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 (as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] 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)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
(5) Total fee paid:
------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the form or schedule and the date of its filing.
(1) Amount previously paid:
------------------------------------------------------------------------
(2) Form, schedule or registration statement no.:
------------------------------------------------------------------------
(3) Filing party:
------------------------------------------------------------------------
(4) Date filed:
------------------------------------------------------------------------
<Table>
[ESCALON(R) LOGO] Escalon Medical Corp.
351 E. Conestoga Road
Wayne, PA 19087
Tel. 610-688-6830 Fax. 610-688-3641
</Table>
- --------------------------------------------------------------------------------
NOTICE OF 2003 ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD NOVEMBER 11, 2003
To the Shareholders of Escalon Medical Corp.:
NOTICE IS HEREBY GIVEN that the 2003 Annual Meeting of the Shareholders of
Escalon Medical Corp. (the "Company" or "Escalon") will be held at the offices
of Duane Morris LLP, One Liberty Place, 1650 Market Street, 42nd Floor,
Philadelphia, Pennsylvania 19103-7396, on Tuesday, November 11, 2003, at 9:00
a.m., local time, for the following purposes:
1. To elect two Class I directors, to serve until the expiration of their
three-year terms and until their successors are elected;
2. To consider a proposal to approve an amendment to the Company's 1999
Equity Incentive Plan to increase the number of shares available for
award under the Plan;
3. To ratify the selection of Parente Randolph, LLC as the Company's
independent auditors for the fiscal year ending June 30, 2004; and
4. To transact such other business as may properly come before the meeting
and any adjournment, postponement or continuation thereof.
The Board of Directors has fixed the close of business on September 22,
2003, as the record date for the determination of shareholders entitled to
notice of, and to vote at, the Annual Meeting.
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
entitled to vote must be present in person or be represented by proxy.
By Order of the Board of Directors,
(-s- Richard J. DePiano)
Richard J. DePiano
Chief Executive Officer
Wayne, Pennsylvania
October 8, 2003
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.
ESCALON MEDICAL CORP.
351 E. CONESTOGA ROAD
WAYNE, PA 19087
PROXY STATEMENT
2003 ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON NOVEMBER 11, 2003
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
Pennsylvania corporation (the "Company"), for use at the 2003 Annual Meeting of
Shareholders of the Company to be held on Tuesday, November 11, 2003, at 9:00
a.m., local time, at the offices of Duane Morris LLP, One Liberty Place, 1650
Market Street, 42nd Floor, Philadelphia, Pennsylvania 19103-7396, and at any
adjournment, postponement or continuation thereof.
The 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. 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 8, 2003.
RECORD DATE AND VOTING
Only shareholders of record at the close of business on September 22, 2003
are entitled to notice of, and to vote at, the Annual Meeting. As of September
22, 2003, 3,365,359 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 for Class I directors listed herein under "Election of Directors,"
for the approval of the amendment to the Company's 1999 Equity Incentive Plan
and for the ratification of the selection of Parente Randolph, LLC as the
Company's independent auditors for the fiscal year ending June 30, 2004.
The two candidates for election as a Class I director who receive the
largest number of votes cast by the holders of Common Stock in person or by
proxy at the Annual Meeting will be elected as Class I directors. Cumulative
voting is not permitted in the election of directors. The approval of the
amendments to the Company's 1999 Equity Incentive Plan and for the ratification
of the selection of independent auditors will require the affirmative vote of a
majority of the votes cast at the Annual Meeting by the holders of Common Stock.
Shares of Common Stock held by brokers or nominees as to which voting
instructions have not been received from the beneficial owner or person
otherwise entitled to vote and as to which the broker or nominee does not have
discretionary voting power, i.e., broker non-votes, will not represent votes
cast for the election of Class I directors or the other two proposals.
Abstentions will be treated as the withholding of authority to vote for nominees
for election as Class I directors. Abstentions from voting and broker non-votes
will therefore have no effect on the election of Class I directors or the
approval of the other two proposals because they will not represent votes cast
at the Annual Meeting. Proxies received but marked as abstentions and broker
non-votes will be included in the calculation of the number of shares considered
to be present at the meeting.
1
(PROPOSAL NO. 1)
ELECTION OF DIRECTORS
The Company's Board of Directors consists of six members. Each director is
elected for a term of three years and until his or her successor is elected and
has qualified or until his or her earlier resignation or removal. The current
three-year terms of the Company's directors expire in the years 2003, 2004 and
2005, respectively.
Two Class I directors are to be elected at the Annual Meeting. Unless
otherwise instructed, the proxies solicited by the Board of Directors will be
voted for the election of the nominees named below, both of whom are currently
directors of the Company. If a nominee becomes unavailable for any reason, it is
intended that the proxies will be voted for a substitute nominee designated by
the Board of Directors. The Board of Directors has no reason to believe the
nominees named will be unable to serve if elected. Any vacancy occurring on the
Board of Directors for any reason may be filled by a majority of the directors
then in office until the expiration of the term of the class of directors in
which the vacancy exists.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE SHAREHOLDERS VOTE
FOR EACH OF THE NOMINEES NAMED BELOW.
The names of the nominees for Class I directors and the Class II directors
and Class III directors who will continue in office after the Annual Meeting
until the expiration of their respective terms, together with certain
information regarding them, are as follows:
<Table>
<Caption>
NOMINEES FOR CLASS I DIRECTORS DIRECTOR YEAR TERM PRINCIPAL OCCUPATIONS DURING PAST FIVE
NAME OF DIRECTOR SINCE WILL EXPIRE AGE YEARS AND CERTAIN DIRECTORSHIPS
- ---------------- -------- ----------- --- --------------------------------------
William L. G. Kwan.............. 1999 2006* 62 Retired; Vice President of Business
Development of Alcon Laboratories,
Inc., a medical products company, from
October 1996 to 1999, and Vice
President of International Surgical
and Instruments from November 1989 to
October 1996.
Anthony J. Coppola.............. 2000 2006* 65 Principal and operator of The Historic
Town of Smithville, Inc., a real
estate and commercial property company
from 1988 to present; Retired Divi-
sion President of SKF Industries, a
manufacturing company, from 1963 to
1986
</Table>
- ---------------
* If elected at the Annual Meeting.
2
<Table>
<Caption>
CLASS II DIRECTORS
DIRECTORS CONTINUING IN OFFICE
DIRECTOR YEAR TERM PRINCIPAL OCCUPATIONS DURING PAST FIVE
NAME OF DIRECTOR SINCE WILL EXPIRE AGE YEARS AND CERTAIN DIRECTORSHIPS
- ---------------- -------- ----------- --- --------------------------------------
Lisa A. Napolitano.............. 2003 2004 40 Tax Manager, Global Tax Management,
Inc., a provider of compliance support
services for both federal and state
taxes, since 1998.
Jeffrey F. O'Donnell............ 1999 2004 42 President and CEO of PhotoMedex, Inc.,
a medical products company, since
November 1999; President and CEO of
Radiance Medical Systems (previously
Cardiovascular Dynamics) from 1997 to
1999 and Vice President of Sales and
Marketing from 1995 to 1997. Mr.
O'Donnell is currently a Board Member
of PhotoMedex, Inc., Endologix, Inc.,
and Cardiac Science, Inc.
</Table>
<Table>
<Caption>
CLASS III DIRECTORS DIRECTOR YEAR TERM PRINCIPAL OCCUPATIONS DURING PAST FIVE
NAME OF DIRECTOR SINCE WILL EXPIRE AGE YEARS AND CERTAIN DIRECTORSHIPS
- ---------------- -------- ----------- --- --------------------------------------
Richard J. DePiano.............. 1996 2005 62 Chairman and CEO of Escalon Medical
Corp. since March 1997; CEO of the
Sandhurst Company, LP and Managing
Director of the Sandhurst Venture Fund
since 1986; Chairman of the Board of
Directors PhotoMedex, Inc.
Jay L. Federman, MD............. 1996 2005 64 Chief of the Division of Ophthalmol-
ogy at the Medical College of Penn-
sylvania and M.C.P. Hahnemann School
of Medicine; Co-Director of the Retina
Service at Wills Eye Hospital in
Philadelphia; Chairman of the Board of
Directors of Escalon Medical Corp.
from February 1996 to March 1997.
</Table>
Ms. Napolitano was appointed to fill a vacancy as a Class II director of
the Company in August 2003.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors held four meetings during the fiscal year ended June
30, 2003. During the fiscal year ended June 30, 2003, all of the members of the
Board of Directors attended in person or telephonically at least 75% of the
meetings of the Board of Directors and the committees of which they were members
held during the periods in which the director served.
The Board of Directors has established three standing committees: the
Executive Committee, the Audit Committee and the Compensation Committee. The
Board of Directors acts as the Company's Nominating Committee.
Executive Committee. The Executive Committee has the authority to take
action that can be taken by the Board of Directors, consistent with applicable
law, between meetings of the Board of Directors. The Executive Committee
consists of three directors: Mr. DePiano, Dr. Federman and Mr. O'Donnell.
3
Audit Committee. The Audit Committee has the primary responsibility of
assisting the Board of Directors in fulfilling its responsibility to oversee
management's conduct of the Company's financial reporting process. The Audit
Committee is directly responsible for determining the appointment, compensation,
retention and oversight of the work of the Company's auditors for the purpose of
preparing or issuing an audit report or performing other audit, review or attest
services for the Company, and the auditors must report directly to the Audit
Committee. The Committee's functions include: (i) selecting, evaluating and,
where appropriate, replacing the 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 four meetings during the fiscal year
ended June 30, 2002. The Audit Committee consists of three directors: Mr.
Coppola, Mr. Kwan and Ms. Napolitano.
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 two meetings during
the fiscal year ended June 30, 2002. The Compensation Committee consists of two
directors: Dr. Federman and Mr. Coppola.
COMPENSATION OF DIRECTORS
None of the Company's directors was paid any directors fees by the Company
during the fiscal year ended June 30, 2003. On August 13, 2002, the non-employee
directors were each issued stock options to purchase 10,000 shares of the
Company's Common Stock. The exercise price for each of these options was $1.45
per share. Each option expires ten years after the date of grant and is
exercisable in full on the grant date. In addition, directors are reimbursed for
expenses incurred in connection with attending meetings.
REPORT OF THE AUDIT COMMITTEE
The Audit Committee is comprised of three directors, none of whom is an
officer of Escalon and all of whom are considered "independent" under the
listing standards of the Nasdaq Stock Market.
Management has the primary responsibility for Escalon's financial
statements and the financial reporting process, including the system of internal
controls. Escalon's independent auditors are responsible for performing an
independent audit of Escalon's consolidated financial statements in accordance
with generally accepted auditing standards and for issuing a report thereon. The
Audit Committee has adopted a charter, under which the Audit Committee is
responsible for monitoring, on behalf of the Board of Directors, Escalon's
financial reporting process and Escalon's internal controls and accounting
practices. The Audit Committee is also responsible for determining the
appointment and retention of, overseeing the work of and confirming the
independence of Escalon's independent auditors.
The auditors presented the Audit Committee with an engagement letter
setting forth the proposed services to be rendered in connection with the audit
for the fiscal year ending June 30, 2003. The Audit Committee reviewed the
engagement letter and approved the engagement of the auditors for the audit of
the fiscal year ending June 30, 2003.
The Audit Committee has reviewed Escalon's audited consolidated financial
statements and discussed those statements with management. The Audit Committee
has also discussed with Parente Randolph, LLC, Escalon's independent auditors
during the fiscal year ended June 30, 2003, the matters required to be discussed
by Statement on Auditing Standards No. 61 (Communications with Audit Committees,
as amended).
4
The Audit Committee received from Parente Randolph, LLC the written
disclosures required by Independence Standards Board Standard No. 1
(Independence Discussions with Audit Committees) and discussed with Parente
Randolph, LLC matters relating to its independence.
The Audit Committee also considered the provision of audit-related and tax
services by Parente Randolph, LLC discussed below under "Principal Accounting
Fees and Services" to the Company is compatible with maintaining Parente
Randolph, LLC's independence.
On the basis of these reviews and discussions, the Audit Committee
recommended to the Board of Directors that Escalon's audited consolidated
financial statements be included in Escalon's Annual Report on Form 10-K for the
fiscal year ended June 30, 2003, and be filed with the Securities and Exchange
Commission.
Anthony J. Coppola
William L. G. Kwan
Lisa A. Napolitano
September 23, 2003
PRINCIPAL ACCOUNTING FEES AND SERVICES
Audit Fees. The aggregate fees billed to Escalon by Parente Randolph, LLC,
the Company's independent auditors, in connection with (i) the audit of
Company's annual consolidated financial statements for the fiscal year ended
June 30, 2003 and (ii) the reviews of the consolidated financial statements
included in the Company's Form 10-Q quarterly reports for the fiscal year ended
June 30, 2003 was $51,575. The auditors presented the Audit Committee with an
engagement letter setting forth the proposed services to be rendered in
connection with the audit for the fiscal year ending June 30, 2003. The Audit
Committee reviewed the engagement letter and approved the engagement of the
auditors for the audit of the fiscal year ending June 30, 2003. The auditors
must present the Audit Committee with an engagement letter setting forth any
proposed services to be rendered to the Company. The Audit Committee will review
the engagement letter and approve the engagement of the auditors if appropriate.
Audit-Related Fees. The aggregate fees billed by Parente Randolph, LLC for
audit-related services in connection with amendments to prior filings with the
SEC during the fiscal year ended June 30, 2003 was $13,000.
Tax Fees. The aggregate fees billed by Parente Randolph, LLC for tax
services during the fiscal year ended June 30, 2003 was $10,750.
All Other Fees. No other fees were billed by Parente Randolph, LLC for
services rendered to the Company during the fiscal year ended June 30, 2003.
EXECUTIVE OFFICERS OF THE COMPANY
<Table>
<Caption>
NAME AGE POSITION
- ---- --- --------
Richard J. DePiano.................... 62 Chairman and Chief Executive Officer
Harry M. Rimmer....................... 56 Senior Vice President, Finance,
Secretary and Treasurer
</Table>
Mr. DePiano has been a director of the Company since February 1996 and has
served as Chairman and Chief Executive Officer of the Company since March 1997.
Mr. DePiano has been the Chief Executive Officer of the Sandhurst Company, L.P.
and Managing Director of the Sandhurst Venture Fund since 1986. Mr. DePiano is
Chairman of the Board of Directors of PhotoMedex, Inc.
Mr. Rimmer was appointed Vice President, Corporate Development of the
Company in March 2000. In August 2000, his role was expanded to include Vice
President, Finance and Secretary. In August 2001, his role
5
was expanded to include Senior Vice President, Finance, Secretary and Treasurer.
From 1996 until 1999 Mr. Rimmer served as the Finance Director for Irving
Tissue, Inc., a manufacturing and marketing company based in Philadelphia. In
1995 Mr. Rimmer was the Finance Officer for a division of Scott Paper, and for
the first eight months of 1996 Mr. Rimmer was employed by the Kimberly Clark
organization in connection with the divestment of a business unit.
EXECUTIVE COMPENSATION
The following table sets forth certain compensation paid by the Company to
its Chief Executive Officer and the only other highly compensated executive
officer of the Company for all services rendered in all capacities for the
periods shown.
SUMMARY COMPENSATION TABLE
<Table>
<Caption>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION AWARDS
-------------------------- -------------------------
SECURITIES
NAME AND OTHER ANNUAL UNDERLYING ALL OTHER
PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION OPTIONS COMPENSATION(1)
- ------------------ ---- -------- -------- ------------ ---------- ---------------
Richard J. DePiano........ 2003 $256,250 $169,000 -- 50,000 $19,600
Chairman and Chief 2002 $250,000 $ 93,000 -- 50,000 $36,324
Executive Officer 2001 $250,000 $ 60,000 -- 105,000 $18,320
Harry M. Rimmer........... 2003 $123,000 $ 50,000 -- 25,000 $ 3,600
Senior Vice President 2002 $120,000 $ 15,000 -- 25,000 --
Finance, Secretary and 2001 $ 90,000 $ 9,000 -- 40,000 --
Treasurer
</Table>
- ---------------
(1) Includes payment by the Company of (i) in the case of Mr. DePiano, (a) an
automobile allowance and (b) insurance premiums paid for life insurance; and
(ii) in the case of Mr. Rimmer, an automobile allowance.
OPTION GRANTS IN LAST FISCAL YEAR INDIVIDUAL GRANTS
<Table>
<Caption>
% OF TOTAL
NUMBER OF OPTIONS
SECURITIES GRANTED TO
UNDERLYING EMPLOYEES EXERCISE
OPTIONS IN FISCAL PRICE EXPIRATION
NAME GRANTED YEAR (PER SHARE) DATE
- ---- ---------- ---------- ----------- ----------
Richard J. DePiano............................... 50,000 40.73% $1.45 8/13/2012
Harry M. Rimmer.................................. 25,000 20.37% $1.45 8/13/2012
</Table>
- ---------------
(1) These options were granted under the Company's 1999 Equity Incentive Plan
and have a term of ten years, subject to earlier termination in certain
events. See "Employment Agreements." The options of Mr. Rimmer vest monthly
over a five-year period. The options of Mr. DePiano vest monthly over a
twenty-four month period.
6
AGGREGATE OPTIONS EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION VALUE
<Table>
<Caption>
VALUE OF UNEXERCISED
NUMBER OF UNEXERCISED IN-THE-MONEY OPTIONS
SHARES OPTIONS AT JUNE 30, 2002 AT JUNE 30, 2002
ACQUIRED ON VALUE --------------------------- ---------------------------
NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------- -------- ----------- ------------- ----------- -------------
Richard J. DePiano....... 0 0 457,500 37,500 $527,888 $50,375
Harry M. Rimmer.......... 0 0 33,416 81,584 $ 29,645 $58,317
</Table>
- ---------------
(1) Potential unrealized value is (i) the fair market value at fiscal 2003
year-end less the option exercise price times (ii) the number of options.
Fair market value as of fiscal 2003 year-end was determined based on a
closing sale price on June 30, 2003 of $3.16.
No awards were made to any named executive officer during such fiscal year
under any long-term incentive plan. The Company does not sponsor any defined
benefit or actuarial plans at this time.
EMPLOYMENT AGREEMENT
On May 12, 1998, the Company entered into an employment agreement with
Richard J. DePiano as the Chairman and Chief Executive Officer of the Company.
The initial term of the employment agreement commenced on May 12, 1998 and
continued through June 30, 2001. The employment agreement renews on July 1 of
each year for successive terms of three years unless either party notifies the
other party at least 30 days prior to such date of the notifying party's
determination not to renew the agreement. The current base salary provided under
the agreement, as adjusted for yearly cost of living adjustments, is $250,000
per year, and the agreement provides for additional incentive compensation in
the form of a cash bonus to be paid by the Company to Mr. DePiano at the
discretion of the Board of Directors. The agreement also provides for health and
long-term disability insurance and other fringe benefits as well as an
automobile allowance of $800 per month.
EQUITY COMPENSATION PLAN INFORMATION
<Table>
<Caption>
WEIGHTED-
AVERAGE EXERCISE
NUMBER OF SECURITIES PRICE OF NUMBER OF SECURITIES
TO BE ISSUED UPON OUTSTANDING REMAINING AVAILABLE
EXERCISE OF OPTIONS, FOR FUTURE ISSUANCE
OUTSTANDING OPTIONS WARRANTS AND UNDER EQUITY
WARRANTS AND RIGHTS RIGHTS COMPENSATION PLANS
-------------------- ----------------- --------------------
Equity Compensation Plans Approved by 1,313,367 $2.27 209,080
Security Holders.........................
Equity Compensation Plans Not Approved By 0 0 0
Security Holders.........................
</Table>
SECURITIES OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of September 22, 2003, certain
information regarding the beneficial ownership of the Company's Common Stock by
(i) each person who is known by the Company to beneficially own more than 5% of
the Company's Common Stock, (ii) each director and nominee for election as
director of the Company, (iii) each of the persons named in the Summary
Compensation table under "Executive Compensation" above and (iv) all directors
and executive officers of the Company as a group.
The calculation of percentage ownership as shown for each person in the
following table assumes the exercise of all options held by such person that are
exercisable on or before December 1, 2003, but not the
7
exercise of any other person's options. 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.
BENEFICIAL OWNERSHIP TABLE
<Table>
<Caption>
AMOUNT OF
AMOUNT OF BENEFICIAL
BENEFICIAL OWNERSHIP AMOUNT OF
OWNERSHIP OF OF SHARES AGGREGATE AGGREGATE
NAME AND ADDRESS OUTSTANDING PERCENT UNDERLYING BENEFICIAL PERCENT
OF BENEFICIAL OWNER SHARES(1)** OF CLASS OPTIONS OWNERSHIP OF CLASS
- ------------------- ------------ -------- ---------- ---------- ---------
Eliot Rose Asset Management, LLC......... 451,900 13.43% -- 451,900 13.43%
Gary S. Siperstein
10 Weybosset Street, Suite 401
Providence, RI 02903(2)
Richard J. DePiano....................... 16,528 * 478,333 494,861 10.58%
Jay L. Federman, M.D..................... 42,072 1.3% 65,000 107,072 2.29%
Lisa A. Napolitano....................... -- -- -- -- --
Jeffrey F. O'Donnell..................... 1,000 * 45,000 46,000 *
William L. G. Kwan....................... -- * 60,000 60,000 1.28%
Anthony J. Coppola....................... -- * 30,000 30,000 *
Harry M. Rimmer.......................... -- * 59,667 59,667 1.28%
All directors and executive officers as a
group (8 persons)...................... 60,416 1.8% 855,000 915,416 19.57%
</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.
(1) 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 13G dated December 31, 2002. Eliot Rose Asset
Management, LLC is deemed to be the beneficial owner of the securities
reflected in the Statement 13G pursuant to separate arrangements whereby it
acts as investment adviser to certain persons. Gary S. Siperstein is deemed
to be the beneficial owner of the securities reflected on Schedule 13G
pursuant to his ownership interest in Eliot Rose Asset Management, LLC.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Company's directors and
executive officers, and persons who own ten percent or more of the Company's
Common Stock, to file with the Commission reports of ownership and changes in
ownership. To the Company's knowledge, based solely on its review of the copies
of such reports furnished to the Company and written representations that no
other reports were required, the Company believes that during the period July 1,
2002 through June 30, 2003, all filing requirements applicable to its officers
and directors were complied with.
(PROPOSAL NO. 2)
AMENDMENT OF 1999 EQUITY INCENTIVE PLAN
At the Annual Meeting, there will be presented to the shareholders a
proposal to approve and adopt an amendment to the Company's 1999 Equity
Incentive Plan (the "Equity Incentive Plan"). On August 15,
8
2003 the Board of Directors of the Company approved the proposed amendment to
the Equity Incentive 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 Equity Incentive Plan from 835,000 to 1,035,000 shares of Common
Stock. The Board of Directors believes that the Company's ability to grant
options under the Equity Incentive Plan is a valuable and necessary compensation
tool that aligns the long-term financial interests of eligible director,
officers, key employees and consultants with the financial interests of the
Company's shareholders. As of June 30, 2003, options to purchase 625,920 shares
of Common Stock were outstanding under the Equity Incentive Plan; and options to
purchase 209,080 shares remained available for future grants. An increase in the
number of shares available for issuance is necessary to meet the objectives
described above. The Board of Directors believes that it is in the best
interests of the Company and its shareholders to incorporate this change into
the Equity Incentive Plan.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR APPROVAL OF THE
AMENDMENT TO THE EQUITY INCENTIVE PLAN.
DESCRIPTION OF THE EQUITY INCENTIVE PLAN
The purpose of the Equity Incentive Plan is to enhance the ability of the
Company and its subsidiaries to attract and retain the best available personnel
for positions of substantial responsibility, to provide additional incentive to
those persons and to promote the success of the Company. The Equity Incentive
Plan currently permits the grant of options for a maximum of 835,000 shares of
the Company's Common Stock.
Options granted under the Equity Incentive Plan may be options intended to
qualify as incentive stock options ("Incentive Stock Options") under section 422
of the Internal Revenue Code of 1986, as amended (the "Code") or options that
are not intended to so qualify ("Non-Qualified Stock Options") (collectively the
"Options") granted to those officers, directors, consultants and key employees
of the Company and the subsidiaries of the Company who are in positions in which
their decisions, actions and counsel significantly impact upon the profitability
and success of the Company and the subsidiaries of the Company. Nothing
contained in the Equity Incentive Plan affects the right of the Company or any
subsidiary of the Company to terminate the employment of any employee or the
services of any director, optionee or consultant.
As of September 22, 2003, options to purchase 625,920 shares of the Common
Stock were outstanding under the Equity Incentive Plan. The Company believes
that additional shares must be reserved under the Equity Incentive Plan to
satisfy anticipated stock option grants over the next several years. The number
of persons who are eligible to participate in the Equity Incentive Plan is
approximately 64, including executive officers and directors of the Company and
executive officers of subsidiaries of the Company.
On September 23, 2003, the closing price of the Company's Common Stock as
reported on the Nasdaq SmallCap Market was $4.65 per share.
No Options may be granted under the Equity Incentive Plan after July 15,
2009. If an Option expires or is terminated for any reason without having been
fully exercised, the number of shares subject to such Option which have not been
purchased may again be made subject to an Option under the Equity Incentive
Plan. Appropriate adjustments to outstanding Options and to the number or kind
of shares subject to the Equity Incentive Plan are provided for in the event of
a stock split, reverse stock split, stock dividend, share combination or
reclassification and certain other types of corporate transactions involving the
Company, including a merger or a sale of substantially all of the assets of the
Company. The maximum number of shares of Common Stock for which Options may be
granted under the Equity Incentive Plan to any employee in any calendar year is
100,000 shares.
The Equity Incentive Plan is administered by a committee appointed by the
Board of Directors of the Company, each member of which must be a "non-employee
director" within the meaning of Rule 16b-3 under the Exchange Act (the
"Committee"), and is currently administered by the Compensation Committee of the
Board of Directors, consisting of Mr. Coppola and Dr. Federman. See "Election of
Directors -- Meetings and Committees of the Board of Directors." The Committee
is authorized to (i) interpret the provisions of the
9
Equity Incentive Plan and decide all questions of fact arising in its
application; (ii) select the directors, officers, employees and consultants to
whom Options are granted and determine the timing, type, amount, size and terms
of each such grant and (iii) to make all other determinations necessary or
advisable for the administration of the Equity Incentive Plan.
INCENTIVE AND NON-QUALIFIED OPTIONS
The exercise price of shares subject to Options granted under the Equity
Incentive Plan will be set by the Committee but may not be less than 100%, with
respect to Incentive Stock Options, and 85%, with respect to Non-Qualified Stock
Options, of the fair market value per share of Common Stock on the date the
Option is granted as determined by the Committee.
Options will be evidenced by written agreements in such form not
inconsistent with the Equity Incentive Plan as the Committee shall approve from
time to time. Each agreement will state the period or periods of time within
which the Option may be exercised. The Committee may accelerate the
exercisability of any Option upon such circumstances and subject to such terms
and conditions as the Committee deems appropriate. Unless otherwise determined
by the Committee, no Option that is unexercisable at the time of the optionee's
termination of employment or service to the Company may thereafter become
exercisable. No Option may be exercised after ten years from the date of grant.
An outstanding Non-Qualified Stock Option that has become exercisable
generally terminates one year after the optionee ceases to be a consultant,
director, officer or employee of the Company or any subsidiary due to death,
retirement or total disability and three months after such termination for any
reason other than retirement, total disability or death. Incentive Stock Options
that have become exercisable generally will terminate one year after termination
of employment due to total disability, death or retirement and three months
after an employment termination for any other reason. Notwithstanding the
foregoing, an Incentive Stock Option that is exercised more that three months
after termination of employment due to retirement will lose its status as an
Incentive Stock Option and will be treated as a Non-Qualified Stock Option. No
Option may be assigned or transferred, except by will or by the applicable laws
of descent and distribution. During the lifetime of the optionee, an Option may
be exercised only by the optionee.
The Committee will determine whether Options granted are to be Incentive
Stock Options meeting the requirements of Section 422 of the Code. Incentive
Stock Options may be granted only to eligible employees. Any such optionee must
own less than 10% of the total combined voting power of the Company or of any of
its subsidiaries unless, at the time such Incentive Stock Option is granted, the
option price is at least 110% of the fair market value of the Common Stock
subject to the Option and, by its terms, the Incentive Stock Option is not
exercisable after the expiration of five years from the date of grant. An
optionee may not receive Incentive Stock Options for shares that first become
exercisable in any calendar year with an aggregate fair market value determined
at the date of grant in excess of $100,000.
The option price must be paid in full at the time of exercise unless
otherwise determined by the Committee. Payment must be made in cash, in shares
of Common Stock valued at their then fair market value, or a combination
thereof, as determined in the discretion of the Committee. It is the policy of
the Committee that any taxes required to be withheld must also be paid at the
time of exercise. The Committee may, in its discretion, allow an optionee to
enter into an agreement with the Company's transfer agent or a brokerage firm of
national standing whereby the optionee will simultaneously exercise the Option
and sell the shares acquired thereby and either the Company's transfer agent or
the brokerage firm executing the sale will remit to the Company from the
proceeds of sale the exercise price of the shares as to which the Option has
been exercised.
AMENDMENT AND TERMINATION
The Board of Directors may terminate or amend the Equity Incentive Plan at
any time with respect to shares as to which Options have not been granted,
subject to any required shareholder approval or any shareholder approval that
the Board may deem to be advisable for any reason, such as for the purpose of
obtaining or retaining any statutory or regulatory benefits under tax,
securities or other laws or satisfying any
10
applicable stock exchange listing requirements. No modification, amendment or
termination may be made to the Equity Incentive Plan without the consent of an
optionee if such modification, amendment or termination will affect the rights
of the optionee under an Option previously granted.
The following table sets forth the total number of shares of Common Stock
for which stock options have been awarded to the persons and groups listed below
under the Equity Incentive Plan as of September 22, 2003.
AWARDS MADE UNDER THE EQUITY INCENTIVE PLAN
<Table>
<Caption>
NUMBER
NAME AND POSITION OF OPTIONS
- ----------------- ----------
Richard J. DePiano.......................................... 282,646
Jay L. Federman, MD......................................... 60,000
Lisa A. Napolitano.......................................... --
Jeffrey F. O'Donnell........................................ 35,000
William L. G. Kwan.......................................... 60,000
Anthony J. Coppola.......................................... 30,000
Harry M. Rimmer............................................. 115,000
All current executive officers as a group................... 397,646
All current directors who are not executive officers as a
group..................................................... 185,000
All employees other than executive officers and directors as
a group................................................... 43,274
</Table>
FEDERAL INCOME TAX CONSEQUENCES
Based on the advice of counsel, the Company believes that the normal
operation of the Equity Incentive Plan should generally have, under the Code and
the regulations thereunder, all as in effect on the date of this Proxy
Statement, the principal federal income tax consequences described below. The
tax treatment described below does not take into account any changes in the Code
or the regulations thereunder that may occur after the date of this Proxy
Statement. The following discussion is only a summary; it is not intended to be
all-inclusive or to constitute tax advice, and, among other things, does not
cover possible state or local tax consequences. This description may differ from
the actual tax consequences of participation in the Equity Incentive Plan.
An employee receiving an Option (an "Optionee") will not recognize taxable
income upon the grant of the Option, nor will the Company be entitled to any
deduction on account of such grant.
In the case of Non-Qualified Stock Options, the Optionee will recognize
ordinary income upon the exercise of the Non-Qualified Stock Option in an amount
equal to the difference between the option price and the fair market value of
the shares on the date of exercise. An Optionee exercising a Non-Qualified Stock
Option is subject to federal income tax withholding on the income recognized as
a result of the exercise of the Non-Qualified Stock Option. Such income will
include any income attributable to any shares issuable upon exercise that are
surrendered, if permitted under the applicable stock option agreement, in order
to satisfy the federal income tax withholding requirements.
Except as provided below, the basis of the shares received by the Optionee
upon the exercise of a Non-Qualified Stock Option will be the fair market value
of the shares on the date of exercise. The Optionee's holding period will begin
on the day after the date on which the Optionee recognizes income with respect
to the transfer of such shares, i.e., generally the day after the exercise date.
When the Optionee disposes of the shares acquired upon exercise of a
Non-Qualified Stock Option, the Optionee will generally recognize capital gain
or loss under the Code rules that govern stock dispositions, assuming the shares
are held as capital assets, equal to the difference between (i) the selling
price of the shares and (ii) the sum of the option price and the amount included
in the Optionee's income when the Non-Qualified Stock Option was exercised. Any
net capital gain (i.e., the excess of the net long-term capital gains for the
taxable year over net short-term capital
11
losses for such taxable year) will be taxed at a capital gains rate that depends
on how long the shares were held and the Optionee's tax bracket. Any net capital
loss may be used only to offset up to $3,000 per year of ordinary income
(reduced to $1,500 in the case of a married individual filing separately) or
carried forward to a subsequent year. The use of shares to pay the exercise
price of a Non-Qualified Stock Option, if permitted under the applicable stock
option agreement, will be treated as a like-kind exchange under Section 1036 of
the Code to the extent that the number of shares received on the exercise does
not exceed the number of shares surrendered. The Optionee will therefore
recognize no gain or loss with respect to the surrendered shares and will have
the same basis and holding period with respect to the newly acquired shares (up
to the number of shares surrendered) as with respect to the surrendered shares.
To the extent the number of shares received exceeds the number surrendered, the
fair market value of such excess shares on the date of exercise, reduced by any
cash paid by the Optionee upon such exercise, will be includible in the gross
income of the Optionee. The Optionee's basis in such excess shares will equal
the fair market value of such shares on the date of exercise, and the Optionee's
holding period with respect to such excess shares will begin on the day
following the date of exercise.
Incentive Stock Options granted under the Equity Incentive Plan are
intended to qualify as incentive stock options under Section 422 of the Code. A
purchase of shares upon exercise of an Incentive Stock Option will not result in
recognition of income at that time, provided the Optionee was an employee of the
Company or certain related corporations described in Section 422(a)(2) of the
Code during the entire period from the date of grant of the Incentive Stock
Option until three months before the date of exercise (increased to 12 months if
employment ceased due to total and permanent disability). The employment
requirement is waived in the event of the Optionee's death. (Of course, in all
of these situations, the Incentive Stock Option itself may provide a shorter
exercise period after employment ceases than the allowable period under the
Code.) However, the excess of the fair market value of the shares purchased over
the exercise price will constitute an item of tax preference. This tax
preference will be included in the Optionee's computation of the Optionee's
alternative minimum tax. The basis of the shares received by the Optionee upon
exercise of an Incentive Stock Option is the exercise price. The Optionee's
holding period for such shares begins on the date of exercise.
If the Optionee does not dispose of the shares issued to the optionee upon
the exercise of an Incentive Stock Option within one year after such issuance or
within two years after the date of the grant of such Incentive Stock Option,
whichever is later, then any gain or loss realized by the Optionee on a later
sale or exchange of such shares generally will be a long-term capital gain or a
long-term capital loss equal to the difference between the amount realized upon
the disposition and the exercise price, if such shares are otherwise a capital
asset in the hands of the Optionee. Any net capital gain (i.e., the excess of
the net long-term capital gains for the taxable year over net short-term capital
losses for such taxable year) will be taxed at a capital gains rate that depends
on how long the shares were held and the Optionee's tax bracket. Any net capital
loss may be used only to offset up to $3,000 per year of ordinary income
(reduced to $1,500 in the case of a married individual filing separately) or
carried forward to a subsequent year. If the Optionee sells the shares during
such period (i.e., within two years after the date of grant of the Incentive
Stock Option or within one year after the transfer of the shares to the
Optionee), the sale will be deemed a "disqualifying disposition." In that event,
the Optionee will recognize ordinary income for the year in which the
disqualifying disposition occurs equal to the amount, if any, by which the
lesser of the fair market value of such shares on the date of exercise of such
Incentive Stock Option or the amount realized from the sale exceeded the amount
the Optionee paid for such shares. In the case of disqualifying dispositions
resulting from certain transactions, such as gift or related party transactions,
the Optionee will realize ordinary income equal to the fair market value of the
shares on the date of exercise minus the exercise price. The basis of the shares
with respect to which a disqualifying disposition occurs will be increased by
the amount included in the Optionee's ordinary income. Disqualifying
dispositions of shares may also, depending upon the sales price, result in
capital gain or loss under the Code rules that govern other stock dispositions,
assuming that the shares are held as a capital asset. The tax treatment of such
capital gain or loss is summarized above.
Except as provided below, the use of shares already owned by the Optionee
to pay the purchase price of an Incentive Stock Option will be treated as a
like-kind exchange under Section 1036 of the Code to the
12
extent that the number of shares received on the exercise does not exceed the
number of shares surrendered. The Optionee will therefore recognize no gain or
loss with respect to the surrendered shares and will have the same basis and
holding period with respect to the newly acquired shares (up to the number of
shares surrendered) as with respect to the surrendered shares. To the extent
that the number of shares received exceeds the number surrendered, the
Optionee's basis in such excess shares will equal the amount of cash paid by the
Optionee upon the exercise of the Incentive Stock Option (if any), and the
Optionee's holding period with respect to such excess shares will begin on the
date such shares are transferred to the Optionee. However, if payment of the
purchase price upon exercise of an Incentive Stock Option is made with shares
acquired upon exercise of an Incentive Stock Option before the shares used for
payment have been held for the two-year or one-year period described herein, use
of such shares as payment will be deemed a "disqualifying disposition" of the
shares used for payment subject to the rules described herein.
Under current law, any gain realized by an Optionee, other than long-term
capital gain, is taxable at a maximum federal income tax rate of 35%. Under
current law, long-term capital gain is taxable at a maximum federal income tax
rate of 15%.
The Company will be entitled to a tax deduction in connection with an
Option under the Equity Incentive Plan in an amount equal to the ordinary income
realized by the Optionee and at the time such Optionee recognizes such income
(including any ordinary income realized by the Optionee upon a "disqualifying
disposition" of an Incentive Stock Option described above).
The foregoing discussion is only a summary of certain of the federal income
tax consequences relating to the Equity Incentive Plan as in effect on the date
of this Proxy Statement. No consideration has been given to the effects of
state, local, and other laws (tax or other) upon the Equity Incentive Plan or
upon the Optionee or Company, which laws will vary depending upon the particular
jurisdiction or jurisdictions involved.
(PROPOSAL NO. 3)
RATIFICATION OF SELECTION OF AUDITORS
The Audit Committee has appointed the firm of Parente Randolph, LLC as
independent auditors for the year ending June 30, 2004.
The appointment of auditors is made by the Audit Committee of the Board of
Directors. In making its decision, 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 Parente Randolph, LLC 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 BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR
RATIFICATION OF THE SELECTION OF PARENTE RANDOLPH, LLC AS THE COMPANY'S
INDEPENDENT AUDITORS FOR THE FISCAL YEAR ENDING JUNE 30, 2004.
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 2004 ANNUAL MEETING
Shareholders may submit proposals on matters appropriate for Shareholder
action at annual meetings in accordance with Rule 14a-8 of the proxy rules of
the Securities and Exchange Commission. To be considered for inclusion in the
proxy statement and form of proxy relating to the 2004 Annual Meeting, such
proposals
13
must be received by the Company no later than June 10, 2004. Proposals should be
directed to the attention of the Secretary of the Company.
Pursuant to Section 2.3 of the Company's By-laws, if a Shareholder wishes
to present at the Company's 2004 Annual Meeting of shareholders (i) a proposal
relating to nominations for and election of directors or (ii) a proposal
relating to a matter other than nominations for and election of directors,
otherwise than pursuant to Rule 14a-8 of the proxy rules of the Commission, the
Shareholder must comply with the provisions relating to Shareholder proposals
set forth in the Company's By-laws, which are summarized below. Written notice
of any such proposal containing the information required under the Company's
By-laws, as described herein, must be delivered in person, by first class United
States mail postage prepaid or by reputable overnight delivery service to the
Company's Secretary at the Company's principal executive offices at the address
set forth in the front of this proxy statement during the period commencing on
June 10, 2004 and ending on July 12, 2004.
A written proposal of nomination for a director must set forth (A) the name
and address of the Shareholder who intends to make the nomination (the
"Nominating Shareholder"), (B) the name, age, business address and, if known,
residence address of each person so proposed, (C) the principal occupation or
employment of each person so proposed for the past five years, (D) the number of
shares of capital stock of the Company beneficially owned within the meaning of
Commission Rule 13d-3 by each person so proposed and the earliest date of
acquisition of any such capital stock, (E) a description of any arrangement or
understanding between each person so proposed and the Nominating Shareholder
with respect to such person's proposal for nomination and election as a director
and actions to be proposed or taken by such person as a director, (F) the
written consent of each person so proposed to serve as a director if nominated
and elected as a director and (G) such other information regarding each such
person as would be required under the proxy solicitation rules of the Commission
if proxies were to be solicited for the election as a director of each person so
proposed. Only candidates nominated by shareholders for election as a member of
the Company's Board of Directors in accordance with the By-law provisions
summarized herein will be eligible to be considered or acted upon for election
at such meeting of shareholders, and any candidate not nominated in accordance
with such provisions will not be considered or acted upon for election as a
director at such meeting of shareholders.
A written proposal relating to a matter other than a nomination for
election as a director must set forth information regarding the matter
equivalent to the information that would be required under the proxy
solicitation rules of the Commission if proxies were solicited for Shareholder
consideration of the matter at a meeting of shareholders. Only Shareholder
proposals submitted in accordance with the By-law provisions summarized above
will be eligible for presentation at the 2004 Annual Meeting of Shareholders,
and any matter not submitted to the Company's Board of Directors in accordance
with such provisions will not be considered or acted upon at the 2004 Annual
Meeting of Shareholders.
ANNUAL REPORT ON FORM 10-K
The Company is furnishing without charge to each person whose proxy is
being solicited, a copy of the Company's annual report for the year ended June
30, 2003. Requests for additional copies of such report and the Company's Form
10-K for the year ended June 30, 2003, exclusive of exhibits, should be directed
to the Company, Attention: Richard J. DePiano.
EACH SHAREHOLDER WHO DOES NOT EXPECT TO ATTEND THE ANNUAL MEETING IN PERSON
IS URGED TO EXECUTE THE ACCOMPANYING PROXY AND RETURN IT PROMPTLY IN THE
ENCLOSED ENVELOPE.
14
PROXY PROXY
ESCALON MEDICAL CORP.
ANNUAL MEETING OF SHAREHOLDERS TO BE HELD NOVEMBER 11, 2003
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS. The undersigned
hereby appoints Richard J. DePiano and Harry M. Rimmer, or either of them acting
alone in the absence of the other, the attorneys, agents and proxies of the
undersigned, with full powers of substitution (the "Proxies"), to attend and act
as proxy or proxies of the undersigned at the Annual Meeting of shareholders
(the "Annual Meeting") of Escalon Medical Corp. (the "Company") to be held at
the offices of Duane Morris LLP, One Liberty Place, 1650 Market Street, 42nd
Floor, Philadelphia, PA 19103-7396, on November 11, 2003 at 9:00 a.m. or any
adjournment or continuation thereof, and to vote as specified herein the number
of shares which the undersigned, if personally present, would be entitled to
vote.
1. ELECTION OF CLASS I DIRECTORS
___ FOR all nominees listed below
(except as marked to contrary)
___ WITHHOLD AUTHORITY to vote for the
all nominees
INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, STRIKE A
LINE THROUGH THE NOMINEE'S NAME ON THE FOLLOWING LIST:
William L. G. Kwan
Anthony J. Coppola
THE BOARD OF DIRECTORS RECOMMENDS VOTING FOR EACH OF THE NOMINEES IN
PROPOSAL 1.
2. PROPOSAL TO APPROVE AN AMENDMENT TO THE COMPANY'S 1999 EQUITY INCENTIVE
PLAN TO INCREASE THE NUMBER OF SHARES AVAILABLE FOR AWARD UNDER THE PLAN.
FOR ____ AGAINST ____ ABSTAIN ____
THE BOARD OF DIRECTORS RECOMMENDS VOTING FOR PROPOSAL NO. 2.
3. PROPOSAL TO RATIFY THE SELECTION OF PARENTE RANDOLPH, LLC AS THE COMPANY'S
INDEPENDENT AUDITORS FOR THE FISCAL YEAR ENDING JUNE 30, 2004.
FOR ____ AGAINST ____ ABSTAIN ____
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. 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.
This Proxy when properly executed will be voted as specified. If no
instruction is specified with respect to a matter to be acted upon, the shares
represented by the Proxy will be voted "FOR" each nominee for Class I Director,
"FOR" the proposal to approve an amendment to the Company's 1999 Equity
Incentive Plan to increase the number of shares available for award under the
Plan, and "FOR" the ratification of Parente Randolph, LLC 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. This Proxy is solicited on behalf of
the Board of Directors and may be revoked prior to its exercise by filing with
the Secretary of the Company a duly executed proxy bearing a later date or an
instrument revoking this Proxy, or by attending the meeting and electing to vote
in person.
Please 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 , 2003
---------------------------------
--------------------------------------------
SIGNATURE
--------------------------------------------
SIGNATURE
I Do ___ I Do Not___ expect to attend the Annual Meeting.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY
CARD PROMPTLY USING THE ENCLOSED ENVELOPE.