def14a
UNITED STATES
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. )
Filed by
the Registrant þ
Filed by a Party other than the Registrant o
Check the appropriate box:
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Preliminary Proxy Statement |
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Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) |
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Definitive Proxy Statement |
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Soliciting Material Pursuant to §240.14a-12 |
Escalon Medical Corp.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
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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
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Escalon Medical Corp.
435 Devon Park Drive, Building 100
Wayne, PA 19087
Tel.610-688-6830 Fax. 610-688-3641
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Notice of
Annual Meeting of Shareholders
To Be Held June 30, 2011
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, 2011, at
the offices of the Company, 435 Devon Park Drive, Building 100,
Wayne, PA 19087. At our annual meeting, our shareholders will
act on the following matters:
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1.
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Election of two Class II directors, each for a term of
three years and until their respective successors have been
elected to serve;
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2.
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To ratify the selection of Mayer Hoffman McCann P.C. as the
Companys independent registered public accounting firm for
the fiscal year ending June 30, 2011; and
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3.
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Any other matters that properly come before our annual meeting.
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All shareholders of record as of the close of business on
May 16, 2011 are entitled to vote at our annual meeting.
We have included our 2010 Annual Report to Shareholders with
this Notice and accompanying proxy statement.
The rules of the Securities and Exchange Commission allow us to
furnish proxy materials to our shareholders on the Internet. We
believe that this process allows us to provide you with the
information you need while lowering the costs associated with
the annual meeting. You are cordially invited to attend the
annual meeting in person. However, to ensure that your vote is
counted at the annual meeting, please vote as promptly as
possible. If you want to receive a paper or
e-mail copy
of these documents, you must request one. There is NO charge for
requesting a copy. Please choose one of the following methods to
make your request:
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1)
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BY INTERNET: www.proxyvote.com
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2)
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BY TELEPHONE:
1-800-579-1639
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3)
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BY
E-MAIL*:
sendmaterial@proxyvote.com
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By Order of the Board of Directors,
Richard J. DePiano
Chairman and Chief Executive Officer
May 20, 2011
Wayne, Pennsylvania
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY
MATERIALS FOR THE ANNUAL MEETING OF SHAREHOLDERS TO BE HELD JUNE
30, 2011
THE ESCALON MEDICAL CORP. PROXY STATEMENT AND 2010 ANNUAL
REPORT TO SHAREHOLDERS ARE AVAILABLE AT WWW.PROXYVOTE.COM.
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, 2011, 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
May 20, 2011. 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.
Questions
and Answers Regarding the Proxy Statement and Annual
Meeting
Why did I
receive a notice in the mail regarding the Internet availability
of proxy materials instead of a full set of proxy
materials?
Pursuant to rules adopted by the Securities and Exchange
Commission, or the SEC, we have elected to provide access to our
proxy materials over the Internet or, upon your request, have
delivered a printed version to you by mail. These materials are
being provided in connection with our solicitation of proxies
for use at the annual meeting of shareholders, to be held on
June 30, 2011 at 9:00 a.m. local time or at any
adjournment or postponement thereof. Accordingly, we sent a
Notice of Internet Availability of Proxy Materials (the
Notice) on or about May 20, 2011 to the Company
shareholders entitled to notice of and to vote at the meeting.
All shareholders will have the ability to access the proxy
materials on the web site referred to in the Notice or to
request to receive a printed set of the proxy materials.
Instructions on how to access the proxy materials over the
Internet or to request a printed copy may be found in the
Notice. In addition, shareholders may request to receive proxy
materials in printed form by mail or electronically by email on
an ongoing basis. The Company encourages shareholders to take
advantage of the availability of the proxy materials on the
Internet.
You are invited to attend the annual meeting and are requested
to vote on the proposals described in this proxy statement. The
annual meeting will be held at the corporate headquarters
located at 435 Devon Park Drive, Building 100, Wayne, PA 19087.
How can I
obtain electronic access to the proxy materials?
The Notice will provide you with instructions regarding how to:
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view our proxy materials for the annual meeting on the
Internet; and
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instruct us to send future proxy materials to you electronically
by email.
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The Company proxy materials are also available at
www.proxyvote.com.
With respect to future annual meetings of shareholders, if you
previously elected to access your proxy materials over the
Internet, you will not receive a Notice or printed proxy
materials in the mail. Instead you will receive an email with a
link to the proxy materials and voting instructions.
Choosing to receive future proxy materials by email will save us
the cost of printing and mailing documents to you thereby
lowering the costs associated with the annual meeting. If you
choose to receive future proxy materials by email, you will
receive an email message next year with instructions containing
a link to those materials and a link to the proxy voting web
site. Your election to receive proxy materials by email will
remain in effect until you terminate it.
i
CONTENTS
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Grants of Plan Based Awards
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iii
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 II
directors, ratification of Mayer Hoffman McCann P.C. as our
independent registered public accounting firm for the fiscal
year ending June 30, 2011 and any other matters that
properly come before our annual meeting. In addition, our
management will report on our performance during fiscal 2010 and
the latest interim period 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, May 16, 2011, 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, 7,526,430 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?
You may vote using any of the following methods:
By Internet or telephone
If you are a shareholder of record, you will need the control
number included on the Notice to access the proxy statement and
annual report. Follow the instructions in the Notice to vote
your shares electronically on the Internet, or by calling the
toll-free number referenced in the materials available on the
Internet.
If you are a beneficial owner of shares, you may vote your
shares electronically on the Internet by following the
instructions sent to you by your broker, bank or other holder of
record, or by calling the toll-free number referenced in the
materials available on the Internet.
1
By mail
If you are a shareholder of record, request from us, by
following the instructions on the Notice, printed copies of the
proxy statement and annual report, which will include a proxy
card. If you are a beneficial owner of shares, follow the
instructions from your broker, bank or other holder of record to
request copies of the proxy statement and annual report, which
will include a voting instruction form. Be sure to complete,
sign and date the proxy card or voting instruction form and
return it in the prepaid envelope.
In person at the annual meeting
All shareholders of record may vote in person at the annual
meeting. You can request a ballot at the meeting. You may also
be represented by another person at the annual meeting by
executing a proper proxy designating that person. If you are a
beneficial owner of shares, you must obtain a legal proxy from
your broker, bank or other holder of record and present it to
the inspector of election with your ballot to be able to vote at
the annual meeting.
Internet and telephone voting facilities for shareholders of
record will be available 24 hours a day, and will close at
11:59 p.m. Eastern Time on June 29, 2011. The
availability of Internet and telephone voting for beneficial
owners will depend on the voting processes of your broker, bank
or other holder of record. We therefore recommend that you
follow the voting instructions in the materials provided to you
by your broker, bank or other holder of record. If you vote on
the Internet or by telephone, you do not have to return a proxy
card or voting instruction form. If you are located outside the
U.S. please use the Internet or mail voting methods. Your
vote is important. Your timely response can save us the expense
of attempting to contact you again.
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.
What
are our Boards 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:
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FOR election of our nominees for Class II directors (see
pages 4 through 8); and
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FOR ratification of Mayer Hoffman McCann P.C. as our independent
registered public accounting firm for the fiscal year ending
June 30, 2011.
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What
vote is required to approve each matter?
Election of Class II Directors. The two
persons receiving the highest number of FOR votes
cast by the holders of our common stock for election as
Class II 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 of Class II directors. We do not permit cumulative
voting in the election of directors.
Ratification of Auditors. The affirmative vote
of a majority of the votes cast by the holders of shares of our
common stock at the annual meeting will be required for the
ratification of the selection of our independent
2
registered public accounting firm for the fiscal year ending
June 30, 2011. Abstentions and broker non-votes do not
constitute votes cast and therefore will not affect the outcome
of the vote.
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 of Directors,
i.e., FOR the election of our nominees for Class II
directors and FOR the ratification of Mayer Hoffman McCann P.C.
as our independent registered public accounting firm for the
fiscal year ending June 30, 2011.
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 of any mailing this proxy
statement. 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.
3
STOCK
OWNERSHIP
Security
Ownership of Certain Beneficial Owners and Management
The following table indicates, as of May 16, 2011, information
about the beneficial ownership of our common stock by
(1) each director as of May 16, 2011, (2) each
Named Executive Officer, (3) all directors and executive
officers as of May 16, 2011 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.
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Outstanding
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Percent
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Underlying
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Beneficial
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Percent of
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Name
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Shares(1)
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of Class
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Options
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Ownership
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Class
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Richard J. DePiano
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144,278
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1.9
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%
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306,897
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451,175
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5.9
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%
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Richard J. DePiano, Jr.
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206
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0.0
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%
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112,367
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112,573
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1.4
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Robert M. OConnor
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0.0
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%
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114,000
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114,000
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1.5
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Mark G. Wallace
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0.0
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%
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57,467
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57,467
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*
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William L.G. Kwan
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0.0
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%
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80,000
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80,000
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1.2
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Jay L. Federman
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12,072
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0.2
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75,000
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87,072
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1.4
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Anthony J. Coppola
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0.0
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%
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55,000
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55,000
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Lisa A. Napolitano
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0.0
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%
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52,000
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52,000
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Fred G. Choate
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0.0
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%
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40,000
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40,000
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*
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All Directors and Executive Officers
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as a group (9 persons)
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156,556
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2.4
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%
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892,731
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1,049,287
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13.9
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%
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(*) |
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Less than one percent |
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Information furnished by each individual named. This table
includes shares that are owned jointly, in whole or in part with
the persons 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, or
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 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 2010, we believe all such filings
required during the fiscal 2010 were made on a timely basis.
4
ELECTION
OF 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 follows 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,
or 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 candidates
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:
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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.
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Consideration of the suitability of the candidates for election,
including incumbent directors.
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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.
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After such review and consideration, propose to the Board of
Directors a slate of candidates for election at the forthcoming
annual meeting of shareholders.
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Actions
Taken by Our Governance and Nominating Committee
Our Governance and Nominating Committee met once in fiscal 2010,
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 2010 Annual
Meeting. The Board of Directors met on May 11, 2011 for the
purpose of nominating candidates for election as directors by
our shareholders at our annual meeting of shareholders 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. 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.
5
Two Class II 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 II nominees currently
serve as members of our Board of Directors.
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 II directors and names
of the Class I 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:
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Nominees for
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Class II
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Director
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Year Term
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Principal Occupation During Past Five
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Name of Director
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Since
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Will Expire
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Age
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Years and Certain Directorships
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Lisa A. Napolitano
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2003
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2013*
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46
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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. Napolotanos financial, operational
and regulatory experience qualifies her to serve as a member of
our Board and our Audit Committee.
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Fred G. Choate
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2005
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2013*
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63
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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. Choates 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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* |
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If elected at the Annual Meeting. |
6
Directors
Continuing in Office
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Class I
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Director
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Year Term
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Principal Occupation During Past Five
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Name of Director
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Since
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Will Expire
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Age
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Years and Certain Directorships
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William L.G. Kwan
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1999
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2012
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69
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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. Kwans
executive and leadership experience in the Ophthalmology
business provides him with a valuable perspective from which to
contribute to the Board, as it oversees our Ophthalmology
operations. We believe that Mr. Kwans executive,
operational and financial experience qualifies him to serve as a
member of our Board and our Audit Committee.
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Anthony J. Coppola
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2000
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2012
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73
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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. Coppolas
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. Coppolas
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. Coppolas executive,
operational and financial experience qualifies him to serve as a
member of our Board and the Chairman of our Audit Committee.
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Class III
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Director
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Year Term
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Principal Occupation During Past Five
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Name of Director
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Since
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Will Expire
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Age
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Years and Certain Directorships
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Richard J. DePiano
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1996
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2011
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69
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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.
DePianos lengthy and significant experience with us,
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.
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7
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Class III
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Director
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Year Term
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Principal Occupation During Past Five
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Name of Director
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Since
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Will Expire
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Age
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Years and Certain Directorships
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Jay L. Federman, M.D.
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1996
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2011
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71
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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. Federmans 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 our Ophthalmology operations. We
believe that Dr. Federmans lengthy experience with
us, his practical, operational and medical experience qualifies
him to serve as a member of our Board.
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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. Any amendment to our Code of Ethics will
be reported on our web site and, to the extent required, in a
Form 8-K
current report filed with the SEC. 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
us 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 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 Boards 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 our financial statements and CEO
and senior management compensation is entrusted to independent
directors. The Board retains the right to review this
determination as facts and circumstances change.
8
Our Board
of Directors and Its Committees
Our Board of Directors met four times in fiscal 2010. Our Board
of Directors has an Executive Committee, an Audit Committee, a
Governance and Nominating Committee and a Compensation
Committee. Each of our directors attended 75% or more of the
meetings of our Board of Directors and committees of our Board
on which that director serves.
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 2010. 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:
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the selection of our independent registered public accounting
firm;
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reviewing the scope and results of the audit;
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reviewing related-party transactions; and
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reviewing the adequacy of our accounting, financial, internal
and operating controls.
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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. The Committee
met once in fiscal 2010. 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:
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developing and recommending to the Board corporate governance
guidelines, establishing procedures to ensure effective
functioning of the Board;
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reviewing of director compensation;
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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
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Identifying members of our Board of Directors qualified to serve
on the various committees of our Board of Directors.
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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 2010. 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:
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the annual review and determination of the compensation of our
executive officers;
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providing annual compensation recommendations to our Board of
Directors for all of our officers;
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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
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the general oversight of our employee benefit plans.
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9
Our Compensation Committee operates pursuant to a written
charter, the full text of which is available on our website. Our
Compensation Committees 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 2009 annual meeting
of shareholders held in 2010 and intend to be in attendance at
our 2010 annual meeting.
EXECUTIVE
OFFICERS OF THE COMPANY
Our executive officers are as follows:
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Name
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Age
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Position
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Richard J. DePiano
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69
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Chairman and Chief Executive Officer
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Richard J. DePiano, Jr.
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44
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President and General Counsel
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Mark G. Wallace
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41
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Chief Operating Officer
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Robert M. OConnor
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49
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Chief Financial Officer
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Mr. DePiano has been a director since February 1996 and has
served as our 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 our Chief Operating
Officer and General Counsel December 28, 2006.
Mr. DePiano, Jr. joined us in November of 2000 as Vice
President Corporate and Legal Affairs. Prior to joining us,
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. OConnor was appointed our Chief Financial Officer
on June 30, 2006. Mr. OConnor joined us 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 the middle market
10
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. OConnor
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
Our Compensation Committee is responsible for reviewing and
approving the annual compensation of our executive officers and
our nonemployee directors.
Our Compensation Committee is composed solely of directors who
are not our current or former employees, and each is independent
under the current listing standards of Nasdaq. The Board of
Directors has delegated to our Compensation Committee the
responsibility to review and approve our compensation and
benefits plans, programs and policies, including the
compensation of the chief executive officer and our other
executive officers as well as middle-level management and other
key employees. The Compensation Committee administers all of our
executive compensation programs, incentive compensation plans
and equity-based plans and provides oversight for all of our
other compensation and benefit programs.
The key components of the compensation program for executive
officers are base salary, bonus and long-term incentives in the
form of stock options. These components are administered with
the goal of providing total compensation that is competitive in
the marketplace, recognizes meaningful differences in individual
performance and offers the opportunity to earn superior rewards
when merited by individual and corporate performance.
Objectives
of Compensation Program
Our Compensation Committee intends to govern and administer
compensation plans to support the achievement of our long-term
strategic objectives, to enhance shareholder value, to attract,
motivate and retain highly qualified employees by paying them
competitively and rewarding them for their own and our success.
We have no retirement plans or deferred compensation programs in
effect for our non-employee directors except for our 401(k) plan
in which the executive officers are eligible to participate and
our executive officers and our Supplemental Executive Retirement
and Benefit Agreement with Richard J. DePiano, our Chairman and
Chief Executive Officer. Compensation is generally paid as
earned. We do not have an exact formula for allocating between
cash and non-cash compensation, which has been in the form of
stock options. We do not have a nonequity incentive plan, as
that term is used in the FASB issued authoritative guidance
related to share based payments.
To the extent consistent with the foregoing objectives, our
compensation committee also intends to maximize the
deductibility of compensation for tax purposes. The committee
may, however, decide to exceed the tax deductible limits
established under Section 162(m) of the Internal Revenue
Code, of 1986, as amended, or the Code, when such a decision
appears to be warranted based upon competitive and other factors.
What
Our Compensation Program Is Designed to Reward
The key components of the compensation program for executive
officers are base salary, bonus and long-term incentives in the
form of stock options. These components are administered with
the goal of providing total compensation that is competitive in
the marketplace, recognizes meaningful differences in individual
performance and offers the opportunity to earn superior rewards
when merited by individual and corporate performance.
Stock price performance has not been a factor in determining
annual compensation insofar as the price of our common stock is
subject to a number of factors outside our control. We have
endeavored through the grants of stock options to the executive
officers to incentivize individual and team performance,
providing a meaningful stake in us and linking them to a stake
in our overall success.
11
Elements
of Our Compensation Plan and How Each Element Relates to
Objectives
There are three primary elements in the compensation package of
our executive officers: base salary, bonus and long-term
incentives.
Base
Salaries
Base salaries for our executive officers are designed to provide
a base pay opportunity that is appropriately competitive within
the marketplace. Adjustments to each individuals base
salary are made in connection with annual performance reviews in
addition to the assessment of market competitiveness.
Bonus
Our Compensation Committee establishes a bonus program for
executive officers and other managers and key employees eligible
to participate in the program. The program is based on a
financial plan for the fiscal year and other business factors.
The amount of bonus, if any, hinges on corporate profitability
and our overall cash position, and on the performance of the
participant in the program. Provision for bonus expense is
typically made over the course of a fiscal year. The provision
becomes fixed, based on the final review of the Compensation
Committee, which is usually made after the financial results of
the fiscal year have been reviewed by our independent
accountants. For fiscal 2010, there were two factors that
determined executive bonuses, our profitability and a
discretionary component. Profitability is the dominant factor
under the bonus plan. For the year ended June 30, 2010,
Mr. DePiano, Mr. DePiano, Jr. Mr. Wallace
and Mr. OConnor did not receive a bonus due to net
loss incurred during this period.
Long-Term
Incentives
Grants of stock options under our stock option plans are
designed to provide executive officers and other managers and
key employees with an opportunity to share, along with
shareholders, in our long-term performance. Stock option grants
are generally made annually to all executive officers, with
additional grants being made following a significant change in
job responsibility, scope or title or a significant achievement.
The size of the option grant to each executive officer is set by
the Compensation Committee at a level that is intended to create
a meaningful opportunity for stock ownership based upon the
individuals current position with us, the
individuals personal performance in recent periods and his
or her potential for future responsibility and promotion over
the option term. The Compensation Committee also takes into
account the number of unvested options held by the executive
officer in order to maintain an appropriate level of equity
incentive for that individual. The relevant weight given to each
of these factors varies from individual to individual.
Stock options granted under the various stock option plans
generally have had a five-year vesting schedule and generally
have been set to expire ten years from the date of grant. The
exercise price of options granted under the stock option plans
is at no less than 100% of the fair market value of the
underlying stock on the date of grant. The number of stock
options granted to each executive officer is determined by the
Compensation Committee based upon several factors, including the
executive officers salary, performance and the estimated
value of the stock at the time of grant, but the Compensation
Committee has the flexibility to make adjustments to those
factors in its discretion.
How
Amounts Were Selected for Each Element of an Executives
Compensation
Each executives current and prior compensation is
considered in setting future compensation. Base salary and the
long-term incentives are not set with reference to a formula.
A target bonus, or portion thereof, is earned, based on
fulfillment of conditions, paramount of which is our
profitability.
As a general rule option awards are made in the first or second
quarter of a year and after the financial results for the prior
year have been audited and reported to the board of directors.
Grants and awards are valued, and exercise prices are set, as of
the date the grant or award is made. Exceptions to the general
rule may arise for grants made to recognize a promotion or to
address the effect of expiring options.
12
The Compensation Committee has considered whether our overall
compensation program for employees in fiscal 2010 creates
incentives for employees to take excessive or unreasonable risks
that could materially harm the Company. We believe that several
features of our compensation policies for management employees
appropriately mitigate such risks, including a mix of long- and
short-term compensation incentives that we believe is properly
weighted, the uniformity of compensation practices across our
Company, as a baseline for bonus plan targets for our management.
Accounting
and Tax Considerations
On July 1, 2007, we adopted in the FASB issued
authoritative guidance related to share based payments. Under
this accounting standard, we are required to value stock options
granted in fiscal year 2007 and in subsequent fiscal years under
the fair value method and expense those amounts in the income
statement over the vesting period of the stock option. We were
also required to value unvested stock options granted prior to
our adoption of the FASB issued authoritative guidance related
to share based payments under the fair value method and amortize
such expense in the income statement over the stock
options remaining vesting period. A material portion of
such amortizing expense relates to option grants made to our
executive officers.
Under Section 162(m) of the Code, a limitation was placed
on tax deductions of any publicly-held corporation for
individual compensation to certain executives of such
corporation exceeding $1,000,000 in any taxable year, unless the
compensation is performance-based. The compensation committee
has been advised that based upon prior shareholder approval of
the material terms of our stock option plans, compensation under
these plans is excluded from this limitation, provided that the
other requirements of Section 162(m) are met. However, when
warranted based upon competitive and other factors, the
compensation committee may decide to exceed the tax deductible
limits established under Section 162(m) Code. The base
salary provided to each executive in 2008, 2009 and 2010 did not
exceed the limits under Section 162(m) for tax
deductibility; no executive exercised any options in 2008, 2009
or 2010.
Overview
of Executive Employment Agreements
On May 12, 1998, we entered into an employment agreement
with Richard J. DePiano, our Chairman and Chief Executive
Officer. 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 partys determination not to renew the agreement.
The current base salary provided under the agreement, as
adjusted for yearly cost of living adjustments, is $313,303 per
year, and the agreement provides for additional incentive
compensation in the form of a cash bonus to be paid to
Mr. DePiano at the discretion of our Board of Directors.
The agreement also provides for health and long-term disability
insurance and other fringe benefits as well as an automobile
allowance.
On June 23, 2005, we 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 us under the following
circumstances:
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If Mr. DePiano retires, we are obligated to pay
Mr. DePiano $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 after such retirement, we
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.
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If Mr. DePiano dies before his retirement, while employed
by us, we would be obligated to make 36 monthly payments to
his beneficiaries of $8,000 per month commencing in the month
after his death.
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If Mr. DePiano were to become permanently disabled while
employed by us, we would be obligated to pay him $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, we would be
obligated to continue making such payments until a minimum of
36 monthly payments have been made to Mr. DePiano and
his beneficiaries in the aggregate.
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13
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If Mr. DePianos employment with is terminated by us,
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.
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During the fourth quarter of fiscal 2005, we recorded as an
expense in our consolidated statement of income, $1,027,821,
which represents the present value of the supplemental
retirement benefits awarded.
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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, 2010, 2009 and 2008 (the Named
Executive Officers).
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|
|
|
Stock
|
|
|
Option
|
|
|
Incentive Plan
|
|
|
Compensation
|
|
|
All Other
|
|
|
|
|
Principal Position
|
|
Year
|
|
|
Salary
|
|
|
Bonus
|
|
|
Awards
|
|
|
Awards(1)
|
|
|
Compensation
|
|
|
Earnings
|
|
|
Compensation(2)
|
|
|
Total
|
|
|
Richard J. DePiano
|
|
|
2010
|
|
|
$
|
313,303
|
|
|
$
|
|
|
|
|
|
|
|
$
|
38,580
|
|
|
|
|
|
|
|
|
|
|
$
|
22,233
|
|
|
$
|
374,116
|
|
Chairman and Chief
|
|
|
2009
|
|
|
$
|
349,319
|
|
|
$
|
|
|
|
|
|
|
|
$
|
51,856
|
|
|
|
|
|
|
|
|
|
|
$
|
20,040
|
|
|
$
|
421,215
|
|
Executive Officer
|
|
|
2008
|
|
|
$
|
336,343
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
57,653
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
9,600
|
|
|
$
|
403,596
|
|
Richard J. DePiano, Jr.
|
|
|
2010
|
|
|
$
|
167,670
|
|
|
$
|
|
|
|
|
|
|
|
$
|
27,301
|
|
|
|
|
|
|
|
|
|
|
$
|
9,600
|
|
|
$
|
204,571
|
|
President and
|
|
|
2009
|
|
|
$
|
191,407
|
|
|
$
|
|
|
|
|
|
|
|
$
|
16,592
|
|
|
|
|
|
|
|
|
|
|
$
|
9,600
|
|
|
$
|
217,599
|
|
General Counsel
|
|
|
2008
|
|
|
$
|
180,000
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
18,448
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
9,600
|
|
|
$
|
208,048
|
|
Robert M. OConnor
|
|
|
2010
|
|
|
$
|
191,330
|
|
|
$
|
|
|
|
|
|
|
|
$
|
19,247
|
|
|
|
|
|
|
|
|
|
|
$
|
9,600
|
|
|
$
|
220,177
|
|
Chief Financial Officer
|
|
|
2009
|
|
|
$
|
217,062
|
|
|
$
|
|
|
|
|
|
|
|
$
|
16,592
|
|
|
|
|
|
|
|
|
|
|
$
|
9,600
|
|
|
$
|
243,254
|
|
|
|
|
2008
|
|
|
$
|
205,400
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
8,547
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
9,600
|
|
|
$
|
223,547
|
|
Mark G. Wallace
|
|
|
2010
|
|
|
$
|
147,150
|
|
|
$
|
|
|
|
|
|
|
|
$
|
11,267
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
158,417
|
|
Chief Operating Officer
|
|
|
2009
|
|
|
$
|
161,004
|
|
|
$
|
|
|
|
|
|
|
|
$
|
4,428
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
165,432
|
|
|
|
|
2008
|
|
|
$
|
93,246
|
|
|
$
|
60,000
|
|
|
$
|
|
|
|
$
|
2,849
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
156,095
|
|
|
|
|
(1) |
|
Represents the dollar amount recognized for financial statement
reporting purposes for the fiscal year ended June 30, 2010,
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 2010. The options
granted to Mr. DePiano, Sr. vest over a two-year period;
options granted to Mr. DePiano, Jr., Mr. OConnor
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, 2010. |
|
(2) |
|
Includes payment of an automobile allowance and insurance
premiums paid for life insurance. |
Grants of
Plan Based Awards
The following table sets forth certain information regarding
plan-based awards granted during the fiscal year ended
June 30, 2010.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
|
|
|
11/16/2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20,000
|
|
|
$
|
1.51
|
|
|
$
|
23,971
|
|
Richard J. DePiano, Jr.
|
|
|
11/16/2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12,000
|
|
|
$
|
1.51
|
|
|
$
|
14,382
|
|
Robert M. OConnor
|
|
|
11/16/2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
14,000
|
|
|
$
|
1.51
|
|
|
$
|
16,780
|
|
Mark G. Wallace
|
|
|
11/16/2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,000
|
|
|
$
|
1.51
|
|
|
$
|
11,985
|
|
14
|
|
|
(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 2010. The options granted to
Mr. DePiano, Sr. vest over a two-year period; options
granted to Mr. DePiano, Jr., Mr. OConnor 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, 2010. |
Outstanding
Equity Plan Based Awards at Fiscal Year-End
2010
The following table sets forth certain information regarding
grants of equity awards held by the named executive officers as
of June 30, 2010.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
|
|
|
|
|
Equity
|
|
|
|
|
|
|
|
|
|
|
Incentive
|
|
|
|
|
|
|
|
|
|
|
Plan Awards:
|
|
|
|
|
|
|
Number of
|
|
Number of
|
|
Number of
|
|
|
|
|
|
|
Securities
|
|
Securities
|
|
Securities
|
|
|
|
|
|
|
Underlying
|
|
Underlying
|
|
Underlying
|
|
|
|
|
|
|
Unexercised
|
|
Unexercised
|
|
Unexercised
|
|
Option
|
|
Option
|
|
|
Options
|
|
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
|
|
|
|
|
25,000
|
|
|
|
|
|
|
|
|
|
|
$
|
3.05
|
|
|
|
11/13/2017
|
|
|
|
|
22,917
|
|
|
|
2,083
|
|
|
|
2,083
|
|
|
$
|
2.22
|
|
|
|
9/26/2018
|
|
|
|
|
6,667
|
|
|
|
13,333
|
|
|
|
13,333
|
|
|
$
|
1.51
|
|
|
|
11/16/2019
|
|
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
|
|
|
|
|
14,666
|
|
|
|
5,334
|
|
|
|
5,334
|
|
|
$
|
2.65
|
|
|
|
11/9/2016
|
|
|
|
|
10,666
|
|
|
|
9,334
|
|
|
|
9,334
|
|
|
$
|
3.05
|
|
|
|
11/13/2017
|
|
|
|
|
7,000
|
|
|
|
13,000
|
|
|
|
13,000
|
|
|
$
|
2.22
|
|
|
|
9/26/2018
|
|
|
|
|
1,600
|
|
|
|
10,400
|
|
|
|
10,400
|
|
|
$
|
1.51
|
|
|
|
11/16/2019
|
|
Robert M. OConnor
|
|
|
60,000
|
|
|
|
|
|
|
|
|
|
|
$
|
5.05
|
|
|
|
6/29/2016
|
|
|
|
|
10,334
|
|
|
|
9,334
|
|
|
|
9,334
|
|
|
$
|
3.05
|
|
|
|
11/13/2017
|
|
|
|
|
7,000
|
|
|
|
13,000
|
|
|
|
13,000
|
|
|
$
|
2.22
|
|
|
|
9/26/2018
|
|
|
|
|
1,867
|
|
|
|
12,133
|
|
|
|
12,133
|
|
|
$
|
1.51
|
|
|
|
11/16/2019
|
|
Mark G. Wallace
|
|
|
2,666
|
|
|
|
2,334
|
|
|
|
2,334
|
|
|
$
|
3.05
|
|
|
|
11/13/2017
|
|
|
|
|
7,000
|
|
|
|
13,000
|
|
|
|
13,000
|
|
|
|
2.22
|
|
|
|
9/26/2018
|
|
|
|
|
1,333
|
|
|
|
8,667
|
|
|
|
8,667
|
|
|
|
1.51
|
|
|
|
11/16/2019
|
|
|
|
|
(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. OConnor and
Mr. Wallace vest over a five-year period. No options were
exercised by the named executives during the fiscal year ended
June 30, 2010. |
15
Potential
Payments upon Termination or
Change-in-Control
If Mr. DePianos 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. OConnor, 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.
If a change of control had occurred on June 30, 2010, the
aggregate amount of payments would have been $288,000 to
Mr. DePiano and $250,000 to Mr. OConnor.
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
|
|
|
849,438
|
|
|
$
|
2.21
|
|
|
|
129,575
|
|
Equity Compensation plans not approved by stockholders
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
849,438
|
|
|
$
|
2.21
|
|
|
|
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 or the Exchange Act, except to the extent
that we specifically incorporate this Compensation Committee
report by reference therein.
We have reviewed and discussed with management the Compensation
Discussion and Analysis to be included in our
Form 10-K
for the year ended June 30, 2010. Based on the reviews and
discussions referred to above, we recommend to our Board of
Directors that the Compensation Discussion and Analysis referred
to above be included in our
Form 10-K
for the year ended June 30, 2010.
Compensation Committee:
Anthony J. Coppola
Fred G. Choate
Lisa A. Napolitano
October 26, 2010
16
COMPENSATION
OF DIRECTORS
None of our directors were paid any directors fees by us during
the fiscal year ended June 30, 2010. Directors are
reimbursed for expenses incurred in connection with attending
meetings of the Board and Board Committees.
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 Audit Committee
and 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.
We and a member of the our Board of Directors, Jay L. Federman,
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. OTMs initial solution
focuses on the diagnosis of diabetic retinopathy by creating
access and providing annual dilated retinal examinations for the
diabetic population. OTM was founded to harness the latest
advances in telecommunications, software and digital imaging in
order to create greater access and a more successful disease
management for populations that are susceptible to ocular
disease. Through June 30, 2010, we had invested $399,000 in
OTM and owned 45% of OTM. We will provide administrative support
functions to OTM. For the year ended June 30, 2010, OTM
recorded losses of $74,911.
Richard J. DePiano, Sr., our Chief Executive Officer.,
participated in an accounts receivable factoring program that we
implemented. Under the program, Mr. DePiano advanced to us
$157,332 which represented 80% of an amount due from a Drew
customer in Algeria, as of June 30, 2010 the entire amount
of the receivable has been collected. The receivable from
Algeria, was not eligible to be sold to our usual factoring
agent. Interest on the transaction is 1.75% per month, which is
equal to the best price offered by our usual factoring agent.
The transaction excluded fees typically charged by the factoring
agent and provided much needed liquidity to us. Mr. DePiano
was paid back in full and was paid $6,351 in interest on the
transaction during the year ended June 30, 2010.
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 P.C. , the following fees for services rendered for the
2010 fiscal year and considered the compatibility of any
non-audit services with Mayer Hoffman McCann P.C.s
independence. A representative of the Companys independent
registered public accounting firm, Mayer Hoffman McCann P.C., is
expected to attend our annual meeting. A representative Mayer
Hoffman McCann P.C., will have an opportunity to make a
statement and respond to questions at our annual meeting.
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Audit Fees. Mayer Hoffman McCann, our
independent registered public accounting firm, billed us
$158,026 and $224,975 in total for the fiscal years ended June
30, 2010 and 2009, respectively in connection with the audit of
our annual consolidated financial statements.
Audit Related Fees. We did not pay any audit
related fees to Mayer Hoffman McCann P.C. during fiscal years
ended June 30, 2010 and 2009.
Tax Fees. We did not pay any fees to Mayer
Hoffman McCann P.C. for tax services during the fiscal years
ended June 30, 2010 and 2009.
All Other Fees. We did not pay any fees to
Mayer Hoffman McCann P.C. for all other services during the
fiscal years ended June 30, 2010 and 2009.
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 SECs rules. Our
Board of Directors adopted a written charter for our Audit
Committee. The full text of the Audit Committee Charter as
currently in effect is available on our web site. 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 P.C., our independent registered public
accounting firm during fiscal 2010, 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 P.C. and
reviewed the written disclosures required by applicable
requirement of the Public Company Accounting Oversight Board
regarding the independent accountants communications with
the Audit Committee concerning independence and discussed with
Mayer Hoffman McCann P.C. matters relating to its independence.
Our Audit Committee also considered the compatibility of the
provision of non-audit services by Mayer Hoffman McCann P.C.
with the maintenance of Mayer Hoffman McCann P.C.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
for the fiscal year ended June 30, 2010 and be filed with
the SEC.
Submitted by:
Audit Committee
Anthony J. Coppola
William L.G. Kwan
Lisa A. Napolitano
September 15, 2010
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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 2011 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 2011 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, 2011 and ending on August 31,
2011.
A written proposal of nomination for a director must set forth:
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the name and address of the shareholder who intends to make the
nomination (the Nominating Shareholder);
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the name, age, business address and, if known, residence address
of each person so proposed;
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the principal occupation or employment of each person so
proposed for the past five years;
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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;
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a description of any arrangement or understanding between each
person so proposed and the Nominating Shareholder with respect
to such persons proposal for nomination and election as a
director and actions to be proposed or taken by such person as a
director;
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the written consent of each person so proposed to serve as a
director if nominated and elected as a director; and
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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.
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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 2011 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 2011
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 2011 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
2011 annual meeting of shareholders.
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(PROPOSAL NO. 2)
RATIFICATION
OF SELECTION OF AUDITORS
Our Audit Committee has appointed the firm of Mayer Hoffman
McCann P.C. as our independent public accounting firm for the
year ending June 30, 2011.
The appointment of auditors is approved annually by the Audit
Committee. In making its recommendations appointment, the Audit
Committee reviews both the audit scope and estimated audit fees
for the coming year. This appointment will be submitted to the
shareholders for ratification at the Annual Meeting.
Although not required by law or by our Bylaws, our Board of
Directors has determined that it would be desirable to request
ratification of this appointment by the shareholders. If
ratification is not received, the Audit Committee will
reconsider the appointment. A representative of Mayer Hoffman
McCann P.C. is expected to be available at the Annual Meeting to
respond to appropriate questions and to make a statement if he
or she so desires.
The Board of Directors recommends that the shareholders vote
FOR ratification of the selection of Mayer Hoffman McCann P.C.
as our independent registered public accounting firm for the
fiscal year ending June 30, 2011.
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
May 20, 2011
Wayne, Pennsylvania
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VOTE BY INTERNET - www.proxyvote.com
Use the Internet to transmit your voting instructions and for
electronic delivery of information up until 11:59 P.M. Eastern
Time the day before the cut-off date or meeting date. Have
your proxy card in hand when you access the web site and
follow the instructions to obtain your records and to create
an electronic voting instruction form.
ELECTRONIC DELIVERY OF FUTURE PROXY MATERIALS
If you would like to reduce the costs incurred by our company
in mailing proxy materials, you can consent to receiving all
future proxy statements, proxy cards and annual reports
electronically via e-mail or the Internet. To sign up for
electronic delivery, please follow the instructions above to
vote using the Internet and, when prompted, indicate that you
agree to receive or access proxy materials electronically in
future years.
VOTE BY PHONE - 1-800-690-6903
Use any touch-tone telephone to transmit your voting
instructions up until 11:59 P.M. Eastern Time the day before
the cut-off date or meeting date. Have your proxy card in hand
when you call and then follow the instructions.
VOTE BY MAIL
Mark, sign and date your proxy card and return it in the
postage-paid envelope we have provided or return it to Vote
Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY
11717.
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS:
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KEEP THIS PORTION FOR YOUR RECORDS |
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DETACH AND RETURN THIS PORTION ONLY |
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.
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For All |
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Withhold All |
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For All Except |
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To withhold authority to vote for any individual nominee(s), mark
For All Except and write the number(s) of the nominee(s) on the line below. |
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The Board of Directors recommends you vote FOR the following
Class II Directors: |
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1. |
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Election of Directors
Nominees |
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01 Lisa A. Napolitano |
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02 Fred G. Choate |
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The Board of Directors recommends you vote FOR the following proposal: |
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Abstain |
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2 To ratify
the selection of Mayer Hoffman McCann P.C. as the Companys independent registered public accounting firm for the fiscal year ending June 30, 2011; and
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NOTE: Any other matters that properly come before our annual meeting.
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Please sign exactly as your name(s) appear(s) hereon. When
signing as attorney, executor, administrator, or other
fiduciary, please give full title as such. Joint owners
should each sign personally. All holders must sign. If a
corporation or partnership, please sign in full corporate
or partnership name, by authorized officer.
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Signature [PLEASE SIGN WITHIN BOX] |
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Signature (Joint Owners) |
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Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting: The
Form 10-K, Notice & Proxy Statement is/are available at www.proxyvote.com.
ESCALON MEDICAL CORP.
Annual Meeting of Shareholders To Be Held June
30, 2011
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, 2011 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.
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 listed for Class II Directors and FOR to ratify the selection of Mayer Hoffman McCann
P.C. as the Companys independent registered public accounting firm. If any other business is
presented at the meeting, this Proxy confers authority to and shall be voted in accordance with the
recommendations of the Board of Directors. This Proxy is solicited on behalf of the Board of
Directors and may be revoked prior to its exercise by filing with the Secretary of the Company a
duly executed proxy bearing a later date or an instrument revoking this Proxy, or by attending the
meeting and electing to vote in person.
Continued and to be signed on reverse side