<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
Escalon Medical Corp.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[x] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:*
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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*(Set forth the amount on which the filing fee is calculated and
state how it was determined):
[ ] 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:
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(2) Form, Schedule or Registration Statement No.:
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(4) Date Filed:
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<PAGE> 2
[ESCALON LETTERHEAD]
================================================================================
NOTICE OF 1997 ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD NOVEMBER 7, 1997
To the Shareholders of Escalon Medical Corp.:
NOTICE IS HEREBY GIVEN that the 1997 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 November 7, 1997, at 10:00 A.M., local time, for the
following purposes:
1. To elect four directors;
2. To approve and adopt an amendment to the Company's 1993 Stock
Option Plan to increase the number of authorized shares of
Common Stock subject to the Plan by 200,000 to 700,000;
3. To approve and adopt an amendment to Section 1 of Article IV
of the Company's Amended and Restated Bylaws (the "Bylaws") to
(i) decrease the minimum authorized number of directors from
five to three and decrease the maximum authorized number of
directors from nine to five; and (ii) allow the Board of
Directors or shareholders to fix the exact number of directors
within such range by resolution rather than through an
amendment to the Bylaws.
4. To ratify the selection of Ernst & Young LLP as the Company's
independent auditors for the fiscal year ending June 30, 1998;
and
5. 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 September
19, 1997, 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,
John T. Rich
Secretary
Skillman, New Jersey
October ___, 1997
================================================================================
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
_______________
1997 ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON NOVEMBER 7, 1997
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 1997 Annual Meeting of
Shareholders of the Company to be held on Friday, November 7, 1997, 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 ___, 1997.
RECORD DATE AND VOTING
Only shareholders of record at the close of business on September 19,
1997 are entitled to notice of, and to vote at, the Annual Meeting and any
adjournment thereof. As of September 11, 1997, 10,517,519 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 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
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 amendment to the Company's 1993 Stock Option Plan, for the amendment to the
bylaws of the Company and for ratification of the selection of Ernst & Young
LLP as the Company's independent auditors for the fiscal year ending June 30,
1998.
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 for a particular nominee for director
(including by withholding authority on the proxy) will not operate to prevent
<PAGE> 4
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
five members, shall consist of four members, all of whom are to be elected at
the 1997 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 four 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>
Richard J. DePiano 56 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. Mr. DePiano has served as Chairman and Chief
Executive Officer of the Company since March 1997.
Jack M. Dodick, MD 58 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 59 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.
Robert J. Kunze 62 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. Both funds were liquidated in
December 1996 and, consequently, Mr. Kunze no longer serves as a general
partner of such funds.
</TABLE>
2
<PAGE> 5
Messrs. 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 14 meetings during the fiscal year ended
June 30, 1997. Each director attended in person or telephonically at least 85%
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 two meetings during the fiscal year
ended June 30, 1997. The Audit Committee currently consists of two directors,
Messrs. 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, 1997. The Compensation
Committee currently consists of three directors, Messrs. DePiano, Federman and
Kunze.
COMPENSATION OF DIRECTORS
Messrs. Dodick and Federman are paid directors' fees of $2,000 for each board
meeting attended in person and $500 for each Committee meeting or meeting
attended telephonically. Mr. Kunze is paid a monthly directors' fee of $4,000
per month. In addition, directors are reimbursed for expenses incurred in
connection with attending meetings. See "Executive Officers--Executive
Compensation."
3
<PAGE> 6
EXECUTIVE OFFICERS OF THE COMPANY
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Richard J. DePiano 56 Chairman and Chief Executive Officer
John T. Rich, C.P.A. 42 Vice President of Finance and Administration, Secretary
Ronald L. Hueneke 54 Vice President, General Manager, Trek Division
</TABLE>
Mr. DePiano's employment background is described above under "Nominees for
Election."
Mr. Rich was appointed the Vice President of Finance and
Administration, the Treasurer and the Secretary of the Company in December
1996. From February 1996 until December 1996, Mr. Rich served as the Vice
President of Finance and Administration and the Assistant Secretary of the
Company. 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 Sterling C. Johnson, who stepped
down from his positions with the Company effective April 30, 1997.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
LONG TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
------------------- OTHER ------
ANNUAL ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION OPTIONS COMPENSATION(1)
- --------------------------- ---- ------ ----- ------------ ------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Richard J. DePiano(2) 1997 $ 73,846 -- -- -- $ 3,200
Chairman and Chief Executive 1996 -- -- -- -- --
Officer 1995 -- -- -- -- --
John T. Rich 1997 $119,000 $ 14,500 -- -- --
Vice President of Finance and 1996 $ 43,858 -- -- -- --
Administration, and Secretary 1995 -- -- -- -- --
Ronald L. Hueneke 1997 $105,000 $ 14,500 -- -- --
Vice President, General Manager, 1996 $ 39,159 -- -- -- --
Trek Division 1995 -- -- -- -- --
Sterling C. Johnson 1997 $118,088 -- -- -- $109,832
Former President, Chief Executive 1996 $ 55,677 -- -- -- $ 2,536
Officer and Chief Operating Officer 1995 -- -- -- -- --
</TABLE>
______________
(1) Includes payment by the Company of (i) in the case of Mr. Johnson (a)
$60,000 in earned but unpaid unemployment compensation pursuant to Mr.
Johnson's employment agreement (see section entitled "Employment Agreements"
herein for a description of Mr. Johnson's
4
<PAGE> 7
employment agreement); (b) an automobiles allowance in the amount of $4,971;
(c) $7,244 in insurance premiums paid for life insurance; (d) severance
payments in the amount of $23,697; and (e) accrued vacation pay in the amount
of $13, 920, paid upon Mr. Johnson's retirement from the Company and (ii), in
the case of Mr. DePiano, an automobile allowance in the amount of $3,200.
(2) Mr. DePiano became Chairman and Chief Executive Officer of the Company on
March 1, 1997.
<TABLE>
<CAPTION>
OPTION GRANTS IN LAST FISCAL YEAR
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF STOCK
PRICE APPRECIATION FOR
% OF OPTION TERM(2)
TOTAL OPTIONS ---------------------------
GRANTED TO
OPTIONS EMPLOYEES IN EXERCISE PRICE EXPIRATION
NAME GRANTED(1) FISCAL YEAR $/SHARE) DATE 5% 10%
---- ---------- ----------- -------------- ------------- -- ---
<S> <C> <C> <C> <C> <C> <C>
Richard J. DePiano 450,000 100% $ 0.563 6/4/07 $159,330 $403,775
John T. Rich -- -- -- -- -- --
Ronald G. Hueneke -- -- -- -- -- --
Sterling C. Johnson -- -- -- -- -- --
</TABLE>
____________________
(1) These options were granted under the Company's 1993 Stock Option Plan
and have a term of ten years, subject to earlier termination in
certain events. See "Employment Agreements." The options are fully
vested.
(2) The potential realizable values are based on an assumption that the
stock price of the Common Stock starts equal to the exercise price
shown for the particular option grant and appreciates at the annual
rate shown (compounded annually) from the date of grant until the end
of the term of the option. These amounts are reported net of the
option exercise price, but before any taxes associated with exercise
or subsequent sale of the underlying stock. The actual value, if any,
an optionholder may realize will be a function of the extent to which
the stock price exceeds the exercise price on the date the option is
exercised and also will depend on the option holder's continued
employment through the vesting period. The actual value to be
realized by the option holder may be greater or less than the values
estimated in this table.
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, 1997 JUNE 30, 1997(1)
SHARES ------------- ------------------
ACQUIRED VALUE
NAME ON EXERCISE REALIZED EXERCISABLE UNEXERCISABE EXERCISABLE UNEXERCISABLE
- ---- ----------- --------- ----------- ------------ ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Richard J. DePiano -- -- 450,000 -- $41,850 --
John T. Rich -- -- -- -- -- --
Ronald L. Hueneke -- -- -- -- -- --
Sterling C. Johnson -- -- -- -- -- --
- -------------------
</TABLE>
(1) Potential unrealized value is (i) the fair market value at fiscal 1997
year-end less the option exercise price times (ii) the number of
options. Fair market value as of fiscal 1997 year-end was determined
based on a closing sale price on June 30, 1997 of $0.656.
NO AWARDS WERE MADE TO ANY NAMED EXECUTIVE OFFICER DURING SUCH FISCAL
YEAR UNDER ANY LONG-TERM INCENTIVE PLAN. THE COMPANY DOES NOT SPONSOR ANY
DEFINED BENEFIT OR ACTUARIAL PLANS AT THIS TIME.
5
<PAGE> 8
EMPLOYMENT AGREEMENTS
On June 4, 1997, the Company entered into an employment agreement
with Richard J. DePiano as the Chairman and Chief Executive Officer of the
Company. The term of the employment agreement commenced on March 1, 1997 and
shall continue through February 28, 1998 subject to any extensions that may be
entered upon the written agreement of the Company and Mr. DePiano. The
agreement provides for a base salary of $240,000 per year plus incentive
compensation in the form of a cash bonus to be paid by the Company to Mr.
DePiano in the event the Company has entered into a sale, license or other
transfer of all or a substantial portion of the assets of the Company, a merger
or consolidation of the Company or a sale of all or a substantial portion of
the Company's capital stock. The bonus to be paid to Mr. DePiano shall be
equal to 10% of the increase in the market capitalization of the Company as a
result of any of the aforementioned transactions from March 1, 1997 to the
close of business on the date on which Mr. DePiano's employment with the
Company terminates; provided, however, that the minimum bonus to be paid to Mr.
DePiano as the result of the Company entering into any of the aforementioned
transactions shall be $250,000. The agreement also provides that the amount of
the bonus is to be reduced by an amount equal to the appreciation value of the
stock options granted to Mr. DePiano that have theretofore been exercised or
that are exercisable. Under the terms of the employment agreement, Mr. DePiano
received options to purchase 450,000 shares of the Company's Common Stock. The
options granted to Mr. DePiano are fully vested but terminate upon the payment
of his aforementioned incentive compensation. The agreement also provides for
health and long term disability insurance and other fringe benefits as well as
an automobile allowance of $800 per month.
John T. Rich entered into an employment agreement with EOI in January
1990 that, as amended in January 1990 and September 1995, provides, among other
things, for annual salary at a rate established by the Company's Board of
Directors which is currently set as $119,000 per annum. Mr. Rich's employment
agreement was assumed by the Company in connection with the Assets Sale and
Purchase Agreement dated February 12, 1996 (the "Asset Sale and Purchase"),
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 agreement also provides for
health, life and long-term disability insurance and other fringe benefits. If
Mr. Rich is terminated without cause, the agreement provides for the
continuation of Mr. Rich's salary and fringe benefits for one year after
termination. Under the agreement, Mr. Rich was also granted options to
purchase up to 50,000 shares of the EOI's Common Stock at an exercise price per
share of $.25. The options are fully vested and currently exercisable. The
employment agreement expires in January 1998, but will be automatically renewed
for successive terms of one year unless either party notifies the other in
writing at least 90 days prior to the expiration of the then current term of
its determination not to renew the agreement.
Ronald L. Hueneke entered into an employment agreement with EOI in
October of 1991 that provides for annual salary at a rate established by the
Company's Board of Directors which is currently set as $105,000 per annum. Mr.
Hueneke's employment agreement was assumed by the Company in connection with
the Asset Sale and Purchase. The agreement also provides for health, life and
long-term disability insurance and other fringe benefits. In addition, the
agreement provided for incentive compensation equal to 3 1/3% of the gross
sales derived from the sale by Mr. Hueneke of certain products during the
initial term of the employment agreement. Under the agreement, Mr. Hueneke was
also granted options to purchase up to 75,000 shares of the EOI's Common Stock
at an exercise price per share of $1.00. The options are fully vested and
currently exercisable. The employment agreement, which had an initial term of
five years, renews automatically from year to year unless either party notifies
the other in writing at least 90 days prior to the expiration of the then
current term of its determination not to renew the agreement.
Sterling C. Johnson entered into an employment agreement with EOI in
1989 that, as amended in January 1991 and January 1995, provided for annual
compensation in the amount of $154,000. In connection with the Assets Sale and
Purchase, Mr. Johnson's employment agreement was assumed by the Company,
including EOI's obligation to pay $60,000 in earned but unpaid compensation to
Mr. Johnson. Mr. Johnson's agreement was for a three-year term ending in
December 1997 and renewed automatically for successive one-year periods unless
either party notified the other in writing at least 90 days prior to the
expiration date. The agreement provided for health, life and long term
disability insurance and other fringe benefits as well as reimbursement of the
costs associated
6
<PAGE> 9
with the lease of an automobile not in excess of $500 per month. The agreement
provided 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. Under the terms of his employment agreement, the Company was
obligated to reimburse Mr. Johnson for any withholding tax obligation and the
tax on such reimbursement in the event Mr. Johnson exercised the options.
Effective April 30, 1997, Mr. Johnson stepped down from the office of President
and Chief Operating Officer. In connection therewith, the Company made
payments to Mr. Johnson in fiscal year 1997 of $23,697 in severance payments
and $13,920 in accrued vacation. The Company will have paid to Mr. Johnson the
balance of all outstanding severance-related expenses, or approximately
$150,000, by the end of April 1998.
SECURITIES OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of September 11, 1997, 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 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.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP TABLE
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...........
D. Blech and D. Blech & Company,
Incorporated (3) ............... -- -- 3,160,000 3,160,000 23.1
599 Lexington Avenue
New York, NY 10022 ...........
Allen & Company Incorporated (4) -- -- 635,841 635,841 5.7
711 Fifth Avenue
New York, NY 10022 ...........
R.A. Mackie & Co., L.P. (4) .... -- -- 560,475 560,475 5.1
One Gorham Island
Westport, CT 06880...........
Sterling C. Johnson ............ -- -- -- -- --
</TABLE>
7
<PAGE> 10
<TABLE>
<S> <C> <C> <C> <C> <C>
Robert J. Kunze.............................. 5,759 * 5,759 5,759 *
Richard J. DePiano(5)........................ -- -- 450,000 450,000 4.1
Jack M. Dodick, M.D.......................... -- -- -- -- --
Jay L. Federman, M.D......................... -- -- -- -- --
All directors and executive officers as a
group (5 persons)............................ 5,759 * 450,000 455,759 4.2
- --------------
</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.
(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 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) 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").
(4) For Allen & Company Incorporated such figures are as reported on
Schedule 13G dated February 14, 1997. Allen & Company Incorporated's
ownership consists of 48,646 shares of Common Stock and shares
underlying 91,805 Class A Warrants and 495,390 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.
(5) Represents 450,000 shares which Mr. DePiano has the right to acquire
upon the exercise of currently exercisable stock options.
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
8
<PAGE> 11
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 former President/Chief Executive Officer, Chief Operating Officer
and Vice President, Finance and Administration/Secretary, respectively, 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., a Director, 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.
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
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<PAGE> 12
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 August 8, 1997, 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 500,000 to 700,000 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
September 22, 1997, options to purchase 450,000 shares of Common Stock were
outstanding under the 1993 Plan; options to purchase 50,000 remain available
for future grants. An increase in the number of shares available for issuance
is necessary to meet the above objectives. The Board of Directors believes
that it is in the best interests of the Company and its shareholders to
incorporate this change 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.
------------------------------------
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 700,000
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 September 22, 1997, options to purchase 450,000 shares
of Common Stock have been granted under the 1993 Plan.
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<PAGE> 13
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, 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 September 22, 1997, approximately 17 non-director
employees, five directors and one Consultant were eligible to participate in
the 1993 Plan.
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
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<PAGE> 14
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, mid-term or short-term, depending
on whether the shares were held for more than 18 months, more than 12 months
but less than 18 months, or 12 months or less, 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.
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.
------------------------------------
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(PROPOSAL NO. 3)
APPROVAL OF AMENDMENT OF THE BYLAWS
Section 1 of Article IV of the Company's Amended and Restated Bylaws
(the "Bylaws") currently provides that the authorized number of directors shall
be a minimum of five and a maximum of nine with the exact number of directors
to be fixed by an amendment to the Bylaws adopted by the board of directors.
Currently, the Bylaws provide that the exact number of directors is to be six.
On August 8, 1997, the Board of Directors of the Company approved,
subject to shareholder approval, an amendment to the Bylaws that would (i)
decrease the minimum authorized number of directors from five to three and
decrease the maximum authorized number of directors from nine to five and (ii)
allow the directors or shareholders to fix the exact number of directors within
such range by resolution rather than through an amendment to the Bylaws. The
amendment will not be effective if the votes cast against its adoption exceed
16 2/3% of the outstanding shares entitled to vote.
The Board of Directors believes that this proposed amendment to the
Bylaws will provide the board of directors more flexibility in searching for
well-qualified candidates without having to fill an empty seat immediately in
order to be in compliance with Section 1 of Article IV of the Bylaws.
Accordingly, it is proposed that Section 1 of Article IV of the Bylaws of the
Company be amended and restated in its entirety to read as follows:
"Section 1. Number of Directors. The number of authorized directors
shall be not less than three (3) nor more than five (5), the exact number of
directors to be fixed from time to time within such range by a duly adopted
resolution of the board of directors or the shareholders."
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR THE
AMENDMENT TO THE BYLAWS.
(PROPOSAL NO. 4)
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, 1998. 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, 1998.
13
<PAGE> 16
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 1998 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 1998 annual meeting, such proposals must be received by
the Company no later than June 30, 1998. 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, 1997,
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.
14
<PAGE> 17
EXHIBIT A
ESCALON MEDICAL CORP.
PROPOSED AMENDMENT TO THE 1993 STOCK OPTION PLAN
SECOND 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
August 8, 1997, as follows (subject to the obtaining of subsequent approval of
the shareholders of the Company):
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 700,000 (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> 18
PROXY PROXY
ESCALON MEDICAL CORP.
ANNUAL MEETING OF SHAREHOLDERS TO BE HELD NOVEMBER 7, 1997
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS. The
undersigned hereby appoints RICHARD J. DEPIANO 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 November 7, 1997 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.
<TABLE>
<S> <C>
1. ELECTION OF DIRECTORS [ ] FOR all nominees listed [ ] WITHHOLD AUTHORITY
below (except as marked to vote for the all nominees
to contrary)
INSTRUCTION: To withhold authority to vote for any individual nominee, strike a line through the nominee's name
on the following list:
Richard DePiano Jay L. Federman, M.D.
Jack M. Dodick, M.D. Robert J. Kunze
THE BOARD OF DIRECTORS RECOMMENDS VOTING FOR EACH OF THE NOMINEES IN PROPOSAL 1.
2. PROPOSAL TO AMEND THE COMPANY'S 1993 STOCK OPTION PLAN TO INCREASE THE NUMBER OF SHARES
AVAILABLE THEREUNDER FROM 500,000 TO 700,000.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
THE BOARD OF DIRECTORS RECOMMENDS VOTING FOR PROPOSAL NO. 2.
3. PROPOSAL TO AMEND THE COMPANY'S AMENDED AND RESTATED BYLAWS TO DECREASE THE MINIMUM AND MAXIMUM
AUTHORIZED NUMBER OF DIRECTORS AND TO ALLOW THE BOARD OF DIRECTORS OR THE SHAREHOLDERS TO FIX
THE EXACT NUMBER OF DIRECTORS BY RESOLUTION.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
THE BOARD OF DIRECTORS RECOMMENDS VOTING FOR PROPOSAL NO. 3.
4. PROPOSAL TO RATIFY THE APPOINTMENT OF ERNST & YOUNG LLP AS THE INDEPENDENT AUDITORS OF THE
COMPANY FOR THE FISCAL YEAR ENDING JUNE 30, 1998.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
THE BOARD OF DIRECTORS RECOMMENDS VOTING FOR PROPOSAL NO. 4.
</TABLE>
5. 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.
IMPORTANT - PLEASE SIGN AND DATE ON REVERSE SIDE AND RETURN THE
PROXY CARD PROMPTLY USING THE ENCLOSED ENVELOPE.
<PAGE> 19
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, "FOR" the amendment of the
Company's Amended and Restated Bylaws, 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 or an instrument revoking this Proxy,
or by attending the meeting and electing to vote in person.
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.
DATE , 1997
------------------------------
------------------------------
SIGNATURE
------------------------------
SIGNATURE
I Do [ ] I Do Not [ ] expect to attend the meeting.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
