ESCALON MEDICAL CORP
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Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Exchange Act of 1934 (Amendment No. )
Filed by
the Registrant þ
Filed by a Party other than the Registrant o
Filed by a Party other than the Registrant o
Check the appropriate box:
| o | Preliminary Proxy Statement | |
| o | Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) | |
| þ | Definitive Proxy Statement | |
| o | Definitive Additional Materials | |
| o | Soliciting Material Pursuant to §240.14a-12 |
Escalon Medical Corp.
Payment of Filing Fee (Check the appropriate box):
| þ | No fee required. | |
| o | Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11. |
| (1) | Title of each class of securities to which transaction applies: | ||
| (2) | Aggregate number of securities to which transaction applies: | ||
| (3) | Per unit or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined): | ||
| (4) | Proposed maximum aggregate value of transaction: | ||
| (5) | Total fee paid: | ||
| o | Fee paid previously with preliminary materials. | |
| o | Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. |
| (1) | Amount Previously Paid: | ||
| (2) | Form, Schedule or Registration Statement No.: | ||
| (3) | Filing Party: | ||
| (4) | Date Filed: | ||
Table of Contents
|
Escalon Medical Corp. 435 Devon Park Drive, Building 100 Wayne, PA 19087 Tel.610-688-6830 • Fax. 610-688-3641 |
Notice of
Annual Meeting of Shareholders
To Be Held June 30, 2010
To Be Held June 30, 2010
To the Shareholders of Escalon Medical Corp.:
The annual meeting of shareholders of Escalon Medical Corp. will
be held at 9:00 a.m., local time, on June 30, 2010, at
the offices of the Company, 435 Devon Park Drive, Building 100,
Wayne, PA 19087. This meeting constitutes our annual meeting for
2009. At our annual meeting, our shareholders will act on the
following matters:
| 1. | Election of two Class I directors, each for a term of three years and until their respective successors have been elected to serve; and | |
| 2. | Any other matters that properly come before our annual meeting. |
All shareholders of record as of the close of business on
June 8, 2010 are entitled to vote at our annual meeting.
Our 2009 Annual Report is being mailed to shareholders together
with this Notice.
It is important that your shares be voted at our annual meeting.
Please complete, sign and return the enclosed proxy card in the
envelope provided whether or not you expect to attend our annual
meeting in person.
By Order of the Board of Directors,
Richard J. DePiano
Chairman and Chief Executive Officer
June 14, 2010
Wayne, Pennsylvania
Table of Contents
ESCALON
MEDICAL CORP.
PROXY
STATEMENT
This proxy statement contains information relating to the annual
meeting of shareholders of Escalon Medical Corp. to be held on
June 30, 2010, at the offices of the Company, 435 Devon
Park Drive, Building 100, Wayne, PA 19087 at
9:00 a.m., local time, and at any adjournment, postponement
or continuation of the annual meeting. This proxy statement and
the accompanying proxy are first being mailed to shareholders on
or about June 14, 2010. Unless the context indicates
otherwise, all references in this proxy statement to
“we,” “us,” “our”
“Escalon” or the “Company” mean Escalon
Medical Corp. and its subsidiaries.
CONTENTS
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Equity Compensation Plan Information
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Director Compensation Table
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ABOUT OUR
ANNUAL MEETING
What
is the purpose of our annual meeting?
At our annual meeting, shareholders will act upon the matters
outlined in the notice of meeting on the cover page of this
proxy statement, including the election of two Class I
directors and any other matters that properly come before our
annual meeting. In addition, our management will report on our
performance during fiscal 2009 and recent fiscal periods and
respond to appropriate questions from shareholders.
VOTING
Who is
entitled to vote at our meeting?
Holders of common stock of record at the close of business on
the record date, June 8, 2010, are entitled to receive
notice of and to vote at our annual meeting, and any
adjournment, postponement or continuation of our annual meeting.
What
are the voting rights of our shareholders?
As of the record date, 7,413,930 shares of common stock
were outstanding, each of which is entitled to one vote with
respect to each matter to be voted on at our annual meeting.
Who
can attend our annual meeting?
All shareholders as of the record date, or their duly appointed
proxies, may attend our annual meeting. Even if you currently
plan to attend our annual meeting, we recommend that you also
submit your proxy as described below so that your vote will be
counted if you later decide not to attend our annual meeting.
If you hold your shares in “street name” (that is,
through a broker or other nominee), you will need to bring a
copy of a brokerage statement reflecting your stock ownership as
of the record date and check in at the registration desk at our
annual meeting.
What
constitutes a quorum?
The presence at our annual meeting, in person or by proxy, of
the holders of a majority of the shares of our common stock
outstanding on the record date will constitute a quorum,
permitting the conduct of business at our annual meeting.
Proxies received but marked as abstentions and broker non-votes
will be included in the calculation of the number of shares
present at our annual meeting.
How do
I vote?
If you or your duly authorized attorney-in-fact complete,
properly sign and return the accompanying proxy card to us, it
will be voted as you direct. If you are a registered shareholder
and attend our annual meeting, you may deliver your completed
proxy card in person. “Street name” shareholders who
wish to vote at our annual meeting will need to obtain a signed
proxy from the institution that holds their shares.
May I
change my vote after I return my proxy card?
Yes. Even after you have submitted your proxy, you may change
your vote at any time before the proxy is exercised by filing
with our Secretary either a notice of revocation or a duly
executed proxy bearing a later date. The powers of the proxy
holders will be revoked if you attend our annual meeting in
person and request that your proxy be revoked, although
attendance at our annual meeting will not by itself revoke a
previously granted proxy.
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What
are our Board’s recommendations?
Unless you give other instructions on your proxy card, the
persons named as proxy holders on the proxy card will vote in
accordance with the recommendations of our Board of Directors.
Our Board of Directors recommends a vote:
| • | FOR election of our nominees for Class I directors (see pages 4 through 7). |
What
vote is required to approve each matter?
Election of Class I Directors. The two
persons receiving the highest number of “FOR” votes
cast by the holders of our common stock for election as
Class I directors will be elected. A properly executed
proxy marked “WITHHOLD AUTHORITY” with respect to the
election of one or more directors will not be voted with respect
to the director or directors indicated, although the proxy will
be counted for purposes of determining whether a quorum is
present. Abstentions and shares held by brokers or nominees as
to which voting instructions have not been received from the
beneficial owner of or persons otherwise entitled to vote the
shares and as to which the broker or nominee does not have
discretionary voting power, i.e., broker non-votes, will
not be taken into account in determining the outcome of the
election. We do not permit cumulative voting in the election of
directors.
Other Matters. The affirmative vote of a
majority of the votes cast by the holders of our common stock on
the proposal will be required to approve any other matter that
properly comes before our annual meeting. Abstentions and broker
non-votes do not constitute votes cast and therefore will not
affect the outcome of the vote.
If you sign your proxy card or broker voting instruction card
with no further instructions, your shares will be voted in
accordance with the recommendations of our Board, i.e.,
FOR the election of our nominees for Class I directors.
Who
will pay the costs of soliciting proxies on behalf of our Board
of Directors?
We are making this solicitation and will pay the cost of
soliciting proxies on behalf of our Board of Directors,
including expenses of preparing and mailing this proxy
statement. In addition to mailing these proxy materials, the
solicitation of proxies or votes may be made in person or by
telephone or telegram by our regular officers and employees,
none of whom will receive special compensation for such
services. Upon request, we will also reimburse brokers,
nominees, fiduciaries and custodians and persons holding shares
in their names or in the names of nominees for their reasonable
expenses in sending proxies and proxy material to beneficial
owners.
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STOCK
OWNERSHIP
Security
Ownership of Certain Beneficial Owners and Management
The following table indicates, as of May 31, 2010,
information about the beneficial ownership of our common stock
by (1) each director as of May 31, 2010, (2) each
Named Executive Officer, (3) all directors and executive
officers as of May 31, 2010 as a group and (4) each
person who we know beneficially owns more than 5% of our common
stock. All such shares were owned directly with sole voting and
investment power unless otherwise indicated.
Beneficial
Ownership Table
|
Amount of |
||||||||||||||||||||
|
Amount of |
Beneficial |
|||||||||||||||||||
|
Beneficial |
Ownership |
|||||||||||||||||||
|
Ownership of |
of Shares |
Amount of |
Aggregate |
|||||||||||||||||
|
Outstanding |
Percent |
Underlying |
Aggregate Beneficial |
Percent of |
||||||||||||||||
|
Name
|
Shares(1) | of Class | Options | Ownership | Class | |||||||||||||||
|
Richard J. DePiano
|
144,278 | 2.2 | % | 286,897 | 431,175 | 6.7 | % | |||||||||||||
|
Richard J. DePiano, Jr.
|
206 | 0.0 | % | 100,367 | 100,573 | 1.6 | % | |||||||||||||
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Robert O’Connor
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— | 0.0 | % | 100,000 | 100,000 | 1.6 | % | |||||||||||||
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Mark Wallace
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— | 0.0 | % | 47,467 | 47,467 | * | ||||||||||||||
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William L.G. Kwan
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— | 0.0 | % | 80,000 | 80,000 | 1.2 | % | |||||||||||||
|
Jay L. Federman
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12,072 | 0.2 | % | 75,000 | 87,072 | 1.4 | % | |||||||||||||
|
Anthony J. Coppola
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— | 0.0 | % | 55,000 | 55,000 | * | ||||||||||||||
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Lisa Napolitano
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— | 0.0 | % | 52,000 | 52,000 | * | ||||||||||||||
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Fred Choate
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— | 0.0 | % | 40,000 | 40,000 | * | ||||||||||||||
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All Directors and Executive Officers as a group (9 persons)
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156,556 | 2.4 | % | 836,731 | 993,287 | 15.5 | % | |||||||||||||
| (*) | Less than one percent | |
| (1) | Information furnished by each individual named. This table includes shares that are owned jointly, in whole or in part with the person’s spouse, or individually by his or her spouse. No shares held by board members or named executive officers are pledged as collateral. |
SECTION 16(a)
BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 (the
“Exchange Act”) requires that our officers and
directors, as well as persons who own 10% or more of a class of
our equity securities, file reports of their ownership of our
securities, as well as statements of changes in such ownership,
with us and the Securities and Exchange Commission (the
“SEC”). Based upon written representations received by
us from our officers, directors and 10% or greater shareholders,
and our review of the statements of beneficial ownership changes
filed with us by our officers, directors and 10% or greater
shareholders during fiscal 2009, we believe all such filings
required during the fiscal 2009 were made on a timely basis.
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ELECTION
OF DIRECTORS
ITEM 1 —
ELECTION OF CLASS I DIRECTORS
Introduction
The election of our directors by our shareholders is governed by
the Pennsylvania Business Corporation Law and our Bylaws. The
following discussion summarizes these provisions and describes
the process our Governance and Nominating Committee will follow
in connection with the nomination of candidates for election as
directors by the holders of our common stock.
Governance
and Nominating Procedures
Our Governance and Nominating Committee is responsible for
recommending to the Board of Directors candidates to stand for
election to the Board of Directors at the annual meeting. Our
Governance and Nominating Committee will also consider director
candidates recommended by shareholders in accordance with the
advance notice procedures in Section 2.3 of our Bylaws.
These procedures are described under “Shareholder
Proposals” in this proxy statement. The Governance and
Nominating Committee may also consider director candidates
proposed by our management. We have not utilized third-party
executive search firms to identify candidates for director.
With the exception of applicable rules of the SEC and the Nasdaq
Stock
MarketSM
(“Nasdaq”), our Governance and Nominating Committee
does not have any specific, minimum qualifications for
candidates for election to our Board of Directors, and our
Governance and Nominating Committee may take into account such
factors as it deems appropriate. Our Governance and Nominating
Committee examines the specific attributes of candidates for
election to our Board of Directors and also considers the
judgment, skill, diversity, business experience, the interplay
of the candidate’s experience with the experience of the
other members of our Board of Directors and the extent to which
the candidate would contribute to the overall effectiveness of
our Board of Directors.
Our Governance and Nominating Committee will utilize the
following process in identifying and evaluating candidates for
election as members of our Board of Directors:
| • | Evaluation of the performance and qualifications of the members of our Board of Directors whose term of office will expire at the forthcoming annual meeting of shareholders and determination of whether they should be nominated for re-election. | |
| • | Consideration of the suitability of the candidates for election, including incumbent directors. | |
| • | Review of the qualifications of any candidates proposed by shareholders in accordance with our Bylaws, candidates proposed by management and candidates proposed by individual members of our Board of Directors. | |
| • | After such review and consideration, propose to the Board of Directors a slate of candidates for election at the forthcoming annual meeting of shareholders. |
Actions
Taken by Our Governance and Nominating Committee
Our Governance and Nominating Committee met in fiscal 2009, but
our entire Board of Directors performed the functions of the
Governance and Nominating Committee with respect to the
nominating of candidates for election at the 2009 Annual
Meeting. The Board of Directors met on May 12, 2010 for the
purpose of nominating candidates for election as directors by
our shareholders at this annual meeting of shareholders,
constituting our 2009 annual meeting, and approved the
nomination of the persons named below.
Candidates
for Election
Our Board of Directors currently consists of six members, four
of whom are considered independent for purposes of the
applicable Nasdaq rules. The current independent directors are
Anthony J. Coppola, Lisa A.
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Napolitano, Fred G. Choate and William L. G. Kwan. Each director
is elected for a three-year term and until
his/her
successor has been duly elected.
Two Class I directors are to be elected at our annual
meeting. Unless otherwise instructed, the proxies solicited by
our Board of Directors will be voted for the election of the
nominees named below. The two Class I nominees are
currently directors of the Company.
If any of the nominees becomes unavailable for any reason, the
proxies intend to vote for a substitute nominee designated by
our Board of Directors. Our Board of Directors has no reason to
believe the nominees named will be unable to serve if elected.
Any vacancy occurring on our Board of Directors for any reason
may be filled by a majority vote of our directors then in office
until the expiration of the term of the class of directors in
which the vacancy exists.
The names of the nominees for Class I directors and the
Class II directors and Class III directors who will
continue in office after our annual meeting until the expiration
of their respective terms, together with certain information
regarding them, are as follows:
|
Class I
|
Director |
Year Term |
Principal Occupation During Past Five |
|||||||||||
|
Name of Director
|
Since | Will Expire | Age |
Years and Certain Directorships
|
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William L.G. Kwan
|
1999 | 2012* | 68 | Retired; Vice President of Business Development of Alcon Laboratories, Inc. a medical products company, from October 1996 to 1999, and Vice President of International Surgical Instruments from November 1989 to October 1999. Mr. Kwan’s executive and leadership experience in the ophthalmology business provides him with a valuable perspective from which to contribute to the Board, as it oversees its Ophthalmology operations. We believe that Mr. Kwan’s executive, operational and financial experience qualifies him to serve as a member of our Board and our Audit Committee. | ||||||||||
|
Anthony J. Coppola
|
2000 | 2012* | 72 | Principal and operator of The Historic Town of Smithville, Inc., a real estate and commercial property company from 1988 to present; Retired Division President of SKF Industries, a manufacturing company, from 1963 to 1986. Mr. Coppola’s experience as an owner and operator of various companies enables him to provide our Board and management with an appropriate perspective on operations. Further, Mr. Coppola’s executive and leadership experience in managing a division of a global manufacturing company provides him with a valuable perspective from which to contribute to the Board and management. We believe that Mr. Coppola’s executive, operational and financial experience qualifies him to serve as a member of our Board and our Chairman of our Audit Committee. | ||||||||||
| * | If elected at the Annual Meeting. |
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Directors
Continuing in Office
|
Nominees for |
||||||||||||||
|
Class II
|
Director |
Year Term |
Principal Occupation During Past Five |
|||||||||||
|
Name of Director
|
Since | Will Expire | Age |
Years and Certain Directorships
|
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Lisa A. Napolitano
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2003 | 2010 | 45 | Tax Manager, Global Tax Management, Inc., a provider of compliance support services for both federal and state taxes, since 1998. Ms. Napolitano is a Certified Public Accountant in Pennsylvania. Ms. Napolitano qualifies for our Board and Audit Committee based on her extensive experience in public accounting and through her understanding of internal controls, accounting principals, business operations and regulatory compliance. We believe that Ms. Napolotano’s financial, operational and regulatory experience qualifies her to serve as a member of our Board and our Audit Committee. | ||||||||||
|
Fred G. Choate
|
2005 | 2010 | 62 | Managing Member of Atlantic Capital Funding LLC, a venture capital fund, from 2003 to present, Managing Member of Atlantic Capital Management LLC, a venture capital fund, from 2004 to present; Baltic-American Enterprise Fund, a venture capital fund, Chief Investment Officer from 2003 to present; Managing Member of Greater Philadelphia Venture Capital Corp, a venture capital fund, from 1992 to present. Mr. Choate has been a director of Parke Bank since 2003. Mr. Choate was formerly a director of Escalon Medical from 1998 to 2003. Mr. Choate has extensive banking, business and industry experience, both in leadership positions, as Managing Member of several venture capital funds and his lengthy experience serving on boards of various companies. Mr. Choate’s substantial financial, banking, corporate, executive and operational experience, in addition to his prior board experience, qualify him to serve on our Board. | ||||||||||
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|
Class III
|
Director |
Year Term |
Principal Occupation During Past Five |
|||||||||||
|
Name of Director
|
Since | Will Expire | Age |
Years and Certain Directorships
|
||||||||||
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Richard J. DePiano
|
1996 | 2011 | 67 | Chairman and CEO of Escalon Medical Corp. since March 1997. CEO of the Sandhurst Company, L.P. and Managing Director of the Sandhurst Venture Fund since 1986; Chairman of the Board of Directors of PhotoMedex, Inc. Our Board has determined that Mr. DePiano’s lengthy and significant experience with the Company, including his operational, financial, accounting, executive and leadership, qualify him to serve as our Chief Executive Officer and as Chairman of our Board of Directors. | ||||||||||
|
Jay L. Federman, M.D.
|
1996 | 2011 | 70 | Jay Federman, M.D. is an ophthalmologist subspecializing in the management of vitreo-retinal diseases with Associated Retinal Consultants. He is currently an Attending Surgeon at Wills Eye Institute and a Professor of Ophthalmology at Jefferson Medical College. His Directorships include the Research Department of Wills Eye Hospital from 1987 to 1995, Chief of the Department Ophthalmology of the Medical College of PA from 1994 to 2004, Co-Director of the Retina Service of Wills Eye Hospital from 1991 to 1999 and a Director of the Vitreo-Retinal Research Foundation of Philadelphia. He is a member of the American Academy of Ophthalmology, American College of Surgeons, American Ophthalmological Society, Association of Research in Vision and Ophthalmology, Club Jules Gonin, Macula Society, and the Retina and Vitreous Societies. Dr. Federman’s extensive and leadership experience in the practice of ophthalmology provides him with a unique and valuable perspective from which to contribute to the Board and management, as it oversees its ophthalmology operations. We believe that Dr. Federman’s lengthy experience with the Company, his practical, operational and medical experience qualifies him to serve as a member of our Board. | ||||||||||
CORPORATE
GOVERNANCE
The SEC and Nasdaq have adopted regulations and listing
requirements that relate to our corporate governance. Our Board
of Directors has adopted standards and practices in order to
comply with those regulations that apply to us. We have has
adopted a Code of Ethics, which can be accessed on our web site
at www.escalonmed.com. Our independent directors meet at
regularly scheduled meetings at which only independent directors
are present.
We believe Shareholders are best served if the Board retains
flexibility to decide what leadership structure works best for
the Company based on the facts and circumstances existing from
time to time. Currently, the offices of Chairman and CEO are
held by the same person, Richard J. DePiano. The Board does not
believe that its independence or performance would be enhanced
by requiring that the Chairman be an independent director. The
Board follows sound corporate governance practices to ensure its
independence and effective functioning. Most
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importantly, four of the six directors are independent and meet
regularly in scheduled executive sessions. These sessions are
led by an independent director with clear duties to ensure
proper checks and balances. In addition, the Board’s audit,
compensation and governance committees are and have for many
years been composed solely of independent directors. This means
that oversight of critical issues such as the integrity of the
Company’s financial statements, CEO and senior management
compensation is entrusted to independent directors. The Board
retains the right to review this determination as facts and
circumstances change.
Our Board
of Directors and Its Committees
Our Board of Directors met eight times in fiscal 2009. Our Board
of Directors has an Executive Committee, an Audit Committee, a
Governance and Nominating Committee and a Compensation Committee.
Audit
Committee
Our Audit Committee consists of Anthony J. Coppola, William L.G.
Kwan and Lisa A. Napolitano. The Committee met five times in
fiscal 2009. Each member of the Audit Committee is independent
within the meaning of the rules of Nasdaq and of the SEC.
Consistent with the Sarbanes-Oxley Act of 2002, the Audit
Committee has responsibility for:
| • | the selection of our independent registered public accounting firm; | |
| • | reviewing the scope and results of the audit; | |
| • | reviewing related-party transactions; and | |
| • | reviewing the adequacy of our accounting, financial, internal and operating controls. |
Our Audit Committee operates pursuant to a written charter, the
full text of which is available on our website.
Governance
and Nominating Committee
Our Governance and Nominating Committee consists of Anthony J.
Coppola, Fred G. Choate and Lisa A. Napolitano. Each member of
the Governance and Nominating Committee is independent within
the meaning of the rules of Nasdaq and of the SEC. Our
Governance and Nominating Committee has responsibility for:
| • | developing and recommending to the Board corporate governance guidelines, establishing procedures to ensure effective functioning of the Board; | |
| • | reviewing of director compensation; | |
| • | identifying individuals believed to be qualified to become members of our Board of Directors and to recommend to our Board of Directors nominees to stand for election as directors; and | |
| • | Identifying members of our Board of Directors qualified to serve on the various committees of our Board of Directors. |
Our Governance and Nominating Committee operates pursuant to a
written charter, the full text of which is available on our
website.
Compensation
Committee
Our Compensation Committee consists of Anthony J. Coppola, Fred
G. Choate and Lisa A. Napolitano. The Committee met one time in
fiscal 2009. Each member of the Compensation Committee is
independent within the meaning of the rules of Nasdaq and of the
SEC. Our Compensation Committee has responsibility for:
| • | the annual review and determination of the compensation of our executive officers; | |
| • | providing annual compensation recommendations to our Board of Directors for all of our officers; | |
| • | determining the employees who participate in our equity incentive plans and the provision of recommendations to our Board of Directors as to individual stock option grants and other awards; and | |
| • | the general oversight of our employee benefit plans. |
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Our Compensation Committee operates pursuant to a written
charter, the full text of which is available on our website. Our
Compensation Committee’s charter reflects these
responsibilities, and the Compensation Committee and our Board
of Directors reviews the charter annually.
Director —
Shareholder Communications
Our shareholders may communicate with our Board of Directors
through our Secretary. Shareholders who wish to communicate with
any of our directors may do so by sending their communication in
writing addressed to a particular director, or in the
alternative, to “Non-management Directors” as a group,
in care of our Secretary at our headquarters, 435 Devon Park
Drive, Building 100, Wayne, PA 19087. All such communications
that are received by our Secretary will be promptly forwarded to
the addressee or addressees set forth in the communication.
We actively encourage our directors to attend our annual
meetings of shareholders because we believe director attendance
at our annual meetings provides our shareholders with an
opportunity to communicate with the members of our Board of
Directors. All of our directors attended our 2008 annual meeting
of shareholders held in 2009 and intend to be in attendance at
this annual meeting with respect to 2009.
EXECUTIVE
OFFICERS OF THE COMPANY
Our executive officers are as follows:
|
Name
|
Age
|
Position
|
||||
|
Richard J. DePiano
|
68 | Chairman and Chief Executive Officer | ||||
|
Richard J. DePiano, Jr.
|
43 | President and General Counsel | ||||
|
Mark G. Wallace
|
40 | Chief Operating Officer | ||||
|
Robert M. O’Connor
|
48 | Chief Financial Officer | ||||
Mr. DePiano has been a director of the Company since
February 1996 and has served as Chairman and Chief Executive
Officer of the Company since March 1997. Mr. DePiano has
been the Chief Executive Officer of the Sandhurst Company, L.P.
and Managing Director of the Sandhurst Venture Fund since 1986.
Mr. DePiano also serves Chairman of the Board of Directors
of PhotoMedex, Inc.
Mr. DePiano, Jr. was appointed Chief Operating Officer
and General Counsel of the Company December 28, 2006. Mr.
DePiano, Jr. is the son of the Company’s Chairman and Chief
Executive Officer. Mr. DePiano, Jr. joined the Company
in November of 2000 as Vice President Corporate and Legal
Affairs. Prior to joining the Company,
Mr. DePiano, Jr. worked with Forceno &
Arangio, L.L.P., from September 1998 until November 2000 as a
Senior Associate representing individual and business clients in
various areas of the law including mergers and acquisitions,
automotive dealership representation, family, small and emerging
businesses, securities law, venture capital financing, consumer
finance and general corporate and commercial matters. Prior to
this Mr. DePiano, Jr. was in private law practice
since 1992. He served as President in 2008 and 2009 and was a
member of the Board of Directors of the Delaware Valley
Corporate Counsel Association from 2005 until 2010
(“DELVACCA”). Mr. DePiano, Jr. also serves
as the Chairman of the Nominations Committee, Chairman of the
Law School Initiative Committee and member of the Pro-Bono
Committee of DELVACCA. He also is Vice Chairman of the Board of
Directors of the Montgomery County Industrial Development
Authority.
Mr. Wallace was appointed our Chief Operating Officer on
January 1, 2008. Mr. Wallace has worked with us since
1997. Previous to being appointed Chief Operating Officer he was
Executive Vice President of our Escalon Digital Solutions and
Trek Medical subsidiaries. He has jointly held the position of
Vice President-Quality, with quality and regulatory
responsibilities for all of the our companies, and has also
previously served as Operations Manager at Sonomed, Inc. and
Quality Manager of Escalon Medical. He had previously worked
with Lunar Corp (now GE Healthcare) and Trek Medical. He holds a
BS Industrial Engineering and a MS Manufacturing Systems
Engineering, both from the University of Wisconsin-Madison, is a
senior member of the American Society of Quality, and has over
18 years experience in the medical device industry.
Mr. O’Connor was appointed Chief Financial Officer of
the Company on June 30, 2006. Mr. O’Connor joined
the Company from BDO Seidman, LLP where he served as a senior
manager from 2004. His prior experience includes both public and
private accounting roles as a manager at PricewaterhouseCoopers,
LLP where he served in
9
Table of Contents
the middle market advisory services group from 1998 until 2000,
and positions of controller and chief financial officer of
Science Dynamics, a manufacturer of high tech telecom equipment,
from 2000 until 2002 and Ianieri & Giampapa, LLC, a
certified public accounting firm from 2002 until 2004.
Mr. O’Connor holds an MBA from Rutgers
University — Graduate School of Management and a B.S.
from Kean University. He is a certified public accountant and a
member of the American Institute of Certified Public Accountants
(AICPA).
EXECUTIVE
COMPENSATION
Compensation
Discussion and Analysis
Introduction
The Compensation Committee of our Board of Directors, or our
Compensation Committee, oversees our compensation and policies,
our compensation levels, including reviewing and approving
equity awards to our executive officers, and reviews and
recommends annually for approval by our Board of Directors all
compensation decisions relating to our executive officers.
Our Compensation Committee believes that the primary objectives
of our compensation programs for our executive officers are to:
| • | attract and retain talented and dedicated executive officers who contribute to our growth, development and profitability and to encourage them to remain with us for many years; | |
| • | motivate our executive officers to achieve our strategic business objectives and to reward them when they achieve those objectives; and | |
| • | provide long-term compensation to our executive officers that rewards our executive officers for sustained financial and operating performance and leadership excellence. |
Our
Compensation Philosophy and Objectives
The most significant component of the compensation policy
administered by our Compensation Committee is that a substantial
portion of the aggregate annual compensation of our named
executive officers should be based on our annual financial
results, our overall sales, growth and our profitability. Our
Compensation Committee also evaluates the achievement of our
other corporate objectives and the contribution of each named
executive officer to those achievements.
We rely on our judgment in making compensation decisions after
reviewing our performance and the performance of our executives
based on financial and operational objectives. We do not retain
the services of any compensation consultants. Three of our named
executive officers, Richard DePiano, Sr., Mark Wallace and
Robert O’Connor, have employment, severance and
change-of-control
agreements. (See “Employment Agreements” below.)
For a number of years, we have maintained a cash incentive
compensation program for our officers, including our named
executive officers. The amount of the bonus is dependent upon
several factors listed below including our financial results,
sales growth and our profitability. Our Compensation Committee
does not assign specific weights to these factors.
The
Compensation of Our Officers
Our officers receive the following types of compensation:
| • | Base Salary. The base salaries of our officers, including our named executive officers, are established based on the scope of their responsibilities and the recommendation of our Chief Executive Officer to our Compensation Committee for other than his own compensation. Our Compensation Committee reviews the base salaries of our named executive officers annually, including our Chief Executive Officer, and adjusts those salaries annually after taking into account individual responsibilities, performance, length of service with us, current salary, experience and compensation history as well as our results of operations. |
10
Table of Contents
| • | Annual Cash Bonus. Our officers, including our named executive officers, receive annual cash bonuses based on our financial results, overall sales growth and profitability. The maximum aggregate amount available annually for our officers is determined by our Compensation Committee. Our Compensation Committee then recommends to our Board of Directors the percentage of the maximum amount to be allocated among our officers, including our named executive officers, on a discretionary basis. Our Chief Executive Officer submits recommended bonus allocations for our officers, including our named executive officers other than himself, to our Compensation Committee, which reviews his recommendations and then establishes the annual bonus allocations for our officers and reports its decisions to our Board of Directors. The annual cash bonuses approved by our Compensation Committee are paid in a single installment following the completion of a particular fiscal year. We did not pay any cash bonuses with respect to fiscal 2009. | |
| • | Long-Term Equity Incentives. We believe that we can maximize our long-term performance best when the performance of our officers is motivated by equity-based awards that provide value based on our long-term performance. We have designed our long-term equity compensation plans to provide all of the members of our management, including our named executive officers, with equity incentives to foster the alignment of the interests of our officers with the interests of our stockholders. Our equity-based compensation plans provide the principal method by which our officers can acquire ownership of our common stock. The primary form of equity compensation that we have historically awarded to our officers, including our named executive officers, is stock options. Our Compensation Committee receives preliminary recommendations for periodic stock option grants from our Chief Executive Officer for our officers other than himself. Our Compensation Committee then recommends stock option grants for all of our officers, including our Chief Executive Officer, for approval by our Board of Directors. We have stock option plans that authorize us to grant options to purchase shares of our common stock to our employees, officers and directors. We have consistently followed the practice of granting stock options at an exercise price of the closing price of our common stock on Nasdaq on the date of grant. |
The
Operation of Our Compensation Process
Our Compensation Committee recommends all compensation and
equity awards to our executive officers for final discretionary
action by our Board of Directors. Our Compensation Committee, in
recommending the annual compensation of our officers, including
our named executive officers, to be established by our Board of
Directors, reviews the performance and compensation of our
officers. In assessing the performance of our named executive
officers in relation to the objectives established by our Board
of Directors, our Compensation Committee reviews specific
achievements associated with attainment of the objectives, the
degree of difficulty of the objectives and the extent to which
significant unforeseen obstacles or favorable circumstances
affected their performance.
Our Compensation Committee recommends to our Board of Directors
the base salaries, annual aggregate bonus amount and stock
option grants to the members of our management. As part of its
oversight of the compensation of our named executive officers,
our Compensation Committee reviewed recommended the following
compensation adjustments for fiscal 2009 for our named executive
officers:
| • | Mark Wallace, our Chief Operating Officer’s base salary was increased by approximately 51% which our Compensation Committee considered an appropriate adjustment consistent Mr. Wallace’s position and performance in fiscal 2009 and recent fiscal periods; | |
| • | The remaining named executives received no salary increases and all named executives received no bonus for the year due to cost cutting measurements in all business units. To that end, executive management took a reduction in salary of ten percent (10%) during fiscal 2009. | |
| • | continued grants of stock options at exercise prices equal to the closing price of our common stock on the grant date because our Compensation Committee believes that our history of stock option grants has in fact been successful in motivating our named executive officers to achieve superior performance. |
11
Table of Contents
Tax
Matters
Section 162(m) of the Code generally does not allow us a
deduction for federal income tax purposes to the extent that we
pay annual compensation to any of our executive officers named
in the Summary Compensation Table in this proxy statement that
is in excess of $1 million. However, compensation paid to
such an executive officer that is paid pursuant to a
performance-based plan is generally not subject to the
Section 162(m) limitation. Although our Compensation
Committee is aware of the Section 162(m) limitation, our
Compensation Committee believes that it is equally important to
maintain flexibility and the competitive effectiveness of the
compensation of our named executive officers. Our Compensation
Committee may, therefore, from time to time, authorize
compensation that is not deductible for federal income tax
purposes if our Compensation Committee believes it is in our
best interests and the best interests of our stockholders to do
so.
Executive
Compensation Tables
Summary
Compensation Table
The following table sets forth certain summary information
concerning compensation that we paid or accrued to or on behalf
of each of our executive officers during each of the fiscal
years ended June 30, 2009, 2008 and 2007 (the “Named
Executive Officers”).
|
Nonqualified |
||||||||||||||||||||||||||||||||||||
|
Non-Equity |
Deferred |
|||||||||||||||||||||||||||||||||||
|
Stock |
Option |
Incentive Plan |
Compensation |
All Other |
||||||||||||||||||||||||||||||||
|
Name and Principal Position
|
Year | Salary | Bonus | Awards | Awards(1) | Compensation | Earnings | Compensation(2) | Total | |||||||||||||||||||||||||||
|
Richard J. DePiano
|
2009 | $ | 349,319 | $ | — | $ | 51,856 | $ | 20,040 | $ | 421,215 | |||||||||||||||||||||||||
|
Chairman and Chief
|
2008 | $ | 336,343 | $ | — | $ | — | $ | 57,653 | $ | — | $ | — | $ | 9,600 | $ | 403,596 | |||||||||||||||||||
|
Executive Officer
|
2007 | $ | 317,700 | $ | 250,000 | $ | — | $ | 23,207 | $ | — | $ | — | $ | 9,600 | $ | 600,507 | |||||||||||||||||||
|
Richard J. DePiano, Jr.
|
2009 | $ | 191,407 | $ | — | $ | 16,592 | $ | 9,600 | $ | 217,599 | |||||||||||||||||||||||||
|
President and
|
2008 | $ | 180,000 | $ | — | $ | — | $ | 18,448 | $ | — | $ | — | $ | 9,600 | $ | 208,048 | |||||||||||||||||||
|
General Counsel
|
2007 | $ | 127,200 | $ | 80,000 | $ | — | $ | 7,425 | $ | — | $ | — | $ | — | $ | 214,625 | |||||||||||||||||||
|
Robert M. O’Connor
|
2009 | $ | 217,062 | $ | — | $ | 16,592 | $ | 9,600 | $ | 243,254 | |||||||||||||||||||||||||
|
Chief Financial Officer
|
2008 | $ | 205,400 | $ | — | $ | — | $ | 8,547 | $ | — | $ | — | $ | 9,600 | $ | 223,547 | |||||||||||||||||||
| 2007 | $ | 200,000 | $ | 25,000 | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 225,000 | ||||||||||||||||||||
|
Mark Wallace
|
2009 | $ | 161,004 | $ | — | $ | 4,428 | $ | 165,432 | |||||||||||||||||||||||||||
|
Chief Operating Officer
|
2008 | $ | 93,246 | $ | 60,000 | $ | — | $ | 2,849 | $ | — | $ | — | $ | — | $ | 156,095 | |||||||||||||||||||
| 2007 | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||||||||||||
| (1) | Represents the dollar amount recognized for financial statement reporting purposes for the fiscal year ended June 30, 2009, in accordance with FASB ASC Topic 718, formerly SFAS 123(r). Assumptions used in the calculation of these amounts are included in Note 2 to the Consolidated Financial Statements. There were no forfeitures during 2009. The options granted to Mr. DePiano, Sr. vest over a two-year period; options granted to Mr. DePiano, Jr., Mr. O’Connor and Mr. Wallace vest over a five-year period (see “Long-Term Incentives” under Compensation Discussion and Analysis). No options were exercised by the named executives during the year ended June 30, 2009. | |
| (2) | Includes payment of, (a) an automobile allowance and (b) insurance premiums paid for life insurance. |
12
Table of Contents
Grants of
Plan Based Awards
The following table sets forth certain information regarding
plan-based awards granted during the fiscal year ended
June 30, 2009.
|
All |
||||||||||||||||||||||||||||||||||||||||||||
|
Other |
Grant |
|||||||||||||||||||||||||||||||||||||||||||
|
Stock |
All Other |
Date |
||||||||||||||||||||||||||||||||||||||||||
|
Awards |
Option |
Fair |
||||||||||||||||||||||||||||||||||||||||||
|
Number |
Awards |
Exercise |
Value |
|||||||||||||||||||||||||||||||||||||||||
|
Estimated Future Payouts |
Estimated Future Payouts |
of |
Number of |
or Base |
of Stock |
|||||||||||||||||||||||||||||||||||||||
|
Under Non-Equity Incentive |
Under Equity Incentive |
Shares |
Securities |
Price of |
and |
|||||||||||||||||||||||||||||||||||||||
|
Grant |
Plan Awards | Plan Awards |
of Stock |
Underlying |
Option |
Option |
||||||||||||||||||||||||||||||||||||||
|
Name
|
Date | Threshold | Target | Maximum | Threshold | Target | Maximum | or Units | Options | Awards | Award(1) | |||||||||||||||||||||||||||||||||
|
Richard J. DePiano
|
9/25/2008 | — | — | — | — | — | — | — | 25,000 | $ | 2.22 | $ | 53,345 | |||||||||||||||||||||||||||||||
|
Richard J. DePiano, Jr.
|
9/25/2008 | — | — | — | — | — | — | — | 20,000 | $ | 2.22 | $ | 44,276 | |||||||||||||||||||||||||||||||
|
Robert M. O’Connor
|
9/25/2008 | — | — | — | — | — | — | — | 20,000 | $ | 2.22 | $ | 44,276 | |||||||||||||||||||||||||||||||
|
Mark Wallace
|
9/25/2008 | — | — | — | — | — | — | — | 20,000 | $ | 2.22 | $ | 44,276 | |||||||||||||||||||||||||||||||
| (1) | Represents the fair value on date of grant in accordance with FASB ASC Topic 718, formerly SFAS 123(r). Assumptions used in the calculation of these amounts are included in Note 2 to the Consolidated Financial Statements. There were no forfeitures during 2008. The options granted to Mr. DePiano, Sr. vest over a two-year period; options granted to Mr. DePiano, Jr., Mr. O’Connor and Mr. Wallace vest over a five-year period years (see “Long-Term Incentives” under Compensation Discussion and Analysis). No options were exercised by the named executives during the year ended June 30, 2009. |
13
Table of Contents
Outstanding
Equity Plan Based Awards at Fiscal Year-End —
2008
The following table sets forth certain information regarding
grants of equity awards held by the named executive officers as
of June 30, 2009.
| Option Awards | ||||||||||||||||||||
|
Equity |
||||||||||||||||||||
|
Incentive |
||||||||||||||||||||
|
Plan Awards: |
||||||||||||||||||||
|
Number of |
||||||||||||||||||||
|
Securities |
||||||||||||||||||||
|
Underlying |
||||||||||||||||||||
|
Number of Securities Underlying |
Unexercised |
Option |
Option |
|||||||||||||||||
| Unexercised Options |
Unearned |
Exercise |
Expiration |
|||||||||||||||||
|
Name
|
Exercisable | Unexercisable | Options | Price | Date | |||||||||||||||
|
Richard J. DePiano
|
45,000 | — | — | $ | 2.38 | 11/1/2010 | ||||||||||||||
| 50,000 | — | — | $ | 2.77 | 11/1/2011 | |||||||||||||||
| 10,417 | — | — | $ | 1.45 | 8/13/2112 | |||||||||||||||
| 25,000 | — | — | $ | 6.94 | 11/10/2013 | |||||||||||||||
| 25,000 | — | — | $ | 6.19 | 8/17/2014 | |||||||||||||||
| 40,000 | — | — | $ | 8.06 | 8/16/2015 | |||||||||||||||
| 15,200 | — | — | $ | 2.65 | 11/9/2016 | |||||||||||||||
| 19,293 | 5,707 | 5,707 | $ | 3.05 | 11/13/2017 | |||||||||||||||
| 9,375 | 15,625 | 15,625 | $ | 2.22 | 9/26/2018 | |||||||||||||||
|
Richard J. DePiano, Jr.
|
700 | — | — | $ | 2.38 | 11/1/2010 | ||||||||||||||
| 1,100 | — | — | $ | 2.77 | 11/1/2011 | |||||||||||||||
| 3,567 | — | — | $ | 1.45 | 8/13/2112 | |||||||||||||||
| 10,000 | — | — | $ | 6.94 | 11/10/2013 | |||||||||||||||
| 25,000 | — | — | $ | 6.19 | 8/17/2014 | |||||||||||||||
| 20,000 | — | — | $ | 8.06 | 8/16/2015 | |||||||||||||||
| 10,334 | 9,666 | 9,666 | $ | 2.65 | 11/9/2016 | |||||||||||||||
| 6,334 | 13,666 | 13,666 | $ | 3.05 | 11/13/2017 | |||||||||||||||
| 3,000 | 22,000 | 22,000 | $ | 2.22 | 9/26/2018 | |||||||||||||||
|
Robert M. O’Connor
|
60,000 | $ | 5.05 | 6/29/2016 | ||||||||||||||||
| 10,334 | 9,666 | 9,666 | $ | 3.05 | 11/13/2017 | |||||||||||||||
| 3,000 | 22,000 | 22,000 | $ | 2.22 | 9/26/2018 | |||||||||||||||
|
Mark Wallace
|
584 | 4,416 | 4,416 | $ | 3.05 | 11/13/2017 | ||||||||||||||
| 3,000 | 22,000 | 22,000 | 2.22 | 9/26/2018 | ||||||||||||||||
| (1) | These options were granted under our 1999 Equity Incentive Plan and have a term of ten years, subject to earlier termination in certain events. The options granted to Mr. DePiano, Sr. vest over a two-year period. Options granted to Mr. DePiano, Jr., Mr. O’Connor and Mr. Wallace vest over a five-year period. No options were exercised by the named executives during the fiscal year ended June 30, 2009. |
Potential
Payments upon Termination or
Change-in-Control
If Mr. DePiano’s employment with us is terminated by
the Company or if he terminates his employment with us for good
reason, as defined in the agreement, we would be obligated to
pay him $8,000 per month for life. If Mr. DePiano were to
die within a period of three years after such termination, we
would be obligated to continue making such payments until a
minimum of 36 monthly payments have been made to him and
his beneficiaries in the aggregate.
Mr. O’Connor, pursuant to his offer letter, will be
entitled to a severance payment equal to 100% of his annual base
salary and an increase of his annual base salary to $250,000 in
connection with a change of control.
Discussion
of Elements of Compensation
Salary. Salaries for named executive
officers are determined based on a variety of factors, including
the executive’s scope of responsibilities. Salaries are
reviewed for our named executive officers once each year, and
14
Table of Contents
may be adjusted after considering the factors listed below and
the named executive officer’s performance. Executive
management took a reduction in salary of ten percent (10%)
during fiscal 2009.
Annual Cash Bonus. In fiscal year 2009,
named executive officers had the opportunity to earn a cash
bonus. Bonuses are provided to reward achieving business results
against individual annual performance commitments and to deliver
cash as part of an overall compensation package that is
competitive in the marketplace.
The Compensation Committee determines bonuses in its discretion
based on performance across a combination of qualitative and
quantitative objectives during the performance period. Working
with our Chief Executive Officer, each named executive officer
establishes these objectives annually. The Chief Executive
Officer establishes his goals in consultation with the Board.
The goals used to determine bonuses vary for each executive
based on his responsibilities and may include financial or
strategic measures, including:
| • | revenue, | |
| • | profitability, | |
| • | innovation, | |
| • | product development and implementation, | |
| • | quality, | |
| • | customer satisfaction, | |
| • | customer acceptance, | |
| • | organizational and leadership, | |
| • | strategic planning and development, | |
| • | operations excellence, and | |
| • | efficiency and productivity. |
For named executive officers other than the Chief Executive
Officer, the Chief Executive Officer recommends individual bonus
payments based on the executive’s performance against his
goals for the year. The Compensation Committee considers the
recommendations and makes a final decision on the bonus payments.
For Mr. DePiano, the Compensation Committee recommends a
bonus payment to the independent members of the Board. In making
this recommendation, the Compensation Committee considers the
performance evaluation of Mr. DePiano. The Board considers
the Committee’s recommendation and Mr. DePiano’s
performance evaluation in determining the bonus for
Mr. DePiano. No cash bonuses were awarded in fiscal 2009.
Employment
Agreements
On May 12, 1998, the Company entered into an employment
agreement with Richard J. DePiano as the Chairman and Chief
Executive Officer of the Company. The initial term of the
employment agreement commenced on May 12, 1998 and
continued through June 30, 2001. The employment agreement
renews on July 1 of each year for successive terms of three
years unless either party notifies the other party at least
30 days prior to such date of the notifying party’s
determination not to renew the agreement. The current base
salary provided under the agreement, as adjusted for yearly cost
of living adjustments, is $317,700 per year, and the agreement
provides for additional incentive compensation in the form of a
cash bonus to be paid by the Company to Mr. DePiano at the
discretion of the Board of Directors. The agreement also
provides for health and long-term disability insurance and other
fringe benefits as well as an automobile allowance of $800 per
month.
On June 23, 2005, the Company entered into a Supplemental
Executive Retirement Benefit Agreement with Mr. DePiano.
The agreement provides for the payment of supplemental
retirement benefits to Mr. DePiano in the event of his
termination of service Mr. DePiano with the Company under
the following circumstances:
| • | If Mr. DePiano retires, the Company is obligated to pay the executive $8,000 per month for life, with payments commencing the month after retirement. If Mr. DePiano were to die within a period of three years |
15
Table of Contents
| after such retirement, the Company would be obligated to continue making such payments until a minimum of 36 monthly payments have been made to the covered executive and his beneficiaries in the aggregate. |
| • | If Mr. DePiano dies before his retirement, while employed by the Company, the Company would be obligated to make 36 monthly payments to his beneficiaries of $8,000 per month commencing in the month after his death. | |
| • | If Mr. DePiano were to become permanently disabled while employed by the Company, the Company would be obligated to pay the executive $8,000 per month for life, with payments commencing the month after he suffers such disability. If Mr. DePiano were to die within three years after suffering such disability, the Company would be obligated to continue making such payments until a minimum of 36 monthly payments have been made to the covered executive and his beneficiaries in the aggregate. | |
| • | If Mr. DePiano’s employment with the Company is terminated by the Company or if he terminates his employment with the Company for good reason, as defined in the agreement, the Company would be obligated to pay him $8,000 per month for life. If Mr. DePiano were to die within a period of three years after such termination, the Company would be obligated to continue making such payments until a minimum of 36 monthly payments have been made to him and his beneficiaries in the aggregate. |
During the fourth quarter of fiscal 2005, we recorded as an
expense in our Consolidated Statement of Income, $1,087,000,
which represents the present value of the supplemental
retirement benefits awarded.
As President and General Counsel, Mr. DePiano, Jr.
received an annual salary of $167,670.
As Chief Financial Officer, Mr. O’Connor’s annual
base salary is $191,330. Mr. O’Connor has been granted
stock options to purchase 60,000 shares of the
Company’s common stock, which are exercisable in full as of
the June 30, 2006 grant date. The exercise price of these
options is $5.05 per share. Mr. O’Connor, pursuant to
his offer letter, will be entitled to a severance payment equal
to his annual base salary and an increase of his annual base
salary to $250,000 in connection with a change of control.
As Chief Operating Officer, Mr. Wallace received an annual
salary of $150,000.
No named executive officer exercised options during the year
ended June 30, 2009. No awards were made to any named
executive officer during such fiscal year under any long-term
incentive plan. We do not currently sponsor any defined benefit
or actuarial plans.
The following table shows securities authorized for issuance
under equity compensation plans.
|
Number of |
||||||||||||
|
Securities |
||||||||||||
|
Remaining |
||||||||||||
|
Available |
||||||||||||
|
for Future |
||||||||||||
|
Number of |
Issuance |
|||||||||||
|
Shares to be |
Under Equity |
|||||||||||
|
Issued Upon |
Weighted-Average |
Compensation |
||||||||||
|
Exercise of |
Exercise Price of |
Plans (Excluding |
||||||||||
|
Outstanding |
Outstanding |
Securities |
||||||||||
|
Stock Options |
Stock Options |
Reflected in Column |
||||||||||
|
Plan Category
|
(a) | (b) | (a))(c) | |||||||||
|
Equity Compensation plans approved by stockholders
|
886,944 | $ | 2.21 | 129,575 | ||||||||
|
Equity Compensation plans not approved by stockholders
|
— | — | — | |||||||||
| 886,944 | $ | 3.05 | 129,575 | |||||||||
Report of
Our Compensation Committee
The following report of our Compensation Committee does not
constitute proxy solicitation material and shall not be deemed
filed or incorporated by reference into any of our filings under
the Securities Act of 1933 (“Securities Act”) or the
Exchange Act, except to the extent that we specifically
incorporate this Compensation Committee report by reference
therein.
16
Table of Contents
Our Compensation Committee held a telephonic joint meeting with
the Board of Directors of the Company on May 12, 2010. The
committee reviewed and discussed the compensation discussion and
analysis that appears under the caption “Executive
Compensation” with management.
Based on the review and discussion by our Compensation Committee
with management, the members of our Compensation Committee then
held a meeting on May 12, 2010 at which they recommended to
our Board of Directors that our Board of Directors approve the
inclusion of the compensation disclosure and analysis in this
Proxy Statement under the caption “Executive
Compensation” for filing with the SEC.
Compensation Committee:
Anthony J. Coppola
Lisa A. Napolitano
Fred G. Choate
Anthony J. Coppola
Lisa A. Napolitano
Fred G. Choate
May 12, 2010
COMPENSATION
OF DIRECTORS
None of our directors were paid any directors fees by us during
the fiscal year ended June 30, 2009. In fiscal 2009, each
of our non-employee directors was awarded a grant of options to
purchase 10,000 shares of our common stock under our 1999
Equity Incentive Plan with an exercise price of $2.22 per share,
which was the closing price of our common stock on the NASDAQ
Capital Market on September 25, 2008, which options became
fully vested immediately upon grant. Directors are reimbursed
for expenses incurred in connection with attending meetings of
the Board and Board Committees.
The following table sets forth certain information regarding the
compensation paid to our directors for their service during the
fiscal year ended June 30, 2009.
|
Change in |
||||||||||||||||||||||||||||
|
per Share Value |
||||||||||||||||||||||||||||
|
Fees |
and Nonqualified |
|||||||||||||||||||||||||||
|
Earned |
Non-Equity |
Deferred |
||||||||||||||||||||||||||
|
or Paid |
Stock |
Option |
Incentive Plan |
Compensation |
All Other |
|||||||||||||||||||||||
|
Name
|
in Cash | Awards | Awards(1) | Compensation | Earnings | Compensation | Total | |||||||||||||||||||||
|
Anthony Coppola
|
$ | — | $ | — | $ | 22,138 | $ | — | $ | — | $ | — | $ | 22,138 | ||||||||||||||
|
Jay L. Federman
|
$ | — | $ | — | $ | 22,138 | $ | — | $ | — | $ | — | $ | 22,138 | ||||||||||||||
|
William L.G. Kwan
|
$ | — | $ | — | $ | 22,138 | $ | — | $ | — | $ | — | $ | 22,138 | ||||||||||||||
|
Lisa Napolitano
|
$ | — | $ | — | $ | 22,138 | $ | — | $ | — | $ | — | $ | 22,138 | ||||||||||||||
|
Fred Choate
|
$ | — | $ | — | $ | 22,138 | $ | — | $ | — | $ | — | $ | 22,138 | ||||||||||||||
| (1) | Represents the dollar amount recognized for financial statement reporting purposes for the fiscal year ended June 30, 2009, in accordance FASB ASC Topic 718, formerly SFAS 123(r). Assumptions used in the calculation of these amounts are included in Note 2 to the Consolidated Financial Statements. There were no forfeitures during 2009. The table below sets forth the aggregate number of stock options to purchase shares of our common stock held by each of our non-employee directors as of June 30, 2009. Options granted to non-employee directors vest on the date of grant and expire after ten years. |
|
Name
|
Shares | |||
|
Anthony Coppola
|
65,000 | |||
|
Jay L. Federman
|
85,000 | |||
|
William L.G. Kwan
|
100,000 | |||
|
Lisa Napolitano
|
62,000 | |||
|
Fred Choate
|
50,000 | |||
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Compensation
Committee Interlocks and Insider Participation
No members of our compensation committee are former or current
officers, or have other interlocking relationships, as defined
by the SEC.
Related
Person Transactions
We recognize that related person transactions present a
heightened risk of conflicts of interest and can create the
appearance of a conflict of interest. Therefore, all proposed
related person transactions are disclosed to our board of
directors before we enter into the transaction, and, if the
transaction continues for more than one year, the continuation
is reviewed annually by our board of directors.
The Company and a member of the Company’s Board of
Directors are founding and equal members of Ocular Telehealth
Management, LLC (“OTM”). OTM is a diagnostic
telemedicine company providing remote examination, diagnosis and
management of disorders affecting the human eye. OTM’s
initial focus is on the diagnosis of diabetic retinopathy by
creating access and providing annual dilated retinal
examinations for the diabetic population. Through March 31,
2010 and 2009, the Company has invested $432,400 and $393,000,
respectively in OTM, including $33,400 and $36,000 invested
during the nine-month periods ended March 31, 2010 and
2009, respectively. As of March 31, 2010, the Company owned
45% of OTM. The Company provides administrative support
functions to OTM. For the three month periods ended
March 31, 2010 and 2009 the Company recorded losses of
$20,963 and $31,336, respectively. For the nine-month periods
ended March 31, 2010 and 2009 the Company recorded losses
of $60,396 and $65,387, respectively.
Richard J. DePiano, Sr., the Company’s Chairman and
Chief Executive Officer, participated in an accounts receivable
factoring program that was implemented by the Company. Under the
program, Mr. DePiano advanced the Company $157,332 which
represented 80% of an amount due from a Drew customer in
Algeria, as of March 31, 2010 the entire amount of the
receivable remained outstanding. The receivable from Algeria,
was not eligible to be sold to the Company’s usual
factoring agent. Interest on the transaction is 1.75% per month,
which is equal to the best price offered by the Company’s
usual factoring agent. The transaction excluded fees typically
charged by the factoring agent and provided much needed
liquidity to the Company. As of the three month and nine month
periods ended March 31, 2010 Mr. DePiano earned $5,056
in interest on the transaction. On March 31, 2010 the
amount of principal and interest due to Mr. DePiano was
$162,388.
AUDIT AND
NON-AUDIT FEES
Our Audit Committee approves the fees and other significant
compensation to be paid to our independent registered public
accounting firm for the purpose of preparing or issuing an audit
report or related work. We provide appropriate funding, as
determined by our Audit Committee, for payment of fees and other
significant compensation to our independent registered public
accounting firm. Our Audit Committee also preapproves all
auditing services and permitted non-audit services, including
the fees and terms thereof, to be performed for us by our
independent registered public accounting firm. The Audit
Committee does not delegate its responsibilities to pre-approve
services performed by the independent public auditors to
management, but may delegate pre-approval authority to one or
more of its members. The member or members to whom such
authority is delegated is required to report any pre-approval
decisions to the Audit Committee at its next scheduled meeting.
Our Audit Committee reviewed and discussed with its current
independent registered public accounting firm, Mayer Hoffman
McCann, the following fees for services rendered for the 2009
fiscal year and considered the compatibility of any non-audit
services with Mayer Hoffman McCann’s independence. A
representative of the Company’s independent registered
public accounting firm, Mayer Hoffman McCann, is expected to
attend our annual meeting. A representative Mayer Hoffman
McCann, will have an opportunity to make a statement and respond
to questions at our annual meeting.
Audit Fees. Mayer Hoffman McCann, our
independent registered public accounting firm, billed us
$224,975 and $175,000 in total for the fiscal years ended
June 30, 2009 and 2008, respectively in connection with the
audit of our annual consolidated financial statements.
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Audit Related Fees. We did not pay any audit
related fees to Mayer Hoffman McCann during fiscal years ended
June 30, 2009 and 2008.
Tax Fees. We did not pay any fees to Mayer
Hoffman McCann for tax services during the fiscal years ended
June 30, 2009 and 2008.
All Other Fees. We did not pay any fees to
Mayer Hoffman McCann for all other services during the fiscal
years ended June 30, 2009 and 2008.
Report of
the Audit Committee
The following report of our Audit Committee shall not be
deemed proxy solicitation material, and shall not be deemed
filed with the SEC or incorporated by reference into any of our
filings under the Exchange Act or the Securities Act of 1933.
The Audit Committee of our Board of Directors was established in
accordance with the Exchange Act and reviews the financial
reporting process, including the overview of our financial
reports and other financial information we provide to
governmental or regulatory bodies, the public and others who
rely thereon; our systems of internal accounting and financial
controls; the selection, evaluation and retention of our
independent registered public accounting firm; and the annual
independent audit of our financial statements.
Each of our Audit Committee members satisfies the independence
requirements of the Exchange Act and Nasdaq rules and complies
with the financial literacy requirements thereof. Our Board of
Directors has determined that all members of Audit Committee,
Anthony J. Coppola, Lisa A. Napolitano and William L.G. Kwan,
satisfy the financial expertise requirements and have the
requisite experience as defined by the SEC’s rules. Our
Board of Directors adopted a written charter for our Audit
Committee on May 9, 2000 and amended such charter on
July 8, 2004. The full text of the Audit Committee Charter
as currently in effect is available on our website. Our Audit
Committee reviews and reassesses the adequacy of the charter on
an annual basis.
Our Audit Committee has reviewed our audited consolidated
financial statements and discussed those statements with
management. Our Audit Committee has also discussed with Mayer
Hoffman McCann, our independent registered public accounting
firm during fiscal 2009, the matters required to be discussed by
Statement of Auditing Standards No. 61, as amended (AICPA,
Professional Standards, Vol. 1. section 380), as adopted by
the Public Company Accounting Oversight Board in Rule 3200T.
Our Audit Committee received from Mayer Hoffman McCann and
reviewed the written disclosures required by applicable
requirements of the Public Company Accounting Oversight Board
regarding the independent accountant’s communications with
the Audit Committee concerning independence and discussed with
Mayer Hoffman McCann matters relating to its independence. Our
Audit Committee also considered the compatibility of the
provision of non-audit services by Mayer Hoffman McCann with the
maintenance of Mayer Hoffman McCann’s independence.
On the basis of these reviews and discussions, our Audit
Committee recommended to the Board of Directors that our audited
consolidated financial statements be included in our Annual
Report on
Form 10-K/A
for the fiscal year ended June 30, 2009 and be filed with
the SEC.
Submitted by:
Audit Committee
Anthony J. Coppola
William L.G. Kwan
Lisa A. Napolitano
Audit Committee
Anthony J. Coppola
William L.G. Kwan
Lisa A. Napolitano
May 12, 2010
19
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SHAREHOLDER
PROPOSALS
Any shareholder who, in accordance with and subject to the
provisions of
Rule 14a-8
of the proxy rules of the SEC, wishes to submit a proposal for
inclusion in our proxy statement for our 2010 annual meeting of
shareholders must deliver such proposal in writing to our
Secretary at our principal executive offices at 435 Devon Park
Drive, Building 100, Wayne, PA 19087 within a reasonable time
prior to printing of our proxy materials.
Pursuant to Section 2.3 of our Bylaws, if a shareholder
wishes to present at our 2010 annual meeting of shareholders
(i) a proposal relating to nominations for and election of
directors for consideration by the Governance and Nominating
Committee of our Board of Directors or (ii) a proposal
relating to a matter other than nominations for and election of
directors, otherwise than pursuant to
Rule 14a-8
of the proxy rules of the SEC, the shareholder must comply with
the provisions relating to shareholder proposals set forth in
our Bylaws, which are summarized below. Written notice of any
such proposal containing the information required under our
Bylaws, as described herein, must be delivered in person, by
first class United States mail postage prepaid or by
reputable overnight delivery service to the Governance and
Nominating Committee in care of our Secretary, for nomination
proposals only, or to the attention of our Secretary for all
other matters, at our principal executive offices at 435 Devon
Park Drive, Building 100, Wayne, PA 19087 during the period
commencing on August 1, 2010 and ending on August 31,
2011.
A written proposal of nomination for a director must set forth:
| • | the name and address of the shareholder who intends to make the nomination (the “Nominating Shareholder”); | |
| • | the name, age, business address and, if known, residence address of each person so proposed; | |
| • | the principal occupation or employment of each person so proposed for the past five years; | |
| • | the number of shares of our capital stock beneficially owned within the meaning of SEC Rule 13d-3 by each person so proposed and the earliest date of acquisition of any such capital stock; | |
| • | a description of any arrangement or understanding between each person so proposed and the Nominating Shareholder with respect to such person’s proposal for nomination and election as a director and actions to be proposed or taken by such person as a director; | |
| • | the written consent of each person so proposed to serve as a director if nominated and elected as a director; and | |
| • | such other information regarding each such person as would be required under the proxy rules of the SEC if proxies were to be solicited for the election as a director of each person so proposed. |
Only candidates nominated by shareholders for election as a
member of our Board of Directors in accordance with our Bylaw
provisions as summarized herein will be eligible for
consideration by the Governance and Nominating Committee to be
nominated for election as a member of our Board of Directors at
our 2010 annual meeting of shareholders, and any candidate not
nominated in accordance with such provisions will not be
considered or acted upon for election as a director at our 2010
annual meeting of shareholders.
A written proposal relating to a matter other than a nomination
for election as a director must set forth information regarding
the matter equivalent to the information that would be required
under the proxy rules of the SEC if proxies were solicited for
shareholder consideration of the matter at a meeting of
shareholders. Only shareholder proposals submitted in accordance
with the Bylaw provisions summarized above will be eligible for
presentation at our 2010 annual meeting of shareholders, and any
matter not submitted to our Board of Directors in accordance
with such provisions will not be considered or acted upon at our
2010 annual meeting of shareholders.
20
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OTHER
MATTERS
Our Board of Directors does not know of any matters to be
presented for consideration at our annual meeting other than the
matters described in the notice of annual meeting, but if any
matters are properly presented, proxies in the enclosed form
returned to us will be voted in accordance with the
recommendation of our Board of Directors or, in the absence of
such a recommendation, in accordance with the judgment of the
proxy holder.
By Order of the Board of Directors,
Richard J.
DePiano
Chairman and Chief Executive Officer
June 14, 2010
Wayne, Pennsylvania
21
Table of Contents
| ESCALON MEDICAL CORP. Annual Meeting of Shareholders To Be Held June 30, 2010 THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS. This Proxy is solicited on behalf of the Board of Directors. The undersigned hereby appoints Richard J. DePiano and Mark Wallace, or either of them acting alone in the absence of the other, the attorneys, agents and proxies of the undersigned, with full powers of substitution (the “Proxies”), to attend and act as proxy or proxies of the undersigned at the Annual Meeting of shareholders (the “Annual Meeting”) of Escalon Medical Corp. (the “Company”) to be held at the offices of the Company 435 Devon Park Drive, Building 100, Wayne, Pennsylvania, on June 30, 2010 at 9:00 a.m. or any adjournment or continuation thereof, and to vote as specified herein the number of shares which the undersigned, if personally present, would be entitled to vote. (Continued and to be signed on the reverse side) • |
Table of Contents
| ANNUAL MEETING OF SHAREHOLDERS OF ESCALON MEDICAL CORP. June 30, 2010 PROXY VOTING INSTRUCTIONS INTERNET — Access “www.voteproxy.com” and follow the on-screen instructions. Have your proxy card available when you access the web page, and use the Company Number and Account Number shown on your proxy card. TELEPHONE — Call toll-free 1 -800-PROXIES (1 -800-776-9437) in I I the United States or 1-718-921-8500 from foreign countries from any COMPANY NUMBER touch-tone telephone and follow the instructions. Have your proxy card available when you call and use the Company Number and ^—^^^^^^—^— Account Number shown on your proxy card. ACCOUNT NUMBER Vote online/phone until 11:59 PM EST the day before the meeting. MAIL — Sign, date and mail your proxy card in the envelope provided as soon as possible. IN PERSON — You may vote your shares in person by attending I 1 the Annual Meeting. NOTICE OF INTERNET AVAILABILITY OF PROXY MATERIAL: The Notice of meeting, proxy statement and proxy card are available at http://www.amstock.com/proxyservices/viewmaterial.asp?CoNumber=02022 f Please detach along perforated line and mail in the envelope provided ]F you are not voting via telephone or the Internet, f • SDSDDDDDDDDDDDDD1DDD 5 Dh3DlD THE BOARD OF DIRECTORS RECOMMENDS VOTING “FOR” EACH OF THE NOMINEES IN PROPOSAL 1. PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE. PLEASE MARK YOUR VOTE IN BLUE OR BLACK INK AS SHOWN HERE [x] 1. Election of Class I Directors 2 . Other Business. In their discretion, the Proxies are authorized to vote upon such other business as may come before the Annual Meeting and any and all I nominees. adjournments thereof. The Board of Directors at present knows of no other LJ for all nominees O W, ham L G. Kwan bu J siness be nted b or on beha , f of the Company or the Board of O Anthony J.Coppola Directors at the Annual Meeting. I WITHHOLD AUTHORITY I for all nominees IMPORTANT — PLEASE SIGN AND DATE BELOW AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED ENVELOPE. I FOR ALL EXCEPT (See instructions below) ’ ‘ This Proxy when properly executed will be voted as specified. If no instruction is specified with respect to a matter to be acted upon, the shares represented by the Proxy will be voted “FOR” each nominee for Class I Director. If any other business is presented at the meeting, this Proxy confers authority to and shall be voted in accordance with the recommendations of the Board of Directors. This Proxy is solicited on behalf of the Board of Directors and may be revoked prior to its exercise by filing with the Secretary of the Company a duly executed proxy bearing a later date or an instrument revoking this Proxy, or by INSTRUCTION: To withhold authority to vote for any individual nominee(s), mark “FOR ALL EXCEPT” attending the meeting and electing to vote in person. and fill in the circle next to each nominee you wish to withhold, as shown here: ^ Please mark here if you plan to attend the Annual Meeting | | To change the address on your account, please check the box at right and indicate your new address in the address space above. Please note that changes to the registered name(s) on the account may not be submitted via I 1 this method. Signature of Shareholder | |Date: Signature of Shareholder | |Date: ^PXjlj&SiO^lSasPS^i exactly as your name or names appear on this Proxy. When shares are held jointly, each holder should sign. When signing as executor, administrator, attorney, trustee or guardian, please give f ull ^^ ^H title as such. If the signer is a corporation, please sign full corporate name by duly authorized officer, giving full title as such. If signer is a partnership, please sign in partnership name by authorized person. |
Table of Contents
| ANNUAL MEETING OF SHAREHOLDERS OF ESCALON MEDICAL CORP. June 30, 2010 NOTICE OF INTERNET AVAILABILITY OF PROXY MATERIAL: The Notice of Meeting, Proxy Statement, Proxy Card are available at http://www.amstock.com/proxyservices/viewmaterial.asp?CoNumber=02022 Please sign, date and mail your proxy card in the envelope provided as soon as possible. 7 Please detach along perforated line and mail in the envelope provided, f • SDSDDDDDDDDDDDDD1DDD 5 Dh3DlD THE BOARD OF DIRECTORS RECOMMENDS VOTING “FOR” EACH OF THE NOMINEES IN PROPOSAL 1. PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE. PLEASE MARK YOUR VOTE IN BLUE OR BLACK INK AS SHOWN HERE [x] 1. Election of Class I Directors 2 . Other Business. In their discretion, the Proxies are authorized to vote upon such other business as may come before the Annual Meeting and any and all I ^-*. lAi-M- i /^ i/ adjournments thereof. The Board of Directors at present knows of no other LJ for all nominees O W, ham L G. Kwan bu J siness be nted b or on bena , f of the Company or the Board of O Anthony J.Coppola Directors at the Annual Meeting. I WITHHOLD AUTHORITY I for all nominees IMPORTANT — PLEASE SIGN AND DATE BELOW AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED ENVELOPE. I FOR ALL EXCEPT (See instructions below) ’ ‘ This Proxy when properly executed will be voted as specified. If no instruction is specified with respect to a matter to be acted upon, the shares represented by the Proxy will be voted “FOR” each nominee for Class I Director. If any other business is presented at the meeting, this Proxy confers authority to and shall be voted in accordance with the recommendations of the Board of Directors. This Proxy is solicited on behalf of the Board of Directors and may be revoked prior to its exercise by filing with the Secretary of the Company a duly executed proxy bearing a later date or an instrument revoking this Proxy, or by INSTRUCTION: To withhold authority to vote for any individual nominee(s), mark “FOR ALL EXCEPT” attending the meeting and electing to vote in person. and fill in the circle next to each nominee you wish to withhold, as shown here: ^ Please mark here if you plan to attend the Annual Meeting | | To change the address on your account, please check the box at right and indicate your new address in the address space above. Please note that changes to the registered name(s) on the account may not be submitted via I 1 this method. Signature of Shareholder Date: Signature of Shareholder Date: PXfJt^}£02IS3£&E& < i exactly as your name or names appear on this Proxy. When shares are held jointly, each holder should sign. When signing as executor, administrator, attorney, trustee or guardian, please give full ^H title as such. If the signer is a corporation, please sign full corporate name by duly authorized officer, giving full title as such. If signer is a partnership, please sign in partnership name by authorized person. 14475 • |
TABLE OF CONTENTS
ABOUT OUR ANNUAL MEETINGWhat is the purpose of our annual meeting?VOTINGWho is entitled to vote at our meeting?What are the voting rights of our shareholders?Who can attend our annual meeting?What constitutes a quorum?How do I vote?May I change my vote after I return my proxy card?What are our Boards recommendations?What vote is required to approve each matter?Who will pay the costs of soliciting proxies on behalf of our Board of Directors?STOCK OWNERSHIPSECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCEELECTION OF DIRECTORSITEM 1 ELECTION OF CLASS I DIRECTORSIntroduction.Governance and Nominating ProceduresActions Taken by Our Governance and Nominating CommitteeCandidates for ElectionDirectors Continuing in OfficeCORPORATE GOVERNANCE.Our Board of Directors and Its CommitteesAudit CommitteeGovernance and Nominating CommitteeCompensation CommitteeDirector Shareholder CommunicationEXECUTIVE OFFICERS OF THE COMPANYEXECUTIVE COMPENSATIONCompensation Discussion and AnalysisIntroductionOur Compensation Philosophy and ObjectivesThe Compensation of Our OfficersThe Operation of Our Compensation Process