), (i) each member of the Committee shall be a director of
the Company who is a "disinterested person" within the meaning of Rule
16b-3(c)(2)(i) under the Exchange Act, and (ii) any Plan provision to the
contrary notwithstanding, any power under this Plan or any outstanding Option
Agreement hereunder shall, if necessary in order to comply with Rule 16b-3
under the Exchange Act, be exercised exclusively by the Committee with respect
to any Optionee who is subject to Section 16 of the Exchange Act; provided,
however, that, in lieu of compliance with this provision, prior to the earlier
of September 1, 1993, or such date as the Company has elected to rely on new
Rule 16b-3, Options may be granted and other powers exercised by the Board of
Directors or Committee in conformity with the plan administration provisions of
old Rule 16b-3(b).
The Committee shall report all action taken by it to the Board of
Directors. The Committee shall have full and final authority, subject to the
provisions of the Plan, to determine to whom each Option shall be granted (the
"Optionee"); the time or times at which each Option shall be granted; whether
an Option shall be an ISO or an NQSO; the number of shares and purchase price
of Common Stock covered by each Option; the vesting schedule with respect to
each Option; to construe and interpret the Plan; to determine the terms and
provisions of the respective Option Agreements, which need not be identical,
including, without limitation, terms relating to the method of payment of the
Option exercise price and such additional contractual terms and conditions as
the Committee may deem necessary or advisable to further the purposes of the
Plan or the Company; to prescribe rules and regulations under the Plan; and to
make all other determinations and take all other actions deemed necessary or
advisable for the proper administration of the Plan. All such actions and
determinations of the Committee shall be conclusive and binding for all
purposes and upon all persons. No Committee member shall be liable for any
action or determination made by him in good faith with respect to the Plan or
any Option granted thereunder.
- 1 -
<PAGE> 18
3. Shares of Common Stock Subject to the Plan. The aggregate
number of shares of the Common Stock which may be issued upon the exercise of
Options granted under the Plan shall not exceed 250,000 (after giving effect to
the reverse stock split effected on November 8, 1993), subject to adjustment
under the provisions of Section 6 hereof. The shares of Common Stock to be
issued upon the exercise of Options may be authorized but unissued shares,
shares issued and reacquired by the Company, or shares purchased by the Company
in privately negotiated or open market transactions for purposes of the Plan.
In the event any Option shall, for any reason, terminate or expire or be
surrendered without having been exercised in full, the shares subject to such
Option but not acquired thereunder shall again be available for Options to be
granted under the Plan.
4. Eligibility and Participation. Only full-time, key employees
of the Company shall be eligible for selection by the Committee to receive
ISOs, and only full-time, key employees, directors of the Company, and any
other persons who perform services for the Company and who, in the opinion of
the Committee, will contribute to the success of the Company shall be eligible
to receive NQSOs. For the purpose of this Plan, the phrase "key employees"
shall include officers, department heads, division managers, other employees
having supervisory responsibilities, and those other employees as the Committee
may specifically designate from time to time. No person shall be granted an
ISO under the Plan unless such person is an eligible employee as provided by
the Code. Members of the Committee shall not be eligible to receive grants of
Options under the Plan.
5. Terms and Conditions of Options. Any Option granted shall be
evidenced by an Option Agreement executed by the Company and the Optionee
substantially in the form of Exhibit "A" to the Plan (in the case of NQSOs) or
Exhibit "B" to the Plan (in the case of ISOs), or in such other form not
inconsistent with the Plan as shall be specified by the Committee, subject to
the following terms and limitations:
(a) Option Price. The exercise price per share of an
NQSO shall be an amount not less than one hundred percent (100%) of the fair
market value per share of the Common Stock on the date of grant of such Option,
as determined by the Committee in good faith in its sole discretion. Except as
provided in Section 5(b) hereof, the exercise price per share of an ISO shall
be an amount not less than one hundred percent (100%) of the fair market value
per share of the Common Stock on the date of grant of such Option (or, in the
case of a grant to a prospective officer or employee, the date the grant
becomes effective), as determined by the Committee in good faith in its sole
discretion. Anything contained in this Paragraph to the contrary
notwithstanding, the exercise price of an ISO issued under the Plan in
connection with a transaction described in Section 424(a) of the Code may be an
amount which conforms to the requirements of that Code section and the
regulations thereunder.
For purposes of the Plan, the "fair market value" of the Common Stock
on a given date shall be based upon: (i) if the Common Stock is listed on a
securities exchange or quoted on an interdealer quotation system, the last sale
price or, if unavailable, the average of the closing bid and asked prices per
share of the Common Stock on such date (or, if there was no trading or
quotation in the Common Stock on such date, on the next preceding date on which
there was trading or quotation) as provided by one of such organizations; or
(ii) if the Common Stock is not listed on a securities exchange or quoted on an
interdealer quotation system, as determined by the Committee in good faith.
The exercise price per share for Options shall be subject to adjustment as
provided in Section 6 hereof.
(b) Additional Provisions Applicable to ISOs. The
aggregate fair market value (determined at the time any ISO is granted) of the
Common Stock with respect to which any Optionee's ISOs, together with incentive
stock options granted under any other plan of the Company and any parent or
subsidiary, are exercisable for the first time by such individual during any
calendar year shall not exceed $100,000. To the extent that Options intended
to be ISOs fail to comply with the dollar limitation set forth in this Section
5(b), such Options shall be deemed to be NQSOs.
No ISO may be granted under the Plan to any person who owns,
directly or indirectly (within the meaning of Sections 422(b)(6) and 424(d) of
the Code), at the time the ISO is granted, stock possessing more than ten
percent (10%) of the total combined voting power of all classes of stock of the
Company or any parent or subsidiary, unless the Option exercise price is at
least one hundred ten percent (110%) of the fair market value of the shares
- 2 -
<PAGE> 19
subject to the Option, determined on the date of the grant, and the Option by
its terms is not exercisable after the expiration of five (5) years from the
date such Option is granted.
(c) Payment of Option Price. The exercise price of an
Option shall be paid in full to the Company at the time of the exercise either
in cash, or, subject to the approval of the Committee and subject to any
requirements or limitations that the Committee may adopt, in whole or in part
by the surrender of shares of previously acquired common stock or Common Stock
of the Company, including shares received upon the prior exercise of Options
regardless of the amount of time such previously acquired shares have been held
by the Optionee. For purposes of the foregoing exchange, the previously
acquired shares shall be valued in the manner set forth in Section 5(a) hereof
relating to the determination of fair market value, determined on the date such
shares are surrendered to the Company. The Committee may, in its discretion,
adopt regulations relating to payment of the Option exercise price with
previously acquired shares, including a requirement that Optionees surrendering
shares that were purchased upon exercise of incentive stock options acknowledge
that such surrender may constitute a disqualifying disposition under Section
422 of the Code.
(d) Term of Option. The expiration date of each Option,
except as provided in Sections 5(b) and 5(h) hereof or as may be provided by
the Committee in any Option Agreement, shall be ten (10) years from the date of
grant of the Option.
(e) Vesting of Shareholder Rights. An Optionee, or any
legal representative of the estate of a deceased Optionee or guardian or legal
representative who acquires the right to exercise an Option by bequest or
inheritance or by reason of the death or incapacity of any Optionee (a
"Successor"), shall not have any of the rights of a shareholder of the Company
until the Option is duly exercised in conformity with the Plan. No adjustment
shall be made for cash dividends or other distributions with respect to which
the record date occurs before the date the Option is duly exercised in
conformity with the Plan, except for adjustments pursuant to Section 6 hereof.
(f) Exercise of Option; Vesting. Each Option may be
exercisable in whole or in part at any time and from time to time during the
Option term; provided, however, the Committee may, by the provisions of any
Option Agreement, limit the number of shares that may be acquired thereunder in
any period or periods of time during the Option term.
(g) Nontransferability of Option. No Option or other
derivative security granted under the Plan shall be transferable or assignable
by an Optionee, other than by will or the laws of descent and distribution, and
each Option shall be exercisable during the Optionee's lifetime only by him or
by his guardian(s) or legal representative(s). No Option shall be pledged or
hypothecated in any way, and no Option shall be subject to execution,
attachment, or similar process except with the express written consent of the
Committee.
(h) Termination of Options. No Option shall be
exercisable after it expires. Unless otherwise provided in the Option
Agreement, each Option shall expire upon the earlier of:
(1) the expiration of the term for which the
Option was granted; or
(2) (A) in the case of an Optionee whose
employment with the Company or any subsidiary is terminated
due to permanent and total disability within the meaning of
Section 22(e)(3) of the Code or death, the expiration of
twelve (12) months from the date of such termination of
employment;
(B) in the case of an Optionee whose
employment with the Company is terminated due to retirement,
if the Option is an ISO, the expiration of three (3) months
from the date of such termination of employment, and, if the
Option is an NQSO, the expiration of twelve (12) months from
the date of such termination of employment; or
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<PAGE> 20
(C) in the case of an Optionee whose
employment with the Company or any subsidiary is terminated
(conversion from full-time to part-time employment shall not
be deemed to be termination of employment for purposes of the
Plan) for any reason other than retirement, permanent and
total disability, or death, at the date and time of such
termination of employment, as conclusively determined by the
Committee; or
(3) the applicable date set forth in Section 6 in
the event of a dissolution, liquidation, or reorganization of
the Company.
(i) Option Issuance Price. An Option shall be issued to
the Optionee without payment of cash consideration.
6. Adjustments. (a) Change in Shares. In the event that the
outstanding shares of Common Stock are hereafter increased or decreased, or
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 a
recapitalization, reclassification, merger, or consolidation in which the
Company or a subsidiary of the Company is the surviving parent corporation,
stock split, reverse stock split, combination of shares, or dividend or other
distribution payable in capital stock, appropriate adjustment shall be made by
the Committee in the number and kind of shares for which Options may be granted
under the Plan. In addition, the Committee shall make appropriate adjustment
in the number and kind of shares as to which outstanding and unexercised
Options shall be exercisable, to the end that the proportionate interest of the
holder of the Option shall, to the extent practicable, be maintained as before
the occurrence of such event. Such adjustment in outstanding Options shall be
made without change in the total price applicable to the unexercised portion of
the Option but with a corresponding adjustment in the exercise price per share.
(b) Dissolution or Liquidation. In the event of the
dissolution or liquidation of the Company, any outstanding and unexercised
Option shall terminate as of a date to be fixed by the Committee, provided that
not less than thirty (30) days' written notice of the date so fixed shall be
given to each Optionee. Each Optionee shall have the right during such period
to exercise his Option as to all or any part of the shares covered thereby,
including shares as to which such Option would not otherwise be exercisable by
reason of an insufficient lapse of time.
(c) Reorganization. In the event of a Reorganization (as
hereinafter defined) in which the Company or a subsidiary of the Company is not
the surviving parent corporation, then
(1) If there is no plan or agreement with respect to the
Reorganization ("Reorganization Agreement"), or if the Reorganization
Agreement does not specifically provide for the change, conversion, or
exchange of the outstanding and unexercised Options, or the shares
subject thereto, for cash or other property or securities of another
corporation, then the Committee shall take such action, and the
Options shall terminate, as provided in Section 6(b) hereof; or
(2) If there is a Reorganization Agreement, and if the
Reorganization Agreement specifically provides for the change,
conversion, or exchange of the outstanding and unexercised Options, or
the shares subject thereto, for cash or other property or securities
of another corporation, then the Committee shall adjust the shares
under such outstanding and unexercised Options, and shall adjust the
shares remaining under the Plan which are then available for the
issuance of Options under the Plan if the Reorganization Agreement
makes specific provisions therefor, in a manner not inconsistent with
the provisions of the Reorganization Agreement for the adjustment,
change, conversion, or exchange of such shares and such Options.
The term "Reorganization" as used in this Section 6(c) shall mean any merger,
consolidation, share exchange, or other business combination pursuant to which
neither the Company nor a subsidiary of the Company is the surviving parent
corporation after the effective date of the Reorganization, or any sale of all
or substantially all of the assets of the Company.
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<PAGE> 21
(d) Any adjustment to any outstanding ISO pursuant to
this Section 6, if made by reason of a transaction described in Section 424(a)
of the Code, shall be made so as to conform to the requirements of that Section
and the regulations thereunder. If any other transaction described in Section
424(a) of the Code affects the Common Stock subject to any unexercised Option
theretofore granted under the Plan (hereinafter for purposes of this Section
6(d) referred to as the "old Option"), the Board of Directors of the Company or
any surviving or acquiring corporation may take such action as it deems
appropriate, and in conformity with the requirements of that Code section and
the regulations thereunder, to substitute a new Option for the old Option, in
order to make the new Option, as nearly as may be practicable, equivalent to
the old Option, or to assume the old Option. No modification, extension,
renewal, or other change in any Option granted under the Plan may, after the
grant of such Option, be made without the Optionee's consent (or even offered
to an Optionee holding an ISO), unless the same is permitted by the provisions
of the Plan and, in the case of an ISO, does not disqualify the ISO from being
considered as such under Section 422 of the Code or constitute a modification,
extension, or renewal of the ISO under Section 424(h) of the Code.
(e) All adjustments and determinations under this Section
6 shall be made by the Committee.
7. Restrictions on Issuing Shares. The exercise of each Option
shall be subject to the condition that if, at any time, the Company and/or the
Committee shall determine in its discretion that the satisfaction of
withholding tax or other liabilities, the listing, registration, or
qualification of any shares otherwise deliverable upon such exercise upon any
securities exchange or under any state or federal law of the United States or
any other jurisdiction, or the consent or approval of any regulatory body is
necessary or desirable as a condition of, or in connection with, such exercise
or the delivery or acquisition of shares pursuant thereto, then such exercise
shall not be effective unless such withholding, listing, registration,
qualification, consent, or approval shall have been effected or obtained free
of any conditions not acceptable to the Company and/or the Committee.
8. Restrictions on Resale of Stock after Transfer. The Company
and/or the Committee may impose at any time prior to the issuance of Common
Stock hereunder such restrictions on the resale of any shares transferred
pursuant to the Plan as it may deem advisable in order to comply with the
Securities Act of 1933, as amended, and the rules and regulations thereunder
(the "1933 Act"), with the requirements of any stock exchange upon which such
shares or shares of the same class are then listed, with any Blue Sky or other
securities law of any jurisdiction applicable to the issuance of such shares,
with any contractual provision relating to the issuance or resale of its shares
to which the Company is a party, or with any provision of the Company's
Certificate of Incorporation or By-Laws. The Company and/or the Committee may
cause a legend or legends to be placed on any certificates representing shares
issued pursuant to the Plan.
The Company and/or the Committee may require as a condition to
the right to exercise any Option that the Company receive from the Optionee, at
the time of any such exercise, representations, warranties and agreements to
the effect that the Common Stock being acquired by the Optionee is for
investment only and not with a view toward distribution of such Common Stock,
and that the Optionee will not dispose of such Common Stock in transactions
which, in the opinion of counsel to the Company, would violate the registration
provisions of the 1933 Act or be contrary to any other applicable provision of
law. Nothing herein shall be deemed to require the Company to apply for or to
obtain listing, registration or qualification of the shares of Common Stock
upon any securities exchange or under any federal or state law.
9. Use of Proceeds. The proceeds received by the Company from
the sale of Common Stock pursuant to the exercise of Options granted under the
Plan shall be added to the Company's general funds and used for general
corporate purposes.
10. Amendment, Suspension, and Termination of Plan. The Board of
Directors may at any time suspend or terminate the Plan or may amend it from
time to time in such respects as the Board may deem advisable in order that the
Options granted hereunder may conform to any changes in the law or in any other
respect which the Board may deem to be in the best interests of the Company and
its shareholders; provided, however, that without approval of the shareholders
of the Company, no such amendment shall (a) except as specified in Section 6
hereof,
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<PAGE> 22
materially increase the number of shares for which Options may be granted under
the Plan, (b) materially modify the requirements as to eligibility for
participation in the Plan, or (c) materially increase the benefits accruing to
participants under the Plan. No amendment, suspension, or termination of the
Plan, other than a termination pursuant to Section 6 hereof, shall, without an
Optionee's consent, materially and adversely affect any of the Optionee's
rights or obligations under any Option theretofore granted to such Optionee
under the Plan. The foregoing notwithstanding, any Plan provision that is a
"plan provision" within the meaning of Rule 16b-3(c)(2)(ii) under the Exchange
Act or any successor provision thereto shall not be amended more than once
every six months other than to comport with changes in the Code, the Employee
Retirement Income Security Act of 1974, as amended (if applicable), or the
rules thereunder.
11. No Implied Agreement. Nothing contained herein or in any
Option Agreement shall be construed to confer on any Optionee any right to
continue as an officer or employee of the Company or any subsidiary, or
derogate from any right of the Company or any subsidiary to retire, request the
resignation of, or discharge such Optionee, or to layoff or require a leave of
absence of such Optionee (with or without pay), at any time, with or without
cause.
12. Acceleration. The Committee may, in its discretion,
accelerate or otherwise amend the time or times any or all outstanding Options
are exercisable. Any provision to the contrary in the Plan or any Option
Agreement notwithstanding, upon the occurrence of a Change of Control (as
hereinafter defined), at the discretion of the Committee, all Options may
become immediately exercisable. The term "Change of Control" shall mean the
happening of any of the following:
(a) The acquisition by any person or group (as such term
is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934
("Person"), other than the Company, a subsidiary, or any Person who
beneficially owns in excess of fifty percent (50%) of the Voting Stock of the
Company on the effective date of the Plan, members of such Persons' families,
or their affiliates, of Voting Stock of the Company after which such person or
group has beneficial ownership of fifty percent (50%) or more of the
outstanding Voting Stock of the Company; or
(b) A change in the composition of the Board of Directors
during any period of twenty-four (24) months such that individuals who at the
beginning of the period were members of the Board of Directors together with
those individuals who first become Directors during such period (other than by
reason of an agreement with the Company in settlement of a proxy contest for
the election of directors) and whose election or nomination for election to the
Board of Directors was approved by a vote of at least seventy-five percent
(75%) of the Directors then still in office who either were Directors at the
beginning of the period or whose election or nomination for election was
previously so approved (the "Continuing Directors") (even if the Continuing
Directors do not constitute a quorum of the whole Board, and it being
understood that this requirement shall not be capable of satisfaction unless
there is at least one Continuing Director) cease for any reason to constitute
at least a majority of the Board of Directors of the Company.
13. Termination. Subject to the provisions of Sections 6 and 10
hereof, this Plan shall terminate ten years after the effective date of the
Plan, and no Option shall be granted hereunder after the termination of the
Plan; provided, however, that any Option then outstanding will continue to be
exercisable according to its terms and will remain subject to all the terms and
conditions of the Plan.
14. Tax Withholding. The Company may withhold from any payroll or
other payment to an Optionee amounts of withholding and other taxes due with
respect to an Option exercise, or take such other action, if and to the extent
that the Committee may deem any such action necessary or advisable, to enable
the Company and Optionees to satisfy obligations for the payment of withholding
taxes and other tax liabilities relating to an Option. This authority shall
include authority to withhold from shares deliverable upon exercise of an
Option or receive other shares surrendered by the Optionee and to make cash
payments in respect thereof in satisfaction of an Optionee's tax obligations,
if and to the extent specified in rules and regulations adopted by the
Committee.
15. Compliance with Rule 16b-3.
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<PAGE> 23
(a) It is the intent of the Company that transactions under this
Plan by persons subject to Section 16 of the Exchange Act generally be exempt
under Rule 16b-3 under the Exchange Act. Accordingly, if any provision of this
Plan or any Option Agreement does not comply with the requirements of Rule
16b-3 as then applicable to such a transaction (except for transactions other
than a "grant or award") that are explicitly intended not to be exempt under
Rule 16b-3), such provision shall be construed or deemed amended to the extent
necessary to conform to such requirements with respect to such transaction.
(b) Unless an Optionee could otherwise dispose of an Option or
other derivative security granted under the Plan, or shares of Common Stock
issued upon exercise of an Option or other derivative security granted under
the Plan, without incurring liability under Section 16(b) of the Exchange Act,
at least six months shall elapse from the date of acquisition of an Option or
other derivative security under the Plan to the date of disposition of the
Option or other derivative security (other than upon exercise) or disposition
of Common Stock acquired upon exercise.
16. Effective Date of Plan. The effective date of the Plan is
September 23, 1993.
- 7 -
<PAGE> 24
PROXY ESCALON MEDICAL CORP. PROXY
ANNUAL MEETING OF SHAREHOLDERS TO BE HELD DECEMBER 10, 1996
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS. The
undersigned hereby appoints STERLING C. JOHNSON and JOHN T. RICH or either of
them acting alone in the absence of the other, the attorneys, agents and
proxies of the undersigned, with full powers of substitution (the "Proxies"),
to attend and act as proxy or proxies of the undersigned at the Annual Meeting
of Shareholders (the "Annual Meeting") of Escalon Medical Corp. (the "Company")
to be held at Morgan, Lewis and Bockius LLP, 2000 One Logan Square,
Philadelphia, PA 19103, on December 10, 1996 at 10:00 a.m. or any adjournment
thereof, and to vote as specified herein the number of shares which the
undersigned, if personally present, would be entitled to vote.
IMPORTANT - PLEASE SIGN AND DATE ON REVERSE SIDE AND RETURN THE
PROXY CARD PROMPTLY USING THE ENCLOSED ENVELOPE.
<PAGE> 25
A [ X ] PLEASE MARK YOUR VOTES AS IN THIS EXAMPLE.
1. Election of Directors FOR all nominees WITHHOLD AUTHORITY
listed at right to vote for
(except as marked all nominees
to the contrary)
[ ] [ ]
INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, STRIKE
SUCH NOMINEE'S NAME FROM THE LIST AT RIGHT:
NOMINEES: Sterling C. Johnson
Richard J. DePiano
Jack M. Dodick, M.D.
Jay L. Federman, M.D.
Robert J. Kunze
THE BOARD OF DIRECTORS RECOMMENDS VOTING FOR EACH OF THE NOMINEES IN PROPOSAL 1.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
FOR AGAINST ABSTAIN
2. Proposal to Amend the Company's 1993 [ ] [ ] [ ]
Stock Option Plan.
THE BOARD OF DIRECTORS RECOMMENDS
VOTING FOR PROPOSAL NO. 2.
3. Proposal to Ratify the Appointment [ ] [ ] [ ]
of Ernst & Young LLP as the Independent
Auditors of the Company for the Fiscal
Year Ending June 30, 1997.
THE BOARD OF DIRECTORS RECOMMENDS
VOTING FOR PROPOSAL NO. 3.
4. Other Business. In their discretion, the Proxies are authorized to
vote upon such other business as may come before the Annual Meeting
and any and all adjournments thereof. Proxies are authorized to
cumulate votes and distribute such votes among some or all nominees
in the event that cumulative voting is invoked by any shareholder.
The Board of Directors at present knows of no other business to be
presented by or on behalf of the Company or the Board of Directors at
the Annual Meeting.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED AS SPECIFIED. IF NO
INSTRUCTION IS SPECIFIED WITH RESPECT TO A MATTER TO BE ACTED UPON, THE SHARES
REPRESENTED BY THE PROXY WILL BE VOTED "FOR" EACH DIRECTOR NOMINEE, "FOR" THE
AMENDMENT OF THE COMPANY'S 1993 STOCK OPTION PLAN, AND "FOR" THE RATIFICATION
OF ERNST & YOUNG LLP AS THE INDEPENDENT AUDITORS OF THE COMPANY. IF ANY OTHER
BUSINESS IS PRESENTED AT THE MEETING, THIS PROXY CONFERS AUTHORITY TO AND SHALL
BE VOTED IN ACCORDANCE WITH THE RECOMMENDATIONS OF THE BOARD OF DIRECTORS.
PROXIES ARE AUTHORIZED TO CUMULATE VOTES AND DISTRIBUTE SUCH VOTES AMONG SOME
OR ALL NOMINEES IN THE EVENT THAT CUMULATIVE VOTING IS INVOKED BY ANY
SHAREHOLDER. THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS AND
MAY BE REVOKED PRIOR TO ITS EXERCISE BY FILING WITH THE ASSISTANT SECRETARY OF
THE COMPANY A DULY EXECUTED PROXY BEARING A LATER DATE OF AN INSTRUMENT
REVOKING THIS PROXY, OR BY ATTENDING THE MEETING AND ELECTING TO VOTE IN
PERSON.
DATE , 1996
- ---------------------- ---------------------- -----------
SIGNATURE SIGNATURE
NOTE: Please sign exactly as name or names appear on this Proxy. If stock
is held jointly, each holder should sign. If signing as attorney,
trustee, executor, administrator, custodian or corporate officer,
please give full title.
