SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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 Under Rule 14a-12
ECHOCATH, INC.
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(Name of Registrant as Specified in Its Charter)
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(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:
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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 (set forth the amount on which the
filing fee is calculated and state how it was determined):
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/ / 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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3) Filing Party:
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4) Date Filed:
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ECHOCATH, INC.
4326 U.S. Route 1
Monmouth Junction, New Jersey 08852
August 29, 2000
Dear Shareholder:
On behalf of the Board of Directors and management, I am pleased to
invite you to the 2000 Annual Meeting of Shareholders of EchoCath, Inc. The
meeting will be held on Friday, September 29, 2000 at the Company's
headquarters, 4326 U.S. Route 1, Monmouth Junction, New Jersey 08852 at 10:00
a.m.
To assure that your vote will be counted, I urge you to read the
enclosed materials carefully and to complete, sign and mail promptly the proxy
card contained with this letter in the manner described on the proxy card. Also
enclosed is a copy of the Company's 1999 Annual Report to Shareholders.
The officers and directors of EchoCath appreciate your continuing
support and we look forward to seeing you at the Annual Meeting.
/s/ Frank A. DeBernardis
President and Chief Executive Officer
Monmouth Junction, New Jersey
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YOUR VOTE IS IMPORTANT
In order to assure your representation at the meeting, you are requested to
complete, sign and date the enclosed proxy as promptly as possible and return it
in the enclosed envelope to which no postage need be affixed if mailed in the
United States.
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P.S. If you are planning to attend the meeting please call us at
609/987-8400 X126, so that we may plan for your attendance and
provide you with the best travel directions.
ECHOCATH, INC.
4326 U.S. Route 1
Monmouth Junction, New Jersey 08852
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD SEPTEMBER 29, 2000
The Annual Meeting of Shareholders (the "Annual Meeting") of EchoCath, Inc., a
New Jersey corporation (the "Company"), will be held at the Company's
headquarters, 4326 U.S. Route 1, Monmouth Junction, New Jersey 08852, on Friday,
September 29, 2000 at 10:00 a.m. (local time) for the following purposes:
1. To elect seven (7) directors to serve until the next Annual
Meeting and until their successors have been duly elected and
qualified;
2. To ratify the appointment of KPMG LLP, as the Company's
independent public accountants for the fiscal year ending August
31, 2001;
3. To approve and ratify the adoption of an amendment to the
Company's Restated Certificate of Incorporation, as amended,
increasing the total number of shares of authorized capital stock
of the Company from twenty-five million (25,000,000) shares to
sixty million (60,000,000) shares, increasing the total number of
shares of the Company's Class A Common Stock, no par value (the
"Class A Common Stock"), from eighteen million five hundred
thousand (18,500,000) shares to fifty million (50,000,000) shares
and increasing the total number shares of the Company's Preferred
Stock from five million (5,000,000) shares to ten million
(10,000,000) shares;
4. To approve an amendment to the Company's 1995 Stock Option Plan,
as amended (the "1995 Stock Plan"), to increase the maximum
number of shares of Class A Common Stock available for issuance
under the 1995 Stock Plan from 1,020,000 shares of Class A Common
Stock to 3,000,000 shares;
5. To approve and ratify the termination of forfeiture provisions of
833,000 shares of the Company's Class A Common Stock, which were
formerly 833,000 shares of Class B Common Stock, no par value;
and
6. To act upon such other matters as may properly come before the
meeting or any adjournments or postponements thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice. The record date for determining those
shareholders who will be entitled to notice of, and to vote at, the Annual
Meeting and at any adjournment thereof is August 15, 2000. The Annual Meeting
may be adjourned from time to time without notice other than by announcement at
the Annual Meeting. The stock transfer books will not be closed between the
record date and the date of the Annual Meeting. A list of shareholders arranged
alphabetically who are entitled to vote at the Annual Meeting will be available
for inspection at the Annual Meeting.
It is important that your shares be represented at the Annual Meeting
regardless of the number of shares you may hold. If you receive more than one
proxy card because your shares are registered in different names or addresses,
each such proxy card should be signed and returned to ensure that all of your
shares will be voted. The prompt return of proxies will ensure a quorum is
present at the Annual Meeting and save the Company the expense of further
solicitation. Whether or not you plan to attend the meeting, please complete,
date, sign and return the enclosed proxy promptly either in the accompanying
reply envelope. Your proxy may be revoked at any time prior to the voting of the
proxy at the Annual Meeting. If you decide to attend the Annual Meeting and wish
to change your proxy vote, you may do so by voting in person at the Annual
Meeting.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Irwin M. Rosenthal
Secretary
Monmouth Junction, New Jersey
August 29, 2000
ECHOCATH, INC.
PROXY STATEMENT
FOR
2000 ANNUAL MEETING OF SHAREHOLDERS
These proxy materials are furnished in connection with the solicitation
of proxies by the Board of Directors of EchoCath, Inc., a New Jersey corporation
("EchoCath" or the "Company"), for use at the 2000 Annual Meeting of
Shareholders (the "Annual Meeting") to be held at 10:00 a.m. (local time) on
Friday, September 29, 2000, at the Company's headquarters, 4326 U.S. Route 1,
Monmouth Junction, New Jersey 08852, and at any adjournment or postponement of
the Annual Meeting. These proxy materials are being distributed to shareholders
by mail on or about August 29, 2000.
PURPOSE OF MEETING
The specific proposals to be considered and acted upon at the Annual
Meeting are summarized in the accompanying Notice of Annual Meeting of
Shareholders. Each proposal is described in more detail in this Proxy Statement.
VOTING RIGHTS AND SOLICITATION
Voting
The Company's Class A Common Stock, no par value (the "Class A Common
Stock"), and the Company's Series B Convertible Preferred Stock, no par value
(the "Series B Preferred Stock"), are the only types of securities entitled to
vote at the Annual Meeting. On August 15, 2000, the record date for
determination of shareholders entitled to vote at the Annual Meeting, there were
6,744,598 shares of Class A Common Stock and 280,000 shares of Series B
Preferred Stock outstanding and eligible to cast 215,385 votes. Each holder of
record of Class A Common Stock on August 15, 2000 is entitled to one vote for
each share of Class A Common Stock held by such shareholder. Each holder of
record of Series B Preferred Stock on August 15, 2000 is entitled to one vote
for each share of Class A Common Stock into which each share of Series B
Preferred Stock may then be converted. The holders of Class A Common Stock and
Series B Preferred Stock vote together as a single class on all matters set
forth in this Proxy Statement.
The presence in person or by proxy of the holders, as of the record
date, of a majority of the outstanding shares of Class A Common Stock and Series
B Preferred Stock will constitute a quorum at the Annual Meeting. In the
election of directors, the seven candidates receiving the highest number of
affirmative votes will be elected. The Board wishes to receive a majority of the
votes cast at the Annual Meeting for Proposal 2. The affirmative vote of a
majority of the votes present in person or by proxy is required for Proposals 3
and 4. The affirmative vote of a majority of the votes of disinterested
shareholders present in person or by proxy is required for Proposal 5.
Abstentions will be treated as shares that are present for purposes of
determining the presence of a quorum but as unvoted for purposes of determining
the approval of any matter submitted for a vote of the shareholders. Proposals 1
and 2 are considered "discretionary" items upon which brokerage firms may vote
in their discretion on behalf of their clients if such clients have not
furnished voting instructions within ten days of the date of the Annual Meeting.
Proposals 3, 4 and 5 are "nondiscretionary" and brokers who have not received
instructions from their clients do not have discretion to vote on these items.
In instances where brokers are prohibited from exercising discretionary
authority for beneficial owners who have not returned a proxy (so called "broker
non-votes"), the shares of Class A Common Stock and Series B Preferred Stock
subject to such broker non-votes will be treated in the same manner as
abstentions.
All votes will be tabulated by the inspector of election appointed for
the Annual Meeting, who will separately tabulate affirmative and negative votes,
abstentions, and broker non-votes.
Proxies
The persons named as proxies are Daniel M. Mulvena, Frank A.
DeBernardis and David Vilkomerson each of whom are currently directors of the
Company. Whether or not you are able to attend the Annual Meeting, you are urged
to complete and return the enclosed proxy, which is solicited by the Company's
Board of Directors and which will be voted as you direct on your proxy when
properly completed. In the event no directions are specified, such proxies will
be voted FOR the nominees of the Board of Directors as provided in Proposal 1,
FOR Proposals 2, 3, 4 and 5, and, as to other matters that may properly come
before the Annual Meeting, in the discretion of the proxy holders. You may
revoke or change your proxy at any time before the voting of the proxy at the
Annual Meeting. To do this, send a written notice of revocation or another
signed proxy with a later date to the Secretary of the Company at the Company's
principal executive offices before the beginning of the Annual Meeting. You may
also revoke your proxy by attending the Annual Meeting and filing a written
notice of revocation with the secretary of the Annual Meeting prior to the
voting at the Annual Meeting or by voting the shares subject to the proxy by
written ballot.
Expenses of Solicitation
The Company will bear the entire cost of solicitation, including the
presentation, assembly, printing, and mailing of this Proxy Statement, the
proxy, and any additional soliciting material furnished to shareholders. Copies
of solicitation material will be furnished to brokerage houses, fiduciaries, and
custodians holding shares in their names that are beneficially owned by others
so that they may forward this solicitation material to such beneficial owners.
In addition, the Company may reimburse such persons for their costs of
forwarding the solicitation material to such beneficial owners. The original
solicitation of proxies by mail may be supplemented by solicitation by
telephone, telegram, or other means by directors, officers, employees, or agents
of the Company. No additional compensation is anticipated to be paid to these
individuals for any such services.
2
PROPOSAL NO. 1
ELECTION OF DIRECTORS
General
The Company's Board of Directors is elected annually by the holders of
the Class A Common Stock and the Series B Preferred Stock and is currently
comprised of seven members (individually a "Director" and collectively the
"Directors"). Each Director holds office until the next Annual Meeting of
Shareholders and until his successor is duly elected and qualified or until his
earlier resignation or removal. The names of the nominees for Director, all of
whom are presently Directors of the Company, and their positions and offices
with the Company are set forth in the table below. None of the Company's
Directors are related to any other Director or to any executive officer of the
Company.
The proxy holders intend to vote all valid proxies received by them for
the nominees listed below unless otherwise instructed. In the event any nominee
is unable or declines to serve as a Director at the time of the Annual Meeting,
the proxies will be voted for any nominee who may be designated by the present
Board of Directors to fill the vacancy. As of the date of this Proxy Statement,
the Board of Directors is not aware of any nominee who is unable or will decline
to serve as a Director. The seven nominees receiving the highest number of
affirmative votes of the shares entitled to vote at the Annual Meeting will be
elected Directors.
Nominees for Election at the 2000 Annual Meeting are:
Positions and Offices Held
Nominees Age with the Company
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Frank A. DeBernardis (1).................... 57 Chief Executive Officer,
President and Director
Anthony J. Dimun (3)........................ 56 Director
Daniel M. Mulvena (1)(2)(3)................. 52 Chairman of the Board of Directors
Joseph J. Prischak ......................... 69 Director
Irwin M. Rosenthal (2)...................... 71 Secretary and Director
David Vilkomerson........................... 59 Executive Vice President, Director of
Research and Development, Assistant
Secretary and Director
Malcolm Dale................................ 65 Director
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(1) Member of the Executive Committee.
(2) Member of the Audit Committee.
(3) Member of the Compensation and Stock Option Committee.
Recommendation of the Board of Directors
The Board of Directors recommends a vote FOR the nominees listed herein.
3
Business Experience of Nominees
The following describes the current and past five years business
experience and certain directorships of each nominee for Director. This
information was furnished to the Company by the respective nominees.
Frank A. DeBernardis has served as Chief Executive Officer, President
and a director of the Company since its inception. From 1989 to 1992, Mr.
DeBernardis served as President and was the sole shareholder of Implemed, Inc.
("Implemed"), a privately-held corporation which provided consulting services in
the area of medical device manufacturing.
Malcolm Dale has served as a Director of the Company since June 2000.
Mr. Dale is Vice President of DB Alex Brown, an investment banking/brokerage
company with whom he has been associated since 1995. He previously held similar
positions at C.J. Lawrence and Prescott, Ball & Turban.
Anthony J. Dimun has served as a director of the Company since
inception, served as Secretary of the Company from inception until August 1995,
and served as a Vice President and Treasurer of the Company from inception until
November 1996. Mr. Dimun has served as the Chief Financial Officer and Executive
Vice President of Vital Signs, Inc. ("Vital Signs") since March 1991, its
Secretary and Treasurer since December 1991, and as a director of Vital Signs
since August 1987. He is also a Director of Bionx Implants Inc., a
publicly-traded medical device company.
Daniel M. Mulvena has served as Chairman of the Board since September
1997 and was Co-Chairman of the Board from August 1995 to September 1997. Mr.
Mulvena is President of Commodore Associates, a private firm providing
consulting services. From February 1992 through April 1995, Mr. Mulvena served
as Vice-President and General Manager of the Mansfield Division of Boston
Scientific Corporation, a publicly-traded corporation which manufactures and
sells minimally invasive medical products. Mr. Mulvena left Boston Scientific in
April 1995 as Group Vice President Cardio/Cardiology responsible for Mansfield
Cardiac Assist and Mansfield Electrophysiology Divisions of Boston Scientific.
Since May 1997, Mr. Mulvena has served on the Board of Directors of Thoratec
Laboratories Corporation, since January 1998 has been acting Chairman of the
Board and, as of December 26, 1999, the Chief Executive Officer of Magna-Lab,
Inc. ("Magna-Lab"). He also is serving on the Board of Directors of Zoll Medical
and Cambridge Heart, Inc., which together with Magna-Lab, are all publicly-held
corporations involved in medical technology.
Joseph J. Prischak has served as a Director since December 1999. Mr.
Prischak is founder, President and Chief Executive Officer of the The Plastek
Group of Erie, Pennsylvania, an international tool making and plastic molding
company in the field of plastic packaging for consumer products.
Irwin M. Rosenthal has served as a director of the Company since August
1995 and as Secretary of the Company since September 1995. Mr. Rosenthal is a
co-founder of Life Medical, has served as a director of Life Medical since its
inception in 1990, and currently serves as both its Secretary and Treasurer. Mr.
Rosenthal is an attorney and since 1960 has specialized in securities law. He is
currently a partner at Greenberg Traurig. Mr. Rosenthal was formerly a partner
at Rubin Baum Levin Constant & Friedman and Graham & James LLP. Mr. Rosenthal is
also a director of Magna-Lab, Inc. and Symbollon Corporation, a publicly-traded
chemical and medical technology company.
David Vilkomerson, Ph.D., has served as Executive Vice President, Vice
President Research and Development, Assistant Secretary and a director of the
Company since its inception. Dr. Vilkomerson is a founder of Ultramed Inc.
("Ultramed") and served as President and Chairman of the Board of Ultramed from
March 1982 to September 1992. Dr. Vilkomerson has authored or coauthored
approximately 30 technical papers and received over 30 United States patents.
4
Board Committees and Meetings
During the fiscal year ended August 31, 1999, the Board of Directors
held six meetings. During this period, each member of the Board of Directors
attended or participated in more than 75% of the aggregate of (i) the total
number of meetings of the Board of Directors (held during the period for which
such person has been a Director) and (ii) the total number of meetings held by
all Committees of the Board on which each such Director served (during the
periods such Director served). During the fiscal year ended August 31, 1999, the
Board of Directors also acted by unanimous written consent one time.
The Company has three standing Committees: the Executive Committee, the
Audit Committee and the Compensation and Stock Option Committee.
The Executive Committee (currently comprised of Mr. DeBernardis and Mr.
Mulvena) exercises all the power and authority of the Board in the management
and affairs of the Company between meetings of the Board to the extent permitted
by a law. During the fiscal year ended August 31, 1999, the Executive Committee
held no meetings and did not act by unanimous written consent.
The Audit Committee (currently comprised of Mr. Mulvena and Mr.
Rosenthal) reviews the engagement of the Company's independent public
accountants and the independence of the accounting firm, the audit and non-audit
fees of the independent public accountants and the adequacy of the Company's
internal control procedures. During the fiscal year ended August 31, 1999, the
Audit Committee held no meetings and did not act by unanimous written consent.
The Compensation and Stock Option Committee (currently comprised of Mr.
Dimun and Mr. Mulvena) makes recommendations to the Board of Directors
concerning compensation, including incentive arrangements, of the Company's
officers and key employees and others, administers the Company's Option Plan and
determines the officers, key employees and others to be granted options under
the Option Plan and the number of shares subject to such options. During the
fiscal year ended August 31, 1999, the Compensation and Stock Option Committee
held one meeting. During the fiscal year ended August 31, 1999, the Compensation
and Stock Option Committee also acted by unanimous written consent one time.
Director Compensation
All outside directors received cash compensation of $500 for each Board
or Committee meeting attended during the 1999 fiscal year. Outside directors may
also be reimbursed for expenses incurred by them in acting as a director or as a
member of any Committee of the Board.
Certain Relationships and Related Transactions
Since October 1, 1992, Vital Signs has provided certain management
services to the Company and incurred certain out-of-pocket expenses on behalf of
the Company. In fiscal 1999, the Company paid Vital Signs approximately $26,004
for such services and costs incurred. Management believes that the fees incurred
by the Company did not exceed fees that would have been charged by unrelated
parties for similar services. Vital Signs provided legal services to the Company
for a portion of the fiscal year ended August 31, 1999.
Pursuant to an agreement, dated July 7, 1995, between Alliance Partners
(Alliance") and the Company the ("Alliance Agreement"), Alliance satisfied a
bank loan of the Company in the principal amount of $750,000 and in exchange,
the Company agreed to repay Alliance if the Company receives at least
$23,040,000 in gross proceeds from the exercise of the warrants (the "Class B
Warrants") to purchase shares of Class B Common Stock, no par value (the "Class
B Common Stock"). In November 1995, Alliance loaned the Company $100,000, which
loan bore interest at a rate of 9% per annum and was repaid in January 1996. In
January 1996, Alliance agreed to arrange for the payment of $750,000 by certain
5
of the Company's existing shareholders to repay a demand note due by the Company
to a bank in connection with the Company's repurchase of rights under the HRT
Agreement. Alliance paid $75,000 of the $575,000.
As of October 30, 1997, the Company amended certain provisions of the
Alliance Agreement, dated July 7. Under the terms of the Alliance Agreement, the
Company had agreed, among other things, to pay $750,000 to Alliance upon the
receipt by the Company of $23,040,000 in proceeds from the exercise of the
Company's outstanding Class B Warrants. The $750,000 contingent payment is
reflected on the Company's balance sheet as a capital contribution subject to
repayment. Under the terms of the Amendment to the Alliance Agreement, Alliance
has agreed to release and discharge the Company from making the contingent
payment and the Company has agreed to issue to Alliance (i) 50,000 shares of
Class A Common Stock and (ii) a six-year option to purchase 50,000 shares of
Class A Common Stock at an exercise price of $2.00 per share. Upon the closing
of the Amendment, the contingent payment was reclassified as equity of the
Company. Irwin M. Rosenthal, a Director of the Company, is a partner of
Alliance.
In connection with the Company's initial public offering, the
underwriter required that certain shareholders, including Messrs. DeBernardis
and Vilkomerson, contribute the Forfeitable Shares (as defined below) to the
Company without consideration if specified earnings levels or market price
targets (collectively, the "Targets") are not met. Such shares of Class B Common
Stock have been subsequently converted into 833,000 shares of Class A Common
Stock. If none of the Targets are met, on November 30, 2001, the Forfeitable
Shares are required to be placed in the Company's treasury and cancelled. To
date, the Company has not achieved any of the Targets. Pursuant to this Proxy
Statement, the Company is seeking shareholder approval to release the
Forfeitable Shares from escrow to the former holders of Class B Common Stock
although the Targets have not yet been achieved.
In February 1999, the Company entered into a joint venture with Vital
Signs, a related party. Certain members of the Company's Board of Directors are
also members of Vital Signs' management. The joint venture will develop
technology related to the use of the Company's EchoFlow(TM) technology in
conjunction with the joint venture partner's technology. The joint venture
partner received a 50% ownership in return for the contribution of certain
technology valued at $665,000, as well as cash and services valued at $185,000.
The Company received 50% ownership in the joint venture in return for
contribution of its research and development efforts on the technology
contributed by the partner. Additional funding of the joint venture is at the
sole discretion of the joint venture partners. During 1999, the Company incurred
research and development expenditures totaling $336,000 on behalf of the joint
venture, of which it was reimbursed $165,000 by the joint venture for such
services.
On October 29, 1999, the Company completed a private placement
offering. The offering consisted of units of (i) a $25,000 convertible
promissory note and (ii) a three-year warrant to purchase 33,333 shares of Class
A Common Stock. A total of 3,366,633 warrants were issued. The notes bear
interest at 6.5% per annum and mature three years from the date of the final
closing October 29, 1999, unless previously converted into Class A Common Stock.
Each warrant entitles the holder to purchase one share of Class A Common Stock
at an exercise price of $0.75 per share. Mr. Prischak, a Director of the
Company, acquired 46 units in the offering. As a result, Mr. Prischak can
convert the promissory notes into an aggregate of 1,533,333 shares of Class A
Common Stock and acquired warrants to purchase an additional 1,533,318 shares of
Class A Common Stock at an exercise price of $0.75 per share.
On February 23, 2000, the Company offered the foregoing noteholders the
opportunity to purchase four shares of Class A Common Stock at $0.75 per share
for every warrant exercised at the same price. The Company issued a total of
1,500,000 million shares in this offering. In connection with such offering, Mr.
Prischak purchased an aggregate of 1,396,638 shares of Class A Common Stock and
exercised warrants to purchase an additional 349,162 shares of Class A Common
Stock with an exercise price of $0.75 per share.
6
On July 31, 2000, Mr. Prischak acquired 1,333,333 shares of Class A
Common Stock for $0.75 per share, together with a three-year warrant to purchase
an additional 1,333,333 shares of Class A Common Stock at $0.75.
7
EXECUTIVE OFFICERS
The following table identifies the executive officers and key employees
of the Company:
Name Age Capacities in Which Served In Current Position Since
---- --- -------------------------- --------------------------
Frank A. DeBernardis 57 Chief Executive Officer, President and September 1992
Director
David Vilkomerson 59 Executive Vice President, Director of September 1992
Research and Development, Assistant
Secretary and Director
None of the Company's executive officers are related to any other
executive officer or to any Director of the Company. Mr. DeBernardis is an
at-will employee and serves at the discretion of the Board of Directors. Dr.
Vilkomerson has entered into an employment agreement with the Company which is
more fully described in "Executive Compensation and Related Information --
Employment Agreements."
Information with regard to Mr. DeBernardis and Dr. Vilkomerson is set
forth under "Nominees for Directors."
8
EXECUTIVE COMPENSATION AND RELATED INFORMATION
No executive officer of the Company served on the board of directors or
compensation committee of any entity that has one or more executive officers
serving as a member of the Company's Board of Directors or Compensation and
Stock Option Committee.
Executive Compensation
Summary of Cash and Certain Other Compensation
The following table and accompanying footnotes provide certain summary
information concerning the compensation earned by Mr. DeBernardis, the Company's
Chief Executive Officer and President, and Dr. Vilkomerson, the Company's
Executive Vice President and Director of Research and Development (the "Named
Officers"), in each case for services rendered in all capacities to the Company
for the years ended August 31, 1999, 1998 and 1997. No other executive officer
received annual compensation in excess of $100,000 for the fiscal years ended
August 31, 1999, 1998 or 1997.
Summary Compensation Table
Long-Term
Compensation
Awards/
Securities
Underlying All Other
Name and Principal Position Annual Compensation Options(#) Compensation($)
- --------------------------- --------------------------------------------------- ---------- ---------------
Other Annual
Year Salary($) Bonus($) Compensation($)
---- --------- -------- ---------------
Frank A. DeBernardis........... 1999 130,000(1) -- -- -- --
Chief Executive Officer and President 1998 130,000 -- -- -- --
1997 130,000 16,000 -- 150,000(2)(3) --
David Vilkomerson.............. 1999 139,560(1) -- -- -- --
Executive Vice President 1998 134,600 -- -- -- --
1997 130,000 16,000 -- 150,000(2)(3) --
(1) Mr. DeBernardis and Dr. Vilkomerson voluntarily deferred a portion of their
compensation to preserve cash flow until the consummation of a private
placement in October 1999. After the private placement was consummated, the
deferred compensation was paid. The table reflects the compensation due
before the voluntary deferral.
(2) The security underlying all options is Class A Common Stock.
(3) Such options vested as to 50,000 shares on April 29, 1998, vested as to
50,000 shares on April 29, 1999, and vest as to 50,000 shares on April 29,
2000.
9
Option Grants in Fiscal 1999
The following table sets forth the options granted to the Named
Officers during the fiscal year ended August 31, 1999. No stock appreciation
rights were granted to these individuals during fiscal year 1999.
Percentage
Number of of Total
Securities Options Exercise or
Underlying Granted to Base Price
Options Employees in Per Share Expiration
Name Granted(#) Fiscal Year (1)(%) ($/Sh)(2) Date(3)
---- ---------- ------------------ ---------- -----------
Frank A. DeBernardis........ 50,000 23.8 1.125 10/23/08
David Vilkomerson........... 50,000 23.8 1.125 10/23/08
- ----------
(1) Such percentages were based upon a total of 210,000 options granted to all
employees in fiscal 1999.
(2) All options were granted under the 1995 Stock Plan at fair market value on
the date of grant as determined by the Compensation and Stock Option
Committee.
(3) Each option has a maximum term of ten years.
Aggregated Option Exercises In Fiscal 1999 And Fiscal 1999 Year-End
Option Values
The following table sets forth, for each of the Named Officers,
information concerning option exercises and option holdings for the fiscal year
ended August 31, 1999. No stock appreciation rights were granted or exercised
during such year or were outstanding at the end of such year.
Aggregated Option Exercises In Last Fiscal Year And
Fiscal Year-End Option Values
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money Options
Options at Fiscal Year End (#) at Fiscal Year End ($)
Shares Acquired Value ------------------------------ -------------------------
Name on Exercise (#)(1) Realized ($) Exercisable Unexercisable Exercisable Unexercisable
---- ------------------ ------------ ----------- ------------- ----------- -------------
Frank A. DeBernardis -- -- 120,000 50,000 -- --
David Vilkomerson -- -- 190,000 50,000 -- --
(1) As of the date of this Proxy Statement, none of the Named Officers have
exercised any of their options.
10
Employment Agreements
The Company entered into employment agreements with Mr. DeBernardis, to
serve as Chief Executive Officer and President of the Company, and Dr. David
Vilkomerson, to serve as Director and Executive Vice President and Director of
Research and Development of the Company, which expired in November 1996.
Pursuant to such agreements, Mr. DeBernardis and Dr. Vilkomerson received a base
salary of $130,000 at the time of expiration of the agreements. The employment
agreements provided that each such agreement could be terminated by the Company
only if such executive officer had materially breached his obligations under the
agreement, engaged in willful misconduct against the Company or was found guilty
of a felony by a court of competent jurisdiction which, in the discretion of the
Board, would interfere with the performance of such executive officer's duties
and responsibilities or would materially adversely affect the Company. The
agreements also contained confidentiality and non-competition provisions.
Under the terms of the agreement Dr. Vilkomerson's base salary
increased from $130,000 in the first year of his agreement, ending November 1,
1997, to $135,000 in the second year of his agreement, ending November 1, 1998,
and $140,600 the last year of his agreement. Dr. Vilkomerson signed an extended
employment agreement on March 10, 1998. That agreement has expired as of
November 1, 1999. The terms of an extended agreement should be similar to the
original agreement.
Mr. DeBernardis has worked without a contract since November 1996, but
is currently in discussion with the Compensation Committee to extend his
employment agreement. The terms of an extended agreement should be similar to
the original agreement.
The Company entered into a consulting agreement with Mr. Mulvena which
expired on June 30, 1997. Pursuant to such agreement, Mr. Mulvena provided
consulting services to the Company from July 1, 1995 through June 30, 1997, for
up to 27 days per quarter, at a rate of $1,000 per day. The agreement provided
for Mr. Mulvena to be reimbursed for his reasonable expenses and to be provided
with Company benefits. The agreement also contained confidentiality and
non-compete provisions. An extension of such consulting agreement has been
negotiated and Mr. Mulvena will provide for up to four days per quarter, at a
rate of $1,700 per day. Upon the extension of his contract with the Company, Mr.
Mulvena was granted an option to purchase 40,000 shares of Class A Common Stock
at an exercise price of $0.39 per share. The option vests immediately upon grant
and has a term of ten years.
All of the employment agreements which have expired are currently being
negotiated. During the time of such negotiations, both the Company and the
employees comply with their obligations under the expired agreements.
Compensation and Stock Option Committee Interlocks and Insider Participation
The members of the Compensation and Stock Option Committee of the
Company's Board of Directors are Mr. Dimun and Mr. Mulvena. No member of any
such Committee was at any time during the 1999 fiscal year or at any other time
an officer or employee of the Company.
11
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding beneficial
ownership of the Class A Common Stock and Series B Preferred Stock as of August
15, 2000 by (i) each person who is known by the Company to own beneficially more
than five percent of the Class A Common Stock and the Series B Preferred Stock,
(ii) each of the Directors, nominees for Director and Named Officers of the
Company and (iii) all current Directors and executive officers as a group.
Unless indicated otherwise, the address of each of these persons is c/o
EchoCath, Inc., 4326 U.S. Route 1, Monmouth Junction, New Jersey 08852.
Amount
and Nature of
Name and Address Beneficial Percent Percent of
of Beneficial Owners Title of Class Ownership(1)(2) of Class(3) Voting Power(3)
-------------------- -------------- --------------- ----------- ---------------
Cathtech Corp.(4)....................Class A 623,906 9.2 9.2
c/o Vital Signs, Inc. Common Stock
20 Campus Road
Totowa, New Jersey 07512
Anthony Dimun(5)(14).................Class A 158,732 2.3 2.3
c/o Vital Signs, Inc. Common Stock
20 Campus Road
Totowa, New Jersey 07512
Frank DeBernardis(6)(14).............Class A 417,424 5.9 5.9
c/o EcoCath, Inc. Common Stock
P.O. Box 7224
Princeton, New Jersey 08543
Medtronic, Inc.(7)...................Class A 363,636 5.4 5.4
7000 Central Avenue. NE Common Stock
Minneapolis, MN 55482
Daniel M. Mulvena(8)(14).............Class A 210,000 3.0 3.0
6 Fuller Lane Common Stock
Marblehead, Mass. 01945
Joseph J. Prischak(9)................Class A 7,129,955 65.9 65.9
c/o EchoCath, Inc. Common Stock
P.O. Box 7224
Princeton, NJ 08543
12
Amount
and Nature of
Name and Address Beneficial Percent Percent of
of Beneficial Owners Title of Class Ownership(1)(2) of Class(3) Voting Power(3)
-------------------- -------------- --------------- ----------- ---------------
Irwin M. Rosenthal(10)(14)...........Class A 332,958 4.9 4.9
c/o Irwin Rosenthal Common Stock
885 Third Avenue
21st Floor
New York, New York 10022
Ultramed, Inc.(11)...................Class A 468,906 6.9 6.9
c/o Frank Joworisak Common Stock
EchoCath, Inc.
Princeton, New Jersey 08543
David Vilkomerson(12)(14)............Class A 427,350 5.9 5.9
c/o EchoCath, Inc. Common Stock
P.O. Box 7224
Princeton, New Jersey 08543
Vital Signs, Inc.(4).................Class A 623,906 9.2 9.2
20 Campus Road Common Stock
Totowa, New Jersey 07512
EP MedSystems, Inc...................Series B 280,000 100 3.1
58 Route 46 West Preferred Stock
Budd Lake, New Jersey
07828(13)
All executive officers...........Class A 8,676,419 70.3 70.3
and Directors as a group (7 Common Stock
persons)(14)
- ---------------------
(1) Except as indicated in the footnotes to this table, and pursuant to
applicable community property laws, the persons named in the table have
sole voting and investment power with respect to all shares of Class A
Common Stock and Series B Preferred Stock. All shares are beneficially
owned and sole voting and investment power is held by the persons
named, except as otherwise noted.
(2) Class A Common Stock subject to options, warrants and convertible
securities (excluding accrued interest) currently exercisable or
exercisable on or prior to 60 days after August 15, 2000 are deemed
outstanding for computing the percentage ownership of the person
holding such options, but are not deemed outstanding for computing the
percentage ownership of any other person.
13
(3) Applicable percentage of ownership is based on 6,774,598 shares of
Class A Common Stock outstanding, plus any Class A Common Stock
equivalents held by such holders.
(4) Cathtech is the beneficial owner of approximately 13% of the Common
Stock of Ultramed. Vital Signs may be deemed to be a beneficial owner
of the 623,906 shares of Class A Common Stock owned by Cathtech.
(5) Mr. Dimun is an officer and a director of Vital Signs and Cathtech.
These shares do not include the 623,906 shares of Class A Common Stock
owned by Cathtech, as to which Mr. Dimun disclaims beneficial
ownership, since Mr. Dimun is not a principal stockholder of Vital
Signs. These shares include an option to purchase 50,000 shares of
Class A Common Stock, which option is presently exercisable.
(6) Includes options granted by the Company to Mr. DeBernardis to purchase
336,740 shares of Class A Common Stock, which options are presently
exercisable. Excludes (i) 10,006 shares of Class A Common Stock held in
a trust for the benefit of Mr. DeBernardis' children, as to which Mr.
DeBernardis disclaims beneficial ownership and (ii) options to purchase
83,260 shares of Class A Common Stock which are not yet vested and
which do not vest within 60 days after August 15, 2000. Also excludes
an option to purchase 250,000 shares of Class A Common Stock that is
subject to shareholder approval.
(7) Represents shares of Class A Common Stock held by Medtronic Asset
Management, Inc., a Minnesota corporation and a wholly-owned
subsidiary of Medtronic, through which Medtronic holds certain
investments.
(8) Includes options granted by the Company to Mr. Mulvena to purchase
210,000 shares of Class A Common Stock, which options are presently
exercisable. These shares exclude an option to purchase 90,000 shares
of Class A Common Stock, which option is subject to shareholder
approval.
(9) Includes warrants to purchase an aggregate of 2,134,171 shares of Class
A Common Stock and the conversion of a promissory note in the aggregate
principal amount of $1,150,000 which may be converted into 1,533,333
shares of Class A Common Stock.
(10) Such shares include 16,667 shares of Class A Common Stock, and an
option to purchase 16,667 shares of Class A Common Stock, issued to Mr.
Rosenthal in connection with the Alliance Agreement. The option to
purchase 16,667 shares of Class A Common Stock is presently
exercisable. These shares also include an option to purchase 50,000
shares of Class A Common Stock, which option is presently exercisable.
(11) All of the shares have been pledged to Vital Signs as collateral for a
loan and accounts payable, respectively. The pledgees disclaim
beneficial ownership of such shares.
(12) Includes (i) options granted by Ultramed to Dr. Vilkomerson to purchase
from Ultramed 7,526 shares of Class A Common Stock, which options are
presently exercisable, and (ii) an option granted by the Company to Dr.
Vilkomerson to purchase 400,740 shares of Class A Common Stock, which
option is presently exercisable. Excludes (i) options granted by
Ultramed to Dr. Vilkomerson to purchase from Ultramed 1,882 shares of
Class A Common Stock of the Company, which options are not presently
exercisable, and (ii) 234,544 shares of Class A Common Stock owned by
Ultramed (of which he is an officer, director and approximately 13%
stockholder), as to which Dr. Vilkomerson disclaims beneficial
ownership. Also excludes an option to purchase 83,260 shares of Class A
Common Stock which are not yet vested and which do not vest within 60
days after August 15, 2000. Also excludes an option to purchase 250,000
shares of Class A Common Stock that is subject to shareholder approval.
14
(13) Represents 215,385 shares of Class A Common Stock (on an as-converted
to Common Stock basis) eligible to vote at the Annual Meeting.
(14) Options were issued to Dr. Vilkomerson and Messrs. DeBernardis, Dimun,
Rosenthal and Mulvena to purchase in the aggregate 690,000 shares of
Class A Common Stock. These options however, are still awaiting
shareholder approval.
15
PROPOSAL NO. 2
RATIFICATION OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board is asking the shareholders of the Company to ratify its
appointment of KPMG LLP as the Company's independent public accountants for the
fiscal year ending August 31, 2001. The Board wishes to receive the majority of
the votes cast at the Annual Meeting to ratify the selection of KPMG LLP.
In the event the shareholders fail to ratify the appointment, the Board
of Directors will reconsider its selection, but may elect to retain KPMG LLP
nevertheless. Even if the selection is ratified, the Board of Directors, in its
discretion, may direct the appointment of a different independent accounting
firm at any time during the year if the Board of Directors feels that such a
change would be in the Company's and its shareholders' best interests.
KPMG LLP has audited the Company's financial statements annually since
fiscal year 1997. Its representatives are expected to be present at the Annual
Meeting, will have the opportunity to make a statement if they desire to do so,
and will be available to respond to appropriate questions.
Recommendation of the Board of Directors
The Board of Directors recommends that the shareholders vote FOR the
ratification of the selection of KPMG LLP to serve as the Company's independent
public accountants for the fiscal year ending August 31, 2001.
16
PROPOSAL NO. 3
APPROVAL OF AMENDMENT TO CERTIFICATE OF INCORPORATION
In April 2000, the Board, subject to shareholder approval, adopted an
amendment to the Restated Certificate of Incorporation of the Company, as
amended (the "Certificate of Incorporation"), to increase the number of shares
of authorized capital stock of the Company from twenty-five million (25,000,000)
shares to sixty million (60,000,000) shares, consisting of: ten million
(10,000,000) shares of Preferred Stock, and fifty million (50,000,000) shares of
Class A Common Stock. Shareholders are being asked to consider and vote upon a
proposal to amend the Certificate of Incorporation to effect the foregoing
proposal. Upon the filing of the amended Certificate of Incorporation, no shares
of Class B Common Stock will be authorized.
Shares of Preferred Stock may be issued in one or more series. The
number of shares included in any series of Preferred Stock and the full or
limited voting rights, if any, the cumulative or non-cumulative dividend rights,
if any, the conversion, redemption or sinking fund rights, if any, and the
priorities, preferences and relative, participating, optional and other special
rights, if any, in respect of the Preferred Stock, any series of Preferred Stock
or any rights pertaining thereto, and the qualification, limitations or
restrictions on the Preferred Stock, any series of Preferred Stock or any rights
pertaining thereto, shall be those set forth in the resolution or resolutions
providing for the issuance of the Preferred Stock or such series of Preferred
Stock adopted at any time and from time to time by the affirmative vote of a
majority of the total number of directors which the Company would have if there
were no vacancies on the Board of Directors at the time of the vote on such
resolution or resolutions and filed with the Secretary of State of the State of
Delaware. Currently, the Board has designated two hundred eighty thousand
(280,000) shares as Series B Preferred Stock.
Recommendation of the Board of Directors
The Board of Directors recommends a vote FOR the approval of the
Amendment to the Certificate of Incorporation of the Company.
17
PROPOSAL NO. 4
APPROVAL OF AMENDMENT TO THE 1995 STOCK PLAN
In August 1995, the Board of Directors adopted and the shareholders
approved the 1995 Stock Plan (the "Option Plan"). The Option Plan provides for
the grant of incentive stock Option ("ISOs") (within the meaning of Section 422
of the Internal Revenue Code of 1986, as amended (the "Code"), and non-qualified
stock options ("NQSOs") to certain directors, officers and employees of the
Company. The Option Plan further provides for the grant of NQSOs and stock
appreciation rights ("SARs") to directors, agents of, and consultants to, the
Company, whether or not employees of the Company. The purpose of the Option Plan
is to attract and retain employees, agents, consultants and directors. Options
and SARs granted under the Plan may not be exercisable for terms in excess of 10
years from the date of grant. In addition, no options or SARs may be granted
under the Option Plan later than 10 years after the Option Plan's effective
date.
The Board of Directors has approved grants that total 1,657,500. The
additional grants above the authorized total of 1,020,000 will require
shareholder approval. Shareholders are being asked to consider and vote upon a
proposed amendment (the "Amendment") to the Option Plan to increase the maximum
number of shares of Common Stock available for issuance under the Option Plan
from 1,020,000 shares to 3,000,000 shares.
The Board of Directors believes that the Amendment provides an
important inducement to recruit and retain the best available personnel. The
Board of Directors believes that providing employees, non-employee directors and
consultants with an opportunity to invest in the Company rewards them
appropriately for their efforts on behalf of the Company.
Previously Granted Options under the 1995 Stock Plan
As of August 15, 2000, options to purchase shares of Class A Common
Stock Common Shares have been granted under the Option Plan at an exercise price
per share equal to the fair market value of the Common Stock on the date of
grant, including grants to officers and directors of the Company as set forth in
the table below:
Number of Weighted Average
Name and Title Options Granted Exercise Price
-------------- --------------- ----------------
Frank A. DeBernardis, Chief Executive Officer, President
and Director............................................ 420,000 1.60
Anthony J. Dimun, Director.................................. 150,000 1.63
Daniel M. Mulvena, Chairman of the Board.................... 210,000 1.56
Irwin M. Rosenthal.......................................... 150,000 1.63
David Vilkomerson, Executive Vice President, Director....... 490,000 1.85
All current executive officers as a group (2 persons)....... 910,000 1.73
18
Number of Weighted Average
Name and Title Options Granted Exercise Price
-------------- --------------- ----------------
All current Directors who are not executive officers as a
group (5 persons)....................................... 510,000 1.60
All employees, including all current officers who are not
executive officers as a group (15 persons)................ 72,000 1.79
- --------------------------------------------------------------------
Whether or not shareholder approval of the amendment to the 1995 Stock
Plan is obtained, options previously granted pursuant to the Option Plan will
remain valid and outstanding.
As of August 15, 2000, the fair market value of the Common Stock
underlying options granted pursuant to the Option Plan was $0.375 per share
equal to the closing price of the Common Stock on the Nasdaq OTC Bulletin Board
on such date.
Summary of the Plan
The total number of shares of Class A Common Stock for which options
and SARs are authorized to be granted under the Option Plan is 1,020,000. The
shares subject to and available under the Option Plan may consist, in whole or
in part, of authorized but unissued stock or treasury stock not reserved for any
other purpose. Any shares subject to an option or SAR that terminates, expires
or lapses for any reason, and any shares purchased pursuant to an option and
subsequently repurchased by the Company pursuant to the terms of the option,
shall again be available for grant under the Option Plan.
The Option Plan is administered by the Board of Directors of the
Company, which will determine, in its discretion, among other things, the
recipients of grants, whether a grant will consist of ISOs, NQSOs or SARs, or a
combination thereof, and the number of shares of Class A Common Stock to be
subject to such options or SARs. The Board of Directors of the Company may, in
its discretion, delegate its power, duties and responsibilities under the Option
Plan to a committee consisting of two or more "Non-Employee" directors within
the meaning of (b)(3) of Rule 16b-3 promulgated under the Exchange Act. The
Compensation and Stock Option Committee, which is responsible for administering
the Option Plan, is composed of Daniel Mulvena and Anthony Dimun. The exercise
price of options granted under the Plan shall not be less than the fair market
value per share on the date of grant, as determined by the Board of Directors.
The Option Plan contains certain limitations applicable only to ISOs
granted thereunder. For example, the aggregate fair market value, as of the date
of grant, of the shares to which ISOs may become exercisable for the first time
by an optionee during a calendar year may not exceed $100,000. To the extent
this requirement is not satisfied, the ISO will be treated as a NQSO. In
addition, if an optionee owns more than 10% of the Company's stock at the time
the individual is granted an ISO, the option price per share cannot be less than
110% of the fair market value per share and the term of the option cannot exceed
five years.
The purpose of the Option Plan is to enhance the ability of the Company
to attract and retain employees, directors, and consultants of outstanding
ability and to provide them with an interest in the Company parallel to that of
the shareholders. The Compensation and Stock Option Committee administers the
Plan. As of August 15, 2000, there were approximately 15 employees, consultants
and non-employee directors who have received stock options. No other form of
stock awards have been granted. Because (i) future participation in the Option
Plan and the level of participation will vary and (ii) the fair market value of
the Class A Common Stock will flucuate, it is not possible to determine the
value of benefits which may be obtained by those eligible to participate in the
Option Plan.
The Compensation and Stock Option Committee may grant options under the
Option Plan to eligible employees, consultants and directors selected by the
Compensation and Stock Option Committee. No employee may be granted in any year
options to purchase more than 1,500,000 shares of Common Stock. The options may
19
be either non-qualified stock options or incentive stock options qualifying
under Section 422 of the Code. The Compensation Committee is to establish the
option price at the time that each option is granted. Options granted under the
Option Plan may be exercised at such time as is determined by the Compensation
Committee, but not more than 10 years from their date of grant.
Options may not be transferred except by will or the laws of descent
and distribution, except that the Compensation Committee may permit
non-qualified stock options to be transferred to members of the holder's
immediate family or trusts, partnerships or limited liability companies
established for such family members.
In the event of a Change in Control (as defined in the Option Plan) of
the Company, any option will become vested and exercisable in full and all
restrictions or conditions, if any, on other stock awards will automatically
lapse.
If an option holder engages in certain activity which is harmful to the
Company, all outstanding and unexercised options may be canceled and terminated.
In addition, such option holders may have to reimburse the Company for any gain
realized upon exercise of options within one year of the harmful behavior. This
forfeiture and repayment provision will not apply following a Change in Control.
The Board of Directors may amend, suspend or terminate the Option Plan
at any time, but no amendment may adversely affect the rights of any person in
connection with an award previously granted. In addition, no amendment to the
Option Plan may be made without subsequent shareholder approval if such approval
is required under any applicable law, regulation or stock exchange rule.
The Option Plan became effective upon adoption by the Board and will
have a term of 10 years from its effective date.
Federal Income Tax Aspects
The following is a general summary of the federal income tax
consequences of the grant and exercise of options under the Plan. This summary
is not intended to provide tax advice to recipients and holders of awards.
Generally, the grant of options does not result in taxable income to
the option holder and the Company is not entitled to a corresponding deduction
from its income taxes.
In the case of ISOs, generally, there will be no taxable income for the
option holder upon the grant or exercise of an ISO. In addition, so long as the
option holder disposes of the shares acquired upon exercise of the ISO until the
later of two years from the date of grant and one year from the date of exercise
(a "qualifying disposition"), any gain or loss realized by the option holder
upon disposition will be taxed as long-term capital gain or loss, as the case
may be. The Company will not be entitled to a tax deduction upon the grant or
exercise of ISOs or the disposition of ISO shares. However, if the option holder
disposes of the shares acquired upon exercise of the ISO earlier than either of
two years from the date of grant and one year from the date of exercise (a
"disqualifying disposition"), then the option holder will realize ordinary
income in the year of disposition in an amount equal to the excess, if any, of
the fair market value of the option shares at the time of exercise (or, if less,
the amount realized on the disqualifying disposition) over the exercise price
thereof. The Company will be entitled to deduct an amount equal to the ordinary
income realized by the option holder upon a disqualifying disposition.
With respect to non-qualified stock options, the option holder will
realize ordinary income equal to the difference between the fair market value of
the option shares upon exercise over the exercise price thereof. The Company
will be entitled to a corresponding deduction in an amount equal to the amount
of ordinary income realized by the option holder. Upon the subsequent
disposition of the option shares, any gain (loss) will be taxed as short-term or
long-term capital gain (loss), as the case may be.
20
Recommendation of the Board of Directors
The Board of Directors recommends a vote FOR the approval of the
Amendment.
21
PROPOSAL NO. 5
SHAREHOLDER PROPOSAL TO APPROVE THE TERMINATION OF THE FORFEITURE
PROVISIONS OF CERTAIN SHARES OF CLASS B COMMON STOCK
Certain shareholders of the Company have submitted the following
narrative statement and proposed resolution for a vote of the shareholders of
the Company. In light of the fact that Messrs. DeBernardis, Dimun, Rosenthal and
Vilkomerson stand to benefit in the event the resolution is approved by the
shareholders, the Board of Directors takes no position on a vote for or against
the resolution. In addition to their own personal interests, Mr. Dimun's
employer, Vital Signs, also stands to benefit if the resolution is approved by
the shareholders. Accordingly, the holders of Forfeitable Shares are precluded
from participating in voting on this proposal.
Narrative Statement
In connection with and as a condition precedent for the initial public
offering of the Company's securities, the underwriter, D.H. Blair Investment
Banking Corp., required that the then current shareholders (the "Founders") of
the Company enter into a Share Restriction Agreement (the "Agreement"). The
Agreement provided, in part, that an aggregate of 833,000 (the "Forfeitable
Shares") shares of the Founders holdings of the Company's Class B Common Stock
(subsequently converted to Class A Common Stock) would be subject to forfeiture
in the event one or more certain defined milestones, set forth in the Agreement,
were not met by the Company by the Target Period, defined in the Agreement as
November 30, 2001.
The milestones consisted of the following:
1. Achieving a 30 day average closing price of the Company's Class A
Common Stock of either $12.50 or $16.50 per share, depending upon
the measuring period; or
2. Achieving minimum pretax income of $3,400,000, $5,000,000, or
$6,600,000 in various fiscal years.
The Forfeitable Shares represented approximately 55.5% of the total
holdings of each of the Founders of the Company's securities. At the time of the
initial public offering the Forfeitable shares represented approximately 26.5%
of the then outstanding shares of the Company. As of August 1, 2000, the
percentage of the Company's equity represented by such shares had been reduced
to 12.3%.
The Forfeitable Shares together with the remainder of the Class B
Common Stock had supervoting rights over the Class A Common Stock at a ratio of
5:1. As a condition to the effectiveness of the Company's private placement of
$2,525,000 in convertible debt during the past fiscal year, the holders of the
shares of Class B Common Stock agreed to forfeit their supervoting rights and
convert their shares to Class A Common Stock (including the Forfeitable Shares
and their non-forfeitable holdings). This forfeiture and conversion was
completed for all but 114,896 of the Forfeitable Shares. These shares were
issued to Marathon Investments, Ltd. ("Marathon"). Notwithstanding the
restriction on sale or other alienation of the share certificates discussed
above, Marathon sold or otherwise transferred the shares of stock that were
issued to it which were subject to forfeiture. Therefore, except for Marathon,
the former holders of Class B Common Stock were issued one share of Class A
Common Stock and one warrant to purchase one share of Class A Common Stock at
$0.75 for each share of Class B Common Stock converted.
The forfeiture provision of the Forfeitable Shares was retained and a
restrictive legend regarding the potential for forfeiture was printed on a
corresponding number of Class A share certificates. However, the Founders held
the expectation that a proposal would be submitted to all of the Company's
22
shareholders to waive the forfeiture provision as a reward to the Founders for
agreeing to waive their supervoting rights in order to allow the aforementioned
private placement of securities to take place.
Proposal
For the foregoing reasons, it is proposed that the shareholders of the
Company vote in favor of the following resolution:
RESOLVED, that the Company hereby waives and forever discharges the
Founders from the obligations and requirements set forth in the Agreement
regarding the Forfeitable Shares and that the Secretary of the Company shall be
and hereby is authorized to remove any restrictive legends on the affected share
certificates indicating that such shares are subject to forfeiture under the
terms of the Agreement.
23
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Under Section 16(a) of the Exchange Act, the Company's directors,
officers, and any person holding more than ten percent of the Common Stock are
required to report initial ownership of the Common Stock and any subsequent
changes in ownership to the Securities and Exchange Commission ("SEC"). Specific
due dates have been established by the SEC, and the Company is required to
disclose in this Proxy Statement any failure to file by these dates. Except as
set forth below, based upon (i) the copies of the Section 16(a) reports that the
Company received from such persons for their 1999 fiscal year transactions and
(ii) the written representations received from one or more of such persons that
no annual Form 5 reports were required to be filed for them for the 1999 fiscal
year, the Company believes that there has been compliance with all Section 16(a)
filing requirements applicable to such directors, officers, and ten percent
beneficial owners.
The Company is not aware that of any late filings with the SEC.
SHAREHOLDER PROPOSALS
Shareholder proposals that are intended to be presented at the 2001
Annual Meeting of Shareholders currently expected to be held on or about April
15, 2001 must be received by the Company at its principal executive offices no
later than December 16, 2000 and must be in compliance with applicable SEC
regulations, in order to be included in the proxy statement and related proxy
materials.
FORM 10-KSB
THE COMPANY WILL MAIL WITHOUT CHARGE, UPON WRITTEN REQUEST, A COPY OF
ITS ANNUAL REPORT ON FORM 10-KSB, INCLUDING THE FINANCIAL STATEMENTS, SCHEDULES,
AND LIST OF EXHIBITS. REQUESTS SHOULD BE SENT TO ECHOCATH, INC., 4326 U.S. ROUTE
1, MONMOUTH JUNCTION, NEW JERSEY 08852, ATTN: IRWIN M. ROSENTHAL, SECRETARY.
OTHER MATTERS
The Board knows of no other matters to be presented for shareholder
action at the Annual Meeting. However, if other matters do properly come before
the Annual Meeting or any adjournments or postponements thereof, the Board
intends that the persons named in the proxies will vote upon such matters in
accordance with their best judgment.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Irwin M. Rosenthal
Secretary
24
Appendix A
ECHOCATH, INC.
1995 STOCK OPTION PLAN
ECHOCATH, INC.
1995 STOCK OPTION PLAN
Table of Contents
-----------------
Page
----
1. Purpose of the Plan...................................................... 1
2. Stock Subject to the Plan................................................ 1
3. Administration of the Plan............................................... 1
4. Type of Options.......................................................... 1
5. Eligibility.............................................................. 2
6. Restrictions on Incentive Stock Options.................................. 2
7. Option and SAR Agreements................................................ 2
8. Option Price............................................................. 3
9. Manner of Payment; Manner of Exercise.................................... 3
10. Exercise of Options and SARs............................................. 4
11. Term of Options and SARs; Exercisability................................. 4
12. Options and SARs Not Transferable........................................ 4
13. Terms and Conditions of SARs............................................. 5
14. Recapitalization, Reorganizations and the Like........................... 5
15. No Special Employment Rights............................................. 6
16. Withholding.............................................................. 6
17. Restrictions on Issuance of Shares....................................... 7
18. Purchase for Investment; Rights of Holder on Subsequent Registration..... 7
19. Loans.................................................................... 7
20. Modification of Outstanding Options and SARs............................. 7
21. Approval of Stockholders................................................. 8
22. Termination and Amendment of Plan........................................ 8
23. Limitation of Rights in the Option Shares................................ 8
24. Notices.................................................................. 8
i
ECHOCATH, INC.
1995 STOCK OPTION PLAN
1. Purpose of the Plan.
The purpose of the Echocath, Inc., 1995 Stock Option Plan (the "Plan")
is to advance the interests of Echocath, Inc., a New Jersey corporation (the
"Company"), by providing an opportunity for ownership of the stock (or, in the
case Of SARs, as defined below, the appreciation of the value of the stock) of
the Company by employees, agents and directors of, and consultants to, the
Company and its subsidiaries. By providing such opportunity, the Company seeks
to attract and retain such qualified personnel, and otherwise to provide
additional incentive for grantees to promote the success of its business.
2. Stock Subiect to the Plan.
(a) The total number of shares of the authorized but unissued or
treasury shares of the Class A common stock, no par value per share, of the
Company (the "Common Stock") for which options (the "Options") and stock
appreciation rights ("SARs") may be granted under the Plan shall be 3,000,000
subject to adjustment as provided in Section 14 hereof.
(b) If an Option granted or assumed hereunder shall expire or terminate
for any reason without having been exercised in full, the unpurchased shares
subject thereto shall again be available for subsequent Option grants under the
Plan; provided, however, that shares as to which an Option has been surrendered
in connection with the exercise of a related SAR will not again be available for
subsequent Option or SAR grants under the Plan.
(c) Stock issuable upon exercise of an Option may be subject to such
restrictions on transfer, repurchase rights or other restrictions as shall be
determined by the Board of Directors of the Company (the "Board").
3. Administration of the Plan.
(a) The Plan shall be administered by the Board. No member of the Board
shall act upon any matter exclusively affecting any Option or SAR granted or to
be granted to himself or herself under the Plan. A majority of the members of
the Board shall constitute a quorum, and any action may be taken by a majority
of those present and voting at any meeting. The decision of the Board as to all
questions of interpretation and application of the Plan shall be final, binding
and conclusive on all persons. The Board, in its sole discretion, may grant
Options to purchase shares of Common Stock and may grant SARs, as provided in
the Plan. The Board shall have authority, subject to the express provisions of
the Plan, to construe the respective Option and SAR agreements and the Plan, to
prescribe, amend and rescind rules and regulations relating to the Plan, to
determine the terms and provisions of the respective Option and SAR agreements,
which may but need not be identical, and to make all other determinations in the
judgment of the Board necessary or desirable for the administration of the Plan.
The Board may correct any defect or supply any omission or reconcile any
inconsistency in the Plan or in any Option or SAR agreement in the manner and to
the extent it shall deem expedient to implement the Plan and shall be the sole
and final judge of such expediency. No director shall be liable for any action
or determination made in good faith. The Board, in its discretion, may delegate
its power, duties and responsibilities to a committee, consisting of two or more
members of the Board, all of whom are "disinterested persons" (as hereinafter
defined). If a committee is so appointed, all references to the Board herein
shall mean and relate to such committee, unless the context otherwise requires.
For the purposes of the Plan, a director or member of such committee shall be
deemed to be "disinterested" only if such person qualified as a "disinterested
person" within the meaning of paragraph (c)(2) of Rule 16b3 promulgated under
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), as such
term is interpreted from time to time.
4. Type of Options.
Options granted pursuant to the Plan shall be authorized by action of
the Board and may be designated as either incentive stock options meeting the
requirements of Section 422 of the Internal Revenue Code of 1986, as amended
(the "Code"), or nonqualified options which are not intended to meet the
requirements of such Section 422 of the Code, the designation to be in the sole
discretion of the Board. Options designated as incentive stock options that fail
to continue to meet the requirements of Section 422 of the Code shall be
redesignated as non-qualified options automatically without further action by
the Board on the date of such failure to continue to meet the requirements of
Section 422 of the Code.
5. Eligibility.
Options designated as incentive stock options may be granted only to
officers and key employees of the Company or of any subsidiary corporation
(herein called "subsidiary" or subsidiaries"), as defined in Section 424(f) of
the Code and the lncome Tax Regulations (the "Regulations") promulgated
thereunder. Directors who are not otherwise employees of the Company or a
subsidiary shall not be eligible to be granted incentive stock options pursuant
to the Plan. Options designated as non-qualified options may be granted to (i)
officers and key employees of the Company or of any of its subsidiaries, or (ii)
agents, directors of and consultants to the Company, whether or not otherwise
employees of the Company.
In determining the eligibility of an individual to be granted an
Option or SAR, as well as in determining the number of shares to be subject to
any such Option or SAR, the Board shall take into account the position and
responsibilities of the individual being considered, the nature and value to the
Company or its subsidiaries of his or her service and accomplishments, his or
her present and potential contribution to the success of the Company or its
subsidiaries, and such other factors as the Board may deem relevant.
6. Restrictions on Incentive Stock Options.
Incentive stock options (but not non-qualified options) granted under
the Plan shall be subject to the following restrictions:
(a) Limitation on Number of Shares. Ordinarily, the aggregate fair
market value of the shares of Common Stock with respect to which
incentive stock options are granted (determined as of the date the
incentive stock options are granted), exercisable for the first time by
an individual during any calendar year shall not exceed $100,000. If an
incentive stock option is granted pursuant to which the aggregate fair
market value of shares with respect to which it first becomes
exercisable in any calendar year by an individual exceeds such $100,000
limitation, the portion of such option which is in excess of the
$100,000 limitation shall be treated as a non-qualified option pursuant
to Section 422(d)(1) of the Code. In the event that an individual is
eligible to participate in any other stock option plan of the Company
or any subsidiary of the Company which is also intended to comply with
the provisions of Section 422 of the Code, such $100,000 limitation
shall apply to the aggregate number of shares for which incentive stock
options may be granted under the Plan and all such other plans.
(b) Ten Percent (10%) Shareholder. If any employee to whom an incentive
stock option is granted pursuant to the provisions of the Plan is on
the date of grant the owner of stock (as determined under Section
424(d) of the Code) possessing more than ten percent (10%) of the total
combined voting power of all classes of stock of the Company or any
subsidiary of the Company, then the following special provisions shall
be applicable to the incentive stock options granted to such
individual:
(i) The Option price per share subject to such incentive stock
options shall be not less than 110% of the fair market value
of the stock determined at the time such Option was granted.
In determining the fair market value under this clause (i),
the provisions of Section 8 hereof shall apply.
(ii) The incentive stock option by its terms shall not be
exercisable after the expiration of five (5) years from the
date such Option is granted.
7. Option and SAR Agreements.
Each Option and SAR shall be evidenced by an agreement (the
"Agreement") duly executed on behalf of the Company and by the grantee to whom
such Option or SAR is granted, which Agreement shall comply with and be subject
to the terms and conditions of the Plan. The Agreement may contain such other
terms, provisions and conditions which are not inconsistent with the Plan as may
be determined by the Board; provided that Options designated as incentive stock
options shall meet all of the conditions for incentive stock options as defined
in Section 422 of the Code. No Option or SAR shall be granted within the meaning
of the Plan and no purported grant of any Option or SAR shall be effective until
the Agreement shall have been duly executed on behalf of the Company and the
grantee. More than one Option and SAR may be granted to an individual, subject,
if applicable, to the limitations of Section 6 hereof.
2
8. Option Price.
(a) Subject to the conditions set forth in Section 8(d) hereof, the
option price or prices of shares of the Common Stock for Options designated as
non-qualified stock options shall be as determined by the Board; provided,
however, that such option price shall be not less than the fair market value of
the shares subject to such Option, determined as of the date of grant of such
Option.
(b) Subject to the conditions set forth in Sections 6(b) and 8(d)
hereof, the option price or prices of shares of the Company's Common Stock for
incentive stock options shall be at least the fair market value of such Common
Stock at the time the Option is granted as determined by the Board in accordance
with the Regulations promulgated under Section 422 of the Code.
(c) If such shares are then listed on any national securities exchange,
the fair market value shall be the mean between the high and low sales prices,
if any, on the largest such exchange on the date of the grant of the Option or,
if none, shall be determined by taking a weighted average of the means between
the highest and, lowest sales prices on the nearest date before and the nearest
date after the date of grant in accordance with Section 25.2512-2 of the
Regulations. If the shares are not then listed on any such exchange, the fair
market value of such shares shall be the mean between the closing "Bid" and the
closing "Ask" prices, if any, as reported in the National Association of
Securities Dealers Automated Quotation System ("NASDAQ") for the date of the
grant of the Option, or, if none, shall be determined by taking a weighted
average of the means between the highest and lowest sales prices on the nearest
date before and the nearest date after the date of grant in accordance with
Section 25. 2512-2 of the Regulations. If the shares are not then either listed
on any such exchange or quoted in NASDAQ, the fair market value shall be the
mean between the average of the "Bid" and "Ask" prices on the National Daily
Quotation Service for the date of the grant of the Option, or, if none, shall be
determined by taking a weighted average of the means between the highest and
lowest sales prices on the nearest date before and the nearest date after the
date of grant in accordance with Section 25.2512-2 of the Regulations. If the
fair market value cannot be determined under the preceding three sentences, it
shall be determined in good faith by the Board.
(d) Prior to the effective date of the Company's contemplated initial
public offering, the Company may not grant options to purchase more than 120,000
shares of Common Stock. Such options, if any, so granted must be granted at an
exercise price per share of not less than the per share initial public offering
price of the Common Stock (without giving any value to warrants which may be
issued in conjunction with Common Stock in such initial public offering).
"Initial public offering" means an initial public offering underwritten by D.H.
Blair Investment Banking Corp. on a firm commitment basis pursuant to an
effective registration statement under the Securities Act of 1933, as amended ("
1933 Act"), covering the offer and sale of equity securities of and for the
account of the Company,
9. Manner of Payment; Manner of Exercise.
(a) Options granted under the Plan may provide for the payment of the
option price by delivery of (i) cash or a check payable to the order of the
Company in an amount equal to the option price of such Options, (ii) shares of
Common Stock owned by the grantee having a fair market value equal in amount to
the option price of the Options being exercised, or (iii) any combination of (i)
and (ii); provided, however, that payment of the option price by delivery of
shares of Common Stock owned by such grantee may be made only upon the condition
that such payment does not result in a charge to earnings for financial
accounting purposes as determined by the Board, unless such condition is waived
by the Board. The fair market value of any shares of Common Stock which may be
delivered as payment upon exercise of an Option shall be determined by the Board
in accordance with Section 8 hereof.
(b) To the extent that the right to purchase shares under an Option has
accrued and is in effect, Options may be exercised in full at one time or in
part from time to time, by giving written notice, signed by the person or
persons exercising the Option, to the Company, stating the number of shares with
respect to which the Option is being exercised, accompanied by payment in full
for such shares as provided in Section 9(a) hereof. Upon such exercise, delivery
of a certificate for paid-up non-assessable shares shall be made at the
principal office of the Company to the person or persons exercising the Option
at such time, during ordinary business hours, after thirty (30) days but not
more than ninety (90) days from the date of receipt of the notice by the
Company, as shall be designated in such notice, or at such time, place and
manner as may be agreed upon by the Company and the person or persons exercising
the Option.
3
10. Exercise of Options and SARs.
Each Option and SAR granted under the Plan shall, subject to Section
11(b) and Section 14 hereof, be exercisable at such time or times and during
such period as shall be set forth in the Agreement; provided, however, that no
Option or SAR granted under the Plan shall have a term in excess of ten (10)
years from the date of grant. To the extent that an Option or SAR is not
exercised by a grantee when it becomes initially exercisable, it shall not
expire but shall be carried forward and shall be exercisable, on a cumulative
basis, until the expiration of the exercise period. No partial exercise may be
made for less than one hundred (100) full shares of Common Stock. The exercise
of an Option shall result in the cancellation of any related SAR with respect to
the same number of shares of Common Stock as to which the Option was exercised.
11. Term of Options and SARs; Exercisability.
(a) Term.
(i) Each Option and SAR shall expire on a date determined by the
Board which is not more than ten (10) years from the date of
the granting thereof, except (a) as otherwise provided
pursuant to the provisions of Section 6(b) hereof, and (b)
for earlier termination as herein provided.
(ii) Except as otherwise provided in this Section 11, an Option or
SAR granted to any grantee whose employment, by the Company
or any of its subsidiaries, is terminated, shall terminate on
the earlier of (i) ninety (90) days after the date such
grantee's employment, for the Company or any such subsidiary,
is terminated, or (ii) the date on which the Option or SAR
expires by its terms.
(iii) If the employment of a grantee is terminated by the Company
or any of its subsidiaries for cause or because the grantee
is in breach of any employment agreement or because the
grantee voluntarily terminates such employment, such Option
or SAR will terminate on the date the grantee's employment is
terminated by the Company or any such subsidiary, unless the
Board determines, at the time of such option, to extend such
option for a specified period (but not beyond the period
described in Section 11 (a)(ii)).
(iv) If the employment of a grantee is terminated by the Company
or any of its subsidiaries because the grantee has become
permanently disabled (within the meaning of Section 22(e)(3)
of the Code), such Option or SAR shall terminate on the
earlier of (i) one (1) year after the date such grantee's
employment, by the Company or any such subsidiary, is
terminated, or (ii) the date on which the Option or SAR
expires by its terms,
(v) In the event of the death of any grantee, any Option or SAR
granted to such grantee shall terminate one (1) year after
the date of death, or on the date on which the Option or SAR
expires by its terms, whichever occurs first.
(b) Exercisability.
(i) An Option or SAR granted to a grantee whose employment, by
the Company or any of its subsidiaries, is terminated, for
whatever reason, including, without limitation, death or
disability, shall be exercisable only to the extent that such
Option or SAR has accrued and is in effect on the date such
grantee's employment, by the Company or any such subsidiary,
is terminated,
(ii) Neither an SAR nor an Option granted in connection with an
SAR to a person subject to Section 16(b) of the Exchange Act
may be exercised before six (6) months after the date of
grant.
12. Options and SARs Not Transferable.
The right of any grantee to exercise any Option or SAR granted to him
or her shall not be assignable or transferable by such grantee other than by
will or the laws of descent and distribution, or the rules thereunder, and any
such Option or SAR shall be exercisable during the lifetime of such grantee only
by him or her. Any Option or SAR granted under the Plan shall be null and void
and without effect upon the bankruptcy of the grantee to whom the Option or SAR
is granted, or upon any attempted assignment or transfer, except as herein
provided, including without limitation, any purported assignment, whether
voluntary or by operation of law, pledge, hypothecation or other disposition,
attachment, trustee process or similar process, whether legal or equitable, upon
such Option or SAR.
4
13. Terms and Conditions of SARs.
(a) An SAR may be granted separately or in connection with an Option
(either at the time of grant or at any time during the term of the Option).
(b) The exercise of an SAR shall result in the cancellation of the
Option to which it relates with respect to the same number of shares of Common
Stock as to which the SAR, was exercised.
(c) An SAR granted in connection with an Option shall be exercisable or
transferable only to the extent that such related Option is exercisable or
transferable.
(d) Upon the exercise of an SAR related to an Option, the holder will
be entitled to receive payment of an amount determined by multiplying:
(i) The difference obtained by subtracting the option price of a
share of Common Stock specified in the related Option from the fair market value
of a share of Common Stock on the date of exercise of such SAR (as determined by
the Board), by
(ii) The number of shares as to which such SAR is exercised.
(e) An SAR granted without relationship to an Option shall be
exercisable as determined by the Board, but in no event after ten (10) years
from the date of grant.
(f) An SAR granted without relationship to an Option will entitle the
holder, upon exercise of the SAR, to receive payment of an amount determined by
multiplying:
(i) The difference obtained by subtracting the fair market value of
the a share of Common Stock on the date the SAR was granted from the fair market
value of a share of Common Stock on the date of exercise of such SAR (as
determined by the Board), by
(ii) The number of shares as to which such SAR is exercised.
(g) Notwithstanding Sections 13 (d) and 13 (f) hereof, the Board may
limit the amount payable upon exercise of an SAR. Any such limitation shall be
determined as of the date of grant and noted on the instrument evidencing the
SAR granted.
(h) At the discretion of the Board, payment of the amount determined
under Sections 13 (d) and 13 (f) hereof may be made solely in whole shares of
Common Stock valued at their fair market value on the date of exercise of the
SAR (as determined by the Board), or solely in cash, or in a combination of cash
and shares. If the Board decides to make full payment in shares of Common Stock
and the amount payable results in a fractional share, payment for the fractional
share shall be made in cash.
14. Recapitalization, Reorganizations and the Like.
In the event that the outstanding shares of the Common Stock are
changed into or exchanged for a different number or kind of shares or other
securities of the Company or of another corporation by reason of any
reorganization, merger, consolidation, recapitalization, reclassification, stock
split-up, combination of shares, or dividends payable in capital stock,
appropriate adjustment shall be made in the number and kind of shares as to
which Options and SARs may be granted under the Plan and as to which outstanding
Options, SARs, or portions thereof then unexercised, shall be exercisable, to
the end that the proportionate interest of the grantee shall be maintained as
before the occurrence of such event; such adjustment in outstanding Options and
SARs shall be made without change in the total price applicable to the
unexercised portion of such Options and SARs and with a corresponding adjustment
in the option price per share.
In addition, unless otherwise determined by the Board in its sole
discretion, in the case of any (i) sale or conveyance to another entity of all
or substantially all of the property and assets of the Company or (ii) Change in
Control (as hereinafter defined) of the Company, the purchaser(s) of the
Company's assets or stock, in his, her or its sole discretion, may deliver to
the grantee the same kind of consideration that is delivered to the shareholders
of the Company as a result of such sale, conveyance or Change in Control, or the
Board may cancel all outstanding Options in exchange for consideration in cash
or in kind, which consideration in both cases shall be equal in value to the
value of those shares of stock or other securities
5
the grantee would have received had the Option been exercised (but only to the
extent then exercisable) and had no disposition of the shares acquired upon such
exercise been made prior to such sale, conveyance or Change in Control, less the
option price therefor. Upon receipt of such consideration, all Options (whether
or not then exercisable) shall immediately terminate and be of no further force
or effect. The value of the stock or other securities the grantee would have
received if the Option had been exercised shall be determined in good faith by
the Board, and in the case of shares of Common Stock, in accordance with the
provisions of Section 8 hereof.
The Board shall also have the power and right to accelerate the
exercisability of any Option, notwithstanding any limitations in this Plan or in
the Agreement upon such a sale, conveyance or Change in Control. Upon such
acceleration, any Option or portion thereof originally designated as an
incentive stock option that no longer qualifies as an incentive stock option
under Section 422 of the Code as a result of such acceleration shall be
redesignated as a non-qualified stock option without the necessity of further
Board action.
A "Change in Control" shall be deemed to have occurred if any person,
or any two (2) or more persons acting as a group, and all affiliates of such
person or persons, who prior to such time owned less than fifty percent (50%) of
the then outstanding Common Stock, shall acquire such additional shares of
Common Stock in one (1) or more transactions, or series of transactions, such
that following such transaction or transactions, such person or group and
affiliates beneficially own fifty percent (50%) or more of the Common Stock
outstanding.
Upon dissolution or liquidation of the Company, all Options and SARs
granted under this Plan shall terminate, but each grantee (if at such time in
the employ of or otherwise associated with the Company or any of its
subsidiaries as a director, agent or consultant) shall have the right,
immediately prior to such dissolution or liquidation, to exercise his or her
Option or SAR to the extent then exercisable.
If by reason of a corporate merger, consolidation, acquisition of
property or stock, separation, reorganization, or liquidation, the Board shall
authorize the issuance or assumption of a stock option or stock options in a
transaction to which Section 424(a) of the Code applies, then, notwithstanding
any other provision of the Plan, the Board may grant an option or options upon
such terms and conditions as it may deem appropriate for the purpose of
assumption of the old Option, or substitution of a new option for the old
Option, in conformity with the provisions of such Section 424(a) of the Code and
the Regulations thereunder, and any such option grant shall not reduce the
number of shares otherwise available for issuance under the Plan.
No fraction of a share shall be purchasable or deliverable upon the
exercise of any Option, but in the event any adjustment hereunder in the number
of shares covered by the Option shall cause such number to include a fraction of
a share, such fraction shall be adjusted to the nearest smaller whole number of
shares.
15. No Special Employment Rights.
Nothing contained in the Plan or in any Option or SAR granted under the
Plan shall confer upon any grantee any right with respect to the continuation of
his or her employment by the Company or any subsidiary or interfere in any way
with the right of the Company or any subsidiary, subject to the terms of any
separate employment agreement to the contrary, at any time to terminate such
employment or to increase or decrease the compensation of the Option or SAR
holder from the rate in existence at the time of the grant of an Option or SAR.
Whether an authorized leave of absence, or absence in military or government
service, shall constitute termination of employment shall be determined by the
Board at the time of such occurrence pursuant to uniform nondiscriminatory
criteria.
16. Withholding.
The Company's obligation to deliver shares upon the exercise of any
non-qualified Option granted under the Plan, or cash upon the exercise of an SAR
granted under the Plan, shall be subject to the grantee's satisfaction of all
applicable Federal, state and local income and employment tax withholding
requirements. The Company and grantee may agree to withhold shares of Common
Stock purchased upon exercise of an Option to satisfy the above-mentioned
withholding requirements; provided, however, that no such agreement may be made
by a grantee who is an "officer" or "director" within the meaning of Section 16
of the Exchange Act, except pursuant to a standing election to so withhold
shares of Common Stock purchased upon exercise of an Option, such election to be
made not less than six (6) months prior to such exercise and which election may
be revoked only upon six (6) months prior written notice.
6
17. Restrictions on Issuance of Shares.
(a) Notwithstanding the provisions of Section 9 hereof, the Company may
delay the issuance of shares covered by the exercise of an Option and the
delivery of a certificate for such shares until one of the following conditions
shall be satisfied:
(i) The shares with respect to which such Option has been
exercised are at the time of the issue of such shares
effectively registered or qualified under applicable Federal
and state securities acts now in force or as hereafter
amended; or
(ii) Counsel for the Company shall have given an opinion, which
opinion shall not be unreasonably conditioned or withheld,
that such shares are exempt from registration and
qualification under applicable Federal and state securities
acts now in force or as hereafter amended.
(b) It is intended that all exercises of Options shall be effective,
and the Company shall use its reasonable efforts to bring about compliance with
the above conditions within a reasonable time, except that the Company shall be
under no obligation to qualify shares or to cause a registration statement or a
post-effective amendment to any registration statement to be prepared for the
purpose of covering the issue of shares in respect of which any Option may be
exercised, except as otherwise agreed to by the Company in writing in its sole
discretion.
18. Purchase for Investment; Rights of Holder on Subsequent
Registration.
Unless and until the shares to be issued upon exercise of an Option
granted under the Plan have been effectively registered under the 1933 Act, as
now in force or hereafter amended, the Company shall be under no obligation to
issue any shares covered by any Option or SAR unless the person who exercises
such Option or SAR, in whole or in part, shall give a written representation and
undertaking to the Company which is satisfactory in form and scope to counsel
for the Company and upon which, in the opinion of such counsel, the Company may
reasonably rely, that he or she is acquiring the shares issued pursuant to such
exercise of the Option or SAR for his or her own account as an investment and
not with a view to, or for sale in connection with, the distribution of any such
shares, and that he or she will make no transfer of the same except in
compliance with any rules and regulations in force at the time of such transfer
under the 1933 Act, or any other applicable law, and that if shares are issued
without such registration, a legend to this effect may be endorsed upon the
securities so issued.
In the event that the Company shall, nevertheless, deem it necessary or
desirable to register under the 1933 Act or other applicable statutes any shares
with respect to which an Option shall have been exercised, or to qualify any
such shares for exemption from the 1933 Act or other applicable statutes, then
the Company may take such action and may require from each grantee such
information in writing for use in any registration statement, supplementary
registration statement, prospectus, preliminary prospectus or offering circular
as is reasonably necessary for such purpose and may require reasonable indemnity
to the Company and its officers and directors from such holder against all
losses, claims, damages and liabilities arising from such use of the information
so furnished and caused by any untrue statement of any material fact therein or
caused by the omission to state a material fact required to be stated therein or
necessary to make the statements therein not misleading in the light of the
circumstances under which they were made.
19. Loans.
At the discretion of the Board, the Company may loan to the grantee
some or all of the option price of the shares acquired upon exercise of an
Option.
20. Modification of Outstanding Options and SARs.
Subject to any applicable limitations contained herein, the Board may
authorize the amendment of any outstanding Option or SAR with the consent of the
grantee when and subject to such conditions as are deemed to be in the best
interests of the Company and in accordance with the purposes of the Plan.
7
21. Approval of Stockholders.
The Plan shall become effective upon adoption by the Board; provided,
however, that the Plan shall be submitted for approval by the stockholders of
the Company no later than twelve (12) months after the date of adoption of the
Plan by the Board. Should the stockholders of the Company fail to approve the
Plan within such twelve-month period, all Options granted thereunder shall be
and become null and void.
22. Termination and Amendment or Plan.
Unless sooner terminated as herein provided, the Plan shall terminate
ten (10) years from the date upon which the Plan was duly adopted by the Board.
The Board may at any time terminate the Plan or make such modification or
amendment thereof as it deems advisable; provided, however, that (i) the Board
may not, without the approval of the stockholders of the Company obtained in the
manner stated in Section 21 hereof, increase the maximum number of shares for
which Options and SARs may be granted or change the designation of the class of
persons eligible to receive Options and SARs under the Plan, and (ii) any such
modification or amendment of the Plan shall be approved by a majority of the
stockholders of the Company to the extent that such stockholder approval is
necessary to comply with applicable provisions of the Code, rules promulgated
pursuant to Section 16 of the Exchange Act (if applicable), applicable state
law, or applicable NASD or exchange listing requirements. Termination or any
modification or amendment of the Plan shall not, without the consent of a
grantee, affect his or her rights under an Option or SAR theretofore granted to
him or her.
23. Limitation of Rights in the Option Shares.
A grantee shall not be deemed for any purpose to be a stockholder of
the Company with respect to any of the Options except to the extent that the
Option shall have been exercised with respect thereto and, in addition, a
certificate shall have been issued theretofore and delivered to the grantee.
24. Notices.
Any communication or notice required or permitted to be given under the
Plan shall be in writing, and mailed by registered or certified mail or
delivered by hand, if to the Company, to the attention of the Chief Executive
Officer at the Company's principal place of business; and, if to a grantee, to
his or her address as it appears on the records of the Company.
8
ECHOCATH, INC.
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
OF THE COMPANY FOR THE ANNUAL MEETING OF SHAREHOLDERS
The undersigned hereby constitutes and appoints Daniel M. Mulvena,
Frank A. DeBernardis and David Vilkomerson and each of them, his or her true and
lawful agent and proxy with full power of substitution in each, to represent and
to vote on behalf of the undersigned all of the shares of EchoCath, Inc. (the
"Company") which the undersigned is entitled to vote at the Annual Meeting of
Shareholders of the Company to be held at the Company's headquarters, 4326 U.S.
Route 1, Monmouth Junction, New Jersey 08852 at 10:00 A.M., local time, on
Friday, September 29, 2000, and at any adjournment or adjournments thereof, upon
the following proposals more fully described in the Notice of Annual Meeting of
Shareholders and Proxy Statement for the Meeting (receipt of which is hereby
acknowledged).
This proxy when properly executed will be voted in the manner directed
herein by the undersigned Shareholder. If no direction is made, this proxy will
be voted FOR proposals 1, 2 3, 4 and 5.
(continued and to be signed on reverse side)
Please Detach and Mail In the Envelope Provided
A /X/ Please mark your
votes as in this
example.
1. ELECTION OF FOR WITHHELD Nominees:
DIRECTORS. ------- ------- Frank A. DeBernardis
Malcolm Dale
------- ------- Anthony J. Dimun
Daniel M. Mulvena
VOTE FOR all the nominees listed at right; Joseph J. Prischak
except vote withheld from the following Irwin M. Rosenthal
nominee(s) (if any). David Vilkomerson
-----------------------------------------------------
2. APPROVAL OF PROPOSAL TO RATIFY FOR AGAINST ABSTAIN
THE APPOINTMENT OF KPMG LLP ------- ------- -------
AS THE INDEPENDENT PUBLIC ACCOUNTANTS
OF THE COMPANY FOR THE YEAR ENDING AUGUST 31, 2001. ------- ------- -------
3. APPROVAL OF A PROPOSAL TO AMEND THE COMPANY'S FOR AGAINST ABSTAIN
RESTATED CERTIFICATE OF INCORPORATION, AS AMENDED, ------- ------- -------
INCREASING THE TOTAL NUMBER OF SHARES OF AUTHORIZED CAPITAL STOCK OF
THE COMPANY FROM 25,000,000 SHARES TO 60,000,000 SHARES, INCREASING THE ------- ------- -------
TOTAL NUMBER OF SHARES OF THE COMPANY'S CLASS A COMMON STOCK FROM
18,500,000 SHARES TO 50,000,000 SHARES AND INCREASING THE TOTAL NUMBER
OF THE COMPANY'S PREFERRED STOCK FROM 5,000,000 SHARES TO 10,000,000
SHARES.
4. APPROVAL OF PROPOSAL TO AMEND THE COMPANY'S 1995 FOR AGAINST ABSTAIN
STOCK OPTION PLAN TO INCREASE THE MAXIMUM AGGREGATE ------- ------- -------
NUMBER OF SHARES OF CLASS A COMMON STOCK AVAILABLE FOR ISSUANCE
THEREUNDER FROM 1,020,000 SHARES TO 3,000,000 SHARES AND TO RESERVE AN ------- ------- -------
ADDITIONAL 1,980,000 SHARES OF COMMON STOCK OF THE COMPANY FOR ISSUANCE
IN CONNECTION WITH AWARDS GRANTED UNDER THE 1995 OPTION PLAN.
5. APPROVAL OF A SHAREHOLDER PROPOSAL TO FOR AGAINST ABSTAIN
TERMINATE THE FORFEITURE PROVISIONS OF 833,000 ------- ------- -------
SHARES OF THE COMPANY'S CLASS A COMMON STOCK,
WHICH WERE FORMERLY 833,000 SHARES OF THE ------- ------- -------
COMPANY'S CLASS B COMMON STOCK.
6. In his or her discretion, the proxy is authorized to vote upon other matters as may properly come before the Meeting.
I will I will not
---------- ----------
---------- ----------
attend the Meeting.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY, USING THE ENCLOSED ENVELOPE.
Signature of Shareholder_______________________ Signature of Shareholder_______________________ Dated: ___________________
IF HELD JOINTLY
Note: This proxy must be signed exactly as the name appears hereon. When shares are held by joint tenants, both should
sign. If the signer is a corporation, please sign full corporate name by duly authorized officer, giving full title
as such. If the signer is a partnership, please sign in partnership name by authorized person.
Please date, sign and mail your
proxy card back as soon as possible!
Annual Meeting of Shareholders
ECHOCATH, INC.
SEPTEMBER 29, 2000
| Please Detach and Mail in the Envelope Provided |